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t/n,;
A GUIDEBOOK OF FINANCIAL TOOLS
April 1999 Revision
FOREWORD
The future course of environmental management in America is increasingly being viewed in Ihe context of
"sustainable systems." Such systems must exhibit sufficient institutional, technical, managerial and financial
capacity to prosper and endure. The question of how to pay for - or how to sustainably finance - the
continuing demands for pollution prevention and ecosystem protection is a central theme for the work of
Ihe U.S. Environmental Protection Agency's (EPA) Environmental Financial Advisory Board and the
Agency's network of university-based Environmental Finance Centers. This Guidebook is intended to be
a working tool to enable practitioners in the public and private sector to find the appropriate methods to
pay for environmental protection efforts.
The genesis of this 1999 Guidebook remains 1he 1992 report of EPA's State Capacity Task Force on
Alterative Financing Mechanisms. This report was so well-received that a significant expansion seemed
the natural thing to do. In a real sense, this and future Guidebook updates will remain as final drafts. The
reason is not the lack of information needed to ensure completion: quite the contrary. We found in pulling
together Ihis extraordinary amount of material that there is so much going on that by press times we always
have more tools to be added. Therefore, we have determined to continue to undertake periodic updates
of the Guidebook. To this end, we ask Guidebook users (via Appendix F) to send us suggestions for new
tools and changes and additions to those listed.
The main laboratories for this fascinating environmental financing experimentation are, not surprisingly,
found at the regional and local levels. The financing arrangements that will characterize how we will pay
for the next generation of pollution prevention and ecosystem prevention are even now being formed in this
crucible.
We remain deeply indebted to the members of the Environmental Financial Advisory Board and the
Directors and Staff of the Environmental Finance Centers for their contributions to this body of work.
Without the efforts on the part of these worthy practitioners in the finance arena, the Guidebook would
remain an unfulfilled goal. Special thanks are also due to past and present EPA Environmental Finance
Program staff - Victoria Kennedy, William Bivens, and Tim McProuty. Finally, Ms. Diane Doyle of GCI
Information Services must be thanked for her efforts to ensure the accuracy of Internet addresses
throughout the Guidebook and for loading the entire document on the Environmental Finance Program's
Web site.
John C. Wise
Executive Director, Environmental Financial Advisory Board
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A GUIDEBOOK OF FINANCIAL TOOLS
April 1999 Revision
ABSTRACT
The April 1999 revision of the A Guidebook of Financial Tools is a reference work intended to provide
an overview of a wide range of ways and means that are useful in paying for sustainable environmental
systems. It is divided into 10 sections, presenting outline information on approximately 340 financial tools.
The first five sections present comprehensive financing tools that include traditional means of raising
revenue, borrowing capital, enhancing credit, creating public-private partnerships, and ways of providing
technical assistance. The next five sections present financing tools that are, will, or might soon be, available
to address significant environmental priorities, including ways of lowering the costs of compliance,
encouraging pollution prevention, paying for community-based environmental protection, financing
brownfields redevelopment, and improving access to capital for small businesses and the environmental
goods and services industry. Each tool is described along with its actual and potential uses, advantages
and limitations, and references for further information The Guidebook is the product of a collaborative
effort among members of the United States Environmental Protection Agency's (EPA) Environmental
Financial Advisory Board, the Directors and staff of eight university-based Environmental Finance Centers,
the staff of EPA's Environmental Finance Program, and numerous other contributors. The Guidebook
contains forms for users to provide comments and suggestions, and it will continue to be revised and
updated as necessary. In this spirit, the Guidebook also now provides users and readers with a site in its
electronic version (Appendix A) for exciting new financing tools to be added during the time between hard
copy revisions. The Guidebook's location on the World Wide Web (Internet address) is:
http://www.epa.gov/efinpage/guidbk98/index.htm
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OVERVIEW OF COMPARATIVE CRITERIA
USED IN THE GUIDEBOOK
April 1999 Revision
A number of criteria are used throughout this Guidebook to compare the current use and potential
effectiveness of individual tools relative to one another in each section. The criteria are discussed briefly
in the single page narratives of Ihe individual financial tool write-ups, chiefly under the "Advantages" and
"Limitations" headings. The comparative criteria also are summarized in matrix form at the end of most
sections.
The comparative criteria are meant to describe and compare single financial mechanisms with others within
each section, in order to give the reader some sense of the prevalence of use and potential longer-term
effectiveness of individual mechanisms. The criteria used in this Guidebook are drawn from the general
literature on revenue raising and financing mechanisms, and the experience of States, localities and the
private sector in using particular tools. Necessarily, some comparisons are somewhatsubjective, since data
on many tools are not available, for example, data on the incidence of actual use. Other criteria depend on
public or private sector viewpoints, for example, whether a tool is considered relatively easy to use, readily
accessible, or reasonably priced. Thus, the comparative criteria are meant to provide the reader some
perspective on the large of number of tools presented in Ibis Guidebook, and some reasons why one or
anolher tool might be utilized
At Hie end of each section, the authors' judgements as to how individual tools might be compared to one
another are summarized in a Comparison Matrix, with ratings of "High", "Moderate", and "Low" assigned
to make these comparisons. On occasion, some numerical value or objective data are presented, such as
the number of States using a tool or money raised or spent, and these data are summarized at the bottom
of the chart. However, most typically the ratings, while incorporating such data, are for comparison
purposes only.
».
Stars (*) also are used in the list of opening list of tools described in each section, as well as in the matrices,
to provide the reader with a summary of which tools have been most highly rated. The stars (*) are meant
to provide some measurement, necessarily subjective, of past effectiveness, and a sense of those financial
mechanisms which seem the most durable, i.e., able to stand the test of time. Tools which may be short-
lived, for example, tools which depend on tax code changes or special assistance program, are not
considered durable.
Ten sections in Unas Guidebook use six, and sometimes seven, criteria to compare individual financial tools
presented in the individual section. However, Section 2C on "Grants" does not have a comparison matrix.
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For the ten sections, the criteria are the same for the most part, with several exceptions as noted below,
and some variation in terms of emphasis or nuance in each section, as described in the narratives
accompanying each section and each tool. A total of nine comparative criteria are described below.
1. Actual Use: All sections of the Guidebook give some indication of current State and local government,
and/or private sector, use of a particular funding mechanism Actual (current) use may give some indication
of the stage of development of individual tools, i.e., how long they have been in existence, how widely
available or applicable they are on a geographic basis, and Iheir acceptability. Financing mechanisms
presented in Section 1 "Tools for Raising Revenue", must be dedicated to environmental protection,
as opposed to being used for non-environmental purposes, to be counted. The number of States using a
particular tool does allow some numerical data to be included in the ratings from "High" to "Low", for
example, high use might mean that a tool is used in over twenly-five States, as opposed to low use, for
example, under ten States. Actual use cannot measure the potential effectiveness of newly created tools,
since by definition they are in their infancy.
2. Revenue Size: This criterion gives an indication of the relative annual sum of money that is raised or
invested within States, annually, as a result of using the financial mechanism, or in some instances the
potential sum of money. Revenue size is used in all sections, but only rarely is accompanied by dollar
amounts since in most cases these data have not been collected nationwide. In those cases where actual
use of a tool is low either because it is new or because it is not dedicated to the environment, potential
revenue size is estimated. For example, tobacco taxes are widely used by States but typically not
dedicated to environmental protection. However, since these taxes yield comparatively large revenues,
size is rated .-"High". Revenue size gives some indication of the actual or potential effectiveness of a
particular financing tool in terms of environmental benefits, although it is not presented in relationship to total
environmental needs. Low revenue size may not mean that a tool is ineffective, because it may be offset
by other criteria scoring high, for example, the ability to leverage other financial resources, or the ability to
enhance environmental awareness. However, low revenue size may signal problems, for example, it might
suggest levying an environmental fee or tax cannot be justified in terms of added administrative costs, time
and political difficulties. A proliferation of many small programs may be confusing and burdensome, leading
to a decline in public acceptability. '
3. Revenue Stability: This criterion is used only for Section 1 "Raising Revenue" and for Section
2B "Loans". Here, the relative stability and predictability of annual revenues is compared for each tool
to indicate whether the revenue source can be relied upon and readily estimated, audited, and factored into
budgetary decisions. Revenue stability can influence the dedication and use of taxes, fees and special
changes (e.g., low-to-moderate), but stable revenue receipts would be suitable for funding State operating
budget costs such as personnel, and larger, steady revenue streams could be used for capital for
infrastructure construction. Many factors can contribute to revenue instability. Examples include consumer
product substitution, pollution "havens" in different geographical areas, political decision-making, tax laws
and general economic conditions. Revenues from pollution control fines, penalties and cost-recovery are
unpredictable and may result only after protracted legal negotiations.
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f
4. Revenue Cost/Savings: Revenue cost/savings is used in six sections. This criterion relates the rough
dollar cost of the financial tool to the user with the amount of revenue saved or accessed as a result of using
the tool. For example, private bond insurance is relatively costly but it can lower interest costs substantially
through improved bond ratings, and may be critical to attracting bond investors. Similarly, private sector
use of surety and performance bonds may enable a project to move forward. Privatization can result in
lower construction, operations and maintenance costs, which may be translated into lower user fees,
compared to the public alternative. Refinancing, while incurring new bond issuance fees and legal costs,
can lower annual interest payments considerably.
5. Administrative Ease: Administrative ease is used as a comparative criterion in all sections, addressing
practical issues pertaining to both the providers and users (clients) of the financial tool. Such issues include
the basic complexity or simplicity of the mechanism, demands on stafftime to process paperwork, handle
applications and red tape, and the flexibility provided in the administration and use of a financial tool. For
Section 1 "Raising Revenue", administrative factors are of special concern to the government imposing
the tax, fee or fine, for example, the administrative costs of imposing new fees, particularly establishing
collection system, and the costs of legal enforcement proceedings for pollution fines and penalties. For
Ihe other sections, administrative ease also can refer to the users of the financial tool, for example, whether
the tool is complicated to understand, whether using it is burdensome in terms of staff time and paperwork,
whether expensive legal advice is required, whether voter approval must be sought. Tools which provide
hands-on technical assistance can be administratively time-consuming for the provider, but on the other
hand are easy to use for the client.
6. Equity: Equity also is used in all ten sections, with varying nuances as described in the text. Equity in
some sections is used to compare the extent of direct public participation in the choice to use a given tool,
or even how to structure the tool. For example, any bond or other local fund-raising device which requires
local voter approval is described as highly equitable. Equity also is used extensively to compare the
accessibility of the financial tool to small versus large potential users and to compare the costs of the tool
for different clients or those who pay. Tools are most equitable if they reflect affordability concerns or
special circumstances of the user, for example, in the case of fees and taxes adopting graduated or non-
regressive rate structures. Taxes which are paid for by non-residents as well as residents, both of whom
may benefit from an environmental improvement, also are highly equitable. Tools are relatively inequitable
if all users pay the same price regardless of economic circumstances, if small users pay more since
investment is considered more risky, or if certain businesses pay much more than others. Some tools are
simply not available to certain small users if they are too costly or complicated, and thus are not particularly
equitable.
7. Cost/Benefit Relationship. The cost/benefit relationship applies only to Section 1 "Raising
Revenue" and Section 8 "Community-Based Environmental Protection". Here, the relationship
addresses "who pays" the tax or fee or other costs and "who benefits" from subsequent environmental
project investment with the dollars collected. A high or close cost/benefit relationship results when people
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who pay can see or directly benefit from specific environmental projects, such a temporary local sales tax
add-on to acquire park land. A high cost/benefit relationship may enhance the public acceptability of the
financing mechanism A high cost/benefit relationship also describes situations in which the "polluter pays"
principle is applied, although Ibis may result in inequities if costs are economically burdensome. In many
sections, a high cost/benefit relationship clearly is present since Ihe users who purchase 1he financing tool
do so for their own benefit, such as a loan or credit enhancement device.
8. Financial Leveraging: This criterion is used in half of the sections to compare the ability of individual
financial tools to leverage, free up or attract additional dollars from other sources. For example, State
Revolving Funds selling bonds to make loans are highly financially leveraged, since more projects can be
initiated in the short-term. Loans are more leveraged than grants, and loans under 100% are further
leveraged. Financial outreach, or technical assistance, is aleveragjng device since local managerial capacity
is heightened which adds to investor willingness to extend credit Small businesses similarly can make
improve their capacity to attract investment by steps such as preparation of business plans and Internet use.
Some locally approved tax and voluntary community-based environmental protection fund raising are
matched by other public and private sector monetary grants or donations.
9. Environmental Benefits: Environmental benefits can result in a variety of ways, some direct and
others less tangible. The most obvious environmental benefit occurs when an environmental project
proceeds as a result of using the tool, such as construction of a drinking water treatment plant or
brownfields redevelopment. However, other environmental benefits may be more indirect For example,
pollutionprevention and recycling, "green" products and marketplace substitutions, conservation easements
and development rights purchases, lands placed in trusts, and other measures may forestall or delay impact
of pollution, although difficult to measure in the short-term. Paying an environmental tax may result in
heightened public awareness of environmental problems and public financing possibilities, as well as change
subsequent polluting behavior. Some financial tools call attention to positive as well as negative
environmental impacts and provide incentives to increase environmental financing. Other mechanisms
enhance the popularity and acceptability of additional pollution control regulations. Hands-on technical
assistance and outreach may increase local capacity to pay for and manage critical environmental assets.
Involving the private and nonprofit sectors in project funding, operations and maintenance vastly multiples
the possibilities for environmental progress. In this Guidebook, only those financial tools which have no
known environmental impact or are neutral are described as "Low".
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^ EFAB/EFC Guidebook . April 1999
1. TOOLS
FOR
RAISING REVENUE
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EFAB/EFC Guidebook
April 1999
t
1. TOOLS FOR RAISING REVENUE
This Section describes specific financial mechanisms which States and localities can use to raise revenue
to dedicate to funding environmental protection. Four ways of generating monies are presented: taxes, both
general and selective; fees; special charges primarily for "polluting" activities; and pollution control fines and
penalties. While many of these tools are used by the federal government, the primary focus here is on State
and local governments.
Taxes are by far the largest source of revenue for State and local spending, and are imposed on individual
and business income and property, and commodity sales. Sales taxes, often termed sales and use taxes,
may be general in nature or selective, such as tobacco taxes. In contrast, fees are much less universally
used and generate far less revenue. Fees are fixed charges paid for governmental administrative services
such as permit issuance, activities such as park fees, and for utility services (user fees). Of these, only user
fees raise significant revenue. Special charges are similar to fees but are aimed specifically at "polluting"
activities such as effluent and emission discharges and development impact fees. Fines and penalties are
monetary or in-kind payments assessed by government on violators of environmental laws and regulations,
and in titis Guidebook include Superfund liability cost-recovery. Both special charges and fines/penalties
are used sporadically and selectively by governments.
Raising revenue through taxes, fees and other means is a multi-step governmental process, and all steps are
complicated and controversial. Imposition of charges is only the first step in the legal process. Taxes, fees
and special charges also must be designed to enable systematic collection and limit possible circumvention.
The next step of ensuring environmental dedication is just as critical. Dedication to environmental
improvements is by no means a foregone conclusion, even for supposedly earmarked taxes, since all
government-funded programs including social services vigorously compete for monies and the popularity
of environmental issues rises and falls over time. Dedication can be made directly to a specific project such
as a park, or indirectly as a source of bond repayment.
Some revenue generation tools are more suitably dedicated to specific environmental work than others.
For example, large and relatively stable revenue sources may be ideal for environmental infrastructure
capital and land-related projects such as parks, while smaller mechanisms can fund program operating
functions such as personnel, monitoring, and technical assistance. Some taxes, fees and special charges
have dual purposes of revenue raising but also as market devices to alter polluting behavior, which may
result in lower revenue collection. State and local governments understand that imposing costs is onerous
to those who pay, unlike many tools presented in this Guidebook which arise from the voluntary action of
individuals and businesses.
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EFAB/EFC Guidebook
April 1999
LA. TAXES
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EFAB/EFC Guidebook: . April 1999
1A. TAXES
Description: Most taxes are charged against income, property or sales. Income taxes are charged as
a percent of the money earned by an individual or corporation; property taxes are based on a percentage
of the value of property owned; and commodity taxes; typically called sales and use taxes, are charged as
a percentage of commodity value or a flat rate per transaction. Most States have a general sales and use
tax on retail sales of commodities, and local governments often have riders charging an additional surtax
to fund local government In addition to general sales taxes, all States and many localities impose selective
taxes on the sales of particular products or services, such as gasoline and tobacco taxes. In all, 23 States
earmark a portion of State taxes to 1he environment, although there is considerable variation among States.
Minis report, tax "base" refers to the segment of population, products, activities or pollutants on which
charges are imposed. Tax "rate" refers to the structural design of tax schedules, i.e., whether flat rates,
graduated rates, volume/toxicity based rates, percentages, or other structures are employed.
Advantages: Taxes typically have a broader revenue base than the fees presented in Part B, and therefore
can generate high revenues at relatively low rates, although the special charges in Part C also have
significant potential. For example, States can levy sales taxes on fertilizer at rates of cents/per pound and
generate millions of dollars annually. Dedicating a surcharge on an existing tax to environmental programs,
or even a percentage of existing taxes, involves little additional administrative costs. Local governments
sometimes can pass a "piggy-back" tax on existing State taxes, generating local revenue, although in some
States this may require legislative authorization and voter approval. In most States, income, property and
sales data are already reported, thus further reducing administrative costs of new surcharges.
Limitations: Public opposition to new or increased taxes often hinders legislative passage. Unlike fees,
many taxes are used for general budgetary support and historically have remained undedicated to particular
programs, with clear exceptions such as gasoline taxes. In some States, institutions do not exist for
arranging the dedication of taxes to particular programs, or there may be constitutional or statutory
limitations on dedication, or "earmarking" as it is often termed. Depending on the market in question, some
taxes may be inappropriate financing mechanisms for those pollution control activities thai require a
predictable amount of revenue every year. Tax bases may shrink due to general economic conditions or
behavioral responses to tax imposition, such as conservation of product use or product substitution in the
case of some selective sales taxes. Also, unless the tax is targeted to a particular type of property, income
or sales, there is only an indirect relationship between the tax base and use of funds, what is termed herein
a weak cost/benefit relationship.
Two types of taxes are discussed here: General taxes and selective sales taxes. The operating
principles and dedication opportunities are different in these two cases, so they are evaluated separately
in Ihe following pages.
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EFAB/EFC Guidebook
April 1999
I.A.I. GENERAL TAXES
t
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EFAB/EFC Guidebook
April 1999
1A.1. GENERAL TAXES
Description: A general tax is atax whose burden falls upon very broad section of the general public, such
as wage earners or property owners. State and/or local general taxes are charged against personal and
corporate income, property, and commodity sales. Income taxes are levied as a percent of the money
earned by an individual wage earners or corporation. Property taxes 'are based on a percentage of the
value of property owned. General commodity taxes, called sales and use taxes, are imposed as a
percentage of the commodity value, or as a flat rate per transaction, and are contrasted wilh selective sales
taxes discussed later. General taxes may fund environmental projects through earmarking or specific tax
surcharges or add-ons. Historically, States have set 1he rules for how local governments are organized and
conduct their affairs, including raising money. Recently however, localities have appeared more active in
seeking and receiving more finance discretion for increasing taxes.
Advantages: General taxes typically have a broader revenue base than other revenue sources and
therefore can generate high revenues at relatively low rates. Not only is the tax base large, but income tax
rate structures typically are graduated, or proportional, thus increasing equity. Sales and property taxes
are more regressive. When local support is high, temporary local tax surcharges may be an effective
environmental financing avenue.
Limitations: Imposing orincreasing general taxes generally requires legislative action and public opposition
often hinders its passage. Since general taxes are not targeted at a particular type of environmentally-
related property, income or transaction, there is only an indirect relationship between the tax base and the
use of the funds (i.e., a weak costTsenefit relationship). General taxes are a more traditional source of
revenue for programs such as education and social services, and thus may be already "tapped out". It may
be difficult to safeguard the earmarking of portions of general taxes for environmental purposes overtime,
since ihe competition from other programs will persist A serious concern also pertains to whether
earmarking of general tax revenues constitutes sound budgetary and fiscal policy, since earmarking
constrains current policy makers' ability to direct funds where they may be most needed, or demanded, at
any particular point in time.
Summary: Historically, general taxes have not been ihe best source for environmental funding compared
to revenue sources aimed at more specific products or activities with a more direct relationship to the
environment In particular, State earmarking has been rare. However, in recent years States have granted
localities more authority to levy tax surcharges or add-ons which have been dedicated to the environment,
especially parks and conservation.
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t
EFAB/EFC Guidebook • April 1999
The nine general taxes described here are compared using seven criteria including:
1. Actual Use: Actual (current) use may indicate the developmental stage of individual taxes, i.e., how
long they have existed, how widely available or applicable they are on a geographic basis, and their
acceptability. Taxes presented in the section must be dedicated to environmental protection to be
counted. The number of States using a tax allows some numerical data to be included in the ratings from
"High" to "Low". For example, high use might mean a tool is used in over 25 States, as opposed to low
use meaning under 10 States. Actual use cannot measure the potential effectiveness of new taxes, since
by definition they are in their infancy.
2. Revenue Size: This criterion helps indicate the annual sum of money raised or invested, or in some
instances the potential sum of money. Revenue size is rarely expressed in dollars since in most cases this
data has not been collected nationally. Where a tax's use is low because it is new or not directed to the
environment, potential revenue size is estimated. Revenue size may give an idea of the actual or potential
effectiveness of a tax in terms of environmental benefits, but not in relation to total environmental needs.
Low revenue size may not mean that a tax is ineffective, because it may be offset by other criteria scoring
high, i.e., the ability to leverage other resources, or enhance environmental awareness. However, it may
signal problems, i.e., by suggesting that levying a tax cannot be justified in terms of added administrative
costs, time and political difficulties.
3. Revenue Stability: The relative stability and predictability of annual revenues is compared for each tax
to indicate whether the revenue source can be relied upon and readily estimated, audited, and factored into
budgetary decisions. Revenue stability can influence the dedication and use of taxes. Stable revenue
receipts would be suitable for funding State operating budget costs such as personnel, while larger, steady
revenue streams could be used for capital infrastructure construction. Many factors contribute to revenue
instability, such as product substitution, pollution "havens" in different geographical areas, political decision-
making, tax laws and general economic conditions.
4. Administrative Ease: Administrative ease addresses practical issues pertaining to the providers and
users of a tax. Such issues include the tax's complexity/simplicity, demands on staff to handle paperwork,
applications and red tape, and the flexibility in administration and use. Administrative ease also can refer
to users of a tax, i.e., whether it is complicated, whether using it is burdensome in terms of staff time and
paperwork, whether expensive legal advice is required, and whether voter approval must be sought Taxes
which provide hands-on technical assistance can be administratively time-consuming for the provider, but
on the other hand are easy to use for the client
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EFAB/EFC Guidebook
April 1999
5. Equity: Equity can be used to compare the extent of public participation in the choice to use a tax, or
even how to structure it. For example, a tax which requires local voter approval is described as highly
equitable. Equity also is used extensively to compare the accessibility of the tax to small versus large
potential users and to compare the costs of the tax for different clients or those who pay. Taxes are most
equitable if they reflect affordability concerns or special circumstances of the user, for example, in the case
of taxes adopting graduated or non-regressive rate structures. Taxes which are paid for by non-residents
as well as residents, both of whom may benefit from an environmental improvement, also are highly
equitable. Taxes are relatively inequitable if all users pay the same price regardless of economic
circumstances, if small users pay more since investment is considered more risky, or if certain businesses
pay much more than others. Some taxes are simply not available to certain small users if they are too
costly or complicated, and thus are not particularly equitable.
6. Cost/Benefit Relationship. This criterion addresses "who pays" and "who benefits" from the
environmental investment made with the taxes collected. A high or close costftenefit relationship results
when those who pay can see or directly benefit from specific environmental projects, such atemporary tax
add-on to acquire park land. A high cost/benefit relationship may enhance public acceptability of a tax.
It also describes situations in which the "polluter pays" principle is applied, although this may result in
inequities if costs are economically burdensome.
7. Environmental Benefits: Environmental benefits may be both direct and indirect The most obvious
environmental benefit occurs when a project proceeds as a result of using a tax, such as construction of a
water treatment plant or brownfields redevelopment. Other environmental benefits may be indirect, i.e.
paving a tax may result in heightened public awareness of environmental problems and public financing
possibilities, as well as change polluting behavior. Some taxes may call attention to positive as well as
negative environmental impacts and provide incentives to increase environmental financing, hi this
Guidebook, only those financial tools which have no known environmental impact or are neutral are
described as "Low".
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EFAB/EFC Guidebook April 1999
i
LIST OF GENERAL TAXES
(In Alphabetical Order)
* 1. Corporate Gross Receipts Taxes
2, Corporate Income Taxes
3. Death and Gift Taxes
4. Individual Income Taxes
*5. Local Sales Taxes
6. Personal (Tangible) Property Taxes
*7. Real (Ad Valorem) Property Taxes
*8. State Sales and Use Taxes
9. Value-Added Taxes
* Stars indicate most highly rated mechanisms as described in the Comparison Matrix at the end of the
narratives. See Introduction to the Guidebook for a description of the criteria used. Ratings of "High",
"Moderate", and "Low" are for comparison purposes only, as some ratings are necessarily subjective and
data are incomplete.
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EFAB/EFC Guidebook April 1999
CORPORATE GROSS RECEIPTS TAXES
Description: These corporate taxes are assessed on the gross receipts of businesses, in some States in
lieu of corporate income taxes.
Actual Use: Several States have general taxes on gross receipts of businesses. Portions of these receipt
revenues are targeted to specific environmental programs. For example, Delaware dedicates 2.9% of its
general gross receipts taxes to a hazardous waste clean-up fund New Jersey has a general hazardous
waste gross receipts tax dedicated to site clean-up.
Potential Use: Gross receipt tax revenues in each State from particular businesses could be dedicated
to the environmental program area that the business activities affect For example, monies from the gross
receipts of dry cleaning businesses could be used to fund small source air emission reduction programs.
Advantages: When tax revenues are dedicated, businesses engaged in environmentally-sensitive activities
pay for the remediation of problems. Unlike net income taxes, gross receipts taxes are based on the full
size of the business and are charged against a broader revenue base. Revenue yield could be quite
significant, although it may vary considerably depending on general economic conditions or other factors.
Dedicated taxes also mean that the cost/benefit relationship is sustained. Gross receipts taxes may be more
simple and equitable, because they employ more reliable administrative and accounting procedures, than
other kinds of taxes. For example, for hazardous waste, data on gross receipts are more accurate than
data underlying a tax on hazardous waste volume produced or feedstock used.
Limitations: Gross receipts taxes may have a disproportionate impact on smaller businesses and on those
wilh high receipts but also high costs. There is no incentive to improve management practices that
contribute to problems, since producers pay the same percent tax regardless of recycling programs or
other efforts at reducing solid waste. The lack of environmental incentives could be overcome if the tax
were structured to provide rebates for recycling or waste reduction, but this would add to administrative
complexities and result in lower revenues.
Reference for Further Information: National Conference of State Legislatures (NCSL), Earmarking
State Taxes, Denver, Colorado, April 1995.
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CORPORATE INCOME TAXES
Description: Corporate income taxes are based upon the net income earned by corporations in a given
State. They sometimes are established as, and termed, corporate franchise taxes.
Actual Use: State dedication of corporate income taxes to environmental protection has been rare. Ohio
dedicates 1.2% of its corporate income tax revenue to litter control and recycling. Pennsylvania allocates
3.8% of its capital stock and franchise tax to ahazardous waste clean-up fund. Arizona commits 0.2% of
its corporate income revenue to environmental programs. The federal government uses an environmental
tax surcharge on corporate income, under Ihe Alternative Minimum Tax provisions of the Tax Reform Act
of 1986, to fund part of the Superfund Trust Fund. The federal tax is 0.12% of taxable corporate income
in excess of $2 million. A few States offer corporate income tax credits for land donations (see Section
I.A.I.: Individual Income Taxes).
Potential Use: Corporate income tax revenues could be dedicated to finance environmental programs
that stem from the corporate activity itself. For example, if two percent of revenues were generated from
mining companies, the State could earmark that portion for erosion control, habitat restoration, and other
activities that mitigate Hie environmental impacts of mining. Similarly, revenues from drink bottle companies
could be used to finance state recycling programs.
Advantages: Witha relatively broad revenue base, corporate income taxes or surcharges can be charged
at relatively low rates and still generate significant revenues. They can spread the costs of the environmental
impacts of business activities to out-of-state consumers, adding pollution control to the overall costs of
production. For example, a paper company might pass on the cost of a corporate income tax to its
customers via a price increase. These revenues could be used to help mitigate environmental impacts of
the paper production process, and improve the equity and cost/benefit criteria.
Limitations: Increasing corporate tax rates may be politically difficult, since States attempt to be
competitive with other States in order to attract corporations. Net income may not serve as a good
measure of 1he actual size of a corporation, since many corporations have small incomes relative to their
gross receipts. This reduces the equity potential of the tax. Of the three main state general taxes (i.e.,
personal and corporate income, and general sales taxes), the corporate income tax is the least stable. As
net corporate income varies tremendously from year to year, the revenue stream will be unpredictable and
thus may be unsuitable for some types of environmental program budgets. Corporate headquarters may
be located in a different State from production activities, meaning that the revenues from the income tax
may not go to the state that experiences environmental damage from a corporation's production activities.
References for Further Information: National Conference of State Legislatures (NCSL), Earmarking
State Taxes, Denver, CO, April 1995.
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DEATH AND GIFT TAXES
Description: Death and gift taxes, or inheritance taxes, are taxes on inherited property or gifts worth more
than a set amount. Inheritance taxes can be structured to provide tax relief for property owners making
outright land donations or by placing conservation easements on inheritance land, even during a donor's
lifetime.
Actual Use: All States now have inheritance tax programs although they vary considerably, Typically,
State death and gift taxes have been dedicated to local government, pension funds, and local police and
fire protection funds, but not the environment Most States also structure inheritance taxes to provide tax
relief for land donated to State or Local governments or nonprofit land trusts, although not always for
conservation easements.
Potential Use: States could earmark a portion of death and gift taxes to general environmental programs.
Alternatively, they could structure such taxes to encourage land conservation. Bargain sales of natural land
to State and local park services, or anti-development deed restrictions (i. e., conservation easements), could
be regarded as non-taxable gifts by the landowner, as is currently done under the federal tax code. While
this does not raise revenue per se, it would lower the costs and increase the administrative ease of natural
lands acquisition.
Advantages:. Inheritance taxes provide a very broad revenue base. If taxes are structured to provide
incentives for land donation, i.e., by offering tax-exempt status for the landowner, this may provide State
and local parks with additional natural lands at a much lower cost than outright purchase, to times of tight
State or local budgets, this facilitates continuation of open space acquisition programs. The donated land
can be purchased and managed initially by State or local land trusts such as The Nature Conservancy, until
the appropriate State or local agency can assume responsibility.
Limitations: Using death and gift taxes to provide incentives for land conservation or donations
decreases government cash revenues. It may also be difficult to evaluate which gifts are actually valuable
natural lands. While most States have natural heritage programs and work closely with non-profit
conservation organizations to establish land protection criteria, for example, the presence of rare animal
and plant species or natural habitats, potential land donors may not recognize such criteria For "less
valuable" open space, States or localities must then work with non-profit land trusts to sell such property
and use the proceeds for other land protection activities.
Reference for Further Information: The Nature Conservancy, Guidebook for Land Giving and
Trusts, Arlington, VA, 1993; The Trust for Public Land, Doing Deals: A Guide to Buying Land for
Conservation, San Francisco, CA, 1997.
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INDIVIDUAL INCOME TAXES
Description: Individual income taxes are assessed based on a specified percentage of income earned by
individuals.
Actual Use: States and counties typically use income taxes for general fund support Presently, at least
17 States earmark a share of their State individual income tax for local governments, most commonly for
education. However, only a few States earmark for environmental purposes. For Example, Arizona
earmarks 0.2% for environmental protection, in this case to a water quality revolving fund. The federal
government has allowed deductions for donated land for some time. Other States use property tax credits
for the same purpose.
Potential Use: A large potential use of State and local income taxes for the environment may come from
income tax credits for land donations, conservation easements, and voluntary income tax check-offs (see
Section 8., Contributions of Land). For example, North Carolina has an individual and corporate
income tax credit of 25% of the value of the donated real property. When the initial $5,000.00 annual
credit cap was raised to $25,000.00 in 1989, donations grew from $800,000.00 to $17.5 million. Credits
can be carried over to succeeding years. California has discussed, but not passed, an ambitious credit of
60-85% of the value of land or water rights donated, which is weighted so that higher taxable incomes
receive the lower percentage credit.
Advantages: Earmarking the income tax for environmental funding could provide significant revenues at
a very low percentage rate, with ahighly stable tax base and revenue stream suitable for dedicating to State
or county capital infrastructure construction funds. Tax credits for land donated or easements could
provide considerable incentives to landowners to make such donations, particularly in times when tax-
averaging would be beneficial.
Limitations: In most States, it is politically difficult to increase and/or dedicate income taxes to specific
programs. When income taxes are earmarked for education and other social programs, they may be
"tapped out" already. Continued dedication of a portion of income tax revenues to the environment may
be difficult to preserve. While individual income taxes are progressive and thus relatively equitable, there
is no direct cost/benefit relationship to be attained through using this revenue source for environmental
protection. As an alternative, many States are using special individual income tax check-offs for
environmental purposes, as opposed to the income tax itself. This practice is discussed subsequently under
Section I.E.: Voluntary Programs.
Reference for Further Information: National Conference of State Legislatures, Earmarking State
Taxes, Denver, CO, April 1995; The Trust for Public Land, GreenSense: Financing Parks and
Recreation, Phyllis Myers, Editor, San Francisco, CA, Autumn, 1995 and 1997, Telephone: 800-714-
LAND, Internet: http;//www.tplor'g/tpl.
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LOCAL SALES TAXES
Description: Local sales taxes are add-ons to State general sales and use taxes, or may exist where there
is no State sales tax. Depending on State constitutions, statutes and home rule traditions, most local
governments must seek State approval to levy local sales taxes, as well as local voter approval. State
authorization processes vary. States may give approval to all counties or communities, or limit it to a
specific localities. Typically, local taxes are limited to a specified time period, or a dollar collection total,
and a specific use. The dedicated revenue stream may be used to back local general obligation or revenue
bonds or to pay for a specific program directly., such as parks and conservation.
Actual Use: Many States have given localities more leeway to levy taxes, and local residents have
approved sales tax increases or new taxes. Revenues often are dedicated to open space acquisition, parks
and recreation, historic preservation and other land projects. Missouri has given communities authority to
raise taxes up to 0.5% for parks and stormwater improvements, and 29 have done so since 1995.
Colorado has been flexible in allowing local taxes, and 17 municipalities and 7 counties use a sales tax
increase of 1/10 cent for 12 years for land conservation. Carson City and Douglas County, Nevada, use
a 1/4 cent "quality of life" sales tax add-on for open space and parks. Three Georgia counties have a 5-
year, 1 cent sales tax for roads, parks, and recreation. Other localities with recent sales tax add-ons from
Yi to 1 cent for 5-20 years include Albuquerque, Tulsa, Scottsdale, Suffolk County (New York), and
counties in Florida where revenues are dedicated to nature centers, trails, environmental education, and
parks. The first across-state tax of 1/8% was passed in four Kansas City counties in 1996, to raise $118
million to restore the historic Union Station.
Potential Use: Local sales tax add-ons are especially useful in high tourism areas and can support a
multitude of environmental programs, including brownfields redevelopment, and wetlands, watershed and
farmland protection through conservation easements and development rights purchases. Sales tax revenues
oftenare used to capitalize local revolving environmental trust funds as in New Jersey and other States, and
may attract State or private matching funds as in Kansas City.
Advantages: Specific approval of dedicated local sales taxes assures revenue use for a particular
environmental purpose, and projects funded enjoy public support Environmental benefits are direct, timely,
visible, and heighten public awareness. Revenues can be sizeable and further leveraged.
Limitations: All sales taxes are highly regressive. State and local approval of tax increases may be time-
consuming and is not assured. The environmental programs funded must be popular.
Reference for Further Information: U.S. Advisory Commission on Intergovernmental Relations,State
Laws Governing Local Government Structure and Administration, March 1995; The Trust for Public
Land, Green Sense: Financing Parks and Conservation, Phyllis Myers, Editor, San Francisco, CA,
Telephone: 800-714-LAND, Internet http://www.tpl.org/tpl.
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PERSONAL (TANGIBLE) PROPERTY TAXES
Description: These are taxes levied on the estimated or assessed value of items of personal property
such as automobiles and boats, but not land. Such taxes are charged on a recurrent basis, frequently
annually or biannually, and sometimes are limited to property worth in excess of a specified dollar value,
e.g., $2,000.
Actual Use: These taxes are used (not widely) by State and local governments for a variety of purposes,
but there is no earmarking for environmental protection at the present time. For example, Virginia charges
a flat percentage tax on 1he blue book value of all motor vehicles, but this is dedicated to highway and road
improvements.
Potential Use: State and local governments could establish personal property taxes to mitigate the
negative environmental impacts of the use of that property. For example, the revenues generated by atax
on air conditioners could be used for Freon disposal; revenues from a tax on lawnmowers and small
engines could be used to fund small source air emissions reduction programs. States could further structure
personal property taxes to encourage emissions reduction and/or energy efficiency by discounting tax rates
onhigh-efficiency appliances such as heaters, refrigerators and air conditioners, and low-emission vehicles.
Advantages: Taxes on tangible property could be carefully structured to have a close cost/benefit
relationship, depending on the particular purposes to which the tax revenues are dedicated. Also
depending on the specific structure of the taxes, they may provide incentives for taxpayers to purchase
higher efficiency appliances and vehicles, although this approach is somewhat inequitable as lower income
individuals are less able to afford new equipment and cars. Revenue yields generated by personal property
taxes tend to be moderate.
Limitations: Few governments have administrative systems in place to track ownership of personal
property, aside from automobiles, so that administrative costs could be high and fee tax easy to circumvent
The legality of state taxes on high-emission vehicles has been disputed in some states, such as in Maryland.
These types of taxes may be highly unpopular with voters and subject to reduction and even elimination.
Reference for Further Information: Virginia Department of Revenue, Annual Personal Property Tax
Estimates, Richmond, VA, 1993.
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REAL (AD VALOREM) PROPERTY TAXES
Description: Real property taxes are charged to property owners as apercentage of the current assessed
value of property. They are limited to local governments, and require voter approval.
Actual Use: There are two main ways localities use property taxes to fund environmental projects. The
first is to earmark a specific portion of annual revenues, which is rare. The second is to direct a property
tax increase or surcharge, temporary or permanent, to a specific purpose. Use of the latter method has
been increasing. Dade County, Florida, dedicated over $45 million in one year to funding local natural
areas. Colorado's Cherry Creek basin project uses a property tax increase to finance building artificial
weflands, channels and sediment holding ponds to control nonpoint sources. The most publicized use is
in New Jersey. By 1997, two counties and 21 municipalities had passed a one or two penny per $100 in
value "land preservation tax" to finance open space and farmland trust funds. Los Angeles County, Kings
County, Washington, Helena, Montana and Marion, Massachusetts use property tax increases to fund
greenways, open space, parks, beaches and shorelines. Several Michigan towns use property tax
surcharges to buy development rights on farmland. Spokane, Washington has a "conservation futures tax"
of 6 cents per $1000 to buy open space and buffer lands. A third way of using the property tax has
occurred in Maryland, which offers a property tax credit to donors who give perpetual easements to the
Maryland Environmental Trust.
Potential Use: Any land-based protection or recreation program could be funded through the property
tax, as well as any environmental infrastructure popular enough to be approved by residents. Revenues
can go to local trust funds, serve as collateral for general obligation or revenue bonds, and leverage State
funds. For example, New Jersey's Green Acres Trust Fund makes 25%grants and low-interest loans to
localities with dedicated taxes and open space plans.
Advantages: Most local governments have administrative systems in place for assessing real estate values
and collecting taxes, which reduces administrative costs. The property tax provides a relatively large and
stable revenue base. Voter approval of tax increases to pay for specific environmental projects, and visible
results, helps ensure revenue dedication. Additional monies can be leveraged when public commitment
is clear, including matching funds.
Limitations: Some localities have statutory limits on property tax levels. Competition for revenues is keen
and environmental dedication may be difficult to safeguard. Many proposed tax hikes have been defeated.
California uses a landscape and lighting law as an alternative, which enables property owners in developing
communities to assess themselves for parks and open space.
Reference for Further Information: The Trust for Public Land, GreenSense: Financing Parks and
Conservation, Phyllis Myers, Editor, San Francisco, CA; The Trust for Public Land, Mid-Atlantic
Regional Office, On the Land, Winter/Spring 1998, New York, NY; The Trust for Public Land, Lands
and People, San Francisco, CA, Spring 1998, Telephone: 800-714-LAND.
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STATE SALES AND USE TAXES
Description: State sales and use taxes are based and levied on the value goods sold in retail stores. The
scope of coverage of these kinds of taxes could be broadened to also include out-of-State mail order sales
to State residents.
Actual Use: Compared to corporate and personal income taxes, State earmarking of general sales tax
revenues has become more common in recent years. Currently,, at least five States dedicate a percent of
their general sales and use taxes to environmental programs. For example, Missouri dedicates 2.9% of its
tax revenues to a conservation fund, including non point source control (0.1%); North Carolina dedicates
0. 1% of its revenues to a Wildlife Resources Fund; Idaho dedicates 1.5%, and Washington 0.1%, of
revenues to water pollution infrastructure funds; and Florida earmarks 0.2% to a solid waste management
fund. Increasingly, States have been allowing counties or cities to charge an additional rider on the State
tax, which may also be dedicated to environmental programs (see Section I.A.I., Local Sales Taxes).
In Sacramento, California, the county rider on the State sales taxis dedicated to funding the local air quality
management district
Potential Use: States could choose to earmark a specified percentage of their sales and use tax revenues
to fund environmental programs. Application of the tax to out-of-state catalog mail order sales, which are
typically not taxed unless a retail store exists in the purchaser's state, would broaden the revenue base
considerably.
Advantages: The revenue base generated by State sales and use taxes is quite broad and relatively stable,
and thus even small percentages of a general sales and use tax can bring in significant revenues.
Limitations: Sales taxes are inherently highly regressive, and thus equity is not attained. The cost/benefit
relationship is not immediately obvious unless taxes on specific goods can be related and dedicated to
related environmental programs, but this may prove administratively burdensome and too complex. States
and localities may have statutory limitations on general sales tax increases and earmarking. Environmental
dedication may be difficult to sustain.
Reference for Further Information: National Conference of State Legislatures (NCSL), Earmarking
State Taxes, Denver, CO, April 1995.
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VALUE-ADDED TAXES
Description: Value-added taxes (VATs) tax the addition to the value of consumer goods or services
created at each stage of production or distribution. The VAT is an alternative way of collecting a tax on
consumption expenditure: it does not tax a base different from other sales taxes. The VAT resembles a
sales tax in that each trader adds the tax to sale invoices issued and accounts for the tax so collected.
However, traders deduct Hie tax paid on invoices received for goods and services.
Actual Use: Michigan's single business tax utilizes value-added principles in part, as does aportion of 1he
Louisiana retail sales tax, but, on the whole, the concept remains generally unused throughout fee United
States.
Potential Use: The VAT is applicable to any State or local sales tax. Implementation of a 10 percent
VAT in the three production stages of manufacturing, wholesaling, and retailing is illustrated as follows: A
wholesaler buys inputs valued at $500 from manufacturers and sells outputs valued at $900 to retailers.
Accordingly, the wholesalers' value-added equals $400. The tax owed by the wholesaler equals $40,
$400 times 10 percent The tax is collected by applying the rate to the transaction price ($900 times 10
percent - $90) and applying a credit for tax paid at earlier stages ($50); the net is the tax on value added
($90 - $50 = $40). The sum of all values added in the process ($500 at manufacturers, $400 at
wholesalers, and $300 at retailers) equals the final value of the product ($1200) and the tax generated at
each stage ($50, $40, and $30) equals the amount from the same rate sales tax on the final value ($120).
Advantages: VAT is a multistage tax that produces a burden equivalent to that of asingle stage retail-sales
tax. The tax is a constant proportion of the retail price of the product; it does not vary according to the
number of transactions in the production process, as normally occurs under multistage taxes. As a result
the tax does not pyramid because it depends on the value added at each stage, not the total transaction
price at each stage, and each firm receives credit for taxes paid in prior stages of the product flow. Thus,
the tax base for any firm in the production-distribution process will equal its value-added — the difference
between file value of its sales and the value of its purchases -instead of the value of its sales (or gross
receipts). The self-enforcing nature of VAT makes it attractive when Ihe tax-compliance climate is not
good. VAT induces purchasers to require a documented receipt from vendors for taxes paid, because
those receipts will be used to pay part of the taxes vendors will owe when they make sales. Vendors pay
the tax because the purchasers of those items demand tax receipts for credit purposes,
Limitations: The European experience with VAT shows that tax evasion still exists and delinquency
continues to be a problem, despite the self-enforcing nature of VATS.
Reference for Further Information: Mikesell, John L, Fiscal Administration: Analysis and
Applications for the Public Sector, Third Edition, Brooks/Cole, Belmont, CA, 1991.
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OTHER
Description:
Actual Use:
Potential Use:
Advantages:
Limitations:
Reference for Further Information:
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COMPARISON MATRIX FOR GENERAL TAXES
Criteria/
General Taxes
•"Corporate
Receipts
Corporate
Income
*Death/
Gift
Individual
Income
"Local Sales
Personal
Property
*Real
Property
*State Sales
and Use
Value Added
Actual
Use
Low
Low
Low
Low
Low
Low
High
Low
Low
Revenu
e
Size
High
High
Mod.
High
High
Low
High
High
Mod.
Revenue
/
Stability
High
Mod.
Low
Mod.
High
Mod.
High
High
Mod.
Admini-
strative
Ease
High
High
Mod.
Mod.
High
Low
High
High
Low
Equity
Mod.
Low
High
Mod.
Low-
Mod.
Low
Low
Low
High
Cost/
Benefit
Ratio
Mod.
Low
High
Low
Mod.
Mod.
Mod.
Low
Low
Environ-
mental
Benefits
High
Mod.
High
Mod.
Mod.
Mod.
High
High
Mod.
High - High use (over 25 states/many localities); criteria score high (many advantages);
High revenue yield (over $50 million annual state revenue, currently)
Mod - Moderate use (10-25 states/many localities); criteria score in medium range;
Moderate revenue yield
Low - Low or rare use; criteria do not rate well (many limitations, and one or more major implementation
problems); Low revenue yield
* Star indicates best rated mechanisms
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l.A.2. SELECTIVE SALES TAXES
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l.A.2. SELECTIVE SALES TAXES
Description: Selective sales taxes are taxes on the sale of particular commodities or services.
Selective sales taxes include all other sales and use taxes that are not applied to the general public as a
whole. These taxes are sometimes termed excise taxes. They are levied either as a percentage of the
sale or price of the item, or as a flat charge per item. Compared to general sales taxes, selective sales
taxes have been more widely used by States and localities, although for environmentally-related
products (e.g., fertilizer/pesticide taxes as opposed to alcohol taxes) the revenue yield is not yet high.
Some selective sales taxes are collected annually at the point of production, as opposed to the point of
sale, to enhance administrative efficiencies in collection. For example, gasoline taxes typically are paid
by manufacturers, who then are reimbursed from revenues collected at the gasoline pump. Many green
product taxes can be most efficiently collected directly from producers or distributors, who typically
will pass on costs to consumers. Selective taxes which do not involve sales, such as effluent fees, are
discussed under Section I.C.: Special Charges.
Advantages: Selective sales taxes are more easily dedicated to a particular environmental program
compared to general sales taxes, since there often is a more direct relationship between the particular
type of product in the tax base and the use of the funds for environmental purposes. For example, the
gasoline tax can be dedicated to oil pollution control, the real estate transfer tax to bond related
acquisitions, and certain green product taxes to water quality. Such taxes may have inherent
environmental incentives, i.e., avoiding the tax may lead to behavioral shifts resulting from conservation
of use or purchase of "safer" products, although this reduces revenue yield. Some taxes such as the real
estate transfer tax, have been used to make interest payments on environmental bonds.
Limitations: The tax base for selective sales taxes is much narrower than for general taxes. Therefore,
a higher rate must be charged to generate the same amount of revenue, which may cause inequities.
Sales taxes typically are highly regressive, since it is difficult to use graduated rate structures depending
on the economic circumstances of the purchaser. However, more "toxic" products could bear higher tax
rates lhan less toxic products, if this could be appropriately measured. Pollution "havens" may arise
between States and localities when taxes are not uniform local sales taxes typically must have State
approval.
Summary: State use of selective sales taxes is widespread, and for environmentally-related products
and services is increasing. However, revenue yield remains modest and there is little uniformity among
States. Some high revenue-producing taxes used in virtually all 50 States, such as alcohol and tobacco
taxes, rarely are dedicated to environmental programs.
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LIST OF SELECTIVE SALES TAXES
(In Alphabetical Order)
1. Alcoholic Beverage Taxes
2. Amusement Taxes
3. Energy Taxes
4. Fertilizer/Pesticide Taxes (Agricultural Chemicals)
*5. Green Product Taxes
*6. Hard-to-Dispose Taxes
*7. Hotel and Resort Taxes
8. Insurance Premium Taxes
9. Litter Control Taxes
10. Marine and Aviation Taxes
11. Miscellaneous Selective Sales Taxes
*12. Motor Fuel Taxes
13. Motor Vehicles Sales and Registration Taxes
14. Petroleum Products Taxes
* 15. Real Estate Transfer Taxes
16. Rental Car Taxes
*17. Tobacco Taxes
18. Watercraft Sales Taxes
* Stars indicate most highly rated mechanisms as described in the Comparison Matrix at the end of
Ihe narratives. See Introduction to the Guidebook for a description of the criteria used. Ratings of
"High", "Moderate", and "Low" are used for comparison purposes only, as some ratings are
necessarily subjective and data are incomplete.
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ALCOHOLIC BEVERAGE TAXES
Description: Alcoholic beverage taxes are based on volume or value, and include liquor, wine and
beer. Along with tobacco and lottery/gambling taxes, alcohol taxes are often termed "sin" taxes. Wine
coolers and similar beverages could be included.
Actual Use: All 50 States, many localities, and the federal government, levy rather steep taxes on
over-the-counter purchase of all alcoholic beverages. Half of the States currently earmark alcohol tax
receipts, typically for local revenue-sharing and State alcoholism prevention and rehabilitation
programs. However, no States have dedicated alcohol tax revenues to environmental protection as yet,
although this is proposed from time to time.
Potential Use: Since alcohol is distilled from agricultural products, State or local governments could
dedicate a surcharge on the alcohol tax to agricultural runoff control or other land-based programs.
Alternatively, since breweries require a large volume of very clean water and discharge wastewater
from distilling processes, revenues could be dedicated to drinking water treatment and point source
water pollution control programs. Breweries might also be taxed directly. Tax surcharges could be
extended to currently non-taxed consumption, such as at military commissaries. Imports would have to
be accounted for.
Advantages: Since administrative records of alcohol sales already exist, a tax surcharge would be
administratively simple to collect and track. Consumption is widespread, and thus revenues could be
significant with an additional tax, for example, of 1%. The demand for alcohol is relatively unresponsive
to price changes, and thus a tax increase may not cause a decrease in sales sufficient to full offset
revenues.
Limitations: All consumption taxes are highly regressive and, therefore, may be considered in this
context as inequitable. Since alcohol taxes already are extremely steep, additional costs may impose
undue hardship. The cost/benefit relationship is questionable. Depending on the State, alcoholic
beverage taxes would face strong opposition from the alcohol industry. Lack of uniformity among State
taxes and surcharges already has given rise to pollution "havens" between States, with consumers
crossing State lines to make purchases, thus reducing tax yield for some States. It might be difficult to
retain the dedication of alcohol surcharges for environmental programs, since total revenue yield is large
and commonly "tapped out" for other State and local programs.
Reference for Further Information: National Conference of State Legislatures (NCSL),
Earmarking State Taxes, Denver, CO, April 1995; U.S. Advisory Committee on Intergovernmental
Relations, Significant Features of Fiscal Federalism, 1991.
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AMUSEMENT TAXES
Description: Taxes on ticket sales to sports or entertainment events, or on gross receipts from events.
Parimutuel taxes are charged on amounts wagered at race tracks. Gambling casinos could be included
as well. Use of lottery ticket purchases is discussed subsequently in Section 8., Environmental
Lotteries.
Actual Use: Amusement taxes are used by both State and local governments for a variety of purposes,
including stadium construction and renovation. However, dedication to environmental programs is rare.
Illinois dedicates a share of proceeds from its parimutuel tax to local park districts, and Oregon
earmarks a small portion for youth conservation programs.
Potential Use: Revenues from amusement and gambling taxes could be used to offset the impact of
large numbers of visitors to a particular site or area. For example, a county with a sports arena and/or
a theme park could use the tax funds generated to cover additional water and solid waste disposal costs
created by visitors. States could dedicate amusement taxes to recycling, litter control, or greenways
beautification programs.
Advantages: Amusement taxes spread the costs of providing government services to benefitting
visitors. Ticket sales are relatively easy to track, although government collection systems must be
established. Taxes are highly equitable in that non-local and out-of State residents can help subsidize
the cost of governmental services.
Limitations: Demand for tickets to sporting and other entertainment venues can be relatively sensitive
to price increases, and therefore taxes could reduce the number of tickets bought and thereby lower
revenues. Revenue yield may not be high.
Reference for Further Information: National Conference of State Legislatures (NCSL),
Earmarking State Taxes, Denver, CO, April 1995.
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ENERGY TAXES
Description: Energy taxes are surcharges on regular customer utility bills, such as electricity, heating
oil or gas, and even telephone charges. Energy taxes could also be charged directly to utility
companies, which then probably would pass costs on to consumers.
Actual Use: Many localities, and a few States, have energy surcharges-taxes to fund environmental
programs among other uses. Maryland has a special electric energy tax which is reflected on regular
electric bills to all customers, and California has a small utility sales tax based on kilowatt generating
capacity. Massachusetts also has established a sales tax on all utility bills. Overland, Missouri has a
3.5% utility surcharge dedicated to open space and greenways. A Federal "BTU Tax" was proposed
and widely discussed in 1993, and the concept of energy taxes in general is often debated.
Potential Use: Any utility bill could be a vehicle for such surcharges, the receipts of which could be
dedicated to the corresponding program, such as heating fuels to spill prevention and recovery projects,
and electricity surcharges to air pollution control and acid rain programs. The concept could be
extended to cable television services, as well as telephone services although these are already subject to
federal, State and local taxes.
Advantages: Energy consumption is readily estimated and tracked on a national, State and local basis.
Tax surcharges would be easy to collect through regular billings, which the utility company then would
rebate to the relevant governmental unit A very close cost/benefit relationship might be attained
depending on subsequent program dedication, since energy production has such strong environmental
impacts. Even low-level increases to annual residential costs for total energy consumption, such as
$5.00 per year, is estimated to yield $10 billion nationwide. The yield would be relatively stable, and
any resulting energy conservation could yield important environmental benefits. State and local
governments could structure surcharges to reflect local economic conditions and existing tax burden,
and provide special subsidies, e.g., for lower income households.
Limitations: Compared to water and sewer utility charges, heating fuel and electricity costs are
already steep, although smaller than the relative costs of cable television. Thus, the impact on some
residential customers could be high within an already highly regressive cost structure. Graduated tax
structures might enhance equities but would be administratively complex since, other than heating fuel
for the elderly in some localities, utility bills are rarely subsidized. If based on the cost of providing
energy, revenue yield could fluctuate dramatically with the price of oil.
Reference for Further Information: National Conference of State Legislatures (NCSL),
Earmarking State Taxes, Denver, CO, April 1995; Warren, Richard E, "Funding Environmental
Values," presented at the Public Works and the Human Environment International Symposium, Seattle,
Washington, April 1995.
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FERTILIZER/PESTICIDE TAXES
(Agricultural Chemicals)
Description: Agricultural chemical taxes are imposed on fertilizers, pesticides, agricultural additives
and minerals, and some herbicides, either as a retail sales tax or as a sales production tax, i.e., a tax
placed directly on the producer, manufacturer or distributor but based on a percentage of the item
value to be sold. They represent a type of green product sales tax.
Actual Use: At least four States, Wisconsin, Iowa, Minnesota and Oregon, assess a surcharges on
fertilizer/pesticide sales or charge producers/distributors directly. Typically, these and other States also
charge fertilizer/pesticide product inspection, registration and/or licensing fees (discussed subsequently
under Part B: Fees). Wisconsin charges $2,000 for each manufacturer of the active (toxic) ingredients
in a pesticide, and $100-$300 for pesticide distributors; Iowa assesses a dedicated tax on nitrogen-
based fertilizers at $.75 a ton; Minnesota levies a sales surcharge on all agricultural chemicals collecting
$2.5 million annually; and Oregon levies a $.20 -.60 per ton tax on producers.
Potential Use: This tax could fund remediation of agricultural nonpoint source and groundwater
pollution. It could also be used to fund research and technical assistance for sustainable fanning
techniques fliat have reduced environmental impact.
Advantages: The tax could generate significant revenues due to the relatively large volume of fertilizers
and pesticides used. States could employ graduated rate structures which vary according to the toxicity
of 1he ingredients in each item, thus improving equity considerations. Such taxes are relatively easy to
collect if imposed on producers directly, and may discourage excessive use of harmful products
(leading to declining revenues). They could include residential garden use.
Limitations: Although there is a direct cost/benefit relationship between agricultural chemical use and
pollution, it would be difficult to apply all revenue receipts to nonpoint source projects because such
projects are generally lower cost compared to point source projects. The tax is highly regressive and
inequitable in terms of the cost to small farmers versus large agricultural businesses, and impacts
vegetable and fruit producers especially hard. Taxes would be strongly opposed by the agricultural
lobby because of toe importance of fertilizers/pesticides to reliable crop production. Pollution "havens"
between States might be created if the taxes were not uniform across States. As a sales tax,
fertilizer/pesticides taxes might be as efficiently and equitably administered at the federal as opposed to
State level, although then would fall most heavily on crop producing States.
References for Further Information: National Conference of States Legislatures (NCSL),
Financing Clean Water, Non Point Source Pamphlet, June 1991; U.S. EPA Report to Congress,
Alternative Funding Study: Water Quality Fees and Debt Financing Issues, Syracuse University,
June 1996; Congressional Research Service, Funding Water Quality Programs, 1992.
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GREEN PRODUCT TAXES
Description: Green product taxes are sales tax surcharges, which might be levied on a large range of
household and commercial products which negatively impact water or air quality. The use of the term
"green" here implies that the product is potentially harmful, not "safe". Taxes may be imposed as a
percentage of value, or a flat fee per item (see Section 7, Deposit Refund Systems ).
Actual Use: States increasingly use green product taxes, although they still are most prevalent as
hard-to-dispose products taxes, pesticide/fertilizer taxes, and petroleum product taxes, described
separately. The majority of States now have recycling program charges (e.g., aluminum cans and some
plastics). Examples of newer green product sales tax programs include Florida's taxes on toilet paper
and dry cleaning solvents, Wisconsin's taxes on de-icing salts, and Washington's wood stove sales tax.
Illinois and Washington also have sales tax surcharges on various toxic products. The federal
government has established a tax on ozone-depleting chlorofluorocarbon yielding almost $1 billion
annually. Green product taxes are used extensively in Western Europe.
Potential Use: The list of potential products in a tax base is very long, and includes: personal cleaning
products (soaps, shampoos, mouthwash, etc.); household paper products; cleaning products and
solvents; chlorides; detergents; cooking oils; plumbing fixtures, chemicals, and copper pipe; paint
products; photo processing chemicals; and synthetic dyes and inks.
Advantages: These taxes could generate significant revenues, if a wide array of products were
included in the tax base and rates were at 3% or more of sales price. When collected directly from
producers/manufacturers as opposed to over-the-counter, they are relatively easy to collect They can
heighten awareness of the negative environmental impacts of such products, and lead to behavioral
shifts such as conservation and the development of new, "safe" products.
Limitations: These taxes are regressive, impacting both small producers and consumers adversely. It
is difficult to define and limit the tax base, as the list of harmful products is so large, and data on
adverse environmental impacts small. The lack of quantitative toxicily data makes it difficult to employ
a more equitable, graduated rate system for different products. Administrative complexities impact the
stability and predictability of the revenue stream, as new products and producers will appear or
disappear over time, and be imported. These taxes create pollution havens if the tax base and rates are
not uniform across States, which is hard to achieve. Industry and consumer resistance may be high.
For many products, green taxes may be best run as a federal and not State program.
References of Further Information: U.S. EPA Report to Congress, Alternative Funding Study:
Water Quality Fees and Debt Financing Issues, Syracuse University, June 1966; Natural
Resources Defense Council; Reprint of "Life and Taxes", The Amicus Journal, 1995; Association of
Metropolitan Sewerage Agencies, "A Federal Green Fee for Clean Water", July 1996.
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HARD-TO-DISPOSE TAXES
Description: Taxes on hard-to-dispose items that contribute heavily to solid waste disposal
problems, such as new or used tires and lead acid batteries, paint and solvent containers, and used oil.
They can be assessed at a flat rate per item, or as a percentage of the value of the item. When
collected at 1he time of purchase, they represent a type of green product tax. If collected at the time of
disposal, they are like solid waste disposal fees (see Section 7, Deposit Refund Systems).
Actual Use: These taxes now are used extensively by States and, for some items, as part of local
government recycling and disposal programs. For example, Arkansas charges $1.50 for each tire sold
at retail and $10.00 for each car battery purchased if customer does not bring the old battery in
exchange. Florida charges $1 for each new tire or battery purchased, while North Carolina assesses
1% of Ihe value of each tire purchased. Other States imposing taxes for new tires include Kansas,
Nebraska, Oklahoma, Oregon and Wisconsin. Montana charges a junk vehicle fee. The Federal
Highway Trust Fund has a graduated tire tax ranging from $. 15/lb, to $10.50/Tb. Used oil taxes are
imposed in Florida and a number of other States.
Potential Use: The tax base could be broadened by imposing charges on any items contributing to
landfill problems, such as fast food packaging materials, cars, mattresses and household appliances, or
on goods that have no recyclable content, such as disposable diapers. Some taxes might be refundable
analogous to deposits on recyclable or reusable material like glass bottles. Florida's Advance Disposal
Fee exempts any item, such as aluminum and steel cans, 50% of which is recycled Statewide. Sales
taxes also could be imposed on surrogates for landfill use, such as plastic garbage bags, garbage and
trash cans, and recycling bins.
Advantages: Hard-to-dispose taxes are easily understood by the public and provide a direct
cost/benefit relationship when proceeds are used for local landfill, incinerator or recycling costs. As in
Arkansas and Florida, taxes could be structured to encourage recycling of reusable commodities and
encourage recycling markets, although this leads to an unpredictable and diminished revenues.
Limitations: It may be administratively difficult to separate out specific commodities for taxation.
Double taxation, if such products are also taxed as green products, may be hard to avoid and would
heighten inequities. If taxes are collected at the point of disposal and not sale, collection may be
administratively expensive, and illegal dumping may result This may also be die case if local and/or
State fees are not uniform Revenue generation and the environmental goal of encouraging
conservation/recycling are very much in conflict for these taxes.
References for Further Information: Natural Resources Defense Council Reprint, "Life and Taxes",
The Amicus Journal, 1995; New York State Department of Environmental Conservation, Survey of
State Funding for Solid Waste Management, June 1991.
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HOTEL AND RESORT TAXES
Description: Hotel and Resort taxes are taxes on room accommodations, or occupancy, charged
either per night or as a percentage of the room rate.
Actual Use: Both State and local governments have used hotel and resort taxes for various purposes,
including alleviating the burden placed by tourism on Hie local culture. For example, Dade County,
North Carolina used occupancy tax proceeds to finance a new wastewater treatment facility made
necessary by the influx of seasonal tourists. Delaware dedicates 12.5% of its public accommodation
tax to beach preservation. Flagstaff, Arizona has a 0.2%, 10-year "BBB" tax on hotels, bars and
restaurant charges dedicated to beautification, greenways and trails, as well as marketing and economic
development. Montana allows resort communities to charge up to a 3% tax on goods and services sold
to tourists, such as hotels, campsites, restaurants and skiing. Designated Colorado communities have a
similar tax
Potential Use: Occupancy taxes could be used to finance operating costs for State and local parks
and natural areas that attract tourists. Revenues could also finance operating and capital costs for local
services. For example, occupancy tax revenues could finance capital costs for fee expansion of a solid
waste facility to accommodate the influx of tourists to a particular area
Advantages: Occupancy taxes spread the costs of maintaining State and local natural areas and
government services to those who benefit from them. Because non-local and out-of-State residents
must pay such taxes, they are equitable and maintain a good cost/benefit relationship.
Limitations: Since the demand for hotel space is relatively elastic, a price increase could reduce
occupancy rates, and ultimately tax revenues, particularly if a city or county unilaterally imposes an
occupancy tax higher lhan in surrounding areas. If no occupancy tax currently exists, collecting
occupancy information for hotels, motels, and rental units each month could involve high administrative
costs. Revenue yield might be low, unpredictable, and lack stability.
Reference for Further Information: The Trust for Public Land, Greensense: Financing Parks and
Recreation, Phyllis Myers, Editor, San Francisco, CA, Telephone: 800-714-LAND, Internet:
http^/www.tpLorg/tpl.
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INSURANCE PREMIUM TAXES
Description: These are taxes that are levied on insurance premiums, or on the gross receipts of
insurance businesses.
Actual Use: Insurance taxes are used by State governments, and they are frequently dedicated to
pension funds.
Potential Use: The proceeds from premium taxes could be dedicated based on the type of insurance.
For example, proceeds from taxes on auto insurance could fund air pollution control and proceeds from
taxes on homeowner's insurance could fund operating costs of water and wastewater facilities. The
concept could be expanded to include liability insurance required in some States for projects falling
under Superfimd laws, and revenues collected could be used to provide funds for abandoned facilities
or very small facilities for which liability insurance is very cosily.
Advantages: Taxes on insurance have a large tax base and thus could yield a significant and
predictable revenue stream at a modest cost For mandatory types of insurance, such as auto liability
and residential fire insurance, and flood plain insurance in some States, revenues will be extremely
dependable.
Limitations: Insurance premiums are not a good proxy for assessing the environmental risk of an
individual. For example, an air pollution control tax based on auto insurance premiums would capture
less revenue from older cars that have lower premiums, but generally higher emissions levels, than from
newer cars. Thus, inequity may result and lower the cost/benefit relationship. Collection by
governments may prove difficult, and administrative tracking will be costly.
Reference for Further Information: Apogee Research, Inc., Preliminary Review of Alternative
Superfund Financing Schemes (unpublished report), July 1991.
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LITTER CONTROL TAXES
Description: Litter taxes are taxes on the sale of virgin newsprint and paper products, such as
newspapers and magazines, that contribute significantly to solid waste volume. When assessed as sales
taxes, litter taxes represent a type of green product sales tax.
Actual Use: The imposition of litter control taxes is generally limited to State governments. At least
three States use them extensively, dedicating tax receipts to solid waste programs. For example,
Nebraska's litter tax funds solid waste facilities. The tax can also be structured to encourage
conservation. To encourage newspapers to use recycled newsprint, North Carolina taxes virgin
newsprint and dedicates the proceeds to a solid waste management trust fund. Washington spends its
litter control tax revenues on recycling and waste reduction programs.
Potential Use: These taxes could be used to finance any solid waste disposal costs, including facility
operation and maintenance, and State recycling facility and program costs. The concept could be
extended to cover sales catalogs which would broaden the tax base and capture revenue from out-of-
State businesses.
Advantages: Litter control taxes might encourage consumers to buy less of the taxed commodity,
reducing the total amount of solid waste but also lowering revenue yield. The cost/benefit ratio can be
strong depending on program dedication. If taxes are collected directly from producers, they can be
relatively easy to collect and administer. However, equity is reduced if ihe tax is then passed on to the
consumer.
Limitations: Virgin newsprint and other paper taxes would face political opposition from the paper
industry or other affected industries.
Reference for Further Information: National Conference of State Legislatures (NCSL),
Earmarking State Taxes, Denver, CO, April 1995.
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MARINE AND AVIATION TAXES
Description: These are taxes on fuel used by commercial or recreational boats and inland barges, and
aviation fuel, tickets and airport service charges. Marine and aviation fuel taxes could be implemented
either by removing the exemptions from highway fuel (gasoline) taxes which exists in many States, or by
instituting fuel tax surcharges at different rates.
Actual Use: Marine fuel taxes are generally limited to State governments. In Alaska, the tax funds
water and harbor facilities. In Iowa, marine fuel revenues are dedicated to Department of Natural
Resources programs. California, Maryland, Oregon and Washington also use these tax receipts to fund
coastal and estuary programs. Aviation fuel and airline ticket taxes (almost 8.5% of ticket value) are
assessed by the federal government, and many localities impose airport service fees to all passengers of
$1-$3.00, which are initially collected by commercial airlines and were authorized under the 1990
Federal Aviation Safety and Expansion Act, as well as aircraft landing fees. The federal government
also imposes a port tax (about .04% of cargo value) and an inland barge fuel tax (slightly over 10
cents/gallon).
Potential Use: Marine tax revenues could be used to fund research on water pollution, particularly
on near coastal and estuarine water quality, and marine fuel spill prevention and response. Sewage
pump-out stations for recreational boaters also is a likely area for funding. Taxes on the use of public
docking and pump-out facilities could be used as a surrogate tax and, if flat tax rates were employed,
might be easier to collect. State or localities could assess surcharges on federal air ticket, port, and
inland barge fuel taxes, although these charges already are quite steep. Aviation-related taxes, often
used for aircraft safety and airport renovation, could be used to support air pollution and noise
abatement programs as well, or safe disposal of de-icing fluids.
Advantages: Implementing marine fuel taxes assures equity among all gasoline and diesel fuel users,
although current marine fuel rates generally are lower than highway gasoline taxes. Having boat and
barge users pay some of the costs of pollution control associated with their activities creates a solid
cost/tenefit relationship, as well as heightening awareness of potential water quality problems.
Aviation-related taxes can be a particularly good source of local revenue and, similar to rental car
taxes, help ensure equity by including out-of-State travelers..
Limitations: If a State does not already tax marine and aviation fuel, it could be costly to set up a
collection and accounting system. The same is true for local mooring and port taxes. The revenue
stream probably will fluctuate depending on a number of factors, including weather and travel
conditions, and the current cost of air travel.
Reference for Further Information: Governor's Panel Financing Alternatives for Maryland's
Tributaries Strategies, Maryland University Sea Grant College, August 1995.
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MISCELLANEOUS SELECTIVE SALES TAXES
Description: Any product or specific activity could be subject to a State or local sales and use tax,
provided authority is granted by the State to a locality and voter approval is gained Local sales tax
may exist in States where no general sales and use tax exist. The taxes described are termed
miscellaneous because they exist sporadically, and are designed to leverage or replace olher monies.
Actual Use: to recent years States and localities have been active and extremely creative in imposing
taxes on individual products or uses. Most taxes are relatively small and limited by a specific time
period, or to raise a specific dollar amount, and then are ended. Sales taxes are designed to meet
unique sales characteristics of individual communities, and may or may not be environmentally-or green
product-related, although the relationship may attract more public support. Examples of local sales
taxes are the BBB (bed, board and booze") tax in Flagstaff, Arizona which raises $2 million a year for
open space and trails and is leveraged by Arizona's lottery and federal transportation funds. Virginia '
Beach uses a tax (sales and service) on cellular phones to make regular payments on farmland
development rights, with Treasury bond proceeds guaranteeing the end balloon payments. Texas taxes
sales of sporting goods (the only State to do so), imposed to replace declining cigarette tax revenues
supporting parks and recreation initiatives. Minnesota has a $2 per ton birdseed manufacturing tax, and
Florida places a penny per pound assessment on Everglades-grown sugar dedicated to the Everglades
Trust Fund which leverages additional government dollars.
Potential Use: Any locality may seek to establish a selective sales tax for a special, and widely
supported environmental purpose, such as parks, recreation, open space, nature centers and trails,
environmental education, and the like. Fees could be designed in concert with federal, State and
private sector programs to leverage additional monies. They could be particularly useful in States
where there is no general sales and use tax.
Advantages: The advantages of selective sales tax pertain to their specificity and short-term nature,
thus yielding direct environmental benefits and heightened public environmental awareness without
becoming too burdensome. The leveraging potential, which may be spelled out at the outset, adds to
revenues and increases popularity. Selective sales taxes may be less regressive than general sales taxes
since in most cases a "higher end" product or activity is taxed, and non-resident's pay as well.
Limitations: There may be voter revolt against special taxes, particularly if the project is not properly
presented, widely supported, or completed on a timely basis. Voter approval is not assured. Revenue
raising potential may be small, unstable or unpredictable if there are ways to avoid the tax..
Reference for Further Information: The Trust for Public Land, Green Sense: Financing Parks
and Conservation, Phyllis Myers, Editor, San Francisco, CA, Telephone: 800-714-LAND,
http://www.tpl.org/tpl
MOTOR FUEL TAXES
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Description: Motor fuel taxes, commonly termed gasoline taxes, are imposed on fuel used in all
vehicles, except off-road vehicles. Fuel includes both gasoline and diesel fuel. Off-road vehicles
typically are exempted because taxes normally are used to fund highway improvements.
Actual Use: All 50 States have gasoline taxes, typically dedicated to highway construction and
maintenance and sometimes to local streets and roads. Three States, Illinois, Massachusetts and
Nevada currently earmark between .3% and 1.7% to environmental programs. California earmarks
$10 million annually for open space acquisition by the State Land Trust Funds. At least four States,
New Mexico, Oklahoma, Vermont and Washington, add a surcharge to existing taxes for
environmental spending. Total gasoline rates generally range from 8 cents to 25 cents per gallon, with
surcharges being considerably less, typically under one cent per gallon. The Federal Leaking
Underground Storage Tank Trust Fund is financed by a 0.1 cent per gallon federal excise tax on motor
fuels. The Federal Highway Trust Fund is supported in large part by federal gasoline taxes, which have
averaged 5 cents/gallon less than similar State taxes.
Potential Use: Because of the impact of auto emissions on air quality, revenues from Ihe tax could be
used to fund air pollution research or control. State motor fuel taxes could also be used to finance
underground storage tank clean-up, such as done in Illinois.
Advantages: Because of the broad tax base, high tax rates, and somewhat inelastic demand, gasoline
tax receipts have the potential to raise considerable revenues, although surcharges would raise less and
may be less predictable and stable. Gasoline taxes exhibit a strong cost benefit relationship when
dedicated to environmental programs. Since all States already have motor fuel taxes, collecting
surcharges would involve few additional administrative costs.
Limitations: Many States have historically dedicated motor fuel taxes to highway funds, and in some
States, revenues from these taxes may be constitutionally or statutorily dedicated to these uses. Since
the tax also increasingly is used to raise general revenues at the State level, and is the largest source of
earmarked road money, it is one of the slowest growing taxes levied by States because gasoline
consumption per mile has declined and most States use flat per gallon rates. Thus, it may be difficult to
legislate new earmarking and surcharges, and safeguard dedication to environmental programs.
Gasoline taxes are notoriously regressive and, thus, inequitable.
Reference for Further Information: National Conference of State Legislatures (NCSL),
Earmarking State Taxes, Denver, CO, April 1995.
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MOTOR VEHICLE SALES AND REGISTRATION TAXES
Description: Motor vehicle taxes are placed on the sale of new and used vehicles by States. They
may include recurrent (annual or biennial) registration of existing vehicles, or registration fees may be
used as a surrogate for a sales tax. Some States incorporate emission-based fees, including for
inspection, into this tax.
Actual Use: All 50 States charge substantial taxes for the purchase of motor vehicles, as well as
ongoing registration and licensing taxes. Generally, the funds raised go to pay for highway-related State
programs. At least three States, including Washington, now dedicate a small portion of these types of
taxes to air pollution control programs. Washington also charges a tax surcharge on campers and
trailers. Illinois raised $5 million in 1997 from the title transfer tax to fund State and local trails and bike
paths.
Potential Use: Earmarking a portion of these taxes or tax surcharge receipts to air pollution control is
an obvious choice. Revenues could be dedicated to solid waste programs as well. The sale or
transfer of recreational vehicles and heavy trucks could be taxed at higher rates.
Advantages: These taxes clearly demonstrate the relationship between motor vehicles and air
pollution. They could be graduated depending on the air pollution control devices on the vehicles, e.g.,
older cars with less efficient catalytic converters could be assessed more, as well as on the specific use
of the vehicle.
Disadvantages: Many States have statutory or constitutional limits on the earmarking of these funds,
such as with motor fuel taxes. These taxes are probably not a large revenue source because of this fact
and the limited tax base. Collectability may be made more difficult if special surcharges are added, and
auto individual dealers may be able to avoid new charges.
Reference for Further Information: National Conference of State Legislatures (NCSL),
Earmarking States Taxes, Denver, CO, April 1995.
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PETROLEUM PRODUCTS TAXES
Description: Petroleum products taxes could cover a wide range of products derived from ihe refining
of crude oil. Excluding motor vehicle gasoline, diesel and aviation fuel, special petroleum products
might include plant condensate, lubrication oils, crankcase motor oil, kerosene, benzol, residual fuel,
petroleum coke, asphalt base, and liquefied or liquefiable gases such as butane, ethane and propane.
Derivatives such as petroleum jellies, cleaning solvents and asphalt paving might also be included
Petroleum product taxes present a type of specialized green product fee, and could be imposed as a
percent of production, wholesale or retail value. Fuel oils and gas for residential and commercial
heating represent an energy tax, discussed earlier along with electric energy surcharges.
Actual Use: These taxes increasingly are used by States, and dedicated to underground storage tank
projects and oil spill or conservation funds. Tennessee earmarks 28.6% of its special petroleum
product tax to an underground storage tank fund, Oklahoma dedicates its excise taxes on petroleum
and gas to oil conservation and well plugging. Washington and Maine dedicate all tax receipts to oil
spill response and insurance. Nebraska taxes petroleum wholesalers directly. Hawaii earmarks a
petroleum product barrel import tax for groundwater protection. New Hampshire taxes all stored oil.
The Federal Superfund Trust Fund was supported in part by a tax of about 10 cents per barrel of
domestic and imported crude oil, and by petroleum chemical feedstock and other taxes. The Federal
Highway Trust Fund is supported by taxes on the sale of elhanol/methanol from petroleum.
Potential Use: Petroleum product taxes could be used by any State to fund oil leakage or spill
projects. Because of existing federal taxes, equity would be enhanced by avoiding federally-taxed
products. The list could be expanded to certain plastics and synthetic rubbers.
Advantages: The cost/benefit relationship between the pollution source and cleanup or prevention is
attractive and easily understood, especially with oil production and storage. Demand is inelastic.
Limitations: Administration and collection could become complicated. It might be difficult to single out
products for taxation in the first place, as the potential list is long, especially if expanded to plastics.
There is potential overlap with other taxes, particularly federal excise taxes supporting the above-
mentioned federal trust funds, and there are many possible collection points. Foreign imports would
have to be accounted for in some fashion, or substantial substitution might occur. It might prove easier
to charge certain petroleum producers directly. The petroleum and chemical industries are already
heavily taxed, resulting in increased inequity of impacts.
References for Further Information: U.S. Department of Transportation, Federal Highway
Administration, Financing Federal-Aid Highways, May 1992; Congressional Research Service
Report, Summaries of Environmental Laws Administered by the Environmental Protection
Agency, January 1993.
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REAL ESTATE TRANSFER TAXES
Description: Real estate transfer taxes are charged to the buyer and/or seller, of real property at the
time of sale, based on a percentage of sale value of the property, a flat deed registration tax, or a
combination. A similar tax is called a documentary stamp tax
Actual Use: Real estate transfer taxes are widely, and increasingly, used by both State and local
governments. At the State level tiie tax has funded trust funds for environmental infrastructure and open
space/natural lands acquisition, park rangers salaries park maintenance, watershed and wetlands
protection, and conservation easements, and has been a dedicated source of payment for revenue
bonds for these projects. For example, Florida and Tennessee finance land acquisition and habitat and
wetlands restoration with taxes of 7.5 cents/$100 and 28 cents/$1000, respectively. Montana finances
State park programs, and Washington uses tax revenues to fund wastewater and drinking water capital
facility construction. Illinois raised $13 million in 1997 to fund a grant program for local open space
acquisition. New York raised $120 million in the same year dedicated to pay a portion of Hie interest
on its 1996 mega-environmental bond act, particularly for watershed protection projects, and North
Carolina and Vermont similarly fund their environmental bonds. Maryland's 0.5% tax funds
Chesapeake Bay protection. At the county and city level, Cape Cod voters approved (and
subsequently eliminated) a 1% tax to finance a land bank for open space and trails, but not before ten
other Massachusetts town asked the State to approve similar local real estate transfer taxes. Colorado
communities use the tax for open space and conservation initiatives.
Potential Use: Real estate transfer taxes could be dedicated to any environmental, land-oriented
program, or mitigation of the impacts of rapid land development such as agricultural and urban runoff.
The tax could be extended to new construction.
Advantages: Real estate transfer taxes based on property values generate a large amount of revenue
at relatively low rates. Most governments already have system in place for recording sales which ease
collection, Tax rates can be graduated to increase eqiritability and a close cost/benefit relationship. The
tax leverages additional monies when it is used as a source of bond repayment Dedication of revenues
to popular land protection programs enhances the acceptability of the tax.
Limitations: Revenues depend on the level of real estate market activity, which is subject to wide and
frequent fluctuations based on economic conditions/interest rates, wealher and olher factors.
Application of the tax may have inequitable distribution effects, and increased housing costs in some
areas. Localities must seek State legislative approval to impose the tax, which has not been easy.
Reference for Further Information: The Trust for Public Land, QreenSense: Financing Parks and
Conservation, Phyllis Myers, Editor, Spring and Fall 1997, San Francisco, CA, Telephone: 800-714-
LAND, Internet: http://www.tpl.org/tpl
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RENTAL CAR TAXES
Description: These types of taxes are levied on rental cars, or on the gross receipts of rental car
businesses.
Actual Use: Like hotel taxes, many States and counties use the revenues raised from rental car taxes
for beatification and tourism promotion purposes,
Potential Use: Because of the impact of rental care use on air quality, a share of rental car taxes could
be dedicated by State and local governments to fund the operating costs of air pollution control
programs. Alternatively, these taxes could be used to finance water quality activities in lake and seaside
area frequented by tourists, or to mitigate any environmental problem exacerbated by increased
tourism.
Advantages: Rental car taxes could help spread the costs of maintaining air and water quality to those
who benefit from it, including out-of-county and out-of-State visitors, which would enhance equity
considerations. These taxes might also serve as an incentive for the visitors to use public transportation,
reducing mobile source air emissions but producing a corresponding drop in revenues.
Limitations: At the local level, imposing a new tax or increasing an existing tax could cause a city or
county to lose rental car business to other, lower-tax jurisdictions. Similarly, State business as a whole
could be affected negatively, particularly in areas bordering other States. The revenue yields from
rental car taxes may be small and unpredictable.
Reference for Further Information: Virginia Department of Revenue, Richmond VA, has
information on Virginia's rental car tax.
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TOBACCO TAXES
Description: These taxes are levied on tobacco, based on either volume or as a percentage of value.
Actual Use: All 50 States have tobacco taxes on cigarettes, pipe and chewing tobacco, and cigars.
However, tax receipts typically are used for general revenue purposes. At least three States, Idaho,
Minnesota and Washington, dedicate a portion of tobacco taxes to water quality, including wastewater
treatment facility construction, generating $3 million, $16 million, and $31 million, respectivefy.
California dedicates tobacco taxes to health programs including indoor air protection.
Potential Use: Tobacco taxes could be used to finance programs for agricultural non-point source
control, such as offering economic incentives to encourage tobacco farmers to use best management
practices. In States without tobacco farming, the tax could be dedicated to indoor air pollution or
solid waste programs.
Advantages: Since demand for tobacco still is not too elastic, small earmarks or tax increases in the
form of an environmental surcharge might yield significant revenues. However, larger tax increases
might produce a behavioral response of declining smoking having personal as well as environmental
benefits. Some States, such as Texas have experienced a large decline in revenues from cigarette sales.
Texas now uses a sporting goods sales tax to compensate for lost revenues, generating $32 million
annually.
Limitations: Tobacco taxes are highly regressive, and the failure of states to dedicate tax revenues to
the environment results in a weak cost/benefit ratio. The tobacco industry is in turmoil due to litigation
and recent congressional debate, and a further decline in smoking may ensue. A dedication of revenues
to the environment may not send the right signal for anti-smoking campaigns.
Reference for Further Information: U.S. EPA, Report to Congress, Alternative Funding Study:
Water Quality Fees and Debt Financing Issues, Syracuse University, June 1996. The Trust for
Public Land, Green Sense: Financing Parks and Conservation, Phyllis Myers, editor, Spring 1995,
San Francisco, CA, Telephone: 800-714-LAND, Internet: http://www.tpl.org/tpl.
*
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WATERCRAFT SALES TAXES
Description: Watercraft taxes may be imposed on boat sales and/or boat title registration and transfer.
Actual Use: Although State use of these taxes is widespread, tax receipts generally are not
dedicated to Ihe environment. Currently, Maryland, Virginia, North Carolina and Washington
earmark the tax to marine estuarine programs.
Potential Use: A tax or a percentage of a tax on boat sales could be specifically dedicated to water
pollution control or marine fuel spill cleanup because of the impact of recreational boating on water.
Advantages: Boat owners would pay some of the costs of maintaining water quality, which creates a
strong cost/benefit ratio.
Limitations: Revenue yield is modest and unstable, as general economic conditions and other factors
influence boat sales. Even in Virginia and Maryland, with strong estuary protection programs, boat
sales taxes are actually several percentage points lower than the standard sales and use tax due to the
strength of the boat-building and fishing lobbies.
Reference for Further Information: Governor's Panel, Financing Alternatives for Maryland's
Tributary Strategies, Maryland University Sea Grant College, August 1995; Virginia Department of
Taxation, 1990 Virginia Sales and Use Tax Expenditure Study, Richmond, VA, 1992.
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OTHER
Description:
Actual Use:
Potential Use:
Advantages:
Limitations:
Reference for Further Information:
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COMPARISON MATRIX FOR SELECTIVE SALES TAXES
Criteria/
Selective
Sales Tax
Alcoholic
Beverage
Amusement
Energy
Fertilizer/
Pesticide
*Green
Product
*Hard-to-
Dispose
*Hotel and
Resort
Insurance
Premium
Litter
Control
Marine &
Aviation
Misc. Select.
Sales
Actual
Use
Low
Low
Low
Low
Mod.
High
High
Low
Low
Mod.
Low
Revenue
Size
High
Low
High
Mod.
Mod.-
High
Low
Mod.
Low-
Mod.
Low-
Mod.
Mod.
Low
Revenue
Stability
Mod.
Low
Mod.
High
Mod.
Mod.
Low
Mod.
Mod.
Mod.
Low
Low
Admini-
strative
Ease
High
Mod.
Mod.
Mod.
Mod.
Mod.
Mod.
Low
Mod.
Low
Mod.
Equity
Low
Mod.
Low
Mod
Low
Low
Mod.
Low
Low-
Mod.
Mod. .
Mod.
Cost/
Benefit
Ratio
Low
Mod.
Mod.
Mod.
Mod.
High
Mod.
Low
Mod.
High
Low
Environ-
mental
Benefit
Mod-
Low •
Mod
High
High
High
Mod.
Low
High
Mod.
Low
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COMPARISON MATRIX continued
Criteria/
Selective
Sales Tax
*Motor
Fuel
Motor
Vehicles
Sales &
Registration
Petroleum
Products
*Real Estate
Transfer
Rental
Car
*Tobacco
Watercraft
Sales
Actual
Use
Mod.
Low
Low.
High
Low
Low
Low
Revenue
Size
High
Low
Low-
Mod.
Mod-
High
Low
High
Low
Revenue
Stability
Mod.
Low
Mod.
Mod.
Low
Mod.
Low
Admini-
strative
Ease
High
Mod.
Mod.
High
Low
High
Mod.
Equity
Low
Mod.
Mod.
Mod.
Mod.
Low
Mod.
Cost/
Benefit
Ratio
High
Low
Mod.
Mod.
Mod.
Mod-
High
High
Environ-
mental
Benefit
High
Low
Mod.
High
Low
High
High
High - High use (over 25 States/many localities); criteria score high (many advantages);
High revenue yield (over $25 million annual State yield currently)
Mod- Moderate Use (10-25 States/many localities); criteria score in medium range;
Moderate revenue yield
Low - Low or rare usage; many limitations and one or more major implementation problems exist;
Low revenue yield
* Star indicates best rated mechanisms
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I.B. FEES
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I.B. FEES
Description: A fee is a financial charge for services rendered, or activity undertaken. Fees can be based
on the service provided or benefit received, including potential negative environmental impacts. Fees
establish direct links between the demand for services and the cost of providing them. For example, local
utilities require customers to pay for the cost of providing water and wastewater services. State permitting
fees are used to finance the cost of processing permit applications, e.g., NPDES permit fees.
Inspection/monitoring fees cover the inspection and certification of equipment, facilities, or employees for
environmental compliance. Park and recreation fees finance oversight of the general public's
environmentally-sensitive activities.
Most of the fees described in this section are dedicated to State or local program budgets, i.e., to cover
personnel and other operating costs, as opposed to be capital-generating fees for environmental facility
construction. Fees that provide environmentally-related services, e.g., laboratory testing fees, are termed
administrative service fees. Fees that allow a certain activity to be undertaken that may impact the
environment negatively, e.g., septage disposal, are called activity fees. User fees that pay for utility
services are called utility fees. Utility fees often are applied to capital cost recovery.
Revenue yield from administrative service and activity fees is typically modest, although the utility fee
revenue stream may be significant Another characteristic of administrative service and activity fees is that
many are one-time charges, i.e., imposed only once, or imposed periodically at the time of demand. In
contrast, most utility user fees are recurrent charges imposed at regular intervals.
Advantages: Well-structured fees can be an equitable means of matching program costs to program
beneficiaries. In many cases, instituting a fee essentially eliminates a subsidy for a government service,
treeing up general revenues that could be used to fund other environmental programs. Thus by definition,
many fees have a very close cost/benefit relationship and, if graduated rate structures are used, are highly
equitable. Because they are imposed at the time of service, or through regular billing, they may be relatively
easy to collect. Behavioral shifts do not reduce revenue potential as much as with sales taxes. In many
States, service and activity fees can be set administratively, meaning that no legislative action is required
to impose them. Utility fees, in contrast, typically require public approval or, in the case of privately-owned
facilities, are subject to State regulation.
Limitations: Since they are targeted to a specific service or group, fees have a narrower revenue base
thanmost taxes. In many States, administrative service fees cannot exceed the costs of providing a service,
although there is often wide latitude in defining what constitutes service. Thus while equitable, revenue
potential is sharply curtailed. Some States have expressed increasing concern over a growing resistance
to both administrative and activity fees among industry groups, as well as the general public. Likewise,
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voters frequently defeat passage of even modest utility user fee increases.
Summary: Increased use of administrative service and activity fees by States and localities is a well-
established trend in environmental program funding, encouraged by the federal government Most
administrative service and activity fees are used solely to offset government operating costs, and, although
equitable and directly related to costs and benefits, they provide only a modest revenue yield, hi an effort
to raise more revenue and cover more budgetary costs, the number of State fees has proliferated in recent
years, and may have led to some public backlash.
Utility user fees have been in existence for a long time, particularly for public water supply, and employ
increasingly sophisticated rate structures and billing mechanisms. In recent years, the policy goal of "full-
cost pricing" appears to be more widely recognized and may provide capital cost-recovery in addition to
ongoing operating costs. However, utility charges may be fashioned to accommodate other policy goals
such as economic development, suburban growth, and privatization
.JS
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LIST OF FEES
(In Alphabetical Order)
1. Access Rights
2. Bond Issuance Fees
*3. Connection Fees
4. Construction Fees
5. Franchise Fees
*6. Inspection/Monitoring/Testing Fees
*7. Licensing and Recreational Fees
*8. Local Aquifer Protection Fees
*9. Local Water/Wastewater Utility User Fees
*10. Permitting Fees
11. Product Registration Fees
12. Professional Certification Fees
13. Septic System Impact Fees
* 14. Solid Waste Disposal Fees (Tipping Fees, Septage/Sludge Fees)
*15. State Public Water Supply Withdrawal Fees
*16. Tolls
17. Transporter Fees
18. Water Rights Application Fees
19. Well Permit/Pumping Fees
* Stars indicate most highly rated mechanisms as described in the Comparison Matrix at the end of the
narratives. See Introduction to the Guidebook for a description of the criteria used. Ratings of "High",
"Moderate", and "Low" are for comparison purposes only, as some ratings are necessarily subjective and
data are incomplete
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ACCESS RIGHTS
Description: Access rights or capacity credits are local fees, imposed on a one-time basis, on new users
requesting access, and old users requiring increases in capacity, to water and sewer facilities. In exchange
for payment, applicants are guaranteed future access to a contracted amount of system capacity lhat has
been reserved for their use.
Actual Use: Many local communities sell water and sewer access rights to finance expansion or upgrades
of water and sewer systems. Water and sewer access rights programs are structured in many different
ways. The basic principle is that for a set, one-time charge, the purchaser of a water and/or sewer access
right is guaranteed the right to connect to the system in the future. This is important since possible sewer
moratoriums at a later date would prohibit new residential or commercial development.
Potential Use: The principle of capacity rights to a new facility could be broadly applied. For example,
developers, industry and households could be required to purchase access rights to solid waste
management removal or treatment services, and revenues from the sale of the rights could be used to
finance construction of future solid waste management facilities.
Advantages: New users of government services pay for the expansion, which helps facilitate
governmental planning and provides needed capital in advance of construction. The cost/benefit
relationship thus is very direct.
Limitations: It may be difficult to sell credits in advance, particularly if a community is not experiencing
a high demand for new housing and commercial activity, or seeks to attract economic development. It is
difficult to measure what the needed capacity might be for some new users, which reduces the likelihood
of equity. Revenue may be neither large nor stable.
Reference for Further Information: U.S. EPA, Alternative Financing Mechanisms, August 1992
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BOND ISSUANCE FEES
Description: These are fees that might be imposed by States or localities on environmentally-related
bonds in addition to normal bond" cost of issuance" fees. Fees are assessed as a percentage of total bond
value, including general obligation bonds, special obligation bonds, appropriation-backed bonds, revenue
and private-activity bonds, and other bond instruments. Any environmental infrastructure construction bond
could be included.
Actual Use: New York State collects a bond issuance fee on all State bonds. Rates move on a sliding
scale, i.e., 7 basis points (.07% of value) for bonds under $1 million, 14 basis points/$l-5 million, 21%
basis points/$5-10 million, 28 basis points/$10-20 million, and 35 basis points for bonds over $20 million.
Revenues in New York are collected by the bond issuance agency or authority but rebated to the State
budget general fund
Potential Use: Bond issuance fees could be used by any level of government or special authority issuing
bonds, and dedicated to its general infrastructure capital account. Fee proceeds might also be used to
lower specific debt reserve fund requirements, pay for bond insurance or legal fees, make hardship, no-
interest loans. For the State Revolving Fund (SRF) program, these fees cannot be used to cover SRF loan
administrative cost due to recent EPA restrictions on using more than 4% of SRF capitalization grants for
administrative purposes but fees from other bonds could also be used.
Advantages: Such fees could provide a significant revenue stream when bond issuing amounts are high.
If graduated fee schedules are established, fees are equitable and provide a good cost/benefit ratio
depending on subsequent environmental dedication.
Limitations: The revenue stream is unpredictable since it depends on the local demand for financing, which
is influenced by environmental compliance issues, local debt capacity, and readiness to proceed with
construction. State private-activity revenue bond issuance fees may result in a lack of State
competitiveness with local industrial development authorities, which already may have lower bond issuance
costs. Fees add to the carrying costs of local agencies undertaking infrastructure work, and thus may seem
counter-productive. The administrative costs of collecting fees on very small bonds may be prohibitive.
InNew York, bond issuance fees were implemented to support the State budget, not to fund environmental
projects.
Reference for Further Information: New York State, Public Authorities Law, Chapter 166 Section
240, "Cost Recovery on the Issuance of Certain Bonds", effective August 1,1991.
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CONNECTION FEES
Description: Connection fees are charged to property owners at the time they hook up to or connect with
an existing municipal utility.
Actual Use: Connection fees generally are limited to local governments. Hook-up fees and new
connection fees are frequently charged by localities in residential developments for water supply services
and wastewater collection systems, as well as for some industry and businesses. At least three States use
drinking water connection fees at present, including Massachusetts, New Jersey and Nevada, with fees
averaging several hundred dollars for each residential hook-up.
Potential Use: Many local governments charge low or no connection fees, particularly for businesses,
essentially subsidizing The cost from general revenues. Charging connection fees would allow these general
revenues to be used for other purposes.
Advantages: Beneficiaries pay for the extension of local government services to them, rather than having
current users subsidize new customers, which increases equity. Connection fees could be a strong revenue
source with a very direct cost/benefit relationship.
Limitations: In contrast to access rights, connection fees provide capital only after, not in advance of the
need created by new residents. Thus, local governments will need some alternative means of raising capital
before new residents actually move in, or necessary expansion may not be completed in time. It is difficult
to provide high equity with connection fees, since water and sewer use may be the same regardless of the
economic status of the household hooking up to the central system. Connection fees may provide some
disincentive for suburban or rural households to join the central systems, thus possibly exacerbating
environmental problems.
Reference for Further Information: Raftelis Environmental Consulting Group (now Raftelis Financial
Consulting, PA), 1998 National Water and Wastewater Rate Survey, Charlotte, NC, 1998, Telephone:
704-373-1199; Raftelis, George, Comprehensive Guide to Water and Wastewater Finance and
Pricing, second edition, CRC Press/Lewis Publishers, 1993; National Conference of State Legislatures,
States as Water Quality Financiers, Denver, CO, May 1991.
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CONSTRUCTION FEES
Description: Construction fees are charged by States and localities on a one-time basis for the right to
construct an environmental facility, most notably for drinking water and underground storage tanks. While
they may be used to cover the costs of reviewing construction plans, environmental impact reviews or
permit issuance, such fees are meant in part to serve as a measure of future environmental impact
Actual Use: At least seven States charge drinking water facility construction fees, including Arkansas,
Florida, Illinois, Missouri, New Jersey, Ohio, and Pennsylvania, in most cases in connection with a
construction permit. Florida's fees range from $50 to $1000; New Jersey's vary between $100 and
$12,000; Illinois structures its fee rate on the depth of the water main extensions; Pennsylvania uses a flat
fee structure of $750 per project New Jersey and Florida also use flat-rate underground storage tank
construction permit fees of $50-$100 per tank which, given the large number of tanks, generates close to
$2 million annually in each State.
Potential Use: Fees could be used to cover expenses related to any future environmental problem,
especially those related to private sector activity. For example, some small, privately-owned drinking water
facilities provided by developers in new residential areas, often result in problems as developers abandon
or turn facilities over to the public. Private underground storage tanks, landfills, and mines similarly may
be abandoned or improperly maintained. Annual operating fees also could be charged by States.
Currently, New Jersey and Oklahoma levy annual operating fees on investor-owned drinking water
systems.
Advantages: Construction fees ensure that States or localities can recover some costs relating to future
environmental compliance, resulting from poor management or other problems, such as closing landfills or
fixing underground leaks in accordance with new regulations.
Limitations: Fees may be difficult to collect up-front from the private sector. Revenue yields may be
modest and sporadic.
Reference for Further Information: U.S. EPA^An Overview of Existing State Alternative Financing
Programs: Financing Drinking Water System Capital Needs in the 1990's, Office of Water, May
1992; National Conference of State Legislators (NCSL), States as Water Quality Financiers, Denver,
CO, May 1991.
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FRANCHISE FEES
Description: Franchise fees can impose on any private activity that must purchase a franchise to operate
a commercial business. Typically, the new private business purchases a franchise to market a parent
company's goods or services, using its name, in a particular territory. In this instance, fee would be
imposed by a State or local government on the new business, and could be dedicated to an environment
program.
Actual Use: Several States, as well as the federal government, are experimenting with franchise fees on
the private sector, primarily in parks and olher public lands. States and localities are vising franchise fees
for private businesses selling products in publicly-owned parks, for example, T-shirts, hats, toys, or food
products bearing the name of the park, or food and beverage concession fees. Private parking lots in parks
have been subject to franchise fees. Fee for such businesses are onetime, but the public entity also may
collect a portion of annual profits. New York City's Central Park charged a $1 million fee for Disney's
production of "Pocahontas" in the Park. Market-driven "profit centers" operating on leased parklands
which pay State and local franchise fees include fees on selling Olympic-type corporate sponsorships,
building and operating sports and entertainment centers piers and bumper boat rides, restaurants and the
like. Franchise fees may be imposed directly on selected private businesses, for example, Florida uses a
franchise fee on electric companies, dedicating revenues to parks and recreation.
Potential Use: While franchises in parks are becoming more commonplace and innovative, franchise fees
on any new businesses unrelated to parks could be expanded.
Advantages: The benefits of franchise fees are not only financial, but for parks they can enhance land uses
which pay for themselves. The market linking of public and private sector goals leverages revenues, such
as additional private contributions, and enhances future funding opportunities.
Limitations: A major concern for non-park business franchising is that it may discourage new development
and commercial concerns. Equity and the cost/benefit relationship is questionable
if fees are placed on non-environmentally related businesses and if dedication of revenues is not sustained.
Reference for Further Information: Garvin, Alexander, The American City: What Works, What
Doesn 't, McGraw, New York, 1995; Souder, Jon and Fairfax, Sally, State Trust Lands: History
Management, and Sustainable Use, University of Kansas Press, 1996; The Trust for Public Land,
GreenSense: Financing Parks and Conservation, Phyllis Myers, editor, San Francisco, CA, Autumn,
1996, f"Nouveau Park Capitalism"), Telephone: 800-714-LAND, Internet: httptf/www.tpLorgttpI.
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INSPECnON/MONITORING/TESTING FEES
Description: These fees pertain to the ongoing inspection and monitoring of operators or outputs of
facilities which have an impact on the environment, to confirm that equipment or discharges meet applicable
standards. This may be part of ongoing permit enforcement, but not actual facility permitting. Outputs, or
discharges, of facilities must be laboratory tested according to regulatory requirements.
Actual Use: Most State and local governments-charge regular inspection/monitoring/testing fees. In a
single year, New York collected almost $3 million in private company reimbursements for State monitoring.
Examples of State programs charging fees include:
- Emissions inspection fees (widespread use);
- Laboratory inspection fees (widespread use);
- Drinking water monitoring fees (New Jersey and Iowa charge for monitoring, but
this is still relatively rare);
- Septic tank inspection fees (Wisconsin, Maine and Massachusetts);
- Laboratory testing fees (widespread use); and
- Underground storage tank inspection fees (Wisconsin).
Potential Use: Many States have privatized water supply, solid waste disposal, and vehicle emissions
inspection facilities. Governmental monitoring of these and other privatized facilities could be financed by
facility inspection/monitoring fees. Septic tank inspection fees could finance the creation of septic tank
management districts to monitor and prevent spillage. Laboratory fee revenues could pay for oversight of
privatized environmental monitoring facilities, such as private air emissions inspection contractors.
Advantages: In addition to revenues, inspection/momtoring/testing fees provide a way of tracking which
facilities are engaged in environmentally-sensitive activities. They may provide environmental incentives to
stay in compliance, as this might reduce the need for inspection. Septic tank fees capture revenues from
households not connected to municipal sewers, but impacting on water quality due to septic tank leakage.
t
Limitations: Fee revenue may be modest in most cases. If set too high, fees may discourage private
companies from owning and operating environmental facilities. It may be difficult to identify and track
owners of some facilities, especially residential septic tanks.
Reference for Further Information: U.S. EPA, Report to Congress, Alternative Funding Study:
Water Quality Fees and Debt Financing Issues, Syracuse University, June 1996.
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I
LICENSING AND RECREATIONAL FEES
Description: These are fees diarged to individuals for ihe privilege of engaging in activities, and can be
distinguished from professional certification fees by the lack of training required. Examples include the
privilege of mooring boats on State waters, using State parks and campgrounds, or for hunting, boating or
fishing licenses. Vanity licensing plate purchases are discussed in Section 8: Tools To Pay For
Community-Based Environmental Protection
Actual Use: Both State and local governments use these fees for a variety of purposes. Some local
governments charge mooring fees at municipal marinas run by port authorities, where the income pays^for
port operations. Delaware charges a $ 1.50/square foot for private docks on State waters to fund its boat
safety program North Carolina supports marine research with salt water fishing license fees. State and
local governments charge fees for park use. Arizona's park user fees produce over $1 million/year for park
operating costs. Fees for fishing and boating licenses also are charged by most States. The federal
government uses park and recreational fees extensively for its facilities.
Potential Use: License revenues could cover the costs of environmental programs associated with Ihe
activity. For example, a share of boat license fee or mooring fee revenues could be used to finance pump-
out facilities for boat toilets. Park fees can be levied wherever State or local governments incur costs for
the provision of recreation services. Camping fees can be used to fund improved access to and maintain
camping sites.
Advantages: These fees can cover expenses for public use of environmentally sensitive areas, and still
represent an untapped revenue source in many States. Charging fees would allow State general revenues
to be used for other purposes. Most license fees have built in enforcement mechanism, since the licensing
government can revoke the privilege granted with the license if fees are not paid, and provide a direct
cost/benefit relationship. Equity is enhanced because out-of-State tourists must pay for the environmental
impacts of increased tourism in an area.
Limitations: It may be difficult to institute recreational fees if use of State waters and parks has historically
been free. Such fees may have a disproportionate impact on lower-income segments of the population who
may have few other low cost recreational opportunities. Since they generally apply only to a limited
population, most license fees have a small revenue base, and it may be difficult to raise significant revenues
if fees are set at low levels.
Reference for Further Information:National Conference of State Legislators (NCSL),States as Water
Quality Financiers, Denver, CO, May 1991.
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LOCAL AQUIFER PROTECTION FEES
Description: Local aquifer protection fees are similar to Ihe concept underlying State water supply
withdrawal fees and State direct water use fees in that they are special charges on local water utility fees
and private well users. By labeling them as "aquifer" or "water conservation" fees, localities are attempting
to highlight the effects on aquifer health of groundwaler withdrawals (see also later in this section, State
Public Water Supply Fees and Well Permit/Pumping Fees, and in Section 1C, State Direct Water
Use Fees).
Actual Use: Local use of special aquifer fees is recent, and sporadic. For example, in Spokane,
Washington all residents are charged a $15 annual "aquifer protection fee". In Dade County, Florida water
utility users pay a 3% surcharge on all water bills. In Providence, Rhode Island all water customers pay
a surcharge of 1 cent/100 gallons of regular water bills. The property tax has been dedicated to open
space, watershed and wetlands protection.
Potential Use: Similar to "quality of life" or "conservation taxes" added on to local general sales taxes or
property taxes, aquifer fees are designed to heighten public awareness of environmental consequences, as
well as raise revenue. Revenues could also be used for a range of drinking water treatment needs,
infrastructure, septic and well rehabilitation, purchase of development rights and other land protection
projects.
Advantages: Advantages in terms of environmental benefits and public awareness are clear. If revenues
are dedicated to specific projects, the cost/benefit relationship is strong. Revenues could be designed to
leverage additional dollars. Water conservation may or may not result, depending on fee structure.
Limitations: Fees are regressive when imposed as flat fees. They require voter approval, which means
that the dedicated uses of fees must be popular, and fees must be affordable. While revenue yield may be
predictable, unless structured to influence water conservation, it most likely is relatively small. There may
be a public backlash against fee surcharges.
Reference for Further Information: The Trust for Public Land, Protecting the Source: Land
Conservation and the Future of America's Drinking Water, Richard Stapleton, author, San Francisco,
CA, Telephone: 800-714-LAND, Internet: htlp;//www.lpLorg^tpl
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LOCAL WATER/WASTEWATER UTILITY USER FEES
Description: User fees are charged regularly to all customers, industrial, commercial and residential, for
the receipt of utility services such as public drinking water, wastewater treatment, and stormwater drainage.
Customers receiving services are connected to central publicly or privately-owned facilities.
Traditionally, utility user fees have been levied for water and sewer. Water meters and pollutant tracking
have led to sophisticated billing procedures and rate structures based on volume and toxicity. Utilities can
assess rates to cover their full costs including capital cost recovery ("full cost pricing"), or subsidize the costs
of service with general revenues. Rates are usually measured in cents per 1,000 gallons of water withdrawn
(drinking water) or discharged (wastewater) into the treatment system.
Actual Use: User fees are limited to localities. (State utility fees will be discussed later). Most localities
issue water and sewer bills once or twice a year. Average annual water/wastewaster rates per household
range from $170 to $230, based on a family of 2.64 persons using 104 - 140 gallons of water per day, at
$.14/1000 gallons. Costs of smaller communities may be two to three times more due to lack of economies
of scale. Costs for stormwater drainage pipes and discharge are less universal and more often subsidized.
Potential Use: A basic issue in rate-setting is the link between capital and operating budgets, and the rate
base and structure. Medium-to-large communities review user fees regularly in relation to budget needs, and
make decisions about using full-cost pricing procedures to cover more than current operating costs. They also
make policy decisions to subsidize classes of users (e.g., the elderly or disadvantaged, urban residents), and
on using ascending block rates for conservation and other purposes, or descending block rates to promote
economic development. Industrial waste stream toxicity is also accounted for. Another issue is if non-users
of the facilities should pay for the environmental benefit to surrounding clean lakes and streams.
Advantages: Utility user fees provide services that most residents require. Thus, the fee base is large
enough to provide a strong and reliable revenue stream at relatively low, equitable rates. Graduated rate
structures would improve equity. Small rate increases can raise significant revenues while imposing a fairly
small increased burden onhouseholds. The cost/benefit relationship is clear and rational rate-setting increases
public awareness of the true cost and environmental benefits of water-related services.
Limitations: Many localities are accustomed to subsidized rates. This makes rate increases difficult. In
small or economically disadvantaged communities, reliance on user fees for operations and maintenance as
well as capital financing may be unaffordable, based on fiscal indicators such as median household income
and community debt capacity. Smaller communities may not have the management and other tools needed
to reevaluate their rate structures with many complex policy choice issues.
Reference for Further Information: Raftelis Environmental Consulting Group (now Raftelis Financial
Consulting, PA), 1998 National Water and Wastewater Rate Survey, Charlotte,NC, 1998, Telephone: 704-
373-1199; Raftelis, G3org&,Comprehensive Guide to Water and Wastewater Finance and Pricing, second
edition, CRC Press/Lewis Publishers, 1993; Association of Metropolitan Sewerage Agencies, Wastewater
User Fee Survey, Washington, DC, 1994.
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PERMITTING FEES
I
Description: Permitting fees are charged for processing costs associated with the initial permitting, and
periodic permit renewal, of municipal and industrial facilities, or a location such as a wetland. Such fees
typically are dedicated to operating, budgets. Fees may be graduated depending on whether a facility is
classified as major and minor, and depending on the toxicity of the waste stream.
Actual Use: Both State and local governments increasingly have used permitting fees to cover the
administrative costs associated with permit writing and issuance. This has been supported by the federal
government, and is required for air emissions under Title V of the 1990 Clean Air Act and in several Clean
Water bills. Wetlands fees are one of the major sources of funding for State wetlands programs. Local
industrial pretreatment permit fees are* a source of revenue for local governments. Examples of
administrative fees and rates include: State NPDES Permit Fees (over 30 States); State Drinking Water
Permit Fees (over 35 States); State Air Emissions Source Permit Fees (all States); State Hazardous
and Solid Waste Permit Fees (at least 20 States); State Wetlands Permit Application Fees (at least
20 States); State Groundwater Certification Fees (used by a growing number of States); State
Underground Storage Tank Fees (at least 10 States); and Local Industrial Pretreatment Permit Fees
(many localities, but only where program is delegated).
Potential Use: State and local governments could institute permit application fees, as well as periodic permit
renewal fees, for any environmentally-related facility or location. Wetlands permits could be expanded to all
areas classified as valuable natural habitat. Permit fees could be more widely used for solid waste, sludge
disposal, underground storage tanks and stormwater discharge.
Advantages: Permit fees may cover some or all of the start-up costs related to the permit application
process. Graduated fee rates based on toxicity, such as used for effluent-based permits in Louisiana, New
Jersey and Louisiana, and hazardous waste permit fees in New York, could produce a significant revenue
stream for State capital-generation for environmental infrastructure. Graduated rates may encourage pollution
reduction, and wetland permits promote conservation and give State governments advance information on
wetland building plans. Fee collection is relatively straightforward.
Limitations: Revenue yield in most States is modest, and somewhat unpredictable. Flat rates may be
inequitable, particularly for minor facilities which constitute the majority of permittees, and facility owners
may not see a close cost/benefit relationship. Tracking ownership and development of wetlands and
underground storage tanks can be administratively complex and expensive.
Reference for Further Information: National Conference of State Legislatures (NCSL), Summary of
State Wastewater Discharge Permit Fees, Denver, CO, December 1993; NCSL, Alternative Funding
Mechanisms for State Drinking Water Programs, Denver, CO, July 1993; U.S. EPA, Report to Congress,
Alternative Funding Study: Water Quality Fees and Debt Financing Issues, Syracuse University, June
1996.
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PRODUCT REGISTRATION FEES
Description: Such fees are charged for the registration of particular products that have some
environmental impact, most notably fertilizers and pesticides.
Actual Use: These fees generally are limited to Slates, as well as the federal government A number of
States have fertilizer registration programs, some of which finance nonpoint source pollution control. In
Kansas, for example, a State $1.70/ton fertilizer fee is charged, with $0.30/ton dedicated to the fertilizer
program and $1.40/ton dedicated to the State Water Plan which funds conservation, water quality and
water use projects throughout the State. Other States with dedicated pesticide registration fees include
Iowa, Minnesota (which raises $3 million annually), New York and Wisconsin.
Potential Use: Any (especially new ones), environmentally-sensitive product, with complex, non-organic
components, could be required to be registered and pay a fee, for example, water treatment compounds,
carpet treating chemicals, and the like.
Advantages: If set high enough, and proportional to anticipated product production, such fees may
increase the awareness of harmful products on the part of consumers and influence the conservation of use
or product substitution. Fee revenues dedicated to research and data collection on new, environmentally-
degrading products would result in a good cost/benefit relationship. These fees also may enable the
placement of limits or regulations on the sale of such products, and at least provide advance notice of new
products coming on the market
Limitations: Product registration fees will face opposition from the producers, who may already have gone
through complicated and expensive federal approval processes, such as the Food and Drug Administration
certification.
Reference for Further Information: The Fertilizer Institute, Summary of State Fertilizer Laws, 1988;
National Council of States Legislators (NCSL), States as Water Quality Financiers, Denver, CO, May
1991; U.S. EPA,Prevention, Pesticides and Toxic Substances: Pesticides Industry Sales and Usage:
1992 and 1993 Market Estimates, June 1994.
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PROFESSIONAL CERTIFICATION FEES
Description: Certification fees are charged to companies or individuals for the privilege of engaging in an
activity, at one time only or on a periodic renewal basis. Fees can fund training for professionals in
environmentally sensitive industries and confirm that environmental officials are certified
Actual Use: Both State and local governments use license fees to finance administrative costs associated
with related government agencies. Examples include:
-Pesticide Dealer and Applicators' License Fees;
-Business License Fees, including for engmeering/construction/testing;
-Laboratory Certification Fees; and
-Occupational License Fees, e.g.,:
-Solid and Hazardous Waste Facility Operator and Transporter Certification
-Water and Wastewater Operator, and Training Program, Certification
-Underground Storage Tank Installer Certification Fees; and
-Septic Tank Installer Certification Fees.
Potential Use: Professional certification revenues could cover the costs of environmental programs
associated with the industry or activity. In addition to plan review and processing costs, fees could be used
to pay for public notification required under regulations. Fees for the professional engineering and
construction industry could be used to mitigate the urban runoff problems associated with construction.
Advantages: Like licensing fees, most professional certification fees have a built-in enforcement
mechanism, in that a privilege granted through certification can be revoked if fees are not paid.
Construction certification fees give States advance warning of construction and the funds to analyze the
extent of the potential impact Laboratory, operator, and testing certification fees for businesses allow the
State to maintain some oversight of particularly privately-owned and/or operated environmental facilities.
Limitations: Certification fees may have a disproportionate impact on small businesses, who may not be
able to afford operator or construction certification. Since these fees generally apply only to a limited
population, most professional certification fees have small revenue base in most cases, and it may be difficult
to raise significant revenues. Fees dedicated to potential future impacts do not have a high cost/benefit
relationship.
Reference for Further Information: U.S. EPA, Office of Underground Storage Tanks, Funding
Options for State and Local Governments, August, 1988; National Governor's Association, Funding
Environmental Programs: An Examination of Alternatives, Washington, D.C., 1989.
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SEPTIC SYSTEM IMPACT FEES
Description: Septic system impact fees are levied on Ihe construction of new septic fields, including
residential septic systems. They are designed as a type of impact fee, which measures the future negative
impact of poorly maintained septic systems.
Actual Use: At least five States impose septic system fees on all new development, including Maryland,
Oregon, North Dakota, Virginia and Wisconsin.
Potential Use: Since individual septic fields and tanks are largely unregulated at the State and local level,
the impact fee could be used as a surrogate for permit issuance. Fee rates could be graduated to reflect
the possible negative damage to water quality resulting from improper maintenance by owners, for example,
fee rates could be higher if septic system were located near lakes or groundwater sources of community
drinking water. Fees could heighten awareness of the importance of preventative maintenance.
Limitations: Fees could be difficult to collect from individual property owners, and administratively
complex and expensive to track. Revenue yield is modest and unpredictable. The cost/benefit relationship
may not be apparent for individual homeowners.
Reference for Further Information: National Conference of State Legislatures (NCSL), Financing
Clean Water, Groundwater Pamphlet, Denver, CO, June 1991.
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SOLID WASTE DISPOSAL FEES
.(Tipping Fees, Septage/Sludge Fees)
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Description: State and local disposal fees are levied for (he volume and sometimes toxicity of solid waste
(e.g., garbage and trash) disposed of at local management and/or treatment facilities, such as landfills and
incinerators. This type of fee also may be used for septage, pumped from septic tanks and treated at local
wastewater treatment plants, and municipal water and wastewater treatment sludge which is sub-surface
disposed and land applied.
Actual Use: Most localities use "tipping fees" to cover solid waste disposal and treatment costs at municipal
(or private) landfills and incinerators. Tipping fees range from $50 to $200 or more per ton depending on
waste content and local demand for service, as well as the availability and location of management/treatment
facilities. While tipping fees represent one type of service unit cost for solid waste, they are not strictly user
fees, and extraneous factors such as geography and public/private competition influence the level of charges.
Many localities also charge fees per bin or bag of garbage and recycling. Connecticut, New Jersey, and
Vermont, levy an added fee per ton of solid waste disposed, ranging from 1 -4 dollars. Septage/sludge disposal
fees used by several States are used to finance sludge management programs. Colorado, Indiana, Oklahoma,
and Wisconsin, charge for industrial sludge disposal.
Potential Use: Local tipping fees could be adjusted to reflect more precisely the true cost of service, as
opposed to demand/supply issues. Disposal fees could be more broadly applied, especially for septage, for
revenue purposes but also as an incentive mechanism to encourage conservation and beneficial use. States
could become more active in assessing solid waste fees.
Advantages: Fees could be set to encourage waste reduction. Currently, solid waste disposers do not bear
the full costs of disposal, which encourages the option of disposal as opposed to recycling. Tipping fees
should remove this disincentive if set at appropriate levels. There is a clear cost/benefit ratio, and revenue
yield could be significant and predictable. Fees from local garbage and trash haulers should be relatively easy
to collect
Limitations: Fees are not necessarily equitable if not directly related to the true cost of service. However,
competition between the public and private sectors, and lack of available landfill space has undercut efforts
at fair pricing. Fees based solely on volume may not adequately capture revenue from the most toxic and
least degradable waste, which is difficult to measure. Very high fees could encourage illegal dumping of
wastes. If significant waste reduction occurs in response to fees, revenues will similarly decline. Also, since
many wastewater treatment plants subsidize the cost of beneficial sludge uses, e.g., land spreading, fees may
be counter-productive.
Reference for Further Information: New York State Department of Environmental Conservation, Survey
of State Funding for Solid Waste Management Programs, June 1991.
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STATE PUBLIC WATER SUPPLY WITHDRAWAL FEES
Description: In addition to local user fees, these State fees are assessed on public and private utilities, or
their industrial, commercial and residential customers, that supply or are supplied consumptive water via
centralfacilities. They may be levied as a percentage of local water utility sales to local customers, or volume
of water treated or produced. They may also be levied as a surcharge or add-on to local water bills.
Imposed as a flat rate and assessed in cents/per 1,000 gallons of water sold or withdrawn, they can be
collected by States directly or, in the case of customer surcharges, by local utilities which rebate the surcharge
to the States. They differ from the Direct Water Use Charges used by States discussed in Section 1 .C.:
Special Charges.
Actual Use: State public water supply withdrawal fees increasingly have been used by States primarily to
cover program costs as opposed to infrastructure capital-generation. Presently, at least 11 States have
imposed such fees in the form of drinking water production, sales or service fees, ranging from $.03 - $.07
per 1,000 gallons, including Arizona, California, Delaware, New Jersey, New Mexico, Montana, Oklahoma,
Rhode Island, Texas, Vermont and Virginia. A similar fee was defeated recently in New York and is being
considered in Pennsylvania and Florida.
Potential Use: An increase of $.07/1000 gallons to water customer bills yields $1 billion annually nationwide,
based on 1990 consumption rates. Thus, there is significant potential for States to use this fee to generate
revenue for capital infrastructure funds for water and wastewater, such as SRFs.
Advantages: This type of broad-based, low level fee can yield high revenue. The regressiveness of flat fees
can be avoided by using graduated fee rate structures or percentages. The cost/benefit relationship is strong,
and such fees may increase awareness of the true cost of water services. The demand for public water,
particularly by industry, is relatively inelastic, resulting in stable and predictable revenues.
Disadvantages: The revenue base of the public water supply withdrawal fee is severely limited, however,
because water supplied by utilities resents only a very slim portion (about 12%) of all water use in this
country. The majority of water use results from direct withdrawals from ground and surface water sources
by industry, mining, hydroelectricity and agriculture, and private wells. Legislation would be required, and
local utilities may resist rebating fees to the State level. New fees would be unpopular with water utilities,
both public and private, which oppose incremental increases in user fees because of lack of community
support particularly when fees are redistributed to other localities. New State administrative procedures
would be required to collect fees from utilities.
Reference for Further Information: U.S. EPA, Report to Congress, Alternative Funding Study: Water
Quality Fees and Debt Financing Issues, Syracuse University, June 1996, discusses the fee in-depth; Clean
Water Council, America's Environmental Infrastructure: A Water and Wastewater Investment Study,
Washington, D. C., December 1990; U.S. EPA, Environmental Finance Advisory Board (EFAB), Public
Sector Options to Finance Environmental Facilities, March 1992.
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TOLLS
Description: Tolls are fees charged for auto and truck passage onthruways, highways, roads and bridges
to offset the expenses of new construction, operation and maintenance. Tolls are also imposed on boats
(e.g., docking fees) and airplanes (e.g., landing fees). Tolls may be used to pay for environmental mitigation
resulting from negative construction impacts (see Section 8, Mitigation Lands and Banking).
Actual Use: Tolls have been used in all States for transportation budgets, and may constitute the State
matching share to federal construction grants. Localities use tolls as well. Traditionally, highway
construction has included some environmental component, for example, preventing nonpoint construction
sites. Recently, some States and localities have gained approval to establish new tolls specifically to pay
for environmental mitigation of problems caused by construction and use. A good example is Alligator
Alley (Interstate 75) bisecting the sensitive Florida Everglades ecosystem, and the construction of which
has been a major Contibutor to altered water flows. An estimated $4.5 million annually of Alligator Alley
toll revenues is being used for environmental mitigation projects, including land purchases in the Everglades
and Florida Bay. Toll dedication was agreed to by both 1he federal and State Government, and is part of
a $685 million, 20-year initiative.
Potential Use: The potential uses of atoll revenues for environmental projects is large. After meeting
federal and state requirements for operation, maintenance and new construction needs, dedication of a
portion of toll receipts can pay for botii on-and-off site environmental mitigation. Highway tolls could be
to correct problems caused by use of de-icing salts. Harbor-related tolls could be used to correct water
degradation. Airport landing fees could be used to collect and treat propylene glycol contaminated runoff
from aircraft deicing operation.
Advantages: Considerable environmental benefits can be achieved, and public awareness of
environmental degradation from highway construction and use may heightened. Toll collection systems
already exist, and non-residents can help bear some of the cost of environmental mitigation. Revenues
could be substantial.
Limitations: Tolls already are fairly steep, and regressive. It may be difficult to increase tolls, and ensure
environmental dedication over time, particularly given competing demands from highly popular
transportation projects.
Reference for Further Information: The Trust for Public Land, GreenSense: Financing Parks and
Conservation, Phyllis Myers, editor, San Francisco, CA, Spring 1996, Telephone: 800-714-LAND,
Internet: http://www.tpLorg/tpL See the Transportation Equity Act for the 21st Century (TEA-21), June
1998, for a description of what tolls may be applied to a State's matching share to federal grants.
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TRANSPORTER FEES
Description: These are fees charged to a company or individual, most notably for hauling and
transporting solid or hazardous wastes, septage, petroleum products, and radioactive waste. Fees can be
charged on volume of waste transferred, or as a flat charge per hauler.
Actual Use: Hazardous waste transporter fees are used to pay the cost ofhazardous waste monitoring
and spill response in many States, including Arkansas, California, Connecticut, Indiana, Massachusetts,
New Jersey, Ohio, Oklahoma, Pennsylvania, Washington, and Wisconsin, often generating several million
dollars per year. A few other States assess septage hauling fees, such as Michigan, Texas and Wisconsin.
Washingtonlevies a flat fee of over $ 1,000 for petroleum transporters, which must be renewed periodically.
Maine charges significant fees for hauling radioactive waste.
Potential Use: Revenues could be used to make road improvements on routes traveled by hazardous
waste transporters with safety considerations in mind. Graduated rate structures based on the anticipated
distance of transporting could be imposed. Revenues also could finance the operating costs of State
monitoring programs for hazardous waste transport.
Advantages: The fees could capture revenue from transporters who are responsible for some waste
spillage. Graduated fee structures based on distance might provide incentives for disposal at nearby sites.
Charging septage haulers may be the only way to include private septic systems in fee systems.
Limitations: The revenue base is very small and thus the revenue yield is low. Depending on the structure
of the fee, it may have a disproportionate impact on small businesses, particularly in the septage hauling
business. The fee might encourage polluters to dump wastes illegally to avoid the costs of transportation
to a legal site.
Reference for Further Information: National Conference of State Legislators (NCSL), States as
Water Quality Financiers, Denver, CO, May 1991.
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WATER RIGHTS APPLICATION FEES
Description: State water rights application fees are imposed on municipal, agricultural and industrial users
seeking to establish legal boundaries for diversion of water for direct use. Fees could be charged at one
time for new permits, or on a recurrent basis.
Actual Use: Most western water rights States use these fees. Rates in California,, Montana and Nevada
are quite steep and recurrent.
Potential Use: This fee concept could be extended to include dam registration fees (Maine) and stream
encroachment fees (New Jersey), or any other water diversions. Also, some western localities have sold
water rights "futures" such as Escondido, California California has considered using income tax credits
to encourage donations of water rights.
Advantages: Water rights application fees could be used to cover the administrative costs of processing
State permits, but also could be designed as an activity impact fee, in recognition of potential negative
impacts on surface or groundwater. If a State does not use direct water use fees (discussed subsequently),
water rights application fees provide some equity in tiie imposition of all water withdrawal and use fees.
Demand for water in the west may still be relatively inelastic, but such fees might heighten awareness of the
importance of water as a vital and potentially nonrenewable natural resource. Collecting fees for water
rights permits may be relatively straightforward in the first instance, but there may be strong opposition to
recurrent fees in western States which traditionally have regarded water as free.
Limitations: Unless fee rates are steep or levied on a recurrent basis, revenue yield is small and
unpredictable. The costfbenefit relationship is not immediately obvious to permittees. Water rights fees
may not be applicable to many eastern riparian rights States.
Reference for Further Information: University of Florida College ofLswJfationwide Survey of State
Water User Fee Legislation, February 1992.
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WELL PERMIT/PUMPING FEES
Description: Like septic field/tank installation and septage disposal, private wells represent a largely
unregulated area Licenses for private well drilling and pumping are imposed in a number of States and
localities as a "surrogate" fee for actual water use/withdrawal which may negatively impact the water table.
Such fees are also discussed earlier in this section under Local Aquifer Protection Fees.
Actual Use: At least seven States levy well drilling license, permit and/or pump fees, including Alabama,
Arizona (including industrial well users), Montana, New Jersey, South Dakota, Virginia, and Wisconsin
(which labels its fee a "compensation" fee for well water use).
Potential Use: Well fees could be used much more widely.
Advantages: Well fees could heighten awareness of the value of water and the potential negative impacts
on the underground water table. Well fees provide equity for all water withdrawal and user fees, since
private wells are currently a loophole in the system of regulation and user fees.
Disadvantages: It may be extremely difficult to administer such fees, particularly at the State level. There
exist few notification mechanisms for individual drilling activity, especially for private homeowners. States
such as New York have attempted to institute such fees, but found them too difficult to collect Revenue
yield would be very small and unpredictable. As with all "surrogate" impact-related fees, the benefit is not
immediately evident to fee payers.
Reference for Reference for Further Information: U.S. EPA, Report to Congress, Alternative
Funding Study: Water Quality Fees and Debt Financing Issues, Syracuse University, June 1996,
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OTHER
Description:
Actual Use:
Potential Use:
Advantages:
Limitations:
Reference for Further Information:
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COMPARISON MATRIX FOR FEES
Criteria/
Fee
Access
Rights
Bond
Issuance
"Connection
Construc-
tion
Franchise
^Inspection/
Monitor/
Testing
^Licensing &
Recreational
Local
Aquifer
Protection
*Local Water
/Wastewater
Utility User
'Permitting
Product
Registration
Actual
Use
Mod.
Low
High
Mod.
High
High
High
Low
High
High
Low
Revenue
Size
Low-
Mod.
Mod.
Mod.
Low
Mod-
High
Low
Mod.
Low
High
Low-
Mod.
Low
Revenue
Stability
Mod.
Mod.
Mod.
Low
Mod-
High
High
Mod.
Mod.
High
High
Low
Admini-
strative
Ease
Mod.
High
High
Mod.
High
High
High
Mod.
High
High
High
Equity
High
High
Mod
Mod.
High
Mod
High
High
Low-
Mod.
Mod.
Mod.
Cost/
Benefit
Ratio
High
Mod.
High
Mod.
Mod.
High
High
High
High
High
Mod.
Environ-
mental
Benefits
High
Low
High
Low
High
Mod.
Mod.
High
Mod.
High
Mod.
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t
COMPARISON MATRIX (continued)
Criteria/
Fee
Professional
Certification
Septic Sys-
tem Impact
*Solid Waste
Disposal
*State Public
Water
Supply
Withdrawal
Tolls
Transporter
Water
Rights
Well Permit/
Pumping
Actual
Use
High
Low
High
Mod.
Mod.
Low
High
Low
Revenue
Size
Low
Low
High
High
High
Low
Low
Low
Revenue
Stability
Low
Low
High
High
Mod.
Mod.
Low-
Mod.
Low
Admini-
strative
Ease
Mod.
Low
High
Mod.
High
Low
Mod.
Low
Equity
Mod.
High
Low
Mod.
Mod.
Mod.
High
High
Cost/
Benefit
Ratio
Low
Mod.
High
Mod.
High
Mod.
Low
Mod.
Environ-
mental
Benefits
Mod.
High
High
Low
High
Mod.
Low
Mod.
High - High use (ova- 25 States/many localities); criteria score high (many advantages);
High revenue yield
Mod.- Moderate Use (10-25 States/many localities); criteria score in medium range;
Moderate Revenue yield
Low - Low or rare usage; many limitations; low revenue
* Star indicates hest rated mechanisms
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l.C. SPECIAL CHARGES
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l.C. SPECIAL CHARGES
Description: Special charges are charges not placed on the general population or upon the sale of a
particular good or service, such as many taxes, and Ihey are not fees for administrative services. Rather,
special charges apply to specific types of transactions or activities which impose unique environmental or
development costs. A special charge may be similar in some features to either a fee or a tax and, in fact,
hitherto have been termed fees or taxes somewhat interchangeably. For example, effluent charges are
sometimes called effluent fees or effluent taxes, and mineral severance charges are sometimes referred to
as fees and sometimes as taxes.
As discussed here, special charges are a way of assigning clean-up costs to whomever or whatever caused,
or may cause, pollution, hence the term "polluter pays". In this sense, special charges may most closely
resemble activity impact fees. However, special charges have the characteristic of being recurrent or
ongoing, instead of being attached to apermit application, renewal, licensing or certification. Unlike activity
fees, special charges typically are quite steep or costly.
Nine special charges are examined in this section, including effluent and emission fees, feedstock and
waste-end special industry fees, direct water use fees, other severance fees (e.g., coal, gas, oil, timber),
special assessments and exactions, and development impact fees. Unlike many other fees and taxes, which
could be used by many different levels of government or even simultaneously by more than one level,
special charges often are limited to one particular level of government depending on the characteristics of
the charge imposed or other revenue and environmental goals. For example, the federal government may
not have the authority or ability to implement direct water use fees (i.e., self-supplied surface and
groundwater withdrawal) on cultural and constitutional grounds. Exaction and impact fees typically are
local in nature. Multi-governmental effluent, emission, feedstock and waste-end fees would result in double
counting, or double taxation, and would be prohibitive from an economic cost and equity standpoint.
Advantages: Special charges can be designed to generate revenues for any environmental and
development-related activity or impact As described in this report, special charges could have a very
significant and highly predictable revenue potential, which in recent years is beginning to be tapped and
dedicated to the environment. The potentially large size of the revenue stream means that such charges
could be highly suitable for dedication to State and local environmental infrastructure capital construction
funds, as opposed to general operating budgets. Some, such as effluent or emission charges and hazardous
waste production charges, can be highly equitable when rate structures are based on volume and toxichy
of the waste stream. The "polluter pays" principle helps to ensure that some cost/benefit relationship is
achieved. Most special charges create strong environmental incentives, i.e., tax avoidance may cause a
reduction in pollution behavior. Thus, some charges are frequently discussed in the current literature as
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market-oriented incentives.
Limitations: Hie polluter pays principle is not widely accepted for many special charges, such as effluent
fees which typically would be opposed by municipal and industrial dischargers. Some long-standing fees
remain largely undedicated to environmental programs, such as severance taxes, which typically are
dedicated to State general budgets. Since many charges are novel, and extremely complex to design and
administer (e.g., effluent and feedstock fees), policy makers should exercise special care in designing new
systems. Collection may cause difficulties, as there may be no existing, related collection bureaucracy and
procedures on which to build. Thus, brand new systems may have to be established. Administrative
complexities in establishing graduated rate structures, and lack of uniformity across States, means that some
charges (e.g., emissions fees) may be best suited to the federal as opposed to State government
Many States and local governments may not have enabling legislation to levy special charges. Both
enabling legislation and specific legislation may be very difficult to achieve, which has been the case with
the federal government and many States up until now.
Summary: Special charges, with which State and local government continue to experiment, are increasing
inimportance. The potential for yielding revenue streams significant enough for environmental infrastructure
capital-generation is high. However, except for the more traditional charges such as exactions and
severance taxes, the use of special charges by all levels of government is still low. This is in part due to
strong industry opposition and because of the very large legal and administrative complexities involved in
instituting equitable programs and rate structures, e.g., for effluent, emissions, and feedstock taxes. Special
charges offer significant opportunity for States and localities to explore in the future.
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LIST OF SPECIAL CHARGES
(In Alphabetical Order)
*1. Direct Water Use Charges
2. Effluent Charges
3. Emission Charges
*4. Exactions
5. Feedstock Charges
*6. Impact Fees
*7. Severance Taxes
*8. Special Assessments
9. Waste-End Charges (Special Industry Fees)
* Stars indicate most highly rated mechanisms as described in the Comparison Matrix at the end of the
narratives. See Introduction to the Guidebook for a description of Ihe criteria used. Ratings of "High",
"Moderate", and "Low" are for comparison purposes only, as some ratings are necessarily subjective and
data are incomplete.
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DIRECT WATER USE CHARGES
Description: Water drawn directly from the surface or ground, by industry, mining, hydroelectric firms,
agriculture and households using private wells represents 88% of all water use. Water supplied and treated
by public or privately-owned utilities constitutes the other 12%. Direct water use charges are fees placed
on self-supplied water, typically measured in terms of cents/per 1000 gallons of water or acreage, by States
and sub-State water districts.
Actual Use: At least 10 State and large sub-State water districts impose a recurrent direct water use fee
on users that "self-supply" their own water. These include Arizona, Arkansas, Connecticut, Kansas, New
Mexico, New Jersey, North and South Dakota, and several sub-State districts in Texas. New York proposed
direct charges, but they were defeated in the legislature. Florida and Pennsylvania are considering such
legislation. Two States exempt agricultural uses, and in two States the hydroelectric industry has challenged
the fees based on temporary non-depletive use. Most States exempt withdrawals below a certain amount,
so private wells are typically excluded.
Potential Use: Direct water use fees could be implemented by any State, or they could be implemented on
a sub-State or even municipal basis. Inclusion of private wells would be difficult to administer, which is why
well drilling fees often are used as surrogate fees.
Advantages: Direct water use charges create equity for all users, i.e., most withdrawals from public and
private utilities are charged regular user fees, but this is the clear minority of all water use. These charges
can raise significant revenue. One study estimates that $1 billion could be raised yearly if all States charged
an industrial use fee of about 2 cents/per 1000 gallons. Revenues would be stable, since demand for water
especially among non-residential users is relatively inelastic. Fees would have little economic impact on small
users, who typically are exempted. The cost/benefit ratio is fair in that some revenues would be dedicated
to both point and nonpoint source projects.
Limitations: Self-supplied water is hard to estimate on a State-by-State basis because water allocation and
regulation (or lack thereof) differs by State. The amount of water returned to the water table, and the degree
it is polluted, also vary widely, and are hard to measure. For example, agricultural returns may be
contaminated (fertilizer/pesticides), but hydroelectric uses may be relatively clean. This decreases the equity
of direct charges substantially. Many water users, especially agricultural, object vigorously to the imposition
of these charges.
Reference for Further Information: U.S. EPA Report to Congress, Alternative Funding Study: Water
Quality Fees and Debt Financing Issues, Syracuse University, June 1996; U.S. Department of Interior,
Estimated Use of Water in the United States in 1990, Solely, Pierce and Perlman, 1993; University of
Florida College of Law, "Nationwide Survey of State Water User Fee Legislation", February 1992;
Congressional Research Service (CRS), Funding Water Quality Programs: Revenues for a National
Water Investment Corporation, July 1992.
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EFFLUENT CHARGES
Description: Effluent charges are those placed on the volume and toxicity of pollutants discharged into
the water by industry and/or municipal wastewater treatment plants.
Actual Use: While effluent fees have been considered by the federal government and a number of States,
only three States, New Jersey, Louisiana, and Washington, have true effluent fee programs. A true effluent
fee program exists when fees are based on measuring the pollutants discharged into water from point
sources, including bofli quantity and quality, and not just what is allowed under NPDES limits. Annual
fees in the three States are upwards of $100,000 for each "major" industrial permit, yielding from $10 to
over $20 million. While these States use the fees mainly to subsidize State operating budgets, they are used
widely in Europe for capital-generation.
Potential Use: Effluent fees could be used by States or the federal government, but probably not by
localities. Revenue could be dedicated to infrastructure funds such as State Revolving Funds. These fees
could be imposed mainly for revenue purposes but also as incentives to reduce pollution.
Advantages: Effluent fees could generate significant and reliable revenue on an annual basis. The
cost/benefit ratio is satisfactory since the "polluter pays" principle exists. Fees could provide strong
environmental incentives to reduce the discharge of harmful pollutants. If tied to NPDES permit issuance
and renewal, fees could be collected by permit writers.
Limitations: Effluent fees are hard to design and administer due to data limitations and policy concerns.
Although self-reported Toxic Release Inventory (TRI) data are used to estimate volume and toxicity, the
TRI only covers major industrial toxic discharges and no standardized toxicity measures exist. Thus, it is
difficult to institute graduated rate structures which characterize true effluent fee systems, and even more
complex to relate discharges to receiving water quality, because waste streams vary in dilution and receiving
water quality varies considerably. The inability to relate fees to specific environmental damage reduces their
equity and the directness of the cost/benefit ratio. Flat-rate fees are simpler and less easily circumvented
via dilution or media transfers. However, even this approach seems to impact heavily, and
disproportionately, on the chemical and allied product industry and, secondarily, on the pulp and paper
industry. Effluent fees are unpopular with industry and municipalities, and there is no observable trend
nationwide for Iheir increased use.
Reference for Further Information: U.S. EPA Report to Congress, Alternative Funding Study:
Water Quality Fees and Debt Financing Issues, Syracuse University, June 1996; Congressional
Research Service, Funding Water Quality Programs: Revenues for a National Water Investment
Corporation, July 1992; Research Triangle Institute, Effluent Discharge Fees and Water Quality,
February 1993; American Petroleum Institute (API), Effluent Fees: Present Practice and Future
Potential., Discussion Paper #075, December 1993.
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EMISSION CHARGES
Description: Emission charges are levied on the volume and toxicity of pollutants emitted into the
atmosphere by industry, and also municipal facilities such as power plants.
Actual Use: States already use a type of emission-based permit fee under Title V of the Clean Air Act,
which requires them to charge permitted sources the equivalent of $25 per ton of regulated pollutants
emitted. Since the purpose of Ihis requirement is to help States recover the full cost of permit issuance,
such fees resemble permit fees. A number of States have emission-based motor vehicle fees which are
reflected in motor vehicle sales taxes and/or recurrent registration fees. In contrast, "true" emission fee
systems cover a large list of toxic pollutants and sources, using graduated rate structures based on toxicity
and volume, and assessing fairly steep rates. The best example is the non-vehicle acid deposition fees used
in California and Wisconsin. California's Acid Deposition Program is funded by low-level fees assessed
against sources that emit 1,000 tons or more of sulfur or nitrogen oxides per year, which are capped at
$5 per ton of pollutant emitted, which produce almost $2 million annually.
Potential Use: Since these fees already exist in States, continued State use as opposed to anew federal
system might seem desirable. However, since atmospheric pollutants cross State boundaries, as shown
by acid rain issues, inter-State issues must be evaluated. States could expand the idea of emission fees to
small sources that are generally exempt from Clean Air Act permits, such as dry cleaners. Because of
overall volume, small sources represent a large share of total emissions. The idea could be extended to
volatile compounds, ozone-depleting emissions, and indoor air emissions.
Advantages: If emission fees were raised above $25/ton, annual revenue might be enough to pay for
State programs such as pollution prevention, monitoring and research, improving the link between costs
and benefits. The broader the coverage, e.g., including small sources, the more equity is achieved.
Environmental incentives often discussed in terms of market-based air emission trading and emission
reduction, would come into play at the higher rates, although reducing fee revenues.
Limitations: States have had problems with these fees. Administrative costs have been high, and fee
avoidance exists. Although sources can be required to monitor emissions, compliance and enforcement
can be costly. Depending on the fee structure, it may be hard to show a polluter's contribution to
atmospheric damage, e.g.5 differing toxicity of sulphur dioxide versus carbon dioxide. Receiving air quality
also varies and critical measurements are national/international in scope. State variations may cause
pollution havens. The national emission trading program has had mixed success.
Reference for Further Information: U.S. EPA, The Clear Air Act Advisory Committee, The Clean
Air Act of 1990: An Introductory Guide to Smart Implementation, Washington, D.C., 1992; U.S.
EPA, Office of Air and Radiation, State Air Emission Fee Programs, 1994; National Governor's
Association (NGA), Funding Environmental Programs: An Examination of Alternatives,
Washington, D.C., 1989.
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EXACTIONS
Description: Exactions, or proffers as they are often called, may be broadly defined as money, land,
construction materials, infrastructure facilities, or in-kind services provided by a private developer to a
public jurisdiction. Traditional exactions typically are on-site, and have included mandatory land dedication
for rights of ways, the provision of road and parking facilities, other infrastructure, and open space and
parks, and cash payments in lieu of these. Exactions sometimes are termed development fees, or impact
fees (but are different from the impact fees discussed subsequently).
Actual Use: Exactions are by nature limited to local governments. They have been in existence for a long
time, and may be offered voluntarily or negotiated with each developer. Most localities use exactions in
some form. Some localities offer competitive exactions programs that assign building permits partially
based on the level of exactions offered by different developers (Napa, California).
Potential Use: Traditional use of exactions for roads and parking could be extended to cover all
necessary government services required by new developments, including water, sewer and solid waste
services, and stormwater drainage. Agreement as to the operation and maintenance of such facilities could
be made at the same time. While not raising new revenue, the money saved by localities could then be
devoted to other environmental infrastructure projects. Another application is the "in lieu of taxes" concept,
whereby a municipality offers tax savings to a developer in exchange for an environmental service or facility
offered or constructed by the same developer in another location.
Advantages: Developers pay the true cost of community expansion out of their direct benefit from that
expansion. Thus, some equity and cost/benefit relationship is achieved, but the way some exactions are
privately negotiated may leave equity issues in doubt. When exactions take the form of construction
materials or facilities, having the developer do the construction may be cheaper and faster than having it
done by the governmental jurisdiction. Since they can be individually negotiated, exactions allow more
flexibility than fixed impact fees discussed later. The revenue collected by monetary contributions, or
represented by cost-savings on facilities built, could be significant.
Limitations: Since they are individually negotiated, exactions are not considered as predictable or
equitable as impact fees. Fairness may be decreased if politics enter into private negotiations. The revenue
source is only as predictable as the economic conditions affecting the construction industry.
Reference for Further Information: NationalLeague of Cities (NLC), Research Report on America's
Cities: City Fiscal Conditions in 1994, Washington D.C. July 1994.
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FEEDSTOCK CHARGES
Description: Feedstock charges typically are taxes levied on the primary chemicals that produce
hazardous products and, ultimately, hazardous wastes.
Actual Use: A federal tax on petrochemical feedstocks finances the Superfund Trust Fund. New Jersey
has a tax on petroleum and chemical feedstocks that is used to fund hazardous waste clean-up. Florida
has a tax on perchloroethylene (dry cleaning solvent). However, State use of feedstock charges has been
rare. Such charges probably are not suitable for localities.
Potential Use: The use of feedstock charges has yet to be fully tested by States. For example, obvious
candidates include chlorine used for disinfection processes, and chlorinated solvents, acids, and
photochemicals used by industry, in addition to the federal petrochemical excise taxes. -
Advantages: Because the tax base is potentially so broad, significant revenues could be raised by the
imposition of charges at relatively low rates. Some of the complexities in the design of equitable rate
structures based on receiving water or air quality for effluent and emission charges could be avoided
because "receiving" environmental quality is not at issue here, rather simply Hie toxicity of the original
chemical. Some cost/benefit relationship is sustained if revenues are dedicated to site remediation or other
environmental projects. Environmental incentives for reduction of feedstock use or substitution of other
chemicals, i.e., pollution prevention, may be achieved.
Limitations: Disadvantages are several. Sometimes product substitution is not an option, or governmental
regulations require on-site remediation, e.g., chlorine used for disinfection and permit requirements for de-
chlorination. Double counting, or double taxation, may be an issue when products are already taxed as
green product sales, under federal law, or the industry is already charged a waste-end, effluent or emission
fee. Standard toxicity measurements likewise do not exist Information on feedstock use is not recorded
on an industry-by-industry, so costly new administrative reporting and collection systems may need to be
devised, which may be easily evaded. Imports must be accounted for. These factors raise administrative
costs, and reduce the equity, of tax imposition. Pollution prevention goals are extremely worthwhile, and
feedstock taxes may be best implemented with behavioral change as "a primary goal, when product
substitutes are known and product costs are similar. However, caution must be exercised to avoid the
complex pitfalls of feedstock charges implemented with revenue generation in mind
Reference for Further Information: U.S. EPA Report to Congress, Alternative Funding Study:
Water Quality Fees and Debt Financing Issues, Syracuse University, June 1996.
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IMPACT FEES
Description: Impact or development fees are one-time charges to new users of government services,
to pay for the expansion of the services that they require. Some are similar to waste and sewer connection
fees, but differ from developer exactions in that they are paid by a broader segment of the population.
Impact fees typically are assessed when building permits or certificates of occupancy are issued.
Actual Use: Impact fees are limited to local government, and are not considered "taxes". Many localities
have wide-ranging impact fee programs requiring new residents and businesses to pay set charges for
police, fire, water, natural resources, and wastewater services, such as the service cost-recovery fee system
in Loveland, Colorado. Parks and recreation facilities are increasingly financed by these fees. More lhan
twenty States have impact fee laws governing local use as a revenue source, and fees are an increasingly
important response to local budget problems.
Potential Use: Impact fees could be used to finance any environmental service or additions to services
that increased or transient population makes necessary. For example, local governments could use impact
fees to finance landfills, stormwater and flood control in addition to more traditional services. In Florida,
impact fees were used as partial security for bonds issued to finance sewer improvements. Communities
attracting high tourism could also expand the use of these fees to such temporary facilities. Higher fees
could be assessed on development in sensitive areas, such as development in flood plains, tidelands,
agricultural lands, or open space. Fees can be graduated depending on tiie kind of development and
affordability, such as in Olathe, Kansas.
Advantages: The beneficiaries of services pay specifically for the extension of local government facilities
to them, rather than being subsidized by current users. This results in enhanced equity and a close
cost/benefit relationship. Impact fees cover non-subdivision projects such as condominiums and
commercial developments. From a developer's perspective, impact fees may replace more unpredictable,
negotiated exactions. Impact fees may help local governments to plan for growth.
Limitations: Impact fees do not provide capital much in advance of development, unless impact "rights"
are sold up-front. It may be hard for localities to ascertain capital needs and Ihus size fees. Impact fees
are criticized for deterring development and increasing new housing costs, and resulting in interjurisdictional
competition. Also, communities may change their policy preferences depending on economic conditions,
for example, finding a need to subsidize new development rather than the reverse. Developers may well
pass on impact fees to residents.
Reference for Further Information: National League of Cities (NLC), Research Report on America's
Cities, July 1994. National Conference of State Legislatures (NCSL), The Fiscal Letter: "Impact Fees
Can Alleviate Local Growing Pains", Denver, CO, July/August 1991.
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SEVERANCE TAXES
Description: A severance tax is a charge on natural resources extracted from the land or waters of a
State. Direct water withdrawal fees, discussed earlier, are a type of severance program. Other types of
severance taxes include fuel/mineral taxes (based on the volume of coal, gas, oil, uranium and other
minerals withdrawn), limber taxes (based on the volume of timber logged), and oyster/shellfish taxes (based
on the volume or value of shellfish harvested).
Actual Use: Severance taxes on coal and gas are used by mining States generating considerable revenues.
For example, Montana collects $66 million annually from its coal severance tax, and Wyoming collects
$20 million annually. However, these States apply most revenues to general State budgets, dedicating only
the interest on the funds to environmental protection. Other States wilh mineral severance taxes include
Louisiana (oil), Nebraska (uranium), New Mexico (all minerals and fuels, dedicated to
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SPECIAL ASSESSMENTS
Description: Special assessments are recurrent charges levied by local jurisdictions on a sub-group of
population. The sub-group receives benefits from an environmental service or improvement not enjoyed by
others in the area. For example, if a community wants to finance treatment plant improvements that
contribute to lake clean-up, residents with waterfront property, or residents not hooked up to the central
sewerage facility but enjoying recreational benefits from clean water, could be assessed a special surcharge.
When benefits accrue to residents outside the improvements area, the benefits typically must be shown
through some measure, such as higher property values, increased business activity, or frequent use of
recreational sites. Special assessment/ improvement districts could be used to define the geographical
boundary of any environmental improvement, e.g., a sewer or stormwater management district.Where the
benefit clearly is shown via higher property values, "Tax Increment Financing" (TIP) can be used. TIF
generates revenue from the incremental change in property values caused by the improvement financed.
After creating a special district, two sets of tax records are maintained — one reflecting the property's value
up to the time of enhancement, and a second reflecting growing assessed value after the enhancement In
some cases, governments issue tax increment bonds for revitalization projects, with the bonds being backed,
in part, by the anticipated increase in property values resulting from the investment (i.e., value capture).
Actual Use: Special assessments are generally limited to local government and often barred by constitution
as a State tool. While not used as much for environmental purposes as for urban redevelopment and sports
facilities, water, storm water, and wastewater treatment have become more common recently. Fast growing
States like Florida and Arizona use special assessments and tax increment financing for many such projects.
Potential Use: Special assessments could be used more widely for park and other open spaces, lake and
stream rehabilitation, estuary and bay protection, and even for solid waste management such as recycling and
resource recovery centers. Assessments usually are recurrent charges, but the concept could cover one-time
charges too. Charges could be graduated depending on ability to pay and other benefits to be obtained.
Advantages: The advantages of this tool relate to the potential revenue yield, which could be stable, and
to increased equity and an improved cost/benefit relationship. Extending revenue requirements to suburban
residents, who may have lower infrastructure costs and greater ability to pay, can relieve the burden on inner
city residents. Asking inner city residents to pay for suburban developments may prove inequitable.
Incentives recognizing the true costs of environmental services is important
Limitations: Assessments require the ability to pass local ordinances and create special financing districts,
which may require State approval, which is often difficult. They require administrative systems that may be
costly to manage over time. It is not possible to achieve total equity, as there may be no ability to collect, for
example, from downstream users benefitting from upstream water quality improvement. Assessments based
on predictions of property value increases, and documentation of results, requires strict record-keeping and
periodic reassessments which may require special management tools unavailable to communities.
Reference for Further Information: Report from The Governor's Panel, Financing Alternatives for
Maryland's Tributary Strategies, University of Maryland Sea Grant College, August 1995.
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WASTE-END CHARGES
(Special Industry Fees)
Description: These charges are applied most notably to the hazardous waste industry, and are intended
to capture revenues from the potential negative impacts of that industry. Structuring the charges is
complicated, and often the most simple method is followed. For example, special industry fees for
hazardous waste may be assessed against waste generators, storers, treaters, or disposal facilities. Fees
may be flat charges on the volume of waste produced, stored or disposed, or be based on the waste or
disposal method The number of methods used by States reflects the complexity of measuring hazardous
waste, and differences in their accounting and tracking systems. For hazardous waste, waste-end charges
are similar to effluent and emission charges for water and air dischargers.
Actual Use: Numerous States use these taxes to finance hazardous waste programs, including
Connecticut, Indiana, Minnesota, New Jersey, and Washington. The first three assess the charge on
generators, while Washington uses three separate taxes; a hazardous substance fee, a generators' fee, and
a tax on the volume/toxichy of substances produced. Other kinds of industry waste-end charges are a
resource recovery facility charge in Connecticut, and a petroleum wholesalers tax in Nebraska.
Potential Use: Waste-end charges might be placed on industrial solid waste as a whole, where the
revenue potential is huge., e.g., a$5 per ton tax would raise over $1 billion annually nationwide. However,
there is little documentation for solid waste collected and disposed of on behalf of industry. The waste-end
idea could also be extended on an induslry-by-industry basis. Revenues could go to special insurance
funds, resource recovery projects, and brownfields redevelopment.
Advantages: Specific waste-end industry taxes have the advantage of collecting revenue from selected
industries considered especially dangerous to the environment, without the legal and administrative steps
of collecting from a broader range of industry, or solid waste in general.
Limitations: Charges are not necessarily equitable, since they are so industry specific, and the cost/benefit
relationship is not clear because revenues may be applied to any clean-up site. Tax assessment methods
are extremely complicated, contributing to revenue instability. Taxes may be easy to circumvent and illegal
dumping may result Pollution "havens" between States may be created when charges are dissimilar.
Hazardous waste disposers may have multi-State disposal options, which increase transportation costs and
risks, but these options are limited and may be prohibited by some State laws. The hazardous waste
industry already is highly regulated
Reference for Further Information: National Conference of State Legislatures (NCSL), Earmarking
State Taxes, Denver, CO, April 1995; Natural Resources Defense Council (NRDC) Reprint, "Life and
Taxes", The Amicus Journal, 1995; U. S. EPA, Environmental Finance Advisory Board, Public Sector
Options to Finance Environmental Facilities, March 1992.
OTHER
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Description:
Actual Use:
Potential Use:
Advantages:
Limitations:
Reference for Further Information:
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COMPARISON MATRIX FOR SPECIAL CHARGES
Criteria/
Special
Charges
*Direct
Water Use
Effluent
Emission
*Exactions
Feedstock
* Impact
Fees
*Severance
Taxes
"Special
Assess-
ments
Waste-End
Charges
Actual
Use
Mod.
Low
Low
High
Low
High.
Mod.
High
Low
Revenue
Size
Mod.
Mod-
High.
Mod-
High
High
Mod.-
High
Mod-
High
High
High
Mod.-
High
Revenue
Stability
Mod.
Mod.
Mod.
Low
Low
Mod.
Mod.-
High
Mod.
Mod.
Adminis-
trative
Ease
Mod.
Mod.
Mod.
High
Low
Mod.
Mod.
Mod.
Low-
Mod.
Equity
High
Low-
Mod.
Low-
Mod.
Low-
Mod.
Mod.
High
Mod.
High
Low-
Mod.
Cost/
Benefit
Ratio
Mod.
Mod.
Mod.
Mod-
High
Mod.
High
Mod-
High
High
Low-
Mod.
Environ-
mental
Benefits
High
High
High
High.
High
High
Mod.
High
Mod.
High-
High use (over 25 States/many localities); criteria score high (many advantages);
High revenue yield (over $20 million annually in State revenue cuirenfly).
Moderate Use (10-25 States/many localities); criteria score in medium range;
Moderate revenue yield
Low or rare use; criteria do not rate well (many limitations, one or more major
implementation problems).
* Star indicates best rated mechanism
Mod-
Low-
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I.D. FINES AND PENALTIES
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UX FINES AND PENALTIES
Description: Violators of federal and/or State environmental laws and regulations are frequently subject
to the payment of monetary fines and penalties. Many of these violators also are subject to court
adjudication. The amount of fines or penalties generally is outlined in federal and State statutes, but die
actual sum imposed typically results from specific administrative or judicial decisions, and may only occur
after repeated violation on the part of offenders. Both municipalities and the private sector are covered by
fines and penalties, although historically prosecution of private sector cases has been more vigorous.
Cases may be either civil or criminal, depending on the degree of negligence. For example, civil cases may
involve a fine measured in thousands of dollars for failure to file documents such as discharge monitoring
reports for wastewater and laboratory testing results for drinking water. Criminal penalties resulting from
intentional polluting behavior are rare, but the resulting penalty may be measured in millions of dollars. Each
federal environmental statute outlines different types of fines, penalties; and administrative and judicial
procedures, including review provisions. Lawsuits may be filed against an offender by government, or as
a result of citizen suits which are provided for in all federal environmental statutes. Foundations such as the
National Resources Defense Council, Environmental Defense Fund, and Atlantic States Foundation, have
all been successful in achieving financial settlements as a result of citizen suits.
In addition to monetary payment of fines and penalties, responsible party reimbursements to government
occur as a result of contingent liability laws under the federal Superfund statutes are evaluated in this
section. Although not fines or penalties per se, reimbursements on the part of industry, municipalities or
individuals for past contamination of waste sites subsequently categorized as hazardous may be paid to the
federal government, or in some cases to States.
Where appropriate, enforcement settlement agreements may include commitments for direct funding of
"environmental benefit" projects, or "supplemental environmental projects" as they are called currently.
Such projects, which may be on- or off-site of the location where the violation occurred, are made in lieu
of dollar penalties, as determined by the courts or in out-of-court settlements. Such projects may entail
contributions in the form of land, wetlands restoration, environmental education or in-kind services, and
similar types of projects.
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Advantages: The revenue benefits from fines and penalties, as well as from environmental benefit projects
implemented in lieu of direct payment by offenders, could be considerable. Of large significance, however,
are 1he environmental improvements to be achieved when compliance is attained through the avoidance of
such fines and penalties. The deterrence value of fines and penalties may large, depending on the
viewpoint of a particular municipality or business, and the trade-off between prompt compliance and
paying the fine or penalty must be carefully evaluated. Fines are considered equitable by much of the
public, because they emphasize the "polluter pays" principle. Large fine and penalty revenues are best
suited to fund State endowments or trust funds
for future capital expenses, and smaller fines can contribute monies to specific remediation or restoration
projects. Both have been used to cover unanticipated budgetary shortfalls in a number of States. Non-
revenue contributions can also be important, and create environmental incentives and attract additional
resources.
Limitations: The revenue stream resulting from fines and penalties is highly unpredictable, both because
it is unclear when and if a violation may occur, and also because court actions and appeals may occur over
a long time period with the final outcome highly uncertain. Thus, these monies are not suited to fund
environmental program operating costs on a regular basis. Moreover, since most fines and penalties by
law are deposited initially in State treasuries, or the U.S. Treasury in the case violations of federal law,
States must take specific legal steps to dedicate funds to environmental purposes instead of general
budgetary support The total amount of revenue generated often depends on the number of staff available
to inspect and monitor activities to uncover violations.
The potential for a conflict of interest between collecting fines and penalties, and gaining compliance without
the necessity of payments, is an ongoing and extremely delicate issue. Fines and penalties may also result
in inequities and have a weak cost/benefit relationship, since small offenders or offenses may cost
considerable sums of money while larger offenders, both municipal and industrial, may be let off the hook
It is often difficult to assess fines against small communities and industries in financial difficulty.
Summary: Fines and penalties can be a source of funds for environmental programs, as well as
environmental benefit projects in lieu of direct payment by violators, but should be considered as a last
resort to encourage municipalities, industries or businesses to comply with State regulations or to submit
to a compliance schedule. Monetary payments will not generate a steady, dependable stream of income.
Three sources of environmental funding from fines and penalties are discussed following: environmental
benefit projects in lieu of financial payments, monetary payments of fines and penalties, and
reimbursements to Superfund site cleanup.
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LIST OF FINES AND PENALTIES
(In Alphabetical Order)
*1. Environmental Benefit Projects (Supplemental Environmental Projects)
*2, Monetary Payments
*3. Reimbursements (Superfund Liability Cost Recoveries)
* Stars indicate most highly rated mechanisms as described in the Comparison Matrix at the end of the
narratives. See Introduction to the Guidebook for a description of the criteria used. Ratings of "High",
"Moderate", and "Low" are for comparison purposes only, as some ratings are necessarily subjective and
data are incomplete.
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ENVIRONMENTAL BENEFIT PROJECTS
(Supplemental Environmental Projects)
Description: Environmental benefit projects, or supplemental environmental projects as they are currently
labeled, are special environmental improvement projects undertaken at the expense of the violator of an
environmental regulation or specific permit requirement They may be in lieu of or in addition to direct
monetary payment by the offender, and may be arranged by adjudicatory authorities or in out-of-court
settlements.
Actual Use: Many States have instituted environmental benefit programs in the last five years. Such
projects may result either from government action or citizen suits. First preference is given to remediation
of an environmental hazard in the same geographical area, i.e., the particular plant, city, or water body, but
funds cannot used by the offender to comply with violations which resulted in the fine or penally in the initial
instance. Examples of environmental benefit projects include purchases or donations of land for open space
or recreational uses, park and nature facilities, improved lake access for boating and hiking, aquariums,
construction of recycling facilities, environmental monitoring and testing, hands-on environmental education
projects, and even reduction in pollutant loading by the same company in another geographical area Use
of environmental benefit support for research and planning generally is not considered the best use.
Potential Use: The environmental projects that might be included are many, in all environmental media,
and Federal policy has been somewhat flexible. Commingling of supplemental environmental benefit
project funds in single governmental trust accounts might permit funding of larger projects on an ongoing
basis, although this undercuts the geographical proximity criterion.
Advantages: Special environmental projects undertaken in this fashion may be those which otherwise
would not be pursued due to budgetary constraints, and thus can be very important in creating
environmental incentives and generating broad interest The potential exists for leveraging other
governmental funds, once seed money is provided. Such projects also enable the original offender to
undertake a "greening" action, thus saving face. If the project result from a citizen suit, citizens may have
a large input and community-based environmental values will be enhanced.
Limitations: Environmental benefit projects may not be equitable, nor support a strong cost/benefit
relationship, because they may not compensate for the environmental damage caused by the violation, and
it may be very difficult to put a monetary number on the damage. Moreover, because such projects may
have to be specially designed, they may be very small and developed piecemeal with no assurance of
continued support. Critics complain that they may have United utility.
Reference for Further Information: New York State Department of Environmental Conservation, The
Conservationist, June, 1996.
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MONETARY PAYMENTS
Description: Fines and penalties for environmental violations range from the very small in the case of
administrative citations or civil penalties, to huge monetary penalties for criminal violations yielding millions
of dollars in a single suit In general, federally-prosecuted cases require monetary penalties be deposited
in the U.S.- Treasury, although they then may be dedicated to States. Most cases settled under State law
or pursued by State officials accrue to the State. However, States must have specific delegated program
authority, such as federal delegation of the NPDES permit program under the Clean Water Act, or drinking
water primacy, to have enforcement authority under federal programs. The major local governmental legal
authority occurs for delegated industrial pretreatment programs. Fines and penalties resulting from citizen
suits must be deposited in government accounts. Oil spill cases are pursued by the Coast Guard, not the
Environmental Protection Agency.
Actual Use: Most States collect fines and penalties, and dedicate them to environmental programs. Many
have set up trust funds to receive the payments and then spend monies for environmental purposes (includes
Florida, Indiana, Massachusetts, Missouri, Montana, Ohio, Pennsylvania, New Jersey, New York,
Virginia, Washington and Wisconsin). Most of these States collect several millions in fines and penalties
annually, with New Jersey heading the list with almost $500 million in one year. For example, New York
collected a $3 million criminal penalty in 1994 from one company, which also had to build a $20 million
industrial pretreatment facility. The Virginia Environmental Endowment is a sizable trust fund begun 20
years ago with contributions of almost $10 million from two companies, which supports research and
special projects. Some fines are dedicated to local projects, such as the Massachusetts Bay Trust Fund
and Massachusetts Bay Credit Project, that fund Boston Harbor clean-up, beach and salt marsh
restoration, and estuary programs.
Potential Use: Fines and penalties could be used by States and localities for any environmental purpose.
States also can pursue out-of court monetary settlements, thus reducing costs.
Advantages: The potential to generate considerable revenues from fines and penalties exists. When
commingled in State trust fund accounts, revenues will continue to grow and be sufficient to use for
infrastructure construction. Interest income is also generated.
Limitations: Revenue streams are unpredictability and delicate. "Bounty hunting" often has been raised
when the seeking of fines or penalties appears more important than gaining compliance on the part of the
offender. Citizen suits have this potential, since nonprofits may recover expenses and legal fees. The costs
of documenting enforcement cases and collecting fines are very high, and must be weighed against the
likelihood and importance of gaining compliance without fines.
Reference for Further Information: Discussion with nonprofit legal foundations: Atlantic Slates
Foundation, Natural Resources Defense Council (NRDC).
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REIMBURSEMENTS
(Superfund Liability Cost Recoveries)
Description: These fine or penalty-type reimbursements arise because of the "joint and several liability"
laws under federal Superfund statutes (both CERCLA and SARA), as well as State hazardous waste laws.
Under these contingent liability provisions, all past and present users of sites designated as federal
Superfund sites, and many State-designated sites, are liable for damage cost recovery, including
abandoned sites. Users, called responsible parties, include waste generators, transporters who select the
disposal site, and disposal facility owners and operators. Responsible parties are liable for both ciean-up
costs and related damage to natural resources.
Actual Use: Currently, 70 percent of site cleanups are funded by private parties found responsible for
waste at Superfund National Priority List sites. Cost-recovery is primarily for the federal government, but
States also have cost-recovery programs. However, reimbursements under Superfund statute clauses on
the "replacement and acquisition of natural resources" have been rare.
Potential Use: The potential for cost-recovery is, theoretically, huge. However, the legal difficulties in
collecting reimbursements mean that negotiations have been protracted and expensive, particularly for
abandoned sites and non-industrial parties. Interest on Superfund settlement accounts also can be large,
and amendments to existing law might create the ability to use such funds for State purposes off-site, such
as credit enhancement for SRF activities, liability insurance funds for small facilities, and brownfields
redevelopment The Superfund natural resources damage laws might be more widely used if ecological
damage could be more readily valuated.
Advantages: The benefit of vigorously pursuing Superfund liability cost-recovery is not only in tie
potential cost-savings, but also in creating environmental incentives for pollution prevention, including illegal
dumping, in the first place. Equity and the cost/benefit relationship is strongly upheld if more responsible
parties contribute to clean-up, although cost-recovery must be based to some extent on ability to pay which
is not acknowledged in Superfund statutes. Many financial leveraging possibilities exist
Limitations: The revenue potential is highly unpredictable, and administrative and legal costs of pursuing
offenders may be prohibitive. Moreover, all negotiations are protracted, and may delay site clean-up
activities. The joint and several liability clauses of current Superfund statutes are the subject of large
debate, and many "softening" Congressional amendments add to uncertainties.
Reference for Further Information: The Congressional Research Service (CRS), Report for Congress,
Summaries of Environmental Laws Administered by the Environmental Protection Agency,
Washington, D.C., January 1993; U.S. EPA, Environmental Finance Advisory Board, "Preliminary
Analysis of Using the Superfund Program as Cross-Collateralization", June 1995.
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OTHER
Description:
Actual Use:
Potential Use:
Advantages:
Limitations:
Reference for Further Information:
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COMPARISON MATRIX FOR FINES AND PENALTIES
Criteria/
Fine or
Penalty
*Environ-
mental
Benefit
Projects
*Monetary
Payments
"Reimburse-
ments
(Superfund
Liability
Cost
Recoveries)
Actual
Use
High
High
High
Revenue
Size
Low
Low-
Mod.
Mod.
Revenue
Stability
Low
Low
Low
Admini-
strative
Ease
High
Low
Mod.
Equity
Mod.
Mod.
Mod.
Costf
Benefit
Ratio
Mod.
High
Mod.
Environ-
mental
Benefits
High
High
High
High use (over 25 States/many localities); criteria score high (many advantages);
High revenue yield
Moderate use (10-25 States/many localities); criteria score in medium range;
Moderate revenue yield
Low or rare use; criteria do not rate well (many limitations)
High-
Mod-
Low-
* Star indicates best-rated mechanisms
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2. TOOLS
FOR
ACQUIRING CAPITAL
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2. TOOLS FOR ACQUIRING CAPITAL
INTRODUCTION
In contrast to raising revalue through taxes and fees which are subsequently dedicated to environmental
projects, this section presents the three major ways in which governments and the private sector acquire
capital to invest in pollution prevention, environmental protection, and environmental improvements: bonds;
loans; and grants. Bonds and loans entail repayments of principal and interest, although interest rates may
be govemmentally subsidized In contrast, grants represent sums of money awarded by the federal
government, States, and even the private sector for specifically designated purposes for which no
repayment is required.
Each form of acquiring capital, bonds, loans and grants, serves distinct purposes and have certain
limitations. Grants are regarded as highly desirable by recipients, and are often crucially important in start-
up situations. However, since grants are designed by the awarding agency to meet ceratin, often specific,
goals, they may carry additional mandates, require matching monies, involve difficult application
procedures, and be piecemeal and small in size for individual recipients. Grants, moreover, are hardly free
in tie sense that the ultimate sources of funds are tax dollars. The redistribution of tax revenues to some
communities and not others can be a very sensitive issue. Historically, many grant programs have been
somewhat unstable since they must be approved annually by legislative bodies whose memberships are ever
changing. The total amount of grant monies, moreover, is strictly limited by appropriation and competition
for grants is very keen.
Government loan programs have similar limitations as do government grant programs, although interest
rates on the loans may be subsidized particularly for small communities. In contrast, commercial loans are
more flexible, but typically more expensive for public and private borrowers. Commercial loans represent
the greatest source of investment capital for private businesses, compared to grants and bonds.
At present, the tax-exempt municipal bond market remains the dominant source of governmental
environmental financing in this country, even compared to grants and loans. The federal wastewater
treatment construction grants programhas virtually ended, and even the Clean Water State Revolving Fund
(SRF) loan program which has replaced it and the newer Drinking Water SRF, operate through the bond
market. Over half of the Clean Water SRFs issue bonds to leverage their wastewater loans. By the end
of 1997, these SRFs had issued almost $10 billion in revenue bonds out of a total loan pool of $24 billion.
Drinking Water SRFs also are beginning to issue bonds to leverage their monies. Furthermore, local debt
obligations, bolh general obligation and revenue bonds, account for the greatest source of local capital for
environmental improvements ranging from pollution control to parks and open space. Although the 1986
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Tax Reform Act made it more difficult for 1he private sector to finance environmental infrastructure through
State and local tax-exempt private activity bonds, these bonds are still widely used as are the more costly
taxable bonds.
Although bonds represent the largest source of ready and expandable capital, they are the most complex
and expensive way to borrow, with the exception of SRF bond-backed loans for which interest rates are
subsidized. The high expense results from the legal and other fees, administrative time, and in some cases
the voter approval process required for issuing bonds. Since small borrowers incur the same costs as large
borrowers, loans may be more advantageous for small borrowers than bonds. While grants are the
cheapest source of funds, comparisons of government grant/loan equivalency ratios demonstrate that
additional governmental mandates required under grants may substantially raise the costs and time of
construction (lowering the effective value of the grant aid).
Bonds, loans and grants are presented separately in the following sections, with emphasis on recent bond
innovations and the State Revolving Fund (SRF) programs. While government loan programs are fewer
in number, grant programs, particularly federal ones, are more numerous. The grant narratives give some
indication of the size and durability of these programs, but are not summarized in a comparison matrix.
Additionally, noted throughout this Section are government grants and loans made to and by the private
sector, although these are presented in more depth in Section 8.: Tools to Pay for Community-Based
Environmental Protection and Section 10.: Tools to Access Financing for Small Businesses and
the Environmental Goods and Services Industry.
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2.A. BONDS
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2A. BONDS
Description: A bond is a written promise to repay borrowed money on a definite schedule and usually
at a fixed rate of interest for tiie life of the bond Bonds can stretch out payments for new projects over
a period of fifteen to thirty years. State and local governments repay this debt with taxes, fees, or other
sources of governmental revenue. As discussed in this section, it is the source of pledged security or
repayment for bonds, or the type of collateral used, that defines the type of bond, for example, general
obligation bonds, a myriad of revenue bonds, or hybrids.
Since most government bonds are tax-exempt, bondholders are generally willing to accept a lower rate of
return on their investment than they would expect on a comparable commercial bond. Bond financing,
therefore, can often provide State and local governments with low-interest capital.
Some State and local governments are required by statute to seek voter approval for certain types of bond
issues. For example, most State and local governments cannot issue general obligation bonds without voter
approval. If achieving this type of approval is difficult or time-consuming, State and local governments may
want to consider issuing bonds that do not require voter approval, or exploring other options for capital
financing, even if interest costs may be higher.
The Tax Reform Act of 1986 altered the tax-exempt status of some government-issued bonds. The Act
reclassified bonds into two categories, governmental purpose bonds and private activity bonds.
Governmental purpose bonds are automatically tax-exempt, but private activity bonds must meet certain
criteria in order to be classified as tax-exempt. To qualify as a governmental purpose bond, at least 90
percent of the bond proceeds must be used by a State or local government, and no more than 10 percent
of the debt service on the bond may be derived from or secured by a trade or business. If a bond does
not meet these criteria, it is classified as a private activity bond. Private activity bonds that are issued for
specific public-purpose projects— such as water supply facilities, sewage treatment plants, solid waste
disposal facilities, and some hazardous waste plants-can be tax-exempt. However, each State is limited
to issuing private activity bonds in the amount of $50 per capita or $150 million each year, whichever is
greater.
Advantages: Bonds provide financing for immediate capital needs. If the project qualifies, tax-exempt
bonds can be a low-interest way of acquiring capital.
Limitations: Certain types of bonds require voter approval. Bonds only spread out costs of a project;
an ultimate revenue source still needs to be identified. There may be some competition for debt capacity
at Ihe State or local level. Some State and local governments may also have statutory limitations on the
dollar amount and/or number of bonds that can be issued. Issuing bonds is an expensive and time-
consuming process, and requires sound legal and financial advice.
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LIST OF BONDS
(In Alphabetical Order)
1. Advance Refunding Bonds
*2. Anticipation Notes
3. Appropriation-Backed Bonds
4. Asset-Backed Revenue Bonds
5. Capital Appreciation and Zero Coupon Bonds
*6. Certificates of Participation
7. Derivatives
*8. Double-Barrel Bonds
*9. General Obligation Bonds
10. Mandate Bonds (Environmental)
11. Mini/Baby Bonds
*12. Moral Obligation Bonds
*13. Mortgage Lease-Back Revenue
*14. Private Activity Bonds
*15. Revenue Bonds
*16. Short-Term Municipal Bonds
*17. Special Assessment Bonds
*18. Special Tax Bonds
*19. State Revolving Fund (SRF) Revenue Bonds
20. Structured Municipal Bonds
21. Tax Increment Bonds
[Special Note: We received writeups for two innovative new bond tools after this section was completed.
Please see the write-ups for Better American Bonds and the EPA: Environmental Bond Guarantee
Program in Appendix A, on pages A-2 and A-3, respectively.]
* Stars indicate most highly rated mechanisms as described in the Comparison Matrix at the end of the
narratives. See Introduction to the Guidebook for a description of 1he criteria used. Ratings of "High",
"Moderate", and "Low" are for comparison purposes only, as some ratings are necessarily subjective and
data are incomplete.
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ADVANCE REFUNDING BONDS
Description: Advance refunding is the refunding of an outstanding issue of bonds by 1he issuance of a
new bonds prior to the date (denned as more than 90 days before) on which the earlier bond can be
redeemed or paid Advance refunding is undertaken for a variety of reasons, but primarily to take
advantage of lower interest rates when general economic conditions permit, and/or to alter debt reserve
requirements, such as to lower coverage requirements. For aperiod of time both the bond being refunded,
or refinanced, and the new bond may be outstanding, although typically Ihe indenture securing Hie earlier
bond may be defeated by deposit of the new issue proceeds into an escrow fund for the earlier bond (see
also Section 6., Refinancing Loans).
Actual Use: Priorto the Tax Reform Act of 1986, advance refunding in the municipal market was a major
source of bond activity, accounting for up to 40% of all new bond issues, and any bond issue could be
advance refunded numerous times to adjust outstanding debt to current interest rates. Actual use now is
sharply curtailed as a result of the new tax code, which limits each governmental activity bond issue to one
advance refunding if the original issue was issued after December 31,1985. Thus, bond leveraged State
Revolving Funds (SRFs), are extremely limited in tiieir use of advance refunding. Advance refunding now
is prohibited entirely for qualified tax-exempt private activity bonds, e.g., bonds financing private
wastewater facilities, except for non-profit 501 (c)(3) issues.
Potential Use: Local government bonds issued before 1985 may still advance refund these earlier bonds
more than once, and SRFs often have given advice to communities on how and when to proceed with
refunding.
Advantages: Significant savings in interest costs to lenders may be achieved as a result of advance
refunding. However, SRF issuers will have to carefully examine Ihe interest rate trends to assure that tie
one-chance refunding nets the issuer the greatest benefit possible. Advance refunding may reduce
significantly the size of debt reserve funds (coverage) or other restrictive covenants.
Limitations: Other restrictions are outlined in the 1986 Tax Reform Act, including complex technical
specifications and requirements that apply to the temporary periods for refunded redemptions, reserve
funds and yield restrictions. These restrictions have made it exceedingly difficult for SRF's using tie over
funded reserve fund method of leveraging, to advance refund tiieir bonds at all. These SRFs need to seek
the advice of their investment bankers on the handling of reserve funds and Guaranteed Investment
Contracts (GICs) before considering advance refunding.
Reference for Further Information: Council of Infrastructure Financing Authorities (GIFA), State
Revolving Funds Under Tax Reform, CIFA Monograph No. 2, William Graham, Paul Shinn and John
Petersen, Washington, D.C., June 1989.
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ANTICIPATION NOTES
Description: Anticipation notes are short-term bond instruments repaid with anticipated revenues from
various sources. They can be used to acquire immediate capital when other funding sources are delayed
or unidentified. For example, if a city anticipated a future federal grant for a project the government might
issue a Revenue Anticipation Note to meet interim construction costs.
There are four primary types of anticipation notes: Tax. Anticipation Notes (TANs) are issued in
anticipation of tax receipts and paid from those receipts; Revenue Anticipation Notes (RANs)me issued
in anticipation of other sources of future revenues, often federal or State aid; Bond Anticipation Notes
(BANsJate supposed to provide financing until a future bond offering is made; General Obligation (GO)
notes are not backed by any particular revenue source, but by the full faith and credit of the issuing
government
Actual Use: Both State and local governments widely use anticipation notes to meet short-term capital
needs while awaiting other sources of revenue.
Potential Use: Anticipation notes can be used to meet short-term gaps in project finance, when the
ultimate revenue source (grants, bonds etc.) has been delayed, or when suitable revenue sources have not
been identified.
Advantages: Tax anticipation notes provide immediate funds for capital projects and other financing
needs.
Limitations: Interest rates for anticipation notes are typically higher than on longer-term securities. They
represent only a temporary funding source. Ultimately, the final source of funding still needs to be identified.
Reference for Further Information: Moody's on Municipals: An Introduction to Issuing Debt,
Moody's Investor Service, Moody's Public Finance Department, Inc., 1989 and subsequent additions,
99 Church St., New York, NY 10007; (212) 553-1658. Lamb, Robert, and Rappaport, Stephen,
Municipal Bonds, McGraw-Hill Book Company, New York, NY, 1987. Contain good basic introduction
to anticipation notes.
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APPROPRIATION-BACKED BONDS
Description: Appropriation-backed bonds are State special obligation bonds using a pledge of future
State direct appropriations, typically annual appropriations, as the form of pay back to the bondholders.
Such bonds may be either tax-exempt or taxable, depending on what is being financed or how monies are
managed, and constitute a specific type of State revenue bond State bond issuance is authorized by State
legislatures, and the issuing authority may enter into a service contract or lease arrangement with the State
or State agency undertaking the activity being financed.
Actual Use: Many States use appropriation-backed bonds for special State projects which do not fall
readily under any specific environmental program category, or when there is an anticipated need for funds
for subsequent outlay. For example, the New York State Environmental Facilities Corporation, which
houses the SRF program, has used appropriation-backed bonds for projects undertaken on behalf of the
State, such as the construction of State park facilities, a State hospital wastewater treatment plant, and
State Thruway Authority hazardous waste clean-up. Some States have used appropriation-backed bonds
to raise the 20% State match required under the SRF program, in which case taxable bonds may be issued
to avoid expensive arbitrage rebate accounting. However, in recent years appropriation-backed bonds
have been challenged legally in a number of States, on the grounds that legislative appropriation of funds
does not constitute adequate assurance for the bondholders and ties the hands of future elected officials.
Hence, current use of appropriation-backed bonds is less common.
Potential Use: Appropriation-backed bonds could be used to provide money for the State match
required for tfie drinking water revolving fund program recently authorized by the Safe Drinking Water Act
of 1996, because the 20% State match payments could be deferred until 1998. Other potential uses are
many, including open space acquisition and solid waste programs, and government air pollution control
facilities.
Advantages: These bonds can be useful as a prompt and efficient financing device to cover special needs
as they arise, and which may fall outside of Ihe normal budgeting cycle of State legislatures. In theory, they
constitute a special obligation of the State.
Limitations: The legal uncertainty surrounding appropriation-backed bonds has made States cautious
about using them when other financing means are available. In some States, use of such bonds is prohibited
by the State constitution.
Reference for Further Information: The Bond Market Association (BMA), Fundamentals of
Municipal Bonds, Fourth Edition, New York, NY, 1990. The BMA updates this book periodically, but
a fiflh edition is not expected until 2000. For information, call (212) 809-7000.
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ASSET-BACKED REVENUE BONDS
Description: An asset-backed bond is a revenue bond backed by a pledge of collateral in the form of
a veiy specific asset, usually a physical asset such as a building, facility or land, and income flow attached
to these. More recently, assets have been interpreted to include a specific revenue stream or portion of
a larger revenue stream, such user fees. Asset-backed bonds are somewhat similar to certificates of
participation, except they are bonds not notes. Bondholders do not have claim on all the assets of the bond
issuer, but only the asset described in the legal bond covenants. Typically, asset-backed bonds arise from
local units of government and the private sector.
Actual Use: Asset-backed bonds are increasingly common, particulatly for defined and limited funding
purposes, and may be issued in smaller denominations and for shorter time periods (under ten years)
compared to other revenue bonds.
Potential Use: Asset-backed bonds could be used to finance a wide range of environmental purposes,
including land acquisition for parks and conservation, brownfields redevelopment, and air pollution control
equipment as well as for water and wastewater projects.
Advantages: Using asset-backed bonds allows municipalities or private entities to structure bonds in a
way which does not expose Iheir full range of assets, or credit, to the market, but still borrow capital funds
for a defined purpose. They may enable businesses to proceed with specific environmental projects when
their overall financial condition may not permit the issuance of larger bonds without extremely high interest
charges or the or the use of costly bond insurance.
Limitations: Because these bonds are not backed by the full faith and credit of the issuer or all of the
issuer's revenue stream, they may be considered more risky and thus be more costly to the issuer in terms
of increased interest costs and bond issuance costs including higher coverage for debt reserve funds. The
collateral pledged may bear little relationship to the project to be funded. In some cases, certificates of
participation may be preferable because bond issuance costs are avoided.
Reference for Further Information: Heide, Susan C, Klein, Robert A, and Lederman, Jess, editors,
The Handbook of Municipal Bonds, Probus Publishing, 1994.
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CAPITAL APPRECIATION AND ZERO COUPON BONDS
Description: Capital appreciation bonds (CABs) and zero coupon bonds (zeros) are used in the issuance
of State and local general obligation and revenue-backed debt. They both provide investors a guaranteed
reinvestment rate, so they are most attractive to investors when interest rates are expected to fall. CABs,
also called compound interest bonds, accumulators or municipal multiplier bonds, are sold at face value
(par) but the issuer makes no periodic interest payments. Instead, the interest component is held by the
issuer and compounded at a stated rate so the investor receives a lump sum multiple of the principal and
interest CABs result in more bond proceeds for the same use of debt capacity (total par value) than do
zeros, which are the most extreme version of original issue discount bonds. Zero coupon securities also
make no periodic interest payments. Instead, they are sold at deep discount from their face value. At
maturity date, the security is redeemed at face value. The investor receives the rate of return based on the
appreciation from the discounted price to the full face value. Zero coupon bonds are also issued by
corporations and may be created by a brokerage firm when it "strips" the coupons off a bond and sells the
corpus and Ihe coupons separately. This latter technique often is used with Treasury bonds. The Internal
Revenue Service maintains that the holder of a taxable zero owes income tax on the interest that accrues,
but not paid, each year, so such bonds tend to be bought for Individual Retirement Accounts and Keogh
Accounts, where they are tax-sheltered. Buying a tax-exempt zero frees the purchaser of paying taxes on
imputed interest income. Zeros are among the most volatile of fixed-income securities, falling more
dramatically when interest rates rise and rising more rapidly when interest rates decline.
Actual Use: Both taxable and tax-exempt CABs and zeros have been used extensively.
Potential Use: These types of bonds can be used to finance virtually any type of physical project for
environmental purposes.
Advantages: CABs and zeros tend to be attractive to investors who are interested in investing for a future
need, such as retirement, or want the convenience of not having to deal with how to reinvest periodic
interest payments. Governments are able to delay interest payments until the final maturity.
Limitations: The issuer must have substantial funds available at maturity for what is effectively a balloon
maturity.
Reference for Further Information: Government Finance Officers Association, 180 North Michigan
Ave., Suite 800, Chicago, IL 60601, Phone: 312-977-9700, Internet: www.gfoa.org; Internet Debt
Reference Guide: www.window.texas.gov/localinf/debtguide/. Moody's on Municipals: An
Introduction to Issuing Debt, Moody's Investors Service, Public Finance Department, 99 Church St.,
New York, NY 10007, Phone: 212-553-1658.
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CERTIFICATES OF PARTICIPATION
Description: Certificates of participation (COPs) are financial instruments used to finance capital projects,
which are backed by the leasing of real property, physical assets, such as wastewater plants or equipment.
The assets are held by a trustee, and the certificate issuer pays yearly lease payments to the certificate
holders until the debt is repaid If the certificate issuer should default on the lease payments, the trustee is
responsible for selling the physical assets and using the proceeds to reimburse the certificate holders.
Certificates of participation are similar to mortgage bonds and asset-backed bonds, but are not legally
classified as such, meaning that State and local governments can issue them without voter approval and
without affecting their overall bonding capacity.
Actual Use: COPs are used primarily by local governments, but sometimes a State, to finance purchase
of property or physical assets, such as mass transit buses, sports facilities, or parks. COPs have been
widely used in California where bond financing through the ballot box is not always a viable option. For
example, San Diego recently issued COPs to help pay for renovation of Balboa and Mission Bay Parks,
and the COPs were guaranteed by city golf course fees and hotel tax revenues. Washington State issued
COP for park redevelopment backed by park fees. COPs were used in Olathe, Kansas to purchase on
historic site and in Arlington, Texas for a municipal golf course. COPs also may be repaid by annual
legislative appropriation.
Potential Use: A wastewater treatment or solid waste management facility might be financed through
certificates of participation. A certificate of participation can also provide an excellent opportunity to
structure a public-private partnership (see Section 4: Tools for Building Public-Private Partnerships).
Advantages: Certificates of participation do not require voter approval, and do not count against debt
capacity limits, but allow governments to pay back year-by-year. In some States, special districts cannot
issue bonds but may issue certificates backed by equipment COP payments to private investors are tax-
exempt, an attractive feature.
Limitations: These certificates can only be issued to finance capital projects where a real asset
exists that is suitable as collateral, and only in jurisdictions in which local authorities are allowed to negotiate
long-term leases. COPs cost 20-35 basis points more than conventional or bond financing.
Reference for Further Information: The Trust for Public Land, Green Sense: Financing Parks and
Conservation, Spring and Autumn, 1996, Spring 1997, Phyllis Myers, Editor, San Francisco, CA,
Telephone: 800-714-LAND, Internet: htip^/www.tplnQrg/tpl
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DERIVATIVES
Description: A derivative product is a financial instrument whereby the value of the instrument is "derived"
fromthe value of a specific, underlying market or index. For example, a bond paying an interest rate based
on changes in the stock market, may be referred to as a derivative because the value of the bond changes
in response to a market, which may be measured by an index such as the Standard and Poor's 500. In
this particular case, the "underlying"is the Standard and Poor's 500.
A wide range of financial instruments have been classified in a generic sense as derivative products. These
instruments include swaps, caps, options, puts, calls, and collars. The common theme of all of these
products share is that their value is derived from the performance of specific indices or cash markets. From
an accounting perspective, a derivative is defined as having two characteristics: 1.) the holder has the right
to participate in some or all of the price change experienced by the underlying; and 2.) the instrument's
value at maturity can be settled in cash as opposed to taking ownership of the underlying.
Actual Use: Many States and medium to large municipalities have used derivatives as a way of reducing
financial risk, either interest rate risk or other related risks. The most common type of derivative used is
the interest rate swap which provides savings to municipal issuers by permitting them to exchange floating
or fixed-rate payments or vice versa Standard and Poor's recommends that municipal issuers should
generally minimize risk by limiting swaps based on markets other than municipals, since many of these other
markets can be highly volatile.
Potential Use: Derivatives can be a useful tool to help States and larger, financially healthy, municipalities
(with financially sophisticated managers) reduce their interest rate risks and to a lesser extent, maximize
financial results. In general, SRFs have avoided use of derivatives as unnecessarily complicated for their
programs, including for arbitrage considerations.
Advantages: Derivatives can be an excellent way to manage interest rate risks.
Limitations: Derivatives are a sophisticated tool for the sophisticated investor. Some can be quite volatile
and financially risky. They should not be undertaken lightly or without professional financial advice, which
may be quite costly. There are other financial tools that should be examined/used before considering
derivatives.
<•»
Reference for Further Information: Standard arid Poor's Structured Municipal Finance Criteria,
McGraw Hill, 1993. Standard and Poor's Corporation, Municipal Finance Department, 25 Broadway,
NY, NY 10004. Goldman Sachs & Co., 85 Broad Street, New York, New York 10004.
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DOUBLE-BARREL BONDS
Description: A double-barrel bond is a revenue bond secured by a pledge of two (or more) sources of
payments, typically a user fee and, secondarily, by the credit of 1he issuing government through ad valorem
taxes (See writeup on "General Obligation Bonds" later in this section). Occasionally, ageneral obligation
bond may also be backed by a specific revenue.
Actual Use: Both State and local governments increasingly have used double-barrel bonds to finance
environmental improvements, including renovation of waste water treatment plants and start-up capital for
stormwater districts. The revenue stream pledge may be in the form of multiple taxes, such as the real
estate transfer tax or special assessment taxes.
Potential Use: Double-barrel bonds can provide cheaper capital than conventional revenue bonds for
projects that generate revenues, such as solid waste landfills, wastewater treatment plants, drinking water
utilities, or stormwater management districts.
Advantages: Double-barrel bonds are a good way for States or localities, particularly those with low
credit ratings or low debt capacity, to obtain lower interest rates on bond issues compared to conventional
revenue bonds. The pledge of a special tax or fee to a visible environmental project may enhance the
acceptability of the tax or fee, and increase leveraging potential. Double-barrel bonds are also useful in
situations where the public benefit, for example, from improved water quality achieved by increased
wastewater treatment is broader than the population base paying the user fee.
Limitations: Some State or local governments may have statutory limitations on the issuance of double-
barrel bonds, or they may subject these bonds to the same statutory limitations as General Obligation
bonds.
Reference for Further Information: Lamb, Robert, and Rappaport, Stephen, Municipal Bonds,
McGraw-Hill Book Company, New York, 1987. Contains a good basic introduction to double barrel
bonds.
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GENERAL OBLIGATION BONDS
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Description: General Obligation (GO) bonds are bonds backed with the guarantee that the issuing
government will use its taxing power to repay the bond. For State GO bonds, the income and sales taxes
secure the debt, while for localities it typically is the property tax. There are two primary types of GO
bonds: unlimited ad valorem tax debt and limited ad valorem tax debt Unlimited ad valorem tax debt
occurs when 1he government pledges its Ml failh and credit with no limitations on possible property tax
rates. Limited ad valorem tax debt occurs when the government pledges its full faith and credit, but witii
a cap or restriction on possible property tax rates to repay the bond. This is regarded as less secure than
an unlimited bond if Ihe tax limits could conceivably be reached within the term of the bond, or if other tax
revenues are not available for debt service.
Actual Use: Both State and local governments have used GO bonds to finance capital projects related
to environmental programs and activities, including natural lands purchase. State referendum environmental
bonds, which often are very large, are GO bonds paid for by a variety of sources of revenue including
appropriations.
Potential Use: GO bonds are suitable for financing any project that requires large amounts of capital up-
front.
Advantages: GO bonds backed by full taxing power are regarded as safer than bonds backed by a single
revenue source, and generally command lower interest rates and lower reserve fund requirements. GO
bonds also have structural flexibility since the issuing government can repay the bond with a variety of
revenue sources.
Limitations: Voter approval is frequently required for GO bonds. Many States and cities also place
statutory limits on total GO debt, or on GO debt as a percent of property valuation. The private bond
rating agencies consider the amount of a government's GO debt, or its debt ceiling, in rating bonds, even
though water and sewer are theoretically not included, the rating agencies generally make note of water and
sewer GO debt in establishing bond ratings.
Reference for Further Information: Lamb, Robert, and Rappaport, Stephen, Municipal Bonds,
McGraw-Hill Book Company, New York, 1987. Contains good basic introduction to GO bonds.
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MANDATE BONDS (Environmental)
Description: The Government Finance Officers Association (GFOA) several years ago proposed the
creation of anew category of tax-exempt bonds called "Mandated Infrastructure Facility Bonds" (MIFs)
for which many of the federal restrictions on tax-exempt financing would be eased. The proposal suggests
that private activity bonds used to finance facilities built, acquired, renovated, or rehabilitated due to a
requirement in a federal statute or regulation should receive the same or more favorable tax treatment as
governmental bonds. Specifically, an MIF bond would ease 1he following restrictions contained in the 1986
tax act:
•The private business use and payment test would be 25 rather than 10 percent;
•The 5 percent private business or disproportionate use test would not apply;
•Arbitrage rebate requirements would not apply, except that yield restrictions would
govern investments., and arbitrage earnings would be used for the project;
•Interest earned on the bonds would not be subject to either individual or corporate
minimum alternative taxes; and
•Financial institutions would be allowed to deduct 80 percent of the cost of purchasing
and carrying the bonds wilhout regard to issuance limitations.
By targeting the proposal to mandated infrastructure and requiring that property be govemmentally owned,
the GFOA hopes to allay fears that creation of this new bond is a return to pre-1986 bonds.
Actual Use: Mandate bonds are still only proposed There have been other similar proposals from
environmental interest groups and various Congressional Representatives.
Potential Use: Mandate bonds could be used by State and local governments to finance federally-
mandated construction, renovation, expansion, and upgrade of environmental facilities.
Advantages: Mandate bonds would allow State and local governments to retain tax-exempt status for
bonds used to finance capital projects that involve greater private participation than is currently allowed for
tax-exempt governmental bonds.
Limitations: Creating mandate bonds would require federal legislative action.
Reference for Further Information: GFOA, Chicago, Illinois, Internet: www.gfoa.org,
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MINI/BABY BONDS
Description: Mini Bonds, also called baby bonds for their smaller-than-normal face or par values
(generally less than$1000, usually $100 to $500, or even $25), are characterized by direct marketing from
issuers to investors. Modeled after federal savings bonds, they bring segments of the bond market within
reach of small investors and open a source of funds to issuers who lack entree to the large institutional
market. Other than their small denominations and direct marketing, baby bonds have diverse
characteristics designed for investors with different objectives. For example, some are structured as capital
appreciation bonds so investors do not have to worry about reinvesting periodic interest earnings (see also
earlier in this section, Ihe writeups on Capital Appreciation Bonds and Zero Coupon Bonds).
Actual Use: In 1997, the Lower Colorado River Authority issued both capital appreciation bonds and
current interest bonds in $500 increments to a maximum of $ 10,000 per owner, with varying maturities of
3,5,11 and 12 years. The City of Tacoma, Washington Solid Waste Utility sold $2 million in $1000 par
value, 3 and 5-year bonds as part of a $71 million debt refinancing rated A by both Moody's and
Standard and Poor's. Baby bonds have experienced widespread use at state and local levels since the late
1970's.
• Potential Use: Mini/baby bonds could be used to finance relatively small, targeted environmental
investments, such as non point source pollution control measures.
Advantages: Lower costs of issuance and flexibility are the chief advantages.
Limitations: Mini bonds generally entail higher administrative costs for distribution and processing, relative
to total money raised, and they lack a large and active market that ensures liquid for bond holders.
Reference for Further Information: Petersen, John and Hough, Wesley, Creative Capital Financing
for State and Local Governments, Government Finance Research Center , 1983; Internet Debt
Reference Guide; www.window.texas.gov/localinf/debtguide/.
Ill
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MORAL OBLIGATION BONDS
Description: A moral obligation bond is a bond secured from revenues from a financed project, as well
as anon-binding pledge that any deficiency in pledged revenues will be reported to the State legislature,
which may appropriate State monies to make up the shortfall. Under most State laws, if a draw down of
the bond's debt reserve occurs, the bond trustee must report the amount used to the governor and the State
legislature. The State legislature is then authorized to appropriate the requested amount to repay the
bondholders, although there is no legally enforceable obligation to do so.
Actual Use: Since 1960, over 20 States have issued moral obligation bonds. The first State to issue this
type of bond was New York, which issued moral obligation bonds to finance a housing authority. In most
cases, moral obligation bonds have been self-supporting, and no State financial assistance has been
required. In all recorded instances to date in which the moral pledge was actually called upon, the
respective State legislatures responded by appropriating the necessary amounts of monies.
Potential Use: Moral obligation bonds can be used to acquire proj ect capital at lower rates than revenue
bonds. Since they generally do not count against debt issuance limitations, they are particularly useful for
governments that are approaching debt limits.
Advantages: Typically, moral obligation bonds do not count against debt limitations. Moral obligation
bonds can obtain interest rates almost as low as general obligation bonds because they are backed by the
pledge of repayment
Limitations: The process required to issue moral obligation bonds may involve legislative action in some
States. Because the pledge of repayment is not legally enforceable, debt holders may expect (demand)
slightly higher rates of return on moral obligation bonds as compared to general obligation bonds.
Reference for Further Information: Raftelis, George A., Comprehensive Guide to Water and
Wastewater Finance and Pricing, second edition, CRC Press/Lewis Publishers, Chelsea, Michigan,
1989. Contains a basic introduction to bonds, including a description of moral obligation bonds.
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MORTGAGE LEASE-BACK REVENUE BONDS
Description: Mortgage lease-back bonds are revenue bonds issued by a State or local authority where
Ihe revenue stream underlying the bonds are lease payments by another public entity, for example, a
municipal unit of government Such bonds typically are used for land or other real property transactions.
Lease or mortgage payments to retire bond investor debt are made through annual budget appropriations,
which may be supplemented by fees generated by the use of the leased property. At the end of the lease
or mortgage terms, the governmental entity assumes ownership. Bonds typically are tax-exempt
Actual Use: Conventional mortgage-backed bonds have been used extensively by the housing industry,
such as Fanny Mae and State housing authorities, as well as for school and hospital constructioa For
environmental purposes, mortgage lease-back revenue bonds have been used in instances where the public
agency, usually a local government lacks the capital funds or debt capacity to make an outright purchase
of land or real property, and thus leases the item from die capital provider which typically is a nonprofit
entity, such as a 501 (c)3 foundation, set up by the local government For example, a park foundation may
purchase land and then lease it to local government, typically a special park district, such as was the case
in Johnson County, Kansas. '
Potential Use: Mortgage lease-back bonds could e used more widely for land purchases, such as for
brownfields, land on which an environmental facility is to be constructed, open space, historic sites and
buildings, trails and bikeways, and other lands. Similarly, nonprofit foundations and land trusts could make
land acquisitions through the use of these bonds, as long as the governmental entity promises to make timely
lease or mortgage payments through appropriations or specific revenue dedication. Some redevelopment
costs could be financed through the bond.
*
Advantages: Benefits pertain mainly to be the ability of local governments to proceed with land
acquisitions or project construction when they do not wish to use condemnation powers or general
obligation bonds, but have insufficient funds to make such purchases in a timely manner, particularly when
land is threatened by potential development The revenue bonds are less often subject to voter approval
than general obligation bond.
Limitations: Using a bond is always more complicated and expensive that an outright purchase. Local
support must exist to help ensure lease payments.
Reference for Further Information: The Trust for Public Land, Greensense: Financing Parks and
Recreation, Spring 1997, Phyllis Myers, editor, SanFrancisco CA, Telephone: 800-714-LAND, Internet:
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PRIVATE ACTIVITY BONDS
Description: "Private activity" or 'Exempt" is a term now used to describe industrial development and
similar bonds which meet one of a number of test under federal tax law measuring private involvement in
a bond financing. The most commonly used definition includes bonds which meet both the private business
use test and the private payment definition. The private business use test is met when no more lhan ten
percent of bond proceeds are used by entity other than a State or local government unit The private
payment test is satisfied when no more lhan ten percent of debt service on the bonds is directly or indirectly
paid or secured by a private entity. Most of these restrictions flow from the 1986 Tax Reform Act.
Actual Use: State and local bonds meeting the definition of private activity bonds may be issued on a tax-
exempt basis if issued for specifically identified purpose and a myriad of specific rules are satisfied Tax-
exempt private activity bonds (qualified or exempt bonds) may be issued for the following purposes:
airports; docks, and wharves; water and sewerage, certain solid waste disposal, and qualified hazardous
waste facilities; certain public housing; facilities for the furnishing of local electric energy or gas, local district
heating and cooling facilities; mass commuting and high-speed intercity rail facilities; certain improvements
to hydroelectric generating facilities; student loans, certain redevelopment and industrial development
activities; facilities for use by 501(c)(3) charitable organizations; and enterprise zone facilities. In addition,
small-issue IDBs may be issued to finance, manufacturing facilities and farming property.
Potential Use: Private activity bonds also could be used for financing brownfields activities.
Advantages: Qualified private activity bonds provide funding at tax-exempt rates of interest which should
be lower than most alternative financing mechanisms. Although interest on such bonds is exempt from the
regular income tax, interest on the bonds (other than for bonds issued for 501(c)(3) charitable
organizations) is an item of "tax preference" for purposes of the alternative minimum tax.
Limitations: Bonds meeting the definition of private activity bonds may only be issued on a tax-exempt
basis if, among other requirements, room is available under the particular State's volume cap. Federal law
imposes a limit on qualified private activity bond issuance for each State of $50 per capita or $150 million,
whichever is greater. Private activity bonds issued for airports, docks, wharfs, municipally-owned solid
waste disposal facilities, and facilities used by 501(c)(3) charitable organizations do not require a volume
cap allocation.
Reference for Further Information: Heide, Susan C., Klein, Robert A., and Lederman, Jess, editors,
The Handbook of Municipal Bonds, Probus Publishing, 1994.
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REVENUE BONDS
Description: Revenue bond is a broad term used to describe bonds on which the debt service typically
is payable mainly from revenue generated from the operation of the project being financed, or from other
non-property tax sources. They may be issued by States or local governments, or by an authority,
commission, special district or other unit created for the purpose of issuing bonds for facility construction,
and typically are tax-exempt. State Revolving Fund (SRF) bonds and private-activity industrial
development bonds are types of revenue bonds, as are others which derive their basic characteristics from
revenue bonds, such as mortgage lease-backed bonds.
Actual Use: Revenue bonds now account for the clear majority of municipal bonds used to finance
infrastructure in this country, including for water, sewer, and solid waste. Issued by all levels of
government, revenue bonds may be preceded by Ihe creation of a special district defining the geographical
boundaries, as well as a public authority issuing and responsible for the bonds. Because the bond payment
is secured mainly by the revenue pledge, additional covenants and mortgages may be used and feasibility
studies required. Bond interest rates may be slightly higher for revenue compared to general obligation
bonds, and even higher for taxable revenue bonds.
Potential Use: These bonds may finance construction of any environmental facility which generates future
payments from its use, such as user fees, tolls, concession fees, and rental or lease-back payments.
Advantages: Revenue bonds have grown in popularity primarily because they are free from the
requirements of general obligation bonds, which must be approved by voters, are subject to debt ceiling
limitations, and may carry other restrictions covering principal and interest repayments. In contrast, revenue
bonds are issued by special authorities and districts, created by local legislative bodies, and do not count
against debt ceilings, although the national rating agencies take this into account in financial capability
analyses. Revenue bonds can be issued in atimely manner, and debt can be specifically structured to meet
project needs. Level annual debt payments ensure that future as well as present users of the new facilities
will p^?, 1hus enhancing equity.
Limitations: For some jurisdictions, the issuance of revenue bonds is more complicated. In New York,
special revenue authorities must be created by the State legislature, and the State comptroller approves
revenue bonds over a set amount Public authorities remove direct control over spending (including
approval of user fees) from local legislative bodies. Thus, political control is exercised indirectly via the
appointment of board and authority members. Some localities strongly resist the creation of revenue
authorities and special districts.
Reference for Further Information: The Bond Market Association, Fundamentals of Municipal
Bonds, Fourth Edition, 40 Broad Street, New York, New York, 10004,1990.
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SHORT-TERM MUNICIPAL BONDS
Description: Historically, the phrase "short-term municipals" referred to short-term municipal bonds and
to short-term securities known as notes. There are two main types of notes, anticipation notes and general
obligation notes. Both types of notes are often used for the same purposes. All of these instruments
generally have maturities ranging from a few months to a few years, have fixed interest rates, and are issued
in anticipation of a bond issue, grant proceeds, or tax collections.
In the 1980s anew, broader class of "short-term municipals" were developed to address high interest rates
and interest rate volatility - and the resulting investor worries about fluctuations in the value of portfolios
and issuer concerns about the increasing costs of borrowing capital. These new "short-term municipals"
are known as demand obligations or variable rate demand obligations. They are based on a simple idea
Governments issue long-term bonds, but they have yields determined as if they are short-term notes. The
bond holders can demand purchase of their bonds at par (the principal due at maturity) , plus accrued
interest at regular predetermined intervals. Bond demand periods can be daily, weekly, monthly, quarterly,
semiannually, or annually. In addition, the interest rate varies at predetermined intervals. Tax-exempt
commercial paper represents another new type of short-term instrument. This is simply a short-term
promissory note issued for up to 270 days. It is often used instead of anticipation notes because of greater
flexibility in determining and setting both maturities and rates.
Actual Use: State and local governments issue billions of dollars a year in "short-term municipals" of all
types, traditional and new, to meet short-term capital needs for design and initial construction while waiting
for long term funding revenues. These short-term instruments are issued to fund many different activities.
Examples include housing and urban renewal, water and wastewater. project start-ups, transportation
proj ects, school district operations, and temporary agency operating deficits caused by seasonal variations
in tax collections.
Potential Use: Short-term municipals can be used to meet short-term gaps in project finance and
operations when they occur, and until the final sources of funds become available.
Advantages: Short-term municipals bonds provide issuers with immediate funds for capital and operating
needs.
Limitations: Short-term municipals have higher interest rates and funding is temporary.
Reference for Further Information: Fundamentals of Municipal Bonds, Fourth Edition, issued by The
Bond Market Association, 40 Broad Street, New York, NY 10004-2373.
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SPECIAL ASSESSMENT BONDS
Description: Special assessment bonds are bonds issued by local governments and/or special authorities
that are secured by some type of special taxes, charges, or fees. Trie bonds are sold to finance specific
public infiastructure improvements that directly benefit the properly owners in limited, identifiable areas.
Assessments are levied on properties in the areas in direct relation to the benefits received from the
projects. Trie assessments are based on property measurement systems related to the benefits such as
street front-footage or square footage owned. The system for collecting assessments is usually tied to tiie
collection of ad valorem property taxes. Most special assessment bonds have maturities of 15 years or
less (see the next tool, Special Tax Bonds).
Actual Use: Examples of projects commonly funded by special assessment bonds include the construction
maintenance, and/or repair of water and sewer lines, storm drains, sidewalks, roadways, and lighting
improvements. However, special assessment bonds have also been sold by communities and/or authorities
to finance public improvement ranging from parks to bicycle paths to major landscaping work to parking
lots.
Potential Use: Special assessment bonds could be used more widely to finance local or even regional
public-purpose projects that benefit specific areas. They could be an excellent tool to fund projects that
provide improved environmental services and benefits, especially ones that are community- and ecosystem-
based.
Advantages: The great attraction of special assessment financing is that it is very equitable. Only those
individuals, private firms, and other groups who directly benefit from the specific public improvements
through improved services, quality of life, and/or increased property values are responsible for paying for
them.
Limitations: Special assessment bonds are normally used only for the construction of a project and not
for maintenance, which can prove to be quite expensive in its own right over the long-term. These bonds
have speculative elements which can be mitigated through backup measures such as limited tax increase
authority, utility revenue pledges, and cash flows. Because only those who benefit from the projects must
pay, these bonds may require high assessments which small and economically disadvantaged communities
may not be able to afford.
Reference for Further Information: Standard and Poor's Municipal Finance Criteria, Standard
and Poor's Corporation, 25 Broadway, New York, NY 10004. Telephone Number: 212-208-1146.
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SPECIAL TAX BONDS
Description: A special tax bond combines some of the characteristics of both revenue bonds and general
obligation bonds. Such bonds, usually issued by local governments to finance a particular type of facility,
are backed by the pledge of proceeds from a specific tax source. However, they differ from "Special
Assessment Bonds" described previously since tax rates are a flat percentage or rates as opposed to being
proportional to the benefit being received from the new project by individuals paying the tax.
Actual Use: Special tax bonds have long been issued by highways authorities to finance highways, roads
and bridges and are paid for out of highway taxes. For environmental purposes, particularly the financing
of parks and open space, localities recently have used special tax bonds financed out of local sales tax
surcharges, or even property tax surcharges. Such surcharges may be approved for a limited time period
or to collect a specified amount of money. M^
Potential Use: The potential for environmental financing from special tax bonds is growing, particularly
when used for local parks, nature facilities, greenways and trails, natural lands acquisition, and similar land-
based projects. This growth is primarily because of the increased local popularity of such environmental
projects.
Advantages : The advantages of special tax bonds are that they may have strong local support, in fact they
have to be popular for a municipality to go through the steps of seeking State approval and local voter
agreement to the special tax to begin with. Community-based environmental protection is greatly enhanced
by the use of these bonds. Bond proceeds sometimes have been dedicated to local land trust to purchase
natural lands on a revolving basis and have been further leveraged through State and private sector
matching grants. When the local sales tax is used, local residents benefit from non-residents paying the tax
as well. When taxes are temporary, to collect a fixed sum of money, the cost/benefit relationship is close.
Limitations: Gaining State and local agreement to tax add-ons is anything but a foregone conclusion, and
often has proven impossible. The taxes usually are highly regressive.
Reference for Further Information: See Section 1A.1.: Local Sales Taxes, Personal (Tangible)
Property Taxes, and Real (Ad Valorem) Property Taxes. See also Section 8.: Tools To Pay For
Community-Based Environmental Protection. Special sales taxes are described in the Bond Markets
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Association's Fundamentals of Municipal Bonds, Forth Edition, New York, 1990.
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STATE REVOLVING FUND (SRF) REVENUE BONDS
Description: SRF revenue bonds are issued to expand, or leverage, loan funding sources for local
projects which meet the eligible project criteria under ihe Clean Water and Drinking Water SRFs (CWSRF
and DWSRF). SRF tax-exempt revenue bonds, issued under the bond leveraging approach are secured
first by local GO or revenue bond pledges as collateral and loan recipient repayments, and by SRF debt
reserve funds underlying the revenue bond. The two basic leveraging approaches used by SRFs are
described in Section 3: Enhancing Credit "SRF"Bond Leveraging". SRF revenue bonds also may be
issued to provide for the required 20% State match to federal capitalization grants, and sometimes are
issued on a taxable basis to avoid complicated arbitrage rebate requirements.
Actual Use: To date, over half of die CWSRFs have bond leveraged their funds with SRF revenue bonds.
Typically this has occurred through bond pools, and over five CWSRFs have received AAA bonds rating.
Single issue revenue bonds may be issued to very large municipalities, such as New York City. The bond
leveraging approach has resulted in 2-3 times more loans being made in the near term compared to the
direct loan approach, and has enable many CWSRFs to meet municipal wastewater treatment demands
and thus fund other projects such as stormwater, solid waste landfills, and source water protection as well
as estuary and agricultural non-point source improvements. Several States already have leveraged their
DWSRFs, The SRF model has been adopted by Congress in tie National Highway System Designation
Act of 1995, which establishes a State infrastructure bank program for transportation projects, and has
been discussed in Congress for school construction.
Advantages: Revenue bond leveraging allows for more projects to be funded in the near term compared
to Ihe direct loan approach. Although SRF revenue bonds are issued at market rates, local borrowers
receive loans at below market interest rates, subsidies provided in part by investments of the large bond
debt reserve funds. Because of their high asset to liability ratio, SRF revenue bonds are high quality credits
and provide market access to borrowers regardless of their individual credit ratings.
Limitations: SRF borrowers must comply with national SRF program requirements, such as Davis Bacon
and a limit of 20 years for loan repayments, unlike other revenue bonds which may extend to 30 years.
Bond leveraging over the long run does not result in loan repayment interest earnings to the SRF fund,
unlike direct loans.
Reference for Further Information: Merrill, Lynch & Co., Guide to State Revolving Fund Revenue
Bondst by Christopher Mauro, December 1995.
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STRUCTURED MUNICIPAL BONDS
Description: All municipal (State and local government) debt issues have a particular structure. However,
Ihe structuring of bonds has come to refer to new financing techniques and credit substitutions where the
financing objectives of 1he issuer and Ihe investment requirements of the purchaser can be achieved
simultaneously, hi this context, structured municipal bonds can provide the issuer cash-flow oriented debt
financing. This approach uses loan pooling, cash flow allocation and credit enhancement to create multi-
class municipal bonds with differing characteristics designed to attract investors with different needs.
Although federal tax and securities laws limit the nature of the application of structured financing techniques
in the design of municipal bonds, the principles are clear. Securitization of diverse municipal cash flows
from various user fees, tax levies, and other payments is similar to residential mortgage-backed securities.
Structured municipal bonds rely on multiple tranches (pieces of an asset) for structuring principle and
interest payments into different classes. They also may have credit enhancements provided by letters of
credit (LOG). An example of structured municipals is a collateralized bond obligation (CBO), which is an
asset-backed security with a portfolio of bonds as collateral. The sponsor transfers the collateral into a
special purpose vehicle, such as atrust or corporation, which has no other assets. Atypical CBO has more
than one tier or tranche and the senior tranche has first claim on the collateral's cash flows to cover it's
payments. The junior tranche, which has more risk of default, has second claim The equity tranche claims
the residual that is left over after satisfying all other claims against the underlying cash flow.
Actual Use: The stmcturing of pools of previously issued tax-exempt bonds has been practiced for some
time now. More recently, pools of municipal property tax liens have been securitized and sold with
relatively high ratings.
Potential Use: Securitization of State Revolving Loan fund portfolios for sale to private investors increases
Ihe availability and lowers the cost of capital. With Securitization, loan repayments are sold to a trust that
finances the purchase by selling securities to investors. Returns to investors in these securities could be
structured by maturity, risk, and flow of funds priorities. ^
Advantages: Structured municipal bonds offer opportunities for more efficient means of raising capital for
environmental projects.
Limitations: Structured debt transactions tend to be complex, reflecting the challenge of mitigating risk to
investors while still providing financial benefits to the issuer.
Reference for Further Information: Government Finance Officers Association, 180 N. MichiganAve.,
Suite 800, Chicago, IL 60601; Phone: 312-977-9700; Fax: 312-977-4806; Standard and Poor's Public
Finance, Structured Finance Group, 25 Broadway, NY, NY 10004; Phone: 212-208-8000; Fax: 212-
412-0475. Getting Secure by Jane Katz at www.bos.frb. org/econontic/neir/katz97_3.htrn.
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TAX INCREMENT BONDS
Description: Tax increment bonds, which differ slightly from special assessment bonds, are local tax-
exempt bonds issued for special assessment or improvement districts where the benefit from the project
being financed is specifically manifested through higher property values. The tax increment financing,
termed TIP., generates revenue for bond repayment from the incremental change in property values caused
by the financed improvement. After creating a special district, two set of tax records are maintained - one
that reflects the property's value before the enhancement, and a second that reflects growing assessed
values (and payments) after the enhancement and serves as the source of bond repayment
Actual Use: TIP has been most frequently for local urban redevelopment and sporting facilities, but water,
stormwater and wastewater treatment have become more common uses in recent years. For example, tax
increment bonds for environmental improvements have been used frequently in rapidly growing States such
as Florida and Arizona. These bonds have not been used by States and, indeed, often are prohibited for
State use by State constitutions.
Potential Use: Tax increment financing could be used more widely for the acquisition of for park and
open spaces, lake and estuarine protection, for recycling facilities and brownfields clean-up and
redevelopment.
Advantages: TIP has Ihe advantage of being able to define specifically the geographical boundaries and
benefits of an environmental improvement. It ensures lhat those individuals or businesses actually benefitting
fromthe improvement will help pay for it, thus increasing equity. TIP bonds for revitalization projects bonds
may be backed by revenue pledges in addition to anticipated increases in property value, called "value
capture", which makes them highly leveraged
Limitations: TIP requires the ability to pass local ordinances and create special financing districts, which
oftenhas proven difficult. Tax increment bonds require effective administrative systems for property value
tax accounting that may be costly and complicated to manage over time. Property tax assessments are
somewhat subjective since they are based on predictions, and assessments must be fully documented,
subject to strict record-keeping, and periodically reassessed.
Reference for Further Information: Report from The Governor's Panel, Financing Alternatives for
Maryland's Tributary Strategies, University of Maryland Sea Grant College, University of Maryland
Environmental Finance Center, August 1995.
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Description:
Actual Use:
Potential Use:
Advantages:
Limitations:
OTHER
Reference for Further Information:
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COMPARISON MATRIX FOR BONDS
Criteria/
Bond
Advance
Refunding
* Anticipa-
tion Notes
Appro-
priation-
Backed
Asset-
Backed
Revenue
Capital
Apprecia-
tion/Zero
Coupon
"Certifi-
cates of
Partici-
pation
Derivatives
*Double-
Barrel
*General
Obligation
Mandate
Mini/
Baby
Actual
Use
High
High
Low
Mod.
High
High
Mod-
Mod.
High
N.A.
Low
Revenue
Size
High
High
Low-
Mod.
Mod.
High
Mod.
High
High
High
N.A.
Low
Revenue
Cost/
Savings
High
High
Low
Mod.
High
Mod.
High
High
High
High
High
Admini-
strative
Ease
Low
High
Mod.
Mod.
Mod.
Mod-
High
Low
Mod.
Low
Mod.
Low
Equity
Low
Mod.
Low
Mod.
Low
High
Low
Mod.
Mod.
High
High
Financial
Leverag-
ing
Mod.
High
Mod.-
High
Mod.
Mod.
High
Mod.-
High
Low
Low
Mod.
Environ-
mental
Benefits
Low
High
High
High
Mod.
Mod.-
High
Low
High
High
High
High
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COMPARISON MATRIX continued
Criteria/
Bond
*MoraI
Obligation
*Mortgage
Lease-
Back
Revenue
*Private
Activity
*Revenue
*Short-
Term Muni
^Special
Assessmen
t
^Special
Tax
*SRF
Revenue
Structured
Municipal
Tax
Increment
Actual
Use
Mod,
Mod.
High
High
High
High
Mod.
High
Low
Low
Revenue
Size
High
Mod.
Mod. -
High
High
High
High
Low-
Mod.
High
Mod.
Low
Revenue
Cost/
Savings
Mod.
Mod.
High
Mod.
High
Mod.
Mod.
High
Mod.
Mod.
Admini-
strative
Ease .
Mod.
Mod
Mod.
Mod.
Mod.
Mod.
Low
Mod.
Low
Low
Equity
Mod.
Mod.
Mod.
Mod.
Mod.
High
Mod-
High
High
Mod.
High
Financial
Leverag-
ing
Mod.
High
Mod.
Mod.
High
Mod.
High
High
Mod.
Mod.
Environ-
mental
Benefits
High
High
High
High
High
High
High
High
Low
High
t • • __|__ I • • • _i
High - High Use (over 25 States, many localities or private sector); revenue over $2 billion annually
nationwide; criteria score well 0ow interest rates, straight forward, flexible, specific)
Mod. - Moderate use (10-25 States, many localities/private); criteria score in medium range
Low - Low or rare usage; criteria score poorly
* Star indicates best rated mechanisms
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2.B. LOANS
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2B. LOANS
Description: A loan is the temporary provision of a specific amount of funds up-front for an expenditure,
that must be repaid in a set amount time, typically with interest The rate of interest is established prior to
Ihe loan or, in the case of commercial loans, determined through negotiations.
Private loans, typically made by banks and other financial institutions, provide capital for a wide variety of
environmental projects within a range of market interest rates. Typically, larger and more financially secure
customers receive the best interest rates, compared to smaller borrowers. However, environmentally risky
projects, such as those involving hazardous waste, also carry higher interest costs. At present, commercial
loans account for the largest portion of private sector capital financing and, depending on economic
conditions, are a highly expandable source of funding.
Government loan programs provide capital funds to a select number of governments, non-profit
organizations, and private businesses. Like grants, government loans are made with very specific goals in
mind, often are accompanied by specific mandates, may be less than 100% of total project costs, and are
limited by legislatively appropriate dollar amounts. Unlike commercial loans, government loans often are
made available at subsidized (lower than market) interest rates for projects that meet eligibility criteria, or
may be interest-free, e.g., some State Revolving Fund (SRF) loans. Many government loan programs are
targeted to small, economically distressed, and/or rural areas, which need the most assistance in acquiring
project capital. In general, small, disadvantaged borrowers receive the lowest interest rates, compared to
the reverse for commercial loans.
The SRF program is clearly the largest government environmental infrastructure loan program available
today, far surpassing and sometimes eclipsing other State loan programs. While the SRF program is
capitalized by a federal capitalization grant (like a block grant), it is presented in here as a State loan
program. With the exception of the federal Department of Agriculture and Small Business Administration
(discussed in Section 10) loan programs, direct federal loan programs are few in number.
Advantages: Government loan programs frequently provide loans at lower interest rates than those that
are available for commercial loan and bond financing. Loans involves fewer and lower transaction costs
than bonds, and may be acquired without voter approval. Smaller, disadvantaged communities may fund
government loans an easier and less costly route than bonds or commercial loans. Moreover, loans from
different sources may be co-mingled, including with grant funds. Loans requiring matching funds are highly
leveraged. Both SRF and commercial loans are especially flexible as to application deadlines and cost
overruns.
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Limitations: Government loans are subject to the availability of approved funds, and competition between
borrowers can be keen. Such loans may carry onerous governmental mandates, such as SRF loans for
which borrowers must comply wife federal "cross-cutters" such as Davis Bacon. Most federal loans have
complicated application procedures and deadlines. Small, disadvantaged communities may be unable to
borrow even at zero interest Other than SRF loans, government refinancing and short-term loans are rare,
and recipients may not be able to finance pre-construction costs on their own. Commercial loans, while
widely available and much more flexible, generally will have higher interest costs than tax-exempt bonds.
Summary: Government loans, particularly SRF loans, are a large source of infrastructure capital, and
monies appropriated for that purpose, and may cany specific government requirements and limitations.
Small, disadvantaged communities receive the most favorable interest rate treatment, and primarily by the
private sector are a large source of both construction and operating capital, and loan terms can be highly
flexible and tailored to meet specific needs, including short-term needs. However, commercial loans are
expensive particularly for small projects.
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LIST OF LOANS
(In Alphabetical Order)
1. Agriculture; Rural Business-Cooperative Service - Economic Development Loans
2. Agriculture: Rural Housing Service (RHS) - Community Facilities Loans
3. Agriculture: RHS - Housing Site & Self-Help Housing Land Development Loans
4. Agriculture: Rural Utilities Service — Water and Waste Disposal Systems Loans
*5. CoBank (National Bank for Cooperatives Loan Program)
*6. Co-Funding
*7. Commercial Loans
8. Direct Source (Equipment) Financing
*9. EPA: State Revolving Funds - Clean Water
*10. EPA; State Revolving Funds - Drinking Water
11. Federal Financing Bank
12. Federal Loan Programs
*13. North American Development Bank
*14. Private Investment
15. State Loan Programs
*16. State Revolving Fund (SRF) Pre-Financing and Short-Term Loans
*17. SRF Private Beneficiary Loans - Clean Water
* Stars indicate most highly rated mechanisms as described in the Comparison Matrix at the end of the
narratives. See Introduction to the Guidebook for a description of the criteria used Ratings of "High",
"Moderate", and "Low" are for comparison purposes only, as some ratings are necessarily subjective and
data are incomplete.
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DEPARTMENT OF AGRICULTURE
RURAL BUSINESS-COOPERATIVE SERVICE
ECONOMIC DEVELOPMENT LOANS
Description: These zero interest loans are used to promote rural economic development and job creation
projects. Loans may fund project feasibility studies, start-up costs, incubator projects, and other related
reasonable expenses. Eligible applicants include electric and telephone utilities with current rural
electrification or rural telephone bank loans or guarantees outstanding.
Actual Use: Examples of projects funded include the establishment or expansion of factories or
businesses, medical facilities, water and sewer industrial development parks, business incubators for rural
economic development activities, and olher jobs projects. Most of the environmental projects funded
involve water or wastewater systems.
More than $12,275,000 in loans were obligated in Fiscal Year (FY) 1997 with assistance ranging from
$10,000 to $750,000 and averaging $375,000. Projected loan obligations for FY 1998 arid 1999 are
approximately $25 million and $15 million respectively. Between May 1989 and September 30,19976,
474 economic development loans totaling $83.2 million were made.
Potential Use: These loans could be used to help finance directly and leverage other capital for additional
wastewater and drinking water utilities, and to fund non-point source improvements. Depending on
interpretation of authorizing legislation and regulations, they might also fund solid waste and waste-to-
energy facilities, as well as brownfields cleanup and redevelopment
Advantages: The loans are inherently equitable since they fund projects that would not otherwise be
funded for an often needy segment of society. Federal funding for this program has been relatively stable
and loan application procedures are not difficult
Limitations: The maximum loan amount is $750,000. The maximum loan term is ten years at a zero
interest rate. Loan recipients must provide supplemental funds totaling 20 percent of the assistance
received. Environmental projects compete with many other types of projects for loans.
Reference for Further Information: U.S. Department of Agriculture, Rural Business - Cooperative
Service, 14th & Independence Avenues, SW, Rm. 5405-South Building, Washington, D.C. 20250,
Internet web site at http://www.mrdev.usda.gov/rbs/index.html. Information on this loan program can
also be found in the Catalog of Federal Domestic Assistance and its World Wide Web site at
http://aspe.os.dhhs.gov/cfda/ideptagr.htm.
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DEPARTMENT OF AGRICULTURE
RURAL HOUSING SERVICE
COMMUNITY FACILITIES LOANS
Description: The Department of Agriculture's Rural Housing Service provides loans to help finance
communily facilities that provide essential services to rural residents. Eligible applicants include city,
county, and State agencies; political and quasi-political subdivisions of States, associations and
corporations; Tribes; and private nonprofit corporations.
Actual Use: These loans are used to build, enlarge, extend, or otherwise improve community facilities
providing safely, transportation, community, social, cultural, and health benefits; industrial parks; access
ways; and utility extensions. They have been used to buy fire fighting equipment, renovate hospitals, and
build rural health clinics, municipal buildings, and schools.
In Fiscal Year 1997,468 direct loans and 80 guaranteed loans were made totaling approximately $130
million and $64 million, respectively. Direct loan amounts ranged from $50,000 to $2,500,000 and
averaged $447,521. Guaranteed loans ranged from $100,000 to $2,500,000 and averaged $905,594.
Rural Housing Service estimates for Fiscal Years 1998 and 1999 are for direct loans of about $206 million
and $200 million and for guaranteed loans of $153 million and $210 millioa
Potential Use: Depending on interpretation of applicable legislation and regulations, these loans could be
used to finance brownfields cleanup and reuse costs relating to the redevelopment of contaminated
community facilities. They night also be used to pay for encapsulating and/or removing asbestos during
the renovation of community facilities. Water and wastewater line extensions could potentially be funded
using these loans.
Advantages: These loans are at zero interest and targeted to areas that are often economically
disadvantaged. Equity and leveraging potentials are high, since State revolving funds, as well as HUD and
EDA grants or loans, could be combined with these loans.
Limitations: Even with a zero interest rate, these loans must be repaid. Assistance is limited to community
facilities in rural areas. The loans can be used to fund all development costs related to the community
facilities, not just environmental costs. The competition for funding from the many different types of non-
environmental projects is great
Reference for Further Information: U.S. Department of Agriculture, Rural Housing Service (RHS),
1400 Independence Avenue, SW, Washington, DC 20250, Telephone: 202-690-1727, RHS home page
is on the World Wide Web at http://www.rurdev.usda.gov/agency/rhs/rhs.html. Information on this
loan program is also available in the Catalog of Federal Domestic Assistance and its World Wide Web
site at http://aspe.os.dhhs.gov/cfda/ideptagrAtai
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t
DEPARTMENT OF AGRICULTURE
RURAL HOUSING SERVICE
HOUSING SITE & SELF HELP HOUSING LAND DEVELOPMENT LOANS
Description: The Department of Agriculture's Rural Housing Service provides this assistance to public
or private non-profit organizations that provide developed housing sites to qualified borrowers in open
country and towns with less than 10,000 people (or under certain conditions in areas up to 25,000 people).
The housing sites must be sold on a cost development basis to low income families, cooperatives, nonprofit
organizations, and public agencies.
Actual Use: Loans are used to purchase and develop adequate housing sites in rural communities,
including any needed equipment which becomes a permanent part of 1he development Loan funds may
be used to pay for water and sewer facilities, if unavailable; needed engineering, legal fees, and closing
costs; and landscaping and related facilities such as walks, parking areas, and driveways. Three loans were
made in Fiscal Year 1997 and loan obligations totaled $1,192,334.
Potential Use: The U.S. Department of Agriculture projects lhatthis loan program will grow dramatically.
The Department estimates that loan obligations for Fiscal Years 1998 and 1999 will be $1,187,000 and
$10,000,000 respectively.
Advantages: These loans could be more aggressively used to ensure that adequate water and wastewater
(sewer) services are provided when housing is developed in lower population areas for use by low-income
residents.
Limitations: Loans can be used to fund all development costs related to housing, notjust for environmental
facilities. Land purchase costs eat up a significant portion of funds and there is competition for funds use
for other non-environmental purposes. All housing developed with Ihese loans must be used by low and
very low income families in generally rural areas. Finally, the program is a relatively small one.
Reference for Further Information: U.S. Department of Agriculture, Rural Housing Service (RHS),
1400 Independence Avenue, SW, Washington, DC 20250, Telephone: 202-690-1727, RHS home page
on the World Wide Web is at http://www.nirdevaisda.gov/agency/rtis/rhs.html. Information on this
loan program can also be accessed in the Catalog of Federal Domestic Assistance and its World Wide
Web site at http://aspe.os.dhhs.gov/cfda/ideptagr.htm
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DEPARTMENT OF AGRICULTURE
RURAL UTILITIES SERVICE
WATER AND WASTE DISPOSAL SYSTEMS LOANS
Description: These loans provide assistance for meeting rural water and waste disposal needs. Funds may
be used to install, repair, improve, or expand water and waste disposal facilities. Eligible applicants include
political subdivisions of a State (municipalities, counties, districts and authorities), associations,
cooperatives, nonprofit corporations, and federally recognized Tribes.
Actual Use: Projects have included construction of water systems involving lines, wells, pumping stations,
storage tanks and treatment plants; improvements to water systems such as new lines, wastewater facilities
and booster pumps; renovation of water systems including distribution lines, wells and pressure tanks;
construction of wastewater collection and treatment systems; replacement of wastewater plants and
upgrade of collection lines; repair of wastewater lines and construction of lift stations; and purchase of
landfill sites and trucks/equipment for solid waste disposal. Loan obligations in Fiscal Year (FY)1997
totaled $480,000. FYs 1998 and 1999 loan obligations are projected at $0 with program funds being
limited to grant awards (see Sec tion2.C., Department of Agriculture-Rural Utilities Service Water
and Waste Disposal Systems Grants).
Potential Use: Loans could be used to acquire capital to finance additional wastewater, drinking water,
and solid waste facilities. Depending on interpretation of legislation and regulations, the grants might
finance waste-to-energy and recycling facilities, and non-point source programs.
Advantages: Equity and leveraging possibilities are high, since State revolving funds, as well as HUD and
EDA grants or loans, can be combined with these loans. State revolving funds can pre-finance these loans
(and/or grants), thus covering up-front design and initial construction costs.
Limitations: Loans are paid out only after construction is completed. Projects cannot service areas in
towns of over 10,000 people. Grants, as opposed to loans, are made only if needed to reduce user
charges to a reasonable level, and only after loan funds are expended. For a grant of up to 70 % of eligible
costs, service area median household income must be below the poverty level or below 80%
of the State non-metropolitan median household income (whichever is higher).
Reference for Further Information: U.S. Department of Agriculture, Rural Utilities Service (RUS),
Stop 1548,1400 Independence Ave., SW, Washington, DC 20250-1548, RUS home page is located
on the World Wide Web at http:/Avww2.hqnet.usda.gov/nisAvater/progranis.htm. Information on die
loans is also available in the Catalog of Federal Domestic Assistance, and at the Catalog's Web site,
httn;//asne.os.dfahs.gov/cfda/identagr.htnt
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COBANK
(NATIONAL BANK FOR COOPERATIVES LOAN PROGRAM)
Description: CoBank is a federally-chartered and regulated private financial institution that serves the
approximately 2,400 local, regional and national agricultural cooperatives and rural utilities systems across
the country. CoBank operates as a financial cooperative and is part of the Farm Credit System, a
government-sponsored enterprise to assist agriculture and other business in rural areas. CoBank's
customers capitalize the bank by providing equity capital based on borrowings. Earnings of the bank are
distributed in the form of patronage refunds based on loan usage.
Actual Use: CoBank offers a broad range of flexible loan programs and specially tailored financial
services. For environmental projects, it provides long-term, interim, and refinancing loans at competitive
rates to credit-worthy water and wastewater systems in unincorporated areas or communities with less than
20,000 people. Loans issued by CoBank have terms extending up to 20 years, with fixed or variable
interest rates, to cooperation with CoBank also provides a cash investment service, to cooperation with
the National Association of Water Companies, CoBank operates a Small Loan Program that provides
loans of $50,000 to $500,000 through a streamlined application process.
Potential Use: Loans are available for interim construction or long-term financing of plant and equipment
of water and waste disposal systems.
Advantages: CoBank is a national cooperatives) bank with very competitive interest rates and flexible
terms.
Limitations: Loan applicants must meet eligibility requirements (population of 20,000 or less) and a test
of acceptable credit quality. CoBank provides funding for many types of projects, not just environmental
ones.
Reference for Further Information: The U.S. EPA Environmental Financial Advisory Board (EFAB)
advisory: Small Community Financing Strategies for Environmental Facilities, August 9, 1991
contains a description of the CoBank loan program. EFAB can be reached via USEPA's Environmental
Finance Program at 401 M Street, SW, Washington, DC 20460, Mail Code: 2731R, Contact: Alecia
Crichlow at crichlow.alecia@epa,gov. For direct information on CoBank and applications for its loan
programs, contact: CoBank National Bank for Cooperatives, P.O. Box 5110, Denver, CO 80217, Phone:
303-740-4051 or 1-800-542-8072.
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CO-FUNDING
Description: Localities may combine federal and State loans in the same project, including grant funded
projects. Project financing may be arranged by the locality or the State, Co-funding opportunities are
particularly applicable and advantageous to small communities, for wastewater, drinking water, nonpoint
sources and other environmental projects.
/•,,
Actual Use: All States and many localities co-mingle sources of funds, both loans and grants. One of the
most prevalent uses is SRF-arranged wastewater project co-financing for small, disadvantaged
communities. This approach takes advantage of the SRFs' flexibility to pre-finance loans prior to
construction, which federal agencies cannot, as well as act as a financial coordinator. For example,
Waverly, New York, facing a $2.7 million wastewater treatment plant and collection sewer project,
qualified for a $900,000 SRF interest-free loan and received commitments from the federal Rural Utilities
Service for a $1.3 million grant and $50,000 loan, and from HUD for a $400,000 grant With these
commitments, the town obtained a short-term, interest free, $2.7 million SRF loan, which will be paid off
by long-term SRF, RUS and HUD financing. Other federal dollars feat could be combined in similar
projects include economic development assistance grants, and State monies may be available from
environmental bonds and legislative appropriations such as for solid waste.
Potential Use: The potential use of co-funding for environmental projects is large, especially, if an agency
is willing to take the lead in organizing and harmonizing different funding sources, cycles and procedures.
This may require regular inter-agency meetings as done in New York. It may be possible to pre-qualify
applicants (which solves problems caused by different agencies' application time periods), and to
consolidate or simplify individual grant/loan applications. It is expected that the Drinking Water SRF
program also will use the co-funding approach for small localities.
Advantages: Co-funding can make project implementation possible, and increases access and equity for
clients, particularly smaller communities. The total number of communities that can be served is also
increased. Co-funding overcomes specific restrictions which apply to individual programs, for example,
federal agencies rarely provided money up-front, and have funding restrictions (e.g., RUS rarely award
grants over $ 1 million and loan interest rates do not vary wilh affordability factors; HUD grants are capped
annually at $400,000). Co-funding helps overcome uncertainties in individual agency annual budget
fluctuations.
Limitations: Co-funding may be beyond the ability of a single community to arrange, since financing
procedures differ so radically and the application process is tedious. Thus, without a lead agency at the
State level to take charge, funding windows may close.
Reference for Further Information: Localities should consult State Self-Help programs, and Rural
Community Assistance Programs, for more information
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COMMERCIAL LOANS
Description: Most commercial banks and/or financial institutions in the United States have public finance
departments that operate to provide State, local and other governments with loans to finance a wide variety
of capital proj ects and purchases.
Actual Use: States and local governments tend to use commercial loans where lower-interest financing
is unavailable and/or to fill short-term financing needs in anticipation of revenues from other sources (i.e.5
so-called bridge loans). Commercial loans are usually provided at set costs keyed within a range of
market-based interest rates.
Commercial lenders such as banks are very low-risk lenders and usually seek to protect themselves and
their loans by securing collateral in one or more of three ways: primary collateral in the form of assets
(preferably liquid), secondary collateral such as guarantees, and cash flow. For governments, some portion
of future revenues or taxes often represents the ultimate security for commercial loans. .
Potential Use: Commercial loans could also be used to finance privatized public-purpose environmental
facilities and equipment that are ineligible for governmental bond financing, or for governments whose
bonding capacity has been exhausted.
Advantages: Hie application process for commercial loans can be much faster than for government loan
programs. Commercial lenders usually have no set eligibility criteria in the way that government loan
programs do and may have no predetermined limits on the total amount of loan capital available.
Limitations: Generally, commercial loans have higher interest rates and less favorable payback terms than
government-funded loan programs.
Reference for Further Information: Most commercial banks have public finance departments that will
assist with inquiries on loan programs. Those that do not, can either handle inquiries from their general
finance/loan operation or refer inquiries to bank that have public finance departments.
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DIRECT SOURCE (EQUIPMENT) FINANCING
Description: Wilh direct source financing the tax-exempt borrower receives equipment financing directly
fromthe investor. This approach tends to streamline the borrowing process, simplifying documentation and
minimizing intermediary involvement In particular, it is not subject to the municipal securities disclosure
requirements of Securities and Exchange Commission (SEC) Rule 15c2-12. Certain large institutional
investors have public finance arms which work wife tax-exempt borrowers to design financing programs
to meet specific equipment needs at tax-exempt interest rates wife flexible payment terms. Generally,
reserve funds are not required and prepayment options are available throughout the term of the loan, rather
1han only on set call dates. Public bond offerings generally involve a more time consuming documentation
process as well as the obligation to provide both continual notices of material events regarding the securities
and annual financial information.
Actual Use: Equipment purchases are often accomplished with direct source financing, which is also
called equipment financing. However, leasing has proven to be a very competitive alternative financing
technique (see Section 4.A., Tax-Exempt Lease). Direct lenders often securitize equipment loans.
Potential Use: Direct source financing could be used to acquire equipment needed for environmental
protection or production of environmentally friendly goods.
Advantages: Because it eliminates underwriter and rating agency fees, printing costs, and time-consuming
documentation and disclosure processes, direct source financing can reduce front-end and total costs.
Limitations: Direct source financing is not practical for major facility projects, which require longer term
funding due to the amounts needed.
Reference for Further Information: Government Finance Officers Association (GFOA), 180 North
Michigan Avenue, Suite 800, Chicago, IL 60601, Phone: 312-977-9700; Fax: 312-977-4806, Internet:
www.gfoa.org. General Electric Capital Public Finance, 8400 Normandale Lake Boulevard, Suite 470,
Minneapolis, MN 55437; Phone: 800-346-3164; E-mail: gecapinfo@corporate.ge.com; Internet address:
www.ge.com/ capital/public/pf2.htm
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ENVIRONMENTAL PROTECTION AGENCY (EPA)
STATE REVOLVING FUNDS - CLEAN WATER
Description: Undo- Title 6 of the 1987 Clean Water Act, States receive federal monies to capitalize clean
water revolving loan fund (CWSRF) programs. States must provide a 20 percent match to the federal
funds. CWSRFs are authorized to make loans to localities to finance wastewater treatment facilities,
nonpoint source pollution control activities and estuary program activities. Loans are made at low interest
rates (0 percent to market rate) for up to 20 years. States can use loan funds to refinance previously
executed debt obligations, guarantee local debt obligations, buy bond insurance for local debt obligations,
or guarantee bonds issued by municipal and inter-municipal revolving funds. States may use up to 4
percent of Ihe federal funds for administrative costs. States may set the criteria for determining which
municipalities can access the loans and other fund uses each year.
Actual Use: All States have CWSRFs, and they increasingly are making loans for non-traditional
wastewaterprojects. Bymid-1997,fifteenStateswerefundingnonpointsourcepollutionprojects(including
direct loans to farmers), six were funding stormwater projects, nine were funding landfill projects, five were
funding septic system rehabilitation and replacement, six were funding estuary wetlands, stream restoration,
and wellhead protection, many were funding sludge projects, and over half were funding combined sewer
overflow projects. Some States have already used their own funds to finance revolving funds to assist
localities with various capital proj ects. At least two States have made loans to acquire land or conservation
easements to protect source water.
Potential Use: States are starting to apply the revolving loan fund concept to other media such as
hazardous waste remediation, Superfund cleanups, brownfields redevelopment, biosolids reuse, highway
and airport cleanups, and solid waste finance. USEPA has indicated the potential eligibility of wetlands
acquisition, watershed protection, habitat restoration, and other new types of projects.
Advantages: The CWSRFs are able to provide localities with extremely low-interest loans at favorable
terms. They can be considerably more flexible lhan commercial banks, as States can adjust interest rates
and other loan terms to suit localities' ability-to-pay.
Limitations: The competition among applicants for access to revolving loan funds is intense in some States.
Federal "cross-cutting" requirements that apply in using CWSRF monies can increase project costs. Some
small communities may not be able to afford any loan. Loan terms are limited to 20 years, although there
have been proposals to extend them to 30 years.
Reference for Further Information:' U.S. General Accounting Office: Water Pollution: States'
Progress in Developing State Revolving Loan Fund Programs, March 1991. Ohio Water
Development Authority, 1995 Annual SRF Survey. U.S. EPA, Office of Water, Annual U.S. Clean
Water SRF Assistance for Wastewater Treatment, 1997.
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ENVIRONMENTAL PROTECTION AGENCY (EPA)
STATE REVOLVING FUNDS - DRINKING WATER
Description: The 1996 Safe Drinking Water Act Amendments authorize the funding of Drinking Water
State Revolving Loan Funds (DWSRFs) to assist drinking water systems in financing the infrastructure
costs of complying with Ihe Act and to protect public health. The DWSRFs provide low cost loans to
publicly and privately owned water systems, as well as nonprofit non-community ones, for up to 20 years
(30 years for small, disadvantageds). States provide a 20 % match, and may use 4% of federal funds for
administratioa Refinancing (except for privates), loan guarantees, and principal subsidies (grants for small,
disadvantageds) also are permitted. Eligible projects include expenditures to upgrade or replace drinking
water infrastructure, distribution or storage facilities, integral land acquisition, planning and design, and
systems restructuring (e.g., regionalization). Although States have considerable flexibility and may use up
to 31 % of federal capitalization grants in special set-asides, they must use 15% of that money for systems
serving less than 10,000 people. States also must take steps such as local capacity building programs to
receive certain federal dollars.
Actual Use: By the end of 1997, all States had set up DWSRFs and most had begun making loans.
Because drinking water has never been funded to this extent, the demand has been very high. Some SRFs,
such as in New York, are taking advantage of provisions permitting the transfer of up to 33% of clean
water capitalization grants to drinking water. A number of States already have issued combined CW/DW
bond pools to increase the pace of funding and to lower costs.
Potential Use: The DWSRF has great potential for pollution prevention. They are increasingly financing
watershed protection and land acquisition, as well as making conservation easement loans. The DWSRFs
•are still working out tax issues pertaining to leveraged loans for the private sector, and credit issues for
private and small borrowers, for whom loan guarantees may be used instead.
Advantages: DWSRFs can support any local water system via low-interest loans and technical
assistance. Their funds are more flexible and less costly than commercial loans or private activity bonds.
They have great flexibility in directing funds to pressing compliance and public health needs.
Limitations: Competition for DWSRF money is intense. Many federal restrictions apply to the program,
such as cross-cutting requirements, planning and other work, and set-asides. Some States still prohibit
private and non-profit sector funding. Operations and maintenance funding is banned. Loans cannot
finance growth or development (i.e., entirely new facilities), or dams.
Reference for Further Information: U.S. EPA-DWSRF 1997 guidance, Office of Water, Office of
Ground Water and Drinking Water, 401 M Street, SW, Washington, DC-20460, Mail Code 4601;
Phone: 202-260-5522; Fax:-202-260-4383. U.S. EPA Environmental Financial Advisory Board
(EFAB) report, Funding Privately Owned Water Providers through the SDWA SRF, Julyl998.
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FEDERAL FINANCING BANK
Description: The Federal Financing Bank was established by Public law 93-224, the "Federal Financing
Bank Act of 1973". The purpose of the Act is to assure that federal and federally assisted borrowing
programs are coordinated with federal economic and fiscal policies to reduce the costs of these borrowings,
and to assure that they are financed in a way that least disrupts private financial markets and institutions.
Accordingly, the Bank is intended to be the vehicle through which most federal agencies finance programs
involving the sale or placement of credit market instruments, including agency securities, guaranteed
obligations and the sale of assets.
Actual Use: The Bank borrows all funds from the Treasury and matches the terms and conditions of its
borrowings to the terms and condition of its loans. Obligations issued by the Bank are subject to federal
taxation and are classified as exempt securities. Since 1975, the Bank has lent funds at a rate one-eighth
percent above the new issue curve of U.S. Treasury securities. Federal agencies using Ihe Bank have
included Ihe Departments of Health and Human Services, Defense, Housing and Urban Development,
Agriculture (Rural Utilities Service), and Commerce; and the Export-Import Bank, the Resolution Trust
Corporation, and the General Services Administration. Federal Financing Bank obligations issued, sold
or guaranteed by other federal agencies totaled $58.2 billion on December 31,1996.
Potential Use: If EPA or other federal agencies sought and obtained the authority to issue
environmentally-related securities to pay for their environmental activities, the Bank could be used to handle
the financing. Such securities might take the form of green or environmental bonds and might be used in
a wide variety of programs including (but not necessarily limited to) brownfields cleanup and
redevelopment, ecosystem and watershed protection, environmentally sustainable community development,
and pollution prevention/recycling.
Advantages: When federal agencies use the Bank to finance activities instead of vising general
appropriations, this contributes to deficit reduction. In addition, Ihe use of the Bank is inherently a more
sustainable way of financing agency activities.
Limitations: Use of the Bank would be more expensive in the immediate term, thus reducing the amount
of assistance provided to program recipients or increasing the cost of that assistance.
Reference for Further Information: Federal Financing Bank, U.S. Department of the Treasury, 1500
Pennsylvania Avenue, NW, Washington, DC 20220. Phone Number: 202-622-2470.
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t
FEDERAL LOAN PROGRAMS
Description: Federal loan programs generally lend funds to State or local governments or nonprofit
organizations at fixed or variable rates of interest. The loan programs exist to fund various types of activities
and projects.
Actual Use: Generally, federal funds are lent for the purpose of financing a particular activity and/or
facility in many areas, including environmental ones. The scope of the federal funds' use for financing Ihe
activity and/or facility can be broadly or narrowly defined depending upon the governments desired role.
Potential Use: Loan programs could feasibly be used to fund abroadnumber of environmental protection
priorities and to leverage a considerable expansion in the long-term impact of federal environmental
assistance.
Advantages: Unlike grants, larger projects can be undertaken with loans, and subsequently the repaid
capital and any interest can be relent to others for additional projects. Properly managed loan program
funds can be recycled indefinitely. Many federal loan programs have very low interest rates and/or very
favorable loan terms.
Limitations: Some low income areas may find lhat they are unable to meet 1he repayment requirement
for any type of loan assistance without imposing an undue economic hardship on Iheir community. Federal
loan programs may require assistance recipients to meet specific eligibility requirements and/or a test of
acceptable credit quality that may disqualify .many communities, including even the most needy.
Reference for Further Information: Information on the wide variety of federal loans and loan programs
is available in 1he Catalog of Federal Domestic Assistance and on its World Wide Web site located at
http://aspe.os.dhhs.gov/cfda/index.htm - at which point there will be links to Programs listed by:
Alphabetic Listing of Programs. Subject or Topic. Target or Beneficiary Group. Agency within
Department. Independent and Other Agencies. There are also links to an Appendix wilh Agency Contact
Information. The U.S. Department of Agriculture's Rural Business- Cooperative Service and Rural Utilities
Service are examples of federal loan programs which may be applicable to small and disadvantaged
communities.
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NORTH AMERICAN DEVELOPMENT BANK
Description: The North American Development Bank (NADBank) was created within the North
American Free Trade Agreement (NAFTA) process. Its principal purpose is to finance (primarily through
loans) environmental infrastructure projects along the United States-Mexico border, with an emphasis on
municipal solid waste management, wastewater treatment, and the supply of potable water. TheNADBank
is equally capitalized by the governments of the United States and Mexico. Ten percent of the NADBank's
capital is to be used for community adjustment and investment program development and financing.
Actual Use: The NADBank and its sister NAFTA institution, the Border Environmental Cooperation
Commission (BECC), are working hard to fulfill their mandates (see also Section S.A., Border
Environmental Cooperation Commission). The BECC, which must review, approve and refer
proposed projects to the NADBank for funding, has developed the necessary criteria and begun to fulfill
this responsibility. The NADBank has announced financing packages for an $830,000 water supply and
wastewater facility in Naco, Senora, and a $1.1 million wastewater plant for the Fraccionadora Industrial
del Norta, S.A. (FINSA) industrial park in Matamoras, Tamaulipas.
Potential Use: Growing populations and trade have increased stress along the border region between the
United States and Mexico. The lack of regional infrastructure to handle these growth patterns manifests
itself in large backlog of municipal, environmental and public health, transportation, and educational needs.
Accordingly, the region can absorb as many environmental projects as the BECC can certify and the
NADBank finance.
Advantages: The NADBank's strong private sector and loan orientations represent clear leveraging
strengths., and enhances equity of access to loans for hard-to-finance projects.
Limitations: Only projects certified by the BECC can be financed by the NADBank. NADBank does
not provide equity funding. Many border communities may not be able to afford to repay loans in any form.
Projects financed by the NADBank must address environmental issues within 100 kilometers of either side
of the United States-Mexico border. NADBank capitalization may fluctuate in the future.
Reference for Further Information: The North American Development Bank (NADBank), 700 North
Mary's Street, Suite 1950, San Antonio, Texas 78205, Phone: 210-231-8000, Fax: 210-231-6232,
Internet site at http://www.nadbank.org/.
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PRIVATE INVESTMENT
Description: Private investment is defined herein as loan and other financial assistance originating from
sources other than commercial banks and/or finance companies. Sources of private investment can
include, but are not limited to, insurance companies, pension funds, venture capital funds, individual venture
capitalists, corporation partners, general capital investors, and even family and friends.
Actual Use: Private investment funds an overwhelming percentage of the new business start-ups in the
United States each and every year. The amount of such investment is not calculated in the hundreds of
millions of dollars, but ratiier in the billions. The entrepreneurial ventures funded with this private investment
range across the entire spectrum of American private sector activities. It includes, of course, the
environmental goods and services sector as well as all environmental-related activities.
Potential Use: The potential uses of private investment for supporting environmentally-related businesses
and/or activities is only limited by the degree of profit associated wi1h them If an idea or activity will make
money, or if it even looks like it will, then private investment can be found to support it
Advantages: The application process for private investment can be much faster than for government loan
programs and even faster than that for commercial loans. Private investors usually have no detailed set
eligibility criteria in the way that government loan programs do and may have no predetermined limits on
the total amount of loan capital available.
Limitations: Private investors will want a significantly higher rate of return on their money than will other
sources of capital. They may demand a'significant piece of the business itself as a potential reward for
risking their money.
Reference for Further Information: Funding information on venture capital funds is available in
directories such as, Who's Who in Venture Capital (third edition, 1986), published by John Wiley and
Sons, Inc. Many sources of information on venture capital and private investment are readily available on
the World Wide Web and can be accessed using public search engines such as Lycos, Yahoo, Infos'eek,
Excite, etc. See Section 10, Tools To Access Financing for Small Businesses and the
Environmental Goods and Services Industry.
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STATE LOAN PROGRAMS
Description: Numerous States have loan programs that provide assistance to localities for financing
inflastmcture or other proj ects. Many of these loan programs operate as revolving funds, meaning that the
programs are at least partially financed by repayment of earlier loans.
Actual Use: Currently, seventeen States administer water-related programs independent of EPA- funded
State revolving loan programs (SRFs). The Washington Public Works Trust Fund operates as a revolving
loan fund, providing low interest (1 to 3 percent) loans for critical public works projects. Texas created
a Water Development Fund to make loans to political subdivisions for constructing dams, reservoirs, and
water supply systems. Among other programs, the Kentucky Infrastructure Financing Authority provides
low cost loans for drinking water facilities. Connecticut operates a loan program and voluntarily pledges
loan repayments to the SRF. Some States operate loan programs for landfills.
Potential Use: State loan programs can be used to assist localities in financing environmental facilities.
In some cases, State programs might be able to enable project financing by providing subordinated loans
for .part of a project. These loans would be the last to be repaid in the event of default, while any
commercial investors who participated in the financing would receive their repayments first For example,
if a solid waste facility needed $30 million in overall financing, and the private sector were willing to come
up with $15 million, a subordinated loan from a State loan program could fill the gap. The private sector
would have the assurance that it would be the first loan repaid in the event of default, and that the entire
project would be fully financed.
Advantages: They can often provide low interest loans with favorable terms. States can target investments
to specific project types, encouraging localities to build particular facilities.
Limitations: Loan programs may have significant start-up costs; need a source of revenue for
capitalization.
Reference for Further Information: Council of Infrastructure Financing Authorities (CIFA),
Washington, DC, CIFA Monograph No. 8: State Revolving Loan Fund Survey, by the Ohio Water
Development Authority, May 1996. Washington Department of Community Development,Pu6//c Works
Trust Fund 1992 Priorities Legislative Report, 1992, describes the Trust Fund's revolving fund program.
Government Finance Research Center (GFRC), Government Finance Officers Association (GFOA),
Credit Pooling to Finance Infrastructure: An Examination of State Bond Banks, State Revolving
Funds andSubstate Credit Pools, September 1988.
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STATE REVOLVING LOAN FUND (SRF)
PRE-FINANCING AND SHORT-TERM LOANS
Description: Some State Revolving Fund (SRF) clean water loan programs make short-term loans for
planning, design and initial construction in localities which may be later receive long-term SRF loans. Some
SRFs pre-finance the loans or grants of other federal and State programs which pay on a reimbursement
or other less timely basis. SRF pre-financing loans have been used for Rural Utility Service wastewater
loans (paid out after construction is completed), HUD wastewater grants (paid on a cost-incurred basis),
and specifically authorized State loans and grants, such as for landfill closure and hazardous waste site
clean-up. SRF pre-financing loans may be taken out later by federal or State payments, in whole or in part,
based on specific SRF funding choices.
Actual Use: A few SRFs, such in New York, are making short-term, no-interest, clean water loans to
regular clients for design and initial construction costs. Others, such as in Texas and Wisconsin, regularly-
pre-finance other grants or loans, and in theory, most States could do likewise. The Texas SRF uses
variable interest rates when pre-financing other loans.
These types of loans depend on funds availability and management decisions. For example, since the New
York SRF makes non-point source landfill-related loans, it can pre-finance State landfill grants and loans
provided for under a State environmental financing bond act. The extent of pre-financing also depends on
the degree and quality of SRF coordination with other program finders.
*
Potential Use: Since SRFs usually offer prompt funding and seek a wide range of clients by offering one-
stop-shoppihg financing services, pre-financing possibilities are large. Drinking water SRF loans also may
be used to pre-finance other federal or State drinking water loans or grants! States like New York are
moving to a common, simplified loan application form, and federal and State funders meet regularly to
review joint projects.
Advantages: Prompt up-front funding increases the chances that facility construction will move forward
in a timely way, or at all. It enhances equity for smaller communities which may not have the resources to
plan, design and construct facilities while waiting for reimbursement SRFs can sometimes fund design
work or land acquisition which other federal or State programs cannot
Limitations: Successful SRF pre- and short-term financing depend on State-specific factors, such as
coordination with other agencies, flexibility and/or breadth of funding choices, availability of funds, and
State priority lists. If SRF managers are unaware of the intentions of other agencies, or if funding cycles
and loan procedures differ greatly, pre-financing opportunities may be limited.
Reference for Further Information: New York State Environmental Facilities Corporation, 50 Wolf
Road, Room 547, Albany, NY 12205; Phone: 518-457-4100;. Fax: 518-485-8773.
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SRF PRIVATE BENEFICIARY LOANS - CLEAN WATER
Description: The Clean Water SRF program (CWSRF) for wastewater is statutorily limited to publicly-
owned projects only, unlike Ifae Drinking Water SRF (DWSRF) program which erases the distinction
between Ihe public and private sectors. However, on occasion loans have been made Ihrough a municipal
lease arrangement that allow private sector use of the funds, as defined under the federal tax code. Under
Ihis arrangement, the SRF makes a loans to a publicly-owned entity, State or municipal, which has leased
a facility to the private sector. The private project is not part of a shared municipal facility. The public
entity acts as a conduit for loan funds to the private beneficiary, who makes lease/loan payments to the
public entity through an operating lease or service agreement The private party serves as the first source
of loan repayment. . .
Actual Use: The New York SRF has made two CWSRF loans to private beneficiaries, including a food
processing wastewater treatment facility and a proposed newspaper recycling facility. The funds used for
CWSRF private beneficiary lending, called economic development loans, are derived only from SRF
"retained earnings", comprised of direct loan interest repayments and investment earnings on recycled
dollars, as opposed to federal capitalization grant dollars. Thus, the number of such loans is automatically
capped by the amount of retained earnings annually, over $60 million in New York's case. Loans may
be made at taxable interest rates to retain the option of refinancing on a leveraged loan pool basis, i.e., so
as not to compromise the tax-exempt status of the pool.
Potential Use: The potential uses of CWSRF loans to private beneficiaries is large, and could fund*
brownfields, solid waste and nonpoint source projects as well as standard wastewater facilities.
Advantages: In terms of the environmental benefits achieved, Ihere is no difference between the public
and private sectors. Accessibility to financing and equity considerations are enhanced by extending SRF
loans to private beneficiaries, as is authorized under the DWSRF program. Because SRF interest
subsidies typically are offered, SRF loans are less expensive than the alternative of tax-exempt private
activity bonds or commercial debt, and the uncertainty of accessing State volume cap is eliminated.
Including such projects in bond pools further may reduce costs to private borrowers.
Limitations: Loan repayments are directly dependent on Ihe economic health of the private beneficiary.
Thus, CWSRFs considering this option must examine carefully the credit of the private beneficiary. Policies
and procedures most be adopted to ensure the publicly-owned proj ects ready for funding are not s acrificed
by excessive private beneficiary funding, and that SRF solvency is not affected. Direct competition on
priority lists between the public and private sectors would be opposed by the private sector, and
circumvent the statutory mandate of the CWSRF.
Reference for Further Information: SRFs should consult their EPA Regional Offices before
undertaking private beneficiary loans.
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OTHER
Description:
Actual Use:
Potential Use:
Advantages:
Limitations:
Reference for Further Information:
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COMPARISON MATRIX FOR LOANS
Criteria/
Loan
Agriculture:
RB-CS
Economic
Development
Agriculture:
RHS
Community
Facilities
Agriculture:
RHS Housing
Site & Self-
Help Housing
Agriculture:
RUS Water/
Waste
Disposal
*Co-Bank
Co-Funding
"Commercial
Loans
*Direct Source
Financing
*EPA:SRFs-
Clean Water
Actual
Use
Low
Low
Low
High
Mod.
Low
High
High
High
Revenue
Size
Low
Low
Low
Mod.
Low
Low
High
High
High
Revenue
Cost/
Saving
Mod.
High
Mod.
High
Mod.
High
Low
Mod.
High
Admini-
strative
Ease
Mod.
Mod.
Mod.
Mod.
Mod.
Low-
Mod.
High
High
Mod.-
High
Equity
High
High
High
High
High
High
Low
Mod.
High
Finan-
cial
Lever-
agng
High
High
Mod.
High
High
Hgh
Mod.
High
Mod.
Environ-
mental
Benefits
Low-
Mod.
Low
Low
High
High
High
High
High
High
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COMPARISON MATRIX continued
I
Criteria/
Loan
*EPA: SRFs
Drinking
Water
Federal
Financing
Bank
Federal
Loan
Programs
*NAD-Bank
*Private
Investment
State Loan
Programs
*SRF Pre-
Financing
*SRF(CW)
Private
Beneficiary
Actual
Use
High
Low
Low
Low
Mod.
Low
Low
Low
Revenue
Size/
Stability
High
High
Low
Low
Mod. -
High
Low
Low
Low
Revenue
Cost/
Savings
High
Low-
Mod.
Mod.
Mod. -
High
Low
Mod.
High
High
Admini-
strative
Ease
High
Mod.
Low
Low-
Mod.
High
Mod.
Low-
Mod.
Mod. -
High
Equity
High
Mod-
High
Mod.
High
Low
Mod. -
High
High
Mod.
Finan-
cial
Lever-
aging
Mod.
Low
Mod.
High
High
Mod.
Mod.
High
Environ-
mental
Benefits
High
Low
Low
High
High
High
High
High
High - High use (over 25 States, many localities/private sector); criteria score high (low cost,
accessible, flexible, project specific)
Mod.- Moderate use (10-25 States, many others); criteria score in medium range
Low - Low or rare use (under 10 States, few localities and private sector); criteria score poorly
* Star indicates best-rated mechanisms
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2.C. GRANTS
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2.C. GRANTS
Description: A grant is a sum of money awarded to an eligible entity without a demand for repayment
Typically, grants are awarded by the federal government to'State or local governments, or by States to
local governments, for the purpose of financing a particular activity or facility. The grant award represents
a monetary transfer payment from one organization to another for a purpose deemed necessary or desirable
by the awarding organization. Grants also can be made by or to the private sector, particularly non-profit
organizations. Matching grants, for example, on a one-to-one basis, are now being used both the public
and private sectors.
Advantages: The primary advantage of grants is that State and local governments and other eligible
recipients do not have to use their own resources to pay the specific eligible costs that the grant monies
cover. In cases where grant recipients do not have Ihe needed resources, grants enable valuable work to
move forward, hi other cases, grants make it possible for recipients to pursue additional environmental
and/or other activities or to forgo expenditures entirely. Grants can be highly equitable when they address
affordability concerns, and may be the only way that some recipients, such as smaller communities, can
proceed Furthermore, grants can leverage additional resources through matching fimds.
Limitations: Applying for grants can be costly, time-consuming, and problematical. It requires trained
staffon the part of the grantee to determine grant opportunities and submit often detailed grant applications.
These grant applications can often take months for the awarding organizations to process and award. Even
then, due to the intense competition at both the State and the local levels for the limited pool of grant funds,
State and local governments and other recipients may find it increasingly difficult to acquire funding for many
projects. Due to grant project eligibility limitations, only a percentage of the total project costs may be
eligible for project assistance. Providing matching funds, often ranging from 5 to 50 percent, may be
difficult Even when grant funding is approved, the grantee may need to seek short-term debt instruments
to cover cash shortages while awaiting the arrival of the funds.
Grant funds often have conditions that affect the scope, intent, nature or cost of the project or program in
question. For example, USEPA Section 105 grants are negotiated grant agreements which obligate State
air programs to use Ihe funds to perform certain activities that may or may not coincide with the State's own
priorities for its air program. Certain grant conditions, such as mandatory grant reviews and production
of detailed reports, may increase the overall cost of the project. Most federal grants also require that
grantees comply with other federal laws and regulations regarding a range of factors such as wage rates,
anti-discrimination and environmental requirements. In recent years, grant funding has been increasingly
unstable, making it difficult to plan ahead.
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Summary: Grants remain 1he cheapest way for grant recipients to fund environmental work, and may be
flie only way to get a project moving, particularly those of smaller, disadvantaged entities. Federal grants
are still the largest source of environmental grant monies compared to States, communities, and then non-
profit sector. Grants clearly demonstrate the federal commitment specific environmental priorities.
However, federal grants have many limitations. These grant monies tend to be unstable, slow-moving,
highly competitive, and not readily expandable, compared to other financing tools such as bonds. Because
of the large number of different federal grants and constantly changing requirements, grants are not
summarized in a Comparison Matrix at the end of the section. Potential grant recipients should, and need
to, consult the Catalog of Federal Domestic Assistance available from the U.S. General Services
Administration. The catalog also can be accessed electronically on the World Wide Web at
http://aspe.os.dhhs.gov/cfda/index.htrn. The catalog has its own write-up in ^Guidebook in Section
5.B.: Electronic Services.
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LIST OF GRANTS
(In Alphabetical Order)
1. Agriculture: Forest Service - Cooperative Forestry Assistance
2. Agriculture: Forest Service — Economic Action Programs
3. Agriculture: Forest Service - Landowner Assistance Programs
4. Agriculture: Forest Service — Urban and Community Forestry Program
5. Agriculture: NRCS - Environmental Quality Incentives Program
6. Agriculture: Rural Business-Cooperative Service - Business Enterprise Grants
7. Agriculture: Rural Business-Cooperative Service - Economic Development Grants
8. Agriculture: Rural Utilities Service - Distance Learning and Telemedicine Grants
9. Agriculture: Rural Utilities Service - Water and Wastewater Disposal Systems Grants
10. Appalachian Regional Commission Supplemental Grants
11. Commerce: EDA - Public Works and Infrastructure Development Grants
12. Commerce: EDA - Special Economic Development & Adjustment Assistance Grants
13. Commerce: NOAA - Coastal Services Center Cooperative Agreements
14. Commerce: NOAA - Coastal Zone Management Administration Implementation Awards
15. Defense: Army Corps of Engineers - Civil Works Projects
16. EPA: Environmental Education and Training Grants
17. EPA: Environmental Justice Grants to Small Community Groups
18. EPA: Environmental Monitoring for Public Access & Community Tracking Grants
19. EPA: Performance Partnership Grants
20. EPA: Program Grants
21. EPA: Section 319 Nonpoint Source Pollution Control Grants
22. EPA: Superfund Technical Assistance Grants
23. EPA: Sustainable Development Challenge Grants
24. EPA: Underground Storage Tank Trust Fund Program Grants
25. EPA: Wetlands Protection Development Grants
26. Environmental Technology Initiative
27. FEMA: Flood Mitigation Assistance
28. FEMA: Hazard Mitigation Assistance
29. Foundation and Corporate Giving
30. HUD: CDBG-Economic Development Initiative Grants
31. HUD: CDBG-Entitlement Grants
32. HUD: CDBG -Small Cities Program Nonentitiement Grants
33. HUD: CDBG - Slates' Grants Program Nonentrflement Grants
34. Interior Fish and Wildlife Service - National Coastal Wetlands Conservation Grants
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LIST OF GRANTS Continued
35. Interior: Fish and Wildlife Service - North American Wetlands Conservation Act Grants
36. State Grant Programs
37. State Revolving Fund (SRF) Drinking Water Principal Subsidies .
38. Transportation: Federal Transit Administration ~ Livable Communities Initiative
39. Transportation: Transportation Equity Act for the 21st Century (TEA-21)
[Special Note: We received a writeup for an innovative new grant tool after this section was completed.
Please see the write-up for the EPA: Clear Air Partnership Fund in Appendix A on page A-4.]
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DEPARTMENT OF AGRICULTURE
FOREST SERVICE
COOPERATIVE FORESTRY ASSISTANCE
Description: Cooperative Forestry Assistance provides formula grants to State forestry agencies to assist
inthe advancement of forest resource management with respect to non-federal forests and other rural lands.
Among the program's objectives are encouragement of the production of timber, control of insects and
diseases affecting trees and forests, control of rural fires, improvement and maintenance offish and wildlife
habitat, planning and conduct of urban and community forestry programs, and efficient utilization of wood
and wood residues, including the recycling of wood fiber. State agencies can use the assistance to provide
funds to owners of non-federal lands, rural communities, urban municipalities, nonprofit organizations, and
State and local agencies for programs which.help to achieve ecosystem health and sustainability by
improving wildlife habitat, conserving forest land, reforestation, improving soil and water quality, preventing
and suppressing damaging insects and diseases, wildfire protection, expanding economies of rural
communities, and improving urban environments.
Actual Use: In Fiscal Year 1997, cooperative forestry grant obligations totaled $91,629,000, with
individual grant amounts ranging from $25,000 to $6 million. Almost sixteen thousand landowners and 2.15
million acres were enrolled in forest stewardship programs. Approximately -1,800 rural and 8,000 urban
communities were being assisted.
Potential Use: State forestry agencies can support a wide range of environmental protection and
enhancement activities. Sound forestry practices can be essential to watershed protection and preservation
of streams, lakes and wetlands. The Forest Service estimates that program grant obligation totals in each
of Fiscal Years 1998 and 1999 will be about $104,000,000. The Service projects that more than
4,000,000 acres will be enrolled in forest stewardship programs by the end of the year 2000.
Advantages: This program provides State forestry agencies wiHi resources theywouldnot otherwise have
to promote and support environmental protection and remediation.
Limitations: Some cooperative forestry assistance is restricted to owners of non-industrial private forest
land.
Reference for Further Information: Contact U. S. Department of Agriculture, Forest Service, State and
Private Forestry Division, Cooperative Forestry Staff, P.O. Box 96090, Washington, DC 20090-6090,
Telephone: 202-205-1657, Fax: 202-205-1174, Internet: www.fs.fied.us/spf/
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DEPARTMENT OF AGRICULTURE
FOREST SERVICE
ECONOMIC ACTION PROGRAMS
Description: The Economic Action Programs framework under Cooperative Forestry Assistance
includes a set of programs aimed at helping communities to diversity and strengthen Iheir local economies
through a whole range of forest-based resources. It focuses on integrating economic development and
environmental protection concerns in Ihe context of sustainable community development goals. The three
major program components are Rural Communily Assistance, Forest Products Conservation and
Recycling, and Market Development and Expansion. Rural Communily Assistance focuses on helping the
whole community capitalize on available local human and natural resources to improve the quality of life and
Ihe social and economic situation. Communities are helped to organize, plan, and implement actions that
are community-based, comprehensive, and partnership oriented. Forest Products Conservation and
Recycling encourages and facilitates more efficient use of forest resources to enhance economic
development and promote better stewardship of the forest resource. Emphasis is on stimulating public and
private sector innovation. Opportunities include new uses for wood and other forest based resources
through recycling and value-added secondary manufacturing, and alternative goods and services. Market
Development and Expansion is meant to strengthen local and regional economies through the creation of
domestic and international markets for forest resources.
Actual Use: The Michigan Forest Management Division emphasizes employment retention through
sustainable economic activities in the forest products industry. The New Mexico Forestry Division has
initiated a forest health/rural wealth partnership to assist forest-based communities to utilize forest products
in ways that help improve 1he health of forest ecosystems.
Potential Use: State foresters can promote conservation and recycling of forest resources in conjunction
with the production and marketing of environmentally friendly goods.
Advantages: Economic Action Programs focus on integrating economic development and environmental
protection concerns. They can help organize diverse community interests for renewable resource based
economic development and conservation.
Limitations: State forestry agencies must participate meaningfully in the program if it is to provide needed
environmental assistance while promoting forest-based economic development
Reference for Further Information: U.S. Department of Agriculture, Forest Service, State and Private
Forestry Division, Cooperative Forestry Staff, P.O. Box 96090, Washington, DC 20090-6090,
Telephone: 202-205-1657, Fax: 202-205-1174, Internet: www.fs.fed.us/spf/.
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DEPARTMENT OF AGRICULTURE
FOREST SERVICE
LANDOWNER ASSISTANCE PROGRAMS
Description: Cooperative Forestiy Assistance includes technical and financial assistance to help private
landowners create sustainable forest land management plans and implement their forest stewardship
objectives. The Forest Stewardship Program (FSP) uses cooperative agreements with State forestry
agencies to deliver professional natural resource management advice to non-industrial private forest (NIPF)
land owners. It provides technical and planning guidance to landowners who agree to maintain the land
under a detailed natural resource management plan for at least ten years. A completed Forest Stewardship
planis required of landowners seeking cost share assistance via the Stewardship Incentives Program (SIP).
This program supports a wide range of forest management activities to develop and implement Forest
Stewardship plans. Eligible activities beyond plan development include reforestation and afforestation,
forest and agroforest improvement, soil and water protection and improvement, riparian and wetland
protection and improvement, fisheries habitat enhancement, wildlife habitat enhancement, forest recreation
enhancement, and windbreak and hedgerow establishment, maintenance and renovation. Preference is
given activities designed to attain multiple objectives, such as forest and agroforest improvements which
enhance wildlife habitat or create recreation opportunities. Federal reimbursement of approved landowner
expenses may be up to 75%, to a maximum of $10,000/year, in exchange for landowner agreement to
maintain and protect SIP-funded practices for at least ten years. The Forest Legacy (FL) Program
supports State acquisition of partial interests (e.g., conservation easements) in privately owned forest lands
to restrict development of environmentally sensitive areas.
Actual Use: Landowner assistance programs have been a basic component of cooperative forestry and
typically involve thousands of landowners and millions of acres.
Potential Use: These programs can improve environmental management of privately owned non-
industrial forest land and can induce landowners to replant and maintain private forests.
Advantages: Federal funds help states provide otherwise unaffordable technical assistance and cost
sharing to private land owners.
Limitations: Participation by private forest owners is voluntary and the limit on federal reimbursement
reduces the attractiveness of the program while program accomplishment standards may promote emphasis
on larger parcels within the pool of eligible lands.
Reference for Further Information: U.S. Department of Agriculture, Forest Service, State and Private
Forestry Division, Cooperative Forestry Staff, P.O. Box 96090, Washington, DC 20090-6090,
Telephone: 202-205-1389, Fax: 202-205-1271, Internet: www.fs.fed.us/spf/
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DEPARTMENT OF AGRICULTURE
FOREST SERVICE
URBAN AND COMMUNITY FORESTRY PROGRAM
Description: The Urban and Community Forestry Program is implemented through Forest Service
Regional/Area Offices working with State Foresters and key cooperators such as Soil and Water
Conservation Districts, state forestry associations, and city foresters/arborists. Each State Forester is
required to establish a State Urban Forestry Advisory Council and a full-time Urban and Community
Forestry coordinator position. The State advisory councils recommend program and funding priorities and
assist the State foresters in preparing State Urban and Community Forestry Strategic Plans. Projects must
include community volunteerism as a major element and must have the objective of solving some specific,
described problem. States may use no more than twenty percent of iheir annual funding for purchasing,
planting, or maintaining trees in communities. Direct funding grants for the purchase and planting of trees
or for maintenance activities are on a 50/50 matching basis.
Actual Use: The Ohio Department of Natural Resources' Division of Forestry works with the Ohio
Environmental Protection Agency and Attorney General's Office to use air pollution fines for pass-through
grants to communities for targeted tree planting projects.
Potential Use: State forestry agencies can support restoration of urban watersheds and help preserve
forest lands threatened by residential and commercial growth, in coordination with related environmental
projects.
Advantages: The program explicitly promotes ethnic and cultural diversity in urban and community
forestry efforts.
Limitations: Grants to communities and nonprofit urban forestry organizations require a 50% match,
potentially eliminating participation by low-income communities.
Reference for Further Information: U.S. Department of Agriculture, Forest Service, State and Private
Forestry Division, Cooperative Forestry Staff, P.O. Box 96090, Washington, DC 20090, Telephone: 202-
205-1389, Fax: 202-205-1271, Internet: www.fs.fed.us/spf/. Ohio Department of Natural Resources,
Division of Forestry, 1855 Fountain Square Court, Columbus, Ohio 43224, Telephone: 614-265-6694,
Internet: www.hcs.Qhio-state.edu/ODNR/Forestrv.htm.
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DEPARTMENT OF AGRICULTURE
NATURAL RESOURCES CONSERVATION SERVICE (NRCS)
ENVIRONMENTAL QUALITY INCENTIVES PROGRAM
Description: The Environmental Quality Incentives Program (EQIP), authorized by tie Federal
Agricultural Improvement and Reform Act of 1996, is a single, voluntary conservation program, that
replaces the Agricultural Conservation Program, Agricultural Water Quality Incentives Program, Great
Plains Conservation Program and Colorado River Basin Salinity Control Program. It provides technical,
financial, and educational assistance to farmers and ranchers through the NRCS. In line with maximizing
Ihe overall environmental benefits, the NRCS may designate a watershed, an area or a region of special
environmental sensitivity as a priority area and give special consideration to applicants who have
conservation plans that address the natural resource concern(s) for which the priority area was designated.
Half of the program's assistance is targeted to livestock-related natural resource concerns and half to
general conservation priorities. It includes cost-share assistance for up to 75% of the cost of conservation
practices such as grassed waterways, filter strips, manure management facilities, capping abandoned wells,
and wildlife habitat enhancement Incentive payments can be made for up to three years to encourage
livestock and agricultural producers to adopt land management practices such as nutrient, manure, irrigation
water, wildlife, and integrated pest management Total cost-share and incentive payments are limited to
$10,000 per person per year and $50,000 for the contract term of 5 to 10 years. Cost-sharing assistance
may not be given to construct animal waste storage or treatment facilities serving large confined livestock
operations.
Actual Use: In Fiscal Year 1997, EQUIP made $171,000,000 in grants and provided $5,066,644 in
educational assistance. The NRCS estimates that EQUIP will make $156,000,000 and $174,000,000
in grant obligations in Fiscal Years 1998 and 1999, respectively.
Potential Use: This program is expected to have a static funding level through fiscal 2002. It can be used
for a wide range of water quality protection measures.
Advantages: The effective consolidation of programs can make it easier to use for both the clients and the
administering agency, but Ihe cost-share limit may retard participation. •
Limitations: If a federal income tax deduction is taken for agricultural soil and water conservation
expenses, cost-sharing payments cannot be excluded from gross income. The program has a $200
million/year authorization but annual funding could be less.
Reference for Further Information: U.S. Department of Agriculture, Natural Resources Conservation
Service, Conservation Operations Division, PO Box 2890, Washington, D.C. 20013, Telephone: 202-
720-1845; Fax: 202-720-1838; Internet: wwwjihq.nrcs.usda.gov/CCS/FB96OPA/ EQIPfinaUitml.
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DEPARTMENT OF AGRICULTURE
RURAL BUSINESS - COOPERATIVE SERVICE
BUSINESS ENTERPRISE GRANTS
Description: These grants (also called Rural Development Grants) provide assistance for developing
private business, industry, and related employment to improve the economy in areas and communities of
less than 50,000 population. They help finance revolving funds, provide operating capital and finance to
industrial sites in rural areas, give technical assistance, pay fees, and refinancing. Public bodies and
nonprofit corporations serving rural areas are eligible applicants.
Actual Use: Typical project activities include acquiring and developing land; construction; converting,
enlarging, repairing or modernizing buildings and equipment; transportation infrastructure; utility extensions;
needed water supply and waste disposal facilities; and pollution control and abatement incidental to site
development Most of the environmental projects traditionally funded with these grants involve water
and/or wastewater systems. In Fiscal Year (FY) 1997, more 369 grants were made with assistance
averaging $1 60,000 and obligations exceeding $47 million. Grant obligations of $38 million and $40 million
are projected for FYs 1996 and 1 997, respectively.
Potential Use: These grants could be used to finance and/or help acquire capital for developing drinking
water, wastewater treatment, solid waste disposal, non-point source and other environmental facilities.
They also might be used to help fund the cleanup and redevelopment costs associated with the
redevelopment of brownfields properties and facilities, and to promote the beneficial uses of sludge on
agricultural land
have
Advantages: Both public and private entities may be supported. The projects supported may
specific and significant environmental impacts.
Limitations: Priority for the grants is given to rural areas having a population of 25,000 or less. Other
priorities include projects located in communities with a large proportion of low-income population;
projects located in areas with high unemployment, projects that will retain existing jobs, and projects that
will create new jobs. Many projects may not have an environmental focus.
Reference for Further Information: U.S. Department of Agriculture, Rural Business - Cooperative
Service, 14th & Independence Aves., SW, Room. 5405-South Bldg., Washington, D.C. 20250,
Telephone: 202-720-1400. Detailed information on these grants can also be accessed through the
Service's World Wide Web site at http://www.iairdev.usda.gov/rbs/busp/ii)eg.htrn
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DEPARTMENT OF AGRICULTURE
RURAL BUSINESS - COOPERATIVE SERVICE
ECONOMIC DEVELOPMENT GRANTS
Description: Provides financial assistance promoting rural economic development and job creation
projects. Grant funding may be used for proj ect feasibilily studies, start-up costs, incubator proj ects, and
other related reasonable expenses. Eligible applicants include electric and telephone utilities with current
rural electrification or rural telephone bank loans or guarantees outstanding.
Actual Use: Examples of projects funded include the establishment or expansion of factories or
businesses, medical facilities, water and sewer industrial development parks, business incubators for rural
economic development activities, and other jobs projects. Some grants have been used to establish
revolving loan funds. Most of the environmentally-related projects funded involve water or wastewater
systems.
Approximately $ 1 ImilJion in grants were obligated in Fiscal Year (FY) 1997 with assistance ranging from
$10,000 to $330,000 and averaging $260,000. Grant obligations are projected at approximately $11
million per year in FYs 1996 and 1997.
Potential Use: These grants could be used to help finance directly and/or acquire capital for additional
wastewater and drinking water utilities, and to fund non-point source improvements. Depending on
interpretation of authorizing legislation and regulations, they might also fund solid waste and waste-to-
energy facilities, as well as brownfields cleanup and redevelopment
Advantages: The grants are inherently equitable since they fund projects that would not otherwise be
funded for an often needy segment of society. When revolving loan funds are created, leveraging is very
high.
Limitations: The maximum grant amount is under $500,000. The maximum loan term is ten years at a
zero interest rate. Grantees must provide supplemental funds totaling 20 percent of the assistance received
from this program.
Reference for Further Information: U.S. Department of Agriculture, Rural Business -Cooperative
Service, 14th & Independence Avenues, SW, Room. 5405-South Building, Washington, D.C. 20250,
Telephone: 202-720-1400, Internet: http://www.rurdev.usda.gov/rbs/index.hnnl: Detailed information
on these grante is also available in ^Catalog of Federal Domestic Assistance and its World Wide Web
site at http://a5pe.os.dhhs.gov/cfda/ideptagr.htm - which has links to these grants and a wide range of
federal assistance.
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DEPARTMENT OF AGRICULTURE
RURAL UTILITIES SERVICE
DISTANCE LEARNING AND TELEMEDICINE GRANTS
Description: The Rural Utilities Service (RUS) awards grants and loans to schools, libraries, or other
eligible organizations lhat use a telecommunications, computer network, or related advanced technology
system to provide educational benefits to rural residents (see also Section 5.B., Long Distance
Learning). This does not include the purchase of land and buildings or construction of buildings. Nor
does it include salaries, wages, or employee benefits of personnel providing educational services or the
administrative expenses of tiie applicant. Grant funding can be for up to 70% of eligible project costs
and applications must include funding commitments from other sources for the rest Grant applications
may be submitted at any time and Ihere is no restriction on the length of time to spend grant funds,
which are advanced monthly or as needed to reimburse disbursements for approved grant purposes.
Audit reports are required for Hie years-in which grant or loan funds are received. RUS will assist in
preparing the preapplication form, OMB Standard Form 424. Also, the Office of Telecommunications
and Information Applications of the Department of Commerce's National Telecommunications and
Information Administration administers the Telecommunications and Information Infrastructure
Assistance Program (THAP). It awards matching grants to non-profit organizations to buy equipment
for connection to networks, to buy software, to train staff and users, to purchase communications
services, and to evaluate projects and disseminate findings.
Actual Use: During fiscal 1993 through 1997 RUS awarded 192 grants totaling $52 million.
Potential Use: Estimated program volume for Fiscal Year 1998 is $21 million for grants and $150 million
for direct loans. Otherwise unavailable environmental education and training in rural areas could be
provided and existing effort could be expanded through distance learning.
Advantages: Grants and loans for required equipment can make distance learning efforts feasible in rural
areas where costs per student would otherwise be unaffordable.
Limitations: Beneficiaries must be people living in rural areas and projects must improve rural
opportunities, particularly in education and training.
Reference for Further Information: Assistant Administrator, Telecommunications, Rural Utilities
Service, Room 4056, South Building, U.S. Department of Agriculture, 1400 Independence Avenue, SW,
Washington, DC 20250-1500, Telephone: 202-720-9554, Internet: www.usda. gov/. U.S. Department
of Commerce, Office of Telecommunications and Information Applications, National Telecommunications
and Information Administration, 1401 Constitution Avenue, NW, Room 4096, Washington, DC 20230,
Telephone: 202-482-2048, Fax: 202-501-5136, E-mail: tiiap@ntia.doc.gov; . Internet:
*"•* ^
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S
DEPARTMENT OF AGRICULTURE
RURAL UTILITIES SERVICE
WATER AND WASTE DISPOSAL SYSTEMS GRANTS
Description: These grants provide assistance for meeting rural water and waste disposal needs. Funds
may be used to install, repair, improve, or expand water and waste disposal facilities. Eligible grant
applicants include political subdivisions of a State (municipalities, counties, districts and authorities),
associations, cooperatives, nonprofit corporations, and Indian Tribes.
Actual Use: Projects have included construction of water systems involving lines, wells, pumping stations,
storage tanks and treatment plants; improvements to water systems such as new lines, wastewater facilities
and booster pumps; renovation of water systems including distribution lines, wells and pressure tanks;
construction of wastewater collection and treatment systems; replacement of wastewater plants and
upgrade of collection lines; repair of wastewater tines and construction of lift stations; and purchase of
landfill sites and trucks/equipment for solid waste disposal.
In Fiscal Year 1997, $518 million was obligated to_617 projects. Assistance ranged from $3,000 to
$4.147 million and averaged $677,198. Estimates for the next two years are for 850 and 800 plus grants,
and obligations of $522 million and $500 million, respectively.
Potential Use: These grants could be used to acquire capital to finance additional wastewater, drinking
water, and solid waste facilities. Depending on interpretation of applicable legislation and regulations, the
grants might also finance waste-to-energy and recycling facilities, and non-point source programs.
Advantages: Equity and leveraging possibilities are high, since State revolving funds, as well as HUD and
EDA grants or loans, can be combined with these grants. State revolving funds can pre-finance these grants
(and/or loans), thus covering up-front design and initial construction costs.
Limitations: Projects cannot service areas in towns of over 10,000 people. Grants (as opposed toloans)
are made only if needed to reduce user charges to a reasonable level. For a grant of up to 70 % of eligible
costs, service area median household income must be below the poverty level or below 80% of the State
nonmetropolitan median household income (whichever is higher).
Reference for Further Information: U.S. Department of Agriculture, Rural Business-Cooperative
Service, 14th and Independence Avenues, SW, Room. 5405-South Bldg., Washington, DC 20250,
Telephone: 202-690-2670, Internet: http://www2Jiqnet.usda.gov/rus/water/programs.htni.
Information on these grants is also available in the Catalog of Federal Domestic Assistance, and at the
Catalog's World Wide Web site, http://aspe.os.dhhs.gov/cfda/ideptagr.htm.
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APPALACHIAN REGIONAL COMMISSION (ARC)
SUPPLEMENTAL GRANTS
Description: ARC supplemental grants are awarded to States, public bodies, and private non-profit
organizations for proj ects that create opportunities for self-sustaining economic development and improved
quality of life for the people of Appalachia The program seeks to stimulate investments in public services
and facilities lhat attract private sector investments and accelerate social and economic development
Actual Use: to fiscal year (FY) 1997, more than $60 million in grants supported 353 projects, including
water and sewer systems, industrial parks, revolving loans, training and education, and business incubators.
Granls funded in FY 1997 ranged from $2,150 to $1,500,000 with an average of $170,402. Funding
estimates in FY 1998 and 1999, were $104,305,000 and $55,994,000, respectively.
Potential Use: The types of physical infrastructure projects supported could include more water and
wastewater treatment systems and could be extended to include solid waste facilities, recycling facilities,
waste-to-energy facilities, small business air pollution and waste audits, and recreation. Project resources
might also be devoted to brownfields cleanup and redevelopment activities.
Advantages: Funding for ihe Appalachian Regional Commission has been quite stable overtheyears, and
highly equitable given the economic need of the region as a whole. Project funding is specific and remains
an opportunity.
Limitations: Grants are limited to counties in all or part of the States comprising Appalachia - including
Alabama, Georgia, Kentucky, Maryland, Mississippi, New York, North Carolina, Ohio, Pennsylvania,
Soufti Carolina, Tennessee, Virginia and West Virginia The program generally only supplements other
federal grants and 20 percent of eligible costs must come from sources other than the federal government.
ARC supplemental grant assistance is limited to 50 percent of total project costs except in distressed
counties where assistance is limited to 80 percent
Reference for Further Information: U.S. Environmental Protection Agency (EPA), Environmental
Financial Advisory Board (EFAB) Advisory, Small Community Financing Strategies for
Environmental Facilities, August 9, 1991 (this report contains a general description of the ARC
supplemental grant program). Additional information on these grants and ARC programs can be found in
die Catalog of Federal Domestic Assistance and at its World Wide Web site:
http://aspe.os.dhhs.gov/cfda/index.htm - wherein there the assistance programs of all federal
departments and agencies can be accessed via various organizational and topical formats.
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DEPARTMENT OF COMMERCE
ECONOMIC DEVELOPMENT ADMINISTRATION (EDA)
PUBLIC WORKS AND INFRASTRUCTURE DEVELOPMENT GRANTS
Description: These grants support projects that promote long-term economic development and help
construct public works/development facilities needed to encourage job creation and retention in
economically distressed areas. States, cities, counties, other political subdivisions, Indian Tribes,
Commonwealths, the Federated States of Micronesia, the Republic of the Marshall Islands, and U.S.
territories, and public and private nonprofit organizations are eligible recipients.
Actual Use: Eligible projects include water and wastewater treatment systems, industrial park
infrastructure improvements, industrial access roads, railroad siding and spurs, port facilities, tourism
facilities, and vocational schools. A basic grant covers up to 50 percent of project costs, but severely
depressed areas may get supplementary grants bringing the federal share to 80 percent of project costs.
Designated Indian reservations may receive up to 100 percent assistance. In Fiscal Year (FY) 1997,
more than $160 million was obligated for these grants covering 188 projects. Obligations are projected
to exceed $160 million per year in FYs 1998 and 1999.
Potential Use: These grants could be used to acquire capital for renovating wastewater and drinking water
utilities to bring tiiem into compliance with Hie Clean Water and Safe Drinking Water Acts. They also might
be used to help fund brownfields cleanup and redevelopment costs associated with the redevelopment of
the types of eligible public facilities listed above.
Advantages: The program has had a significant environmental focus. Grants have on occasion been
combined with State revolving fund loans and rural utility grants/loans for water and wastewater. Aid to
the private non-profit sector enhances leveraging opportunities.
Limitations: Grants are limited to communities experiencing severe economic distress. Also, communities
must generally provide matching funds of up to 50 percent. Further, grant funds are disbursed for costs
incurred only after all construction contracts have been awarded EDA grants have historically been
somewhat unstable.
Reference for Further Information: U.S. Environmental Protection Agency (EPA), Environmental
Financial Advisory Board (EFAB) Advisory, Small Community Financing Strategies for
Environmental Facilities, August 9,1991. An excellent description of the program is also available in
the Catalog of Federal Domestic Assistance and its World Wide Web site,
http://aspe.os.dhhs.gov/cfda/ideptdoc.htm- which has links to these Department of Commerce Grants,
under ECONOMIC DEVELOPMENT ADMINISTRATION.
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DEPARTMENT OF COMMERCE
ECONOMIC DEVELOPMENT ADMINISTRATION (EDA)
SPECIAL ECONOMIC DEVELOPMENT & ADJUSTMENT ASSISTANCE GRANTS
Description: These grants help State and local areas to develop and/or implement strategies addressing
problems .caused by sudden and severe economic dislocation such as business closings, military base
closures and natural disasters, or resulting from long-term economic deterioration. Eligible recipients
include States, cities, counties, oHier political subdivisions of a State, groups of political subdivisions, and
public or private nonprofit organizations.
Actual Use: The grants are used to develop economic adjustment strategies and fund projects that
implement such strategies, including tiie construction of public facilities, financing (including revolving loan
funds), business development, technical assistance, training or other activity that addresses the economic
adjustment problem A 25 percent local share is required for all grants.
In Fiscal Year (FY) 1997, more than $300 million in funds obligated to 268 projects (includes funds for
defense adjustment, hurricanes and the Midwest floods). Grant obligations for FYs 1998 and 99 are
estimated to be $167 million and $175 million, respectively.
Potential Use: These grants could be used to renovate or build, or acquire the capital to renovate or
build, many types of environmental facilities (including water, wastewater treatment, solid waste, waste-to-
energy, and/or recycling facilities). They might also finance, or generate financing for, brownfields cleanup
and reuse costs associated with the redevelopment of public facilities and businesses.
*
Advantages: The potential to use grant monies for environmental improvements in disaster areas is high,
as improved environmental services are crucial. Equity and leveraging potential are also strong.
Limitations: Grants are limited to areas experiencing sudden economic distress or long-term economic
decline. Communities participating in the program must provide matching funds equal to 25 percent of the
grant received. The program supports many non-environmental projects, and funding had varied
considerably over the years.
Reference for Further Information: A description of this program, as well as other EDA programs,
can be found in the Catalog of Federal Domestic Assistance and also at the Catalog's World Wide
Web site, http://aspe.os.dhhs.gov/cfda/ideptdoc.htm- which has links to these Department of
Commerce Grants, under ECONOMIC DEVELOPMENT ADMINISTRATION.
I
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DEPARTMENT OF COMMERCE
NATIONAL OCEANIC AND ATMOSPHERIC ADMINISTRATION (NOAA)
COASTAL SERVICES CENTER COOPERATIVE AGREEMENTS
Description: The National Oceanic and Atmospheric Administration's Coastal Service Center supports
projects aimed at developing creative, multi-dimensional, science-based solutions to coastal management
issues dial will allow maintenance or improvement of natural resources while also allowing for economic
growth. State and local governments, public non-profit organizations, and other public institutions (e.g.,
colleges) are eligible for project grants (or cooperative agreements). In fiscal 1998 the Center will support
activities in landscape characterization and restoration, coastal change analysis, coastal remote sensing,
development and integration of geographic and tabular information, training and meeting facilitation,
administration of the Coastal Management Fellowship program, commercialization of environmental
technologies, and special projects.
Actual Use: Among others, cooperative agreements have been awarded to the University of Texas at
Austin to develop a Coastal Technology Institute and North Carolina State University for commercial
technology development, starting with an inventory of technologies. Global markets for four sectors of
environmental technologies have been assessed and a technology business incubator has been staffed and
opened.
From FY1996 through FY1998 twelve awards were made to twelve States. Grant obligations totaled
$2 million in FY 1997 and are estimated to be $2 million and $1.7 million in FY 1998 and 1999,
respectively.
Potential Use: This program can be used for coastal watershed protection and to support efforts to foster
environmental technology businesses.
Advantages: The program's recognition of a need to allow economic growth distinguishes it from
narrower efforts.
Limitations: This is a very small program (approximately $2 million) limited to projects to improve or
maintain environmental quality in coastal areas.
«
Reference for Further Information: U.S. Department of Commerce, National Oceanic and
Atmospheric Administration, National Ocean Service, Coastal Services Center, 2234 South Hobson
Avenue, Charleston, SC 29405-2413; Telephone: 843-740-1200, Fax: 843-740-1224, E-mail:
csc@csc.noaa.gov, Internet site: www.csc.noaa.gov/
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DEPARTMENT OF COMMERCE
NATIONAL OCEANIC AND ATMOSPHERIC ADMINISTRATION (NOAA))
COASTAL ZONE MANAGEMENT ADMINISTRATION
IMPLEMENTATION AWARDS
Description: The Coastal Zone Management Program, authorized by the Coastal Zone Management Act
of 1972, assists coastal states and island territories, including Great Lakes states, in implementing and
enhancing coastal zone management activities approved by the Secretary of Commerce. Formula grants,
which are based on population and miles of coastal shoreline and require anon-federal match, can be used
to support assessment of the impacts of coastal growth and development, as well as projects in coastal
wetlands management and protection, natural hazards management, reduction of marine debris, special area
management planning, siting of coastal energy and government facilities, and ocean resource planning. No
match is required for Coastal Zone Enhancement Program grants (cooperative agreements), which are
meant to induce states to improve special area management planning, government and energy facility siting,
ocean governance, public access to the coast, wetlands protection, and measures to deal with coastal
hazards, marine debris, and cumulative and secondary impacts of development
Actual Use: Management grants average $1.3 million and range from $500,000 to $2 million. Supported
coastal zone management programs have included protection of wildlife and fisheries habitats and regulation
of land use impacts on water quality. Grant obligations exceeded $48 million in Fiscal Year (FY) 1997,
$49 million in FY 1998, and are projected to be $5.5 million in FY 1999.
Potential Use: Implementation funds can support marine wetlands and watershed protection and other
important environmental measures in coastal areas.
Advantages: Federal actions that are reasonably likely to affect any land or water use or natural resource
of the coastal zone must be consistent with the enforceable policies of a coastal State's or territory's
federally approved coastal zone management program.
Limitations: The programs are limited to oceanic and Great Lakes coastal areas. The governor of the
state or territory must designate an agency to participate and the Secretary of Commerce must approve
the state's coastal zone management program
Reference for Further Information: U.S. Department of Commerce, National Oceanic and
Atmospheric Administration, National Ocean Service, Office of Ocean Resources Conservation and
Assessment, Coastal Programs Division, 1305 East-West Highway, Silver Spring, MD 20910, Telephone:
301-713-3155x195, Fax: 301-713-4012, E-mail: juravitch@coasts.nos.noaa.gov, Internet site:
www.nos Jioaa.eov7ocrm/czm/.
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DEPARTMENT OF DEFENSE
ARMY CORPS OF ENGINEERS
CIVIL WORKS PROJECTS
Description: The Army Coips of Engineers' Civil Works Directorate has numerous environmental
responsibilities. Not only is the Corps the largest provider of water-based recreation facilities, it also
administers a major environmental permitting program and operates hydropower facilities which provide
24 percent of the nation's electricity. Now among the Corps' responsibilities is management of the
Formerly Used Sites Remedial Action Program (FUSRAP), which was transferred from the Department
of Energy in 1997. Although major projects require congressional approval, the Corps' Continuing
Authority projects, which must cost under $5 million, can take care of emergency repairs to streambanks
and shorelines, small beach erosion control projects, Section 107 Small Navigation Projects, projects to
mitigate shore damage at federal navigation projects, small flood control projects, and snagging and clearing
for flood control. Some types of projects have federal cost limits of $500,000. Depending upon Ihe type.
of project, cost sharing may be 50 percent federal, 80 percent federal, or potentially more complicated.
For most assistance, preapplication consultation and coordination is essential and the application is simply
a letter to the District Engineer, indicating clear intent to provide all required local participation.
Actual Use: The Corps spends about $500 million a year on environmental activities. The Continuing
Authorities Program had $50 million for Fiscal Year 1998 and the President's budget requests $47 million
for Fiscal Year 1999. Recent projects include work to prevent Judsonia, Arkansas', sewage lagoon levee
from collapsing into the Little Red River and plans to combine structural flood control with creation offish
and wildlife habitats in New Jersey's Raritan River Basin.
Potential Use: State and local governments can work with the Corps' District Engineer to define
mvironrnentally sensitive project objectives and identify realistic sources of the non-federal share of costs.
Advantages: The Continuing Authorities Program eliminates the need for proj ect-specific congressional
authorizations for relatively small projects and the federal share of costs can make such projects affordable
for state and local governments.
Limitations: Projects must be engineering feasible, economically justified, and complete within themselves.
Reference for Further Information: Contact US. Army Corps of Engineers, Directorate of Civil
Works, 20 Massachusetts Avenue, NW, Washington, DC 20314-1000; Phone: 202-272-1975; Internet:
www.usace.army.mil/. • •-
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ENVIRONMENTAL PROTECTION AGENCY (EPA)
ENVIRONMENTAL EDUCATION AND TRAINING GRANTS
Description: The National Environmental Education Act authorizes project grants to establish
environmental education and training programs. EPA's Office of Environmental Education runs an
Environmental Education and Training Program (EETP), to train educational professionals in the
development and delivery of environmental education programs, and Environmental Education Grants
(BEG), to support projects to design, demonstrate, or disseminate practices, methods or techniques related
to environmental education and training. EETP supports classroom training in environmental education and
studies including environmental sciences and theory, educational methods and practices, environmental
career or occupational education, and topical environmental issues and problems. It also supports
development of environmental education programs and curricula, including those to meet the needs of
diverse ethnic and cultural groups. EEGs support the design, demonstration, or dissemination of
environmental curricula, including development of educational tools and materials. Projects must focus on
improving environmental education teaching skills, or educating communities, the general public, teachers,
or students about public health, or building State, local or tribal government capacity to develop
environmental education programs.
Actual Use: In Fiscal Year 1997 EPA awarded a small grant to Haskell Indian Nations University to
support extension of environmental education to under-served American Indian audiences through distance
learning (See Section 2.C., Agriculture: RUS - Distance Learning and Telemedicine Loans and
Grants). Large awards have been made to the University of Michigan and the North American
Association for Environmental Education. In Fiscal Year 1997, grant obligations totaled $1.95 million.
For Fiscal Years 1998 and 1999, grant obligations are estimated at $1.95 and $1'.82 million, respectively.
Potential Use: Environmental Education Grants can be used to develop a grass-roots capability to
understand and evaluate environmental conditions and measures proposed to address them
Advantages: Grants make environmental education projects feasible in circumstances in which they are
not otherwise possible. Environmental education prepares voters to deal rationally with critical issues which
might be manipulated by vested interests.
Limitations: Funds cannot be used for acquisition of real property, including buildings, or the construction
or substantial modification of any building. These grants require a 25% non-federal match and tie training
program grants are for five years subject to the availability of funds.
Reference for Further Information: U.S. EPA, Office of Communications, Education and Public
Affairs, Environmental Education Division, Mail Code 1704,401M Street, SW, Washington, DC 20460,
Telephone: 202-260-4965, Fax: 202-260-4095, Internet: www.epa.gov/.
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ENVIRONMENTAL PROTECTION AGENCY (EPA)
ENVIRONMENTAL JUSTICE GRANTS TO SMALL COMMUNITY GROUPS
Description: The Environmental Protection Agency's (EPA's) Environmental Justice Initiative was
established in 1994 by Executive Order 12898. Environmental justice is the fair treatment and meaningful
involvement of all people regardless of race, color, national origin, or income with respect to the
development, implementation, and enforcement of environmental laws, regulations and policies. EPA's
Office of Environmental Justice also provides funds to EPA Regional Offices for small grants (up to
$20,000) to community groups. Applications are submitted to EPA regional offices, which select projects
and award grants.
The Environmental Justice Small Grants Program provides financial assistance to eligible non-profit, tax-
exempt, incorporated community groups and federally recognized tribal governments that are working on
or plan to carry out projects to address environmental justice issues. Grants may be used for education
and awareness programs, technical assistance in accessing available public information, technical assistance
with gathering and interpreting existing environmental justice data, and activities such as river monitoring
and pollution prevention for environmental justice purposes. Education programs can include provision of
environmental justice training for teachers or related personnel as well as design, demonstration or
dissemination of environmental justice curricula, education tools and materials.
Actual Use: In Fiscal Year 1997,139 grants totaling approximately $2.7 million were awarded. • The
program was funded at $2.5 million in fiscal 1998 and 125 were awarded. Funding in Fiscal Year 1999
is estimated to be $2 million.
Potential Use: Community groups can use small grants to employ technical advice and media services to
help residents understand environmental information that provides a basis for concerted action to protect
the community's environmental health.
Advantages: Grants can pay for technical assistance, thereby enabling community groups to deal
effectively with information needed to undertake a variety of environmental justice activities. There is no
match requirement, making Ihe program very practicable for low-income communities.
Limitations: Individual grants may not exceed $20,000. Grant funds may not be used to acquire real
property or to construct or modify building.'
Reference for Further Information: Environmental Protection Agency, Office of Environmental Justice,
Mail Code 2201 A, 401M Street, SW, Washington, DC 20460, Telephone: 202-564-2515 or 800-962-
6215, E-mail: environmental-justice-epa@epa.gov,hiternet: www.epa.gov/.
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ENVIRONMENTAL PROTECTION AGENCY (EPA)
ENVIRONMENTAL MONITORING FOR PUBLIC ACCESS
AND COMMUNITY TRACKING (EMPACT) GRANTS
Description: The EMPACT grants program is a pilot program designed to provide public access to clear,
understandable, timely and accurate environmental monitoring data in at least 75 of the 86 larger
metropolitan areas. The purpose is to assist the public in day-to-day decision-making about their health
and the environment The emphasis is on active partnerships between local and state government, research
institutions, non-governmental organizations, the private sector, and the federal government in the use of
advanced and innovative technologies to monitor environmental conditions and communicate clearly
understandable, time-relevant and credible information to the lay public. Proposed partnerships must be
established with formal agreements which outline the roles and responsibilities of individual partners. Each
application must include provision for an Internet home page used for describing the program and for
posting local environmental data. Grant or cooperative agreement awards range from $250,000 to
$600,000 for a period of 12 to 24 months.
Actual Use: This is anew $3.5 million pilot program, for which full applications were due on May 15,
1998.
Potential Use: If the programis expanded, it could support provision of contemporaneous environmental
information in a form readily understood by and useful to voters and taxpayers.
Advantages: Federal funding can facilitate die public understanding of environmental information that is
essential for reasoned decision making in both public and private policy arenas.
Limitations: While it may yield valuable experience, this pilot program is for the most populous
metropolitan areas and there is no assurance that it will be expanded or continued.
Reference for Further Information: Contact Environmental Protection Agency, Office of Research and
Development, National Center for Environmental Research and Quality Assurance, Environmental
Engineering Research Division, Mail Stop 8722R, Washington, DC 20460, Telephone: 202-564-6824,
Fax: 202-565-2446, E-mail: kam.barbara@epa.gov, Internet: es.epa.gov/ ncerqa/rfa/empacthtml.
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ENVIRONMENTAL PROTECTION AGENCY (EPA)
PERFORMANCE PARTNERSHIP GRANTS
Description: Performance Partnership Grants (PPGs) are multi-program grants made to State or Tribal
agencies by EPA from funds allocated and otherwise available for categorical grant programs. They are
voluntary and provide States and Tribes the option to combine funds from two or more categorical grants
into one or more PPGs. PPGs are authorized by the 1996 Omnibus Consolidated Rescissions and
Appropriations Act (PL 104-134). The authority covers the following sixteen program grants funded from
EPA's State and Tribal Assistance Grants appropriation:
1. Air pollution control (CAA section 105);
2. Water pollution control (CWA section 106);
3. Nonpoint source management;
4. Water quality cooperative agreements (CWA section 104(b)(3));
5. Wetlands program development CWA section 014(b)(3));
6. Public water supervision (SDWA sections 1443(a) and 1451(a)(:
7. Underground water source protection (SDWA section 1443(b));
8 Hazardous waste management (Solid Waste Disposal Act section 301 l(a)):
9. Underground storage tank (Solid Waste Disposal Act section 2007(f)(2));
10. Radon assessment and mitigation (TSCA section 306);
11. Lead-based paint activities (TSCA section 404(g));
12. Toxics compliance and monitoring (TSCA section 28);
13. Pollution prevention incentives for States (PPA section 6605);
14. Pesticide cooperative enforcement (FIFRA section 23(a)(l));
15. Pesticides and program implementation (FIFRA section 23(a)(l))
16. Pesticide applicator certification & training/pesticide program (FIFRA section 23(a)(2));
and
17. GeneralAssistance Grants to Indian Tribes (Indian Environmental General Assistance Act).
Actual Use: States began to seek PPG authority and negotiate with EPA in FY1997.
Potential Use: All fifty States and the Tribal agencies could negotiate and implement PPGs allowing them
increased flexibility in implementing and funding environmental priorities. $169,900,000 in grants were
obligated in Fiscal Year 1997.
Advantages: PPGs give States and Tribes more flexibility to address Iheir highest environmental priorities,
thus increasing equity and environmental incentives. They provide incentives to States and Tribes to
improve environmental performance and links between program goals and outcomes. PPGs also cut
administrative burdens/costs for recipients and EPA by reducing thenumbers of grant applications, budgets,
work plans and reports. EPA will build partnerships with States and Tribes via shared goals and division
of responsibilities.
Limitations: No extra funds are available via use of PPGs. States and Tribes must first develop
environmental indicators and performance measures to ensure progress is made to agreed on goals.
Reference for Further Information: U.S. EPA, Office of the Administrator, Office of Regional
Operations and State/Local Relations, 401 M Street, SW, Washington, D.C. 20460, Mail Code:1501.
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ENVIRONMENTAL PROTECTION AGENCY (EPA)
PROGRAM GRANTS
Description: Federal grants for various purposes including State and local program research,
demonstrations, development, and implementation. The amount available, application criteria, and
requirements differ from grant to grant, depending on Congressional authorization and internal EPA grant
policies. Some grant programs are specifically authorized for a particular purpose, while other grant
programs give significant discretion to the supervising EPA office.
Actual Use: The table on the following page provides a partial list of EPA grants, organized by the office
that administers the grant This list is provided only as an example; it is not necessarily comprehensive or
current, since grants change from year to year according to Congressional authorization. Historically, EPA
grants have funded both State and local programs in all environmental media A number of grants are
targeted to research and demonstration projects; other grants provide support for State and local program
activities that coincide with federal environmental quality priorities.
Potential Use: State and local governments could use EPA grant funds to cover the costs of whatever
program activities and/or capital purchases meet the applicable grant criteria
Advantages: Federal grants provide State and local governments with the means of meeting national
environmental quality goals. They may also provide funds otherwise unavailable to State or local programs,
thus enhancing equity, environmental incentives, and financial leveraging considerations.
Limitations: Funds may be targeted to specific statutory goals. Programs must compete for limited funds
and sign EPA grant agreements to perform activities. Each grant is very specific, thus limiting State and
local flexibility.
Reference for Further Information: U.S. EPA grants can be accessed on the Agency's Web Page
under: Grant Programs Administered by EPA at http://www.epa.gov/ogd/grants.htm. The respective
EPA program offices will also have information on the grant programs that Ihey oversee. In addition, the
Catalog of Federal Domestic Assistance contains descriptions of all federal grant programs, including
EPA's, and can be obtained at the Government Printing Office. EPA grant programs can also be accessed
in the Catalog electronically through its Internet Website athttp://aspe.os.dhhs.gov/cfda/ideptaa.htm -
which is the section for Independent Agencies.
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PARTIAL LISTING OF EPA PROGRAM GRANTS BY OFFICE, 1995
Office of Water
Office of
Research and
Development
Office of
Administration
Office of
Prevention,
Pesticides, and
Toxic Substances
Water Pollution Control State and Interstate Program Support Grants (Section 106)
Water Quality Control Information System Grants
State Public Water System Supervision Grants
State Underground Water Source Protection Grants
Water Pollution Control — Lake Restoration Cooperative Agreements
National Estuary Program Grants
Nonpoint Source Planning Grants
Nonpoint Source Set-Asides (under Title VI of the CWA)
Wetlands Protection — State Development Grants
Solid Waste Disposal Research Grants
Water Pollution Control ~ Research, Development and Demonstration Grants
Toxic Substances Research Grants
Safe Drinking Water Research and Demonstration Grants
Environmental Protection -• Consolidated Research Grants
Air Pollution Control Research Grants
Pesticides Control Research Grants
Environmental Protection Consolidated Grants ~ Program Support
Consolidated Pesticide Compliance Monitoring and Program
Pollution Prevention Grants Program
Cooperative Agreements
Toxic Substances Compliance Monitoring Program Grants
Asbestos Hazard Abatement (Schools) Assistance
Toxic Release Inventory Data Quality Assurance Program
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Office of Solid
Waste and
Emergency
Response
Hazardous Waste Management State Program Support
Superfund State Core Program Cooperative Agreements
Hazardous Substance Response Trust Fund (Superfund)
State Underground Storage Tank Trust Fund Program
Solid Waste Management Assistance Grants
Superfund Innovative Technology Evaluation Program
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ENVIRONMENTAL PROTECTION AGENCY (EPA)
SECTION 319 NONPOINT SOURCE POLLUTION CONTROL GRANTS
Description: Section 319{h) of the Clean Water Act provides for formula grants to States and tribes to
implement projects or programs that will help to reduce non-point sources of water pollution within
identified priority watersheds. All project funding must implement EPA-approved nonpoint source
management programs and include at least 40 percent nonfederal match.
Fundable projects include the design, demonstration, implementation, and evaluation of Best Management
Practices (BMPs) for animal waste, nonpoint pollution reduction in priority watersheds, groundwater
protectionfromnonpoint sources, public education programs on nonpoint source management (e.g.5 basin-
wide landowner and homeowner education). Also covered now are lake prqj ects previously funded under
the Clean Water Act Section 314 Clean Lakes Program. Nonprofit organizations may submit applications
to State lead agencies for funds in accordance with the State's work program.
Actual Use: State grants average $2 million and range from $268,651 to $5,310,372. Indian tribe grants
average $50,000 and range from $45,000 to $55,000. In Fiscal Year 1997, grant obligations totaled $100
million. Grant obligation estimates for Fiscal Years 1998 and 1999 are $105 million and $200 million,
respectively. Best management practices have been designed and implemented for stream, lake and estuary
watersheds and for animal wastes and sediment, pesticide and fertilizer control. Several States have used
Section 319 funds to support their Farm*A*Syst source water protection programs (see Section S.A.,
Cooperative Extension Systems).
Potential Use: States can use funds to implement portions of nonpoint source management programs
addressing critical priorities.
Advantages: Grant funds can make some otherwise unafFordable water quality activities feasible.
Limitations: States must provide a non-federal match of at least forty percent and meet maintenance of
effort requirements. Only $100 million is available nationally and prqj ects or programs must be conducted
within the state's non-point source priority watersheds. .
Reference for Further Information: U.S. EPA, Office of Wetlands, Oceans and Watersheds,
Assessment and Watershed Protection Division, Nonpoint Source Control Branch, Mail Code: 4503F,
401 M Street, SW, Washington, DC 20460; Telephone: 202-260-7100, E-mail: ow.general@epagov,
Internet: www.epa.gov/owow/NPS/guide.html. A description of this grant program can be found in the
Catalog of Federal Domestic Assistance and at the Catalog's World Wide Web site,
htto;/yaspe.os.dhhs.gov/cfda/tdeDtdoc.htni.
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ENVIRONMENTAL PROTECTION AGENCY (EPA)
SUPERFUND TECHNICAL ASSISTANCE GRANTS
Description: EPA's Office of Solid Waste and Emergency Response administers Superfimd Technical
Assistance Grants (TAG) for Citizen Groups at Priority Sites. The program provides project grants for
incorporated community groups to hire technical advisors who can assist tiiem in interpreting technical
infoimation concerning the assessment of potential hazards and the selection and design of appropriate
remedies at sites eligible for cleanup under the Superfund program. Funds may be used at sites listed or
proposed for listing on the National Priority List (NPL) where cleanup is underway to obtain technical
assistance in interpreting information regarding Hie nature of the hazard, remedial investigation and feasibility
study, record of decision, selection and construction of remedial action, operation and maintenance, or
removal action.
Incorporated groups of individuals who may be affected by a release or threatened release at any
Superfund facility are eligible. Affected individuals are homeowners, landowners and others who can
demonstrate direct effects from the site, such as actual or potential health or economic injury. Competing
groups are encouraged to consolidate and submit a single application. Only one grant is made per site, for
a maximum of $50,000 unless waived for up to an additional $50,000. A twenty percent match, including
in-kind contributions, is required unless waived or lowered due to financial burden. The Superfimd TAG
Handbook provides detailed application instructions.
Actual Use: These grants help citizens acquire technical advisors to help them understand proposed clean-
up remedies, better understand the technical problem at the site, and respond to EPA actions. Since the
program began in March 1988, EPA has issued 196 awards totaling more than $72 million (including new
awards, waivers and deviations). EPA superfund technical assistance grant obligations totaled $700,000
in Fiscal Year 1997 and are projected to be $1,000,000 and $500,000 in Fiscal Years 1998 and 1999,
respectively.
Advantages: Technical assistance grants provide resources to help those directly affected by hazardous
chemical waste sites to understand the situation and what is being done to correct it.
Limitations: Grants are limited to Superfund site communities and can be no more than $50,000-
$100,000 for what is typically a six-year period. Funds cannot be used to develop new information or
underwrite legal actions.
Reference for Further Information: U.S. EPA, Office of Solid Waste and Emergency Response, Office
ofEmergency and Remedial Response, Community Involvement and Outreach Center, Mail Code 5204G,
401 M Street, SW, Washington, DC 20460, Telephone: 703-603-8863; Fax: 703-603-9100; E-
mail:superrund.info@epagov; Internet: www.epa.gov/oerrpage/superfnd//web/tools/tag/ index.htm
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ENVIRONMENTAL PROTECTION AGENCY (EPA)
SUSTAINABLE DEVELOPMENT CHALLENGE GRANTS
Description: This EPA grant program is designed to encourage people, organizations, governments and
businesses to work cooperatively to develop flexible, locally-oriented approaches that link place-based
environmental management with sustainable development and revitalizatica The program funds projects
that improve the environment, build sustainable futures for communities, help local economies and
encourage partnerships among community groups, businesses, government and others. Itlooks for proj ects
yielding the greatest environmental and economic benefits, and leverage the most community investment
and resources.
Actual Use: The Sustainable Development Grant Program solicits project proposals for grants of up to
$250,000. Proposals are received from public entities, agencies, institutions and organizations (such as
State and local governments, and federally recognized tribes and regional entities), and non- profit private
agencies, institutions and organizations.
The Program obligated $5 million in grants in Fiscal Year 1997, Projects funded have ranged from better
forest management practices in New Hampshire to a network of 26 community supported organic farms
in the Mid-Atlantic region to a mid-city green projects building materials exchange in Louisiana to a smart
wood certification program in Washingtoa
Potential Use: The program could potentially fund the demonstration of a wide variety of environmentally
and economically sustainable projects in all environmental media and program areas. These projects could
help identify those practices which show promise of being truly sustainable and those which are not and
should be avoided. EPA estimates that the program will have grant obligations in Fiscal Years 1998 and
1999 of $5 million and $9.3 million, respectively.
Advantages: Funding authorities are broad and the program supports an unusually wide range of creative
and innovative approaches, and provides support to segments of the private sector. Project support
represents seed funding and successful grantees leverage substantial additional public and private resources.
Environmental incentives are very high and built into the program.
Limitations: The program requires1 a nonfederal match of 20 percent of a project's total budget and
federal assistance may not exceed $250,000.
Reference for Further Information: U.S. EPA, Office of Air and Radiation, 401 M Street, SW,
Washington, D.C. 20460, Telephone Numb'er:202-260-2441, Contact: Pamela Hurt.
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ENVIRONMENTAL PROTECTION AGENCY (EPA)
UNDERGROUND STORAGE TANK TRUST FUND PROGRAM GRANTS
Description: EPA's Office of Solid Waste and Emergency Response oversees two grant programs dealing
with underground storage tanks. The State Underground Storage Tanks (UST) Program provides project
grants to assist state governments in the development and implementation of underground storage tank
programs, so as to build their capacity to operate tiieir programs in lieu of the federal program. A high
priority is to encourage owners and operators to upgrade or replace their tanks well in advance of the
deadline. Owners and operators of UST systems have until December 22,1998, to upgrade, replace or
close substandard systems. The Leaking Underground Storage Tank (LUST) Trust Fund Program
provides project grants (cooperative agreements) to support state corrective action and enforcement
programs that address releases from underground storage tanks containing petroleum. Funds are used to
provide resources for the oversight and cleanup of petroleum releases from underground storage tanks
where owners and operators are unknown, unwilling or unable to take corrective actions themselves.
States may also oversee responsible party cleanups A ten percent state cost share is required.
Actual Use: The average LUST grant is $1.5 million and tfie range is from $300,000 to $4.3 million. All
50 states and six territories have cooperative agreements with EPA to conduct cleanups and provide
oversight of responsible party cleanups. Some states, such as New York, provide additional funds to
support their cleanup efforts. Funding for the grants (cooperative agreements) was approximately $50.3
million in Fiscal Year 1997. Funding estimates for Fiscal Years 1998 and 1999 are $55.25 million and
$57.7 million, respectively.
Potential Us e: The program can be used not only to solve the immediate problem of leaking underground
petroleum storage tanks, but also to raise public awareness of the pollution threat to groundwater.
Advantages: Federal funds make it feasible for states and territories to conduct programs dealing with the
environmental threat of leaking underground petroleum storage tanks. The program has been effective,
reflecting the specific benefits of cleanup projects and tiie flexibility afforded the states to consider
affordability issues and implement various financing arrangements.
Limitations: The programs are nearing a critical juncture which could lead to premature reductions in
effort. The deadline for upgrading or replacing substandard systems is late December, 1998, but some
small operatois may not yet be in compliance due to financial difficulties.
Reference for Further Information: Contact Environmental Protection Agency, Office of Underground
Storage Tanks, Implementation Division, 401M Street, SW, Washington, DC 20460; Mail Code: 5403G,
Telephone: 703-603-7175, Fax: 703-603-9163, Internet: www.epa.gov/.
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ENVIRONMENTAL PROTECTION AGENCY (EPA)
WETLANDS PROTECTION DEVELOPMENT GRANTS
Description: Environmental Protection Agency (EPA) regional offices administer project grants to State
or tribal agencies, interstate/inter-tribal agencies, and local governments in developing new or enhancing
existing wetlands protection programs. Grants are intended to encourage wetlands protection program
development or to enhance/augment existing effective programs. Project proposals must clearly
demonstrate a direct link to increasing a state's, tribe's, or local government's ability to protect its wetlands
resources. The required minimum match is twenty-five percent of the total project costs. While projects
funded should support the initial development of a wetlands protection program or the
enhancement/refinement of an existing program, current priorities are Wetland/Watershed Protection
Approach Demonstration Projects and River Corridor and Wetland Restoration Projects.
Actual Use: Each state has received at least one grant In Fiscal Year (FY) 1997, grant obligations
totaled $15 million and grant awards ranged from $1500 to $489,000. Grant obligations are estimated to
remain at $15 million for bolh FY 1999 and FY 2000. Funds have been used to support development
of wetland water quality standards which can be used as a primary tool in water quality certification
decisions. Funding has been focused on wetlands/watershed protection, approach demonstrations and
river corridor and wetlands reservations projects.
Potential Use: Grants can be used to support redesign of wetland and watershed protection programs
that need to be changed to reflect evolving demographic and ecological realities.
Advantages; Design or improvement of wetlands protection programs can be made financially possible
by these federal grants.
Limitations: Grant funds cannot be used for operational support of wetlands protection programs. The
lack of operational support funds is a serious impediment to State involvement in wetlands protection.
Reference forFurtherlnformation: U.S. EPA, Office of Wetlands, Oceans and Watersheds, Wetlands
Division, 401 M Street, SW, Washington, DC 20460, Mail Code: 4502F, Telephone: 800-)832-7828
or 202-260-1917, Fax: 202-260-2356, Internet: http://www.epa.gov/OWOW/wetlands/
partners.html.
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ENVIRONMENTAL TECHNOLOGY INITIATIVE (ETI)
Description: ETI is an interageticy effort led by (he U.S. Environmental Protection Agency (EPA)
supporting partnerships and projects that promote improved public health and environmental protection
by advancing the development and use of innovative environmental technologies. The Initiative promotes
innovative technologies that prevent pollution, control and treat air and water pollution, remediate
contaminated soil and groundwater, assess and monitor exposure levels and mange environmental
protection information.
Actual Use: ETI has provided funding support in excess of $100 million for more than 250 partnerships
and projects throughout the United States advancing the development and use of innovative environmental
technologies. Many of the partners participating in ETI projects are investing three to four dollars for every
ETI dollar invested.
Potential Use: As the costs and an difficulties of meeting environmental challenges grow, the need for new
and better environmental technologies will grow. The potential prospects for the environmental technology
industry are truly staggering. The United States' environmental technology industry is already ahigh-wage,
high growth industry. More than a million Americans are employed in over 50,000 companies nation-wide.
Our market for environmental technology is the largest in the world and global markets are expected to
grow by hundreds of billions of dollars in the coming years.
Advantages: Use of the innovative environmental technologies being developed and promoted by ETI
partnerships and projects can cut regulatory compliance costs, reduce public health risks, gain superior
environmental results, make companies more efficient and competitive, and improve community
environmental services. Private sector equity, environmental incentives, and leveraging possibilities are all
high
Limitations: Before innovative environmental technologies can achieve regulatory acceptance, technology
developers must decipher and meet a disjointed system of verification requirements in each State where
a potential market exists. Once regulatory acceptance is achieved, the innovative technologies must then
prove themselves and gain acceptance for actual field use.
Reference for Further Information: U.S. EPA; Office of Policy, Planning, and Evaluation, Policy and
Technology Innovations Division, 401 M Street SW, Washington, DC 20460, Mail Code: 2127, ETI
Infoline: 202-260-2686, Internet site: http://www.epa.gov/oppe/eti.
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FEDERAL EMERGENCY MANAGEMENT AGENCY (FEMA)
FLOOD MITIGATION ASSISTANCE
Description: The Federal Emergency Management Agency (FEMA) provides planning grants to assist
communities with development of flood mitigation plans and project grants for implementation of planned
measures to reduce flood losses. State agencies, participating National Flood Insurance Program (NFIP)
communities, and qualified local organizations are eligible. Planning grants support assessment of long-term
risk of flood damage to homes and other structures insurable under the NFIP and identification of actions
needed to reduce risk of flood losses. Communities must have Flood Mitigation Plans to be eligible for
project grants. Implementation project grants may support measures such as dry flood-proofing, elevation,
relocation, acquisition, or demolition of insured structures, erosion control and drainage improvements, and
beachnourishment activities such as planting of dune grass. They can be used for minor, localized structural
projects, such as erosion control and drainage improvements, that are not fundable by state or other
federal programs.
Actual Use: The Flood Mitigation Assistance program obligated about $17 million in grants in Fiscal Year
1997, so risk assessments and mitigation plans were principal activities. FEMA estimates that grant
obligations will be $20 million in Fiscal Years 1998 and 1999, respectively. The program's
accomplishments, including examples of the types of projects funded, are contained in a Biennial Report
to the Congress. This report can be obtained from FEMA upon request
Potential Use: This program has the potential to help support coastal watershed protection and dune
preservation activities.
Advantages: The Flood Mitigation Assistance program can in specific circumstances fill funding gaps left
by other federal and State programs. FEMA may fund up to seventy-five percent of the cost of eligible
activities. Each State and territory receives a guaranteed base funding for Planning ($10,000) and Projects
($100,000).
Limitations: Communities that have been suspended from the National Flood Insurance Program are not
eligible. This is a relatively small program. A twenty-five percent non federal match is required.
Reference for Further Information: U.S. Federal Emergency Management Agency (FEMA), Mitigation
Directorate, 500 C Street, SW, Washington, DC 20472, Telephone: 202-646-4621, Internet:
www.fema.gov/home/MIT/nnasst.htni FEMA Regional Offices in Boston, MA, New York, NY,
Philadelphia, PA, Atlanta, GA, Chicago, IL, Demon, TX, Kansas City, MO, Denver, CO, San Francisco,
CA, and Bothell, WA (check with FEMA Headquarters for appropriate contracts and numbers).
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FEDERAL EMERGENCY MANAGEMENT AGENCY (FEMA)
HAZARD MITIGATION GRANTS
Description: The Federal Emergency Management Agency (FEMA) provides State and local
governments project grants to implement measures that will permanently reduce or eliminate future
damages and losses from natural hazards. A State Administrative Plan and State 409 Plan, which
describe projects, are required for FEMA to identify a need for funding assistance. The State solicits,
reviews, prioritizes and selects applications, 1hen forwards them with project narratives, descriptions
and fact sheets to FEMA for review. FEMA can fund up to seventy-five percent of eligible project
costs and the State or project applicants must provide the nonfederal share. State agencies, local
governments, public entities, private non-profit organizations, Native American Tribes, and Alaskan
Native villages are eligible for subgrants from the States. Funds may be used for the acquisition of real
property.
Actual Use: FEMA funded 51 projects in Fiscal Year 1997 and 45 in Fiscal Year 1998. Drainage
improvement and vegetation management projects are among those the types of environmentally-related
activities that have been funded.
Potential Use: Real properly can be required for treatments which will meet environmental objectives
while mitigating natural hazards.
Advantages: The federal share can be up to seventy-five percent of total eligible costs, making otherwise
unaffordable projects feasible.
Limitations: The program is based on fifteen percent of all other public and individual disaster grants.
Projects must be in Presidentially declared disaster areas and applicants must work through the state
agency that is responsible for setting priorities for funding. The State or project applicant must provide a
twenty-five percent match. The nonfederal match, however, can be a combination of cash, in-kind
services, or materials.
Reference for Further Information: U.S. Federal Emergency Management Agency (FEMA), Mitigation
Directorate, Program Implementation Division, 500 C Street, SW, Washington, DC 20472, Telephone:
202-646-4621, FEMA Regional Offices in Boston, MA, New York, NY, Philadelphia, PA, Atlanta, GA,
Chicago, IL, Denton, TX, Kansas City, MO, Denver, CO, San Francisco, CA, Bothell, WA, Internet:
www.fema.gov/mit/hmgp.htm
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FOUNDATION AND CORPORATE GIVING
Description: Foundation and corporate giving are an important source of funding for activities in
education, health and human services, civic and community affairs, and culture and the arts. They are also
a significant and growing source of funding for environmental projects. Most such funding is in the form
of grants for well-defined projects (i.e., time, cost, and deliverables) that meet the immediate priorities of
the funding source, and are not funded by governments.
Actual Use: More than 7,500 major foundations in the United States with assets totaling about $170
billion make annual donations exceeding $10 billion. Corporations alone support 2,300 philanthropic
programs in the form of foundations or as direct-giving programs. In 1995, 703 foundations made
environmental gifts totaling more than $425 million.
The Global Futures Foundation is a nonprofit environmental foundation that supports integrated programs
leading to source reduction, pollution prevention, low-cost market development and incentive driven
regulatory structures which reduce economic and environmental costs. Patagonia, Inc. is a clothing firm
that devotes 1% of sales to its environmental grants program and gave more than $1.1 million in 1995-6
to over 200 projects for preserving and restoring the environment
Potential Use: Foundation and corporate giving could fund innovative environmental projects in many
areas, and total support could reach more than a billion dollars. Chants typically go for research, education,
and demonstration projects, but also could be used to fund projects involving planning, monitoring, and
technology.
Advantages: These grants are not directly dependent on tax dollars and grant conditions may be less
burdensome. Innovation is encouraged and equity provided since grantees are not supported by
governments. Grantees are forced to leverage other resources or become self-sustaining.
Limitations: Funding levels may be highly variable, competition for resources is very intense and awards
are usually directed to innovative projects. Environmental impacts may be limited if projects are too small
and esoteric. Since funding is typically for very short, defined periods of time, it is a real challenge for
grantees to succeed or become independent
Reference for Further Information: The Foundation Directory features the nation's largest
foundation funders. The National Directory of Corporate Giving profiles over 2,300 corporate
philanthropic programs. These books are available from the Foundation Center, 79 Fifth Avenue, New
York, NY 10003-3076, Telephone: 212-620-4320. See also Environmental Data Resources, Inc.,
Environmental Grantmaking Foundations, 1995 Directory, Rochester, NY, 1996.
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DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT (HUD)
COMMUNITY DEVELOPMENT BLOCK GRANTS (CDBG)
ECONOMIC DEVELOPMENT INITIATIVE GRANTS
Description: The CDBG Economic Development Initiative (EDI) awards project grants to help local
governments eligible under HUD's Section 108 Loan Guarantee Program carry out economic development
projects. The grants must enhance the security of loans guaranteed under the Section 108 Program or
improve the viability of projects financed under the Section 108 Program.
Actual Use: Fiscal Year 1996 assistance ranged from $975,000 to $3.5 million, with an average grant of
$1.8 million. For Fiscal Year 1998, EDA estimates $38 million in funding for 50-75 standard EDI projects
and $25 million for funding for up to 25 brownfields projects. In Fiscal Year 1999, $ 400 million in EDI
funds will be allocated to the proposed Community Empowerment Fund and $50 million in funds will be
allocated for up to 50 brownfields projects.
Projects funded include a wide range of economic development activities including commercial, industrial
and economic development revolving loan funds. Eligible activities include acquisition of real property;
rehabilitation of publicly-owned real property, housing rehabilitation, economic development activities,
acquisition, construction reconstruction, or installation of public facilities, and, in the colonias, public works
and other site improvements. Brownfields EDI giants will result in a similar range of activities for qualified
Brownfield sites.
Potential Use: Depending on interpretation of Section 108 criteria, grants might finance or leverage loans
funding facilities in water, wastewater, solid waste, recycling, waste-to-energy, and small business air
quality improvements.
Advantages: Equity and leveraging opportunities are high and built into the program. Some very specific
environmental projects have been completed in low-income areas.
Limitations: EDI grant funds only be used in conjunction with projects and activities assisted under die
Section 108 loan Program. Principal beneficiaries of the grants must be low and moderate income persons.
Many non-environmental projects are funded and payment is on a cost-incurred basis.
Reference for Further Information: The U.S. Department of Housing and Urban Development (HUD)
publication, Programs of HUD, contains a description of this CDBG program. Information on it can also
be found in the Catalog of Federal Domestic Assistance and its Internet site at
http://aspe.os.dhhs.gov/cfda/idepthud.htm - which has links to these HUD grants.
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DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT (HUD)
COMMUNITY DEVELOPMENT BLOCK GRANTS (CDBG)
ENTITLEMENT GRANTS
Description: The CDBG Entitlement Grants Program seeks to develop viable urban communities by
providing decent housing and a suitable living environment, and by expanding economic opportunities. It
supports activities lhat benefit low-to moderate income citizens in cities in Metropolitan Statistical Areas
(MSAs) designated by OMB as a central city of the MSA and other cities over 50,000 in MSAs and
qualified urban counties of at least 200,000 (excluding entitlement cities located in such counties). Federal
formula grants based on population, income, housing, and growth lag are awarded to eligible entities.
Specific activities that can be carried out include acquisition of real property, relocation and demolition,
rehabilitation of residential and nonresidential structures, and the provision of public facilities and
improvements, such as water and wastewater treatment facilities.
Actual Use: HUD obligated more than $3 billion in entitlement grants in fiscal year (FY) 1997 and plans
to obligate approximately that much in both FYs 1998 and 1999. Nine hundred and eighty-six local
governments were eligible to receive these grants in FY 1998. Grantees must certify that at least seventy
percent of grant funds received are spent for activities that principally benefit low- and moderate-income
persons. Water and wastewater treatment facilities and brownfields-related activities are among the types
of eligible projects that have been funded by these important grants.
Potential Use: Depending on interpretation of grant criteria, these CDBG grants might be used to
increasingly finance brownfields cleanup and redevelopment activities, as well as air pollution and solid
waste facilities.
Advantages: This grant program is HUD's major program and has been relatively stable.
Limitations: These grants assist a limited number of relatively large communities with distressed areas.
To apply, communities must develop and submit a number of detailed documents including a Consolidated
Plan, annual action plan and certifications. Post award requirements include annual performance reports,
audits, and detailed records maintenance. Many non-environmental projects are funded, competition is
fierce, and assistance is provided on a reimbursement basis.
Reference for Further Information: The U.S. Department of Housing and Urban Development (HUD)
publication, Programs of HUD, contains a description of this CDBG program. Information on it can also
be found in the Catalog of Federal Domestic Assistance and its Internet site at
http://aspe.os.dhhs.gov/cfda/idepthud.htm - which has links to these HUD grants.
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DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT (HUD)
COMMUNITY DEVELOPMENT BLOCK GRANTS (CDBG)
SMALL CITIES PROGRAM NONENTITLEMENT GRANTS
Description: These grants support decent housing, a suitable living environment, and expanded economic
opportunities for low and moderate income persons. They fund activities in nonentitlement areas (cities with
50,000 or less people and counties with less than 200,000 people that do not receive entitlement grants)
in New York and Hawaii. Eligible activities include the acquisition, rehabilitation or construction of public
works facilities and improvements, clearance, housing rehabilitation, code enforcement, home ownership
assistance, relocation payments, economic development, existing urban renewal projects, and certain public
services.
Actual Use: HUD obligated just over $60 million for these grants in fiscal year (FY) 1997 and plans to
obligate like amounts in FYs 1998 and 1999. Water and wastewater systems are among the projects
funded by Ibis assistance. State fund allocations are determined by formula taking into account population,
income levels, per room housing density; age of housing, and other factors.
Potential Use: Depending on HUD interpretation of grant criteria, these grants might be used to finance
air pollution control, solid waste, recycling, and waste-to-energy facilities, as well as arange of brownfields
cleanup and redevelopment activities.
Advantages: Environmental justice and equity concerns in terms of addressing ability-to-pay are good.
Leveraging possibilities with State revolving loans and rural utility water and wastewater funding and/or pre-
financing are high
Limitations: Priority is given to grants that benefit low and moderate income persons or aid in the
elimination of slums or blight At least seventy percent of each grant made must benefit low and moderate
income persons. For metropolitan areas, low and moderate income is a level equal to or less than HUD's
Section 8 low income limit For non-metropolitan areas, low and moderate income is defined as eighty
percent of the median income for those areas in the State.
Reference for Further Information: The U.S. Department of Housing and Urban Development (HUD)
publication, Programs of HUD, contains a description of this CDBG program. Information on it can also
be found in the Catalog of Federal Domestic Assistance and its Internet site at
http://aspe.os.dhhs.gov/cfda/idepthud.htm - which has links to these HUD grants.
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DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT (HUD)
COMMUNITY DEVELOPMENT BLOCK GRANTS (CDBG)
STATES' GRANTS PROGRAM NONENTITLEMENT GRANTS
Description: These grants help provide communities withdecenthousing, asuitable living environment and
expanded economic opportunities. They finance activities in nonentiuement areas (cities with 50,000 or less
people and counties with less than 200,000 people which do not receive entitlement grants) tiiat benefit low
to moderate income citizens. Puerto Rico and all States except New York and Hawaii receive funds to
administerthese grants to localities. Each State develops its own program and funding priorities. Fundable
activities include buying real property, relocation and demolition, rehabilitation of residential and
nonresidential structures, and providing public facilities and improvements such as water and wastewater
treatment facilities.
Actual Use: HUD obligated more than $1.2 billion in nonentiflement grants in fiscal year (FY) 1997 and
plans to obligate about as much in both FYs 1998 and 1999. Grantees must ensure that seventy percent
of grant funds benefit low- and moderate-income persons. Water and wastewater treatment systems are
among the projects eligible for assistance. State allocations are set by formula using population, income
levels, per room housing density; age of housing, and other factors.
Potential Use: Depending on each State's interpretation of grant criteria, CDG8 entitlement grants might
also be used to finance air pollution control, solid waste, recycling, and waste-to-energy facilities, as well
as a range of brownfields cleanup and redevelopment activities.
Advantages: The program is equitable from an affordability perspective. Leveraging can be high, as
communities can combine State revolving loans, as well as rural utility grants and loans, for water and
wastewater systems.
Limitations: Grants are limited to low and moderate income communities experiencing distress. For
metropolitan areas, low and moderate income is a level equal to or less thanHUD's Section 8 low income
limit For non-metropolitan areas, it is defined as eighty percent of the median income for those areas in
the State. A State may only use up to $100,000 plus two percent of its grant to administer the program
and must match each federal dollar over $100,000 used for administration with a dollar of its own.
Reference for Further Information: The U.S. Department of Housing and Urban Development (HUD)
Fact Sheet, State Community Development Block Grant Program, describes the program. HUD, Office
ofBlock Grant Assistance, Small Cities Division, 415 7th Street, SW, Washington, DC 20410, Telephone:
202-708-1322. The HUD publication, Programs of HUD, also has a description of this CDBG
program. Information on it can also be found in the Catalog of Federal Domestic Assistance and its
Internet site at http://aspe.os.dhhs.gov/cfda/idepthud.htm
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DEPARTMENT OF THE INTERIOR
FISH AND WILDLIFE SERVICE
NATIONAL COASTAL WETLANDS CONSERVATION GRANTS
Description: The Department of the Interior's Fish and Wildlife Service administers the Coastal Wetlands
Conservation Grants Program. The Division of Habitat Conservation and the Division of Federal Aid
review project selections by the agency's regional offices. All coastal states except Louisiana are eligible
*to submit project proposals, which are due by September 1 each year. Projects are undertaken by state
agencies having responsibility for acquisition of interests in coastal lands or waters and for restoration,
management or enhancement of coastal wetlands ecosystems. Projects must provide for the long term
conservation of coastal lands or waters and the hydrology, water quality and fish and wildlife dependent
thereon. The federal share of project costs cannot exceed fifty percent except thatit may be seventy-five
percent if the State has established a trust fund for the purpose of acquiring coastal wetlands, other natural
areas or open spaces. Although program applicants must be State/territorial agencies, project participants
may include State, county and municipal agencies and non-governmental entities.
Actual Us e: Grant funds are used to restore wetlands under state/territorial ownership and to acquire new
wetlands. The average grant is $507,840 and the range has been from$l 9,428 to $1,609,731. In fiscal
1997,18 proposals covering 10,741 acres received approximately $9.1 million. 928 acres were restored
and 2,082 acres were acquired.
Potential Use: The program is authorized through fiscal 1999, for which funding will be supported by the
allocation of eighteen percent of tfie Sport Fish Restoration Account up to $15 million. Around $7 million
has been available annually.
Advantages: Up to seventy-five percent of the cost of placing critical wetlands in protective public
ownership can be covered by federal funds.
Limitations: This is a relatively small program which depends heavily upon State participation.
It is limited by law to coastal States.
Reference for Further Information: Contact U. S. Department of the Interior, Fish and Wildlife Service,
Division of Federal Aid, Arlington Square, Room 140,4401 North Fairfax Drive, Arlington, VA 22203,
Telephone: 703-358-2156, Fax: 703-358-1837, E-mail: RobertJ>acific@rnail.fws.gov, Internet:
www.ftvs.gov/.
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DEPARTMENT OF THE INTERIOR
FISH AND WILDLIFE SERVICE
NORTH AMERICAN WETLANDS CONSERVATION ACT GRANTS
Description: The North American Wetlands Conservation Act Grant Programs promote long term
conservation of wetland ecosystems and the waterfowl and other migratory birds, fish and wildlife that
depend upon such habitat It provides project grants on a matching basis for acquisition,'enhancement and
restoration of wetlands and associated habitat The programs are meant to encourage voluntary public-
private partnerships to conserve wetland ecosystems by creating an institutional infrastructure and providing
a source of funding. The funding cap for Standard Grants is $1 million, while the cap for Small Grants is
$50,000. The nine-member North American Wetlands Conservation Council, created by the North
American Wetlands Conservation Act of 1989, reviews the merits of wetlands conservation proposals
submitted for funding. The Council considers the extentto which the project fulfills the purpose of the Act,
the North American Waterfowl Management Plan, or the Canadian-Mexican-U. S. Tripartite Agreement,
as well as its consistency with the National Wetlands Priority Conservation Plan developed under the
Emergency Wetlands Resources Act of 1986. While anyone can apply for a grant at anytime, the Council
goes through the proposal selection process three times a year. It then makes recommendations to the
Migratory Bird Conservation Commission for consideration of funding.
Actual Use: In March 1998, nineteen U.S. projects in fifteen states were approved for about $10.2 million
in federal funding, to be matched by almost $24.5 million from partners. For example, $655,000 was
approved for the Teton River Valley Ecosystem Project in Idaho.
Potential Use: The programs can fund acquisition of real property interests such as conservation
easements, fee simple title, and wildlife management agreements.
Advantages: The programs take anon-regulatory approach encouraging voluntary partnerships to develop
and implement wetland conservation projects to benefit wetland dependent wildlife.
Limitations: The current funding authorization expires at the end of fiscal 1998; however, reauthorization
appears likely.
Reference for Further Information: For a copy of"'the 1998 Grant Application Instructions, contact
the U.S. Department of the Interior, Fish and Wildlife Service, North American Wetlands Conservation
Council Coordinator, North American Waterfowl and Wetlands Office, 4401 North Fairfax Drive, Room
110, Arlington, VA 22203, Telephone: 703-358-1784, E-mail: r9arw_nawwo@mail.fws.gov, Internet:
www.fivs.gov/.
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STATE GRANT PROGRAMS
Description: Almost all Slates have environmentally-related grantprograms for eligiblelocal governmental
units, and sometimes the private sector. Since tiie source and type of grant varies considerably from state-
to-state, localities should obtain copies of State grant catalogs for specific information. State grants fall
into several categories: (1) annually appropriated grant monies; (2)
federally mandated grants; and (3) grants arising from referendum bond acts, which historically have been
the largest source of State grant monies.
Actual Use: Annually appropriated States grants historically have been small, and typically provide funds
for programs (as opposed to construction) for which there has been no federal funding, e.g., water and
wastewater operator training, drinking water and air pollution, and nonpoint source control. Federally
mandated grants include the twenty percent match required for the SRF, and other environmental
requirements such as facility operator certification, monitoring and testing, and small business clean air
audits. By far the largest State grants arise from environmental bond acts passed by referendum, which
historically have been the main source of funding for environmental infrastructure, parks and conservation,
and solid and hazardous waste. Recent years have seen a surge in large State referendum bond acts. For
example, New York's 1996 $1.75 billion bond act included money for drinking water grants, watersheds,
small business (water and air) and brownfields grants. California passed a $994 million bond act financing
drinking water grants, New Jersey a $340 million bond act which included incentive matching grants for
localities and nonprofits, Massachusetts a $399 bond act which included watershed and farmland
protection grants, and Florida a $300 million bond act which included habitat protection grants.
Potential Use: States have become increasingly creative in leveraging grants, and providing assistance
to non-traditional clients such as nonprofits and small businesses. Many States now provide matching
incentive grants to localities for local fundraising and to nonprofit organizations, such as in New Jersey and
New York. Minnesota and Maryland provide dollar-for-dollar matching grants for private contributions
for wildlife and wetlands protection, including private mitigation.
Advantages: State grants can be directed to pressing compliance needs and small communities, thus
reducing costs and enhancing equity. State grants may be more flexible and entail less red tape than
federal assistance, and can be further leveraged.
Limitation: Historically, State grants have not been large or predictable. Funding tends to come and go,
and monies are available on a first-come-first-serve basis, favoring projects ready to proceed. Many
restrictions still apply, such as on grants to non-profits and individuals. Grants, compared to loans, may
result in more costly and slower projects, since the money is regarded as "free".
Reference for Further Information: Contact State Budget Offices for further information.
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STATE REVOLVING FUND (SRF)
DRINKING WATER PRINCIPAL SUBSIDIES
Description: The 1996 Amendments to the Safe Drinking Water Act (SDWA), which established the
Drinking Water State Revolving Loan Fund program (DWSRF) capitalized by federal grants and State
matching grants, provides for loan subsidies in the form of "forgiveness of principal" to communities defined
as disadvantaged. A principal subsidy is the same as grant The SDWA provisions from creation of
revolving loan funds permits states to use up to 30% of the federal capitalization grants for principal
subsidies. States must established affordability criteria which guide the circumstances when a
"disadvantaged" community may received a principal subsidy. Affordability criteria typically are based on
the target service charge compared to median household income. Principal subsidies are not permitted
under the Clean Water SRFs.
Actual Use: Most States plan to use the principal subsidy authority under the DWSRF. Principal
subsidies are available to private public purpose drinking water projects as well as publicly-owned proj ects.
States with many small communities and low median household incomes may reach the 30% limit set by
1he Act However, in many States the loan demand is so large that principal subsidies will be a smaller
percentage than this limit hi New York, principal subsidies come from environmental bond act monies
instead of SRF funds, and may provide up to 75% of project funding.
Potential Use: Principal subsidies may, allow drinking water projects to proceed which otherwise wold
be delayed or not undertaken. They also may be combined with SDWA provisions allowing a 30-year
loan instead of the 20 year limit on most SRF loans. SRFs can set aside a set amount of monies for
investment purposes to assist in subsidizing loans. For a $ 100,000 principal subsidy, an SRF could invest
$71,430 ayear at 7%, yielding $5,000 a year for 20 years to pay for the subsidy.
Advantages: SRF grants make proj ects more affordable for smaller communities and may be the crucial
factor is whether such a community proceeds or not Hence, accessibility as well as equity are enhanced.
SRFs can leverage their subsidy potential through sound investments. Based on a states affordability levels,
projects entitled to principal subsidies can be prequalified for assistance, thus easing administrative burdens
and uncertainties.
Limitations: Principal subsidies reduce Ihe leveraging potential ofloanable funds, as well as their revolving
nature. Thus, States must be very careful not to undercut the long term solvency of SRF funds by providing
too many grants as opposed to loans. Accessibility to loans for other communities declines by the amount
of principal subsidies offered.
Reference for Further Information: Localities should consult their State DWSRF officials to
determined principal subsidies policies and affordability criteria State Intended Use Plans published
annually will describe principal subsidy benefit recipients.
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DEPARTMENT OF TRANSPORTATION
FEDERAL TRANSIT ADMINISTRATION
LIVABLE COMMUNITIES INITIATIVE
Description: The Federal Transit Administration (FTA) Livable Communities Initiative supports sound
environmental practices, as part of its effort to improve the quality of life by promoting compact
communities with user-friendly transit linked to related development. Metropolitan and other planning
organizations lhat get FTA planning funds must adopt Livable Communities elements in Iheir planning
efforts. Eligible activities include assessment of environmental, social, economic, land use, and urban design
impacts; evaluation of best practices; participation by community groups; and development of innovative
urban design, land use, and zoning. Limited funding exists for technical assistance, planning, modeling,
urban design, and community involvement. Recipients may include transit operators, metropolitan planning
bodies, local governments, States, planning agencies and other public bodies. Non-profit, community and
civic groups are encouraged to join in project planning and development. Eligible capital activities or capital
enhancements of demonstration projects include property acquisition, restoration or demolition of
structures, site preparation, utilities, building foundations, walkways, and open space physically and
functionally related to mass transportation facilities. Also eligible are enhancements to transit stations, park-
and-ride lots and transfer facilities with community services such as day care, health care and public safety.
Funding is provided by Hie Intermodal Surface Transportation Efficiency Act of 1991.
Actual Use: Among the Livable Communities projects are the Orlando Park and Play Garage Child Care
Center and the Health Station at Roxbury Crossing.
Potential Use: Projects can emphasize sound environmental practices reducing automobile trips,
conserving open space, encouraging green areas, and improving air quality.
Advantages: The program recognizes lhat Ihe purpose of federal transit laws is to improve the quality of
life through use of transit, not simply to fund costs of transit systems.
Limitations: The physical or functional tie to transit eliminates many otherwise appropriate projects.
Project funding depends on the interest of transit planning and operating agencies.
Reference for Further Information: U. S. Department of Transportation, FTA regional offices:
Cambridge, MA, Phone: 617-494-2055; New York, NY, Phone: 212-264-8162; Philadelphia, PA,
Phone: 215-656-6900; Atlanta, GA, Phone: 404-347-3948; Chicago, IL, Phone: 312-353-2789;
Arlington, TX, Phone: 817-860-9663; Kansas City, MO, Phone: 816-523-0204; Denver, CO, Phone:
303-844-3242; San Francisco, CA, Phone: 415-744-3133; Seattle, WA, Phone: 206-220-7954.
Internet: www.fta»dotgov/.
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DEPARTMENT OF TRANSPORTATION
TRANSPORTATION EQUITY ACT FOR THE 21ST CENTURY (TEA-21)
Description: The Mtermodal Surface Transportation Efficiency Act (ISTEA) of 1991 set new standards
for environmental sensitivity. The Transportation Equity Act for the 21st Century (TEA-21) signed June
9,1998, reauthorized, modified and extended ISTEA largely continuing the improved relationship between
transportation and the environment ISTEA made wetlands mitigation efforts eligible under both the
National Highway System and Surface Transportation Program. Eligible activities included mitigation
banking, wetland preservation and restoration efforts, and State and regional wetland planning. TEA-21
retains wetland mitigation proj ect eligibility and adds natural habitat. It allows up to 20% of reconstruction,
resurfacing, rehabilitation or restoration project costs for environmental restoration and pollution abatement,
including retrofit or construction of stormwater treatment systems to address environmental problems
caused or contributed to by transportation facilities. Other eligible activities, including purchase of scenic
easements, scenic beautification and landscaping, preservation of abandoned railway corridors, and
mitigation to address water pollution due to highway runoff, are reauthorized with 40% more money.
The Congestion Mitigation and Air Quality Improvement Program continues with $9.1 billion authorized.
A new Clean Fuels Program is authorized at $1.2 billion. The Congestion Pricing Pilot Program becomes
the Value Pricing Pilot Program and the number of project States grows from 5 to 15, with funding of $8
millionyyear. A new $100 million National Wetlands Restoration Pilot Program to offset wetlands
degradation caused by highway construction before 12/27/77, is authorized. A 5-year, $120 million
program is authorized to research relationships between transportation, community preservation and the
environment, and the role of the private sector.
Actual Use: The new authorities tend to build on experience under ISTEA.
Potential Use: Contingent upon regulations implementing changes made by the reauthorization, state
transportation agencies will be able to undertake a variety of measures to combat air pollution, restore and
preserve wetlands, and otherwise mitigate environmental impacts.
Advantages: Inclusion of support for environmental measures diminishes counterproductive tensions
between transportation infrastructure development and environmental protection.
Limitations: If the legislation's potential is to be realized, transportation agencies must be willing to take
advantage of the environmental authorities conveyed.
Reference for Further Information: U.S. Department of Transportation, The Federal Highway
Administration, 400 7* Street, SW5 Washington, DC 20590; Telephone: 202-366-5004, Internet:
www,dotgov/.
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OTHER
Description:
Actual Use:
Potential Use:
Advantages:
Limitations:
Reference for Further Information:
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3. TOOLS
FOR
ENHANCING CREDIT
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3. TOOLS FOR ENHANCING CREDIT
INTRODUCTION
Description; Credit enhancement serves as an assurance to lenders or bondholders that credit is available,
and that they will be repaid if the debtor government or private party should default or delay payment. By
providing additional guarantees for bond and/or loan repayment, credit enhancement mechanisms may
improve toe ability of bolh the public and private sectors to acquire capital in the first instance, to acquire
capital at lower costs including issuance, coverage and interest costs, to lower debt service reserve
requirements, and to achieve other goals. Credit enhancement tools may be as straightforward as
purchasing commercial bond insurance or posting a performance bond, or as complex as Slate Revolving
Fund (SRF) collateral or cross-collateral bond leveraged financing, senior and subordinate debt
arrangements, and over funded debt reserve funds.
Advantages: Local governments with poor credit ratings (below investment grade), or no credits ratings,
may be able to gain access to capital markets and/or loan funds through credit enhancements, tiius
increasing the equity of access and allowing environmental projects to move forward. Complex, expensive
environmental facilities may benefit from credit enhancement debt structuring, and "risky" environmental
projects such as those involving hazardous waste may benefit from bond or liability (indemnity) insurance.
SRF bond leveraging creates SRF-backed, and sometimes oversized, debt reserve funds to secure bonds
and subsidize interest rates. Bond pools and bond banks result in lower interest costs for some individual
recipients through diversification. Bond insurance may result in significantly lower carrying costs than
otherwise. The credit enhancements presented here have been as important to the private sector, and in
many instances are more widely used, compared to the public sector. Individual borrowers can help assure
lenders as to future risks through environmental sand financial due diligence steps.
Limitations: Most credit enhancements involve additional costs that may outweigh tie financial advantage
fromthe lower interest rates, or other cost-savings, achieved through the mechanisms. Thus, use of credit
enhancements must be evaluated on a case-by-case basis. There may be intense competition for federal
and State credit enhancement programs, which in themselves may be administratively difficultto access and
arrange. Bond or loan holders may be given a false sense of security if credit enhancements are applied
to funding projects which are inherently unaffordable, difficult to structure, or risky. The more complex
credit enhancement mechanisms involving bond leveraging and debt reserve fund management may be too
difficult for some governments to undertake and entail high administrative/accounting costs.
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LIST OF TOOLS FOR ENHANCING CREDIT
(In Alphabetical Order)
1. Association Pooling
2. Commerce: Small Business Administration — Surety Bond Program
*3. Commercial Insurance and Guarantees
*4. Environmental Due Diligence
*5, Financial Due Diligence
6. Grant-Backed Credit Enhancements
7. HUD: Community Development Block Grants -Section 108 Loan Guarantees
*8. Letters of Credit/Lines of Credit
*9, Performance Bonds
*10. Senior and Subordinate Debt Structuring
*11. State Bond Banks
*12. State Guarantees and Insurance
*13. State Revolving Fund (SRF) Bond Leveraging
*14. SRF Common Bond Pools and Cross-Collateralization
*15. SRF Interest Rate Subsidies
* Stars indicate most highly rated mechanisms as described in the Comparison Matrix at the end of the
narratives. See Introduction to the Guidebook for a description of the criteria used. Ratings of "High",
"Moderate", and "Low" are for comparison purposes only, as some ratings are necessarily subjective and
data are incomplete.
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ASSOCIATION POOLING
Description: Members of an association combine their resources in a common pool to improve the
creditworthiness of participants, thus helping them to obtain financing for environmental capital
improvements. For example, a nonprofit trade association representing a manufacturing sector creates a
revolving fund that could: (1) provide lines of credit to participating members; (2) purchase insurance or
letters of credit to back the borrowings of members; and (3) itself borrow on behalf of members, using the
assets of ihe fund as collateral or reserve. In the latter case, the pool would be a true revolving fund.
Besides contributions from participating members, the resources and capability of the pool might be
enhanced via assistance from the Small Business Administration
Actual Use: No examples are known of associations establishing pools to facilitate the financing of
environmental improvements. Readers are encouraged to let us know of any new tools (see Appendix A).
There are many examples of communities and/or State governments forming bond pools to enable all pool
members to have access to affordable capital. Many cooperatives are formed, at least in part, to serve this
same function
Potential Use: The potential use of this tool is impossible to predict, but if pools could be made large
enough, then it is conceivable that otherwise uncreditworthy borrowers could become bankable credits at
reasonable costs. It would probably have the greatest application with industrial trade associations
possessing a wide range of members in terms of their financial conditions.
Advantages: EPA's Common Sense Initiative has clearly demonstrated that there is a need to improve
the access to capital for many small businesses in order to make it economic for them to invest in
environment capital improvements. Existing public and private institutional arrangements are not meeting
this need. Association pooling might be a means for a business sector to help itself without trying to solve
the problem through public assistance programs.
Limitations: There is little incentive for already creditworthy association members to participate in the pool
unless incentives are offered. For the pool to function effectively, it much reach a critical mass of
creditworthiness that could prove difficult to achieve. It may prove difficult to assess and administer
sanctions against individual pool members who default on their financing arrangements.
References for Further Information: Small Business Administration Programs can be found under The
Catalog of Federal Domestic Assistance and at the Catalog's Internet site, under Independent Agencies
at http://aspe.os.dhhs.gov/cfda/ideptaa.htm. Select "Small Business Administration".
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DEPARTMENT OF COMMERCE
SMALL BUSINESS ADMINISTRATION (SBA) -
SURETY BOND PROGRAM
Description: A surely bond is a bond issued by one party, the surety, guaranteeing that he will perform
certain acts promised by another or pay a stipulated sum, up to a set limit, in lieu of performance, should
Ihe principal fail to perform. Surety bonds include contractor bid, performance and payment bonds,
maintenance bonds, supply bonds, financial guarantee bonds, and license and permit bonds, among others.
For example, a performance bond is an agreement whereby an insurance company becomes liable for the
performance of work or services provided'by a contractor by an agreed-upon date. If the contractor does
not do what was promised, the surety is financially responsible (see Section 10.B., Surety Bonds and
Section 3., Performance Bonds). Most large property and casualty insurance companies have surety
departments. Professional agents or brokers specializing in providing surety bonds, can provide information
regarding specific surety companies.
Actual Use: By law, prime contractors* to the federal government must post surety bonds on federal
construction projects valued at $25,000 or more. Many state, county, chy and private sector projects also
require bonding. The Small Business Administration (SBA) can guarantee bid, performance, and payment
bonds for contracts up to $1.25 million for small businesses that cannot obtain bonds via regular
commercial channels. Contractors apply to SBA for a guarantee through a surety bonding agent, in which
case the guarantee goes to the surety, or the contractor may use a "preferred surety" authorized by the
SBA to issue, monitor and service guaranteed bonds without prior SBA approval.
Potential Use: The SBA guarantee can enable the participation of otherwise non-competitive small
businesses in environmental facility or clean-up proj ects.
• Advantages: The SBA program protects both the principal and the obligee at a lower cost because its
guarantee protects the surety.
Limitations: Size standards for construction industry firms limit eligible general and heavy construction
contractors to companies with annual revenues of no more than $17 million and special trade contractors
to those with no more than $7 million annual revenues.
Reference for Further Information: Small Business Administration, 409 Third Street, SW, Washington,
DC 20416; Telephone: 202-205-6485; Fax: 202-205-7064, Internet address:
www.sba.gov/financing/surety.htnil. U.S. Department of the Treasury list of surety companies qualified
to write bonds required by the federal government (Circular 570 - Surety Companies Acceptable on
Federal Bonds). This list is published in 1he Federal Register on July 1 each year and is available from
the Surety Bond Branch, Financial Management Service, U.S. Department of the Treasury, 3700 East-
West Highway, Room 6F04, Hyattsville, MD 20782, Telephone: 202- 874-6850.
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COMMERCIAL INSURANCE AND GUARANTEES
(Page 1 of 2)
Description: Private bond insurance is purchased at the time of bond issuance, and represents a legal,
noncancellable commitment by a third party (here a bond insurance company) to make timely payments
of principal and interest in the event that the debt issuer cannot. Bond insurance is usually paid at the time
of issue as a percentage of the bond amount, and may be used for any bond including general obligation
and revenue bonds. TTie role of municipal bond insurance in the tax-exempt market is threefold: to reduce
interest costs to issuers, to provide a high level security to investors, and to furnish improved secondary
market liquidity and price support Four major insurers are active in the insurance of new-issue municipal
bonds: the Municipal Bond Investors Assurance Corporation (MBIA); the American Municipal Bond
Assurance Corporation (AMBAC); the Financial Guaranty Insurance Company (FGIC); and the Capital
Guaranty Insurance Company. Bond insurance may also be used for private-activity bonds and by private
companies and corporations.
Private or commercial loan or mortgage guarantees, such as by banks or individuals, may also be used by
any private company or individual receiving a loan. Insurance companies may also offer special insurance
for hazardous waste projects to cover future liability suits or losses resulting from Superfund joint and
several liability statutes, allhoi^h indemnification is never complete.
Actual Use: The use of private bond insurance by State and local governments for municipal bonds
issued to finance environmental facilities varies greatly. In general, the purchase of such insurance by SRFs
has been rare, since SRF debt is well regarded by the market. A number of SRFs have AAA ratings on
their pooled bonds, with New York, New Jersey and Minnesota receiving AAA from three bond rating
companies. Most other bond-leveraged SRFs receive the next highest rating. States more often use bond
insurance for private activity tax-exempt bonds, particularly for environmentally "risky" solid waste-type
facilities. Bond insurance is one of the few ways qualified exempt private activity bonds have of lowering
their interest rate, since insurance expense does not count against the 2% issuance cost limitation and is
treated as deductible interest expense by the federal tax code. In 1990, 25%, or $30.6 billion, of new
municipal bond issues were insured. Commercial bond insurance also is available for municipal unit
investment trusts, private portfolios, and bonds traded in the secondary market
Potential Use: Bond insurance can be purchased for debt, public or private, covering any environmental
media to general, it may be especially valuable for solid and hazardous waste financings, including recycling
and resource recovery facilities, andbrownfields redevelopment, which may appear more environmentally
risky than water and wastewater systems. In such cases, special insurance funds may help provide
protection against future liability suits. Small public and private water systems could use bond insurance
more widely to gain investment grade ratings.
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COMMERCIAL INSURANCE AND GUARANTEES
(Page 2 of 2)
Advantages: In general, the use of commercial bond insurance will lower annual carrying costs, once
premiums are paid, since they result in higher bond ratings which lead to lower annual interest rates. For
example, in 1990, Standard and Poor's typically rated investment grade bonds insured by the above-
mentioned four companies AAA, while Moody's rated bonds insured by all four as Aaa Commercial bond
insurance allows many small communities and companies to receive investment grade ratings and thus have
access to the debt market which might otherwise be unavailable.
Limitations: While bond insurance provides significant additional security, investors should be aware that
the issuers are still the first source to look to for payment of principal and interest on their bonds. For that
reasons, and other technical and tax-related consideration, all insured bonds do not carry identical rates
of return. Moreover, insurance costs will vary considerable with the strength of the borrower and size of
the bond, as well as the perceived risk associated with the financing, and thus may not also result in cost-
savings particularly for small issues. Of course, some bonds are not, or should not be, insurable at all.
Reference for Further Information: The Bond Market Association (BMA), Fundamentals of
Municipal Bonds, Fourth Edition, New York, 1990; Council of Infrastructure Financing Authorities
(CIFA), State Revolving Funds Under Tax Reform, MonographNo. 2, Washington, D.C., June 1989,
and Financing Alternatives for Small Water and Wastewater Utility Systems, Monograph No. 3 by
Michael Curley, Washington, D.C., January 1990.
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I
ENVIRONMENTAL DUE DILIGENCE
Description: Ehvironmenlal due diligence is an element of qualifying Hie collateral value of real property,
and thereby qualifying credit risks. In addition, purchasers and lenders must document sufficient
environmental due diligence to protect themselves from environmental cleanup liability. Without proper due
diligence purchasers and lenders face strict liability for pre-acquisition contamination on property.
Although there are no specific standards for examinations in the Comprehensive Environmental Response
Compensation and Liability Act (CERCLA), it is common for environmental due diligence to involve five
potential levels of environmental assessment The first level is an environmental screening inspection, which
is a check-list inspection to determine the presence or absence of visible environmental concerns. The
second level is an environmental risk screening, which evaluates the environmental risks associated with
conditions on the property and adjacent parcels. The third level is a phase I environmental site
assessment/audit. The fourth level is a phase II environmental site assessment/audit The fifth and last level
is a phase ni environmental site assessment/audit
Actual Use: Due diligence including at least aphase I environmental site audit is arequirement for virtually
all commercial and industrial real estate transactions financed by institutional lenders. The American Society
for Testing and Materials has published standards for environmental assessments (see Standard Practice
for E1527-97, Environmental Site Assessments: Phase I Environmental Site Assessment Process;
E1528-96, Environmental Site Assessments: Transaction Screen Process; PS37-95, Conducting
Environmental Baseline Surveys).
Potential Use: Competent due diligence can free a property from suspicion of contamination, thereby
qualifying it for third-party insurance coverage and use as loan collateral.
Advantages: Proper environmental due diligence may enable a party to undertake an innocent landowner
defense under the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA).
Limitations: The due diligence process itself can become relatively expensive and it may reveal conditions
which require substantial expenditures.
Reference for Further Information: American Society for Testing and Materials, 100 Barr Harbor
Drive, West Conshohocken, PA 19428-2959, Telephone: 610-832-9585, Fax: 610-832-9555, Internet:
3ywwiastm.org/,
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FINANCIAL DUE DILIGENCE
j
Description: Due diligence is a series of tests which must be passed for a financing deal to qualify for
investment In the venture capital arena there typically are five types of risk appraised pertaining to product
development, manufacturing, marketing, management, and growth. To investors, the acceptable risks are
marketing and management Therefore, venture capital tends to flow to companies that demonstrate a
completely operative product or service.
Due diligence begins with sending a business plan to the potential investor, who applies preset criteria to
screen out unacceptable deals. As part of this process, investors should investigate the assumptions
supporting a plan's projections. If the plan passes muster, further investigation and appraisal is done. The
size of the identified market, proprietary nature of the product, and background of management are factors
which may be looked at more carefully at this stage. The scope and rigor of due diligence grow if federal
securities laws apply. Financial audits, legal due diligence, personal investigations, and business valuation
appraisals can be parts of the process. In an initial public offering, at least one due diligence meeting must
be run by the underwriter to allow brokers to question the issuer's representatives. Further meetings may
be held for analysts and institutional investors to question the issuer's top managers. They also should
examine the reputations of potential investors.
Actual Use: Financial due diligence is commonly used by institutional investors and lenders considering
commitment of significant funds to a venture. For example, a subcommittee of the Board of Directors of
the Alternative Agricultural Research and Commercialization Corporation conducts due diligence visits prior
to final consideration of an investment proposal (see Section 10.A., Agriculture: Alternative Research
and Commercialization Corporation).
Potential Use: While financial due diligence is essential to protect lenders and investors, it also can bolster
confidence in and otherwise assist companies that are examined Firms seeking financing for producing or
marketing environmentally friendly goods must anticipate a due diligence investigation.
Advantages: Due diligence may identify weaknesses that can be corrected, thereby making a loan or
investment financially feasible. Careful due diligence can protect brokers against successful lawsuits by
investors if the investment goes bad.
Limitations: Due diligence is not a guarantee of a successful investment It may be difficult to uncover
some important factors and impossible to offset market uncertainties.
Reference for Further Information: Lawrence, Gary M, Due Diligence in Business Transactions,
Law Journal Seminars-Press, 1994; Due Diligence for the Financial Professional, Agiato & Nesbit
(Eds.), Everest Publishing, 7534 East 2nd Street, Suite 102, Scottsdale,'AZ 85251, Telephone: 602-
994-5024, Fax: 602-941-5561.
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GRANT-BACKED CREDIT ENHANCEMENTS
Description: Grant-backed credit enhancements (GBCEs) are guarantees that assure lenders and
bondholders that a percentage of anticipated grant funds will be used to fund bond reserve funds. As a
result of GBCEs, investors can achieve higher bond ratings. GBCES may use authorized trust funds,
formula and block grants administered by the Federal Highway Administration (FHA), the Department
of Housing and Urban Development, the Department of Commerce, and other Federal agencies.
GBCES are different from grant-anticipation notes (GANs) used for short-term, or bridge construction
financing
Actual Use: Grant-backed, credit enhancements have not been widely used, although they have been
proposed to build highway projects using State-issued debt back by GBCES from the State's share of
FHA funding. Since the EPA's wastewater construction grant program has been replaced by the State
Revolving Loan Fund (SRF) program, this credit enhancement technique is less applicable.
Potential Use: There are several ways in which GBCEs could be used in fee future. Bond-leveraged
SRFs could use a pledge of future federal wastewater and drinking water capitalization grants to build
up or over fund, or overcome temporary shortages in, debt reserve funds, which might improve bond
ratings and allow for great interest rate subsidy. Second, when grants as opposed to loans are available
to communities, for example, new SRF drinking water grants for small communities, they could use
GBCEs to back the local debt issued. Third, Hie concept in theory could be extended to loans, i.e.,
communities could use a Loan-Backed Credit Enhancement based on anticipated SRF loans. This
could not be used by States for federal loans, however, since the implicit double guarantee might affect
the tax status of subsequent bonds.
Advantages: Grant-rbacked credit enhancements might reduce the cost of borrowing by communities,
and allow projects to move forward in a timely manner. They require no initial investment by the
communities.
Limitations: Since grant as opposed to loan funds for environmental facilities are less prevalent, and
SRF loans have been available on a timely basis, there may be a declining need for this kind of credit
enhancement for EPA-related programs. In addition, grant funds and policies may fluctuate from year
to year, which increases uncertainty on the part of all parties.
Reference for Further Information: U.S. EPA Publication: Alternative Financing Mechanisms
for Environmental Programs, August 1992. U.S. EPA, Office of the Comptroller, Environmental
Finance Program, 401 M Street, SW, Washington, DC 20460. Mail Code: 2731R, Fax: 202-565-
2587. Contact: George Ames at ames.george@epa.gov.
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DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT
COMMUNITY DEVELOPMENT BLOCK GRANTS -
SECTION 108 LOAN GUARANTEES
Description: Section 108 is the loan guarantee part of the Community Development Block Grant
(CDGB) program. Section 108 helps communities to secure affordable financing for economic
development, housing rehabilitation,1 public facilities, and large physical development projects. CDGB
rules and requirements govern eligibility with qualified applicants being those eligible under the CDGB
Entitlement Grants, State Grants, and Small Cities programs (see appropriate pages in Section 2.C.:
Grants). Projects must benefit low- and moderate-income persons, or help eliminate or prevent slums
and blight, and meet urgent community needs.
The maximum repayment time for Section 108 loans is twenty years. HUD helps to structure principal
amortizations to match the needs of projects and borrowers. Section 108 obligations are financed by
underwritten public offerings wilh interest rates pegged to Treasury obligations of similar maturity plus a
small additional fee. The actual loans are secured by the community's current and future CDBG grants
and project collateral.
Actual Use: The 108 program has operated since 1974 making more than 930 commitments for
economic development and housing purposes totaling in excess of $4.4 billion. In October 1996, HUD
approved a $50 million Section 108 loan guarantee to the City of Chicago supporting the Chicago
Brownfields Redevelopment Program (funds to be spent over three years).
Potential Use: This program could help finance considerably more brownfields redevelopment
projects and public environmental facilities involving drinking water, wastewater, solid waste.
Advantages: A CDGB Section 108 loan guarantee allows public entity applicants to obtain the best
possible financing terms. In general, applicants can request up to five times their latest approved
•CDBG amount minus outstanding Section 108 commitments and/or principal balances.
Limitations: While Section 108 loan guarantees may help access money at good interest rates, they
provide no actual funds to the community. Furthermore, the use of 108 loan authority requires that an
applicant pledge its current or future CDGB funds as security for the loan, as well as another form of
security such as the assets finance by the loan.
Reference for Further Information: U.S. Department of Housing and Urban Development, 451 7th
Street, SW, Washington, DC 20410. Telephone: 202-708-1112. Additional information on the 108
program can be accessed at HUD's World Wide Web site at http://www.hud.gov.
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LETTERS OF CREDIT/ LINES OF CREDIT
Description: Commercial letters of credit (LOCs), usually issued by commercial banks, are security
documents that enhance the basic security behind a bond. With "direct pay" LOCs, the bondholder
can request the bank to make payment directly rather than via the issuer. Letters of credit specify that
funds will be used only for bond or loan repayment In contrast, lines of credit, also available from
commercial banks, assure potential lenders that borrowers will have access to cash if necessary,
although lenders have no guarantee that borrowers will not use this line of credit for other purposes In
this case, borrowers may be either public or private sector institutions or individuals.
Actual Use: The use of letters and lines of credit is widespread and commonly accepted, particularly •
for the private sector, which helps to assure all lenders of the security of the bond/ loan. The federal
government also uses the letter of credit mechanism as a way for States to periodically draw down on
already appropriated federal grants (it was used initially for CWSRF capitalization grants). In this case,
the LOC mechanism served federal budget deficit control goals (i.e., outlay controls) and allowed
SRFs to make loan commitments without having the cash in hand.
Potential Use: Communities or companies ineligible for other types of credit enhancements may be
able to use commercial letters and lines of credit. These tools may be particularly important for
privatizing solid waste facilities and brownfields redevelopment Bank letters of credit may be used in
many States to assure DWSRFs that loans to smaller borrowers, with weak credit, will be repaid.
Advantages: Arranging for commercial credit enhancement may be much faster than federal or State
mechanisms. Letters and lines of credit reduce borrowing costs and, sometimes at minimal expense,
permit access to the debt market for projects considered somewhat risky either from the financial or
environmental standpoint Letters and lines of credit may be used to reduce debt service reserve
requirements, or bond "coverage". Coverage, a term usually used in connection with revenue bonds,
represents the margin of safety for payment of debt service, as reflected by the number of times (e.g.,
"120 percent coverage") by which annual revenues exceed annual debt service.
Limitations: Unlike commercial bond insurance which typically is readily available at a predictable
(although variable) cost, State and local governments as well as the private sector may have difficulty
finding commercial letters and lines of credit at reasonable rates, since it depends on the financial
condition of commercial lenders, their willingness to assume risk, their client relationship with the
borrower, and many economic factors. Individual lines of credit are negotiated by borrowers and
lenders on a case-by-case basis, and the fees charged by the lender may vary considerably. This
reduces equity of access as well as the revenue cost/saving ratio.
Reference for Further Information: The Bond Market Association (BMA), Fundamentals of
Municipal Bonds, Fourth Edition, New York, 1990.
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PERFORMANCE BONDS
Description: Performance bonds are issued by commercial institutions on behalf of contractors, such
as construction companies, to protect project owners from the consequences the contractors' failure to
complete contracts in accord with plans and specifications. These bonds indicate that a financially
responsible party, such as a commercial bank or insurance company and termed the "surety" in this
case, stands behind the contractor. By furnishing these bonds (often required by the owners of the
land to be developed or facility to be built), contractors may obtain credit (i.e., construction loans), at
lower rates. These bonds limit surety liabilities to set amounts specified in bond agreements and
contracts, and does not cover third parties. "Payment bonds" may accompany performance bonds and
cover payment of contractor obligations to third parties, for example, for labor and materials.
Actual Use: Use of performance bonds by the private sector is a widely used and commonly
excepted practice. The public sector might furnish a performance bond only if it were actually
undertaking construction of an environmental facility itself More typically, local government is the
entity, or owner of a facility to be constructed, requesting the use of performance bonds by the private
sector. On occasion, States, including SRFs, have undertaken construction on behalf of State agencies
and employed this mechanism as a means of assuring the performance of contractors.
Potential Use: Performance bonds might be particularly helpful in the case of especially
environmentally risky or complex projects, such as hazardous waste and brownfields projects.
Advantages: While performance bonds have value as a credit enhancement device for borrowers,
they may have even more value in enabling all parties to feel comfortable with a project and helping
projects which might otherwise be viewed as to risky or complex to move forward on a timely basis.
Also, they help ensure equity of access to the construction market for a wider range of contractors,
especially for small businesses, which in itself might assist in lowering contract costs. Performance
bond agreements are quite straightforward and simple to arrange, although the cost and exact terms of
the bonds vary depending upon whether the contract is public or private, the number of sureties
involved, or contractor's status, e.g., whether the contractor is a prime contractor or a subcontractor.
Limitations: A performance bond does not provide absolute assurance that contract work will be
completed as specified for the contract price, but it does permit the surety, upon contractor default, to
either pay the bond penalty, or finance or hire a new contractor. Validity of the bonds can be impaired
by the project owner's actions, such as when an owner fundamentally alters the scope of contract
performance or violates contract terms. Historically, "completion bonds" were used to guarantee the
performance of owners and contractors but recently this has been viewed as too risky.
Reference for Further Information: The American Institute of Architects, Performance and
Payment Bonds, Document A312, Washington, D.C., March 1989.
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SENIOR AND SUBORDINATE DEBT STRUCTURING
Description: Senior and subordinate debt structuring provides for two categories of lenders, or loans,
for a individual project Those considered "senior" are those that would be repaid first should default or
payment delays occur. Those considered "subordinate" are those that would repaid only after the
senior debt, or lenders, are paid. Thus, senior debt typically carries lower interest rates of return,
because it is "safer", than subordinate debt. In this sense, this kind of debt structuring is a credit
enhancement for the senior debt or lender.
Debt structuring can be important to State Revolving Fund (SRF) bond leveraged lending, particularly
in loans to large entities issuing their own debt as a pledge of repayment. For example, senior and
subordinate debt structuring has been pursued in New York and Massachusetts, where the SRFs
issued large revenue bonds for the benefit of a single user, i.e., the New York City Municipal Water
Finance Authority and the Massachusetts Water Resources Authority. In Massachusetts, payment by
the Authority to the SRF was subordinate to the Authority's obligation to meet debt service on its own
bonds. In New York, the SRF loan repayment was a parity obligation to the city's outstanding revenue
bonds for several years. In 1994, a senior/subordinate debt arrangement was developed whereby the
local debt was subordinate to the debt to the SRF, which resulted in the New York City Water .
Resources Authority being able to lower its debt reserve requirements and realize the SRFs interest
rate subsidy immediately.
Actual Use: The private sector uses senior/subordinate debt structures frequently. The public sector
has used this structure for SRF bond leveraged financing on rare occasions..
Potential Use: Public sector use of senior/subordinate debt structuring could be expanded. However,
similar to other market tools such as the use of derivative products, structuring is complicated and
should be evaluated carefully.
Advantages: The advantages of this kind of debt structuring for the private sector are that it allows a
greater number of investors in an individual project, with the credit enhancement pertaining to 1he senior
investors or lenders. For the public sector, particularly SRF bond leveraged debt structuring, cost
savings can be significant and accrue to both the and local parties.
Limitations: Bond leveraged transactions involving senior and subordinate debt are complicated, and
require drafting of bond resolution and indenture documents which permit debt restructuring.
Reference for Further Information: Merrill Lynch and Co., Guide to State Revolving Fund
Revenue Bonds, Municipal Credit Research, Christopher Mauro, New York, 1995.
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STATE BOND BANKS
Description: State braid banks are public authorities created to help communities, especially smaller
ones without financial expertise or credit history, to access the lower loan rates and other efficiencies of
the tax-exempt bond market By pooling smaller issues and giving State credit backing, they cut the
cost of borrowing to communities, with significant savings in debt service over the term of borrowing.
State credit enhancement may be provided via moral obligation pledges, which guarantee either the
local bonds purchased by the bond bank or bonds issued by the bank, or other guarantees such as tax
or State aid intercept devices. Bonds banks can be State-wide, or serve special localities.
Actual Use: State bond banks have been active in environmental financing over 25 years, beginning
with the Vermont Municipal Bond Bank, and have been replicated in the majority of States with
ap/plication to a range of public facilities including sewage and water systems, solid waste, schools and
hospitals and other facilities. The State Revolving Funds (SRFs) are a specialized form of bond bank,
and several States such as Kentucky, Maine, Michigan and Vermont have designated their previously
created bonds banks as their SRF bond issuer.
Potential Use: Bond banks could be used to pool the debt of communities to construct any kind of
environmental facility, not simply traditional water and sewer facilities. A private activity, tax-exempt
bond pool also could be used for private debt, as was undertaken before the DWSRF in New York
for several small, private water suppliers.
Advantages: Besides providing access to the tax-exempt credit market for smaller localities or
companies, bond banks provide three main economic advantages to localities. First are economies of
scale in bond issuance, resulting from the elimination of duplication of fixed issuance costs and
negotiated underwriting, administrative cost savings pertaining to tasks such as arbitrage rebate
accounting, and the use of specialized techniques to further reduce interest costs such as variable rates
or zero coupon bonds. Second, a pool of credit is generally perceived as more credit worthy than an
individual credit because default risk is diversified. And third, a wide issuer typically improves credit
quality via enhancement devices such as moral obligation pledges and revenue intercept mechanisms.
Limitations: A great deal of work must be undertaken by State program managers to bring and
retain in a bond pool small communities that may have limited management and technical capacity. If
one borrower drops out, the success of the pool may be put in jeopardy, since relative to the size of the
bond pools issuance and administrative costs already are quite high. Standard and Poor's has been
somewhat rigid in providing improved credit ratings based on a diversified pool of borrowers. SRF-
related bond pools are limited to a 20-year loan duration limit
Reference for Further Information: Council of Infrastructure Financing Authorities (CIFA), State
Municipal Bond Banks, CIFA Monograph No. 5 by Daniel Irvin, Paine Webber, New York, NY,
March 1993.
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STATE GUARANTEES AND INSURANCE
Description: Specific forms of State credit assistance to localities and private borrowers include the
State loan guarantee provisions federally authorized for CW and DW SRFs, special State bond
insurance programs, and dedicated State revenue guarantees as collateral for debt repayment. State
revenue guarantees can take the form of special appropriations to replenish reserve funds, dedicated
sources of taxes or other revenue, and State aid intercepts. More general guarantees might include
State general or moral obligation pledges for State bonds.
Actual Use: In general, States have not been particularly active in offering specific guarantees and
insurance to localities. To date, no State has used the CWSKF loan guarantee provision, primarily
because loan funds have been available and credit issues have not been a consideration. There have
been few payment delays on CWSRF loans nationwide. Several States, including Maryland and
Maine, have special bond insurance programs, but rarely have used them. Some States have loan or
bond guarantee programs arising from non-environmental agencies, such as economic development
agencies, but use has been limited. Three States, Maine, Minnesota (although not at present) and
Wisconsin, have provided moral obligation pledges on SRF bonds as additional bondholder security,
and five States including Massachusetts, Michigan, Maryland, New York and Wisconsin have a State
aid intercept mechanism although this has not been used for SRF bonds.
Potential Use: The use of State credit assistance potentially may be much greater in the future
particularly as SRFs expand into private drinking water financing, and hazardous waste and
brownfields. A number of SRFs have indicated that they may use DWSRF loan guarantee provisions
more readily for private sector borrowers since this removes the SRF from having to closely scrutinize
private client credit conditions, or be involved in enforcement or foreclosure proceedings should
defaults occur. DWSRF loan guarantees would be made to commercial banks, which would actually
make the loans. States could use pledges of environmental fees, and taxes, as collateral for loans or
loan guarantees.
Advantages: State loan or bond guarantees cost communities little to nothing, and thus are one of the
cheapest avenues to follow. Additional State guarantees can considerably reduce the costs of
borrowing for loan or bond pool recipients, and are the most leveraged of all financing techniques.
Limitations: The debt market may not recognize any form of credit assistance if the underlying
recipient or project is weak, and found unacceptable from an affordability or technological standpoint
Reference for Further Information: U.S. EPA Environmental Financial Advisory Board (EFAB)
report, Funding Privately-Owned Water Providers Through the SDWA SRF, July, 1998; Council
of Infrastructure Financing Authorities (GIFA), State Municipal Bond Banks, Monograph No. 5, by
Daniel Irvin, Paine Webber, Washington, D.C., March 1993.
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1
STATE REVOLVING FUND (SRF)
BOND LEVERAGING
(Page 1 of 2)
Description: Leveraging, in the State Revolving Fund (SRF) context, means that States have the
discretion to use the federal capitalization grants for wastewater and drinking water, as well as their
required 20% matching share and other assets such a principal and interest repayments, as "collateral"
to borrow in tiie tax-exempt municipal bond market for purposes of increasing the pool of available
funds for project lending and for interest rate subsidization. The leveraging option allows States to use
such funds as a security for the payment of principal and interest on their revenue bonds. SRFs may
issue individual revenue bonds for large borrowers or pooled bonds for groups of borrowers. Bond
pools with a diversity of participants improve bond ratings for the "weaker" borrowers. A few SRFs '
are issuing common bond pooled debt for both clean water and drinking water projects. SRF bond.
leveraged loans are contrasted with SRF direct loans to localities, although many bond leveraged SRFs
also make direct loans, especially to smaller communities.
Actual Use: By the end of 1997,25 States had used their Clean Water SRFs (CWSRFs) to leverage
a total of $8.8 billion in additional dollars loaned since the initiation of the SRF program. These
additional dollars represent 36% of total funds in the lending pool.
There are two basic forms of SRF bond leveraging, with many variations: the "blended rate loan
leveraging" or "cash flow" approach and the "reserve fund leveraging11 structure. The first is the most
simple and direct, using the proceeds from original SRF direct loans, funded by federal capitalization
grants and the State match, to help create a debt service reserve fund for simultaneous or subsequent
SRF revenue bond sales which finance additional loans. Here, SRFs can make below market rate
loans to localities from blend of both the SRF funds and bond proceeds in the debt service reserve
fund. The blended rate loan leveraging approach has been adopted by CWSRFs in Arkansas,
Maryland, Maine, North Dakota, Oklahoma, Ohio, Texas, South Dakota and other States.
The second approach, the reserve fund leveraging structure, has generated the most sizeable and high-
profile SRF municipal bonds issues to date. Here, federal capitalization grants and the State match are
deposited into a reserve fund, typically oversized, to serve as security for SRF revenue bonds. The
debt reserve fund serves as 1he source of interest rate subsidies for localities, wMh the amount of
subsidy depending on the size of the reserve fund. CWSRFs using this approach include Alabama,
Arizona, Colorado, Connecticut, Massachusetts, Michigan, Minnesota, Missouri, New York and
Rhode Island. New York has pursued the most aggressive leveraging - 2 to 3 times federal
capitalization grants - by creating "extraordinary" reserve funds resulting in interest rate subsidies from
33-50%. Other States have "overmatched" federal funds with their own funds.
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STATE REVOLVING FUND (SRF)
BOND LEVERAGING
(Page 2 of 2)
Potential Use: Many Drinking Water SRFs (DWSRFs) are expected to bond leverage. DWSRF
bond leveraging and common DW/CW bond pools, discussed later, will allow even greater dollar
leveraging. The SRF leveraging approach is being adopted in some States for highway financing, as
authorized under the 1990ISTEA legislation for the Federal Highway Trust Fund, and can be used for
solid waste funding. Localities and sub-State districts also could create leveraged revolving loan funds,
which may be SRF-subsidized.
Advantages: The credit enhancement advantages of the SRF bond leveraging approach are twofold.
First, localities can take advantage of the interest rate subsidy offered by the SRF. Second, SRF
pooled revenue bonds loans typically are rated in the highest two categories because of the strong
characteristics of the SRF program, low default incidence, and strong collateral. Not only is a large
number of pool participants (e.g., over 20) considered advantageous by the rating agencies and may
lower collateral requirements, but a diversification of size, low concentration (i.e., since borrowers not
responsible for more than 10% of the portfolio) and even credit ratings can provide advantageous to
both the borrowers and lenders. By providing large amounts of additional capital in the short term,
bond leveraged wastewater SRFs have been able to expand their loan portfolios into eligible non-point
source related funding such as agricultural and urban runoff control, sludge management, septic system
rehabilitation, estuary protection, and landfill projects, and save local interest cost payment through
refinancing and advance refunding.
Limitations: Successful SRF bond leveraging relies on a number of factors, including the immediate
demand for SRF loans by localities. Bond leveraging is much more complicated than a direct loan
approach, and involves sophisticated, expensive and time-consuming activities, requiring expert account
management, legal, tax, and underwriting skills, and market acumen. It also triggers arbitrage rebate
requirements and advanced refunding demands. Thus, it may not be suitable for all SRFs. Some cities
with high general obligation bonds ratings and the need to offer bonds for longer than 20 years, e.g., for
water and sewer pipes, may prefer to finance facilities on their own.
Reference for Further Information: Council of Infrastructure Financing Authorities (CIFA),
Leveraged SRF Programs: A Comparative Review, Monograph No. 6 by Paul Ladd, Kidder
Peabody, Washington, D.C., August 1994; CIFA and U.S. EPA Environmental Financial Advisory ,
Board (EFAB), State Revolving Fund: A Decade of Successful SRF Performance, 1987-1997,
January, 1998, Washington, D.C.; Merrill Lynch & Co., Guide to State Revolving Fund Revenue
Bonds, New York, NY, 1995; U.S. EPA Office of Water Fact Sheet, The Clean Water State
Revolving Fund, Publication 832-F-96-003 (call National Service Center for Environmental
Publications at 513-489-8190 or 1-800-490-9198, or access on the World Wide Web at
http://www.epa.gov/ncepihom/.
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SRF COMMON BOND POOLS AND CROSS-COLLATERALIZATION
Description: With Ihe advent of the Drinking Water SRF (DWSRF), bond-leveraged SRFs may issue
common pooled debt (i.e., bond pools combining recipients of both drinking water and clean water
loans) to increase the size and pace of bond issuance, reduce costs, maximize management options, and
increase the size and diversity of bond pools to improve bond ratings. Common SRF bond pools are
jointly managed, but money is accounted for separately.
Cross-collaterization, as authorized by the DRSFW legislation, is one approach to common pools, and
refers to devices by which security is provided to common pool holders in the unlikely event of '
inadequate debt reserve funds to cover either DW or CW loan defaults. It does not mean debt reserve
fund dollars or loan repayments will be transferred from the DWSRF to the CWSRF or, vice versa
Actual Use: Since 1997, at least one State, New York, has issued several common bond pools under
a Master Indenture, and cross-collateraUzed using a common debt reserve fund, by assuring that
underlying CW and DW loans are proportional to the bonds issued and creating a mechanism whereby
deficiency in DW funds (subsequent to a hypothetical DW loan default) can be made up in the form of
anew bond issue from CW SRF monies or vice-versa At least two States, Colorado and Arizona,
have issued common DW/CW bond pools but not cross-collateralized the debt reserve funds.
Potential Use: As States clarify their own legislation to permit cross-collateralization, common bond
pools may become a more prevalent SRF practice, particularly in States where the DWSRF and
CWSRF are co-located. Since cross-collateralization has been controversial and subject to varying
interpretations by USEPA, it will take time for States to feel-comfortable with this approach.
Advantages: Common bond pools can reduce SRF bond issuance, management and administration
costs, and increase the size and pace of loans. Joint pools and debt reserve funds also increase the
diversity and size of SRF bond pools, and reduce the percentage of the portfolio of any one borrower,
all of which are key determinants the private rating agencies use in rating or "grading" bonds. The new
DWSRF also can benefit from the experience gained by the CWSRF over fee past ten years.
Limitations: Common bond pools may prove difficult if the DW and CW SRFs are not located in the
same State authority. Some States have no authority for either joint bond pools or cross-
collateralization. DW and CW monies must be separately accounted for (complex), and must meet
USEPA technical definitions of proportionality and cross-collateralization, which have been subject to
varying interpretation. SRFs should check with their USEPA regional office before proceeding.
Finally, including private drinking water loan recipients in a bond pool raises complex tax issues.
Reference for Further Information: U.S. EPA's Environmental Financial Advisory Board (EFAB)
and Office of Water have a number of documents on aoss-collateralization, which can be accessed on
U.S. EPA's Web site at http://www.eDa.gov/ef1noageyefabcoU.hrni
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SRF INTEREST RATE SUBSIDIES
Description: The most direct form of credit enhancement is an interest rate subsidy of loans to public
and private entities, such as provided under the State Revolving Fund (SRF) loan programs for
wastewater and for drinking water facilities. Under federal statutes, SRFs are authorized to make loaris
at or below market rates of interest. All States have chosen to subsidize CWSRF interest rates,
providing zero interest loans in some cases, Interest rate subsidies are a credit enhancement for
localities increasing the likelihood that ihey will receive loans in the first place. They can be seen as a
credit enhancement for bond leveraged SRFs since this increases the likelihood of bond repayment
Actual Use: In 1997, the weighted average of SRF interest rates was 2.90%, ranging from zero
interest rates in Utah and Vermont to 4.60% in Texas. Most SRFs offer rates between 2-4%, while
the 20-year revenue bond average was 5.78%. Some States offer a fixed, or relatively fixed, rate,
while others use a methodology independent of market conditions. Still others base the percent of
subsidy on the reality of market conditions, and SRF loan demand Interest rate subsidies are fixed by
several State legislatures including in New York and Indiana. California allows local govemment.to
provide the State match portion of their project in return for a zero interest loan. Massachusetts has
legislation pending to convert all SRF loans to 50% grant equivalency, with the net effect of reducing
loans to a 0% net interest rate. 22 SRFs make a distinction in their programs for loans to small,
disadvantaged communities and have developed interest rate criteria, i.e., using medium household
income and local debt factors. States also subsidize interest rates for planning, design, and initial
construction. New York offers interest-free short-term loans to communities of any size.
Potential Use: Drinking Water State Revolving Funds (DWSRFs) probably will offer similar interest
rate subsidies to communities, and the private sector, although the possibility of grants (i.e., principal
subsidies) to smaller communities may reduce the demand for zero interest loans somewhat
Advantages: Interest rate subsidies reduce the costs of environmental infrastructure for communities
and the private sector. They make it possible for communities to access affordable credit for which they
might otherwise not qualify. DWSRF loans to private sector firms avoid some tax issues.
Limitations: Very low to zero interest rates will not permit SRFs to operate into perpetuity without
fund replenishment from other State assets or toe federal government. Hence, interest rate subsidies
must be evaluated frequently by the SRFs. Interest rate subsidies do not always make the SRF
competitive with local tax-exempt bond financing, since SRFs are limited to 20-year loan terms for
wastewater and cities may have GO bond ratings stronger than SRF revenue bonds.
Reference for Further Information: Council of Infrastructure Financing Authorities (CIFA) and
U.S. EPA Environmental Financial Advisory Board (EFAB), State Revolving Fund: A Decade of
Successful SRF Performance, 1987-1997, Washington, D.C., January, 1998.
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Description:
Actual Use:
Potential Use:
Advantages:
Limitations:
OTHER
I
Reference for Further Information:
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COMPARISON MATRIX FOR CREDIT ENHANCEMENT MECHANISMS
Criteria/
Credit
Enhancement
Association
Pooling
Commerce: SBA
Surety Bond
Program
"Commercial
Insurance &
Guarantees
"Environmental
Due Diligence
"Financial
Due Diligence
Grant-Backed
Credit
Enhancements
HUD: CDBG -
Section 108 Loan
Guarantees
"Letters/Lines
of Credit
"Performance
Bonds
"Senior/Subordinate
Debt Structuring
Actual
Use
N. A.
Low
High
High
High
Low
Low
High
High "
High
Revenue
Size
HA.
Low
High
Mod.
High
Low
Low
High
High
High
Revenue
Cost/
Saving
Mod.
High
Mod.
Low-Mod.
Mod.
Mod.
Mod.
Mod.
Mod.
Mod.
Admini-
strative
Ease
Mod.
Mod.
High
Low
Mod.
Mod.
Low
Mod.
High
Mod.
Equity
High
High'
High
Mod.
Mod.
Mod.
Mod.
Mod.
High
Mod.
Environ-
mental
Impact
Mod.
Mod.
ttgh
High
High
Low
Mod.
High
High
High
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COMPARISON MATRIX continued
Criteria/
Credit
Enhancement
"State Bond
Banks
*State Guarantees
& Insurance
*SRFBond
Leveraging
*SRF Common
Bond Pools &
Cross-Collateral-
ization
*SRF Interest
Rate Subsidies
Actual
Use
High
Low
High
Low
High
Revenue
Size
Low
Mod.
High
High
High
Revenue
Cost/
Saving
Mod.
High
High
High
High
Admini-
strative
Ease
Mod.
Mod.
Mod.
Low-
Mod.
High
Equity
High
High
High
High
High
Environ-
mental
Impact
High
High
High
High
High
High - Indicates high use (over 25 States, most localities and private sector); criterion scores
well; leveraging potential is over $1 billion annually nationwide
Mod.- Indicates moderate use (10-25 States, many localities and private sector); criterion
scores in medium range; moderate leveraging potential
Low - Indicates low or rare use by States, localities and the private sector; criterion scores
very low; low leveraging potential
* Star indicates best rated mechanisms
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4. TOOLS
FOR BUILDING
PUBLIC-PRIVATE
PARTNERSHIPS
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4. TOOLS FOR BUILDING PUBLIC-PRIVATE PARTNERSHIPS
INTRODUCTION
Community leaders across the nation face the prospect of building, upgrading or renovating facilities to meet
important environmental needs. They are feeling the squeeze of growing environmental expectations and
costs coupled with increasing constraints on funding for all types of infrastructure and services. As the
pressure to hold rate increases down for facility users grows, local leaders must find new ways to hold
down costs and build public support for necessary expenditures. Public-private partnerships offer local
governments one possible solution to this growing challenge.
This section evaluates the use of public-private partnerships (P3s). The P3s discussed here are contractual
relationships between a public authority (usually a local government) and a private company that commits
both parties to providing an environmental or other service, and for which the private sector seeks a profit.
They may involve a variety of activities ranging from designing a facility such as a wastewater treatment
plant to its financing, construction, operations, maintenance, management, and/or ownership. While each
partnership is unique, most fall into one of five general categories: contract services; turnkey; developer
financing; privatization; and merchant facility. However, there are important sub-types of partnerships
within each of these major categories.
Other types of P3s involving the voluntary and not-for-profit collaboration of many individuals and the
nonprofit sector, especially involving areas such as parks and conservation, are not covered in Ihis section.
They are presented in sections throughout the guidebook, but perhaps most prominently in Section 8.:
Tools for Financing Community-Based Environmental Protection and in Section 9.: Tools for
Financing Browniields Redevelopment.
In Part A of this section, a number of important types of contractual public-private partnerships are
presented and evaluated. Each includes a look at some of their advantages and limitations. Depending on
1he individual arrangement, a public-private partnership may allow communities to capture some of the
following important private sector efficiencies:
• private financing can reduce the burden on public debt capacity;
• private operation, maintenance, and manage can generate efficiency savings;
« private sector procurement and construction methods can provide significant savings;
• the private sector can provide technology and expertise otherwise unavailable to the
public sector, or a higher level of quality of services;
private sector operations can shorten implementation time; and
• private sector involvement can reduce public liabilities through risk-sharing.
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In Part B, abstracts of recent case studies developed by USEPA's Environmental Financial Advisory
Board are profiled. These case studies are cutting edge examples of how communities have implemented
successful public-private partnerships andintemal optimization models. The abstracts both supplement and
complement the partnership arrangements presented in part A of this section. They provide concrete
examples of how successful partnerships and other models can be implemented by communities to provide
needed environmental services and result in a "win-win" situation for both public and private parties.
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4.A. PUBLIC-PRIVATE PARTNERSHIP
ARRANGEMENTS
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4.A. PUBLIC-PRIVATE PARTNERSHIP ARRANGEMENTS
Description: A contractual public-private partnership (P3), commits the public sector (usually a local
government) and a private sector company to providing a facility-based environmental service, which is
undertaken by the private sector for business (profit-making) purposes. The private party can be involved
in a variety of ways from designing the public-purpose facility to its financing, construction, operations,
maintenance, management, and/or ownership. Although each public-private partnership is unique, most
fall into one of five general categories: contract services; turnkey; developer financing; privatization; and
merchant facility. There are different responsibilities and benefits associated with each type.
To encourage and facilitate private investment and involvement in local infrastructure, including federally
grant funded facilities, Executive Order No. 12803 was issued on May 4, 1992 directing executive
agencies to make needed policy and regulatory changes. The order is intended to:
• assist local privatization initiatives,
• remove federal regulatory impediments to private sector involvement,
relax federal repayment requirements, thus increasing State and local governments'
proceeds from privatization arrangements, and
• protect the public interest by ensuring that privatized assets continue to be used for
original purposes and that user charges remain consistent with current federal conditions.
Advantages: Depending on the nature of the specific arrangement, a public-private partnership may be
able to capitalize on anumber of private sector resources. If private financing is used, the burden on public
debt capacity can be reduced If private operations, maintenance, and/or management is used, efficiency
savings are generally realized. Private sector procurement and construction methods typically provide
significant savings as well. Due to access to sophisticated technologies and specialized expertise, the
private sector can sometimes provide services otherwise 'unavailable to the public sector, or services at a
higher level of quality. Private ownership can transfer part or all of the responsibility for financial risk and
environmental compliance from the public to the private company (risk-sharing). Finally, private sector
operations can frequently have a shorter implementation time.
Limitations: A major concern of governments in public-private partnerships is loss of control. When the
public party is not involved in day-to-day operations, it may believe it does not have the same control over
quality, including compliance with environmental standards and permits. Public employees and unions may
oppose the public-private partnership due to fears about the loss of jobs. Local governments may not
always have the legal authority to enter into contracts wilh private
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parties. Tax-exempt and/or other low-cost financing may not be available from federal or State
governments for partnership arrangements, and in general, changes in the tax code directly impact private
sector profit-making opportunities. At times, for example private landfills, the public and private sectors
have been in direct competition, and disputes have occurred.
Summary: The impetus for local communities to undertake a contractual P3 arrangement for
environmental services differs for each environmental media, depending on the history of public funding and
facility ownership, the tax code, and other factors. Hitherto, most attention has focused on wastewater
treatment facilities, compared to drinking water or solid waste, because wastewater has been dominated
by federally-funded, and now State Revolving Fund-financed facilities, which by law provide monies only
for publically owned systems. Since 98 percent of all wastewater infrastructure is currently publically
owned, mechanisms to encourage private sector involvement have been an important topic. Examples of
these mechanisms include tax code issues which affect private sector profits, lease arrangement that avoid
some funding restrictions, the disposition and use of previously federally-funded (i.e., by construction
grants) projects, and private operations and maintenance contracts. In contrast, well over fifty percent of
all drinking water and solid waste systems/facilities are privately-owned. Thus, privatization in the drinking
water and solid waste areas is a well-established and widely accepted commercial practice, and offers a
somewhat different set of topics for discussion. For example, equal treatment for both the public and
private sectors is an issue, as exemplified by the ability of the Drinking Water State Revolving Fund to fund
both the public and private sectors. Meanwhile, limiting competition has been an important solid waste
issue with regards to landfills.
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LIST OF PUBLIC-PRIVATE PARTNERSHIP ARRANGEMENTS
(In Alphabetical Order)
1. Asset Sales (Under Executive Order 12803)
*2. Build/Operate/Transfer or Build/Transfer/Operate (New Facility Construction, Operation,
and/or Ownership)
*3. Contract Services: Operations and Maintenance (Private Services Contract)
*4. Contract Services: Operations, Maintenance, and Management (Private Services Contract)
5. Developer Financing
6. Lease/Develop/Operate or Build/Develop/Operate (Existing Facility Lease and Renovation)
7. Lease/Purchase (New Facility Construction)
8. Long-Term Lease (Under Executive Order 12803)
9. Merchant Facility
*10. Privatization
11. Sale/Leaseback
12. Self-Regulation (Inspection and Monitoring)
13. Tax-Exempt Lease
*14. Turnkey (New Facility Construction)
* Stars indicate most highly rated mechanisms as described in the Comparison Matrix at the end of the
narratives. See Introduction to the Guidebook for a description of the criteria used. Ratings of "High",
"Moderate", and "Low" are for comparison purposes only, as some ratings are necessarily subjective and
data are incomplete.
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ASSET SALES
(Under Executive Order 12803)
Description: Executive Order 12803 directs all federal departments and agencies to support the
privatization (sale or long-term lease from a State or local government to a private party) of infrastructure
assets financed in whole or part by the federal government to the extent permitted by law and consistent
with originally authorized purposes. The Executive Order also lays out the transfer price distribution and
recoupment priorities needed to meet the disposition requirements of federal administrative grant
requirements.
Actual Use: Li July 1995, the Miami Conservancy District (MCD), a government flood control agency
serving the municipalities and counties abutting the Miami River near Dayton, Ohio, sold its 4.5 MGD
wastewater treatment facility to Wheelabrator Environmental Operational Services (see the EFAB case
study on the District in Section 4.B.). This historic transaction, approved by USEPA represented the first
sale of a grant-funded wastewater treatment facility to the private sector under Executive Order 12803.
Potential Use: Asset sales could be used by local governments and authorities to attract private sector
investment This new investment could be used to upgrade and/or expand previously grant-funded, public-
purpose wastewater treatment facilities, equipment, and services. Private investment represents a largely
untapped, badly needed source of financing to help communities maintain environmental compliance and
meet new mandates.
Advantages: An asset sale allows the public sector to take advantage of possible construction and
operational efficiencies (faster time frames and lower costs) of the private sector and to unlock the
potentially significant economic value of fee public sector's wastewater treatment assets. In addition, the
partnership arrangement offers an opportunity for the public and private sectors to share the regulatory risks
and responsibilities as well as important economic benefits.
Limitations: The "asset sale" privatization process can be complex, politically sensitive, and time-
consuming from a legal stand-point. Regulatory agency concerns and inexperience with this type of
transactional arrangement may contribute to these barriers. While asset sales have received a lot of
attention, few have been concluded successfully. There is little assurance that fee public revenues gained
will be reinvested in the environment.
Reference for Further Information: USEPA, Office of Water, Office ofWastewater Management, 401
M Street, SW, Washington, DC 20460 (Mail Code: 4201). Phone: 202-260-5880. Fax: 202-260-1040.
USEPA, Office of the Comptroller, Environmental Finance Program, 401M Street, SW, Washington, DC
20460. Mail Code: 2731R.»
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BUILD/OPERATE/TRANSFER
OR
BUILD/TRANSFER/OPERATE
(New Facility Construction, Operation, and/or Ownership)
Description: Under the Build/Operate/Transfer (EOT) option, the private sector partner builds a facility
to the specifications agreed to by the public agency (usually under a turnkey arrangement), operates the
facility for a specified time period under a contract or franchise agreement with the agency, and then
transfers the facility to the agency at the end of the specified period of time. In most cases, the private
partner will also provide some, or all, of the financing for the facility, so the length of the contract or
franchise must be sufficient to enable the private partner to realize a reasonable return on its investment
through user charges. At the end of the franchise period, the public partner can assume operating
responsibility for the facility, contract the operations to the original franchise holder, or award a new
contract or franchise to a new private partner.
Actual Use: There have been quite a few BOT arrangements implemented for the provision of
environmental services. For example, the City of Bristol, Connecticut, entered into a contractual
arrangement with a private partner to design build, operate and own a resource recovery facility. In Lee
County, Alabama, the county contracted with a private company to site, construct, operate and own a
landfill in the county.
Potential Use: The Build/Operate/Transfer arrangement could be used in a substantial number of situations
to build new wastewater and solid waste management facilities.
Advantages: BOT arrangements allow the public sector to capitalize on the construction efficiencies of
the private sectors such as faster time frames and lower construction costs. Depending on the individual
contractual arrangement, BOT may also allow the public partner to reap the benefits of private sector
operating efficiencies. The arrangements may allow the private partner to enjoy the tax benefits of
ownership and, in some cases, provide access to lower cost public financing.
Limitations: Like the case with turnkey arrangements, Build/Operate/Transfer arrangements must be
individually negotiated. Many traditional low-bid governmental procurement policies often do not work
very well.
Reference for Further Information: Apogee Research, Inc., Unpublished Paper: Private Sector
Involvement in Trans it Maintenance: Sharing the Benefits and the Risks, April, 1992.
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CONTRACT SERVICES: OPERATIONS AND MAINTENANCE
(Private Services Contract)
Description: A public partner (federal, State, or local government, agency, or authority) contracts with
a private partner to provide and/or maintain a specific public environmental service. Examples of the type
of service provided include lab testing, auditing, the collection of fines and penalties, solid waste collection
and disposal, and die operation and maintenance of water and wastewater treatment facilities and systems.
Under the private operation and maintenance option, the public partner retains ownership and overall
management of the public facility or system.
- '
Actual Use: This contractual.arrangement is used by nearly one thousand local governments for
wastewater treatment and by many thousands for the transportation and disposal of solid waste. Local
governments have also used contract services to provide recycling services, asbestos encapsulation or
removal operations, and many other municipal services. State governments have contracted out various
parts of their environmental programs. For example, the monitoring of wastewater discharges in Wisconsin
has been contracted out to a private laboratory by the State of Wisconsin's Water Quality Program.
Potential Use: Contract services could be used to provide and/or maintain services involving water and
air quality monitoring, hazardous waste facility management, drinking water facility operation, hazardous
waste remediation, and many additional activities in these and other environmental media
Advantages: Depending on the nature of the activity or service, private sector operators have achieved
efficiency savings of 10-40 percent compared to public sector operation and maintenance. Under some
contract operation or service agreements, the risk of operations is shared with the private partner or even
transferred to them entirely.
Limitations: In some cases, the transfer of formerly public services and operations to private companies
can cause labor difficulties among public employees. Some local governments and authorities fear that
contracting out may' result in the possible loss of control over important public services for which they are
held responsible by constituents.
Reference for Further Information: USEPA, Office of the Comptroller, Environmental Finance
Program publication, Public Private Partnerships Case Studies: Profiles of Success in Providing
Environmental Services, September, 1990, contains case studies on contract operations in solid waste
removal, wastewater treatment, and drinking water utilities. USEPA Environmental Finance Program, 401
M Street, SW, Washington, DC 20460. Mail Code: 2731R.
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CONTRACT SERVICES:
OPERATIONS, MAINTENANCE, AND MANAGEMENT
(Private Services Contract)
Description: A public partner (federal, State, or local government, agency, or authority) contracts with
a private partner to operate, maintain, and manage a facility or system providing a public environmental or
other service. Under this contract option, Ihe public partner retains ownership of the public facility or
system, but the private party may invest its own capital in Ihe facility or system Any private investment is
carefully calculated in relation to its contributions to operational efficiencies and savings over the term of
the contract. Generally, the longer the contract term, the greater the opportunity for increased private
investment because there is more time available in which to recoup any investment and earn a reasonable
return.
Actual Use: Many local governments use this partnership to provide wastewater treatment services. The
City of Indianapolis used it fortwo large advanced wastewater treatment facilities and saved $22.6million
dollars in two years (see the EFAB case study, on the City in Section 4.B.). Baltimore also has realized
substantial savings. Local governments can use the arrangement for solid waste collection and disposal,
recycling services, and other operations and services. States contract with private parties to operate,
maintain, and manage highly specialized environmental activities such as the vehicle emissions testing
programs needed to comply with the Clean Air Act.
Potential Use: This type of contract arrangement could also be more extensively used to provide services
relating to water and air quality monitoring, solid and hazardous waste collection and disposal, drinking
water facilities, and hazardous waste remediation. The 1997 Private Activity Regulation liberalized the
treatment of lax-exempt funds used to finance public facilities under private management contracts,
extending the contract term from five to 20 years.
Advantages: Depending on the nature of the activity or service, private sector operators have achieved
efficiency savings of 10-30 percent compared to public sector operation and maintenance. The total
pro] ected savings for the Indianapolis proj ect referenced above is $60 million over five years. Under many
operations, maintenance, and management contracts, the risk of operations is shared with the private
partner or transferred to them entirely.
Limitations: In some cases, the transfer of public services and operations to private companies can cause
labor difficulties with public employees. Some local governments fear that contracting out may lead to loss
of control over services for which they are held responsible by the public.
Reference for Further Information: USEPA Environmental Financial Advisory Board report, Cost-
Effective Environmental Management Case Studies. USEPA, Office of the Comptroller, Environmental
Finance Program, 401 M Street, SW, Washington, DC 20460. Mail Code: 2731R.
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DEVELOPER FINANCING
Description: Under developer financing, ihe private party (usually a real estate developer) finances the
construction or expansion of an environmental facility in exchange for the right to build residential housing,
commercial stores, and/or industrial facilities. The private developer contributes capital and may operate
1he facility under Ihe oversight of Ihe local government The developer gains the right to use the facility and
may receive future income from user fees. While developers may in rare cases build a facility, more
typically they are charged a fee or required to purchase capacity in an existing facility. This payment is used
to expand or upgrade the facility. Developer financing arrangements are often called capacity credits,
sewer access rights, impact fees, or exactions. Developer financing may be voluntary or involuntary
depending on local circumstances.
Actual Use: Anecdotal reports suggest the number of developer financed municipal facilities is significant
and growing. One survey found 190 cities with populations of over 15,000 had tapped developers to
finance wastewater treatment plants and sewer lines. This occurred most often in areas with rapid growth
such as California, Colorado, Florida, and Texas. Developer financing also occurs where growth is tightly
regulated or restricted, and/or where the value of the development is great. Other developer financed
facilities have included drinking water systems (distribution lines, wells, treatment plants, and storage tanks),
landfills, and trucks/equipment for solid waste disposal.
Potential Use: Developer financing arrangements might also be used to help acquire the capital needed
to finance solid waste disposal, storm water management, and recycling facilities, as well as the
establishment and/or purchase of riparian buffer zones. Proffers (exactions) or impact fees also could be
used to acquire capital.
Advantages: Current users of the environmental service do not have to provide the capital needed to
upgrading or expand the facility. The private partner gets the right, which it otherwise would not have, to
develop lucrative residential, commercial, and/or industrial property.
Limitations: Developer financing is almost always limited to certain locations such as in rapid growth
areas. The developer receives no preferential tax treatment. Most developers do not like to pay or
manage for these facilities and often resist, even to the point of engaging litigation with local governments.
Serious environmental problems can result if developers neglect or abandon Ihe facilities, which has
occurred in some localities.
Reference for Further Information: USEPA Publication 20M-2005, Public-Private Partnerships
Case Studies: Profiles of Success in Providing Environmental Services, September 1990. USEPA,
Office of the Comptroller, Environmental Finance Program, 401 M Street, SW, Washington, DC 20460.
Mail Code: 2731R
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LEASE/DEVELOP/OPERATE
OR
BUILD/DEVELOP/OPERATE
(Existing Facility Lease and Renovation)
Description: Under these partnership arrangements, the private party leases or buys a facility from a
public agency, invests its own capital to renovate, modernize and/or expand tiie facility, and then operates
it under a contract with the public agency.
Actual Use: A number of different types of municipal transit facilities have been leased and developed
under various Lease/Develop/Operate (LDO) and Build/Develop/Operate (BDO) partnership
arrangements.
Potential Use: LDO and BDO arrangements also could be used to acquire the private capital needed
to finance upgrades to local environmental facilities, such as wastewater treatment plants or solid waste
management facilities, to bring them into compliance with environmental regulations. By facilitating the lease
of federally-grant funded wastewater treatment works, Executive Order 12803 on Privatization permits
local governments to enter into LDO arrangements if and when they determine it beneficial and appropriate.
Advantages: Under LDO, the public agency may not have to provide the capital investment necessary
for upgrading or expanding its environmental facilities. The public agency also may be able to take
advantage of possible private sector construction and operational efficiencies. The private partner gets the
right to operate the facility for a predetermined length of time and recover its investment through carefully
crafted user charges.
Limitations: State and local governments may be concerned about negotiating and guaranteeing the
correct operating contract with a particular vendor. In some States or areas, local governments and/or
other authorities may lack the power to enter into lease arrangements. State regulatory or statutory action
may be required for tiiese govemments/aulhorities to enable them to lease their environmental facilities.
Reference for Further Information: Apogee Research, Inc., Unpublished Paper: Private Sector
Involvement in Trans it Maintenance: Sharing the Benefits and the Risks, April, 1992. Contains a
number of examples of LDO and BDO arrangements. USEPA, Office of the Comptroller, Environmental
Finance Program, 401 M Street, SW, Washington, DC 20460. Mail Code: 2731R
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LEASE/PURCHASE
(New Facility Construction)
Description: A lease/purchase is an installment-purchase contract. Under tins model, fee private sector
finances and builds a facility which it then leases to a public agency. The public agency makes scheduled
lease payments to the private party. The public agency accrues equity in the facility with each payment
At the end of the lease term, the public agency owns the facility or purchases it at the cost of any remaining
unpaid balance in the lease. Under tins arrangement, the facility may be operated by either the public
agency or the private developer during the term of the lease.
Actual Use: Lease/purchase arrangements have been widely used for years by the General Services
Adminislration for building federal office buildings. Pennsylvania and a growing number of otiier States
(Departments of Corrections) have used lease/purchase arrangements to build prisons and otiier
correctional facilities.,
Potential Use: Lease/purchase arrangements could be used to provide the financing mechanism for
wastewater treatment, solid waste disposal, and water storage facilities, as well as a wide variety of other
environmental and non-environmental uses.
Advantages: The basic reason for this transaction is to enable a public agency to obtain a new facility
without the need for the additional capital investment or debt. The private sector puts up the investment
and tiie public agency pays for it over a set period of time. Private sector design and construction
efficiencies may result in lower costs than would be incurred by apublic agency. The interest earned from
the transaction may be tax-exempt.
Limitations: The cost of the private capital used to finance the project may be higher than the cost of
public capital, and may or may not outweigh the benefit gained from private sector construction efficiencies.
There is also a slight possibility that tiie public agency could default on tiie lease and not end owning the
facility.
Reference for Further Information: USEPA State Capacity Task Force Draft Report, Alternative
Financing Mechanisms, August 1992. USEPA, Office of tiie Comptroller, Environmental Finance
Program, 401 M Street, SW, Washington, DC 20460. Mail Code: 2731R. See also Municipal Tax-
Exempt Lease Purchasing, Richard Chambers, Touche Ross.
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LONG-TERM LEASE
(Under Executive Order 12803)
Description: Executive Order 12803 directs all federal departments and agencies to support the
privatization (sale or long-term lease from a State or local government to a private party) of infrastructure
assets (including publicly-owned wastewater treatment works or POTWs) financed in whole or part by
the federal government to ihe extent permitted by law and consistent with originally authorized purposes.
The Order also lays out the transfer price distribution and recoupment priorities needed to meet the
disposition requirements of federal administrative grant requirements.
Actual Use: No long-term leases have been implemented under the Executive Order to date. However,
long-termleases have been successfully used for years in a wide range of public and private real estate and
economic development situations.
Potential Use: Under the Executive Order, long-term leases could be used, where needed and
appropriate, to attract increased private sector investment to previously grant-funded, publicly-owned,
wastewater treatment facilities, equipment, and services. This new investment could be used to fund the
rehabilitation., upgrade, and/or expansion of these important public assets needed to maintain environmental
compliance and help meet future mandates.
Advantages: Long-term lease arrangements allow the public sector to capitalize on the operational and
construction efficiencies enjoyed by the private sector and to unlock the potentially significant economic
value of previously grant-funded public wastewater treatment assets. In addition, the public and private
sectors can use this type of partnership arrangement to share regulatory risks and responsibilities, as well
as economic benefits.
Limitations: The use of long-term leases to privatize wastewater treatment assets under the provisions of
Executive Order 12803 remains untested at this time. Qven this lack of experience, this privatization
process may prove to be complex, politically sensitive, and time-consuming from federal, State, and local
regulatory standpoints.
Reference for Further Information: USEPA, Office of Wastewater Management, 401M Street, SW,
Washington, DC 20460. Mail Code: 4201. Telephone Number: 202-260-5880. Fax Number: 202-260-
1040. USEPA Environmental Financial Advisory Board Report, Private Sector Partici-
pation in the Provision of Environmental Services: Barriers and Incentives, November 25, 1991.
USEPA, Office of the Comptroller, Environmental Finance Program, 401M Street, SW, Washington, DC
20460. Mail Code: 2731R.
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MERCHANT FACILITY
Description: In this type of partnership arrangement, the private sector party not only owns and operates
the environmental facility, as in privatization deals (see the next tool in this section, Privatization), but it
also makes the decision to provide the environmental service to the community in the first place. The
concept is similar to that of fast food, clothing store, or automotive services franchises except that it
involves the provision of an environmental service.
Actual Use: Merchant facilities have been generally associated with the provision of solid waste
management services such as landfills, composting facilities, recycling plants, and resource recovery facilities
(mass-bum incinerators). Examples of diverse communities having merchant facility solid waste composting
plants include Milbury, Massachusetts (population 11,500), and Saint Cloud, Minnesota (population
181,570). Lee County, Alabama, (population 80,800), is an example of a community where efficient
landfill service is provided through a merchant facility arrangement
Potential Use: Given favorable economics and community support, merchant facilities could more
frequently provide environmental services in any of the solid waste management areas listed above. In
addition, if political hurdles can be overcome, merchant facilities arrangements might also be used to
facilitate the rail transportation of solid waste from point of generation to point of disposal. This may
become necessary as large cities begin to run out of local disposal sites and must transport their solid waste
to sites farther away from their metropolitan regions.
Advantages: Through the use of merchant facility arrangements, the public sector enjoys access to private
sector financing, superior technology, and considerable operating expertise. Merchant facilities can be built
more quickly and at a lower costs, in large part, because they do not need to go through the public sector
procurement process. This type of partnership arrangement shifts the regulatory responsibilities to the
private sector. If they are efficiently built, maintained and marketed, merchant facilities can be very
profitable for the private owner and operator.
Limitations: There may be local employee/union opposition to privately owned and run public-purpose
facilities. The private investment required is large and facility use must be maximized. The private party
can suffer financial difficulties if service demand falls or low-cost competition Thus, there are many
situations in which the public and private sector have competed for solid waste delivery, giving rise to
lawsuits and other complaints, such as in New York.
Reference for Further Information: USEPA Publication 20M-2005, Public-Private Partnerships
Case Studies: Profiles of Success in Providing Environmental Services, September 1990. USEPA,
Office of the Comptroller, Environmental Finance Program, 401 M Street, SW, Washington, DC 20460.
Mail Code: 2731R
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PRIVATIZATION
Description: In privatization, the public sector (usually a local or State government) decides to provide
an environmental service and looks to the private sector for help in meeting that need. The private sector
contracts to design, build, own and operate the desired environmental facility. Generally, the private party
partially or totally finances the project They may, however, access tax-exempt financing available through
the State for public-purpose projects (see also Section 2.A., Private-Activity Bonds, for a summary of
eligibilities by environmental media).
Actual Use: Privatization is very common for solid waste management and drinking water systems, but
is still rare for wastewater treatment. Frequently, the privatized facilities provide services to more than one
government or community. A good example of privatization is a resource recovery facility (mass-bum
incinerator) built in Bristol, Connecticut in the late 1980s. In this case, eight Connecticut communities
entered into an. agreement with a private party to make the facility possible. The State issued private
activity tax-exempt bonds to finance the project and an expanded group of eleven communities contracted
together to oversee facility operations and agreed to provide a minimum amount of waste to it each year.
There are many rate-regulated privately owned water supply companies nationwide, some of which are
very large and operate in multi-states. In two States, Connecticut and Missouri, the majority of population
is served by private water companies
Potential Use: Further privatization deals are possible in the environmental areas named above in cases
where groups of communities can agree to site and share a common facility. They are also possible in areas
where high user fees already exist. Such deals could be used to finance other environmental technology
approaches such as waste-to-energy-facilities and advanced treatment wastewater plants. The Drinking
Water State Revolving Fund can provide low-cost loans to even regulated water companies.
Advantages: Privatization allows the private party to bring sophisticated technology to the solution of
environmental management challenges. It also allows the public sector to share or transfer the risks of the
technology and future environmental compliance responsibilities with the private sector.
Limitations: Public tax-exempt financing may not be available for all private, public-purpose environmental
projects. The reduction in tax incentives resulting from the Tax Reform Act of 1986 greatly reduced private
interest in this partnership option, particularly for wastewater. Frequently, privatized facilities must provide
services to numerous governments to make economic sense.
Reference for Further Information: USEPA Publication 20M-2005, Public-Private Partnerships
Case Studies: Profiles of Success in Providing Environmental Services, September 1990. USEPA,
Office of the Comptroller, Environmental Finance Program, 401 M Street, SW, Washington, DC 20460.
Mail Code: 2731R.
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SALE/LEASEBACK
Description: A sale/leaseback is a financial arrangement in which the owner of a facility sells it to another
entity, and subsequently leases it back from the new owner. Both public and private entities may enter into
sale/leaseback arrangements foravariety of reasons. For example, a tax-exempt lease, is a particular type
of sale/leaseback arrangement in which a public entity sells a facility to a private partner in order to finance
construction or upgrades, and repays tie private partner's investment with lease payments (see write-up
on Tax Exempt Lease later in this section). Another innovative application of the sale/leaseback
technique is the sale of a public facility to a public or private holding company for the purposes of Uniting
governmental liability under environmental statutes. Under this arrangement, the government that sold the
facility leases it back and continues to operate it. Since ownership remains with the holding company,
however, the government may not be held financially liable for potential violations of environmental
regulations.
Actual Use: Sale/leaseback arrangements can be used by both State and local governments. Phoenix,
Arizona is setting up a sale/leaseback arrangement to sell an environmental facility to a municipal holding
company that has the power to issue tax-exempt bonds. The government will lease and operate the facility
while the holding company will retain ownership and the risk of environmental liability associated with the
facility.
Potential Use: Sale/leaseback arrangements could be used to limit potential governmental liability from
operation of hazardous waste disposal facilities.
Advantages: Sale/leaseback arrangements can sometimes provide private sector financing for a facility
(as with a tax-exempt lease), and may be able to limit a government's potential liability. If a sale/leaseback
arrangement involves private ownership, the private partner gains the tax benefits of depreciation on the
facility.
Limitations: Enacting sale/leaseback arrangements may be difficult under State or local law. In exchange
for the protection from liability, the public partner may be concerned about losing control over the facility.
Reference for Further Information: Gelfand, M. David, State and Local Government Debt
Financing, Volume 2, Caflaghan & Company, Deerfield, Illinois, December, 1988. Contains general
definition and description of sale/leaseback arrangements. For further information on sale/leaseback
arrangement in Phoenix, contact George Britton, City Manager, (602) 256-3248.
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SELF-REGULATION
(Inspection and Monitoring)
Description: Self-regulation is a form of environmental enforcement wherein private sector industry is
responsible for inspecting and monitoring its own discharges and emissions with some reduced form of
governmental oversight such as a State auditing program The State auditing program may review all
instances of self-regulation or may review a random sampling of these partnerships each year.
Actual Use: Some State governments have already contracted out various portions of their environmental
programs and activities. For example, the Wisconsin water quality program has contracted out monitoring
of wastewater discharges to a private laboratory. Ohio is in 1he process of contracting out a significant
portion of its State voluntary cleanup program for brownfields properties. Ohio plans to maintain oversight
of private party cleanup efforts through the operation of an audit program.
Potential Use: The self-regulation approach works best for industries that generate relatively low quality
and quantity pollutant streams. It is also a feasible approach for those industries and/or private companies
with minimal incentive to pollute or with good compliance histories.
Advantages: Self-regulation does not generate revenue per se, but does present significant cost savings
to the governing enforcement agency through reduction in program implementation, oversight and
inspection. It allows the enforcement agency to focus its efforts on other industry (ies) that presents a
greater and more immediate environmental threat, or is more capable or likely to pollute Ihe environment
Limitations: Overtime the polluting strength of a given industry may change, thereby presenting agreater
risk in allowing self-regulation. The approach imposes costs upon the industry that is self-regulating.
Industiies that are not designated as self-regulating may protest the burdens they face from excessive
governmental regulation. Audit programs using sampling techniques may not catch self-regulators who are
violating their agreements (polluting).
Reference for Further Information: The State of Wisconsin's water quality program can be contacted
for information on its wastewater discharges monitoring contract. The State of Ohio has information on
its State voluntary cleanup program
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TAX-EXEMPT.LEASE
Description: Under a tax-exempt lease arrangement, a public partner finances capital assets or facilities
by borrowing funds from a private investor or financial institutioa The private partner generally acquires
title to the asset, but then transfers it to the public partner either at the end or the beginning of the lease
term. The portion of the lease payment that is used to pay interest on the capital investment is tax-exempt
under State and federal laws.
Actual Use: Tax-exempt leases have been used to finance a wide variety of capital assets, ranging from
computers to telecommunication systems to municipal vehicles/fleets such as buses, police cars, fire trucks,
and garbage trucks to professional sports arenas and stadiums.
Potential Use: Tax-exempt leases are another method of capital financing that could be applied to
environmental facilities and equipment Since the lease arrangements usually do not count against local
statutory debt limitations, they may be a particularly valuable tool for communities whose debt capacity is
nearly exhausted.
Advantages: The primary advantage to the local government is the fact that it can use the tax-exempt lease
to access capital from the private sector without having to issue a bond or some other public debt
instrument In addition, the public partner can often use the tax-exempt lease to acquire private capital at
discounted rates. The private partner, meanwhile, realizes the benefit of tax-exempt income from the
interest portion of the lease payments.
Limitations: Since some lease arrangements are long-term, the public partner must have the authority to
enter into long-term contracts. If they do not have this authority, State regulatory or statutory action may
be necessary to grant it to them. This may prove to be a difficult and time-consuming process.
Reference for Further Information: USEPA State Capacity Task Force Draft Report, Alternative.
Financing Mechanisms, August 1992. USEPA, Office of the Comptroller, Environmental Finance
Program, 401 M Street, SW, Washington, DC 20460. Mail Code: 2731R. Municipal Tax-Exempt
Lease Purchasing, Richard Chambers, Touche Ross.
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TURNKEY
(New Facility Construction)
Description: Under atumkey arrangement, a public agency will contract with a private investor or vendor
to design and build a complete facility in accordance with specified performance standards and criteria
agreed to between Ihe agency and 1he vendor. The private developer will commit to build the facility for
a fixed price and will absorb the construction risk of meeting that price commitment Generally, in atumkey
transaction, the private partners will use fast-track construction techniques (such as design-build) and will
not be bound by traditional public sector procurement regulations. This combination often enables the
private partner to complete the facility in significantly less time and for less cost than could be accomplished
under traditional construction techniques. In a turnkey transaction, financing and ownership of the facility
can rest with either the public or private partner. For example, the public agency might provide the
financing, with the attendant costs and risks. Alternatively, the private party might provide the financing
capital, generally in exchange for a long-term contract to operate the facility.
Actual Use: A large number of State and local governments have used turnkey agreements to build
wastewater treatment plants and solid waste disposal facilities. For example, the City of Huntsville,
Alabama, created a Solid Waste Disposal Authority that contracted with a private partner to design,
construct, and operate a mass-bum incinerator owned by the authority. Furthermore, the steam generated
by the facility is sold to a federal arsenal.
Potential Use: Turnkey agreements would be particularly suited to build facilities that require highly-
specialized technology, such as hazardous waste disposal, waste-to-energy generation, orvehicle emissions
inspection.
Advantages: Turnkey agreements take advantage of the private sector procurement process and potential
construction efficiencies, which allows private facilities to be built faster and more cheaply than comparable
public facilities.
Limitations: Implementation of atumkey transaction requires that a public agency be able to negotiate
a contract with a private vendor. The traditional "low-bid" procurement frequently will not work for a
turnkey project.
Reference for Further Information: Public Private Partnerships Case Studies: Profiles of Success
in Providing Environmental Services, September, 1990, USEPA, Office of the Comptroller,
Environmental Finance Program, 401 M Street, SW, Washington, DC 20460. Mail Code: 2731R
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OTHER
Description:
Actual Use:
Potential Use:
Advantages:
Limitations:
Reference for Further Information:
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COMPARISON MATRIX FOR PUBLIC-PRIVATE PARTNERSHIP ARRANGEMENTS
Criteria/
P3 Tool
Asset Sales
* Build/Operate/
Transfer, etc.
*Contract Services
(O&M)
""•Contract
Services
(O&M&M)
*Developer
Financing
Lease/Develop/
Operate or Build/
Develop/Operate
Lease/Purchase
Long- Term Lease
Merchant Facility
"Privatization
Actual
Use
Low
Mod. -
Low
High
High
High
Low
Low
Low
Mod. -
High
High
Revenue
Size
Mod.
Mod. -
High
High
High
High
Mod.
Mod.
Low-
Mod.
High
Mod. -
High
Revenue
Cost/
Savings
High
Mod. -
High
Mod.-
High
High
Mod.
Mod. -
High
Low-
Mod.
Mod.
Mod
Low-
Mod.
Admini-
strative
Ease
Low
Mod.
Mod.-
High
Mod.
Mod.
Low
Low-
Mod.
Low
Mod.-
High
Mod.
Equity
Mod.
Mod.
Mod.
Mod.
Low
Mod.
Mod.
Mod.
Low
Mod.
Environ-
mental
Benefits
Mod. -
High
High
Mod.
Mod.
Mod.
Mod.
Mod.
Mod.
Mod. -
High
High
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EFAB/EFC Guidebook
April 1999
COMPARISON MATRIX continued
Criteria/
P3 Tool
Sale/
Leaseback
Self-
Regulation
(Inspection &
Monitoring)
Tax-Exempt
Lease
*Turnkey
Actual
Use
Low-
Mod.
Low.
Mod.
High
Program
Size
Low-
Mod.
Low
Low-
Mod.
High
Revenue
Cost/
Savings
Low-
Mod.
High
Mod -
High
Mod-
High
Admini-
strative
Ease
Low - Mod.
Mod.
Low-
Mod.
Mod-
High
\
Equity
Mod.
Mod.
Mod.
High
Environ-
mental
Benefit
Mod.
Mod.
Mod.
High
High -High use (over 25 States, many localities/private sector); most environmental media covered (water,
wastewater, solid waste, air, etc.); criteria score high (e.g., program lowers costs, is easy to use, readily
available, and results in improved facility construction and management)
Mod.-Moderate use (10-25 States, some localities/private sector); programs include two or more
environmental media; criteria score in medium range
Low - Low or rare use; scope is very limited; one or more major implementation problems exist
'"Star indicates best rated mechanisms
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4.B. EFAB
PUBLIC-PRIVATE PARTNERSHIP AND
OPTIMIZATION
CASE STUDIES
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4.B. EFAB PUBLIC-PRIVATE PARTNERSHIP AND OPTIMIZATION
CASE STUDIES
The Environmental Financial Advisory Board (EFAB) is a federally chartered advisory board that provides
independent advice to EPA on issues relating to environmental finance. EFAB is comprised of nationally
recognized experts drawn from government; the finance, banking, and legal communities; business and
industry; and national organizations. EFAB has produced more than twenty major reports and advisories
since 1989, identifying numerous policy and program options across a broad spectrum that seek to lower
the costs of environmental protection, increase public and private investment, and build and local financial
capacity to carry out environmental programs (see Section 5.A., Environmental Financial Advisory
Board).
The Board's Cost Effectiveness Environmental Management Workgroup has focused on identifying
institutional models that communities have used to create more cost effective environmental services. The
workgroup recognizes that in some cases these models may be public-private partnership arrangements,
while in other cases, communities may look internally to optimization, competitivization, or re-engineering
approaches. In its deliberations, the workgroup determined that it would produce two products:
• A "Compendium of Case Studies" showcasing cutting edge examples of how
communities have implemented successful public-private partnerships and optimization
models. These case studies include a discussion of the lessons learned from these case
studies and how this information might be used in helping other communities design their
own approaches.
• A "How To Handbook" providing guidance to local officials and managers when
evaluating the feasibility of various public-private partnership arrangements and internal
models. The handbook would also discuss ways that various models might be
implemented
The case study abstracts on the following pages are brief summaries that attempt to capture the essence
of the first series of EFAB public-private partnership/optimization case studies. The work of the Board's
Cost Effective Environmental Management Workgroup is freely acknowledged and greatly appreciated.
We believe that these abstracts both supplement and complement the public-private partnership
arrangemenls presented in Section 4.A.. They provide concrete examples to local officials of how
successful partnerships and othermodels can be used by communities to provide needed environmental
services more efficiently. They also show how public-private partnerships can be used as a way to provide
substantial benefits to both the public and private sectors, creating the classic "win-win" situation.
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LIST OF
EFAB PUBLIC-PRIVATE PARTNERSHIP
AND OPTIMIZATION
CASE STUDIES
(In Alphabetical Order)
1. Charlotte, North Carolina
(Contract Operations and Maintenance)
2. Indianapolis, Indiana
(Contract Operations, Maintenance, & Management)
3. Jersey City, New Jersey
(Contract Services)
4. Miami Conservancy District, Ohio
(Asset Sale Under Executive Order 12803)
5. New Orleans, Louisiana
(Contract Operations)
6. North Brunswick Township,
(Concession Operations)
New Jersey
7. Oklahoma City, Oklahoma
(Contract Operations)
8. Philadelphia, Pennsylvania
(Contract Operations)
9. West New York, New Jersey
(Contract Operations)
10. Wilmington, Delaware
(Asset Sale/Privatization)
11. Wixom, Michigan
(Contract Operations)
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CHARLOTTE, NORTH CAROLINA
(Contract Operations and Maintenance)
Description: The City of Charlotte seeks competition and outsourcing to reduce the costs of public
services. Water and wastewater services are provided to Charlotte and Mecklenberg County by the
Charlotte-Mecklenberg Utilities Department (CMUD) which runs toee water treatment plants and five
wastewater treatment plants. To explore cost savings through public-private partnership, CMUD offered
the Vest Water Treatment Plant and the Irwin Creek Wastewater Treatment Plant for contract operations.
The partnership offered was a five-year contract (a three year contract whh two one-year renewal options)
for operations and maintenance of 1he facilities only. Each plant was treated as a separate procurement,
but firms were allowed to submit a combined proposal in addition to the individual ones, if there was a cost
savings to the City.
Demographics: The City and County have a strong economy with significant growth and these trends are
expected to continue. The service area includes Mecklenberg County (about 500,000 people) and both
plants are in Charlotte, NC. The Vest plant treats 16-24 million gallons a day (MGD) and has a hydraulic
capacity of about 30 MOD. The actual range of finished water ranges from 6-46 MGD. The Irwin plant
treats an average of 12 MGD of mostly domestic wastewater, with a design capacity of 15 MGD.
Secondary treatment is based on a modified Bio-Filter activated sludge process and recently completed
upgrades add a single media filter to provide tertiary treatment. CMUD has not experienced recent
compliance problems.
Procurement/Competition: The City used a two-stage procurement process which began in late spring
1995. Thefirstwas a request for qualifications from firms interested in proposing on one or both projects.
Separate statements of qualifications (SOQs) were required for each. The City received nine SOQs for
the Vest project and eight for Hie Irwin project. SOQs were evaluated based on management
arrangements, experience, key staff experience and qualifications, technical resources, financial resources,
performance history, and project understanding/contracting suggestions. The SOQs received were of high
quality and only one firm did make the short-list
Including the in-house proposal (it was pre-qualified), seven proposals were submitted for Vest and six for
Irwin. The main criterion for evaluating proposals was cost Technical criteria included the quality and
reliability of proposed operations and maintenance services, level and skill of staff, transition plan, and
specific areas of risk for each proposal. Considerable efforts were taken to ensure alevel playing field for
all proposers, particularly in regards to separating the in-house proposal team from the procurement team,
and in fairly allocating indirect department and City overhead costs to the in-house proposal. In addition,
an independent consulting team was hired to manage the procurement process, and assist in evaluating
qualifications and technical/cost proposals.
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CHARLOTTE, NORTH CAROLINA
Proposer Selected: The City selected CMUD's in-house team to operate both plants. Their proposed
price was substantially lower than the lowest privatizer's price. Technically, the City's in-house proposal
was comparable to the privatizers' proposals. The in-house proposal reduced costs through staff
reductions, increased automation, and improved process control equipment The City set up a separate
cost center to track the performance of the in-house team in meeting cost-saving goals. Failure to meet
the goals allows the non-binding memorandum of understanding with the in-house team to be ended and
operation of the plants again offered for privatization. Employee bonuses are based on cost savings
exceeding those guaranteed in the proposal. The contract began July 1,1996.
Benefits: Based on the City's in-house proposal, costs savings of about 30% are expected the first year
compared to the previous year's budget. Since the operation of these two plants is only a small part of
the total CMUD budget, the impact on rates will not be significant over the five-year time frame of the
contract. However, the implications for achieving similar savings throughout CMUD operations may have
a significant impact on long-term costs and future rates. The City expects to benefit from improved
maintenance and the corresponding preservation of its assets.
Drawbacks: None. Cost of capital was not an issue since the City was retaining responsibility for capital
expenditures and none are expected over the five-year term of the contract The City view of privatization
is still favorable and perceived loss of control is not an issue. The City believes it can maintain control via
the provisions of the service contract and by owning the land and assets.
Lessons Learned: Even though the City choose not to privatize, the procurement was successful and
valuable lessons were learned, including:
• Open communications between the City and private parties are essential.
. The evaluation process must be objective and provide a level playing field for all
proposers.
A two-step procurement can be an effective way to streamline the process.
• Requests for Proposal should include comprehensive and explicit draft service
agreements.
Both sides must understand the maintenance risks assumed by the contract operator so
that cost-effective proposals can be prepared and evaluated.
» Given Ihe same flexibility as a private party, a public entity can achieve major cost
savings.
. The proposal process must provide all participants an equal opportunity to develop
creative and cost-effective proposals.
Reference for Further Information: Doug Bean, Director, Charlotte-Mecklenberg Utility Department,
5100Brookshire Boulevard, Charlotte,NC 28216. TelephoneNumber: 704-391-5073. EFAB Member
George Raftelis, 6100FairviewTower, Suite 615, Charlotte,NC 28210. TelephoneNumber: 704-556-
1936. Fax Number: 704-556-1937.
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t
INDIANAPOLIS, INDIANA
(Contract Operations, Maintenance, and Management)
Description: This partnership involves the contract management, maintenance and operations of two
advanced wastewatertreatment (AWT) facilities by aprivate operator. Priorto the contract, both facilities
were sophisticated, state-of-the-art, and operated at a high level of efficiency. The facilities include
preliminary treatment, primary clarification, biological treatment via bio-roughing and oxygen nitrification,
followed by secondary clarification, effluent filtration, and ozone disinfection prior to effluent discharge into
the river. Also included in the contract were the associated sludge handling facilities, laboratories, and
pretreatment programs. Excluded from the contract were sewer collection, billing and collection, and
customer service functions. Major capital improvements remain the responsibility of the City.
Demographics: The Indianapolis area has a very stable and diversified economy, with average growth
of approximately 1.5% annually. The two AWT facilities serve 850,000 to 900,000 people (400,000
accounts) in the greater Indianapolis area, which includes all of Marion County. Total average treatment
capacity of Ihe plants is 300 million gallons per day ("MGD") -150 MGD each. The plants were 11 years
old in 1993 when the procurement began.
Procurement/Competition: The City wanted to improve operation, maintenance, and management
(OM&M) while cutting costs and generating revenue for system improvements. The City looked at many
options and chose to compete the OM&M of flue facilities. In selecting this option, the City retained the
tax advantages of public ownership and gained savings via private sector efficiencies.
A task force was formed to evaluate proposals. It included members of the City-County Council, utility
management and staff, regulatory officials, general citizens, and the union - the American Federation of
State, County, and Municipal Employees (AFSCME). Relations between the City and AFSCME were
originally constrained, but they improved over the course of the procurement The winning proposer
honored the agreement between AFSCME and Ihe City and guaranteed jobs. All employees were placed
within two months. The entire process, including the preparation time for procurement, took 8 to 10
months. It cost $200,000 to $300,000 for advisors, consultants and engineers. This amount was >
recovered by the City through contract savings within a few weeks.
ProposerSelected: White River Environmental Partners (WREP), a group of private firms, was selected
to operate,, maintain, and manage the two AWT facilities. WREP's proposal guaranteed 38% savings over
tiie previous year's budget, and the professional capabilities of the companies in the group were considered
superior to the other proposers. WREP must meetNPDES requirements, is responsible for any penalties
as a result of violations, and must maintain the same effluent level or better than under City operations.
WREP is subject to selective audit by an overseeing "board" to ensure both compliance with the contract
and the quality of private operations.
•
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INDIANAPOLIS, INDIANA
Benefits: WREP operations are projected to save about $60 million over five years. Between 1993 and
1994, the facilities' O&M budget was reduced from $30 million to $17 million and the number of
employees reduced from 328 to 196. By June 1996,168 WREP employees staffed the facilities.
The City has held rates constant due to savings, but they are expected to grow slowly in the future due to
inflation. Instead of lowering rates, the City puts savings into a Sewer Sanitary Fund used to improve the
City's system. These funds have been used to dry out interceptors and collector systems and to provide
sewer service to new areas.
Effluent violations have been cut from seven under City operations to one even though rains have been
heavier than usual. The facilities accident rate decreased by 80% in the first two years of the contract and
the Indiana Water Pollution Control Association gave its 1995 safety award to WREP. Since the contract
began, employee grievances have dropped from 38 in 1993 to 1 in 1994, and none in 1995.
Drawbacks: The contract is only for five years. At the end of the contract term, ihe contract will have to
be renegotiated Any changes desired by the City or the private operator at that time must be incorporated
into a new contract, or the City will need to re-propose the operations.
Lessons Learned: Although Indianapolis approaches each competition individually, it has developed
general principles which guide its efforts:
. The key to positive results is public and open competitions.
. Evaluations teams need to be inclusive and formed early in the procurement process.
. Employees are encouraged to compete and unions to be involved in the process.
(The creativity of these competitions was recognized in 1995 by an American
Government Award from the Ford Foundation, presented jointly to the union and the
City.)
» Although the City gets advice from experts, when in doubt it lets the marketplace speak.
The study conducted for the two AWT facilities underestimated savings of by 30-35%.
. Deal documents need to explicitly address performance standards, and provide
incentives for vendors to attain and maintain performance goals. Provisions must be
implemented with effective contract oversight and management by Ihe City.
Reference for Further Information: Tom Olsen, Director of Enterprise Development, City of
Indianapolis, City-County Building, Suite 2460,200 East Washington Street, Indianapolis, Indiana 46204.
Telephone Number: 317-327-4794. Fax Number: 317-327-4954. EFAB Member George Raftelis,
6100 Fairview Tower, Suite 615, Charlotte, NC 28210. Telephone Number: 704-556-1936. Fax
Number: 704-556-1937.
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JERSEY CITY, NEW JERSEY
(Contract Services)
Description: In the summer of 1995, the City of Jersey City (City) sought to privatize the operations of
its Water Department through the efforts of a new Mayor elected on a pro-business and privatization
platform. After investigating options, the City projected lhat large cost savings and the increased revenue
could be achieved through a public-private partnership. After issuing a comprehensive Request For
Proposals (RFP) and carefully evaluating the proposals, the City entered into a three-year operating
contract (with two optional one-year renewals) with United Water Resources (UWR).
Demographics: Jersey City has a favorable cost of living and tax environment for attracting business.
Wages are relatively low as are taxes and other city charges for utility services. Many New York City
companies have offices in the City due to the lower cost of doing business, hi recent years the City has had
economic problems, and as a result, the Mayor has focused on the City's economic development and
financial challenges. He has been iristrumental in promoting privatization and desires the most cost-effective
method for providing water services.
The Jersey City Water Department provides water service to about 32,000 retail customers located in the
New Jersey metropolitan area across the Hudson River from New York City. Potable water is pumped
via aqueduct to the Jersey City area, where it is distributed to retail customers. Wholesale customers in
Hackensack, New Jersey and the municipalities of Hoboken, Lyndhurst, and West Caldwell are served
along the aqueduct
The City-owned system consists of two reservoirs, 5,700 acres of watershed property surrounding them,
a treatment facility, and an extensive transmission and distribution system The reservoirs have capacities
of 3.3 and 8.0 billion gallons a day, respectively. The 80 million gallons per day (MOD) water treatment
facility receives average daily flows of about 55 MOD. The water treatment plant is located adjacent to
one of the reservoirs, 23 miles northwest of the City.
The City .has had compliance problems with State and federal regulations in the past In particular, the City
had been stockpiling sludge from the water treatment plant and was forced to dispose of this stockpile, and
further sludge generated, into a regulation disposal site.
Procurement/Competition: A steering committee was formed, consisting of members of the City Council
and key staff personnel involved in providing water services. Labor unions were active in the process, as
were water utility managers and the City's Business Manager. Raftelis Environmental Consulting Group
managed the privatization feasibility and procurement process, assisted by W.R. Lazard on financial issues.
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JERSEY CITY, NEW JERSEY
A detailed RFP was prepared and proposers were evaluated on technical merit, management., operations
and maintenance approach, experience and responsiveness, ability to meet contract obligations, and price.
New Jersey had recently passed a privatization procurement act for water utilities and the procurement
required approval from several State agencies. The procurement took about one year, cost $300,000 to
$350,000, and the contract was signed on April 1,1996. Given projections for savings and increased
revenues, gaining the City Council's support was straightforward Labor unions were brought into the
process early and were heavily involved in negotiating the contract. An innovative leasing of employees
was the basis for agreement. The contract required the privatizer to use all employees for at least one year.
Proposer Selected: The City entered into a three-year operating contract with UWR. The contract
privatized all water services including source of supply, treatment, distribution, meter reading, billing and
collection, and laboratory services. UWR assumed liability for any fines due to regulatory violations. The
City retained rate setting and policy making functions. A creative cost-sharing approach was negotiated
to encourage a decrease in uncollectible, promote marketing of water services to new wholesale customers,
and reduce the amount of unaccounted-for water.
Benefits: The City is projected to save about $38.5 million over the five-year contract period: a $2.5
million up-front concession payment to the City by UWR; $17.5 million in operational savings; and $18.5
million from increased revenues to the utility via improved collections and bulk water sales. The contract
has incentive clauses which allow UWR to earn additional revenue if it increases the collection rate and
successfully markets excess water. Instead of lowering rates, the City is using cost savings for capital
improvements in the system. UWR has begun a comprehensive predictive and preventive maintenance
program unavailable to the City. Privatization is expected to lead to improved customer service and
expanded opportunities for employees via training and higher pay.
Drawbacks: Although unions were included from the beginning, the transition of labor to private operations
was difficult Since UWR chose to base its customer service operations in its Hackensack headquarters,
concerns were raised about UWR's ability to be as responsive as City operations.
Lessons Learned: A comprehensive, detailed RFP and frank negotiations with all parties are essential.
A Draft Service Agreement which gave proposers expected contractual requirements was invaluable at the
time of actual contract negotiations as all parties were on the same page. Labor negotiations played a
major role in Hie privatization process and cannot be downplayed.
Reference for Further Information: Daniel F. Mahoney, Jr., City of Jersey City, 325 Palisades Ave,
Jersey City, NJ 07307. Ph: 201-547-5157. Fax: 201-547-6586. EFAB Member George Raftelis, 6100
Fairview Tower, Suite 615, Charlotte, NC 28210. Phone: 704-556-1936. Fax: 704-556-1937.
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MIAMI CONSERVANCY DISTRICT
(Asset Sale Under Executive Order 12803)
Description: This partnership involved the sale of a wastewater treatment facility by Ihe Miami
. Conservancy District (MCD) to Wheelabrator Environmental Operational Services (WEOS). The
transaction was the first sale of a grant-funded environmental facility to the private sector under Executive
Order 12803, signed in April 1992. MCD is a flood'control government agency serving the counties
abutting the greater Miami River in the Dayton, Ohio area The plant was built in 1972 at a cost of $3.2
million, including a $1.75 million federal grant Upgrades and expansions totaling $7.5 million were
completed in 1984,1989, and 1991. Since the municipalities and counties had existing service agreements
with MCD, it was necessary for them to approve the sale of the facility.
Demographics: The Franklin wastewater treatment plant serves 40,000 people in the municipalities of
Carlisle, Franklin, and Germantown, and incorporated areas of Montgomery and Warren counties. Growth
has been moderate but steady. Area governments have focused on economic development. The 4.5
million gallons per day (MOD) facility serves 8,000 households. Several major industries represent 33%
of the plant's total effluent flow and over 75% of plant loadings. The facility was built to treat a combination
of industrial and domestic waste. Current flows average just over 2.0 MOD.
Procurement/Competition: Flood control is MCD's major mission and it recognized the need to divest
itself of the wastewater facility and concentrate on this main focus. MCD moved to contract operations
of the Franklin facility in July 1987. Over the next several years, MCD considered full privatization. As
a result of Executive Order. 12803, the full privatization of the Franklin plant became a possibility. The
proposed sale of the Franklin facility as an EPA pilot project was approved in December 1992.
The plant is regulated by the Ohio EPA. The transfer of the Domestic Sewage Exclusion (DSE) from MCD
to the private and public partners (WEOS and the three municipalities of Carlisle, Franklin, and
Germantown) was a key issue in the sale. In addition, the Ohio Water Development Authority (OWDA)
had loaned approximately $5.0 million to MCD for upgrades and expansions, and OWDAhad to approve
the transfer. Another key element of the transfer was the assurance that the OWDA tax-exempt status of
the current outstanding bonds would be preserved.
Major community participants included the MCD General Manager and the leaders of the affected
communities. The Ohio EPA, EPA Region V in Chicago, the US EPA Headquarters, and the US Office
of Management and Budget were all key in approving the sale of the facility. The sale was approved July
11, 1995. The feasibility analysis cost $35,000 and supporting activities cost $150,000. Community
consensus was achieved by committed involvement from the municipal managers, MCD Director,
community advisors, and Wheelabrator EOS. Montgomery and Warren counties were brought on board
at a later date to support the project
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MIAMI CONSERVANCY DISTRICT
Proposer Selected: After significant economic analysis, policy evaluation, and other relevant
considerations, MCD, the bulk municipal customers, and WEOS agreed to the sale of the facility to
WEOS. WEOS had been the successful contract operator for over six years. WEOS had a long history
of dealing with similar transactions in the waste energy business, and Ohio law allowed MCD to conduct
negotiations with Wheelabrator EOS without going through a procurement process.
The municipalities retained ownership of the land and a prepaid lease was structured to pay the
muniripalilies for use of the land by WEOS. A 20-year service agreement, with two fiveyear options, was
used to effect the transfer. The contract requires WEOS to comply with environmental regulations and
maintain customer service levels. The contract also requires that WEOS expand the facility at certain
threshold points. Formulas were put in the service agreement which allow for the recovery of expansion
costs. The three municipalities and WEOS are co-permitees of the facility. An advisory board of
representatives from the municipalities and the counties works wilh WEOS.
Benefits: The communities were able to assign certain ownership risks to the private partner in the
contract, and can repurchase the facilities at the end of 20 years. Over the contract period, the cost of
continued MCD operation versus WEOS operation will be basically the same. WEOS can make only
reasonable returns, similar to what would be achieved under regulation by the Ohio Public Utility
Commission. WEOS's cost in the early years will be much lower than MCD'S, but as existing bonds are
paid off, MCD costs will fall. The plant sale to WEOS is, in effect, a refinanting of the mortgage of the
plant over the contract term. The rate charged for sewage was cut by 14%.
Drawbacks: The privatization process was complex and the large number of parties involved made
reaching consensus difficult The amount of time it takes to navigate tie approval process, particularly
when federal approvals are required for the sale of grant-funded assets, is very lengthy.
Lessons Learned: All affected political jurisdictions need to be on board early. By not including
Montgomery and Warren counties early on, the consensus process took longer as all agreements were
executed. Do not underestimate the time it takes to privatize when federal approvals are needed to sell
grant-funded assets. Gaining approvals for a sale is complex and requires appropriate internal and external
input and commitment Negotiation with a private contractor is a careful and important process. It is
essential to negotiate with the proper resources, time frame and venue in mind. Appropriate economic,
legal, and engineering input is key in the privatization process.
Reference for Further Information: Jim Rozelle, General Manager, Miami Conservancy District, 38
East Monument, Dayton, OH 45402. Telephone Number: 513-223-1271. FaxNumber: 513-223-4730.
EFAB Member George Raftelis, 6100 Fairview Tower, Suite 615, Charlotte, NC 28210. Telephone
Number: 704-556-1936. FaxNumber: 704-556-1937.
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NEW ORLEANS, LOUISIANA
(Contract Operations)
Description: The Sewerage and Water Board of New Orleans (S&WB), a statutory body of the
Louisiana constitution, owned and operated two wastewater treatment plants providing secondary
. treatment of wastewater in the greater New Orleans area The S&WB was having difficulty meeting permit
levels for effluents, operating costs were increasing, and the maintenance program could not keep pace with
facility repair requirements. In 1991, the S&WB funded a $1.7 million capital improvements program to
rehabilitate major equipment and contracted with the Professional Services Group (PSG) to operate,
maintain, and manage its two sewage treatment plants for a five-year term. PSG operations have saved
the S&WB an average of $ 1.1 million ayear since 1991.
Demographics: The two plants serve approximately 165,000 customers inihe greater New Orleans area
(population of 480,000). The customer base consists of retail customers, mainly residential and 1%
industrial. In addition to year-round tourism, the City of New Orleans (City) is a major shipping port,
especialty for grain and petrochemicals.
The East Bank treatment facility is a 122 million gallons per day (MGD) pure oxygen activated sludge plant
It processes over 90% of the City's wastewater. Although the facility is rated at 122 MGD and short-term
peak treatment capacity of 239 MGD, extended wet weather flows as high as 250 MGD are not
uncommon. The smaller West Bank secondary treatment facility is a 10 MGD trickling filter plant which
is being expanded to double its capacity.
The S&WB has had difficulty meeting NPDES permit requirements which resulted in several violations.
These violations, prior to privatization, continue to be the subject of litigation between the city, and US EPA
and the U S. Department of Justice.
Procurement/Competition: All research was performed in-house. Beginning in early 1991, the S&WB
conducted a ten-month study of contract operations, which included tours of other privately-operated
facilities. The study projected that besides achieving permit compliance, annual operating savings of
$750,000 were possible under a service contract due to improved worker productivity. The main
opponent of the contract was the City Civil Service Commission who make decisions on City employee
matters. Agreement was achieved when PSG offered to give the plants 52 employees better pay and
benefits and a two-year job guarantee. Furthermore, employees could choose to remain with the S&WB.
Although not quantified by the City, the procurement process probably cost less than $ 100,000, since
outside advisors were not used.
Proposer Selected: PSG was selected from a short-list of three firms based on cost, operating
experience, technical resources, employee training and development programs, safety programs,
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NEW ORLEANS, LOUISIANA
computerized process controls, and procedures for the transition from public to private operations. This
contract represents one of the largest OM&M wastewater operations contracts in the nation. PSG
assumed OM&M responsibility for the facilities on January 10,1992.
PSGhas established regular reporting mechanisms to provide S&WB management with current information
on plant operations. The service contract has been structured so that the responsibility for making all
capital improvements and maintenance of items costing greater than $5,000 (or having a service life of over
three years) rests with the S&WB. PSG is responsible for all routine maintenance and repair. The
contractor's operations remain under the scrutiny of the same regulatory bodies as the S&WB's operations.
The S&WB has retained the NPDES responsibilities with the EPA Any fines resulting from violations
under contract operations are the liability of PSG.
Benefits: PSGhas achieved operational savings of $1.1 million annually since 1991 and savings are
expected to grow in future years. Rates have not been increased since 1987, remaining flat despite the
cost savings achieved by privatization. Private operations have provided improved wages and productivity
incentives for employees, as well as extensive employee training programs.
PSG set up a preventive maintenance program and a comprehensive odor control plan and did a complete
evaluation of the plants on assuming operational control. PSG directed the rehabilitation of a 70 tpd
cryogenic plant which had been inoperable for years and restored inoperable 40 tpd and 20 tpd
incinerators, whose failure had resulted in numerous compliance violations. Plant discharge quality has been
improved. Increased incinerator capacity has cut solids inventory, fecal coliform in the effluent has been
reduced because of the rehabilitation of the chlorination system
Drawbacks: The S&WB believes it was a mistake to sign a five-year contract, renewable for only one-
year periods. It believes that a longer-term provider has more financial exposure and thus more incentive
to work harder and increase efficiencies. Although the S&WB and PSG have excellent relations,
disagreements occur over who should bear certain costs.
Lessons Learned: The key to a successful privatization is having a well-defined contract with a reputable
firm The contracting government should make sure that the term "maintenance" is well-defined in the
contract, as well as who will pay for each type of maintenance. This will prevent any arm-wrestling matches
during the contract period.
Reference for Further Information: Don Crowder, S&WB Liaison, Sewerage and Water Board of
New Orleans, 625 Saint Joseph Street, New Orleans, LA 70625. Telephone Number: 504-585-2271
or 585-2272. EFAB Member George Raftelis, 6100 Fairview Tower, Suite 615, Charlotte, NC 28210.
Telephone Number: 704-556-1936. Fax Number: 704-556-1937.
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NORTH BRUNSWICK TOWNSHIP, NEW JERSEY
(Concession Operations)
Description: The first US publicly-procured, long-term concession contract for the operation of a water
and sewer system was signed in February 1996 by North Brunswick Township (the Township) and US
Water Inc. The treatment plant had been run by US Water under contract for ten years prior to the
concession agreement This concession contract was the first application of two New Jersey State laws:
the New Jersey Wastewater Treatment Public-Private Contracting Act and the New Jersey Water Supply
Public-Private Contracting Act. Under the terms of the concession, US Water will operate, maintain, and
manage the systems for 20 years. The Township retains ownership of the facilities and its rate-setting
ability.
Demographics: The facilities serve the Township of North Brunswick, population 35,000, and an
additional 200 surrounding residences. The number of customers served is about 12,000, consisting of
70% residential, 15% commercial, and 15% industrial. The Township is located in Middlesex County,
New Jersey. The economic base of the region includes manufacturing and pharmaceutical companies. The
area has steady population growth of about 1/2% per year.
The water treatment plant has a capatily of 10.0 million gallons per day (MOD). Average flows are 4.0
to 5.0 MOD. The Township has a contract with the New Jersey Water Supply Authority to draw 8.0
MGD. The plant is only four years old, but some of the pumping stations and lines are 50 to 60 years old.
The Township has experienced minor violations of New Jersey Water Supply Authority and Department
of Environmental Protection1 regulations.
* A
Procurement/Competition: The Township wanted to find a less expensive way to operate the facility,
and to relieve itself of billing and collection, customer service, and other responsibilities related to operating
Ihe facility, but still retain ownership and control rate-setting. The Township also wanted to improve its
balance sheet by decreasing its outstanding debt A blue ribbon panel comprised of Town Council
members and the mayor was organized in the fall of 1994 to study the available options. A combined
RFQ/RAP was issued in February 1995 and proposals were due May 1995.
The procurement process was delayed while Ihe Township waited for two New Jersey public-private
contracting acts to become law. This innovative new legislation allows payment of concession fees to a
municipality. These fees may be paid eilher up-front, annually, or as a municipality desires. They must be
used to reduce or offset property taxes, service rates, nonrecurring expenses, or capital asset expenditures.
The laws permit a wide range of contractual forms to meet municipal needs. Competitive procurement is
required, and asset sales prohibited. When both acts were finally passed, the Township issued an amended
RAP, providing bidders with the opportunity to re-propose based on the passage of these two new laws.
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The Township began negotiations with US Water in September of 1995. US Water agreed to hire all six
current employees for at least two years. At the end of two years, the employees would either be offered
a permanent j ob with US Water or offered ajob with the Township. The Township invested approximately
$400,000 in (he privatization process. The entire process took one year. The decision to privatize was not
an issue since the facility was already being operated under a contract with US Water. This contract was
a win-win-win public-private partnership for the taxpayers and utility users, the employees and the private
firm
ProposerSelected: US Water was selected for economic reasons, as well as its experience and expertise
in operating the plant Under the terms of the partnership, US Water operates, maintains and manages
bolh the water and wastewater systems for a twenty-year period, including the distribution and collection
systems, billing and collection, and customer service. The Township still owns the facilities, sets rates, and
is responsible for capital improvements. The Township does not participate in day-to-day operations, but
does oversee the operations and perform annual inspections. US Water must comply with all State and
federal standards and pay any fines assessed for violations. The firm must also meet set requirements for
repairs and maintenance, as well as customer service.
Benefits: The Township estimates savings of $46 million over the 20-year period. US Water estimated
rates for the next 20 years based on their annual fee, with the first year's rates increasing 5.75% over the
previous year's, and eventually increasing 3.0% in 1he latter years of the contract The cost of operations
by US Water was significantly less expensive than Township operations. As a result of the concession, $23
millionof Township debt was deceased by US Water, an initial concession payment of $6 million was made
to the Township, and royalties of $22.9 million will be paid to the Township over the 20 years of the
contract The system-wide replacement of all water meters was included in the contract as part of US
Water's responsibilities.
Lessons Learned: The main questions to ask are: "What is the objective of the municipality?" and "Can
this objective be achieved through private operations?" hi the case of North Brunswick, the Township
wanted to be relieved of all utility requirements, to improve its balance sheet, and to have some budget
relief. Because of these goals, the Township took a long-term view.
Reference for Further Information: Paul Keller, Business Administrator, North Brunswick Township.
Telephone Number: 908-247-0922 extension 435. EFAB Case Study, EFAB Member George Raftelis,
Inc., 6100 Fairview Tower, Suite 615, Charlotte, NC 28210. Telephone Number: 704-556-1936. Fax
Number: 704-556-1937.
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OKLAHOMA CITY, OKLAHOMA
(Contract Operations)
Description: hi 1988, the Oklahoma City Water Utilities Trust (OCWUT), contracted out the operations,
maintenance, and management of three wastewater treatment facilities, a pumping station, and all sludge
disposal services to Professional Services Group (PSG). Prior contracting with PSG, operations and
maintenance duties at two wastewater treatment facilities been performed by two separate companies,
while operations at the third had been carried out by City employees. Sludge disposal for each facility had
been performed by another company under three separate contracts. This independent structure of
operations, maintenance, and sludge removal activities was an unnecessary and expensive duplication of
operations, equipment, and personnel. The incorporation of all the facilities into contract operations by
PSG has created savings of about 11 % annually for OCWUT.
Demographics: The three wastewater treatment facilities receive mostly domestic waste from about
600,000 residents, as well as process waste from light industries in the service area The facilities serve a
530 square mile area in and around Oklahoma City (City). In addition to its retail, residential, commercial,
institutional, and industrial customers, the City has wholesale contracts with surrounding municipalities, the
local Air Force base, and General Motors.
The North Canadian plant has an design capacity of 80 million gallons per day (MGD), and the Deer
Creek and Chisholm Creek plants have design capacities of 10 MGD and 5 MGD, respectively.
Collectively, the three plants generate about 23,500 tons of sludge per year. The North Canadian plant
has primary and secondary treatment processes, as well as chemical scrubbers and a hydrogen peroxide
injection system. The Witcher Pumping Complex has two large lift stations and three aeration wastewater
storage lagoons. The Deer Creek plant is a rotating biological contractor plant for secondary treatment
followed by nitrification and chlorination. Finally, the Chisholm Creek plant has primary, secondary, and
advanced treatment prior to discharge.
Procurement/Competition: The City wanted the contract to lower costs. In 1987, the City's wastewater
treatment cost about twice what other Oklahoma municipalities were paying on a per unit basis. The Water
and Wastewater Utilities Department conducted the procurement. The assistant city manager had an
engineering background and:easily explained the process and projected results to the City Council.
Employment of existing employees was a condition of the RFP. In 1987, the City put sludge management,
disposal services and operations of all the facilities up for competition. The RFP directed prospective firms
to identify operational changes and/or capital improvements to ensure maximum efficiency and to lower
costs. This provision allowed for innovative techniques in sludge processing and disposal. The entire
process took about a year, and cost less than $100,000.
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Proposer Selected: PSG was chosen for having the lowest costs as a result of the capital improvements
and operational changes contained in their proposal. The contract was progressive for its time, since most
contract operations agreements for wastewater treatment plants were for operation of the plant "as is."
In this case, the agreement permits operational changes and capital improvements to ensure the most
efficient and cost-effective operation of the facilities.
Under the contract, the City owns the facilities, but PSG is responsible for operating the three plants, their
effluent quality, and paying any fines for compliance violations. The City's Water and Wastewater Utilities
Department employs three people to oversee the private operations by looking after the plant and making
routine inspections. The operations are subject to regulations and checks by the EPA, the State
Department of Environmental Health, and the City-County Health Department.
PSG offered equal salary and benefits to all plant employees. In the first year, the firm conducted intensive
training. Many employees attended a local college to prepare for certification, with tuition reimbursed by
PSG. Employees who did not choose to work for PSG could remain with the City.
Benefits: In the first year, the City saved about $4.5 million. The City has been saving about 11% per
year over projections due to capital improvements and operational changes from privatization. After three
years, the contract was renewed for five years, and will be eligible for renewal again next year. PSG's
annual fee is $10.3 million, which is lower than the 1987 cost of OCWUT operations.
Wastewater rates have not increased since October 1983. From 1989 to 1993, a 4% annual decrease
in rates occurred due to savings achieved by private operations. Since the last decrease, the City has used
the savings from privatization to make improvements in the system instead of lowering rates. The Gty is
considering rate increases of 3 % per year for three years beginning in October 1996.
A post-dewatered lime stabilization process has reduced energy consumption for sludge processing. The
largest reduction has been a decrease in transportation costs. Previously, 6,500 gallon tankers carried 60
to 65 loads of sludge per day, seven days a week to application sites. After increasing the sludge solids
content, truckloads have been decreased to 18 to 20 per day, five days a week.
Lessons Learned: The City did not anticipate how large a role it would need to play in supervising the
contract operations. The City now has three employees dedicated to the oversight of the facilities.
Reference for Further Information: James Couch, Director of Utilities, Oklahoma City Water Utilities
Trust Phone: 405-232-6238. EFAB Member George Raftelis, 6100 Fairview Tower, Suite 615,
Charlotte, NC 28210. Telephone Number: 704-556-1936. Fax Number: 704-556-1937.
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PHILADELPHIA, PENNSYLVANIA
(Contract Operations)
Description: The City of Philadelphia Water Department (PWD) owns and operates one of the largest
centralized biosolids processing facilities in the country, the Biosolids Recycling Center (BRC). In the late
1980's, the BRC faced numerous problems, including: high operations costs, low productivity, community
distrust, extremely high overtime expenditures, labor unrest, improper equipment, and most importantly,
a consent decree imposed by the State of Pennsylvania for the removal of stockpiled products from
unpermitted areas. The BRC was also the target of unfavorable union action and media attention during
protracted municipal union negotiations in the summer of 1992. Hiis combination of factors made the BRC
a candidate for privatization.
*
After a new city administration settled the union contract, it set a goal to reduce operating costs at the BRC
by $5 million (about one-fifth), and retained the engineering firm of Camp, Dresser & McKee (CDM) to
evaluate the BRC and estimate the cost of operations under private management. Contract operations was
presumed the only viable option available to the city to achieve the cost savings goal. While no specific
assurance was given, the BRC managers believed a challenge had been presented to them to accomplish
a successful turn-around, concurrent with the CDM study, which might thereby dissuade officials from
proceeding with contract operations.
Demographics: The BRC provides the dewatering and composting processes for two regional
wastewater plants which serve about 487,000 accounts (2.3 million people). The PWD provides sludge
disposal services via the BRC to the City of Philadelphia and ten counties, townships, and/ or authorities
in the surrounding area The BRC processes liquid sludge from the two regional wastewater facilities and
distributes the processed biosolids product to contractors for disposal.
The BRC consists of a centralized biosolids dewatering station and a 72 acre biosolids composting plant
In October 1993, the BRC handled about 15.5 million gallons per week of digested and thickened sludge.
A consent decree was imposed on the PWD by the Pennsylvania Department of Environmental Resources
for the removal of stockpiled products from unpermitted areas.
Procurement/Competition: The City retained Camp, Dresser & McKee to evaluate the facilities and
estimate the cost to operate the plants under private management The study estimated that contract
operations of the BRC would yield annual savings of $6 million to $8 million over current city operations.
The City issued an RFQ in October 1993 to begin the privatization process.
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Meanwhile, BRC managers made vigorous changes at the facility, focusing on meeting self-imposed
"expense goals". Management reduced staffing and funding levels. Staffing for biosolids management fell
from 235 positions in 1993 to 133 positions in 1996, a reduction of over 40%. The cost of biosolids
processing was cut from $21 million in 1992 to $9.8 million in 1995. Starting from December 1993, the
BRC operating budget was decreased from $30.6 million to $15.7 million between 1993 and 1995.
The American Federation of State, County, and Municipal Employees negotiated with PWD management
to ensure that no layoffs occurred. In turn, PWD management worked closely with them to develop a
strategy for moving employees within the department. Although some employees were placed in lesser
positions, no one was unemployed as a result of the changes.
Proposer Selected: The PWD management succeeded in meeting the challenge, and the City halted the
privatization process.
Benefits: The BRC rates are set by the PWD for the entire department and are fixed for long periods of
time. Rates have not been reduced as a result of cost savings; however, 1hey are not expected to be
increased until after the turn of the century. Customer service became the focus for the BRC's operational
improvements.
Management modernized the dewatering equipment by replacing eddy current back drives and installing
automatic torque control which removed the need for "hands-on" operation and improved the consistency
of equipment performance. Vehicular equipment was reassigned to upgrade the BRC's capacity for
materials handling, and production of screened compost was reduced from two shifts to one shift of
operation as a result of a better coordinated screening system.
Lessons Learned: Municipal operations, even those with a tradition of union activism and strong work
rules, present an opportunity for positive change. Sound data and clear operational objectives can set the
stage for positive change in municipal operations. A city can realize large financial benefits in changing a
municipal operation, and the potential savings can be of a magnitude meeting or exceeding the projected
financial benefits of privatization.
Reference for Further Information: Guru P. Bose, Manager of Wastewater Operations, City of
Philadelphia Water Department, ARA Tower, 1101 Market Street, Philadelphia, PA 19107. Telephone
Number: 215-685-6250. EFAB Member George Raftelis, 6100 Fairview Tower, Suite 615, Charlotte,
NC 28210. Telephone Number: 704-556-1936. Fax Number. 704-556-1937.
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WEST NEW YORK, NEW JERSEY
(Contract Operations)
Description: talhe fall of 1994, the West New York Municipal Utility Authority (MU A) issued a Request
For Qualifications (RFQ) for the purchase or lease of its wastewater treatment facility. In early 1995, the
MUA issued a Request For Proposals (RFP), and three proposals from private parties were received by
June 1995. Concurrent with receipt of the proposals, a new mayor and city administration were elected,
creating the need to familiarize the new administration with privatization.
In addition to these political changes, a nearby wastewater authority, the TriCities Authority; expressed
interest in buying the assets of the MUA soon after the private proposals had been received. This interest
created a new dynamic, since Hie issues involved in a sale to another public entity differ from those in a sale
to a private party. This opportunity has created new possibilities for the MUA not contemplated earlier
and has delayed Ihe procurement process for over a year.
The West New York (Town) is still in the process of deciding whether to sell to a public authority or a
private contractor. The decision of which privatizer to choose would obviously have to come after this
decision is made. The Town wants to put the privatization process officially on hold, so that if the decision
is made to sell to the private sector, no backtracking will be necessary.
Demographics: West New York, NJ is located a few miles from Bergen County. The area's economy
is composed of service-oriented companies. The MUA serves a population of 60,000 and has 4,900
customer accounts. The MUA serves primarily retail customers in West New York, but also serves
portions of Union City and Weehawken as wholesale customers. It operates a 10 million gallons per day
(MOD) wastewater treatment facility.
Procurement/Competition: The MUA is having trouble managing the debtservice generated from capital
investment The Town Council and the MUA Board are involved in the privatization process. CME
Associates are the consulting engineers; Natwest is the financial advisor; and DeCotiss, Fitzpatrick & Quck
are legal counsel for the MUA.
The MUA received three private proposals in June 1995 to purchase the facility, and as of July 1996, the
proposals were still being considered. The potential still exists for the procurement process to be put on
hold so the MUA can consider another option, the possibility of merging with or selling its assets to another
public authority. If the MUA decides on full privatization, it will retain some control over its facility through
a service agreement with the privatizer. If the MUA decides to sell to the Tri-Cities Authority, it will not
be responsible for any aspects of the wastewater treatment facility, nor will it have any control over
operations or rates.
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WEST NEW YORK, NEW JERSEY
Proposer Selected: No proposer has been selected yet. TTie MUA has been considering privatization
for approximately two years as of June 1996. As of July 1996, US Water, Me. and American Anglian
Environmental Technologies, Inc. are the only two contractors that remain in the competition.
Lessons Learned: Economic and political factors which may affect the privatization process are really
very case specific. The election of a new mayor and the purchase offer from a public authority have
hindered the privatization process in West New York.
Reference for Further Information: Arnold Mitnaul, Executive Director, West New York Municipal
Utility Authority, West New York, NJ. Telephone Number: 201-295-5240. EFAB Member George
Raftelis, 6100 Fairview Tower, Suite 615, Charlotte, NC 28210. Telephone Number: 704-556-1936.
Fax Number: 704-556-1937.
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WILMINGTON, DELAWARE
(Asset Sale/Privatization)
Description: In the fall of 1994, the City ofWilrnington (City) began investigating the economic benefits
of privatizing the operation of its wastewater treatment plant Two options were evaluated initially: (1)
leasing Ihe plant to a private operator and (2) the sale of plant assets to a private owner/operator with a
20-year operations contract. Under the guidelines established by Presidential Executive Orders 12803 and
12893, the City sought a substantial up-front payment by the privatizerto be amortized over the contract.
After completing an elaborate procurement process to select a preferred privatizer, the proj ect was delay ed
due to concerns raised by New Castle County (County).
Demographics: The City and surrounding County includes large professional group and industrial
presences with almost all growth occurring in the County. The plant, located in the City, serves about
460,000 people. The City generates 30% of flows to the plant and New Castle County 70%. The City
provides wholesales wastewater service to the County. Their relationship is governed by an
interjurisdictional service agreement which sets the method used to allocate costs to the County.
The plant has a rated capacity to treat 90 million gallons per day (MGD) and is operating at capacity. It
provides tertiary treatment of wastewater to meet stringent requirements before release into the Delaware
River. The plant has maintained general compliance with environmental regulations, with the exception of
some problems related to high flows to the plant during wet periods.
Procurement/Competition: The City expressed three main objectives in privatizing the facility: controlling
operating costs; ensuring rate stability; and generating a cash infusion for the City to meet other needs. The
privatization option, including the sale of the plant assets with a 20-year operations contract, was the most
effective method to achieve these goals. Other objectives included acceptable rate impacts to all
customers, preserving the City's capital investment to assure long-term plant reliability and performance,
and gaining help in meeting future capital expenditures objectives.
The feasibility study to determine the economic benefits of privatization and the preferred option began in
the fall of 1994. The decision to move with privatization came in January 1995, and RFP work'began in
March 1995. The RFP was issued in early May, with technical proposals due in late June, and cost
proposals due by July 21. The proposal evaluation process, including requests for clarification and
interviews, took about six weeks, with the notice of rankings issued in late August.
The evaluation was conducted by a City review committee and utility advisors based upon a matrix that
included: corporate profile; corporate experience and expertise; regulatory experience; key management
and operational personnel; financial'strength; employee considerations; references and reputation; use of
Disadvantaged Business Enterprises andEEO compliance; and proposal completeness andresponsiveness.
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WILMINGTON, DELAWARE
Cost proposals were submitted separately from technical proposals, as required by City policies, and were
not used in evaluating and ranking submittals. Proposers were scored and ranked solely on the basis of
technical proposals. Cost proposals were used for developing a cost basis for negotiating a Service
Contract and Service Fee with the preferred vendor. Tlie most qualified privatizer was selected at least
cost. The process was challenged in court, but the City won. Hie cost for project feasibility studies.,
procurement services, negotiation, and implementation ran $300,000 to $400,000.
Proposer Selected: Wheelabrator EOS (WEOS) was the preferred vendor based on the evaluation.
As plant owner, WEOS would maintain all local, State, regional, and federal permits. Since WEOS would
not directly deal with customers, it was not expected that the plant would be regulated by Ihe Delaware
Public Service Commission. If full privatization included Ihe purchase of plant assets and repayment of
federal grants, it was expected that approvals would be required from the State, USEPA Region III,
USEPA headquarters, and the federal Office of Management and Budget. The need for regional and
federal approvals under a long-term lease privatization was also investigated.
Contract negotiations with WEOS began shortly thereafter and were to have been completed by the end
of 1995, with a scheduled project start date of January 1,1996. However, the County did not approve
of the project and voiced significant concerns that the City was going to receive a substantial financial
windfall that County customers would pay for in the form of higher rates. Even after it was shown that
privatization would benefit all customers, the County believed that it had an "equity position" in the assets
and should share in the up-front cash benefits. Disagreement over this issue is the primary reason the
privatization initiative failed. However, negotiations are underway between the City, County, and
Wheelabrator EOS to develop an acceptable privatization scenario meeting the objectives of all parties,
which will likely be a service contract with a 4 to 20 year term
Benefits: No benefits have yet been realized.
Lessons Learned: All major users or stakeholders should be included in the privatization process from
Ihe beginning. Personnel involved in operating facilities to be privatized should be excluded from the
process: It is essential to review, understand, and seek clarifications where needed, on any laws,
regulations, or guidelines lhat may affect the procurement, evaluation, selection, or negotiation process.
Rigorous compliance with all rules and guidelines is essential to avoid legal challenges. It is important to
keep State environmental agencies informed during the privatization process.
Reference for Further Information: Mr. Kash Srinivasan, Water Division Director, City ofWilmington,
Louis L. Redding Building, 800 French Street, Wilmington, DE19801. EFAB Member George Raftelis,
6100FairviewTower, Suite 615, Charlotte, NC 28210. Phone: 704-556-1936. FaxNumber; 704-556-
1937.
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WIXOM, MICHIGAN
(Contract Operations)
Description: Dissatisfied with its lessor/public operator, the Oakland County Department of Public
Works (OCDPW), (he City of Wixom (City) began to investigate the process for contracting the operation
and maintenance of its wastewater treatment facility in 1990. The study revealed that savings and
improvements could be achieved through private operations and maintenance of the facility. After a lengthy
procurement competition and the City's decision to acquire die facility, a private operator was engaged and
savings realized.
Demographics: The water distribution system consists of 7 separate systems, 19 wells, 15 miles of water
mains with 767 connections. The system has a capacity of 16 million gallons per day (MGD), which is
about the level of current use. The wastewater treatment plant is a 5 MGD facility serving 1,620
customers. Of the 5 MGD capacity, 1.5 is used and half of the unused capacity is dedicated, by
agreement, to Ford Motor Company.
The wastewater treatment plant was the subject of environmental permitting violations which resulted in a
consent order. As a result, the state-of-the-art facility which presently services tiie community was built
The facility has an oxidation ditch activated sludge process with a chemical phosphorus removal system,
and tertiary filtration and ultraviolet disinfection and aerobic digestive system to handle solids with sludge
storage (1.7 million gallons) for possible land application.
Procurement/Competition: The City was dissatisfied with the cost, communications and control that they
were experiencing with their lessor/operator, the OCDPW. They wanted to become the owner of the
wastewater facility and contract operations and maintenance of the water and wastewater systems to a
private operator. Consensus was achieved by constant review and attention to the process by the city
council, city manager, treasurer, and public works manager. The matter was discussed openly at council
meetings and community input solicited.
The Michigan Department of Natural Resources and USEP A became involved regarding dismissal of the
consent order. This dismissal was required for transfer of ownership of the plant from OCDPW to 1he
City of Wixom Advice from Hie DNR and EPA was also sought as to whether Ihe privatizer/operator
could operate both the waste facility and (he industrial pretreatment program for Ford Motor Company.
The procurement process cost about $100,000 incurred over three years. A portion of the cost was
recouped through a charge of $2,000 from each of the five proposers and as a result of lower interest costs
on the bonds subsequently issued for the purchase of the wastewater plant
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WIXOM, MICHIGAN
Proposer Selected: Williams and Works (now Earth Tec) was selected in the spring of 1994 after a
competitive request for proposal process, answers to written questions, and personal interviews with three
of the most competitive proposers (including OCDPW). They had superior technology and innovative
ideas; and they provided additional services not included in the OCDPW proposal. Earth Tec received
a five year contract to operate the wastewater which limited price adjustments to changes in flow or
content, Consumer Price Index fluctuations, and other escalators. It withdrew from its previous testing and
services role in Ford Motor Company's pretreatment program. The City decided to payoff the County
bonds and acquire ownership of the wastewater facility.
Labor was addressed in an agreement that OCDPW employees could apply for employment at Earth Tec,
OCDPW provided an early retirement program, and reassignment was offered to other positions in the
Oakland County system. All issues were openly discussed and resolved without cost to the City of
Wixom Labor issues caused no delays in the project, and there were no layoffs.
Benefits: The community saved about ten percent or $100,000 in the first year of operation and received
additional programs and services. The City was impressed with the increased level of information provided
by the private operator, including more timely cost and budgetary data The City believes it is more
knowledgeable about wastewater operations and has better information with which to develop its budget
and conduct long term planning. The privatization process informed the City, its people, elected officials,
and management on the value of analyzing the quality of functions run by government agencies and on the
benefits of public-private partnerships.
Drawbacks: The process was lengthy and time consuming, especially for the owner's personnel. It also
required an up front commitment of funds to get through tie process.
Lessons Learned: Politics are always a factor in anything that involves major change from former
municipal ownership and operations. The political process requires patience, flexibility and the ability to
fund necessary experts and consultants. Public owners and operators will not give up control until the full
administrative/political process has been used and all options carefully explored. It is essential to engage
experts early in the process and include them in the review team analyzing proposals and drafting contracts.
The city council must be committed to the project and involved in the process. A strong administrative
leadership team (city manager, treasurer, and director of Public Works) is essential for a project to remain
focused
Reference for Further Information: Mr. J Michael Doman, City Manager, City of Wixom, 49045
Pontiac Trail, PO Box 155 Wixon, MI 48393-0155. David M. Lick, Partner, Loomis, Ewert, Ederer,
Parsley, Davis & Getting, P.C., 232 South Capitol Avenue, Suite 1000, Lansing, MI 48933. Telephone
Number: 517-482-2400. Fax Number: 517-482-6604.
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Description:
OTHER
Demographics:
Procurement/Competition:
Proposer Selected:
Benefits:
Lessons Learned:
Reference for Further Information:
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5. TOOLS
FOR
DELIVERING
FINANCIAL
OUTREACH
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5. TOOLS FOR DELIVERING FINANCIAL OUTREACH
INTRODUCTION
Financial outreach and technical assistance at the State and local level can be vital to the success of
environmental programs. The outreach tools described in this section are different from direct governmental
assistance, such as financial assistance, and traditionally have been offered by a range of non-profit and
private sector organizations as well as some governments. Outreach can be very important for
environmental programs because of the multiplicity and complexity of constantly changing environmental
regulations, both federal and State, and the need to finance, operate, improve or construct facilities to
comply with these regulations. Financial outreach is increasingly important because of the growing cost of
environmental facilities, programs., and activities. This is particularly true for small community environmental
projects because this kind of outreach has not been readily provided by the federal government, and can
be a critical link between environmental mandates and implementation of these mandates by local managers
in the field.
Two types of financial outreach are presented in this section: institutional arrangements and electronic
services. Institutional outreach arrangements are provided by organizations, initiatives and mechanisms
that provide information, advice and hands-on training on how to finance environmental facilities and
implement new programs. Institutional outreach traditionally has been provided by non-profit groups and
private associations, such as universities, professional associations, trade organizations, and advisory panels.
However, many States are now providing more financial and technical assistance to communities,
especially small ones, in connection with their State Revolving Fund (SRF) Programs for financing clean
water and drinking water activities. For example, capacity development assistance in the context of a State
capacity development plan is mandated under the Drinking Water SRF program. SRF self-help type
outreach also is increasing in a number of States.
Electronic outreach is achieved through computers and electronic technology such as telephone, fax and
video links. These electronic services represent one of the fastest growing forms of access and data
sharing. They can be a prompt and highly cost-effective method of financial outreach, provided that
potential users have adequate access to them. These servicesxcan be highly beneficial to even large,
sophisticated public and private entities.
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5.A. INSTITUTIONAL
ARRANGEMENTS
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5A. INSTITUTIONAL ARRANGEMENTS
Description: The term institutional arrangement as used in the context of financial outreach and technical
assistance includes organizations, initiatives, and mechanisms that support and facilitate the financing and
implementation of sustainable environmental programs, systems, and projects by all levels of government,
as well as the private sector and individuals. Such arrangements can range from non-profit environmental
and service associations to university-based technical assistance networks, government advisory or ad
hoc groups, and State capacity development assistance programs. All arrangements, however, must
promote the exchange of information and technical assistance on sustainable ways to pay for the myriad
of environmental activities undertaken by regulated entities, public and private.
Advantages: Institutional arrangements have some distinct advantages over direct governmental
assistance approaches. Since there are so many types of arrangements, there is a likelihood that one or
more can be found to help meet the financing needs of any regulated entity. Theses arrangements tend to
be independent, innovative, and non-bureaucratic in nature. They often provide help to'clients more easily,
faster, and at lower costs. They typically involve face-to-face, hands-on training, and are project specific.
They also may require significant client involvement ranging from detailed feedback and cooperation to
direct project participation and funding. As a result, the outreach and technical assistance provided is of
extremely high quality and may be highly financially leveraged.
The very nature of institutional outreach arrangements presumes a close interaction with client groups.
Consequently, such arrangements often have, or come to have, a high degree of credibility and standing
with clients. They can also often develop over time a considerable body and degree of technical expertise
in a relatively focused area, such as finance, which can be replicated in other locations. Furthermore, since
they are not regulatory in nature and operate more informally, client groups often develop and maintain a
higher level of comfort with them than they do with federal and State government agencies and approaches.
Limitations: Institutional arrangements are not typically themselves a source of funds, with the exception
of the State Revolving Fund Self-Help and Drinking Water Financial Assistance programs that some States
have for smaller, disadvantaged communities. However, many efforts may serve as pass-through entities
funneling money to assistance recipients (in demonstrations or pilots). Outreach, assistance, and direction
provided to clients via these arrangements may be rejected by State or federal regulatory agencies. Care
must be taken when designing and establishing these arrangements to give clear guidelines on requirements,
responsibilities, and authorities with clients and governments, or the organization may not be able to cany
out its mission effectively.
Summary: The fourteen types of institutional outreach arrangements presented here are hardly exhaustive.
Many other kinds and sources of outreach and technical assistance exist Some arrangementsAechniques
are quite informal and ad hoc, for example, pro bono legal services, business panels and forums, and the
like. The mechanisms presented here are arranged or supported more formally by governments, such as
the eight university-based Environmental Finance Centers (EFCs). Reader suggestions for additional types
of outreach arrangements are not only welcome, but actively encouraged and solicited.
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LIST OF INSTITUTIONAL ARRANGEMENTS
(In Alphabetical Order)
1. Border Environmental Cooperation Commission
2. Circuit Riders
3. Cooperatives
*4. Cooperative Extension Systems
*5. Drinking Water SRF Capacity Development
*6. Environmental Finance Center (EFC) Network
7. Region 6 EFC at the University of New Mexico
8. Region 3 EFC at the University of Maryland
9. Region 2 EFC at Ihe Maxwell School, Syracuse University
10. Region 9 EFC at California State University at Hayward
11. Region 5 EFC at Cleveland State University
12. Region 10 EFC at Boise State University
13. Region 4 EFC at the University of North Carolina
14. Region 4 EFC at the University of Louisville
*15. EPA: Environmental Finance Program
16. EPA: Environmental Financial Advisory Board
*17. Finance Charrettes
*18. National Technical Assistance Programs (Non-profit)
19. Retired Volunteers
*20. Rural Community Assistance Corporation
*21. Self-Help
*22. West Virginia University Environmental Services and Training Division
* Stars indicate most highly rated mechanisms as described in the Comparison Matrix at the end of the
narratives. See Introduction to the Guidebook for a description of 1he criteria used Ratings of "High",
"Moderate", and "Low" are for comparison purposes only, as some ratings are necessarily subjective and
data are incomplete.
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BORDER ENVIRONMENTAL COOPERATION COMMISSION
Description: The Border Environmental Cooperation Commission (BECC) was created within ihe
context of the North American Free Trade Agreement process and is a sister agency to the North
American Development Bank (NADBank). The BECC reviews proposals for environmental projects in
Ihe region along the US-Mexico border region and certifies them for loan funding by the NADBank (see
Section 2.B., North American Development Bank). The purpose of the BECC is to help preserve,
protect, and enhance the environment of the border region in order to advance the well-being of the
region's residents and to achieve sustainable development. Environmental areas to be emphasized by the
BECC include municipal solid waste management, wastewater treatment, and the supply of potable water.
Actual Use: Before the BECC certifies a project for funding by the NADBank, criteria in the following
six categories must be satisfied: 1) general project description; 2) environmental and human health; 3)
technical feasibility; 4) financial feasibility and program management; 5) community participation; and 6)
sustainable development By mid-year 1998, the BECC had certified twenty-five projects for funding in
a range of environmental areas including water supply, wastewater treatment, regional landfills,
water/wastewater facilities maintenance, and a surface water cleanup study.
Potential Use: Growing trade and population has increased stress along the border region between the
US and Mexico. The lack of adequate environmental and other infrastructure to handle rising population
and traffic has led to additional municipal, environmental and public health, transportation, and educational
needs. The growth potential for BECC approved environmental infrastructure projects is very significant
Advantages: Both the BECC and the NADBank have a strong private sector orientation. Private
financial institutions and firms play a key role in financing, building, operating, and maintaining the
infrastructure. Because of the strong private sector orientation, employment along the border and
equipment suppliers have benefitted from increased economic development.
Limitations: Projects that require grants or equity funding are not considered for certification by Ihe
BECC. There is considerable concern that border communities may not be able to repay loans of any kind.
All proj ects certified by the BECC and funded by NADBank must address environmental issues within 100
kilometers of the US-Mexico border.
Reference for Further Information: Border Environmental Cooperation Commission (BECC), Post
Office Box 221648, El Paso, Texas 79913, E-Mail: becc@cocef.interjuarez.com
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CIRCUIT RIDERS
Description: A circuit rider is a dedicated expert who travels on some established regular basis to a
number of participating individuals and organizations to provide hands-on technical assistance, professional
services, and .education. The circuit rider can be either an independent entrepreneur contracting with the
participants-individually or as a group, or an employee of the participant group acting cooperatively.
Furthermore, the circuit'rider can work either a full or part-time depending on the number of systems
participating and the assistance and services provided.
For example, several publicly or privately owned water or other environmental systems may agree to jointly
obtain administrative, management, technical, or other services from a common source to meet their
comtnonneeds. The common source, the circuit rider, addresses the common need such as the collection
of samples from each system and delivery of the batch to a lab for testing.
Actual Use: Cooperatives in many fields use circuit riders to obtain specialized goods and services.
State government agencies in fields such as education, the environment, transportation, and small business
development use the circuit rider approach to provide technical assistance to small, often rural,
communities and businesses. Ohio's T2 Center Circuit Rider program is a good example of a
transportation-based effort. AmeriCorps' programs make significant use of circuit riders in-implementing
their varied activities.
Potential Use: There is high potential for use of circuit riders by smaller environmental systems in areas
such as mobile home trailer parks. For many of these systems, circuit riders are a good way to overcome
their geographical dispersion and individual inability to afford technical assistance. These same systems are
also good candidates for membership in cooperatives.
Advantages: The circuit rider approach is a cost-effective way for smaller environmental systems to be
able to afford technical assistance. The pooling of their business needs lets the individual systems negotiate
lower overall rates with assistance providers by virtue of being part of a larger business opportunity.
Limitations: Circuit riders cannot be at every location all the time and may not be accessible in a timely
manner during an emergency. The circuit rider may try to play one system off against another to negotiate
a better deal. Small systems are often very independent
Reference for Further Information: Ohio T2 Center Circuit Rider Program, Program Coordinator
Mike Fitch, Telephone: 614-292-4988. National Association of Service and Conservation Corps (an
AmeriCorps T/TA provider), Circuit Rider Program, Telephone: 202-737-6272.
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COOPERATIVES
I
I
Description: A cooperative is an independent association of people and/or groups voluntary united to
meet commonneeds through a jointly owned and democratically operated venture. For example, several
publicly and/or privately owned environmental systems could agree to jointly share administrative,
management and technical resources in providing common environmental services. The resulting cost
savings would be either passed along to users, reinvested in the cooperative venture, or returned to the
member systems.
Actual Use: Some limited numbers of water systems operate jointly in cooperatives. The Water
Cooperative of Pierce County located in Washington State is a good example. This organization consists
of several municipal and mutual utilities that provide water to almost a quarter million people. It has both
an environmental and a legislative agenda Nationally over 100 million.people belong to 47,000
cooperatives. Cooperatives are set up to provide/receive just about any good or service including: business
services, child care, financial services, employment, equipment and farm supplies, food and food services,
health care, housing, insurance, legal and professional services, the marketing of agricultural and other
products, and utilities. They are organized in one of three ways: producer-owned, consumer-owned or
worker owned.
Potential Use: There is a high potential for using tie cooperatives approach with smaller water,
wastewater, and solid waste systems. Cooperatives also could also be very effective in helping implement
community-based environmental programs. For example, agricultural cooperatives could promote with their
members techniques to reduce fertilizer and pesticide runoff and use. Forming cooperatives to buy
environmentally friendly products in bulk would reduce costs and encourage market expansion in the
availability of such products.
Advantages: Cooperatives can reduce costs (sometimes dramatically) through the buying/selling power
achieved through economies of scale. Cooperatives allow systems to pool not just their resources, but also
their technical expertise and knowledge regarding outside sources of assistance.
Limitations: Cooperatives can be a challenge to start as tiieir members are often very independent and
used to operating in their own ways.
Reference for Further Information: U.S. Department of Agriculture, Rural Business-Cooperative
Service, 14th & Independence Avenues, SW, Room. 5405-South Bldg, Washington, D.C. 20250, Web
site: http://mvw.mrdev.usda.gov/rbs/mdex.html Information is also available on the National
Cooperatives Business Association web site at http://tvww.cooperative.org. The Pierce County
Cooperative web site is http://users.aol.com/waterguy3/waterworks.html.
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COOPERATIVE EXTENSION SYSTEMS
Description: Cooperative extension is a government-supported effort that attempts to link the
universi1y(ies) and citizens in each State, usually at the county level, using education and information as
tools to help address real-world problems. Traditional areas in which the cooperative extension approach
has been applied include agriculture and natural resources. The approach is increasingly being focused on
environmental protection and topics such as sustainable development
Actual Use: The Department of Agriculture's Cooperative State Research, Education, and Extension
Service (CSREES) supports community-based environmental education efforts by the land-grant
universities and the 57 State/territorial cooperative extension services, which employ over 9,600 local
extension agents. The Smith-Lever and Renewable Resources Extension Acts provide formula grants
supporting extension programs that promote community-based volunteer activities, collaborations among
public and private institutions, and other delivery systems.
Since 1991, the Cooperative Extension Service at the University of Connecticut has provided information
on non-point pollution sources and their links to land use. Farm*A*Syst and Home*A*
Syst (in 47 and 30 States, respectively) are voluntary, rural water pollution prevention programs run by the
University of Wisconsin, to 1997, CSREES working with EPA, State extension services and others
supported four pilot projects applying environmental education to sustainable development issues at 1he
community level. These projects encourage community-based environmental education models, build the
capacity of regional, State and community agencies to work via education institutions and systems, and
improve the ability of communities to plan/implement development that integrates economic, environmental
and social capacities.
Potential Use: If the four CSREES/EPA pilot projects produce workable models, or are extended to
and embraced by other communities, the opportunities for environmentally sound, sustainable development
projects could be increased.
Advantages: The program can integrate environmental thinking at all governmental levels.
Limitations: Funding for environmental education and technical assistance activities tends to be very
limited. Some approaches have limited applicability.
Reference for Further Information: USDA, CSREES, Ag Box 2210, Aerospace Bldg, Rm 826,
Washington, DC 20250, Phone: 202-401-6050, Fax: 202-401-1706, E-mail: gcrosby@ reeusdagov,
Internet: www.reeusda.gov/. NEMO, 1066 Saybrook Rd, Box 70, Haddam, CT 06438, Phone: 860-
345-4511, Fax: 860-345-3357, Internet: http://wwwJib.uconn.edu/CANR/ces/nemo/. Farm*A*Syst
and Home*A*Syst, 550 Babcock Drive, Madison, WI 53706; Phone: 608-262-0024; E-mail:
farmasyst@macc.wisc.edu; Internet: www.wisc.edu/farmasyst/.
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DRINKING WATER SRF CAPACITY DEVELOPMENT
S55?
t
Description: "Capacity" is a term currently used to describe the technical, financial and managerial ability
of public and private entities to administer vital services, in this case drinking water facilities.
The 1996 Safe Drinking Water Act authorizing the Drinking Water State Revolving Fund (DWSRF)
requires States to prepare capacity development strategies for assessing and assisting adequate local capacity.
All DWSRF local applicants must demonstrate that their water system has appropriate:capacity to qualify for
financial assistance. Since DWSRFs without strategies may lose up to 20 percent of federal capitalization
grants beginning in the year 2000, and must use 15 percent of funds to finance water systems under 10,000
customers, local capacity now receives formal attention.
Actual Use: All States are focusing systematically on capacity development, primarily via State Departments
of Health, DWSRF's and/or Self-Help programs, and are permitted to use 2% of DWSRF funds for technical
assistance and up to 10% for program management including capacity development and operator certification.
Technical capacity refers to engineering knowledge and operator skills. Financial capacity describes local
revenue, income and cost issues, credit worthiness, and rate systems supporting drinking water facilities.
Managerial capacity is the expertise of personnel administering overall water systems on a day-to-day basis
and overseeing financial operations to ensure viability.
Potential Use: A number of important issues will be addressed as part of capacity development assistance
for water systems, and such strategies are transferrable to other environmental facilities such as wastewater,
solid waste and air pollution. These include a stronger focus on local affordability, including cumulative cost
of all environmental services, facility operator training and certification, regionalization/consolidation of
systems to achieve economies of scale, privatization alternatives such as contract management, and
assessment of local environmental conditions such as adequacy of source water and comparative risk ranking.
Advantages: Adequate local capacity to design and administer pollution control projects on a long-term basis
is the single most important factor influencing the success of money spent on environmental improvements.
Small communities in particular can greatly benefit from capacity development assistance, which further may
reduce costs. Systematic criteria such as for affordability can be extremely helpful in determining whether
and what type of financial assistance is needed, and enables comparison of alternatives.
Limitations: there is no guarantee that localities needing improved capacity will receive assistance, as
projects ranking highest on DWSRF priority lists and ready to proceed will be assisted first The DWSRF
capacity development set-aside decreases the total amount of DWSRF money available to make loans. SRF
may find the specific federal compliance dates and set-asides onerous.
Reference for Farther Information: The federal capacity development strategy is outlined in Section 1420
of the 1996 SDWA Amendments. Each State will develop and administer its own plan. .
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ENVIRONMENTAL FINANCE CENTER (EFC) NETWORK
Description: The EFC Network is a system of university-based regional centers that provides State and
local governments and the private sector with educational, technical, and analytic assistance on
environmental finance (see the following eight pages). Centers are located at: Syracuse University (Region
2); the University of Maryland (Region 3); Cleveland State University (Region 5); ihe University of New
Mexico (Region 6); California State University at Hay ward (Region 9); and Boise State University (Region
10). Prospective centers are located at 1he University of North Carolina (Region 4) and the University of
Louisville (Region 4). Coordination of the EFC Network is assisted by the Environmental Protection
Agency's (EPA's) Environmental Finance Program.
Actual Use: During the past several years, the Network has helped numerous communities across ihe
nation. Network centers have held more than thirty conferences, meetings, workshops, and advisory panels
withmore than 1,000 State and local officials, and private parties covering a wide range of financing topics.
These have included watershed management, brownfields redevelopment, drinking water and wastewater
financial planning, stormwater runoff, environmental business opportunities, and solid waste management
Network centers have developed detailed training courses on innovative financing alternatives. They have
also produced approximately fifty guidance documents, reports, articles, and models on these and other
environmental financing topics.
Potential Use: The Network has the capacity to assist many more of the large numbers of State, local
and private parties who need to identity and access suitable financing tools. It could grow without
expanding by allowing individual Centers to set up satellite arrangements with other universities in its EPA
Region. For example, the Cleveland State EFC in Ohio might link with institutions in Wisconsin,
Minnesota, Illinois, etc., to workjointly on specific brownfields projects.
Advantages: Each EFC has its own environmental finance speciality(ies). The Network is highly
leveraged in that it taps the expertise(s) of each, as well as the strengths of the universities at which they are
located. Network centers are well distributed and well positioned around the country. By sharing
information and serving as a clearinghouse, the Network is able to efficiently help States and localities
nationwide identify and access suitable environmental financing approaches.
Limitations: The EFC Network and individual centers are generally not able to provide direct financial
assistance for environmental activities to State and local governments and businesses. All fifty States are
not yet covered by tiie program.
Reference for Further Information: U.S. EPA, Office of the Comptroller, Environmental Finance
Program, 401 M Street, SW, Washington, DC 20460, Mail Code: 2731R, Contact: Vera Hannigan at
hannigan.vera@.epa.gov. EFC Network information can also be accessed via the Environmental
Finance Program's home page on the World Wide Web located at http://www.epa.gov/efinpage
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REGION 6 EFC at the UNIVERSITY of NEW MEXICO
Description: Established in 1992, tiie University of New Mexico Environmental Finance Center (UNM-
EFC) is located at the New Mexico Engineering Research Institute. UNM-EFC provides technical
assistance to federal, State, and local governments and focuses on public and private water systems. The
Center seeks to identify viable financing options and promote low-cost, alternative, and appropriate
technologies for environmental projects that strengthen 1he movement toward sustainable development.
The UNM-EFC seeks to develop and implement affordable pollution prevention and source reduction
approaches, when possible.
Actual Use: The UNM-EFC has aided New Mexico counties on the US-Mexico border with meeting
environmental infrastructure needs by analyzing Hie feasibility of small regional water systems. The EFC
has developed benchmark criteria as an assessment tool/methodology to evaluate the viability of small., rural
water systems. The Center is providing assistance to New Mexico State agencies in developing and
implementing a program to enhance resources available for small system capacity development. This work
has provided a model for mobilizing water systems to better meet Ihe small system capacity/viability
requirements of the Safe Drinking Water Act.
Potential Use: The UNM-EFC is undertaking new projects in a variety of environmental areas and
locations. These include brownfields site redevelopment projects, a small system rate structuring for the
Texas Natural Resources Conservation Commission (TRNCC) using expert rate setting, impact fee, and
financial planning computer software known as RateModProrM, municipal water conservation projects, and
small system capacity development analysis for the Pueblo of Jemez, New Mexico and the TNRCC
Advantages: The UNM-EFC participates fully in EPA's university-based Environmental Finance Center
Network. Through its own expertise, the sharing of information and expertise between centers, and use
of tie Network as a clearinghouse on environmental financial issues, UNM-EFC is able to greatly leverage
the technical assistance on environmental finance that it provides to Region 6 State and local governments.
Limitations: Although UNM-EFC identifies financing options and low-cost, alternative and appropriate
technologies for environmental projects, tiie Center is not a funding resource.
Reference for Further Information: The University ofNew Mexico Environmental Finance Center, 901
University Blvd. SE, Albuquerque, NM 87106, Telephone: 505-272-7356, Fax: 505-272-7203. The
UNM-EFC World Wide Web site is located at http://nmeri.unm.edu/ta/efc.htm
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REGION 3 EFC AT THE UNIVERSITY OF MARYLAND
Description: The Environmental Protection Agency (EPA)Environmental Finance Center (EFC) in Region
3 is part of the University of Maryland's Coastal and Environmental Policy Program. It is hosted by Ihe
Maryland Sea Grant College, and was created to train, provide assistance, and act as an advisor to State
and local governments/private parties on environmental finance issues.
Actual Use: To help communities assess and analyze funding options for specific environmental projects,
the EFC has staged over a dozen finance charrettes — forums for frank discussions between local officials
and technical/finance experts. Charrette issues have included wastewater treatment, stormwater
management, solid waste facilities, drinking water systems, costal zone protection, and credit access for
small businesses. The EFC has also produced reports on financing alternatives for Chesapeake Bay
cleanup for setting up riparian buffers in the Bay watershed. Another EFC publication assists air program
agencies with financial management of the Clean Air Act Title V program The EFC also has a pilot project
showing Ihe feasibility of extending the State Revolving Fund (SRF) program to sustainable agriculture
practices. Finally, the EFC has co-sponsored Regional conferences to discuss and disseminate information
on financing environmental projects.
Potential Use: The EFC is designing educational workshops for environmental finance issues that are best
addressed via a local watershed-based strategy. For Maryland's multi-county, watershed-specific,
"Tributary Teams", it is developing workshops to identify fiscal problems relating to nutrient reduction,
policy making processes, and major fiscal options. Excess nutrients have been identified as a major cause
of Chesapeake Bay pollution. In cooperation with EPA, the EFC is conducting a series of workshops
nationwide to encourage SRFs to move to an integrated watershed planning and priority setting process
in considering loan applications to their programs..
Advantages: As part of the University of Maryland's Coastal and Environmental Policy Program, the EFC
draws on die expertise of professionals in the fields of environmental research, agriculture, engineering, law,
and policy as a holistic response to addressing environmental finance issues. Being part of EPA's network
of university-based EFCs and working with its Environmental Finance Program, provides access to
information on environmental finance from around the nation.
Limitations: 'While able to design and demonstrate ways to lower the cost of environmental facilities and
services, the EFC does not provide direct funding for environmental projects.
Reference for Further Information: Region 3 EFC, University of Maryland Sea Grant College, 0112
Skinner Hall, College Park MD 20742. Phone: 301-405-6384. Fax: 301-314-9581. E-mail:
hickey@umbi. umd.edu; World Wide Web: http://www.mdsa.umd.edu/JVtDSG/EFC/index.htmi
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REGION 2 EFC at the MAXWELL SCHOOL, SYRACUSE UNIVERSITY
Description: Established in 1994, the Syracuse University Environmental Finance Center (EFC) is
located at 1he Maxwell School of Citizenship and Public Affairs. TTie EFC provides training, technical
assistance, and outreach services to State and local officials relating to financing environmental systems. The
EFC has undertaken projects ranging from studies of risk and finance decision-making methodologies to
financing strategies and delivery mechanisms for funding water infrastructure. It has interests in the full-cost
pricing of environmental services, water and wastewater privatization, and small community environmental
infrastructure needs.
Actual Use: In 1996, the EFC completed a Congressionally-requested report for the Environmental
Protection Agency (EPA) Office of Water examining alternative strategies for financing the water and
wastewater infrastructure needed to meet national environmental mandates. The EFC also has conducted
an analysis of the economic and fiscal consequences for Onondaga County (Syracuse) ofthe court-ordered
remediation of Lake Onondaga It has completed demonstrations and training on the use of an EPA-
funded computer software program for setting water and wastewater rates. The EFC also co-sponsored
a number of conferences/meetings with the New York State Environmental Facilities Corporation.
Potential Use: The EFC plans to conduct seminars and training throughout New York and the rest of the
Region on water/wastewater rate-setting. The EFC plans to work with Cornell University and the
Rensselaer Polytechnic Institute on a joint effort to form an Environmental Community Assistance
Consortium (ECAC). The ECAC would assist New State and local officials in New York by providing
training, institutional expertise, education, and outreach to assist in implementing State environmental
programs.
Advantages: The Syracuse EFC benefits from the combined expertise of the network of university-based
EFCs. Further, the EFC enjoys close access to the expertise at the Maxwell School, which is renowned
for its premier public adminislration graduate programs and high quality, practitioner-focused training.
When and if operational, the ECAC would be an intra-university partnership tapping the further expertise
of Cornell University and the Rensselaer Polytechnic Institute.
Limitations: EFC program funding and staff resources are currently limited. Efforts are being made to
expand the center's financial base to expand services. The EFC is not a funding source.
Reference for Further Information: U.S. EPA Region 2 Syracuse University Environmental Finance
Center, The Maxwell School, 219 Maxwell Hall, Syracuse, New York 13244-1090. Phone:
315-443-943$. Fax: 315-443-5330. World Wide Web: http://www.maxwell.syr.edu/exed/efc/
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REGION 9 EFC at CALIFORNIA STATE UNIVERSITY at HAYWARD
Description: The Environmental Finance Center, Region 9 (EFC9), is affiliated with California State
University at Hay ward (CSUH), and exists to benefit Environmental Protection Agency (EPA) Region 9,
which includes Arizona, California, Hawaii, Nevada, Guam, and the Marshall Islands. The mission of the
EFC9 is to educate and assist public and private business/financial managers, owners, and advisors in the
application and use of innovative financing techniques that further the implementation of environmental
programs and projects, EFC9 also seeks to support the establishment of environmental businesses and
environmental technology development enterprises.
Actual Use: To assist environmental industry entrepreneurs in understanding the dynamics of their markets
and identifying those market segments with the greatest potential, EFC9 has developed profiles of the U.S.
environmental industry, environmental industry labor market models and databases, a 100 page directory
of funding sources, and environmental education and training programs. The EFC has developed a
financial model for assessing the viability, short- and long-term financial characteristics, and capital needs
required for establishing and operating an Environmental Technology Incubator. EFC9 has also hosted
numerous Environmental Business Opportunity conferences throughout California and in Hawaii.
Potential Use: EFC9 will be working to complete development and begin implementation of an innovative
financing model designed to stimulate capital investments in the environmental industry. The EFC plans to
inventory and assess current/planned water sy stemimprovements, expansions, and additions in EPA Region
9. EFC9 also looks forward to hosting and/or participating in future conferences involving such diverse
topics as environmental business opportunities and ways to improve and finance the water systems of small
and rural counties and cities.
Advantages: The EFC possesses considerable technical expertise on matters relating to the environmental
industry, and through its participation in the Environmental Finance Center Network the diverse expertise
of the other EFCs. In addition, EFC9 benefits from the expertise of the faculty at CSUH and from its
contacts and connections with other colleges, universities, and affiliated laboratories through the State of
California's renowned educational systems.
Limitations: While clients can benefit from EFC9's expert advice and technical assistance/outreach, the
center is unable to provide direct financial support to businesses and communities in the Region.
Reference for Further Information: U.S. EPA EFC9, Building 7, Alameda Point, 851 West
Midway Avenue, Alameda, California 94501, Telephone 510-749-6867, Fax: 510-749-6862, World
Wide Web: www.greenstart.org/efc9/.
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REGION 5 GREAT LAKES EFC at CLEVELAND STATE UNIVERSITY
Description: In May 1995; the Environmental Protection Agency (EPA) established the Region 5 Great
Lakes Environmental Finance Center (EFC) in the Urban Center at Cleveland State University (CSU).
The Great Lakes EFC serves a six-State area, including Ohio, Indiana, Illinois, Michigan, Wisconsin, and
Minnesota The primary mission of the EFC is to assist State and local government and private sector
organizations in devising effective financing strategies for environmental improvement projects. It
accomplishes this by providing high-quality technical assistance and training services to its clients. While
the EFC's chief client is the public sector, it has steadily increased services to banks, insurance companies,
environmental consultants, law firms, and olher private businesses serving the environmental industry.
Actual Use: Hie Region 5 EFC's initial major focus has been on brownfields site redevelopment This
involves the financial issues affecting the availability of credit and financial tools and incentives to spur
investment in abandoned commercial and industrial* sites. These sites are a major constraint to the
redevelopment of central city neighborhoods, which desperately need new jobs and investment The issue
is atop priority in all of the Great Lakes region's major cities, including many small and medium-sized cities.
Other areas of importance for the EFC are environmental facility privatization and market-based pollution
prevention, both of which are emerging strategies cities are examining to achieve more cost effective
environmental cleanup-up goals.
Potential Use: The EFC plans to work more closely in joint projects with other centers. It will be
collaborating with the Region 9 EFC in a two-city demonstration project to develop innovative regional
strategies to increase the demand for pollution prevention activities by smaller companies. The EFC will
continue and expand its efforts to provide on-site advisory assistance to Midwestern cities In addition to
working with Benton Harbor, Michigan, the plans to conduct technical assistance workshops in five other
Midwestern cities in 1997,
Advantages: The EFC can tap the expertise and resources of CSU's Urban Center as well as the rest
of the University. It can also tap the expertise and contacts of the other centers in EPA's EFC Network
and Ihose of EPA's Environmental Finance Program in Washington, DC.
Limitations: Most EFC activities are concentrated in the six-States comprising EPA Region 5.
The EFC provides financial technical assistance and outreach, but no direct funding support.
Reference for Further Information: Region V Great Lakes EFC, the Urban Center at Cleveland State
University, Economic Development Program, UB 215, Cleveland, Ohio 44115, Telephone: 216-687-
6947, Fax: 216-687-9227, World Wide Web site: http://www.csuohio.edu/glefc/.
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REGION 10 EFC at BOISE STATE UNIVERSITY
Description: The Environmental Protection Agency's (EPA's) Region 10 Environmental Finance Center
(EFC) was created in 1995 and is contained within the Public Affairs Program of Ihe Boise State University
(BSU) College of Social Sciences and Public Affairs. The EFC serves the Pacific Northwest and
Intermountain States of Alaska, Idaho, Oregon and Washington, The EFC seeks to assistthese States and
their communities on environmental financing issues, particularly with regard to drinking water system
capacity assessment and the needs of small communities and systems.
Actual Use: The EFC has been an important partner to State and local governments in Region 10 in
addressing financing issues relating to unfunded and underfunded environmental mandates in small
communities. Program faculty, working with staff from Ihe State of Idaho, have been national leaders in
developing multi variate drinking water capacity assessment and strategic planning approaches similar to
those in the Safe Drinking Water Act Amendments of 1996. The EFC has been working to improve 1he
financial and managerial capacities of public water and wastewater treatment systems.
Potential Use: The EFC seeks to provide Ihe following technical assistance and outreach services:
workshops, conferences, training seminars, and formal education directed at expanding Ihe ability of public
and private leaders to address environmental problems; practical guides, handbooks, and reports on
financial and management issues relating to environmental systems; assistance to local and tribal
governments and other publi c water and wastewater systems to improve financial management capabilities
and, where appropriate, to increase their use of alternative approaches to traditional finance and revenue
raising methods; and initiatives to foster regional partnerships in improving public management and
innovative financing techniques.
Advantages: The Region 10 EFC participates in EPA's university-based Environmental FinanceNetwork.
Using its own expertise, the sharing of information and expertise between centers, and using Ihe Network
as a clearinghouse on financing issues, the EFC is at BSU is able to assist in addressing the how-to-pay
issues of environmental compliance in Region 10.
Limitations: Although the EFC helps communities to address financing options, low-cost alternative and
appropriate technologies, and appropriate technologies and management techniques to meet infrastructure
challenges, the EFC is not itself a funding source.
Reference for Further Information: The Environmental Finance Center at Boise State University, 1910
University Drive, Boise, ID 83725, Telephone: 208-385-4293, Fax: 208-385-4370, E-mail:
bjarock@idbsu.edu/efc, Web site: http://sspa.boisesfate.edu/cfc/iiidex.html
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REGION 4 EFC at the UNIVERSITY OF NORTH CAROLINA
Description: This prospective Environmental Protection Agency (EPA) Region 4 Environmental Finance
Center (EFC) is contained within the Economic Development Office of the University of North Carolina
(UNC) at Chapel Hill. The UNC EFC primarily will serve the Southeastern United States - including
Alabama, Florida, Georgia, Kentucky, North Carolina, South Carolina, and Tennessee. The EFC's initial
expertise will be in the areas of environmental finance, management and planning. The Center recognizes
the importance of economic development to environmental infrastructure and to the provision of truly
sustainable environmental services.
Actual Use: The North Carolina EFC's initial core mission will focus on Ihe environmental financing
needs of small- to medium-sized communities, particularly those considering interlocal or regional
arrangements for providing environmental infrastructure. In this regard, the EFC's staff has begun working
with representatives from four counties in the North Carolina central coastal plain to help promote joint
solutions to critical wastewater issues on that coast The EFC is developing an approach involving
enhanced local planning and plans to prepare one or more case studies during and/or upon completion of
Ibis project. The EFC also has begun working wife the Eastern Band of Cherokee Indians and the North
Carolina Attorney General's office to advise the Tribe on accessing State resources for environmental
financing needs.
Potential Use: The North Carolina EFC intends to assemble a group of expert advisors drawn from
academia, government, and mission-related non-governmental organizations (NGOs) to help set future
directions and assess projects. The EFC also plans to develop a matrix of contacts for use by staff and
clients on any particular project. The EFC recognizes the need for constructing an Internet web site and
developing the information management tools necessary to carry out its planned environmental and finance
missions.
Advantages: The Region 4 EFC located at fee University of North Carolina hopes to become one of fee
university-based centers participating in EPA's Environmental Finance Network. Using its own expertise
in a number of areas, fee sharing of information and expertise between centers, and using fee Network as
a clearinghouse on financing issues, fee EFC at UNC will be able to assist in addressing fee how-to-pay
issues of environmental compliance in Region 4 and beyond
Limitations: The EFC's program funding and staff resources are currently quite limited. The EFC plans
concentrated efforts to expand fee center's financial base in order to expand services. The EFC is not a
funding source for environmental financing needs. ,
Reference for Further Information: U.S. EPA Region4 (prospective) Environmental Finance Center
atfee University of North Carolina, Office of Economic Development, CB#3435, Chapel Hill, NC 27599,
Telephone: 919-962-8494, Fax: 919-962-5824, E-Mail: mlugeivgtemail.imc.edii
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REGION 4 EFC at the UNIVERSITY OF LOUISVILLE
Description: This prospective Environmental Finance Center (EFC) at the University of Louisville (UL)
is located in the University's Kentucky Institute for the Environment and Sustainable Development The
UL EFC's primary service area will be the Southeastern United States - encompassing Alabama, Florida,
Georgia, Kentucky, North Carolina, South Carolina, and Tennessee. The EFC's staffhas expertise and
interest in environmental policy and planning, economic development, environmental and other public
utilities, sustainable development, urban sprawl, brownfields redevelopment, and cost-benefit analyses.
Actual Use: The prospective Louisville EFC is currently developing a detailed work plan in consultation
wnhlhe Environmental Protection Agency's (EPA's) Region 4 Office in Atlanta, GA The UL EFC is also
meeting with the other Region 4 EFC located at the University of North Carolina in Chapel Hill to develop
joint environmental finance work projects, as appropriate.
Potential Use: The EFC Staffs wide range of expertise gives it considerable leeway in determining the
Center's future work areas. Examples of possible future work areas include brownfields finance,
environmentally sustainable development/smart growlh, multi-media environmental revolving funds, rate-
setting for environmental infrastructure services, and capital access for small businesses and businesses in
the environmental goods and services industry.
Advantages: The Region 4 EFC located at the University of Louisville hopes to become one of the
university-based centers participating in EPA's Environmental Finance Network, and one of two in EPA
Region 4. Using its own expertise in a number of areas, sharing of information and expertise with other
centers, and using the Network as a clearinghouse, the Louisville EFC will be able to assist communities
in Region 4 and beyond in addressing the financial components of environmental compliance issues.
Limitations: the EFC is in the early stages of its development The EFC itself is not a source of money
to help meet environmental financing needs.
Reference for Further Information: U.S. EPA Region 4 (prospective) Environmental Finance Center
at the University of Louisville, Kentucky Institute for the Environment and Sustainable Development, 203
Patterson Hall, Louisville, KY 40292, Telephone: 502-852-1851, Fax: 502-852^677, E-Mail:
rabam01@ulkvum.louisviMe.edu
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ENVIRONMENTAL PROTECTION AGENCY
ENVIRONMENTAL FINANCE PROGRAM
Description: The Environmental Protection Agency's (EPA's) Environmental Finance Program (EFP) is
a small, multi-media effort that seeks to bridge the gap between the growing costs of environmental
protection and'the ability of governments and the private sector to meet those costs. Drawing on the
expertise of EFP staff, the Environmental Financial Advisory Board (EFAB) and the Environmental Finance
Center (EFC) Network, the EFP works to lower costs, avoid costs, increase efficiencies, stimulate public
and private investment, and build financial capacity by creating partnerships with State and local
governments and Ihe private sector to help fund environmental needs.
Actual Use: The EFP provides professional staff support to EFAB. EFAB is a federally chartered
advisory board composed of finance experts that provides advice and analysis to EPA on how to pay for
environmental protection. To date, EFAB has produced numerous advisories and reports on a wide range
of environmental financing topics. For more information on EFAB, see Hie immediately prior tool in tins
section, Environmental Financial Advisory Board.
The EFP also manages EPA's network of university-based, regional EFCs. These EFCs provide State
and local officials and small businesses with training, advisory services, publications, and analyses on
environmental financing trends and techniques. The eight-university network currently includes the
University of New Mexico, University of Maryland, Syracuse University, California State University at
Hayward, Cleveland State University, Boise State University, University of North Carolina and University
of Louisville.
Potential Use: The EFP could take additional steps to improve its efforts in working more closely wilh
all EPA program offices. It could also seek within resource constraints to expand its efforts in working with
those EPA Regions not having EFCs.
Advantages: The EFP provides EPA wilh an integrated, multi-media environmental financing focus.
Through EFAB and the EFCs, the Agency can access real-world, public finance/investment banking
expertise which it does not have and could not afford to obtain. Working wilh these groups, the EFP is
able to greatly leverage its own financing expertise and resources.
Limitations: The EFP is small and cannot work with all EPA offices at once. Due to resource constraints
and tiie demonstration nature of the EFC concept, there are EFCs in only seven Regions.
Reference for Further Information: U.S. EPA, Office of the Comptroller, Environmental Finance
Program, 401 M Street, SW, Washington, DC, 20460, Mail Code: 2731R, Fax: 202-565-2587, Contact
• George Ames at ames.george@epa.gov, Internet web site: http://www.epa.gov/efinpage.
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ENVIRONMENTAL PROTECTION AGENCY
ENVIRONMENTAL FINANCIAL ADVISORY BOARD
Description: The Environmental Financial Advisory Board (EFAB), a federally chartered advisory board
operating under the Federal Advisory Committee Act, provides independent advice to the Environmental
Protection Agency (EPA) on environmental finance issues. The Board consists of nationally recognized
experts drawn from government; the finance, banking, and legal communities; business and industry; and
national organizations.
Actual Use: EFAB has an impressive record, producing more than over twenty major reports and
advisories since 1989. The Board has identified numerous policy and program options across a broad
spectrum — incentives and revenues; environmental costing; institutional efficiencies; outreach and
coordination; and rural, urban, and international - that seek to lower the costs of environmental protection,
increase public and private investment, and build State and local financial capacity to carry out
environmental programs. Examples of EFAB work includes reports on: financing brownfields
redevelopment, Superfund leveraging, intemational/NAFTA implementation, EPA's Safe Drinking Water
Act guidance, finance options to implement the Clean Air Act, the integration of environmental risk and
finance, and small businesses' problems in accessing capital. EFAB continues to work with EPA's
Environmental Finance Centers (EFCs), with members advising the EFCs and serving on EFC-sponsored
expert finance panels (charrettes) designed to help local governments and small businesses.
Potential Use: Senior EPA managers could more frequently request lhat the Board address financing
issues related to important and topical environmental protection activities, including legislation and
regulatory matters.
Advantages: EFAB provides EPA with real-world public finance/inveslment banking expertise which the
Agency does not possess, nor can it afford to pay to retain the services of the typical member. The only
realistic way to access such expertise is on a volunteer, advisory basis.
Limitations: As a federal advisory committee, the Board's recommendations are purely advice and EPA
may choose not to act on them. Also, by the nature of the advisory board process, the Board's
recommendations are developed by a group of approximately twenty-five individuals, and not by an all-
inclusive, consensus development process encompassing all interested stakeholders.
-!
Reference for Further Information: U.S. EPA, Office of the Comptroller, Environmental Finance
Program, 401 M Street, SW, Washington, DC, 20460, Mail Code: 2731R, Fax: 202-565-2587, Contact:
Alecia Crichlow at crichlow.alecia@epa.gov. EFAB information is also available on the World Wide
Web at http://www.epa.gov/efinpage.
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FINANCE CHARRETTES
Description: A "finance charrette" is a forum where a regulated entity meets with a panel of finance
experts from Hie public and private sectors that offers advice and recommendations on finance issues faced
by that entity. The charrette technique has been pioneered in the environmental finance field by 1he EPA
Region 3 Environmental Finance Center (EFC) at the University of Maryland at College Park (see Section
5.A., Region 3 EFC at the University of Maryland). The public sector expert participants come from
interested federal and State agencies. The private sector experts are drawn from business and industry,
banks and other financial institutions, and the professional consultant services arena. Typically, a charrette
lasts a half day beginning with a description of Hie problems by, for example, officials from a local
government, followed by questions and answers with the panel, and report out by panel members on the
actions they recommend as individuals and as a group. The proceedings are taped and results summarized,
Actual Use: Through April 1999, Ihe University of Maryland EFC has developed and conducted more
lhan twenty charrettes examining the environmental financing problems of communities, counties, and
businesses in the mid-Atlantic region and across the nation.
Potential Use: Charrettes could be used by colleges, universities, and othertechnical assistance providers
nationwide to determine, evaluate and help solve Ihe environmental financing problems facing governments,
communities, and businesses.
Advantages: Charrettes have proven to be a highly effective outreach tool in providing useful advice and
recommendations to local governments not only on the environmental financing problem that brought them
to Ihe table to begin with, but also on other issues lhat they might not have been aware of. A significant
spinoff benefit has been that the real world information gleaned from the charrettes can be used to develop
and improve finance courses offered by EPA's network of eight university-based Environmental Finance
Centers ( see tool listings on the EFCs in this section).
Limitations: To maximize the panel's contribution, it is essential to give them clear, accurate and complete
information on the issue prior to the charrette. Political issues disguised as finance issues need to be
weeded out in advance. The charrettes undertaken to date have tended to work best with communities
of populations under 50,000.
Reference for Further Information: Region 3 EFC, University of Maryland Sea Grant College, 0112
Skinner Hall, College Park MD 20742, Telephone: 301-405-6384, E-mail: hickey@umbi. umd.edu.,
World wide web: http://www.mdsg.umd.edu/MDSG/EFC/index.html.
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NATIONAL TECHNICAL ASSISTANCE PROGRAMS
(Non-profit)
Description: National non-profittechnical assistance entities that facilitate the financing and implementation
of environmental projects and programs. Such entities can include non-profit organizations ranging from
environmental media-based associations to community-focused programs to university-based groups to
professional associations and organizations to cooperative networks.
Actual Use: There are a significant number of excellent nonprofit national technical assistance organizations
operating in the environmental arena Some good examples of this type of organization include the
American Waterworks Association, the Environmental Protection Agency's (EPA's) network of eight
university-based Environmental Finance Centers, the National Rural Water Association, the six Rural
Community Assistance Programs, and West Virginia University's Environmental Services and Training
Division.
Potential Use: There is a great need in communities, especially in the thousands of smaller ones, for
technical assistance and outreach related to financing environmental systems and activities. As both federal
and State budget constraints continue, the costs of environmental compliance grows, and communities face
increasing demands in all service areas, this need for financial technical assistance will grow even further.
Advantages: Many national technical assistance organizations have accumulated considerable experience
and developed significant technical expertise in dealing with communities and their environmental and
financing problems. The best of these organizations have earned the hard-won confidence of their client
communities and other groups.
Limitations: Most technical assistance organizations usually do not provide any significant direct financial
assistance to communities for environmental activities. Furthermore, providing financial technical assistance
and/or environmental assistance may be often only one part of the overall mission of many national technical
assistance providers.
»
Reference for Further Information: American Water Works Association, 6666 West Quincy Avenue,
Denver, CO 80235. Phone: 303-794-7711. U.S. EPA Environmental Finance Center Network: see
Page 5A-10. National Rural Water Association, P.O. Box 1428, Duncan, OK 73534. Phone: 405-252-
0629. Rural Community Assistance Programs, 602 South King Street, #402, Leesburg, VA 22075.
Phone: 703-771-8636, Also, see Section 5 A., Rural Community Assistance Corporation and West
Virginia Environmental Services and Training Division
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i
RETIRED VOLUNTEERS
Description: A group of retired environmental finance practitioners could make their professional services
available to small local governments and businesses on a voluntary basis. The program could be publicly
or privately sponsored or supported by some combination of public-private partnership. The assistance
offered would be advisory in nature, extending to such matters as suggestions for raising revenues to finance
environmental improvements, review of capital programs, tracking new developments in environmental
finance, and assisting at meetings with citizens and regulatory officials. Travel and living expenses could be
paid by host communities/businesses or via cost-sharing arrangements with sponsoring organizations.
Actual Use: None currently known involving this type of technical assistance. However, the Senior
Corps of Retired Executives (SCORE) program of the Small Business Administration is a good example
of this outreach technique. SCORE volunteers assist small businesses with management issues. No
compensationis paid, but volunteers are paid for "out-of-pocket" expenses. The programhas over 12,000
volunteers nationwide. Readers are encouraged to let us know of any other examples by filling out a blank
tool form (see Appendix F).
Potential Use: There is great potential use for this tool given the need by many smaller communities and
businesses for financial technical assistance. Volunteer assistance could easily be linked to other outreach
efforts such as follow-up to a finance charrette (see in this section, Finance Charrettes) and/or a water
and wastewater rate model workshop (see in Section 5.B., Rate Models).
Advantages: Useful, professional financial outreach services could be provided to needy customers at
very low costs. Retired volunteers could also help give State and federal environ- mental officials a more
complete and clearer picture of the nature of financing problems faced by small local governments and
businesses. This knowledge could help State and federal officials improve their regulatory programs as well
as the content and delivery of technical assistance.
Limitations: Connecting volunteers with communities/businesses takes a lot of up-front work. Help
provided is only as good as the volunteer. Job benefits such as workmen's compensation can be a
problem. Volunteer programs must not to compete unfairly with the private sector.
Reference for Further Information: SCORE Association, 409 3rd Street, SW 6th Floor, Washington,
DC 20024, Telephone: 800-634-0245, World Wide Website: http://www.score.org/
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t
RURAL COMMUNITY ASSISTANCE CORPORATION
Description: The Rural Community Assistance Corporation (RCAC) is a recognized 501(c)(3) nonprofit
organization. RCAC seeks to improve the quality of life for rural communities and disadvantaged people
in 12 western States: Alaska, Arizona, California, Colorado, Hawaii, Idaho, Montana, New Mexico,
Nevada, Oregon, Utah, and Washingtoa Working with rural governments and community organizations,
RCAC provides a wide range of development assistance involving housing, environmental services, local
organizational capacity, and information and outreach. RCAC environmental activities focus on improving
local drinking water, wastewater, and solid waste management and helping communities comply with
environmental requirements.
Actual Use: RCAC provides environmental training and technical assistance to more than 120
communities and small utilities each year. It helps these entities to comply with federal and State drinking
water standards, reduce or eliminate water pollution, develop and implement low-cost water and
wastewater systems, train water, wastewater, and solid waste operators, and acquire affordable
environmental systems. In Fiscal Year 1994, RCAC leveraged more than $18 million for water and
wastewater facilities development and trained more than 1500 public officials and citizens. The division
also provides help to more than 60 native American Tribes in 75 communities. This work includes
evaluating the management of wastewater facilities, developing rehabilitation plans for environmental
systems, producing reference materials, and assisting in disputes resolution.
Potential Use: RCAC's community-based approach could be successfully applied in many more small
communities throughout its 12 State service area The assistance that RCAC provides in those States could
be replicated by similar nonprofit technical assistance providers throughout the rest of the country. Given
adequate resources, RCAC could expand the types of assistance that it provides.
Advantages: RCAC stresses low-cost and low-tech solutions whenever possible and appropriate. In
almost twenty years of working with small communities and developing solutions to their environmental
problems, RCAC has developed considerable expertise and earned the hard-won confidence of rural
communities in its service area
Limitations: RCAC does not assist medium-sized and larger communities/utilities, and does not possess
the resources to help all of the small ones. It works only in 12 States located in the western United States.
Other rural assistance providers run programs that cover the remaining 38 States.
Reference for Further Information: Rural Community Assistance Corporation, 212519th Street, Suite
203, Sacramento, California 95818, Telephone: 916-447-2854, Fax: 916-447-2878, RCAC's
homepage on the World Wide Web: http://www.rcac.org/index.htm
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SELF-HELP
Description: Self-hdp is an "in the field" strategy supported by many State government and
nongovernmental organizations that helps small communities help themselves in solving their environmental
problems. Self-help has proven a highly effective, low-cost approach to providing environmental services
and achieving compliance in small communities. It depends heavily on local residents to contribute their
time, labor and, on occasion, material and equipment in getting the job done. Alocal project coordinator
or "sparkplug" is essential to success. In the self-help paradigm, State and federal agencies are called upon
to move to supporting roles - providing outreach and technical services.
Actual Use: The self-help approach was pioneered in the State of New York by the Rensselaerville
Institute. The Institute helped New York State create its "Self-Help Support System,", a ten-year old
program that has saved nearly 150 New York towns more than $17 million over the cost of initial job
estimates. The Institute has taken its programnationwide supporting self-help projects and related activities
in Arkansas, Maryland, North Carolina, Oklahoma, and Washington State. The self-help approach has
also been employed in countries worldwide - including Australia, Nicaragua, Japan and Finland.
Potential Use: Self-help could be effectively used to implement environmental projects and activities in
thousands of communities nationwide. The approach could provide substantial assistance to the 75% of
American communities with less than 10,000. Based on past experiences it could be especially effective
with regard to small capital projects providing drinking water and wastewater treatment services.
Advantages: The approach offers a proven, viable local alternative to implementing local environmental
that holds down costs, sizes technology to needs, builds local capacity, and supports community
independence. Self-help projects can be implemented in a very timely manner due to the lack of
bureaucratic red tape.
Limitations: Self-help will not work in every commurrily. There has to be in the community a minimum
level of consensus of purpose as well as confidence in local abilities to succeed with the project. In
addition, the approach does not work very well in the absence of a local "sparkplug" or champion pushing
the project along.
Reference for Further Information: See "The Self-Help Handbook" by Jane W. Schautz, available
through the Rensselaerville Institute, Rensselaerville, NY, Telephone: 518-797-3783, Fax: 518-797-
3692.
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WEST VIRGINIA UNIVERSITY
ENVIRONMENTAL SERVICES AND TRAINING DIVISION
Description: West Virginia University's Environmental Services and Training Division (ESTD) is an
important national environmental technical assistance program directed at small cornmunities. The Division
is comprised of four major federally-supported technical assistance efforts:
l,)National Small Flows Clearinghouse - proves technical information, educational products, and
assistance on wastewater issues to small communities;
2.}National Environmental Training Center for Small Communities - provides information and
training to small communities on wastewater, drinking water, and solid waste issues;
3.)National Onsite Demonstration Project - manages six. demonstration sites testing alter- native
wastewater solutions for small communities in environmentally sensitive areas; and
4.}National Drinking Water Clearinghouse - provides technical assistance, information, and
educational products relating to drinking water issues to small communities.
Actual Use: ESTD provides free and low-cost information to every State and US territory. It provides
this assistance each year through 30,000 telephone calls, 30,000 computer Bulletin Board System calls,
65,000 product distributions, 100,000 newsletters mailed quarterly, and 10 or more train-the trainer
sessions. ESTD assistance helps small communities to understand environmental and public health
regulations, save or locate money, solve technical problems, learn about alternative technologies, and locate
additional assistance, hi its work with small communities, ESTD seeks through its work to increase the
environmentalknowledge base, spur appropriate technology transfer, create informed decision makers and
problem solvers, and enhance professional skills.
Potential Use: The potential use, and growth of use, of ESTD services is high. Many thousands of
additional small communities could benefit from the environmental information and assistance provided by
ESTD.
Advantages: Access to, and use of, its information/assistance is easy and free or low-cost ESTD
provides a comprehensive one-stop shop for small communities needing environmental information.
Limitations: Providing financial technical information and assistance is only one part of ESTD's overall
work. ESTD's single location limits its ability to deliver field technical assistance nationally.
Reference for Further Information: Environmental Training and Services Division, West Virginia
University, P.O. Box6064, Morgantown, WV 26506-6064, Telephone: 304-293-4191, Fax: 304-293-
3161, Toll Free: 1-800-624-8301, BBS: 1-800-932-7459.
S
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Description:
Actual Use:
OTHER
t
Potential Use:
Advantages:
Limitations:
Reference for Further Information:
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COMPARISON MATRIX FOR
INSTITUTIONAL ARRANGEMENTS
Criteria/
Outreach Tool
*Border Environmental
Cooperation
Commission
Circuit Riders
"Cooperatives
"Cooperative
Extension Systems
* Drinking Water State
Revolving Fund
Capacity Development
"Environmental
Finance
Center Network
*EPA: Environmental
Finance Program
EPA: Environmental
Financial Advisory
Board
"Finance Charrettes
"National Technical
Assistance Programs
(Non-profit)
Actual
Use
Low
Mod.
Low
High
High
Mod.
Mod.
Low
Low
High
Program
Size
Mod.
Low
Mod.
High
High
Low
Mod.
Low
Low
High
Program
Quality
High
Mod.
High
Mod.
High
Mod.
Low
Mod.
High
High
Admini-
strative
Ease
Low-
Mod.
High
Mod.
High
Mod.
High
High
Mod.
High
High
Equity
Mod.
Mod..
Low
Mod.
Mod.
Mod.
Mod.
Low
Mod.
High
Environ-
mental
Impact
High
Mod.
Mod.
Mod.
High
High
Mod.
Mod.
High
Mod.
t
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COMPARISON MATRIX continued
t
Criteria/
Outreach Tool
Retired Volunteers
*Rural Community
Assistance
Corporation
"Self-Help
*West Virginia
University
Environmental
Services and
Training Division
Actual
Use
Low
Mod.
Mod.
High
Program
Size
Low
Mod-
High
Mod.
High
Program
Quality
Mod. -
High
High
High
Mod.
Admini-
strative
Ease
Mod.
High
High
High
Equity
Low-
Mod.
Mod.
Mod.
Mod.
Environ-
mental
Benefits
Low
Mod. -
High
High
Mod.
High-
Mod.-
Low-
High use (over 25 States and many localities); criteria score high (e.g., assistance is
hands-on, easy to use, cost-effective, and project specific)
Moderate use (10-25 States and many localities); criteria score in medium range
Low use (under 10 States and few localities); criteria score poorly (e.g., printed
information only, difficult to access, and not project specific)
*Star indicates comparatively best rated mechanisms
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5.B. ELECTRONIC SERVICES
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5.B. ELECTRONIC SERVICES
Description: Electronic services are forms of electronic technology used by one party to provide
information, training, analyses, advice, and outreach to one or more other parties. These services can
include- but are not necessarily limited to - computer networks, online data bases and libraries, computer
software, and voice, video, and/or data transmission. This last category encompasses such technologies
as facsimile transmissions, computerized telephone referral services, telephone conferencing, and video
conferencing.
Electronic services are the fastest growing method of conveying information in this country and many others,
including environmental and financing information. The use of these services is growing and is increasingly
being incorporated into the routine operations of all levels of government, the private sector, professional
associations non-profit organizations, educational and training institutions, and large numbers of the general
public.
Advantages: Electronic services can greatly facilitate the flow of information and outreach between these
many and often varied parties. These services have the capability of making these exchange processes both
much faster and much more efficient Using electronic services, more people and parties, public and
private, can interact and access significantly more information in much shorter periods of time. Large,
sophisticated users may benefit as much, or even more, from these services as small users.In addition, these
interactions and information exchanges can often be implemented in a more cost-effective manner.
Properly implemented, electronic services can help control resource consumption and pollution by reducing
paper use, cutting transportation and fuel costs, and preventing related air, water and land pollution (and
the need to clean it up).
Limitations: Electronic services in one way are almost the exact opposite of institutional outreach since
most are impersonal. Not everyone has access to, and/or the inclination to use, these types of services.
The costs of obtaining the technological equipment needed can be a financial burdensome, perhaps
prohibitively so to some parties. As with many other complex technologies, not everyone has the necessary
skills to properly use and/or maintain electronic services and any associated equipment The popularity of
an electronic service such as the Internet/World Wide Web may also cause problems. Growth in use can
outstrip the ability of technology vendors to provide and maintain a service. A good example of this
limitation is the serious service outage problems experienced by America On Line, Inc. during the winter
of 1996-1997.
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Summary: The nine electronic services described here are government-sponsored services, with ihe
exception of the World Wide Web which in itself makes many of the olhers possible. Since electronic
services are the fastest growing source of information exchange many other new services are possible.
Some private sector electronic services for businesses are discussed in Section 10 : Tools to Access
Financing for Small Businesses and the Environmental Goods and Services Industry. For almost
any environmental finance problem-solving effort, there is probably existing software that is useful,-or if not,
it could be developed. Suggestions for additional electronic services and software for inclusion in the
Guidebook are most welcome.
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I
LIST OF ELECTRONIC SERVICES
(In Alphabetical Order)
*1. Catalog of Federal Domestic Assistance
*2. EPA: Environmental Finance Program Home Page
3. EPA: Environmental Financing Information Network
*4. EPA: Home Page
*5. FinanceNet
6. Long Distance Learning
*7. Rate Models
*8. The Environmental Hotline, Earth's 911
*9. World Wide Web
* Stars indicate most highly rated mechanisms as described in the Comparison Matrix at the end of the
narratives. See Introduction to the Guidebook for a description of the criteria used. Ratings of "High",
"Moderate", and "Low" are for comparison purposes only, as some ratings are necessarily subjective and
data are incomplete.
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CATALOG OF FEDERAL DOMESTIC ASSISTANCE
Description: The Catalog of Federal Domestic Assistance (CFDA) is agovemment-wide compendium
of federal programs, projects, services and activities which provide grants, loans, and other assistance or
benefits to the American public. The CFDA contains information on financial and nonfinancial assistance
programs administered by departments, agencies, commissions, and other federal government
establishments. Potential recipients of assistance or benefits include, but are not limited to: State, local, and
other governments; non-profit organizations, groups and institutions; private sector for-profit firms,
partnerships and corporate entities; and the general public. The Catalog is updated at least twice a year.
Actual Use: CFDA data is available in multiple formats: hard copy through the World Wide Web,
machine-readable magnetic tape, high-density floppy diskettes, and CD-ROM. These last three formats
contain the text published in the program description section of the CFDA, as well as characteristics data
of coded program information taken from the text Important information provided in the CFDA includes
programfunction, types of assistance, applicants, beneficiaries, circular requirements, obligations, matching
requirements, agency contact information and authorizing legislation. The Catalog is a valuable and widely
used reference document in all of its formats. For example, between January 5,1997, and February 12,
1997, the CFDA's World Wide Web site alone was accessed and searched more than 41,000 times.
Potential Use: The potential future use of the CFDA via its numerous forms, but especially its World
Wide Web site, is large. As more local officials become more computer proficient and more
knowledgeable about the World Wide Web, their use of the CFDA should grow rapidly.
Advantages: Accessing the CFDA by computer through the World Wide Web is fast, easy, and efficient
Summaries and detailed program information on all types of federal assistance from all federal departments,
agencies and other organizations can be accessed and printed.
Limitations: hTformation retrieval may be slowed by growing use of the World Wide Web and
accompanying strains on technical systems support. User uncertainty or lack of specificity as to the agency
and/or assistance program in question can complicate and delay the search for information.
Reference for Further Information: The Catalog can be accessed via the World Wide Web at
http://aspe.os.dhhs.gov/cfda/index.hrra Questions and requests to buy magnetic tapes, diskettes, or
CD-ROM should go to the Federal Domestic Assistance Catalog Staff (MVS), General Services
Administration, 300 7th St, SW, Washington, DC 20407. Phone: 202-708-5126.
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ENVIRONMENTAL PROTECTION AGENCY
ENVIRONMENTAL FINANCE PROGRAM HOME PAGE
Description: The Home Page for the Environmental Protection Agmcy's(EPA's) Environmental Finance
Program(EFP) contains detailed information on the program, its primary components, and important work
products. Primary EFP components include: the network of eight-university based Environmental Finance
Centers (EFCs); the Environmental Financial Advisory Board (EFAB) and the Environmental Financing
MormationNetwork. Important information provided on the home page includes contacts for the EFCs,
selected EFC documents, such as case studies developed through Ihe Region 3 EFC finance charrettes,
the names and affiliations of EFAB members, EFAB advisories and reports; and instructions for accessing
the EFIN database.
Actual Use: The EFP Home Page provides wide, unrestricted, and cost-free public access to a large
number of computer users desiring information on environmental finance and costs. This information,
moreover, is multi-media in scope and covers both the public and private sectors.
Potential Use: The amount of environmental finance information available on the Home Page will continue
to grow and this growing body of information will be electronically available to a growing (perhaps
exponentially) number of Internet/World Wide Web users.
Advantages: Information on the EFP Home Page is currently quickly accessible to a wide variety of
users. Through the electronic medium, users have a central location where they can access important
environmental finance information and contacts.
Limitations: The EFP Home Page is only available to users who have World Wide Web access. Growing
use of Ihe World Wide Web combined with server constraints may limit or slow access to this and other
Home Page sites. The costs of maintaining the Home Page and possible Home Page space limitations may
in the future dictate the volume of information (such as full text documents) that can be put on the Web site.
•-,
Reference for Further Information: The Environmental Finance Program (EFP) Home Page can be
accessed via U.S. EPA's Home Page, http://www.epa.gov, under "Money Matters" or directly at
http://www.epa.gov/efinpage/. The EFP's mailing address is U.S. EPA, Office of the Comptroller,
Environmental Finance Program, 401 M Street, SW, Washington, DC 20460, Mail Code: 2731R, Fax:
202-565-2587, E-mail: GeorgeAmesatames.george@epa.gov.
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ENVIRONMENTAL PROTECTION AGENCY
ENVIRONMENTAL FINANCING INFORMATION NETWORK
Description: The Environmental Protection Agency's (EPA's) Environmental Financing Information
Network (EFIN) provides information on financing alternatives for State and local environmental programs
and projects and small businesses. Information is available through an online database, which contains
abstracts of publications, case studies and contacts, and via the EFIN World Wide Web site at
http://www.epa.gov/efinpage/. The EFIN Center operates an infoline which provides callers wifli
referrals, assistance with accessing and searching the EFIN database and the Web site, and serves as a
point of contact for ordering documents.
Actual Use: Federal, State and local officials, and individuals seeking sources of funding for new
businesses and research use EFIN as a reference service. Users can search the EFIN database or request
tiie librarian to conduct a search for them The EFIN Center also distributes documents published by 1he
Environmental Finance Program (EFP), such as reports and advisories developed by the Environmental
Financial Advisory Board (EFAB) as well as information about projects managed by the Environmental
Finance Center (EFC) network. The EFIN and Environmental Finance Program Home Page are
increasingly being used as a source of information on EFP programs, services and publications.
Potential Use: Through the EFIN Home Page, EFIN will provide electronic information on the EFP
programs and full text of EFP publications, for example, case studies developed from Environmental
Finance Center charrettes. EFIN can also provide links to other sources of information such as EPA's
grant and research programs.
Advantages: EFIN is a central point for environmental financing information. It provides an easily
accessible reference service via the infoline, EFIN e-mail mailbox and a link to the EFIN database via the
EPA's Online Library System Web site.
Limitations: The EFIN database can be difficult to access if the user does not have the proper Telnet or
modem connections, hi addition, there can be a lag time between the time material is received by EFIN
and loaded onto the database.
Reference for Further Information: U.S. EPA, Office of the Comptroller, Environmental Finance
Program, 400 M Street, SW, Washington, DC 20460, Mail Code: 2731R, Infoline: 202-564-4994, Fax:
202-565-2587, E-mail address: efin@epa.gov, Internet access to the EFIN database:
http://www.epa.gov/efinpage/efindata.htm
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ENVIRONMENTAL PROTECTION AGENCY
HOME PAGE
Description: The Environmental Protection Agency (EPA) Home Page provides public access to the
activities and organizational components of the Agency. The Home Page has two sections. The first
section is divided into user groups, such as "Concerned Citizens" and "Small Business and Industry". The
second includes access to the Agency's "Offices, Labs and Regions" and "Projects and Programs". Links
to financial information can'be found under the category "Money Matters".
Actual Use: The EPA Home Page provides the first step in locating information in the EPA. A user can
select a link from the user and resource categories. The EPA Home Page also has both browse and search
capabilities. A user can browse for information on a specific subjects), or search for sites on a topic(s).
There is also the capability to search via zip code.
Potential Use: The EPA Home Page could be more of a source for researching environmental topics
rather than a starting point Currently, there are several levels a user must go through to locate information
• on a specific topic. The Home Page could be restructured to include more information, such as a list of
the "Offices, Labs and Regions" on the page itself. The functions of the Offices and Programs could be
more transparent, and the subjects could be shown on the Home Page.
Advantages: The EPA Home Page provides a fairly comprehensive guide to the many types of
information located on the overall EPA Web site. Interested users are directed to specific areas to begin
their search and further directed at each subsequent step to sub-areas.
• Limitation: There are numerous layers on information on the EPA World Wide Web site and it can take
considerable time to locate information. The current search engine does not always provide relevant
results.
Reference for More Information: U.S. EPA, Information Resource Center, 400 M Street, SW,
Washington, DC 20460, Mail Code: 3404, Telephone: 202-260-8674, Internet/World Wide Web access:
http://www.epa.gov/. There are contacts for various types of questions, which can be accessed by
clicking on the Comments section. This includes general questions, comments and technical assistance.
There is also an e-mail address: public-access@ep3mail.epa.gov.
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FINANCENET
Description: Established in 1994 by Vice-President Al Gore's National Performance Review,
FinanceNet is 1he largest government Internet administrative platform in the world It serves as the
Internet's home for public financial management information. FinanceNet is a worldwide network of
people spanning federal executive agencies, departments and other groups; International, State, local, and
other municipal governments; professional organizations, educational institutions; and the general public.
Actual Use: FinanceNet provides Internet users with access to current and archival electronic reference
libraries of financial legislation, Congressional testimony, executive orders and memoranda, minutes and
highlights of meetings of the U.S. Chief Financial Officers (CFOs) Council (comprised of CFOs from the
24 largest federal agencies and departments), and federal, State, and local government financial circulars,
bulletins, releases, news, notices. It also provides Internet users with access to public Internet mailing lists
and discussion forums covering a wide range of government finance topics to stimulate dialogue, information
sharing and reinvention ideas.
Potential Use: FinanceNet could play an growing role in improving the delivery of government services
by reducing information distribution costs. It could also facilitate access to government information and
build 1he partnerships necessary to make it the electronic vehicle for intra-and inter-governmental
communications, coordination, and collaboration. Governments, public and private organizations, and
individuals involved in financing environmental protection could take an role in such an effort
Advantages: As more people access and participate in FinanceNet, the sources and range of financing
information will grow. FinanceNet users will be able to research topics more quickly and completely.
Government users will able to network more efficiently wilh Iheir peers and keep better track of innovative
developments in financial management The general public will have better access to information on the
activities of their own and other governments.
Limitations: If FinanceNet grows too fast and/or too much, it may become overloaded with information
and users. Information searches may be slowed by irrelevant material and heavy suer traffic. There are
also a lot of people who do not have (and may never have) Internet/World Wide Web access. If
information is distributed electronically, they will not be able to access it
Reference for Further Information: National Science Foundation, 4201 Wilson Boulevard, Arlington
Virginia 22230, Telephone: 703-303-1282. Most importantly, FinanceNet itself can be accessed on the
World Wide Web at http://www.financenet.gov.
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LONG DISTANCE LEARNING
Description: Long distance learning is the use of electronic technology to provide education and training
to and between numerous remote locations. The electronic technologies employed in long distance learning
may include one-way transmission of voice, video, and/or data or two-way sharing of information with or
without video. Long distance learning can be applied in all areas of education, including primary and
secondary schools, higher education, continuing education, corporate training, military and government
training, and professional meetings and conferences.
Actual Use: Universities and colleges, businesses, governments, primary and secondary schools, private
educational vendors, professional associations and organizations, and other groups incorporate long
distance learning in iheir educational, training, and communications programs and activities. For example,
the University of Maryland at College Park held a Teleconference on Environmental Finance in September
1995. Using satellite downlinks to sites in Tennessee and New Mexico, the teleconference was an
interactive vehicle for environmental professionals to discuss options for financing environmental mandates.
The American Bar Association's multi-site teleconference on brownfields redevelopment held in the spring
of 1996 is another example.
Potential Use: The long distance learning/teleconferencing technique could be employed much more
extensively by governments, professional associations and organizations, and educational institutions to
share information on all aspects of environmental protection and finance. It could be especially valuable
in helping to get the word out about new cleanup and financing technologies.
Advantages: Long distance learning permits individuals anywhere in the world with access to the
necessary technical capabilities to participate in the education/training experience. When two-way
communication is available, it allows participants who might otherwise not meet to share information and
discuss important issues. Long" distance learning can be less expensive than traveling to the primary site
from which the education/training originates.
Limitations: There may not be enough individuals at some remote sites to justify the expense of
electronically hooking up with the long distance learning session(s). Many remote sites may have poor
technical capabilities or they may not have the technical capability to hook up at all.
Reference for Further Information: Many colleges and universities nationwide arid across the world
have long distance learning departments or centers. There are numerous sites on the World Wide Web
accessible under the phrase "long distance learning" by using common and popular search engines such as
Alta Vista.
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RATE MODELS
Description: Rate models are expert utility rate-setting, impact fee and'financial planning software for
water and wastewater managers. These models prepare cost-of-service studies and multi-year budget,
rate, and financial forecasts using widely accepted methods. One such model used by the network of eight
Environmental Protection Agency (EPA)-supported Environmental Finance Centers (EFCs) allows users
to define up to thirty-three customer groups or four rate blocks. This model automatically generates flat,
minimum, uniform, and block rates, and impact fee schedules. It also performs "what if analysis and
designs inside/outside or wholesale rates, excess loading, and fire protection charges. This particular model
is suited for smaller systems, and for systems wrtii up to 100,000 connections.
Actual Use: Rate models are being used by local utility managers and finance officers across the country
to set user rates and impact fees. They are also being used to examine alternative funding options, plan and
schedule capital improvements, determine ihe impact of planned improvements on system and individual
customer ability-to-pay, and forecast system budget and financial data
Potential Use: While many medium to large communities can access and afford their own rate models
and/or consultants, low cost models could help thousands of small communities nationwide to develop, set
and test water and wastewater system rates and design. They also could be used by State and federal
officials in financing and regulatory agencies to determine ability-to-pay, review rates and criteria,
determine rates of return, underwrite and size grant/loan assistance packages and terms, and provide
technical assistance to increase local financial and management capabilities.
Advantages: Small community managers can be trained to use models such as the one used by the EFCs
at a low cost. These models can be easily customized by the user to meet the needs of a wide variety of
system sizes. They have multiple rate design options and "smart" defaults that guide users through rate-
setting and cost allocation. Variables affecting rates and finances are available for fast "what if" analysis.
The model used by the EFCs comes with a user guide, QuickStart instructions, sample files, and telephone
support On-site training is available directly or through the EFCs.
Limitations: Rate models require a personal computer and laser j et printer. An Impact Fee Model must
be acquired separately. Some technical training is necessary with any model.
Reference for Further Information: Information on rate models and training conducted at EFCs is
available through U.S. EPA's Environmental Finance Program at 401 M Street, SW, Washington, DC
20460, Mail Code: 2731R, E-mail contact: George Ames at: ames.george@epa.gov. Information on
Ihe model used by the EFCs is also available from RateMod Associates, 4401-A Connecticut Ave., NW,
Washington, DC 20008, Telephone: 202-237-2455, Fax: 202-237-2456.
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THE ENVIRONMENTAL HOTLINE,
EARTH'S 911
Description:. The Environmental Hotline, Earth's 911, is a 24 hour telephone education service that
provides environmental information specific to any "zip code" area in the United States. By dialing atoll-
free phone number, anyone in the country can receive current and detailed information concerning any
environmental media area on issues ranging from recycling business/household waste products - i. e., paper,
plastic, oil, glass, tires, etc to pesticide product registration to air and water pollution. Through the Hotline,
citizens, businesses and governments can both access and provide environmental information by dialing a
1-800 phone number.
The Hotline was established and expanded nationwide through a public-private partnership with the
Environmental Protection Agency (EPA) and several other public/private partners. It is sustained through
the support of private companies and organizations who benefit from the hotline and/or companies and
organizations who support its positive impact on the environment
Actual Use: The Hotline is online and available to everyone in Ihe United States. The hotline can be
accessed by dialing the toll-free phone number, "1-800 CLEANUP", on any telephone from anywhere
in the United States. In its six years of existence, the Hotline has received more than 15 million calls
nationwide.
Potential Use: The Hotline concept could be adapted geographically to any environmental and/or other
subject area of interest to the general public. For example, the concept could be expanded to Mexico,
other counties such as Canada, and even globally.
Advantages: The Hotline provides information free of charge without taxpayer/federal/State government
funding. The fact of having one phone number to call nationwide greatly simplifies for businesses, citizens,
and governments the task of searching for environmental information. The environmental benefits in terms
of pollution prevention and conservation are immense. The accompanying dollar savings are also large and
growing (many millions). The hotline concentrates on proactive solutions.
*
Limitations: In terms of expanding the hotline concept to other subject areas or countries, the basic
problem is simply convincing people of the value of this new way of doing business and providing
information to the public.
Reference for Further Information: Hotline Address: 5110 North 44* St, Suite L120, Phoenix,
Arizona, 85018. The Environmental Hotline, Earth's 911, can be also be accessed at its World Wide Web
site address: http://www.18uOcleanup.org/. E-mail: webmaster@cleanup.org.
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WORLD WIDE WEB
Description: The World Wide Web provides users on computer networks with a means of accessing
information on a wide variety of subjects, from government legislation to personal home pages. The Web
contains an international collection of sites, which are developed by governments, private and commercial
sectors, educational institutions and individuals. The Web operates through hypertext, which provides links
(connections) within the text of a document to other documents or other sites. This can be a link to text
or other media, such as sounds, images or movies. A user selects/clicks on a link to access the next
document. This can lead to another source of information,, creating a "web".
Actual Use: The World Wide Web is the fastest growing, largest means of locating information on atopic
and disseminating information on a product or service. Web users come from all levels and age groups.
Grade school students and scientists use the Web for research on projects. The Web has in many cases
taken the place of the printed document It provides a central location for environmental information, such
as 1he Environmental Protection Agency's Home Page/Web site. This she includes information on the
Environmental Finance Program and other Agency initiatives, which describe their components and link to
contacts and publications (see the EPA Home Page writeup earlier in this section). There are also search
engines, such as Yahoo and AltaVista which assist users in finding anumber of different sites or documents
on their subjects.
Potential Use: As more people access the Web, their sources and range of information will increase.
They would be able to perform research more quickly and from one location. Users who do not have
physical access to hard copies of information could access them electronically. Examples are newspapers
and government reference documents (see earlier in this section the tool, Catalog of Federal Domestic
Assistance). Information providers also could use the Web as a bulletin board to post current and
upcoming events.
Limitations: There is a growing overload of information on the Web, because of unlimited access. When
users conduct searches using aNet Search Engine or even an internal search engine within a site, they could
get many irrelevant hits. In addition, many users have not caught up with the available and often-changing
technology. There are different browsers and several levels of software and hardware. If a document is
in one format, such as PDF, the user might not have the software to read it Finally, there are still many
people who do not have access to the Web. If information is only distributed electronically, they will not
be able to acquire it
Reference for More Information: Contact the access providers, such as America On Line, Netscape,
or Microsoft. Use a Search Engine such as Yahoo! (IM), Lycos, or Infoseek to search for terms on the
World Wide Web.
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Description:
Actual Use:
Potential Use:
Advantages:
OTHER
Limitations:
Reference for Further Information:
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COMPARISON MATRIX FOR ELECTRONIC SERVICES
Criteria/
Outreach Tool
* Catalog of Federal
Domestic Assistance
^Environmental
Finance Program
Home Page
EFEV
*EPA
Home Page
*FinanceNet
Long Distance
Learning
*Rate
Models
*The Environmental
Hotline, Earth's 911
World Wide Web
Actual
Use
High
Mod.
Low
High
Mod.
Low
Low-
Mod.
High
High
Revenue
Size
N.A.
N.A.
N.A.
N.A.
N.A.
N.A.
Low.
Low
N.A.
Program
Quality
High
Mod. -
High
Mod.
Mod.
Mod.
Low
Mod -
High
Mod-
High
High
Admini-
strative
Ease
High
High
Mod.
High
Mod.
Low-
Mod.
Mod.
High
Mod.
Equity
Mod. -
High
Mod.
Mod.
Mod.
Mod.
Low-
Mod.
Mod.
High
Mod.
Environ-
mental
Benefits
Mod.
Mod
Low-
Mod
Mod.
Low
Low-
Mod
High
High
Low-
Mod.
High -High use (over 25 States, many localities); criteria score high (information is abundant,
specific, easy to access, cost-effective to provide, and impacts projects)
Mod.-Moderate use (10-15 States, many localities); criteria score in medium range
Low-Low or rare use; criteria score poorly (printed information only, difficult to access, and
not project specific)
N.A.-Not Applicable
*Star indicates best rated mechanisms
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6. TOOLS
FOR
LOWERING COSTS
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6. TOOLS FOR LOWERING COSTS
INTRODUCTION
Environmental protection needs and expectations are continuing to grow, while the resources available to
meet those needs and expectations are increasingly constrained at all levels of government Federal, State
and local governments and the private sector are exploring the use of more efficient, effective, and
innovative solutions to help address these maj or challenges. They are aggressively looking for and creating
ways and opportunities to lower environmental costs, increase environmental investment, and build
environmental capacity by creating partnerships with State and local governments and Ihe private sector
to fund environmental needs.
This section presents and evaluates a number of the important mechanisms that these governments are
testing and using to lower costs, increase investment, and build capacity through partnerships. It also looks
at these mechanisms in terms of their contribution and/or potential contribution to financing environmental
needs on a sustainable basis. The mechanisms reviewed in Ihe section vary widely, ranging from specific
analytical financial management tools to common-sense financial practices to broad, sweeping, innovative
government programs and initiatives.
Some of the tools and initiatives discussed such as refinancing, pollutant loading allocation, and financial
capability analysis have been used for years. Others such as cost-benefit analyses, cost-effectiveness
analysis, and full-cost pricing are not new, but their use in the environmental arena may be new or growing.
Still others such as emissions trading and risk ranking have been used one environmental media or by one
level of government, and are their use is now being incorporated in new areas or by new parties. Finally,
some such as USEPA's Common Sense Initiative and Project XL are new, innovative, and constantly
evolving. But the one thing that they all have in common is that they represent approaches for lowering
costs in the short- and/or long-term) and for helping to address the long-term environmental protection and
related financing needs facing the nation
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LIST OF TOOLS FOR LOWERING COSTS
(In Alphabetical Order)
*1. Accelerated Depreciation
2. Activity-Based Costing (ABC)
3. Amortization of Pollution Control Facilities
* 4. Appropriate Technology
5. Barter and Payment-In-Kind
6. Benchmarking
*7. Capital Planning and Budgeting
*8. Comparative Risk Ranking
*9. Cost-Benefit Analysis
*10. Cost-Effectiveness Analysis
*11. Deduction of Agricultural Conservation Expenses
*12, Discounting (Economic)
13. Employee Stock Ownership Plans
14. EPA: Common Sense initiative
15. EPA: Project XL
*16. Expensing of Assets
*17. Financial Capability Analysis
18. Fiscal Impact Analysis
*19. Full-Cost Pricing
20. Life Cycle Assessment/Costing/Design
*21. Pay-As-You-Go
*22. Pollutant Loading Allocation
23. Refinancing Loans
*24. Reforestation Tax Credit and Amortization
*25. Regionalizaton
• 26. Rehabilitation Tax Credits
*27. Risk Management and Insurance
28. Value Engineering
* Stars indicate most highly rated mechanisms as described in the Comparison Matrix at the end of the
narratives. See Introduction to the Guidebook for a description of the criteria used. Ratings of "High",
"Moderate", and "Low" are for comparison purposes only, as some ratings are necessarily subjective and
data are incomplete.
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EFAB/EFC Guidebook . April 1999
ACCELERATED DEPRECIATION
Description: Accelerated depreciation is an accounting concept which allows writing off the costs of a
fixed asset faster than under straight-line or units-of-production depreciation, thus, increasing the
depreciation deduction and decreasing taxable income in the early years of an assets life. This assumes
that spreading an asset's cost equally and evenly over each year of its life is not realistic for many assets.
Since repair and maintenance costs are usually higher in later years, the recovery of greater costs in earlier
years results in a more nearly equal effect on earnings over the asset's useful life. This allows funds to be
retained in a business and encourages modernization. Traditional accelerated depreciation methods such
as sum-of-the-years digits and double-declining balance focus on the taxpayer's basis (at-risk investment)
in the property, the property's useful life, and its salvage value at the end of its life.
The accelerated cost recovery system eliminates useful life and salvage value as concerns by placing
property in one of four categories, which set the number of years over which an item's cost may be
recovered. The modified accelerated cost recovery system allowed by the federal tax code provides three
preset conventions for depreciation in the year property is placed in service and the year of its disposition
and defines five methods of figuring depreciation The general depreciation system (GDS) allows straight
line or either of two methods of accelerated depreciation (150% or 200% declining balance) over the
recovery periods assigned to eight property classes. The alternative depreciation system has recovery
times that generally are longer and it allows only straight line or 150% declining balance. Under the GDS,
even shorter recovery periods are allowed for qualified property placed in service on Tribal lands.
Actual Use: Accelerated depreciation is commonly used for tax purposes when it is allowed; however,
straight-line depreciation is preferable under some circumstances, such as when there is insufficient taxable
income to be offset by the larger, accelerated depreciation deductions.
Potential Use: Private, for-profit businesses could use accelerated depreciation to reduce their income
tax liabilities and cut the after-tax costs of investments in environmental equipment
Advantages: Accelerated depreciation shelters income from taxation by providing larger early-year
writeoffs with no reduction of cash flow. Different degrees of acceleration of depreciation are provided
by different methods (e.g., more with 200% than with 150% declining balance).
Limitations: The federal tax code specifies numerous limitations too complicated to summarize.
Reference for Further Information: Consult a tax practitioner. See Internal Revenue Service (IRS)
Publication 946, How To Depreciate Property. Contact IRS, 1111 Constitution Avenue, NW,
Washington, DC 20224; Phone: 800-829-1040; Fax: 703-368-9694; Internet: www.irs.ustreas.gov/.
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EFAB/EFC Guidebook | ' April 1999
ACTIVITY-BASED-COSTING (ABC)
Description: Activity-based-costing (ABC), a cost accounting methodology, supports activity-based
management which portrays an organization as a series of activities related to customer desires and cost
ABC assigns functional costs, direct and indirect, to an organization's activities and traces those activities
to the products or services that caused them to be performed. ABC is a basis for strategic management
accounting which supports a long-term approach to decision making. ABC may also incorporate Total
Cost Assessment (TC A) which uses cost accounting methods and capital budgeting procedures to uncover
potentially neglected costs and savings of investments which, when fully accounted for, may yield substantial
changes in project profitability. The inventory of costs, savings, and revenues includes indirect, less tangible
items typically omitted from project analysis, such as compliance, training, testing, liability, and image.
Costs and savings are directly allocated to specific process and product lines instead of being pooled in
overhead accounts. Time horizons for calculating profitability are expanded to capture longer term benefits.
Profitability indicators capable of incorporating the time value of money and long-term costs and savings
are used.
Actual Use: ABC is commonly used in relatively sophisticated cost accounting analyses, especially in the
private sector. There are commercially available computer software packages for employing ABC on
mainframes, networks, and personal computers.
Potential Use: Activity-based-costing is an aid to business process reengineering, yielding information
that may be key in determining whether to restructure or privatize an activity.
Advantages: ABC gives visibility to how effectively resources are being used and how all relevant
activities contribute to the cost of a product or service. Such information may be key to making decisions
about whether to restructure or privatize an activity.
Limitations: ABC requires extensive data collection as well as the ability to analyze cost data while
recognizing cost accounting's difficulties in handling incremental, separable and sunk costs, as well as
common costs.
Reference for Further Information: "An Introduction to Environmental Accounting as a Business
Management Tool: Key Concepts and Terms", USEPA, Office of Pollution Prevention and Toxics, Mail
Code: 7409, Washington, DC 20460, Phone: 202-260-3557; USEPA Full Cost Accounting Program at
www.epa.gov/epaoswer/non-hw/muncpI/fuUcos1/index.htm. "Activity Based CostfromthePerspective
of Competitive Advantage" at mijuno.larc.nasa.gov/dfc/abcJitml and "An Annotated Bibliography of
Activity Based Costing" at dfca.larcjiasa.gov/dfc/abc/abcbib.html; Langley Research Center, NASA.
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April 1999
AMORTIZATION OF POLLUTION CONTROL FACILITIES
Description: The cost of a certified pollution control facility used with a plant or other property in
operation before 1976 can be amortized over 60 months. A certified pollution control facility is a new
identifiable treatment facility used to reduce or control water or atmospheric pollution or contamination.
The facility must do so by removing, changing, disposing, storing, or preventing the creation or emission
of pollutants, contaminants, wastes, or heat. It does not include a building and its structural components
unless the entire building is a treatment facility. The facility must not significantly increase the output or
capacity, extend the useful life, or reduce the total operating costs of the plant or other property. It also
must not significantly change the nature of the manufacturing or production processing facility. The facility
must be certified by the state and federal certifying authorities, as required by Section 169 of the Internal
Revenue Code and the related income tax regulations (Section 1.169). If it appears that all or part of a
facility's cost will be recovered from the profit based on its operation, the federal authority will not certify
that part of what would otherwise be the amortizable basis. For some corporations, amortization of
pollution control facilities is a tax preference item requiring reduction of the amortizable basis by 20% in
determining the amortization deduction. If costs are not amortized they can be capitalized and depreciated.
Actual Use: Part VI of Internal Revenue Service Form 4562 is used to claim amortization, including that
of pollution control facilities. It appears that use of the deduction is declining as eligible, older facilities have
been upgraded, replaced or abandoned.
Potential Use: Deductible amortization can be used to reduce the after-tax cost of pollution control
facilities added to older plants to meet or exceed environmental requirements.
Advantages: Amortization over 60 months reduces taxable income for the affected tax years, thereby
reducing the real cost of Ihe facility by ihe amount that income tax is reduced.
Limitations: The amortization provision applies only to equipment used with plants in service prior to
1976. Tax-deductible amortization has no net benefit if there is no taxable income to be reduced by the
amortization deduction. Also, amortization is similarto tiie straight-line method of depreciation rather than
accelerated depreciation.
Reference for Further Information: Consult a tax practitioner. See page 53, Internal Revenue Service
Publication 535, Business Expenses and page 5, Publication 542, Corporations. Contact IRS, 1111
Constitution Avenue, NW, Washington, DC 20224; Phone: 800-829-1040; Internet:
wwwars.ustreas.gov/.
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EFAB/EFC Guidebook April 1999
APPROPRIATE TECHNOLOGY
Description: Appropriate technology refers to a socio-economic movement, its conceptual basis, and the
technological tools it employs. The movement promoting the appropriate technology approach to problem
solving is based on the idea that the most advanced or sophisticated technology, and even tried and tested
conventional technology, may be inappropriate in certain circumstances. The corollary is that a relatively
basic or intermediate level of technology reliant on locally available skills, materials, geography, and
resources may be better suited to specific situations. This recognizes the fact is that technological
alternatives can be more efficient and/or effective in different settings. For example, different technologies
are characterized by differing economies of scale, so some work better for larger volumes of production.
Also, some technologies require more capital investment, while others need more maintenance. Choices
among mixes of characteristics are often possible, yielding a technological approach that is more
appropriate to a specific context.
Actual Use: Appropriate technology has been a recognized need for some time in wastewater treatment
for small communities. Also, it is being used increasingly in some aspects of agriculture to achieve
sustainable productivity with reduced chemical inputs.
Potential Use: Appropriate technology can offer opportunities for cost reduction. Total life-cycle costs
can be lowered substantially by selection of atechnological approach based on a realistic appraisal of input
requirements, pollution consequences, and social implications.
Advantages: Lower-cost technologies might be ignored if an appropriate technology perspective is not
employed.
Limitations: The use of the appropriate technology approach can be counterproductive if it is biased
against technological improvement
Reference for Further Information: National Small Flows Clearinghouse, PO Box 6064, Morgantown,
WV 26506-6064; Phone: 800-624-8301; Internet address: wwwjisfc.wvu.edu/. Appropriate
Technology Transfer for Rural Areas,'University of Arkansas, PO Box 3657, Fayetteville, AR 72702;
Phone:800-346-9140; Internet address: www.attra.org/. National Center for Appropriate Technology,
3040 Continental Drive, Butte, MT 59702; Phone: 800-275-6228; Fax: 406-494-2905; Internet address:
www.ncat.org/ Appropriate Technology Institute, Wll0 Engineering Research Center, Colorado State
University, Fort Collins, CO 80523; Phone: 970-491-7189; Fax: 970-491-2729; Center for Renewable
Energy and Sustainable Technology, 120018th Street, NW, #900, Washington, DC 20036; Phone: 202-
530-2202; Fax: 202-887-0497; Internet address: solstice.crest.org/.
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EFAB/EFC Guidebook April 1999
BARTER AND PAYMENT-IN-KIND
Description: Barter is the trade of goods or services without the use of money. Payment-in-kind (PIK)
is payment with something of the same or similar type or quality to that which was received, but not
necessarily an identical article. For example, a PIK provision may provide for the issuance of more of the
same type of securities to bondholders in lieu of cash interest payments. PIK has been used in farm
programs to compensate participants with agricultural commodities. Barter and PIK are recognized
methods of payment in many relatively minor and certain specialized busiriess-to-business transactions. In-
kind matching is accepted by numerous federal grant programs. In many localities, sophisticated bartering
arrangements which eliminate the limitations of one-one-one trades have been formalized by clearinghouses
that provide an organized marketplace. These commercial exchanges charge a commission on each barter
transaction and keep records of trade credits accruing to members' accounts. Legally, a barter transaction
is defined to be an exchange rather than a sale, which involves money, but since 1982 barter income has
been taxable just like cash sales income. IRS Form 1099-B, Proceeds from Broker and Barter
Exchange Transactions is used to report the value of any cash, property, services, credits, or scrip
received from exchanges. (See pages 15-16 of IRS Publication 525, Taxable andNontaxqble Income.)
However, a business can deduct any costs incurred to perform work that is bartered. Payment-in-kind
is used in certain securities transactions.
Actual Use: In 1995, barter was an $8.4 billion industry including more than 380,000 clients. The
following year, perhaps 85 percent of Fortune 500 companies participated in barter transactions. There
are approximately 500 barter/trade exchanges and 100 corporate trade companies and brokers.
Potential Use: Barter or payment-in-kind might be used to obtain services or equipment needed for
environmental projects or to produce environmentally friendly products.
Advantages: Organizations that do not have sufficient cash flow to make conventional monetary payment
feasible may use barter as an alternative to relatively expensive debt which could further drain cash flow.
Even financially healthy companies can benefit from preservation of cash flow and the opportunity to
transform surplus inventory into needed goods and services.
Limitations: Barter is not a legitimate method of tax avoidance. Some goods and services may not be
available on other than a cash payment basis.
Reference for Further Information: International Reciprocal Trade Association, 175 West Jackson
Boulevard, Suite 625, Chicago, IL 60604; Phone: 312-461-0236; Fax: 312-461-0474; E-mail
adminl@irtanet; Internet: wwwJrta.net/. National Association of Trade Exchanges, 27801 Euclid
Avenue, Suite 610, Cleveland, OH 44132; Phone: 216-732-7171; Fax: 216-732-7172; E-mail:
swhite@ibinc.com; Internet: www.nate.org/.
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BENCHMARKING
Description: Benchmarking is a process of establishing tangible standards of achievement in progressing
toward and reaching a specified set of goal(s). After a defined and shared agenda is developed and
adopted, benchmarks are used as a tool to focus planning and implementation activities on achieving
measurable, desired results. Benchmarking has a long history of extensive use in the private sector,
especially in regards to manufacturing industries such as defense and commercial aviation, automobiles and
trucks, machine tools, and appliances.
Actual Use: The State of Oregon pioneered the public sector use of the benchmarking technique with its
innovative Oregon Benchmarks program begun in 1990-1. The Oregon program established benchmarks
to measure the quality of the State's human, environmental (quality oflife), and economic well-being over
a twenty-year period. Oregon established benchmarks at three time frames within the twenty year period
— 1995,2000, and 2010 - for measuring progress in 158 discrete areas from the 1990 baseline. The tool
has a long-term focus and is part of the State's efforts to develop sustainable communities.
Potential Use: Communities and States across the country could use benchmarking as a tool to help in
addressing environmental, economic, and quality-of-life conditions and problems. Benchmarking could be
a powerful way for empowerment zones and enterprise communities to strengthen implementation of their
programs and activities. It also might prove useful in supporting community involvement in brownfields
cleanup and redevelopment Finally, benchmarking could be particularly helpful in focusing community-
driven efforts on developing truly sustainable environmental systems.
Advantages: The mechanism is community-driven and agreement on shared goals can be a powerful
driver towards any successful effort. Benchmarking provides tangible goals and measures of success
against which to judge progress and results.
Limitations: The process of developing community consensus can be complex and time-consuming.
Reaching a consensus on benchmarks (and even goals) may or may not be possible. Developing and
implementing a benchmark program requires a continuing commitment over a long period of time and can
be costly.
Reference for Further Information: Oregon Benchmarks: Setting Measurable Standards for
Progress, Oregon Progress Board, 775 Summer Street, N.E., Salem, Oregon.
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April 1999
CAPITAL PLANNING AND BUDGETING
Description: Capital planning and budgeting, sometimes called capital or public improvement
programming (See Section 8: Capital Improvements Program), is a set of techniques for considering the
long-tennneeds for capital facilities and funding options for meeting such needs. Capital planning focuses
on current unmet service requirements and needs for expansion, replacement, or renewal of existing
facilities. It relies on engineering and feasibility studies to provide objective project appraisals and set
project guidelines. If a capital budget is used, day-to-day operating expenses and capital (fixed asset)
investments are accounted for separately. The capital budget generally includes appropriations for the
acquisition, construction and repair of capital assets such as land, buildings, and other infrastructure
improvements. '
hi the public sector, funds in a capital budget come primarily from general obligation bonds, dedicated
taxes, fees, and trust fund revenues. In the corporate finance context, capital budgeting is a decision-
making process with respect to investment in fixed assets (plant and equipment). It focuses on measuring
Ihe incremental cash flows associated with investment proposals and evaluating the attractiveness of these
cash flows relative to the project's costs. Common evaluative techniques include payback period,
discounted payback period, net present value, profitability index, and internal rate of return.
Actual Use: Capital budgeting is commonly employed by relatively sophisticated organizations in both
the public and private sectors.
Potential Use: Capital budgeting has received increased federal attention. Executive Order 13037, dated
March 3,1997, established an eleven-member Commission to Study Capital Budgeting. Supported by
the Treasury Department, it is to report to the National Economic Council, probably at the end of 1998.
Capital planning and budgeting can provide a process whereby environmentally sensitive investment
decisions will result
»
Advantages: A capital budget separates investments from current expenses and focuses attention on long-
term planning.
Limitations: Successful capital planning and budgeting depends on political support as well as the
capability to collect and analyze data and express results in a form useful to decision-makers.
Reference for Further Information: Government Finance Officers Association (GFOA), 180 North
Michigan Avenue, Suite 800, Chicago, IL 60601; Phone: 312-977-9700; Fax: 312-977-4806; Internet:
www.gfoa.org/. International City/County Management Association (ICMA), 777 North Capitol Street,
NE, Suite 500, Washington, DC 20002-4201; Phone: 202-289-4262; Fax: 202-962-3500; Internet:
wwwJcma.org/.
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EFAB/EFC Guidebook . ' April 1999
COMPARATIVE RISK RANKING
Description: Risk ranking or comparative risk analysis is the management procedure of prioritizing
environmental and public health problems that have undergone risk assessment Risk assessment involves
the identification of hazards, determination of their severity and discovery of exposure patterns. Risk
ranking involves comparing individual risk characterizations, on amulti-mediabasis if possible, and ordering
them by the priority in which they should or will be addressed.
Actual Use: Risks used in a local context differ from the use of risk in assessments driving federal or State
regulations. The latter are often statistical statements of the probability of death, injury, or damage. Alocal
risk assessment might be based on a survey, field-testing, or reliable empirical information that gives an
indication of the nature and magnitude of a problem. Currently, separate rankings are generally done for
public health and ecological risks, and assessments and ranking may vary from one community to the next
due to varying local conditions. However, many States and a growing number of municipalities such as
Cleveland, Ohio, and Phoenix, Arizona, are undertaking comparative risk studies.
Potential Use: Comparative risk ranking could be used by all levels of government to assist in financial
decision-making, as to which problem to finance first, regardless of compliance deadlines.
Advantages: The consideration of comparative risk ranking permits communities to allocate limited
resources to the most serious environmental and public health concerns first, and involves a high level of
citizen input Such risks may be less costly than other more expensive problems with shorter compliance
deadlines. In 1995, EPA's Small Town Task Force formally recognized the need for flexibility in
reordering priorities and compliance dates.
Limitations: The flexibility to set risk-based policies locally is not recognized in federal law, so specific
agreements between the federal government, States, and localities must be negotiated. There is often a
lack of objective risk information available and citizen input must be accounted for.
Reference for Further Information: ICMA, Risk Assessment: The Role of Local Government,
Washington, D.C., 1997. Syracuse University, Environmental Finance Center draft report, Risk and
Finance, June 1994. USEPA Journal, Profiles In Risk Assessment: New Science, New Contexts,
Vol. 199, No. 1, January/February/March 1993. USEPA Science Advisory Board Kpor^ReducingRisk:
Setting Priorities and Strategies for Environmental Protection, September 1990. USEPA Office of
Policy, Planning & Evaluation report,^ Guidebook to Comparing Risks and Setting Environmental
Priorities, September 1993. EPA sponsors Comparative Risk Centers in Vermont and Colorado.
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EFAB/EFC Guidebook ' April 1999
COST-BENEFIT ANALYSIS
Description: Cost-benefit analysis is a short-hand term for a conceptual framework encompassing a
variety of techniques for quantifying and comparing the incremental and total costs, risks, and benefits of
legislation, regulations, and policies. Cost-benefit analysis attempts to quantify and assign dollar values to
the costs and benefits of particular actions regardless of to whom those costs and benefits accrue. The use
of cost-benefit analysis is intended to help produce the best decision by revealing the efficiency of proposed
approaches.
Actual Use: Cost-benefit analysis has been used to varying extent for many years by federal, State and
local governments (and agencies), as well as the private sector, as one tool to aid in important decision-
making on a wide variety of topics, including environmental matters. For example, New York State
agencies have been required by statute since 1983 to weigh the costs and benefits of proposed regulations
during the rulemaking process. The federal government, meanwhile, has incorporated cost and benefit
considerations aspartofregulatoryimpartanalysesforrnanyyears-mostrecentlyinflieJanuary 11,1996
Office of Management and Budget policy memorandum, Economic Analysis of Federal Regulations
Under Executive Order No. 12866 ("Regulatory Planning and Review").
\
Potential Use: Cost-benefit analysis could be used by all governments and private sector to help evaluate
1he efficiency of any and all decision options.
Advantages: Cost-benefit analysis can communicate to decision makers the economic efficiency of
proposed/possible approaches. This economic information then can be given appropriate consideration
along withrelevant social, health, environmental, and technical considerations in making environmental and
other decisions.
Limitations: Good cost-benefit analyses may be time consuming and costly, require considerable
technical expertise, and depend heavily on good (and available) information from multiple data sources.
hi 1he absence of any or all of these factors, a cost-benefit analysis may be considered suspect and/or
inadequate.
Reference for Further Information: Executive Office of the President, Office of Management and
Budget, New York State, Governor's Office of Regulatory Reform, Cost-Benefit Handbook: A Guide
for New York State Regulatory Agencies. USEPA's Economy and the Environment Homepage is
located at http://www.epa.gov/oppe/eaed/eedhmpg.htm.
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COST-EFFECTIVENESS ANALYSIS
Description: This is an analytic process where the cost-effectiveness of a regulatory or other policy
alternative is calculated by dividing the annualized cost of the alternative by some measure of its
effectiveness. For environmental protection purposes, the measure of a policy alternative's effectiveness
may range from the amount of the reduction in a pollutant generated to statistical and actual improvements
in human health and/or the environment In general, the specific measure of effectiveness chosen should
correspond as closely as possible to the final effects sought by the regulatory or other policy alternative.
Actual Use: Cost-effectiveness analyses are routinely used by federal executive departments and
agencies, including the Environmental Protection Agency, when performing Regulatory Impact Analyses
(RIAs) of regulatory alternatives for which there are many benefits that cannot be easily monetized, or when
flie law sets forth aspecific regulatory objective. Cost-effective analyses are also performed by many State
agencies and private businesses.
Potential Use: These analyses could be used more frequently by Ihe federal government in helping to
make decisions on selecting environmental regulatory alternatives. It could also be used by more State
governments, as well as the governments of large cities to guide and support their environmental decision-
making.
Advantages: Cost -effectiveness analysis can be used quite effectively to identify the least-cost way of
reaching a pre-determined objective, policies that maximize the level of a stated type of benefit, and the
incremental tradeoffs between different levels of controls when no benchmarks exist It can indicate which
pollution control measures or policies are inferior alternatives.
Limitations: It must be emphasized that the use of cost-effectiveness analysis does not necessarily reveal
what level of environmental control is reasonable or even desirable. Furthermore, this type of analysis
requires considerable analytical expertise on the part of staff) and can be both time-consuming and
expensive to implement (outside experts also can be very costly).
<
Reference for Further Information: USEPA, Office of Policy, 401 M Street, SW, Washington, DC
20460, Mail Code: 2111; Phone: 202-260-4332; Fax: 202-260-0275. See "Guidelines for Performing
Regulatory Impact Analysis", reprinted March 1991
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DEDUCTION OF AGRICULTURAL CONSERVATION EXPENSES
Description: Certain agricultural soil and water conservation expenses are deductible for federal income
tax purposes. These include the costs of soil and water conservation improvements to, or prevention of
erosion of, land the owner or a tenant is using or has used for fanning. Among the covered activities are
leveling, conditioning, grading, terracing, contour furrowing, restoration of soil fertility, and related treatment
or movement of earth. Also covered are the construction, control and protection of diversion channels,
drainage ditches, irrigation ditches, earthen dams, watercourses, outlets, and ponds. Costs of the planting
of windbreaks and eradication of brush also may be deducted. Expenses to drill a water well for irrigation
or other agricultural purposes, to prepare land for center pivot irrigation systems, or to drain or fill wetlands
are not deductible. Assessments for depreciable property that a soil and water conservation or drainage
district levies against farm land also can be deducted. Although not conservation expenses, other ordinary
and necessary expenses such as the cost of annual removal of sediment from a drainage ditch are
deductible as business expenses on Part n of IRS Schedule F, Profit or Loss from Farming.
Actual Use: This deduction is commonly used when the tax reduction benefits outweigh the burdens
imposed by inclusion of cost-sharing payments in gross income.
Potential Use: The deduction can encourage farmers and ranchers to undertake soil and water
conservation measures they would not otherwise undertake.
Advantages: Deductions in tiie tax years of covered expenditures can reduce the after-tax cost.
Limitations: Expenses can be deducted only if they are consistent with a plan approved by the U.S.
Department of Agriculture's Natural Resources and Conservation Service. If soil and water conservation
expenses are deducted, cost-sharing payments for such expenses cannot be excluded from gross income.
Any portion of conservation expenses benefitting land that does not qualify as farm land cannot be
deducted. Direct expenses for structures or facilities subject to an allowance for depreciation must be
capitalized, including expenses for moving dirt when making structures such as reservoirs, tanks, canals,
conduits, twells and dams composed of masonry, concrete, tile, metal or wood. Similarly, expenses to drain
or fill wetlands must be added to the basis of the land. The deduction cannot be more than 25 percent of
gross income from farming.
Reference for Further Information: Consult a tax practitioner. See also pages 30-32 of Internal
Revenue Service Publication 225, Farmer's Tax Guide. Contact the IRS at 1111 Constitution Avenue,
NW, Washington, DC 20224; Phone: 800-829-1040; Fax: 703-368-9694; Internet Address:
www.irs.ustreas.gov/prod/formsjpubs/indexJitml
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DISCOUNTING (ECONOMIC)
Description: Discounting focuses on Ihe time value of money (a dollar today is worth more than a dollar
tomorrow). In financial accounting it is Ifae essence of most capital investment appraisal, comparing present
cash flows with cash flows in a later period. Methods often used include net present value (NPV) and
internal rate of return (IRR). NPV discounts all cash flows to present values at a predetermined rate of
interest (discount rate). The rate estimates the cost of capital adjusted for anticipated inflation and
investment risk. The present value of cash outflows is deducted from the present value of inflows to arrive
at a net present value. The IRR is that discount rate which when applied to cash flows makes its NPV
equal to zero. With the IRR method, more than one solution is possible if the cash flow pattern is not one
of net outflows followed by net inflows. In practice, present value arid future value tables are used to
determine the proper discount factor, hi real property appraisal, discounted cash flow (DCF) analysis is
used to prepare a cash flow forecast for the property interest appraised. The total present value of the cash
becomes the value estimate for that interest Two common income capitalization approaches are direct
capitalization and yield capitalization. A number of alternative algebraic formulas can be used to account
for Ihe impact of financing terms, use of a sinking fund, and prospective changes in income and value.
Actual Use: Discounting is commonly used in capital investment decision-making. Discount rates
(compound interest rates) are used to convert expected future cash flows into present value estimates for
commercial real estate appraisals. In practice, the discount rate is the competitive rate of return applicable
to the property interest and cash flows analyzed Payback period (PBP) and discounted cash flow (DCF)
techniques are often used in combination, tilting results toward risk reduction.
Potential Use: Discounting can provide a basis for choices among alternative investments in environmental
measures or equipment needed to produce environmentally friendly goods.
Advantages: Discounting is easy to use with financial calculators or personal computer software.
Accounting for the time value of money deals with opportunity costs, inflation, and time preferences. NPV
and IRR are not subject to problems caused by accounting adjustments as decisions are based on cash
flows; however, they tilt results toward maximization of owners' or stockholders' wealth.
Limitations: Discounting does not answer all of the questions involved in capital investment decisions.
Its application to public sector investments is criticized as unfair to future generations and as ignoring Ihe
essential issue of sustainability.
Reference for Further Information: For real property transactions, consult a licensed/certified
commercial real estate appraiser.
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EMPLOYEE STOCK OWNERSHIP PLANS
Description: An employee stock ownership plan (ESOP) is a type of tax-qualified employee benefit plan
governed by the Employee Retirement Income Security Act (ERISA). As such, it is a defined contribution
pensionplan (stock bonus and/or money purchase) designed to invest primarily in the stock of the employer
firm. Under an ESOP, employees can take over or participate in the management of the employer by
becoming stock shareholders through a nonprofit trust However, the trustee of the ESOP (usually a
commercial bank that does not have a lending relationship with the parties) actually votes the ESOP shares.
The most sophisticated use of an ESOP is to borrow money. Leveraged ESOPs can use borrowed funds
to provide an accelerated transfer of stock to employees and provide new capital to the company.
Although the employer must guarantee repayment of the loan, it can take tax deductions for contributions
to the ESOP used to repay both principal and interest on the loan, as well as for dividends on ESOP-
owned stock. If the leveraging is to provide the company new capital for expansion or capital
improvements, the company uses the cash to buy new shares of stock. If the leveraging is being used to
divest a division, the ESOP buys the shares of anewly created shell company, which in turn purchases the
division and its assets. In the public sector, an ESOP can be used in privatizing a service or function.
Actual Use: There are over 10,000 ESOPs in the U.S. covering almost 9 million participants and
controlling over $210 billion in company stock. Only about 15 percent are in publicly traded companies,
but this group has accounted for approximately 80 percent of ESOP borrowing.
Potential Use: Leveraged ESOPs can be used to finance environmental investments such as purchases
of pollution abatement equipment or development of ecologically friendly products.
Advantages: Contributions to ESOPs are tax deductible to the sponsoring corporation up to certain
limits. When employer securities are contributed directly, ihe employer may take a tax deduction for the
full value of the stock contributed. This increases the employer's cash profits by the value of the taxes
saved.
Limitations: ESOP participants must be allowed to direct the ESOP trustee's vote of unallocated shares
on major corporate transactions, such as a merger.
Reference for Further Information: Consult a tax practitioner. See also the National Center for
Employee Ownership, 1201 Martin Luther King Jr Way, Oakland, CA 94612; Phone: 510-272-9461;
E-mail: nceo@nceo.org; Internet: wwwjiceo.org. For tax rules, contact the Internal Revenue Service,
1111 Constitution Avenue, NW, Washington, DC 20224; Phone: 800-829-1040; Fax: 703-368-9694;
Internet: www.irs.ustreas.gov/.
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EFAB/EFC Guidebook April 1999
ENVIRONMENTAL PROTECTION AGENCY
COMMON SENSE INITIATIVE
Description: The Environmental Protection Agency's (EPA's) Common Sense Initiative (CSI) embodies
anew generation of environmental protection. Via the CSI, EPA brings together businesses, governments,
and environmentalists to develop cleaner, cheaper and smarter ways of protecting public health and the
environment The Initiative takes an industiy-by-industry approach working to prevent and cleanup
pollution rather than shifting it around. It seeks to bring all involved parties together to develop consensus
solutions. Using innovation and common sense, it strives for cleaner goals using flexible means. The CSI
incorporates pollution prevention as a standard environmental tool to be used with cleanup controls. It tries
to tailor environmental requirements to fit the way that businesses work to ensure that real environmental
results are achieved.
Actual Use: The six industries participating in the first phase of the CSI are automobile assembly,
computers and electronics, iron and steel, metal plating and finishing, petroleum refining, and printing.
These industries represent over 11 % of Ihe Gross Domestic Product, employ 4 million people, and account
for 12.4% of toxic releases reported by industry in 1992. For each industry, EPA assembles a team of
stakeholders to find ways to change complex and inconsistent environmental policies into better, more
usable comprehensive sector approaches. For example, the computer and electronics group is identifying
the composition of its waste streams to develop new pollution prevention tools and improve waste
collection. The metal finishing industry is looking for ways to improve Ihe ability of firms to access and
afford financing for environmental investments.
Potential Use: While currently experimental, Ihe CSI is potentially applicable to all US industrial sectors.
It facilitates the development and testing of realistic and effective multimedia environmental policies. The
Initiative offers an opportunity to forge a new and better environmental consensus for the future.
Advantages: The CSI's multi-media focus can produce improved environmental results at less cost Its
flexible approach promotes creativity and encourages use of innovative technologies. Industry cooperation
means 1hat results will be real and measurable (so they can take credit for them).
Limitations: Current federal environmental laws and corresponding regulations are media-specific (air,
land, water, etc.) and are not necessarily flexible. -The process of reaching consensus among industry,
government, and environmentalists on achievable environmental goals and acceptable flexibility is often
slow, not easy, and may not always be possible.
r i
Reference for Further Information: USEPA, 401 M Street, SW, Washington, DC 20460 - Mail
Code: 6101; Phone Number: 202-260-7417. CSI's home page is located on the World Wide Web at
http://www.epa.gov/commonsense/.
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ENVIRONMENTAL PROTECTION AGENCY
PROJECT XL
Description: Proj ect XL is a federal program managed by the Environmental Protection Agency (EPA)
that gives regulated entities the flexibility to implement alternative strategies that replace or modify specific
regulatory requirements, produce superior environmental results and promote greater accountability. While
ftis is a federal program, most XL Projects require the participation of State regulatory agencies and local
governments. Project XL seeks to give a limited number of responsible parties the opportunity to
demonstrate environmental excellence and leadership. It seeks to develop real world projects that produce
costs savings, reduce paperwork burdens, build stakeholder support, test innovative multimedia strategies
(with a pollution prevention preference), and can be replicated. Under XL, project sponsors can include
private facilities, multiple facilities, industry sectors, federal facilities, communities, and States.
Actual Use: XL projects go through three phases: proposal development; project development; and
implementation and evaluation. As of April 1998, seven pilot projects were being implemented and twenty-
ne additional projects were being developed. Some of the companies participating in XL projects being
implemented include the Berry Corporation, Weyerhauser, the Intel Corporation, Lucent Technologies,
Vandenberg Air Force Base (the Department of defense), Merck & Co. Inc., and the HADCO
Corporation.
Potential Use: EPA has committed to a goal of implementing fifty pilot projects in four categories: XL
projects for facilities, sectors, government agencies, and communities. The new approaches tested in XL
projects could be incorporated into EPA and State environmental programs, replicated in other facilities
in the same industry or community, and/or transferred for use in other industries and communities.
Advantages: The multi-media focus of XL projects can produce superior environmental results often at
less cost. The flexible approach used in XL projects promotes creativity and encourages innovation,
especially with pollution prevention. When stakeholder consensus can be achieved, it can mean fewer
future disagreements between affected parties and less after-lhe-fact litigation.
Limitations: Current federal environmental laws and corresponding regulations are media-specific (air,
land, water, etc.) and are not necessarily flexible. The process of reaching consensus among stakeholders
on acceptable regulatory alternatives, definitions of excellence, and adequate accountability may be slow,
difficult, and not always possible.
Reference for Further Information: USEPA, Office of Reinvention Initiatives, Project XL, 401 M
Street, SW, Washington, DC 20460; Phone: 202-260-5754; Fax-on-demand line:202-260-8690.
Internet: http ://yosemite.epa.gov/xl/xI home.nsf/all/homepage
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EFAB/EFC Guidebook April 1999
EXPENSING OF ASSETS
Description: Hie expensing of depreciable assets is a tax accounting concept Section 179 of the Internal
Revenue Code allows businesses to elect a current expense deduction in the year the qualifying properly
is placed in service, which gives them a more immediate tax benefit than does a depreciation deduction over
a specified recovery period. Qualifying property is acquired for use in a trade or business and includes
tangible personal property such as machinery and equipment. However, property acquired from related
persons, including corporations, does not qualify.
Actual Use:. Expensing is a widely and commonly used current-year income tax minimization strategy.
Gasoline storage tanks and pumps at retail service stations are qualifying tangible personal property.
Single-purpose agricultural and horticultural structures also qualify. Energy property otherthan public utility
property can qualify. This includes equipment that uses solar energy to generate electricity, to heat or cool,
or to provide hot water for use in a structure, or to provide solar process heat. Also included is equipment
to produce, distribute or use energy derived from a geothermal deposit up to the electrical transmission
stage. Other type of air conditioning or heating units do not qualify.
Potential Use: Environmental equipment acquisitions can be expensed to reduce the after-tax cost, as can
be purchases of equipment needed for production of environmentally friendly goods or delivery of
environmental services.
Advantages: The use of expensing increases current year cash profits by decreasing taxable income and
consequent federal tax liability.
Limitations: The deduction must be claimed on Form 4562. The $18,000 limit for 1997 is reduced
dollar-for-dollar by the amount of investment in qualifying property exceeding $200,000. For 1998 the
limit is $18,500 and the same investment restriction applies. The maximum deduction for qualified zone
property, including buildings, is $38,000 for enterprise zone businesses. Definitions of qualified zone
property and enterprise zone businesses were changed effective August 5, 1997.
Reference for Further Information: Consult a tax practitioner. See pages 11 -21 of Internal Revenue
Service (IRS) Publication 946, How To Depreciate Property. Contact the IRS at 1111 Constitution
Avenue, NW, Washington, DC 20224; Phone: 800-829-1040; Fax: 703-368-9694; Internet:
www.iixustreas.gov/prod/fonnsjubs/index.htinl.
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April! 999
FINANCIAL CAPABILITY ANALYSIS
Description: Financial capability/affordability analysis is a tool used by public and private entities such
as local governments and businesses, to determine if they have Hie ability to pay for capital investments and
the costs of operations, maintenance, and replacement, of specific facilities or pieces of major equipment.
It is used to examine the financial impact of proposed projects or purchases on the entity as a whole, as
well as on individuals and households. It is used to help size/match investment plans to resources.
Affordability analysis is a type of financial capability tool that measures the impact of proposed investments
as a percentage of median household income (MHI).
Actual Use: Most State Revolving Funds require communities seeking assistance to submit financial
information to them, and this information is especially critical in determining interest rates for hardship loans.
The Drinking Water SRF (DWSRF) also uses this information when determining if a principal subsidy is
offered. Businesses use financial capability analysis to help determine the feasibility of desired capital
investments. Debt/credit rating organizations use them in calculating the quality/strength of bonds being
offered by public and private entities. Banks and other financial institutions use them in credit analyses to
help decide whether to make loans, and setting proper interest rates. State comptrollers may review local
capability when evaluating revenue bond issues.
Potential Use: Ideally, financial capability analysis would be utilized by both public and private entities
whenever a substantial environmental or other investment is contemplated and/or made. An example of
a financing tool that performs a financial capability analysis is the expert rate-setting and financial planning
software for water and wastewater systems known as the "rate model." TTris electronic tool is described
in Section SB: Electronic Services.
Advantages: Proper use of this tool helps to ensure that communities and business alike are able to
develop and implement financially sustainable environmental and other systems. It also determines the level
and kind of SRF and other government loan programs.
Limitations: Determining financial capability may be difficult and expensive for small communities to
perform on their own, as they may lack in-house financial and economic expertise. Affordability analyses
typically do not evaluate the cumulative costs of environmental mandates and no standardized or common
methodology exists. DWSRFs are finding it difficult to perform such analyses for small private drinking
water loan recipients, because of lack of data
Reference for Further Information: USEPA, Office of Policy, Economy and the Environment
Division, 401 M Street, SW, Washington, DC 20460, Mail Code: 2172; Phone: 202-260-5488. Fax:
202-250-5732. New England Interstate Water Pollution Control Commission, Projected Household
Costs of Mandated Environmental Infrastructure Investments, August 1995.
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EFAB/EFC Guidebook . April 1999
FISCAL IMPACT ANALYSIS
Description: Fiscal impact analysis is a basic component of development analysis, along with
environmental impact analysis. It is a tool for identifying public costs, including the potential cost of public
services, associated with private development. (In Ms regard it is somewhat similarto state legislative fiscal
impact analysis, although typically narrower in focus.) At a minimum, fiscal impact analysis considers
capital costs, operating and maintenance costs, changes in revenue attributable to the project, impacts on
energy requirements, and potential legal liabilities which result from action or inaction on the project Each
element may be weighted to reflect policy priorities. The length of the payback period may be estimated
for projects creating savings or revenues, or the project's present worth in terms of the stream of outlays
and revenues may be calculated.
Various local governments use different methods and criteria For example, some look at the public costs
of health and safety effects, community economic impacts and quality-of-life factors. Interrelationships
among projects, including those in neighboring jurisdictions also are considered in some cases. In any
event, 1he ultimate concern is whether the prospective fiscal impact of a project is the imposition of net
additional expenditures.
Actual Use: Most cities and counties in the State of California require fiscal impact analysis prior to project
consideration. Many other local governments across the country use limited versions of fiscal impact
analysis as part of their land-use planning and zoning processes.
Potential Use: Fiscal impact analysis can be used to show the real costs to the public sector (as a proxy
for a community) of public and private development projects and alternatives.
Advantages: Fiscal impact analysis can reveal environmental and quality of life benefits, as well as direct
and indirect costs.
Limitations: Useful fiscal impact analysis depends upon adequate data as well as analytical capability.
It can be expensive and time-consuming or, if limited to simplistic marginal cost calculations, have little
utility.
Reference for Further Information: Government Finance Officers Association (GFOA), 180 North
Michigan Avenue, Suite 800, Chicago, IL 60601; Phone: 312-977-9700; Fax: 312-977-4806; Internet:
www.gfoa.org/.American Planning Association, 1776 Massachusetts Avenue, NW, Washington, DC
20036, or 122 South Michigan Avenue, Suite 1600, Chicago, IL 60603; Phone: 202-872-0611 or 312-
431-9100; Fax: 202-872-0643 or 312-431-9985; Internet address:
www.planning.org/info/infoguid.html. International City/County Management Association (ICMA), 777
North Capitol Street, NE, Suite 500, Washington, DC 20002-4201; Phone: 202-289-4262; Fax: 202-
962-3500; Internet: www.icma.org/.
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April 1999
FULL-COST PRICING
Description: Full cost pricing for public and private utilities occurs when user fees are set to recover all
of the costs associated with providing services — capital, operations, maintenance, debt service, and
replacement. Charging the full cost for environmental facilities and services helps to ensure that the demand
for the facilities and services is proportionate with the cost of providing them, and that they are both
environmentally and financially self-sustaining.
Actual Use: Historically, not many communities have relied on user fees to cover the full costs of
providing environmental facilities and services. Instead, they have elected to subsidize to varying degrees
the provision of these facilities and services, particularly non-capital costs, from some other source of
revenue. Private businesses, on the other hand, more often ensure that the full costs for facilities and
services are passed on to customers/users.
Potential Use: In an ideal world, the full-cost pricing of environmental facilities and services would be
adopted as the financing standard in the public sector—being implemented for all activities in every State
and community across the nation. As governmental and/or natural resources become increasingly
constrained, the pressure for full-cost pricing will build
Advantages: Charging fees that recover the full costs of providing facilities and services create financially
sustainable environmental systems. Costs are not hidden or ignored, and careful strategies can reduce
operations and maintenance costs in the future. In addition, capital investments can be undertaken when
market conditions and interest rates are most advantageous. The full-cost pricing of environmental activities
may also encourage users to better conserve valuable or limited natural resources.
Limitations: Determining "full-cost pricing" user fees can be a difficult and an expensive job for public
agencies. Especially in smaller communities, such agencies often lack general, in-house expertise in
determining these costs. Public agencies must also address numerous regulatory issues in determining fair
fees that must be set at new levels. They may also face strong political constraints and voter objections to
full-price costing if the resulting user fees must be substantially higher than in the past Local governments
may decide to subsidize user fees to achieve some other public policy goal, e.g., to attract industry or
control growth.
Reference for Further Information: USEPA Environmental Financial Advisory Board Advisory -
Private Sector Participation in the Provision of Environmental Services: Barriers and Incentives,
November 25,1991. USEPA, 401 M Street, SW, Washington, DC 20460. Mail Code: 2731R
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April 1999
LIFE-CYCLE ASSESSMENT/COSTING/DESIGN
Description: Ufe-cyde assessment/costing seeks the most cost-effective alternative that achieves the
least long-term cost of acquisition and ownership. A low initial acquisition cost does not ensure a low life-
cycle cost, which includes operating and support costs (e.g., spare parts, maintenance and support
equipment). Life cycle cost is the total of all costs from project inception through development, acquisition,
and support to the decommissioning of a facility or disposal of equipment at the conclusion of its useful life.
Life-cycle accounting assigns product-specific costs, including contingent liabilities, in aholistic frame-work
Life-cycle design applies life-cycle assessment to product design and redesign decisions. Four linked
components have been defined for life-cycle assessment of environmental impacts. Goal definition and
scoping identifies the assessment purpose and the study' s expected products. It determines the boundaries
of the study and assumptions based on the goal definition. Life-cycle inventory quantifies the energy and
raw material inputs and environmental releases associated with each stage of production. Impact analysis
assesses die impacts on human health and tiie environment associated with energy and raw material inputs
and environmental releases quantified by the inventory. Improvement analysis evaluates opportunities to
reduce energy, material inputs, or environmental impacts at each stage of Ihe product life-cycle.
Actual Use: Life-cycle assessment has become a valuable decision-support tool in examining the cradle-
to-grave impacts of processes and products, in part due to the Chemical Manufacturer Association's
Responsible Care Program, methodological developments by the Society for Environmental Toxicology
and Chemistry, and increasing adoption of ISO 14000 (see Section 7., Green Code of Conduct (ISO
14000 Standards Voluntary Environmental Standards)). A1995 survey of Fortune 500 companies
indicated that most who were routinely assessing the environmental consequences of their products and
production systems were doing so to reduce environmental costs.
Potential Use: Life-cycle analysis methodologies can be used to assess the environmental impacts of
products and industrial processes from the inputs to final disposal.
Advantages: Recognition of life-cycle costs allows an organization to minimize total costs.
Limitations: The data required is extensive and the analytical techniques can be complicated,
Reference for Further Information: Life Cycle Design Guidance Manual: Environmental
Requirements and the Product System and Life Cycle Assessment: Investments Guidelines and
Principles; Office of Pollution Prevention and Toxics, USEPA, 401M Street, SW, Washington, DC, Mail
Code: 7409; Phone: 202-260-3557; Fax: 202-260-0178.' Tellus Institute, 11 Arlington Street, Boston,
MA 02116-3411; Phone: 617-266-5400; Fax: 617-266-8303; E-mail: INFO@tellus.org; Internet:
www.tellus.org/.
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PAY-AS-YOU-GO
Description: Although, inlhe public sector, "pay-as-you-go" normally is associated with operating budgets
and current expenses, it also is die financial policy of funding capital outlays from the cash budget, which
depends on current, usually own-source, revenues, rather lhan by borrowing. As such, it relies on current
tax and fee revenues, intergovernmental transfers, and/or trust fund balances rather lhan the issuance of
even short-term debt User fees and special, earmarked taxes tend to be the revenue foundations of a pay-
as-you-go system. Creation and maintenance of reserve/trust funds often are employed to accrete sufficient
amounts for fixed asset projects. The Federal Highway Trust Fund is perhaps the prime example of this
approach. A governmental unit which pays for some improvements from current revenues and for others
by borrowing is on a partial or modified pay-as-you-go basis. A pay-as-you-go approach to.fixed asset
financing tends to work best if funds are allocated in an annual capital budget, not an operating budget
Actual Use: Pay-as-you-go is the traditional approach for financing relatively small fixed asset projects,
such as some communications equipment and transportation vehicles. Its popularity increases with higher
interest rates and the consequent higher cost of debt.
Potential Use: The pay-as-you-go approach is feasible for relatively small environmental projects that
enjoy sufficient political support to compete against other current budget priorities.
•;
Advantages: Avoidance of the interest costs and other fees lhat are an integral part of borrowing can
represent substantial savings. In addition, the fiscal discipline inextricably associated with pay-as-yo-go
can encourage public attention to preventive maintenance and proper operation so as to avoid unnecessary
capital outlays.
Limitations: Pay-as-you-go tends to be a realistic approach only for capital investment projects that do
not cost so much that their funding precludes other, equally important activities. Although some projects
can be financed incrementally, the magnitude and/or uneven nature over time of some capital investments
(e.g., bridges) precludes such a strategy.
Reference for Further Information: Government Finance Officers Association (GFOA), 180 North
Michigan Avenue, Suite 800, Chicago, IL 60601; Phone: 312-977-9700; Fax: 312-977-4806; Internet:
www.gfoa.org/. International City/Counly Management Association (ICMA), 777 North Capitol Street,
NE, Suite 500, Washington, DC 200024201; Phone: 202-289-4262; Fax: 202-962-3500; Internet:
wwwjcma.org/.
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EFAB/EFC Guidebook April 1999
POLLUTANT LOADING ALLOCATION
Description: Pollutant loading allocation is a valuable tool for implementing environmental quality
standards by establishing the relationship between pollution sources and environmental conditions. The
objective of allocation is to distribute allowable pollutant loadings among different pollutant sources so that
the appropriate control actions can be taken and the required environmental quality standards achieved
Specifically, the Total Maximum Daily Loading (TMDL) approach provides an estimate of pollutant
loadings from all sources and predicts the resulting pollutant concentrations. The TMDL is derived from
all point, nonpoint, and background sources. After the TMDL is derived, maximum limits are allocated to
various pollution sources.
Actual Use: The Clean Water Act requires that States develop TMDL processes for water-quality limited
waters. The TMDL concept has been successfully applied to develop waste load allocations for point
sources in low flow situations where nonpoint sources are not a concern. These allocations, which are
based on actual water quality impacts, can produce quantifiable pollution reductions.
«••
Potential Use: The TMDL process must take into account nonpoint sources as well. For example, if
excess sediment proves detrimental to water quality, nonpoint and point sources of sediment could be
identified, and loadings assigned to each kind of source. If the measurement and tracking of air pollution
becomes sufficiently exact, a TMDL process might also be applied to help communities better meet water
quality standards, as well as meet air quality standards.
Advantages: TMDLs may significantly reduce pollution when attention is focused on all nonpoint sources,
some of which may be newly recognized. TMDLs allow (in fact, encourage) the private sector to innovate
because they typically do not require use of a particular technology or Best Management Practice (BMP),
but let the TMDL holder decide how reductions will be achieved, thus analysis of the least-cost solution
is encouraged.
Limitations: In some cases, it may be difficult to determine sources of pollution, particularly nonpoint
sources, and therefore determine appropriate loadings. The impacts on water quality from different sources
is also a complicated analysis. Currently, a number of States and localities are not, vigorously pursuing
TMDL work. Considerable staff expertise may be necessary to credibly pursue TMDL work in an
expeditious and timely manner.
Reference for Further Information: U.S. EPA, Office of Water, Guidance for Water-Quality Based
Decisions, The TMDL Process, April, 1991. See also the U.S. EPA, Office of Water TMDL web page
on the Internet at: http://wvw.epa.gov/OWOW/tmdI/mde3Lhtml.
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REFINANCING LOANS
Description: Refinancing loans can be a way to reduce interest payments when the economic climate is
one of lower interest rates compared to the time of Ihe original loan. Refinancing may be used to change
loan maturity and, if extended or lengthened, can reduce annual repayment costs, in the short term A
related financing tool is bond refinancing, typically termed as refunding or advanced refunding. Bond
refinancing occurs when bonds are sold to provide funds to retire outstanding debt of an issuer. This
related financing tool is discussed in Section 2A., Advanced Refunding.
Actual Use: Loan refinancing is along-standing, common, and widely accepted financial practice in both
Ihe public and private sectors. Most commercial lending institutions will refinance loans, and the refinancing
need not be handled by the original lender. Loan refinancing is much less complex than bond refunding,
since the financial return to individual investors is less of an issue. State Revolving Fund (SRF) refinancings
are extremely common, although both the Clean Water Act and the Safe Drinking Water Act set time
restrictions on refinancing, i.e., refinancings are allowed for bonds issued after March 7, 1985 (Clean
Water SRF) and July 1,1993 (Drinking Water SRF). These restrictions are meant to assist the refinancing
of recent short-term municipal debt as well as long-term debt when SRF financing is not immediately
available. The Drinking Water SRF, however, may not be used to refinance private sector water projects.
Nationally, Clean Water SRF refinancing accounted for 17% of SRF lending in 1995, and exceeded 25%
in Maine, Massachusetts, and New York. The Clean Water SRF also may be used to refinance Rural
Development loans.
Potential Use: Refinancing can occur for any environmental lending., since it is the interest rate climate and
availability of lending monies that influence refinancing rather than the environmental program area Many
commercial institutions specialize in refinancing.
Advantages: The possibilities for lowering costs through the interest rate reductions associated with
refinancings are considerable, particular in today's (1998) climate of extremely low interest rates. Annual
interest payment costs can be reduced further through Ihe extension of loan maturity dates, although longer
maturities can end up costing more. The money which is saved through refinancing can be invested in new
environmental projects and other initiatives.
Limitations: Similar to home mortgages, refinancing can be administratively burdensome. Also, borrowers
have to absorb new financing costs such as issuance and service fees. Thus, small borrowers may have
less access to refinancing than large ones, and commercial lending institutions may be less interested in
refinancing small loans because of the time, effort and cost involved.
Reference for Further Information: Council of Infrastructure Financing Authorities, 1995 Revolving
Loan Fund Survey, prepared by the Ohio Water Development Authority, May 1996.
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REFORESTATION TAX CREDIT AND AMORTIZATION
Description: Up to $10,000 per year of qualified timber properly reforestation expenses can be amortized
over an 84-month period A tax credit of either 10% or 8% of the expenditures qualified for amortization
can be claimed Qualifying expenses include only costs which must otherwise be capitalized (e.g., site
preparation, seeds or seedlings, paid labor, small tools, and depreciation on equipment used in planting and
seeding). Qualifying timber property must consist of at least one acre planted with tree seedlings in the
manner normally used in forestation or reforestation for commercial production of timber. This does not
include property on which shelter belts, nut trees, Christmas trees, or ornamental trees have been planted
Nor does timber grown for personal use qualify. However, the site can be owned or leased.
To amortize, the deduction must be entered in Part VI of IRS Form 4562 and a statement describing the
expenses attached. A federal income tax credit can apply to up to $10,000 of the costs incurred each year
to forest or reforest property held for growing trees for sale or use in the commercial production of timber
products. Although costs must quality for amortization, the credit can used regardless of whether the costs
are amortized or added to the basis of the property. If qualified property is disposed of within ten years
after the tax year in which amortization of reforestation expenses is taken, gains must be reported as
ordinary income up to the amount of amortization taken,
Actual Use: Since 1980, Section 194 of the Internal Revenue Code (26 USC 194) has allowed
deduction of the amortization of qualified timber property from adjusted gross income for income tax
purposes. Section 48(b) of the Code authorizes the reforestation credit
Potential Use: Tax credits can induce for-profit entities to make reforestation investments which would
otherwise not be considered.
Advantages: Both the tax credit and amortization can make reforestationinvestments financially feasible
for-profit landowners.
Limitations: Expenses reimbursed under any governmental reforestation cost-share program cannot be
amortized unless the reimbursement is included in gross income. Qualifying expenses in excess of the
$10,000 annual limit cannot be carried over or back to other tax years. If any of the amortized timber
stand is disposed of within 10 years of the year in which amortization was elected, any gain up to the
amount of amortization taken is recaptured as ordinary income.
Reference for Further Information: Consult a tax practitioner. See page 49, IRS Publication 225,
Farmer's Tax Guide and page 52, IRS Publication 535, Business Expenses. Contact Internal Revenue
Service, 1111 Constitution Avenue, NW, Washington, DC 20224; Phone: 1-800-829-1040; Internet:
www.irs.ustreas.gov/.
v
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EFAB/EFC Guidebook April 1999
REGIONALIZATION
Description: Pollution does not respect political boundaries. Agglomeration economies promoting
industrial urbanization and pollution often transcend political jurisdictions. The regional impacts of air and
water pollution have meant that Slates and communities cannot independently solve all of their pollution
problems. For example, chemical precursors to ground-level ozone pollution can be carried hundreds of
miles downwind from their origins. It is also clear that watersheds and other "trans-boundary" ecosystems
cross the territorial lines of governmental jurisdictions, including national borders. In response to these
realities, geographic regionalization of some types of environmental facilities and services can produce
economies of scale which reduce average unit cost The regional consolidation of management and
overhead functions such as procurement, pooling of debt issuance and risk management, can also reduce
costs associated with environmental concerns.
Actual Use: Regional approaches have been used increasingly to solve problems. The Association of
Bay Area Governments, a regional organization serving the San Francisco area, offers a wide range of
financial programs for issuance of conduit revenue bonds or certificates of participation., general municipal
credit obligations, tax increment bonds, community facilities district and special assessment bonds, general
capital financing, and low-cost alternatives to vendor financing.
Potential Use: Regional strategies are essential to prevent certain types of environmental degradation and
pollution or effectively remediate effects of cross-border pollution. They also offer opportunities to reduce
costs and improve services where economies of scale are a significant factor.
Advantages: For drinking water, economies of scale offer the most promising way of lowering the unit
cost of production, and thus, consumer bills, in some circumstances. Economies of scale are particularly
relevant for source-of-supply and treatment functions and can be achieved via mergers, acquisitions,
interconnection, and wholesale water markets. Some economies can be achieved through common
ownership or management even without the benefit of physical interconnection.
Limitations: Regional approaches require cooperation and legal authority. They also may be attacked
as interfering with local political power or home rule.
Reference for Further Information: USEPA, Office of Air Quality Planning and Standards,
Research Triangle Park, NC 27711; Phone: 919-541-5616; Fax: 919-541-2464; National
Association of Development Organizations, 444 North Capitol Street, NW, Suite 630, Washington, .
DC 20001; Phone: 202-624-7806; Fax: 202-624-8813; E-mail: nado@sso.org; Internet:
wwwjiado.org/; National Association of Regional Councils, 1700 K Street, NW, Suite 1300,
Washington, DC 20006; Phone: 202-457-0710; Internet: www.narc.org/. Association of Bay Area
Governments, PO Box 2050, Oakland, CA 94604-2050; Phone:510-464-7900; Fax:510-464-
7979;Intemet: www.abag.ca.gov/services/finance/abagfs.htm.
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REHABILITATION TAX CREDITS
Description: Federal tax credits to support private investment in the substantial rehabilitation of historic
and older buildings are authorized by Section 251 of the Tax Reform Act of 1986. This certified
rehabilitation of a certified historic structure is supported by a twenty percent tax credit. A depreciable
building rehabilitated for office, commercial, industrial, agricultural, or rental residential purposes may qualify
for the tax credit if it is listed in the National Register of Historic Places or is located in a registered historic
district and is certified by the National Park Service as contributing to the district's historic significance.
The owner must hold Ihe building for five full years after completing the rehabilitation, or pay back a portion
of the tax credit. A ten percent tax credit is available for substantial rehabilitation of older, non-historic
buildings (built before 1936) for non-residential uses. The cost of rehabilitation must exceed the greater
of $5,000 or the adjusted basis of the depreciable property and at least seventy-five percent of the
building's internal structural framework must remain in place.
Actual Use: Rehabilitation tax credits for historic and other buildings have been authorized in federal
income tax laws since 1976. These tax credits have been used extensively in a number of inner-city
revitalization efforts.
Potential Use: The availability of a federal tax credit for. building rehabilitation offers owners of qualifying
historic and older, non-historic buildings the opportunity to accomplish much needed environmental
remediation involving the removal of the hazardous substances at significantly lower after-tax costs.
/
Advantages: Tax credits reduce income tax liabilities dollar-for-dollar, unlike deductions which have a
value based on the marginal tax rate.
Limitations: Buildings listed in the National Register of Historic Places are not eligible for the ten percent
credit; therefore, owners ofhistoric buildings denied certification forthe twenty percent credit may not claim
the ten percent credit. Tax credits are useful only to the extent taxes are otherwise owed.
Reference for Further Information: For general information contact National Park Service, Room
NC200,1849 C Street, NW, Washington, DC 20240; Phone: 202-343-9578; E-mail: hps-info@nps.gov.
For federal tax rules, contact the Internal Revenue Service, Washington, DC 20224; Phone: 1-800-829-
1040; Internet: www.irs.ustreas.gov/. For application forms and instructions, contact the appropriate
State's historic preservation office.
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EFAB/EFC Guidebook ; April 1999
RISK MANAGEMENT AND INSURANCE
Description: Risk management and insurance can be a key ingredient in a long-term cost reduction
strategy. Risk management is the process of managing risk exposure to achieve objectives in a manner
consistent with public interest, human safely, environmental factors, and Ihe law. It consists of planning,
organizing, leading, coordinating and controlling activities wilh the intent of providing an efficient pre-loss
plan that minimizes the adverse impact of risk on the organization's resources, earnings and cash flows.
Risk management involves systematic, continuous investigation of risk loss exposures, evaluation of iheir
nature, frequency, severity and potential impact on the organization, and planning, organizing and
implementing appropriate risk control and risk financing techniques to minimize loss impacts on the
organization. Effective risk management is needed to avoid adverse effects on an organization's credit
rating and cost of capital. Frequently, risk management involves risk transfer via purchase of insurance or
other specialized financial instruments (derivatives). The insurance industry includes properly and casualty
insurers that underwrite the financial risks associated wilh potential environmental liabilities. Some
environmental risks impose potential losses greater than associated profit opportunities. For example, the
potential contamination of brownfields can impose liability risks lhat severely inhibit redevelopment and
reuse of such property (see Section 9., Environmental Insurance).
Actual Use: Virtually all organizations of significant size exercise some type and degree of risk
management, if only Ihe purchase of commercial umbrella liability insurance coverage. Risk transfer
mechanisms such as environmental liability insurance are widely available.
Potential Use: Environmental insurance can reduce risks involved in brownfields redevelopment.
Advantages: Risk management lets officials avoid spending excessive time and attention in dealing with
unanticipated losses. It protects cash flows, profitability, and growth for-profit firms.
Limitations: Insurance premiums can be prohibitively expensive for small organizations. The relative cost
of insurance as policy limits decline, decreasing the feasibility of insurance for smaller transaction requiring
lower coverages. Also, the uncertainties of future liability under the Comprehensive Environmental
Response, Compensation, and Liability Act (CERCLA) are not eliminated by insurance if the insurer can
seek payment from former owners of contaminated property under the Act's retroactive, strict, joint and
several liability standard.
Reference for Further Information: American Risk and Insurance Association, c/o Chase
Communications, PO Box 9001, Mount Vemon, NY 10552-9001; Phone: 914-699-2025; E-mail:
aria@pipeline.com; Internet: www.aria.org/. National Center for Environmental Assessment; Phone: 202-
564-3361. Potential Insurance Products for Brownfields Cleanup and Redevelopment, June 1996,
PB96-963244, USEPA, Office of Emergency and Remedial Response.
30
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EFAB/EFC Guidebook April 1999
VALUE ENGINEERING
Description: Value Engineering, also known as Value Analysis, Value Management or Function Analysis,
focuses on cost reduction through function cost analysis and engineering. First, a product and all of its
components are studied to determine their functions or purposes, then various analytical techniques such
as functional analysis, economic analysis, cost analysis, and value-added analysis are used to provide a
product with minimum essential function at lowest cost Function cost analysis differs from activity-based
costing (see Section 6., Activity-Based Costing) which considers engineering process improvement as
a source of cost reduction. Value engineering studies involve information gathering, definition of functions,
speculation on alternatives, and the evaluation of all alternative ways of meeting requirements.
Actual Use: Office of Management and Budget Circular A-131 (June 1993) and the National Defense
Authorization Act for fiscal 1996 (Public Law 104-106) require federal agencies to establish and maintain
cost-effective value engineering procedures and processes. The Department of Defense uses both value
engineering incentives and program requirements, including value engineering clauses in procurement
contracts. The Federal Highway Administration and the Bureau of Reclamation have used value
engineering for design and construction projects for a decade. EPA Region 8 used a value engineering
study for the California Gulch Superfund Site (Leadville, CO) which may result in cost reductions of as
much as $14 million. In the private sector, Toyota has integrated value engineering into its cost
management process.
Potential Use: Value analysis can be applied to environmental protection projects, particularly
infrastructure construction and hazardous waste clean-up, to reduce costs.
Advantages: In both public and private sector applications, value engineering can reduce costs while
improving performance and client satisfaction
Limitations: As practiced, value engineering is a powerful too! for cost reduction but generally does not
deal with value as a function of quality, and ignores the fact that product choices are usually based on more
than the minimum of essential product function. Importantly, it also may ignore certain environmental trade-
offs.
Reference for Further Information: Contact Society of American Value Engineers, 60 Revere Drive,
Suite 500, Norflibrook, IL 60062; Phone: 847-480-1730; Fax: 847-480-9282; E-mail value@value-
eng.org; National Aeronautics and Space Administration, Langley Research Center, Design for
Competitive Advantage, Mail Stop 159,18e West Taylor Street, Hampton, VA 23665-2199; Phone:
757-864-8213; Fax: 757-864-9713; Internet: mijuno.larcjiasa.gov/dfc/ve.html
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EFAB/EFC Guidebook
April 1999
Description:
Actual Use:
OTHER
Potential Use:
t
Advantages:
Limitations:
Reference for Further Information:
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EFAB/EFC Guidebook
April 1999
COMPARISON MATRIX FOR TOOLS FOR LOWERING COSTS
f
t
Criteria/
Tools
* Accelerated
Depreciation
Activity-Based
Costing
Amoritization '
of Pollution
Control
Facilities
* Appropriate
Technology
Barter and
Payment-In-
Kind
Benchmarking
"Capital
Planning and
Budgeting
"Comparative
Risk Ranking
*Cost-Benefit
Analysis
*Cost
Effectiveness
Analysis
Actual
Use
High
Mod.
Mod.
Mod.
Mod.-
High
Low
High
Mod.
High
High
Revenue
Size
Mod. -
High
Mod. -
High
Mod.
High-
Mod. -
High
Low
High.
Mod.
High
High
Revenue
Cost/
Savings
High
Mod.
Mod.
High
High
Low
High
Mod. -
High
Mod.
High
Admini-
strative
Ease
Low-
Mod.
Low
High
Mod.
Mod. -
High
Low- '
Mod.
Mod.
Low-
Mod.
Mod.
Mod.
Equity
Mod.
Low
Low
Mod.
Mod.
High
Low-
Mod.
High
Low-
Mod.
Low
Environmental
Impact
High
Mod.
Low-
Mod.
High
Mod.
Mod. -
High
Mod. -
High
High
Mod.
Mod.
t
33
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EFAB/EFC Guidebook
April 1999
COMPARISON MATRIX continued
Criteria/
Tools
* Deduction of
Agricultural
Conservation
Expenses
"Discounting
(Economic)
Employee
Stock
Ownership
Plans
EPA: Common
Sense Initiative
EPA: Project
XL
"Expensing
of Assets
"Financial
Capability
Analysis
Fiscal Impact
Analysis
"Full-Cost
Pricing
Life Cycle
Assessment/
Costing/Design
Actual
Use
Mod. -
High
High
High
Low
Low
High
High
High
High
Mod- ,
High
Revenue
Size
Mod.
High
High
Mod.
Low
Mod.
High
High
High
High
Revenue
Costf
Savings
High
Mod. -
High
Mod.
Mod.
High
Mod. -
High
Mod.
Mod.
Mod.
Mod.
Admini-
strative
Ease
Low-
Mod.
Mod.
Low-
Mod.
Mod.
Mod. -
High
Mod.
Mod.
Low-
Mod.
Mod.
Low-
Mod.
Equity
Mod.
Mod.
Low
Mod.
Low-
Mod.
High
Mod.-
High
Low-
Mod.
Mod.
Low
Environmental
Impact
High
Mod. -
High
Mod.
High
High
Mod. -
High
High
Mod.
«
High
Low-
Mod.
t
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EFAB/EFC Guidebook
April 1999
COMPARISON MATRIX continued
t
Criteria/
Tools
*Pay-As-You-Go
*PoIlutant
Loading
Allocation
^Refinancing
Loans
* Reforestation
.Tax Credit and
Amoritization
*Regionalization
Rehabilitation
Tax Credits
"Risk
Management
and Insurance
Value Analysis
Actual
Use
High
High
High
Mod. -
High
High
Mod.
High
High
Revenue
Size
High
High
High
Mod.
Mod. -
High
Mod.
High
High
Revenue
Cost/
Savings
High
Mod.
High
High
High
High
Mod. -
High
Mod.
Admini-
strative
Ease
Mod.
Low
Mod.
Mod.
Low-
Mod.
Mod. -
High
Mod.
Mod.
Equity
Mod. -
High
Low-
Mod.
Low-
Mod. .
High
Mod.
Mod.
Low
Low
Environmental
Impact
High
i
High
Mod.
High
High
High
High
Low
High - High use (over 25 States, many localities); criteria score high (cost-effective, easy to use,
accessible, impacts specific projects)
Mod.- Moderate use (10-25 States, many localities); criteria score medium well
Low - Low or rare use; criteria score poorly (complicated, not cost effective or equitable to use,
used for analytical purposes only)
* Star indicates best rated mechanism
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EFAB/EFC Guidebook
April 1999
7. TOOLS
FOR
ENCOURAGING
POLLUTION PREVENTION
t
AND
RECYCLING
36
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EFAB/EFC Guidebook • April 1999
7. TOOLS FOR ENCOURAGING
POLLUTION PREVENTION AND RECYCLING
INTRODUCTION
"When the Environmental Protection Agency (EPA) was created in the early 1970's its focus was on
cleaning up and controlling Ihe most immediate environmental problems. Over the next twenty years, the
nationmade huge investments in these efforts and realized major reductions in air, water, and land pollution.
However, it became increasingly apparent over time that Ihe traditional "end-of-the-pipe" approaches are
expensive (increasingly so), not fully effective, and sometimes transfer pollution between environmental
media.
To achieve needed additional improvements to environmental quality, environmental activities must move
"upstream to prevent pollution before it occurs and to recycle waste wherever possible. The Pollution
Prevention Act of 1990 recognized that pollution should be prevented or reduced at the source whenever
feasible. USEPA defines pollution prevention as "source reduction" since that term is defined in the Act
(see Appendix E: Glossary), and adds protecting natural resources through conservation and increased
efficiency.
Pollution prevention is not the only strategy for reducing environmental risks, but it is the preferred one,
followed by recycling. This priority is reflected in USEPA's environmental management hierarchy which
includes:
1) pollution prevention;
2) recycling;
3) treatment; and
4) disposal or release.
Preventing pollution offers important economic benefits, as pollution never created does not need to be
managed or cleaned up. Recycling means that wastes do not have to be disposed and that raw materials
can be conserved. Pollution prevention and recycling have the potential to protect the environment and
improve manufacturing efficiency and reduce the use of raw materials.
This section evaluates financing tools which States, communities, and the private sector can use to
encourage pollution prevention and recycling. Seventeen ways of raising revenues, lowering costs, and
influencing behavior are discussed The tools range from traditional State and federal assistance programs
to proven financial management techniques that encourage conservation and reuse to bold new financial
management and investment strategies, programs, and techniques.
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EFAB/EFC Guidebook
April 1999
LIST OF TOOLS FOR ENCOURAGING
POLLUTION PREVENTION AND RECYCLING
(In Alphabetical Order)
1. Assurance/Performance Bonding
*2. Demand-Side Management Pricing
*3. Deposit-Refund Systems
*4. Development Rights Purchases
*5. Differential Pricing
6. Energy: NICE 3
7. EPA: Pollution Prevention Grants
*8. Environmental Self-Auditing
*9. Full-Cost Environmental Accounting
*10. Green Code of Conduct (ISO 14000 Voluntary Environmental Standards)
*11. Green Investments
12. Liability Assignment
13. Pollution Charges
14. Private Forest Banking
15. State Pollution Prevention (P2)/Recycling Loan Programs
*16. Tax Incentive Programs
*17. Transit Pass Subsidy Programs
t
* Stars indicate most highly rated mechanisms as described in the Comparison Matrix at the end of the
narratives. See Introduction to the Guidebook for a description of Ihe criteria used Ratings of 'High",
"Moderate", and "Low" are for comparison purposes only, as some ratings are necessarily subjective and
data are incomplete.
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EFAB/EFC Guidebook April 1999
ASSURANCE/PERFORMANCE BONDING
Description: One method of incorporating social cost into decision making by polluters or developers is
to require them to purchase dated assurance or performance bonds that reflect the lull value of potential
worst-case costs to remedied environmental damage resulting from their actions. The bond would be
repaid in full (possibly with interest) at ihe time of maturity if the bondholder demonstrates that fee potential
damage has not occurred. The bond would be repaid in part if some level of damage less than ihe potential
baseline has occurred, and would be forfeited if worst-case damages are incurred. If damages did occur,
Ihe bond could be used to remedy the environmental damages or to compensate injured parties.
Actual Use: Performance bonding is widely used in the construction business, to assure feat work is
completed within fee specified time period. For environmental purposes, it has been used in surface mine
reclamation programs to provide assurance feat surface mined areas will be reclaimed and restored to a
natural condition. These assurances are particularly helpful for obtaining debt for brownfields
redevelopment projects.
• Potential Use: An assurance/performance bonding requirement could be administered by a State
regulatory agency, which would act as fee bonding agency. If fee bonds were administered through another
agency, fee regulatory agency would have to be integrally involved.
Advantages: Assurance/performance bonding is designed to incorporate environmental criteria and
uncertainly (i.e., fee process and extent of damages is uncertain prior to development) into fee market
system. This approach reflects fee estimated cost of potential future environmental damages in fee value
of fee bond. It provides a strong economic incentive to minimize damages and to develop innovative, cost-
effective pollution control technologies.
Limitations: Although based on scientific information on potential damages, setting fee value of fee bond
would still be a subjective decision dependent on numerous assumptions. Where fee value of fee bond is
based on fee cost of remediation or replacement, depending on fee circumstances, it may not capture fee
full social cost of environmental damage. Setting bond values might be subject to lengthy legal challenges,
requiring extensive documentation and possibly causing program delays.
Reference for Further Information: Costanza, Robert and Perrings, Charles, "A Flexible Assurance
Bonding System for Improved Environmental Management,"Ecological Economics (1990), pp. 57-75.
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EFAB/EFC Guidebook
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DEMAND-SIDE MANAGEMENT PRICING
Description: This is a unit pricing structure that is sensitive to the timing of usage (demand) during a utility
system's peak hours or peak days. Usage that occurs during these peak periods is charged at a higher
rate. The structure is designed to result in more accurate pricing for the usage which occurs during a
system's peak demand periods. Utilities must incur additional capital and operating costs to develop the
capacity to meet peak demands. Through demand-side management pricing, these additional costs can
be shifted to those customers who create 1he need for the peak period capacity. Such pricing also tends
to reduce peak demand by causing system users to reduce their use of the system or at least shift some
portion of their usage to non-peak periods. As a result, the utility can "shave" operating costs and stretch
existing investment, or reduce future investment in facilities necessary to meet peak period demands.
Actual Use: The demand-side management pricing structure is most commonly used by electrical, gas,
and communications utilities, and less frequently by water or sewer utilities. Demand-side management
pricing has also been used for a considerable number of years by the airline industry. More recently, it has
been adapted to transportation facilities, including roads and bridges, through the use of time-sensitive (rush
hour-based) tolls. This type of pricing structure is used most extensively by utilities and other parties which
have the capability of metering usage by time of day.
Potential Use: The use of this pricing technique could be extended to other utilities and public
infrastructure for which user fees are charged, and for which time of use can be determined, such as park
and recreation facilities. Its adoption by water and wastewater utilities could also be greatly expanded if
better systems of measuring use were implemented. Demand-side management pricing may have valuable
application by these latter utilities with regard to stormwater management
Advantages: The pricing structure shifts costs to those users who place the greatest demand on the
system, creating greater equity in pricing and maximizing the user pays principle. It can significantly reduce
or shift demand to less costly periods, and help to avoid costly, and maybe, unnecessary future capital
investment required to meet peak demands.
Limitations: The technique requires the ability to monitor consumption by individual users at different
times. Only a few water and wastewater systems have this ability. It requires expensive, special metering
equipment and billing systems which can accommodate variable rates. Poor customers who cannot shift
or reduce their usage are penalized by 1he resulting higher prices.
Reference for Further Information: USEPA, Office of the Comptroller, Environmental Finance
Program, 401 M Street, SW, Washington, DC 20460. Mail Code: 2731R. Contact: Timothy McProuty
at mcprouty.timothy@epa.gov.
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EFAB/EFC Guidebook April 1999
DEPOSIT-REFUND SYSTEMS
Description: Improved price signals can reduce the volume of waste that is reaching our landfills and
incinerators. One kind of improved price signal, the deposit-refund system, combines a special front-end
surcharge (the deposit) on a particular substance or product with a reftind payable to the consumer when
quantities of the substance or product in question are turned in for recycling or proper disposal.
Actual Use: Historically, deposit-refund systems have been applied primarily at Ihe State level. The
systems have typically applied to glass, aluminum, plastic, or other containers, such as drink bottles and
cans. Many States have a five cent deposit-refund on soft-drink bottles and cans. However, such systems
are now being expanded to include other types of products. For example, in some areas they are being
applied to office products, such as photocopy machine toner cartridges. States such as Maine and Rhode
Island have established deposit-refund systems to encourage the recycling of lead-acid/automobile
batteries.
Potential Use: These systems could be expanded to include many other types of products. They could
• be applied to containers that hold chemicals or other environmentally hazardous products. Lead-
acid/automobile batteries may be good candidates for inclusion in deposit-refund systems nationwide.
Other possible candidates for these recycling systems include motor oil, other automobile fluids, and
pesticide containers. For some substances and problems, a federal deposit-refund system might be
appropriate. This would be the case when dealing with products that have national markets, are easily
transported, and have uniform recycling characteristics and consequences.
Advantages: Deposit-refund systems can be placed on any product which is currently disposable and
contains materials that can be reused. It also provides an incentive to recycle and therefore reduces the
quantity of solid waste produced. Deposit-refund systems can assist regulatory agencies in accomplishing
their enforcement and compliance program objectives by reducing the need for additional regulatory
resources while simultaneously augmenting agency .efforts.
Limitations: Under this lype of system, consumers, not producers bear the economic burden. The
market for raw materials in product of deposit-refund system needs to be identified.
Reference for Further Information: Stavins, Robert, N. And Whitehead, Bradley W., Progressive
Policy Institute, Policy Report No. 13, The Greening of America's Taxes: Pollution Charges and
Environmental Protection, February 1992.
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EFAB/EFC Guidebook April 1999
DEVELOPMENT RIGHTS PURCHASES
Description: Purchasing development rights, often on agricultural or forest lands, is die buying of the legal
"right" of the owner, or subsequent owners, to develop land for residential or commercial uses. Existing
land uses are usually maintained, although bans on development may be limited, i.e., allowing some low
density development These rights are bought by State and local governments and/or nonprofits groups.
They are like conservation easements, since bolh entail partial ownership via deed restrictions, contracts
or covenants, as opposed to fee-simple transfer of ownership. But, development rights purchases often
entail payments to land owners, contrasted to the preferential tax treatment of conservation easements.
Buying the rights restricts development whereas conservation easements may require more land
management such as soil conservation and plant maintenance to protect water quality and natural habitats
(see also the related tool at Section 8., Conservation Easements).
Actual Use: Nonprofit organizations have been buying development rights for many years. Recently,
government purchases capitalized by bonds and special taxes have been growing rapidly. For example,
Peninsula Township, Michigan funds purchases with a small property tax increase assisted by a grant from
the State's Conservation Trust Fund. Pittsford, New York issues bonds to buy development rights. New
York State's annual debt service payments on its mega-environmental bond, which pays for farmland
preservation, are financed by the real estate transfer tax. Virginia Beach, Virginia and Howard County,
Maryland buy development rights at market value on an installment basis by making interest-only tax-
exemptpayrnentstolandownersfor25and30years,respectively,andpaying1heprincipalattheend. The
landowner thus defers capital gains. The balloon payment is guaranteed by municipal investments in zero
interest Treasury bonds.
Potential Use: Any rural or urban site, including green space, forests, wetlands and ranch lands, can be
protected fromdevelopment Additional environmental protection work could be added to the development
rights deed restrictions similar to conservation easements.
Advantages: Partial ownership through deed restrictions, contracts and covenants, is much less costly
ton outright ownership. Local financing encourages maximum local citizen involvement
Limitations: The program is voluntary, and some difficult negotiations still may fail. Revenues must be
raised to cover costs, so widespread local agreement must exist. Development rights purchases may
provide protection only against development, and not for other ecological purposes.
Reference for Further Information: Henry Diamond and Patrick Noonan, Land Use in America,
Lincoln Institute of Land Policy, Island Press, 1996; American Farmland Tmst,ForgingNew Protection:
Purchasing Development Rights to Save Farmland, andSaving America's Countryside, Washington,
D.C., 1996, Telephone: 202-659-5170; The Trust for Public Land, GreenSense: Financing Parks and
Conservation, Phyllis Myers, editor, San Francisco, CA, Spring 1998.
42
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EFAB/EFC Guidebook . . April 1999
DIFFERENTIAL PRICING
Description: Differential (nonlinear) pricing, including declining block rates and progressive rate systems,
as opposed to single tariff pricing, gives utilities flexibility to handle demand management and service
affordability issues. Inclining block rates, peak hour and/or day surcharges, seasonal rates, and excess
loading surcharges are forms of conservation pricing. In these systems, the unit price rises as use rises or
the time period changes, giving customers a real and growing incentive to control use. Increasing block-
rate systems charge higher unit prices for higher levels of usage. By contrast, with a declining block rate
the unit price decreases when consumption exceeds a threshold amount. This form of marginal cost pricing
recognizes that high volume users may contribute to economies of large scale for a facility or service. Single
tariff pricing spreads costs over a wider population so that service to high-cost areas is subsidized by areas
with greater cost efficiency. Utility design can affect demand for services as it affects the ability of
businesses and households to pay for them. For example, a lifeline rate bills a relatively low price for basic,
essential service (See also Section 6., Full-Cost Pricing; Section 7., Demand-Side Management
Pricing; Section I.E., Local Water/Wastewater Utility User Fees; and Section I.E., Solid Waste
Disposal Fees).
Actual Use: Although rate structures vary widely, most utilities use some form of differential pricing in their
rate structures. These include toxicity charges for industrial wastewater and incentive rates for off-peak
use.
Potential Use: Differential pricing can be used for various purposes, including promotion of water
conservation (increasing block rates), savings for low-income households, encouragement of industrial
location (decreasing block rates), energy conservation (peak use surchargeX and land use growth control
(increasing block rates).
Advantages: Not only utilities, but'also other agencies that charge fees may be able to use a rate structure
to pursue environmental goals while ensuring adequate revenues and serving socio-economic equity
objectives.
Limitations: Rate structures are not easy to change, particularly if they must be approved by a local
legislative body or state public service commission. Most rate structures are somewhat regressive
(insensitive to ability to pay), therefore may be considered socially inequitable. Differential pricing can be
complicated by attempts to deal wilh multiple issues. Some variations also can reduce collectibility in small
communities experiencing high rates due to diseconomies of small scale.
Reference for Further Information: Raftelis, George, Comprehensive Guide to Water and
Wastewater Finance and Pricing, second edition, CRC Press/Lewis Publishers^Revenwe Requirements,
Manual M35,1990, Alternative Rates, 1992, and Water Rates and Related Charges, Manual M26,
1996, American Water Works Association, 6666 West Quincy Ave., Denver, CO 80235, Telephone:
800-926-7337 or 303-794-7711, Internet: www.awwa.org/.
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EFAB/EFC Guidebook
April 1999
DEPARTMENT OF ENERGY
NICE 3
Description: This Department of Energy (DOE) program gets its acronym from its purpose—to promote
National Industrial Competitiveness through Energy, Environmental, and Economics. The NICE 3
program seeks to support via cost-sharing grants the development of new processes and/or equipment to
reduce the generation of wastes and green house gases and to conserve energy and energy-intensive
feedstocks. The program gives preference to proposals that use pollution prevention and integrate pollution
prevention and recycling approaches. It focuses on States and industries with high energy consumption and
pollution problems, including chemicals and allied products (SIC 28), petroleum and coal products (SIC
29), paper and allied products (SIC 26), and primary metal industries (SIC 33). Eligible applicants include
States in partnership with industry, and three-year proj ects are funded at 45 % DOE federal funds and 55
% industry and State monies.
Actual Use: The NICE 3 program obligated grants totaling $5.8 million in Fiscal Year (FY) 1997, and
estimates for FYs 1998 and 1999 are $6 million, respectively. In FY 1997, grant assistance ranged from
$69,000 to the legal maximum of $425,000 and averaged $310,000. Projects funded include one in
Oregon to recycle raw glass by removing contaminants, one in Ohio to reclaim and reuse wastewater to
a water-based paint plant, a New York project to develop an approach to identify optimal volatile organic
compound control strategies for industrial facilities, and one in Texas to develop a methanol recovery
process for hydrogen peroxide production.
Potential Use: There are an abundance of unexplored and /or untapped opportunities for improving
pollution prevention, recycling and energy processes and strategies in many, if not all, of the industrial
sectors of the nation's economy.
Advantages: The NICE 3 program is highly leveraged in that it requires industry and States provide a
substantial cost-share in order to be able to receive DOE federal funds. The program concentrates its
assistance by focusing on those States and industrial sectors with energy consumption and pollution
problems.
i
Limitations: The program's focus on four specific industrial groups may limit the resources that can be
used to help other industries. The cost-share requirement may limit the ability of some industries/firms to
take part in the program. The three-year project period may eliminate some good longer-term projects.
Federal reporting, documentation, and auditing requirements can be extensive.
Reference for Further Information: U.S. DOE Headquarters, E-22, Room 5F-067C, 1000
Independence Avenue, SW, Washington, DC 20585. Telephone Number: 202-586-1641. USEPA,
Office of Pollution Prevention and Toxics, 401 M Street, SW, Washington, DC 20460. Telephone
Number: 202-260-3557.
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EFAB/EFC Guidebook April 1999
ENVIRONMENTAL PROTECTION AGENCY
POLLUTION PREVENTION GRANTS
t
Description: The Environmental Protection Agency (EPA) Pollution Prevention Grants Program awards
these project grants to support the establishment and expansion of State pollution prevention programs and
address sectors of concern such as industrial toxics, agriculture, energy, and transportation. The program
is focused on demonstrating the value of making multimedia pollution prevention an environmental
management priority. Eligible recipients include the States, the District of Columbia, the U.S. Virgin
Islands, the Commonwealth of Puerto Rico, any territory or possession of the United States, any agency
or instrumentality of a State, including State universities, and all federally recognized Indian Tribes. While
local governments, private universities, and private nonprofit organizations are not eligible to receive
funding, EPA encourages eligible recipients to work with these groups. Grant recipients must contribute
at fifty percent of the total cost of their project in dollars or in-kind goods and services.
Actual Use: These grants are used to fund a wide range of pollution prevention projects that build State
pollution prevention capabilities and test innovative pollution prevention approaches. Types of projects
funded include technical assistance, data collection and dissemination, education and outreach to business
and government personnel, training, environmental auditing, technology transfer, demonstration projects,
and integration of pollution prevention in State regulatory programs. During fiscal year 1997, the EPA
obligated $4.9 million in these grants to fifty-seven State and Tribal agencies. Grant assistance ranged from
$20,000 to $200,000 and averaged $75,000. The Agency projects it will obligate approximately $5
million in pollution prevention grants in FYs 1998 and 1999, respectively.
Potential Use: These grants are available for a broad and growing range of pollution prevention uses.
Advantages: The grant assistance is highly leveraged through the fifty percent match required of grant
recipients. The assistance is limited to use for pollution prevention related purposes.
Limitations: Some potential recipients may have their grant amount limited by their ability to raise the fifty
percent match. Local governments, private universities and other private nonprofits are not eligible for
assistance and may not be included as project partners in some States.
Reference for Further Information: U.S. EPA, Office of Pesticides and Toxic Substances, 401 M
Street, SW, Washington, DC 20460, Mail Code: 7401,TelephoneNumber: 202-260-3810, FaxNumber:
202-260-0575. Information on Ihese grants is also available in the Catalog of Federal Domestic
Assistance and its Internet site at http://aspe.os.dhhs.gov/cfda/ideptaa.htm. This is the page for the
Independent Agencies, select EPA.
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EFAB/EFC Guidebook
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ENVIRONMENTAL SELF-AUDITING
Description: Environmental self-auditing, as used in here, relates to voluntary efforts by corporations and
other organizations to focus not just on environmental compliance, but also on how efficiently they comply
with environmental regulations or how to improve their environmental performance. The voluntary efforts
are accomplished by detailed tracking and reporting on a wide range of environmental performance
measures. These performance measures include not only traditional output measures such as the number
of Notices of Violations and total emissions, but also new, non-traditional measures. Some examples of
non-traditional measures are percent of energy usage per unit of output or product managed, number of
self-identified environmental audit issues compared to the total number of such issues, percentage of issues
resolved within established time frames., and percentage of operating and other personnel receiving
environmental training.
Actual Use: Private companies in the forefront of developing these new, more comprehensive self-
auditing programs include Waste Management Technologies, Inc., the 3M Corporation(through its famous
Pollution Prevention Pays program), Tenneco Gas, and Browning-Ferris Industries. The Illinois EPA
(IEPA) in cooperation with Arthur Andersen & Co. has worked on exploring and developing a range new
corporate performance measures that better reflect company priorities and performance trends. Some of
the companies involved in the IEPA project included Abbott Laboratories, Amoco Corporation,
Caterpillar, Inc., Monsanto Co., and Sundstrand.
Potential Use: Corporations, governmental organizations, and non-profit groups nationwide could
voluntarily develop and adopt self-auditing programs employing more effective measures of environmental
performance.
Advantages: Such programs could allow the corporations and other organizations to better understand
their environmental performance and operations. Using this knowledge, they could design programs and
processes to operate more efficiently/effectively and to improve their financial performance. Based on the
experiences of companies such as 3M, they might be able to re-engineer entire systems and cut waste by
up to 35 percent or more.
Limitations: It is not easy to develop and establish comprehensive, cost-effective measures of
performance. It requires expertise, time, and resources, that not all companies or organization may have,
or be able to access.
Reference for Further Information: Van Epps, Ronald E. and Walters, Susan D., Measure for
Measure: Evaluating Environmental Performance with Tact and Insight, Corporate Environmental
Strategy, The Journal of Environmental Leadership, Volume 3, Number 2.
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EFAB/EFC Guidebook . April 1999
FULL-COST ENVIRONMENTAL ACCOUNTING
Description: This is a financial and management cost accounting method that allocates all direct and
indirect historical costs, including embedded environmental ones, to a product, process, or activity over
its life. Themelhod uses 1hree important concepts: full-cost accounting, environmental cost accounting, and
life-cycle costing. Full-cost accounting allocates historical costs. Environmental cost accounting brings
in environmental costs and ties tiiem to the product, process, or activity. Finally, life-cycle costing identifies
fee effects of the product, process, or activity at each life-cycle stage (raw materials acquisition,
mahufacturing, use/reuse/maintenance, and recycle/waste management) and assigns those effects monetary
values. Together, the concepts help incorporate in decisions the hidden costs which can hinder efficient
management and environmental protection
Actual Use: The use of full-cost environmental accounting, as well as its component concepts and related
approaches, is in its infancy but slowly growing. For example, federal facilities are required under
Executive Order 12586 to apply life-cycle analysis and total-cost accounting (a synonym for full-cost
accounting) when estimating pollution prevention opportunities. USEPA's Environmental Accounting
Proj ect is working with over 650 different individuals organizations including more than 150 from industry.
Project case studies include environmental accounting efforts at AT&T and full-cost accounting work at
Ontario Hydro, the Canadian power company.
Potential Use: Every organization could adopt these techniques or some combination of them.
International standards are under development to encourage companies and governments to better manage
their environmental costs. For example, Ihe International Organization for Standardization 0SO) is
developing a series of voluntary environmental management standards entitled ISO 14000. These
standards could become requirements for conducting trade and business worldwide.
Advantages: Not only are great environmental benefits to be gained from internalizing the value of
environmental resources and the costs of damaging them, but large economic efficiencies may be gained
from reducing current costs as well as future liabilities. ;
Limitations: There is a need to decide on clear standards for all of these terms and to make their use
universal or major competitiveness concerns arise. This is a major change and may not occur easily or
without some significant short-term costs and economic dislocations.
Reference for Further Information: USEPA, Office of the Comptroller, Environmental Finance
Program, 401 M Street, SW, Washington, DC 20460. Mail Code: 2731R, U8EPA^ Office of Pollution
Prevention and Toxics, Pollution Prevention Division, 401 M Street, SW, Washington, DC 20460. Mail
Code: 7409. Phone No: 202-260-3557. Information on USEPA's Environmental Accounting Project
is available on the World Wide Web at http://www.epa.gov/opptintr/acctg/.
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GREEN CODE OF CONDUCT
(ISO 14000 VOLUNTARY ENVIRONMENTAL STANDARDS)
Description: The International Standards Organization (ISO) has published several standards in its
Environmental Management Series covering Management Systems and Auditing to help businesses build
sound environmental management/processes into existing systems and practices. These standards have^
been approved by Ihe American National Standards Institute as American National Standards, The
identifying numbers and tides for Ihe standards are as follows: ISO 14001 Environmental Management-
Systems - Specifications with Guidance for Use; ISO 14004 Environmental Management Systems -
General Guidance on Principles, Systems, and Supporting Techniques; ISO 14010 Guidelines for
Environmental Auditing - General Principles; ISO 14011 Guidelines for Environmental Auditing - Audit
Procedures, Auditing of Environmental Management Systems; ISO 14012 Guidelines for Environmental
Auditing - Qualification Criteria for Environ-mental Auditors; ISO 14020 Environmental Labeling; ISO
14031 Environmental Performance Evaluation; ISO 14040 Life Cycle Assessment; ISO 14050 Terms and
Definitions; ISO 14060 Environmental Aspects of Product Standards. ISO 14001 is the key standard,
containing a pattern of specifications that must be followed if an organization is to be recognized as adhering
to ISO 14000. Requirements include a statement of environmental policy, environmental objectives and
targets, and procedures to monitor activities that can have significant impact on the environment
Actual Use: ISO 14000 is being adopted voluntarily by U.S. businesses, particularly those involved in
exporting.
Potential Use: Although aimed primarily at industrial situations, the standards could be applied to other
organizations and activities.
Advantages: If they have sufficient scope and rigor to achieve environmental improvement, widespread
adoption of voluntary standards of conduct can reduce societal costs otherwise imposed by negative
environmental externalities produced by businesses and government agencies.
Limitations: Voluntary codes or standards of conduct depend on effective communication, the
practicability of implementation, and the willingness of institutional leaders to support adoption.
Reference for Further Information: American National Standards Institute, 11W. 42nd St., NY, NY
10036; Phone: 212-642-4900; Internet: web.ansi.org/public/ isol4000/defaulthtm; International
Organization,for Standardization, 1, Rue de Varembe, Case postale 56, CH-1211 Geneve 20,
Switzerland; Phone 41-22-749-0111; E-mail: central@iso.ch; Internet: wwwJso.cn/; Coalition for
Environmentally Responsible Economies, 11 Arlington St, 6th Floor, Boston, MA 02116-3411.
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EFAB/EFC Guidebook ' April 1999
GREEN INVESTMENTS
Description: Green investments are financial investments in companies, financial institutions, monetary
funds, and/or other financial entities that to the extent practicable or possible do not engage in, or support
organizations that engage in, environmentally harmful behavior. Green investments are deliberate decisions
to make informed financial investments that incorporate environmentally responsible behavior. They are
made with profit in mind, but tempered by environmental concerns.
Actual Use: There are substantial and growing number of banks, mutual funds, financial networks,
financial management companies, and firms advertising claims that their behavior is socially and/or
environmentally responsible. -For example, the Calvert Group offers the nation's largest family of socially
and environmentally responsible mutual funds with screened assets under management exceeding $1,4
billion in stocks, bonds, and money market funds. The Bank of America has a strong program to assist
"green" companies with funding. Earth Tones is a long distance telephone company that gives 100% of
its profits to environmental campaigns and prints its bills on recycled papers along with Green Alert updates
about pressing environmental issues. There are also firms that provide screening services for investors to
determine the validity of green advertisements.
Potential Use: The potential for growth in green investments is good as people become more
environmentally aware. As these investments develop proven track records of financial success, they will
attract more investors. Given their small current size compared to financial markets, they represent an area
ripe for further growth.
Advantages: Returns on green investments can be as good or better than most regular investments.
Between May 1990 and December 1994, an index of 400 socially responsible firms (includes environment
considerations) outperformed the S&P 500 by 70.41 percent to 60.38 percent. Environmentally
responsible investments offer an alternative to ones that involve environmentally harmful behavior, take
money away from these investments, and may encourage organizations to review and reevaluate their
environmental behavior.
Limitations: These investments options are minuscule in size relative to all investment vehicles; and some
lenders report a dearth of funding opportunities. Not every investor is environmentally motivated. The
range of green investments are not well-publicized, disingenuous advertising occurs, and improved
screening of potential investments is needed.
Reference for Further Information: Social Funds Guide To Environmentally & Socially Screened
Mutual Funds and Directory of Information Resources for Socially & Environmentally Concerned
Investors, Consumers and Business People, Good Money Publications, 1995.
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LIABILITY ASSIGNMENT
Description: Assignment of liability pertains to insurance markets where premiums would reflect the
relative degree of risk that activities pose to the environment. Premiums send price signals to polluters and
provide incentives (i.e., the possibility of lower insurance costs) to modify behavior and reduce risks.
Liability release also is included here and refers to the removal of liability for pollution or contamination.
Actual Use: Liability is assigned through common law (negligence) or environmental statutes. Liability
rules provide incentives to prevent pollution or to avoid behavior that will result in paying damages to
aggrieved parties. The Resource Conservation and Recovery Act (RCRA) program includes a financial
responsibility requirement under which disposers of hazardous substances must show they can handle the
costs of corrective action. This encourages companies to buy insurance to cover the costs of potential
damages and provides incentives to avoid releases of hazardous wastes or constituents into the
environment Liability standards are also a way to fund remediation activities, i.e., responsible parties are
liable for cleanup costs under the Super-fund program.
Potential Use: Liability assignment could be used for many types of pollution problems to provide
incentives to modify behavior. Liability assignment may be more practical, and have a more direct incentive
effect, in circumstances where the relationship between activities and environmental damage is clearly
defined. Liability release is commonly used for brownfields applications. A liability release shields property
owners from all liability, providing they are in no way responsible for the original contamination. It is
intended to encourage prospective purchasers to clean up contaminated property, without exposing them
to the risk of being held liable for the original contamination. It may be granted prior to cleanup, and may
be conditional on an intention to clean and reuse the site.
Advantages: Where insurance premiums accurately reflect the degree of risk, or the expected frequency
and severity of damages., then companies have a financial incentive to take actions that reduce their potential
liability.
Limitations: It may be difficult for insurers to underwrite risks for certain types of behavior. In some
cases, insurers have been unwilling to write liability policies, and thus insurance markets have not developed
as expected. In addition, the unpredictability of court decisions on damage awards makes it difficult for
polluters and their insurers to assess potential risks.
Reference for Further Information: Moore, John L, et. al., Using Incentives for Environmental
Protection: An Overview, Washington, DC, Congressional Research Service, June 2,1989.
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EFAB/EFC Guidebook April 1999
POLLUTION CHARGES
Description: Pollution charges are fees or taxes imposed on polluters based on the amount of pollution
generated, rather ton the level of pollution-generating activity. Sometimes, the charges can be based on
a product's potential pollution. True pollution charges give producers or consumers incentives to reduce
polluting behavior by making it a less expensive alterative. These charges reduce economic market
inefficiencies by discouraging undesirable activities that have external or unaccounted for costs. They force
firms and consumers to pay for the health and environmental consequences of pollution. They can spur
technological innovation, as polluters look to cut pollution and its costs (see Section I.C., Effluent
Charges and Emission Charges, respectively).
Actual Use: While the U.S. does not have much experience with pollution charges, there are some
examples at the State and local levels. Under the Colorado Pollution Prevention Act of 1992, fee State
levies chemical inventory fees on certain hazardous and extremely hazardous waste generators that exceed
the threshold planning quantities under the Superfund Amendments and Reauthorization Act At the local
level, some cities have instituted volume charges for solid waste collection and disposal to reduce (through
prevention and/or recycling) the amount of waste going to landfills. A number of European nations have
considerably more experience with pollution prevention charges including Germany, the Netherlands, the
Scandinavian countries, and Great Britain.
Potential Use: Pollution charges could be implemented by any and all levels of government throughout
the U.S. These charges might also be more appropriate and effective than traditional "end of the pipe"
regulatory approaches in addressing problems such as nonpoint source water pollution and air pollution
fromsmall sources. This is because they force producers and consumers when making economic decisions
to decide either prevent pollution or pay for it up front.
Advantages: Pollution charges encourage pollution prevention and technological innovation. They make
the polluter pay and can lead to savings over the cost of traditional regulation. As noted above, these
charges may be able to better address small source, nonpoint source pollution problems, they also could
improve the efficiency of the tax system by accounting for the external costs of pollution.
Limitations: It may be difficult to determine the true costs of pollution and thus the proper levels for
pollution charges. There may be business competitiveness issues involved in implementing Ihese charges.
Governments may have difficulty in switching to anew, relatively untested tax approach.
Reference for Further Information: Stavins, Robert, N. and Whitehead, Bradley W., Progressive
Policy Institute, Policy Report No. 13, The Greening of America's Taxes: Pollution Charges and
Environmental Protection, February 1992. U.S. EPAReportto Congress^llternativeFundingStudy:
Water Quality Fees and Debt Financing Issues, Syracuse University, June 1996; Congressional
Research Service, Funding Water Quality Programs, 1992.
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EFAB/EFC Guidebook April 1999
PRIVATE FOREST BANKING
Description: This is an emerging tool whereby a privately created Forest Bank accepts deposits from
forest owners in the form of the permanent rights to grow, manage and harvest trees on their land. In
exchange, the landowner receives guaranteed annual payments of interest-only on the "principal" (i.e., the
assessed market value of the timber at time of deposit in the Bank), a right to withdraw principal revenue
on demand, and a guarantee that the timber will remain forever as forest. Forest owners also are assured
1hat trees will be harvested and marketed in an ecologically sound manner. This concept has been
practiced for private mineral rights for some time, but private banking of timber rights is anew business idea
developed by the Center for Compatible Economic Development (CCED), a distinct operating unit within
The Nature Conservancy. For a closely related tool, see Section 8., Land Trusts and Reclamation
Banks.
Actual Use: The Forest Bank concept is aimed primarily at non-industrial private forest owners, including
very small owners. The first timber rights to be deposited in the Forest Bank will be 5000 acres around
the Clinch River in Virginia The Forest Bank is structured as a limited liability corporation operating for
profit, but it is partially owned by the nonprofit Center for Compatible Economic Development Initial
capitalization of the bank may require the sale of bonds. It is anticipated that landowners depositing timber
rights will withdraw principal, averaging 10-20 percent a year, in addition to annual interest payments, to
meet liquidity requirements.
Potential Use: The concept is applicable nationwide, and could be extended to ranching.
Advantages: The Forest Bank uses private market incentives to answer the needs of forest owners who
are uncertain how to manage timber to maximize short-term dollar return while at the same time protecting
forest ecology over the long term. The Bank removes the responsibility of landowners to access up-to-date
secondary and tertiary markets for ecologically sound forest products, Although conservation easements
may be used as an alternative to forest protection, and landowners may receive some financial assistance
and/or tax relief from several U.S. Department of Agriculture programs, Ihis approach may offer more
monetary return to the landowner.
Limitations: The Bank is still in its infancy. A private bank may be somewhat more risky than a federal
similar government program, because it is new, relies in large part on marketing incentives, may compete
wilhmore aggressive timber cutting sales, and is guaranteed only indirectly by the financial resources of The
Nature Conservancy.
Reference for Further Information: Kent Gilges, Center for Compatible Economic Development
(CCED), The Nature Conservancy, 315 Alexander Street, Rochester, NY 14604, Telephone: 716-232-
3530, Fax 716-546-7825, E-mail:kgilges@inc.org.
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EFAB/EFC Guidebook April 1999
STATE POLLUTION PREVENTION (P2)/RECYCLING LOAN PROGRAMS
Description: These are State funded loan programs-that support pollution prevention and/or recycling
activities and businesses, particularly with regard to small businesses. They may be direct loan programs
requiring annual appropriations support, or revolving funds that recycle a one-time capitalization amount
using repayments from earlier loans to make new loans. Eligible projects may include any pollution
prevention and/or recycling activity or may be tied to specific activities outlined in a State waste
management, pollution prevention, and/ or recycling plan.
Actual Use: Connecticut, Colorado, Maine, Massachusetts, Minnesota, New Jersey, Ohio, and
Pennsylvania have pollution prevention, recycling direct loan, or revolving loan fund programs. States
considering or developing programs include Arkansas, Montana, New York, and West Virginia Each
State program has unique purposes, loan terms, and eligibilities. For example, Ohio has a $10 million
Pollution Prevention Loan Program that is a revolving fund. The program makes low-interest loans for
construction and equipment purchases for pollution prevention activities at small-to medium-sized
businesses. Loans range from $25,000 to $200,000 per facility and cannot exceed 75 % of the fixed asset
costs of the facilities serving as collateral. The RENEW Loan Program in Colorado is very difFerent. It
gives close to prime rate loans to any business with arecycling or waste component to purchase equipment,
real estate or use as working capital. RENEW is funded from a voluntary fee which tire retailers collect
from new tire buyers for each old tire.
Potential Use: Because such programs offer good interest rates and/or flexible financing terms and small
businesses frequently need loan support, these programs could be expanded to any State with adequate
numbers of small businesses and willing/able to fund the start-up and capitalization costs. Clean Water
State Revolving Finds are beginning to make loans for recycling projects, which will substantially increase
the amount of funding nationwide (See Section 2B: State Revolving Funds).
Advantages: State loans for small businesses increases the likelihood that pollution prevention and
recycling activity will move forward in atimely fashion, or at all. It enhances the financial capacity of smaller
firms which may not have Hie resources and collateral to afford commercial financing. In addition,
revolving funds leverage State support by recycling loan monies over a period of years.
Limitations: Program funding is not large and many small businesses are only fair to poor credits. The
programs need to be well publicized to capture private sector awareness and interest.
Reference for Further Information: Great Lakes Environmental Finance Center Draft Report
(prepared for\]SEPA),An Inventory and Assessment of Pollution Control and Prevention Financing
Programs, December 1996. Great Lakes EFC, The Urban Center, Cleveland State University, UB 215,
Cleveland, Ohio 44115. Telephone Number: 216-687-4590. FaxNumber: 216-687-9277. Worldwide
Web site: http://www.csuohio.edu/giefc/.
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t
TAX INCENTIVE PROGRAMS
Description: Tax incentive programs offer inducements to private firms to encourage them to invest in
pollution prevention (and pollution control) equipment and facilities. The inducements offered in these
programs may include tax credits, property tax exemptions or abatements, and sales and use tax
exemptions.
Actual Use: Numerous States have tax incentive programs that include pollution prevention expenditures
as an eligible item For example, Louisiana, Oklahoma, and Oregon give income tax credit to businesses
that spend money on pollution prevention, recycling, and pollution control. Ohio, Texas, and West Virginia
have property tax exemption or abatement programs for pollution control/prevention facilities and
equipment. Louisiana, Ohio, Texas, and Virginia offer sales and use tax exemptions for environmental
investments, including pollution prevention.
Potential Use: Many more States could set up tax incentives programs to encourage businesses to invest
in pollution prevention and control. The federal government could establish a federal income tax credit
program for pollution prevention investments. Some larger cities might derive real benefit from specialized
property and sales tax exemptions for pollution prevention activities.
Advantages: These programs provide strong reasons for firms to make environmental investments, thereby
contributing to pollution reduction and control. Since most governments have considerable experience with
tax programs, establishing tax incentives programs for pollution prevention investment is technically very
feasible. Tax incentive programs may encourage business to stay or locate in a particular State and
community.
Limitations: Tax incentives programs take revenues away from governments and keep it in the private
sector. Some jurisdictions may not be able to absorb, either financially or politically, such revenue losses.
Since most environmental laws still primarily contemplate pollution control approaches, most tax incentive
programs are used by business to help meet the costs of pollution control investments rather than pollution
prevention ones.
Reference for Further Information: Great Lakes Environmental Finance Center Draft Report (prepared
for USEPA), An Inventory and Assessment of Pollution Control and Prevention Financing
Programs, December 19%. Great Lakes EFC, The Urban Center, Cleveland State University, UB 215,
Cleveland, Ohio 44115. Telephone Number: 216-687-4590. FaxNumber: 216-687-9277. Worldwide
Web site: http://www.csuohio.edu/glefc/.
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TRANSIT PASS SUBSIDY PROGRAMS
Description: Public Law 103-172, Ihe "Federal Employees Clean Air Incentives Act," provides for the
establishment of federal programs to encourage employees to commute by means other than single-
occupancy motor vehicles. The purpose of this law is to improve air quality and reduce traffic congestion.
One of the programs contemplated under the law is the offering of transit passes that subsidize employee
use of public transportation. Such passes represent benefits that fall under the "Energy Policy Actof 1992."
This act amended section 132 (f) of the Internal Revenue Code to change the tax treatment of employer-
provided "qualified transportation fringe" benefits by increasing the tax exclusion for transit passes from $21
to $60 per month and setting a new $60 exclusion for van pools ($60 is an aggregate limit). In other
words, it specified that employees are not taxed for these employer-provided transit pass benefits.
Actual Use: Under these laws, the Environmental Protection Agency (EPA) implements the EPA
Transit Subsidy Program in its offices across Ihe country. In Washington, D.C., Ihis is done through a
farecard voucher system in partnership with the Washington Area Mass Transit Authority WAMTA The
farecard vouchers are issued by WAMTA in amounts up to $60 per month for use by more than 2100
participating Agency employees. These vouchers are good for subway rides or they can be exchanged for
equal fares on any other type of approved public transportation that serves the Washington, D.C.,
metropolitan area.
Potential Use: Transit pass subsidy programs such as this could be adopted by State and local
governments across Ihe country, as well as by private sector firms. While they might be most effective in
large urban areas, they should be environmentally beneficial in any location.
Advantages: These subsidy programs can reduce pollution emissions (estimates for the federal program
are 6.6 million metric tons of carbon equivalent by the year 2000), contribute to energy savings, and help
reduce vehicular traffic congestion during rush-hour. They can reduce the need to construct new parking
facilities, and reduce or delay the need for new highway expenditures. Finally, they raise the disposable
income of employees taking advantage of such programs.
Limitations: Transit pass programs are subsidies that must be funded out of employer resources. There
may be negative economic impacts on some business sectors by promoting mass transit
Reference for Further Information: U.S. EPA, Office of the Comptroller, Environmental Finance
Program, 401 M Street, SW, Washington, DC, 20460. Mail Code: 2731R. Contact: Timothy McProuty
at mcprouty.tuno1iiy@epa.gov.
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Description:
Actual Use:
Potential Use:
Advantages:
Limitations:
OTHER
Reference for Further Information:
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COMPARISON MATRIX FOR POLLUTION PREVENTION/RECYCLING
I
I
Criteria/
P2 Tool
* Assurance/
Performance
Bonding
* Demand-Side
Management
Pricing
""Deposit-Refund
Systems
^Development
Rights
Purchases
"Differential
Pricing
Energy: NICE 3
EPA: Pollution
Prevention
Grants
^Environmental
Self-Auditing
*Full-Cost
Environmental
Accounting
*Green Code
of Conduct
Actual
Use
Low
Mod-
High
High
High
High
Low
Low
Mod.
Low
V
Mod.
Revenue
Size
?
High
Low
Mod. .
High
Low
Low
High
High
0
High
Revenue
Cost/
Savings
Mod.
High
Mod.
High
Mod.
Mod.
Low-
Mod.
Mod-
High
Mod. -
High
Low
Admini-
strative
Ease
Mod.
Mod.
Mod.
Mod.
Mod-
High
Mod.
Mod.
Low-
Mod.
Low
Mod.
Equity
Low-
Mod.
Low-
Mod.
Mod.
Mod.
High
Low-
Mod.
Low
Mod.
Mod.
Mod. -
High
Environ-
mental
Benefits
Mod-
High
High
High
High
High
High
High
High
High
High
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t
COMPARISON MATRIX continued
Criteria/
P2 Tool
* Green
Investments
Liability
Assignment
Pollution
Charges
Private Forest
Banking
*State P2/
Recycling Loan
Programs
Tax Incentive
Programs
*Transit Pass
Subsidy Programs
Actual
Use
Low
Mod.
Low
Low
Mod.
Mod.
Low
Revenue
Size
High
Mod.
Low
Mod.
Mod.
Mod.
Low
Revenue
Cost/
Savings
Mod.
Mod-
High
Low-
Mod.
Mod.
Mod.-
High
Mod.
Mod.
Admini-
strative
Ease
Mod.
Low
Low
Low
High
Mod.
Mod.
Equity
Mod.
Low-
Mod.
Low
High
Mod.
Mod.
High
Environ-
mental
Benefits
Mod. -
High
High
High
Mod. -
High
High
Mod.
High
I
High - High use (over 25 States, many localities/private sector); most environmental media covered
(water, wastewater, solid waste and air); criteria score high (e.g., program lowers costs, is
easy to use, readily available, and impacts special projects)
Mod. -Moderate use (10-25 States, some localities/private sector); programs include two or more
environmental media; criteria score in the medium range.
Low - Low or rare use; scope is very limited; one or more major implementation problems exist
* Star indicates good mechanism for future use
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8. TOOLS
TO PAY FOR
COMMUNITY-BASED
ENVIRONMENTAL
PROTECTION
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TOOLS TO PAY FOR
COMMUNITY-BASED ENVIRONMENTAL PROTECTION
(CBEP)
INTRODUCTION
Community-Based Environmental Protection (CBEP) refers to the tailoring of environmental programs and
revenue devices to the unique problems and goals of a particular place — be it a watershed, ecosystem,
or a community. The CBEP approach is designed to involve localities more intimately in the choice and
use of financial mechanisms, maximize the use of scare resources, enhance the popularity of environmental
issues, and more readily involve the private sector in public improvements. CBEP seeks to better reflect
regional and local conditions, environmental priorities, and economic goals.
Community-Based Environmental Protection funding approaches now are among the most innovative and
fastest growing type of financing in this country today. The hallmark of CBEP tools is that most are
voluntary, based on the acceptance and active participation of individuals, and involve both the private and
nonprofit sectors in non-traditional roles. Any of the financial tools in this Guidebook can be fitted to local
use and priorities, from fees and taxes, grants and loans, public-private partnerships, pollution prevention,
to brownfields and small business mechanisms. However, the unique and highly innovative tools described
in this section employ traditional forms of financing as the take-offpoint They are designed to reward and
encourage environmental protection, unite the public and private sectors in interdependent ways, and bend
the forces of the economic marketplace toward these ends. In a sense, CBEP views the public and private
sectors as interchangeable, with the government sector supporting the private sector and the latter assuming
quasi-govemment roles.
Parks and recreation, open space conservation, and natural habitat protection currently are the most
popular focus of innovative community-based environmental protection funding, and represent the area of
greatest voluntarism with the nonprofit sector often taking the lead. Here, communities have adapted some
structured funding approaches to meet their needs, such as formation of special districts, tax increment
financing and special tax bonds, and even a portion of State lotteries. Dedicated trust funds, land trusts and
conservation easements have been the target of both of public and private financing, including matching
funds, special bonds, and SRF Joans to pay for land easements, and corporate and individual donations.
Mitigation banking and pollution trading represent a new type of private sector involvement, sometimes
voluntary. Donations from "green" credit cards, affinity merchandise and license plates, and eeotourism
are growing.
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In short, die tools in this section capture the spirit, enthusiasm and love that Americans hold for specific
regions, valuable natural locations and the places where they live. They depend also on the enlightened
self-interest of individuals, private firms and governments. They finance long-term protection measures
which are not necessarily the target or result of government regulation.
Advantages: A chief advantage of the majority of community-based environmental financing mechanisms
is that they can generate a great deal of enthusiastic and voluntary support without causing much opposition.
They are equitable, flexible and may result in considerable financial leveraging, as in Hie case of donations
or special revenue-raising devices matched by government and private sector dollars and in-kind services,
or investment proceeds and loan repayments to trust funds. While government voluntary mechanisms such
as income tax check-offs or vanity auto license plates have not raised much revenue, similar private and
nonprofit sector programs such as land or easement donations and in-kind services are huge. The novelty
of mechanisms involving public and private sector funds advertises the need for environmental
improvements and enhances the awareness of even the most reluctant participants. The cost/benefit
relationship is particularly high when revenues go to specific local projects such as open space acquisition
and protection.
Limitations: Government CBEP measures have been overshadowed by the success of the private and
nonprofit sectors, with a few exceptions such as Department of Agriculture's conservation reserve program.
While the revenue raising potential particularly of private and nonprofit sector measures is large, revenues
may be unstable and unpredictable at times, fluctuating particularly with economic conditions and tax
treatment of philanthropic activity. The use of lotteries have been controversial, since individuals purchasing
lottery tickets may be those least able to pay, and environmental dedication has not always been assured.
Summary: No CBEP funding mechanism should be regarded as unimportant, because of the enormous
potential to harness market forces, heighten environmental awareness, leverage additional resources, and
join the public and private sectors in new ways. The focus of CBEP funding, moreover, whether
communities or ecosystems, represents the new wave of environmental protection which relies on
prevention and cooperation as opposed to regulation.
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LIST OF TOOLS TO PAY FOR
COMMUNITY-BASED ENVIRONMENTAL PROTECTION
(In Alphabetical Order)
1. Adopt-An-Animal/Habitat Programs
2. Affinity Merchandise (License Plates, Stamps)
*3. Agriculture: Farm Service Agency — Conservation Reserve Program
4. Agriculture: Natural Resources Conservation Service - Wetlands Reserve Program
5. Assurances
*6. Capital Improvements Program
*7. Community Foundations
*8. Conservation Easements .
*9. Conservation Partnerships
*10. Contributions of Land
11. Cost-Share for Livestock Waste Storage Systems
* 12. Dedicated Government Trust Funds
13. Ecotourism
14. Emissions Trading
15. Environmental Lotteries
*16. Environmental Revolving Funds
17. Green Credit Card
*18. Individual and Corporate Donations
*19. Land Trusts and Reclamation Banks
20. Mini Bonds for Stream Restoration
*21. Mitigation Lands and Banking
22. Municipal Utility Asset Sales
*23. Non-Profit Organizations .
24. Point Source/Nonpoint Source Trading
*25. Special Districts (Special Purpose Districts, Regional Authorities)
*26. Tax Increment Financing - CBEP
* Stars indicate most highly rated mechanisms as described in the Comparison Matrix at the end of the
narratives. See Introduction to tiie Guidebook for a description of the criteria used Ratings of "High",
"Moderate", and "Low" are for comparison purposes only, as some ratings are necessarily subjective and
data are incomplete.
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ADOPT-AN-ANIMAL/HABITAT PROGRAMS
Description: These types of programs solicit individuals and corporations to adopt a special animal or
species or habitat that is endangered or needs to be helped/improved. For a fee, interested parties support
their animal or habitat through the purchase a kit of educational materials on their chosen animal or area.
Programs can also include publicity and outreach campaigns where experts visit local schools, community
centers, and parks to speak about an endangered or valuable local animal/habitat The programs may sell
the educational information kits at these events and publicize environmental curricula available at local
schools.
Actual Use: A prime example of this approach is the now famous "adopt-a-whale program" which was
created by the National Wildlife Federation. Another example is the adopt-a-beach program in California,
which provides community outreach to schools and youth groups via a special curriculum promoting
conservation of natural resources. This beach program is a joint effort of the California Coastal
Commission, the California State Parks Foundation, and private 'corporate sponsors.
Potential Use: These programs could be initiated in attractive and popular areas throughout the nation
that represent special habitats and contain threatened species. Examples of such areas could include
estuaries such as the Chesapeake Bay, old-growth forests, beaches, as well as local parks, scenic spots,
lakes, grassland, wetlands, or woods in any community. Examples of species that could be adopted
include (but would not necessarily be limited to) animals such as eagles, condors, sand hill cranes, spotted
owls, wolves, turtles, and manatees.
Advantages: This type of program persuades people to become involved in their community by focusing
on an animal or habitat that they already prize, or that they can come to value. Furthermore, it
accomplishes this purpose while at the same time raising money for environmental projects that benefit the
local community or ecosystem.
Limitations: Animal and habitat adoption programs require start up capital and expertise for die
development and acquisition of special environmental educational materials. Marketing campaigns can be
very costly as well. The revenues raised are moderate at best and would only be a supplemental source
of project funding.
Reference for Further Information: State of Maryland, Financing Alternatives for Maryland's
Tributary Strategies, A Report From the Governor's Blue Ribbon Panel, 1994. University of Maryland
Environmental Finance Center, University of Maryland, Coastal and Environmental Policy Program, 0112
Skinner Hall, College Park, Maryland 20742. Telephone Number. 301-405-6384. Fax Number: 301-
314-9581. Web site - http://www.mdsg.umd.edu/MDSG/EFC/index.html
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AFFINITY MERCHANDISE
(License Plates, Stamps)
Description: States and localities, as welt as the federal government, can sell various items and dedicate
the revenues to environmental programs. Sometimes revenues are earmarked to site-specific environmental
proj ects. Items sold range from the more traditional such as auto license plates and special postage stamps,
to items such as governmental publications, maps, logo material such as decals (see also Section I.B.,
Franchise Fees).
Actual Use: At least 32 States sell special edition license plates to fund the protection and clean-up of
natural areas. The plates are decorated with environmental slogans and designs to show the car owner's
support of a particular environmental cause. Over 10 million plates have been sold nationwide raising $324
million For example, Maryland and Virginia sell a special "Save the Bay" license plate for $25-$28 which
generate over $1 million a year in each State for the Chesapeake Bay program. Washington and
Massachusetts operate similar programs. States and localities also issue and sell stamps, decals, clothing
and prints depicting environmental resources. Nebraska and New Jersey sell stamps for $7.50 and $2.50,
respectively, on every hunting license. The federal government and nearly all States have duck stamp
programs to raise money for waterfowl and wetland projects, and postage stamps and reproductions are
considered valuable collector's items. Hats and T-shirts may be sold for lake clean-up or recreational sites.
Potential Use: The potential list of items that might be marketed is long. For example, a share of the
proceeds from items sold by authorized vendors on governmental parkland and recreational sites could be
dedicated to specific environmental programs. There is little reason why governments could not act more
like the private sector in selling special merchandise.
Advantages: Since the purchase of special affinity merchandise by individuals is entirely voluntary, costs
are fairly distributed to those persons who choose to incur them Such programs allow anyone to advocate
environmental improvement and support it financially. Advertisement also develops public awareness of
the natural resource that the product displays. When products and proceeds are directed to a specific local
site, the cosl/benefit link is dose.
Limitations: Caution must exercised to ensure that the administrative costs of voluntary sales and tours
justify the typically small amount of revenue raised, even if such programs are implemented primarily to
heighten public awareness. Proliferation of many voluntary programs should be avoided Governments
may also be criticized for competing with the private sector.
Reference for Further Information: Report from the Governor's Blue Ribbon Panel, Financing
Maryland's Tributary Strategies, University of Maryland Sea Grant College, August 1995; Indiana
Legislative Services Agency, Issues Relating to the Indiana Heritage Trust, 1997.
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DEPARTMENT OF AGRICULTURE
FARM SERVICE AGENCY
CONSERVATION RESERVE PROGRAM
Description: This program, managed by the Farm Service Agency of fee U.S. Department of Agriculture
(USDA), provides direct assistance payments to eligible applicants to place highly credible or
environmentally sensitive cropland into a 10-15 year contract, i.e., taking it out of crop production. The
participant, in return for annual payments, implements a locally approved conservation plan for converting
cropland to a less intensive use such as grasses, legumes, fobs, shrubs, or trees. Eligible applicants include
any individual, private business, legal entity, State, political sub-division of a State, or any agency thereof
owning or operating private, State, and local government croplands. The program seeks to protect the
nation's long-term capability to produce food and fiber, reduce soil erosion and sedimentation, improve
quality, create better habitat for fish and wildlife, provide needed income support to fanners, and curb
surplus production of some commodities.
Actual Use: The Conservation Reserve Program obligated approximately $1.7 billion in cash or generic
commodity certificates in Fiscal Years 1996 and 1997, respectively. The assistance ranged from $50 to
$50,000 and averaged more than $4,315. The USDA forecasts that it will obligate an another $1.797
billion and $1.694 billion in this type of assistance in Fiscal Years 1998 and 1999. In Fiscal Years 1986
through 1997, the program had signed contracts for 33.1 million acres. The average soil erosion reduction
on land contracted in the program is 19 tons per acre per year.
Potential Use: This important federal program can be used to help idle cropland and reduce nonpoint
source pollution in watersheds throughout the country.
Advantages: The program provides an incentive to cropland owners to convert overused acreage to a
less intensive use and adopt approved conservation plans. The less intensive use helps reduce erosion, as
well as accompanying nonpoint source runoff and pollution. The program is leveraged in that it will pay up
to fifty percent of the cost of implementing approved conservation practices.
Limitations: The cropland must be owned or operated for at least three years prior to the close of the
sign up period. Competition for the program is so intense that some cropland owners wilh environmentally
sensitive properties may not be able to enroll in the program before its annual appropriations are exhausted.
Reference for Further Information: U.S. Department of Agriculture, Farm Service Agency, 14th &
Independence Avenues, SW, Washington, DC 20250. Telephone Number: 202-720-6221.
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DEPARTMENT OF AGRICULTURE
NATURAL RESOURCES CONSERVATION SERVICE
WETLANDS RESERVE PROGRAM
Description: This program, managed by the Natural Resources Conservation Service of the U.S.
Department of Agriculture (USDA), provides cash payments to eligible applicants to place farmed
wetlands, prior converted wetlands, pasture and hayland riparian areas, and eligible buffer areas under
permanent or long-term (30 years) easement or restoration agreements, i.e., taking it out of crop
production. Eligible applicants include individual landowners, partnerships, associations, corporations,
estates, trusts, other business enterprises, or other legal entities and when applicable, States, political sub-
divisions of States, or any agency thereof owning private croplands. The program seeks to restore and
protect farmed wetlands, prior converted wetlands, riparian areas, and eligible buffer zones.
Actual Use: Lump sum payments are made for permanent easements while from five to thirty payments
totally 75 percent of easements amounts are made for 30-year easements. The Wetlands Reserve Program
obligated direct payments of approximately $106.0 million in Fiscal Year 1997. The USDA further
estimated obligations of about $239.3 million and $127.7 million in Fiscal Years 1998 and 1999,
respectively. The Agency projected that its Fiscal Year 1998 funds would enroll an estimated 212,000
acres in the program nationwide.
Potential Use: This federal program can be used to preserve environmentally sensitive land and protect
water quality by reducing nonpoint source pollution in watersheds throughout the country. The program's
goal is to have 975,000 acres enrolled by 2002 with a third in permanent easements, a third in 30-year
easements, and a third in restoration agreements.
Advantages: The program provides an incentive to cropland owners to take sensitive acreage out of
production. The protection of wetlands helps absorb and reduce nonpoint source runoffand pollution. The
program is multi-faceted in that easements can be long-term or permanent
Limitations: The cropland must be owned or operated for at least three years prior to the close of the
sign up period Competition for the program is so intense that some cropland owners with environmentally
sensitive properties may not be able to enroll in the program before its annual appropriations are exhausted.
Reference for Further Information: U.S. Department of Agriculture, Natural Resources Conservation
Service, Watersheds and Wetlands Division, P.O. Box 2890, Washington, DC 20013, Telephone: 202-
690-0848.
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ASSURANCES
Description: Private landowners negotiate agreements with the appropriate governments) to fund
specified conservation costs in exchange for "assurances" that their businesses will not be interrupted or
seriously impacted due to environmental concerns. The private landowners agree to ensure that their
business activities will not have a detrimental impact on specified plant and animal species living on their
properly for a specified period of time, usually at least twenty years.
Actual Use: The Fieldstone Habitat Conservation Plan program in southern California spent $13 million
dollars to secure compliance for Endangered Species Act (ES A) regulations on 63 species for 30 years.
Fieldstone had calculated that it would cost much more than that amount to attempt to save some or all of
the 63 species at a later date.
Potential Use: Assurances could be used wherever landowners and corporations own and/or operate
businesses on economically-valuable property on, adjacent to, or near environmentally valuable habitat
The landowners and businesses would agree to fund the conservation so that they can ensure the profitable
use the property without danger, or with reduced 'danger, of future ES A legal entanglements.
Advantages: Assurance programs harness the calculated economic profit motivations of the private
sector to achieve conservation and beneficial use of properly. The environmental community gets
substantial environmental investment from the private party and a concrete, legally enforceable contract to
protect species and habitat.
Limitations: Assurances are expensive and many landowners and businesses may not be able to afford
the investment Some private parties may feel that the practice approaches or represents heavy-handed,
environmental arm twisting. The assurances only protect the specific species listed in the contract
agreement. ;
Reference for Further Information: The Keystone National Policy Dialogue on Ecosystem
Management, October 1996. The Keystone Center, P.O. Box 8606, Keystone, Colorado 80435-7998.
Telephone Number: 970-468-5822.
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CAPITAL IMPROVEMENTS PROGRAM
Description: A Capital Improvements Program (CIP) is a planning and financial management process
used by public sector agencies for identifying, prioritizing and scheduling planned capital improvements.,
usually over a 5-6 year period. CIP's are usually updated and revised on an annual or semi-annual basis.
At Iheir most basic, they involve an internal and public review process which results in a prioritized listing
and schedule for future capital investments. More sophisticated CIP's will also contain a financing element
which may consider sources of financing, impacts of facilities on operating costs, and effect on tax rates,
debt loads and borrowing limitations. Some CIP's are tied more explicitly to the development approval
process through concurrency requirements which provide that adequate facilities must be in place, or
scheduled in the CIP, in order for zoning or development proposals to be approved.
Actual Use: Used by most medium and large governmental units and public service providers throughout
the nation to plan their capital investments, environmental and otherwise. In Florida and Maryland, for
example, concurrency requirements are tied to CIPs.
Potential Use: All general and special purpose governmental units and service providers could benefit
fromimplementing a formal CIP process, either basic or sophisticated, to implement long-term, community-
based environmental investments. Those governments which have a basic CEP could consider expanding
it to include a financing element and/or concurrency requirements.
Advantages: Because of the public hearing process, a CIP makes the community infrastructure investment
process more open to the public and stakeholders. It also enables general and special purpose
governmental units and service providers to consider capital needs on a cumulative or multi-year basis. A
CIP can lead to more efficient and effective use of a community's limited capital resources as it provides
a framework for continuity and policy commitment
Limitations: A CIP requires an investment of time and commitment of an organization to develop,
approve and implement It requires expertise that a small and/or disadvantaged community may not have.
When tied to concurrency requirements, CEPs can have the effect of privatizing" the community investment
and construction process by allowing developers and property owners to determine when and where
facilities are to be constructed.
Reference for Further Information: International City/County Management Association, 777 North
Capitol Street, NE, Washington 20002. Internet: wwwjcma.org. Government Finance Officers
Association, 180 North Michigan Avenue, Suite 800, Chicago, Illinois 60601. Internet: www.gfoa.org.
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COMMUNITY FOUNDATIONS
Description: A community foundation is a federally tax-exempt non-profit organization that makes grants
for charitable purposes in a specific community or region. Hie funds available to a community foundation
are usually derived from many donors and held in an endowment that is independently administered.
Income earned by the endowment is used to make discretionary grants meant to build, strengthen and
improve die community. Although a community foundation may be classified by the Internal Revenue
Service as a private foundation under Section 501(c)(3) of the tax code, most are classified as public
charities and are thus eligible for maximum tax-deductible contributions from the general public under
Section 170 of the code. . •
Community associations' basic appeal to donors is their flexibility. A donor can use a variety of tax-
efTective ways of giving charitable gifts and can choose how these donations will be used. The flexibility
allows many individuals, through gifts and bequests, to establish permanent endowment funds within one
foundation. A donor can create a permanent legacy with a cash contribution, gift of securities or real estate,
assignment of ownership of a life insurance policy, creation of a charitable remainder trust, a bequest, or
even transfer of an existing private foundation
Actual Use: In 1995, community foundations in the U.S. had more than $12.4 billion in assets and made
$806 million in grants. Community foundations are located in every major metropolitan area and state.
' While the number remains limited, they are a growing source of program-related investments (see Section
10.B., Foundations: Program-Related Investments).
Potential Use: Community foundations are excellent vehicles for support of community-based pollution
prevention and similar environmental enhancement efforts. Community foundations are increasingly using
program-related investments as an adjunct to their grantmaking in support of their purposes.
Advantages: Federally tax-exempt foundations that offer tax deducibility of donations can appeal to
profitable businesses and high-income individuals able to donate substantial amounts with the benefit from
a consequent reduction in income tax liability.
Limitations: Success in fund raising is essential for community foundations and they tend to make
relatively small grants/reflecting the size of the endowments they manage.
Reference for Further Information: Contact Foundation Center, 79 Fifth Avenue, New York, NY
10003-3076, Phone: 212-620-4230, Fax: 212-691-1828, E-mail: mfh@fdncenter.org, Internet:
www.fdncenter.org/.
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CONSERVATION EASEMENTS
Description: Conservation easements are deed restrictions or covenants lhat prohibit, limit, or permit
certain activities on privately-owned land in perpetuity. The easements do not restrict ownership or sale
of the parcel, although purchasing an easement constitutes partial ownership in some sense. Not only do
easements prohibit or limit the density of development, but also may require additional landowner work,
e.g., soil conservation and weed control, or monitoring particular types of plants, animals and habitat (see
also Section 7., Development Rights Purchases).
Actual Use: These purchases are made by both public and nonprofit organizations, and easement activity
has increased greatly in recent years. In Vermont, where easements have a long history, public funds had
protected over 62,000 acres by 1997, four times the amount reported a few years ago. Florida, New
Jersey, Iowa and Colorado also report recent increases, and States such as Texas and Montana have now
started easement funding. The Nature Conservancy's cumulative easement activity quadrupled between
1986 and 1996. Governments are becoming more sophisticated in funding easements, now often financed
via bonds, taxes, and trust funds. The new DWSRF program lets SRFs purchase easements to protect
drinking water quality, if die land is integral to Ihe project The Ohio CWSRF loaned easement money to
The Nature Conservancy, which will repay it via voluntary contributions. The mixing of public, nonprofit
and private funds for easements is growing.
Potential Use: Besides watersheds, wetlands, farmlands and habitats, easements could be used to guide
land use on urban brownfields, e.g., to adjust future exposure risks by tying clean-up standards to future
use. They could be used to limit or direct development in a more protective and sustainable way. A wider
range of required improvements could be added to easements, e.g., restoring habitats.
Advantages: Acquiring conservation easements is much cheaper than fee-simple purchases. Land
maintenance costs are reduced, as these are paid by private landowners. The tax base is less severely
diminished as property stays in private hands. The private landowner gains federal tax benefits if Ihe
easement is permanent Environmental awareness and citizen involvement are heightened.
Limitations: Laws in each State vary as to Ihe use and tax implications of private land donations to
easements. While some States and localities offer income tax and property tax credits or deductions, other
States pay flie landowner directly or make in-lieu payments to localities. Legal and oversight activities may
be very costly, and the possibility exists for easements to be violated.
Reference for Further Information: The Trust for Public Land (TPL), GreenSense: Financing Parks
and Conservation, Phyllis Myers, ed, State Resource Strategies, Washington, D.C., Spr. 1997, E-mail:
greensense@igc.org.; TPL, Protecting the Source: Haw Land Conservation Safeguards Drinking
Water, by Richard Stapleton, San Francisco, 1997 and Doing Deals: A Guide to Buying Land for
Conservation, 1995; Samuel Stokes, A. Elizabeth Watson, and Shelley Mastran, Saving American's
Countryside: A Guide to Rural Conservation, John Hopkins Press, Baltimore, 1997.
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I
CONSERVATION PARTNERSHIPS
Description: Conservation partnerships are partnerships between conservation organizations, federal and
State agencies, and private industry. Through conservation partnerships, industrial and commercial activity
is permitted on or near ecologically valuable land without threatening the natural resources on that land.
Working together, the non-profit groups, the public agencies and industry determine what industrial and/or
commercial activities might be compatible with the ecologically valuable land.
Actual Use: Conservation partnerships can be used to resolve conflicts over land use, while protecting
ecosystems. For example, The Nature Conservancy makes extensive use of conservation partnerships
in working with the private sector to protect valuable ecosystems. In one California preserve, oil drilling,
sand-mining, and agriculture coexist with a protected natural area. The private partners accepted necessary
limitations and restrictions on these activities, such as Best Management Practices (BMPs) that prevent or
reduce pollution, and the use of advanced pollution control and monitoring technology.
Potential Use: These partnerships could be used to broker arrangements for use of federal land that is
currently protected They could also be structured to protect special habitats such as redwood or old-
growth forests, sand dune beaches, and coral reef systems.
Advantages: Conservation partnerships can actually enhance private sector land values because of the
proximity of environmentally-protected land. In addition, unlike traditional nature preserves, conservation
partnerships maintain important tax bases for local governments.
Limitations: Partnerships may not be feasible in all cases. For example, some industrial or commercial
activities may have pollution impacts that are not sufficiently controllable through BMPs or pollution control
technology, and thus may be unsuited to use near ecologically valuable areas. Some locations and industries
may require technological approaches that make the partnership economically unworkable for the private
partner.
Reference for Further Information: The Nature Conservancy, Last Great Places: The
Conservancy's Protection Initiative for the 1990s, Arlington, VA, May, 1991.
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CONTRIBUTIONS OF LAND
Description: Direct contributions of environmentally-sensitive land from individuals and businesses can
reduce Ihe need for outright governmental expense, or the land can be sold to raise revenue for other
environmentalproj ects. Land donated through conservation easements and the USDA conservation reserve
program are discussed elsewhere in Ihis section. A closely related tool is discussed in Section 7.,
Development Rights Purchases).
Actual Use: Many non-profit land trusts which receive direct land donations from individuals and
corporations exist on a national, State and local basis. For example, The Nature Conservancy regularly
receives donations in land, which it 1hen manages for environmental purposes or, if not environmentally
sensitive., sells for other natural lands acquisition. Groups such as these often work in tandem with local
non-profit land trusts. Corporate land donations have been increasing in recent years, as large businesses
seek to avoid the costs of environmental management or enhance their image. State wetlands mitigation
programs, whereby developers altering exiting wetlands must create a wetland elsewhere, are a form of
contribution in land sometimes required by regulation. Contributions of land may be offered in lieu of
monetary fines.
Advantages: Voluntary contributions of land are a potentially large revenue source, or form of
governmental cost-savings, andavaluableformofnon-regulatory environmental protection. Potential cost-
savings from pollution prevention in fee first place, as opposed to cleaning up sites after the fact, could be
notable, even if there is an initial governmental monetary outlay such as under fee federal agricultural reserve
program. The environmental incentives in term of enhancing public awareness of environmental needs are
clear-cut, and fee opportunity exists to attract additional public or private resources to manage lands set
aside for protection is strong.
Limitations: As wife all in-kind voluntary programs, revenue is unpredictable or non-existent.
Administrative costs for future oversight may be high. Donations may be made to get rid of neglected land,
which then must be managed or sold, by governments or non-profit organizations. Thus, these programs
must be evaluated on a case-by-case basis.
Reference for Further Information: The Conservation Foandaiian^nnual Report: 1995, Washington,
D.C.; The Nature Conservancy, 1995 Annual Report, Arlington, VA
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COST-SHARE FOR LIVESTOCK WASTE STORAGE SYSTEMS
Description: Under ibis program, farm owners enroll or are accepted in a State or other government-
sponsored livestock waste storage program (usually for hogs, chicken, cattle, and/or horses): The farmers
then invest their own money in some form of approved best-management practices for ensuring proper
livestock waste storage systems. The program participants receive a matching cost-share payment up to
a specified limit from the State or other government sponsoring the program.
Actual Use: Anumber of States have this type of subsidy program for livestock waste-storage control.
For example, Maryland's Agricultural Cost-Share Law authorizes cost-share payments for livestock waste
storage systems up to a maximum of $35,000 per system. The Maryland program's cost-share payments
currently cover 30 percent to 60 percent of the cost of the typical farm waste storage system.
Potential Use: This kind of community-based program could provide valuable assistance to pollution
control efforts in any watershed. The program would encourage farmers to adopt the best currently
available management practices for their livestock herds.
Advantages: The program is leveraged in that it elicits a matching share from the private sector. The
assistance provided to farmers in this type of State or local program could be combined with that provided
in other federal programs to leverage even more moneys and to fund larger projects (for example, see
Section 7., Conservation Reserve Program).
Limitations: The incentives provided by typical livestock waste control programs may be too low to
attract all or most fanners to participate in Ihe programs. Some smaller and/or needy farmers may not be
able to afford to share any amount of the share. •
Reference for Further Information: Financing Alternatives for Maryland's Tributary Strategies,
A Report From the Governor's Blue Ribbon Panel, 1994. Copies are available from the University of
Maryland Environmental Finance Center, Coastal and Environmental Policy Program, 0112 Skinner Hall,
College Park, Maryland 20742. Telephone Number: 301-405-6384. Fax Number: 301-314-9581.
World Wide Web site - http://wwwjndsg.umd.edu/MDSG/EFC/index.html
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DEDICATED GOVERNMENT TRUST FUNDS
Description: A government trust fund is a special account set up to receive and disburse revenues for a
specific program/activity. States and localities earmark revenue to trust funds either constitu-tionally or by
legislation The most commonly used include earmarked portions of taxes and fees, referendum bond act
dollars, environmental fines and penalties, lotteries, budget surpluses, and even private donations. Some
federal grants are targeted to trust funds. Most constitutionally earmarked funds need no legislative
appropriation to release fund deposits. Deposits accrue automatically and usually are available only for the
purpose named in 1he constitution, hence iheir dedication. In other cases, the legislature pledges revenues
from a funding source(s), and creates a trust fund to manage them. Legislative appropriations may or may
not be required to release statutorily dedicated funds.
Actual Use: All States have dedicated environmental trust funds, some very large (over $100 million),
and local trust funds are growing rapidly in popularity. Fund revenue sources, uses and financing techniques
are getting more innovative. State and local funds typically make loans as well as grants, require public or
private matching dollars, and fund public and nonprofit sector projects. Common dedicated uses are open
space acquisition and easements, parks and recreation, habitat restoration, green ways, trails and historic
sites, and pollution control facilities. Examples include New Jersey's Green Acre Program funded by
multiple bond acts and real estate transfer taxes, which gives 25% grants and low-interest loans to local
trust funds with voter-approved "open space" property assessments. Minnesota's Environmental Trust and
Colorado's Great Outdoors Funds are funded in part by lottery revenues, Missouri's Soil and Water Fund
by sales tax set-asides, Florida's Everglades Fund and Maryland's Program Open Space by
environmental fees, and North Carolina's Clean Water Fund by a 6.5% budget surplus earmark.
Washington's Public Works Trust Fund uses the cigarette tax. Federal ones include the Inland Waterways,
Highway, and Superfund Trust Funds.
Potential Use: The potential uses of dedicated trust funds are large and growing, and capable of funding
any environmental project or program
Advantages: Trust funds help ensure that revenues are used for intended purposes, but fund managers
may have flexibility in what projects to finance. Some revenue sources, e.g., specific taxes, are even more
predictable than legislative appropriations. Revolving funds and matching requirements are highly
leveraged, and investment earnings add to revenues. Particularly local trust funds have a high cost/benefit
relationship, are popular, and have voter approved funding sources.
Limitations: There is some administrative burden to set up and maintain trust funds. Temporarily idle
resources may be targets of budgetary raids and, historically, not all earmarks have been assured.
Reference of Further Information: The Trust for Public Lands, various publications including
GreenSense: Financing Parks and Conservation, Phyllis Myers, editor, States Resource Strategies,
1616 P. St NW, Washington, D.C. (email: greensense@igc.org)
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ECOTOURISM
Description: Ecotourism is Ihe use of recreational revenues (often generated by non-indigenous peoples)
to fund conservation activities in natural areas which are visited. The Ecotourism Society expands this
concept by defining ecotourism as "purposeful travel to natural areas to understand the culture and natural
history of the environment, taking care not to alter the integrity of tiie ecosystem, while producing economic
opportunities that make the conservation of natural resources beneficial to local people."
Actual Use: A number of countries have used ecotourism to both finance environmental protection efforts
and prevent additional environmental damage. For example, Australia established a National Ecotourism
policy that mandates environmental impact review in areas that experience significant natural resource
tourism.
Potential Use: Ecotourism could be further applied to many natural areas in additional countries
worldwide. The rainforests in South America represent an excellent opportunity to further test and develop
the ecotourism concept
Advantages: If carefully targeted and properly implemented, ecotourism offers the real hope of protecting
valuable ecosystems while producing a source of revenue for the local community. In Rwanda, for
example, ecotourism has helped save mountain gorillas from extinction. Rwanda's Volcano Park has
become an international attraction and represents that third-world country's largest source of foreign
exchange.
Limitations: Ecotourism may be infeasible, or even harmful, in natural areas that are too fragile to support
visitation. For example, along popular Himalayan tourist routes, litter has been strewn on trails and the
alpine forest devastated by travelers looking for fuel to heat food and bath water. On the olher hand, many
natural areas may not attract a sufficient number of paying visitors to warrant ecotourism Some countries
may decide not to use the revenues generated by ecotourism to protect and support the natural areas
visited
Reference for Further Information: Apogee Research, Inc. draft report, Environmentally-
Sustainable Tourism in APEC Member Countries, prepared for the Asian-Pacific Economic Council,
March, 1995. World Wide Web site article tided, " Can Ecotourism Save the Rainforests?", located at
http://www.ran.org/ran/info_center/ecotourism.html
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EMISSIONS TRADING
Description: Emissions trading programs allow sources of air pollutants to trade pollutants in some
fashion, either geographically, over time, or among other sources. Many emissions trading programs
incorporate a "bubble" structure. A bubble program treats multiple emission sources as if they were
included wilhin an imaginary bubble, allowing existing sources to adjust emissions levels within the bubble
as long as an aggregate limit on emissions is not exceeded. "Offset" programs allow new sources to obtain
emissions credits from existing sources to offset new emissions. "Banking" programs allow sources to store
emission reduction credits for future use or sale, while "netting" programs allow sources undergoing
modification to avoid new source review if plant-wide emissions are reduced.
Actual Use: TTie EP A's air emissions trading program began in 1975 wife a proposal to exempt emissions
at new or modified existing sources from New Source Performance Standards as long as total emissions
fromthe facility did not increase. Since that proposal, the EPA's air emissions trading program has included
bubbles, offsets, banking, and netting elements. An emissions trading program is an integral part of the
sulfur dioxide control plan outlined in the Clean Air Act Amendments of 1990. to California, the South
Coast Air Quality Management District is setting up a Regional Clean Air Incentives Market (RECLAIM)
that will allow around 2,000 sources of reactive organic gases, nitrogen oxides, and sulfur oxides to buy
and sell emission reduction credits on an open market.
Potential Use: State and local air programs may be able to use emissions trading as a tool to meet the
air quality standards outlined in the Clean Air Act Amendments of 1990.
Advantages: According to a GAO study, emissions trading can save up to 90 percent of private control
costs. It encourages private research into air pollution control technologies, and lets the private sector
allocate resources to produce emissions reductions in the most cost-effective manner.
Limitations: Emission trades may require extensive and time-consuming prior approval, and may be
hindered by legal and regulatory requirements. Establishing emissions and air quality levels before and after
trading is often difficult
Reference for Further Information: American Petroleum Institute, The Use of Economic Incentive
Mechanisms in Environmental Management, June, 1990. Provides a general discussion of all types of
economic incentive programs, including a discussion of current and historical emissions trading programs.
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ENVIRONMENTAL LOTTERIES
Description: Lotteries sell tickets for a chance to win a sum of money or other valuable prize. Where
operated for the benefit of State or local government, they generally retain a portion of the revenue from
ticket sales, ranging from 10 to 50 percent depending on the game, for a dedicated use. Lottery games can
be designed to appeal to particular demographic groups, including those who support various types of
environmental protection programs or ecological enhancement measures. State lotteries regularly change
the appearance of their games as part of their marketing strategies. State legislatures could take this
concept a step further by requiring changes in the purposes of lottery games to attract participants who
might not otherwise play.
Actual Use: Lottery profits are contributing significantly ($14 billion) to the revenues of 37 states.
Portions of lottery revenue are earmarked for education, and profits from specific games are devoted to
special agencies such as stadium authorities. Minnesota has had an environmental lottery for over ten years
and voted in 1990 to require that not less than 40 percent of net proceeds go to the Environmental and
Natural Resources Trust Fund. Colorado has a lottery-funded conservation program (GOCO). Maine's
lottery dedicates most profits to the Outdoor Heritage Trust Kansas also dedicates a small, fixed
percentage of lottery proceeds to wetlands and nonpoint source control.
Potential Use: Earmarking of portions of general lottery profits for purposes such as K-12 education has
been happening. Whether environmental purposes receive part of lottery profits depends on their political
appeal in state legislatures.
Advantages: Lottery revenues can substitute for 'unpopular taxing or borrowing. There is a large,
relatively stable revenue potential and lottery advertising can be used to heighten public awareness of
environmental needs.
Limitations: Lotteries, off-track betting and other legalized gambling are controversial means for raising
public sector revenues. Some critics raise equity issues regarding a shift in fiscal burden among socio-
economic groups. Off-track betting and other gambling are criticized for attracting and promoting criminal
activities. The bottom line is that legalized gambling has social costs, such as the high suicide rate among
compulsive gamblers. The Governor of South Carolina is leading an effort to eliminate legalized video
poker despite its $61 million contribution to the state budget
Reference for Further Information: Contact North American Association of State and Provincial
Lotteries, 1700 East 13th Street, Suite 4-PE, Cleveland, OH 44114; Phone (216)241-2310; Fax
(216)241-4350. See States as Water Quality Financiers, National Conference of State Legislatures,
Denver, Colorado, May 1991.
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ENVIRONMENTAL REVOLVING FUNDS
Description: Multi-media Environmental Revolving Funds are Slate run lending institutions generally
modeled after the wastewater and drinking water revolving funds established under the Clean Water Act
and the Safe Drinking Water Act with several important differences.
Actual Use: The notion of a single lending entity based on the revolving fund principle is not a new one
at the State level. Several States, including Texas and Ohio, have long-established multi-media revolving
funds making loans for a wide variety of environmental infrastructure needs. An example of an even
broader entity is the Kentucky Infrastructure Authority which includes eligibility for environmental,
transportation and other public purpose facilities.
Potential Use: Environmental SRFs hold great promise in their capacity to direct and apportion subsidies
to multi-media eligibilities. In that sense, they allow States to plan and target limited resources to their
highest priority needs. The environmental SRF concept represents an excellent vehicle for directing and
apportioning funding to a wide variety of community-based, watershed protection and nonpoint source
projects.
The States might establish these multi-media SRFs in tandem with the Environmental Protection Agency
(EPA)-supported wastewater and drinking water programs operating them in a kind of corporate group
structure. At the very least, the EPA-funded SRFs could co-finance water related projects with the multi-
media purely State-funded entities.
Advantages: Comprehensive (multi-media) funding eligibilities make the environmental SRF concept
extraordinarily well suited to meeting the goals of community-based environmental protection.
Limitations: Not all communities can afford loans, even at subsidized rates. The initial capitalization of
a revolving loan fund is expensive and raising adequate money to capitalize the funds may not always be
poKtically feasible.
Reference for Further Information: Council of Infrastructure Financing Authorities, 1625 K Street,
NW, Suite 200, Washington DC 20006. Telephone Number: 202-371-9694. FacsimileNumber: 202-
371-6601. USEPA, Office of the Comptroller, Environmental Finance Program, 401 M Street, SW,
Washington, DC 20460. Mail Code: 2731R. Contact: George Ames at ames.george@epa.gov
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GREEN CREDIT CARD
Description: A private company or a nonprofit environmental organization works with a bank or other
financial institution to issue a major credit card on a State, regional, or even national basis. The card is
structured to benefit an existing or new fund in an organization dedicated to watershed protection, habitat
management, species protection, or other environmental goals. For each "green card" issued by the
sponsors, a fixed amount per card and a small percentage of tiie spending would be donated to the fund
in ihe card user's name. The fund would then be drawn upon by the host environmental organization to
finance individual environmental projects-and activities.
Actual Use: Many State, regional, and national credit cards are issued by banks and affiliated
organizations such as major automobile manufacturing companies for special purposes or "affinities.-" In
the environmental arena, the National Wildlife Federation and the Sierra Club have explored and/or
developed green credit cards directed at existing and potential members. The Chesapeake Bay Foundation
has issued a regionally-based green credit card to help finance proj ects and activities in the Bay watershed.
Potential Use: Like the Chesapeake Bay Foundation example, special watershed groups located in other
parts of the country could issue regional green credit cards. The Puget Sound (Seattle market) area, the
Great Lakes (Milwaukee, Chicago, Detroit, Toledo, Cleveland markets), and the Gulf of Mexico (Houston/
New Orleans, Mobile, Tampa-St Petersburg markets) are possible examples of prime areas for this
approach ,if they have not already implemented it
Advantages: This type of program allows people to become involved in their community by focusing on
an ecosystem/place thatthey already value. Furthermore, it accomplishes this purpose while simultaneously
time raising money for worthwhile environmental projects that benefit the local community or ecosystem
in which they live or visit
Limitations: Start up and marketing campaign cost may be high. There has been a proliferation of
special "affinity" cards in recent years and the competition for each card user's account is intense. The
revenues raised would be moderate at first and probably suited to proj ect rather than major system funding. •
Reference for Further Information: See Financing Alternatives for Maryland's Tributary
Strategies, A Report From the Governor's Blue Ribbon Panel, 1994. Copies are available from the
University of Maryland Environmental Finance Center, Coastal and Environmental Policy Program, 0112
Skinner Hall, College Park, Maryland 20742. • Telephone Number. 301-405-6384. Facsimile Number.
301-314-9581. Web site - http://www.mdsg.umd.edu/MDSG/EFC/index.htmI.
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INDIVIDUAL AND CORPORATE DONATIONS
Description: Donations are the volunlaiy giving of money. Most frequency, donations are made to non-
profit foundations or trusts, or company-sponsored organizations or trusts, or company-sponsored
foundations. Frequently, private sector corporations and/or foundations match individual donations.
Donations to governments are made through line item check-offs on income tax returns or to government
trust funds.
Actual Use: At least seven States, including Arkansas, Ohio, North Carolina, Virginia and Wisconsin,
now use a check-off box on the State income tax return to allow taxpayers to earmark a portion of tax
refunds for non-game wildlife programs and natural areas such as wetlands. The federal government also
experimented with this form of fund-raising for a time. However, compared to government efforts,
donations to non profit organizations are huge, measuring in the hundreds of millions annually. Many non
profit organization operating budgets come largely from individual, as opposed to corporate, donations.
Potential Use: The use of voluntary programs has grown steadily, and has become increasingly innovative
to attract more potential donors. Voluntary programs are best suited to finance environmental programs
that attract significant public interest and are highly visible, such as an estuary, urban lake, or wetland. The
use of income tax check-off donations has grown in popularity as a State funding mechanism, and could
be used locally as well. Corporate and individual giving may also take the form of in-kind payments or
special services.
Advantages: There is little public opposition to voluntary donations, and the advantage of enhancing
public interest Ihrough a well-publicized campaign and equitable financing means can be extremely
important Although government revenue collection may be limited, money can provide valuable
supplemental funding for specific cleanup programs. The ability to leverage additional financial resources,
e.g., Ihrough corporate matching contributions and in-kind services, is high.
Limitations: Donations tend to fluctuate with the economy, and also to some extent depending on current
tax code restrictions on philanthropic activity. Thus, the revenue stream may be unpredictable and
unreliable for financing some necessary program costs. Administrative costs may be high, and it may be
difficult to track the use of funds which may be demanded by donors.
Reference for Further Information: Environmental Data Resources, Inc., Environmental Grant
Making Foundations: 1995 Directory, Rochester, New York, 1996 (Email: edri@eznet.net); The
Foundation Center, National Directory of Corporate Giving, New York, 1995(212-620-4320).
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LAND TRUSTS AND RECLAMATION BANKS
Description: Land tmsts acquire and manage natural lands and resources on behalf of State or local
governments. They are fund/ed by a variety of sources similar to dedicated government trust funds,
especially land-related sources like real estate transfer and property taxes. Nonprofit land trusts are
supported by government monies and private donations. Revenues from timber-cutting, farming, recreation,
and other land uses may be rededicated to trusts. Land bought for mitigation purposes often are put in
trusts. Land reclamation banks are publicly or privately funded institutions that buy contaminated sites,
remediate them, and sell or lease them to raise income for further remediation.
Actual Use: All States and a growing number of localities have land trusts. A recent survey of 22 States
describes how they manage some 135 million acres of trust land, in forests, farmland, and parks. State
trusts are funded by a combination of State (sometimes multi-State) and local revenues, federal and private
foundation support including matching grants, and corporate donations. Land acquisition often is brokered
by nonprofit groups such as The Trust for Public Land, American Farmland Trust, Nature Conservancy,
and local counterparts. A recent example is the Sterling Forest 16,000 acre acquisition in New York and
New Jersey. Land management also is often a joint endeavor, lasting in perpetuity. A local example is
Nantucket Island, which set up a trust in 1983 to buy up to 15% of its shores and moors by 1990, financed
in part by a 2% real estate transfer tax on all property sold. The trust manages the resources for long-term
protection and recreation, using volunteers. Several cities have used land reclamation banks to clean up and
redevelop brownfields.
Potential Uses: State, localities and the nonprofit sector could use land trusts as mechanisms to
encourage protection of any natural land and unique habitats, including watersheds.
Advantages: Land trusts combine financing, management and planning functions in a single entity. They
are highly leveraged linking public and private of funding, and are one of the most innovative approaches
today. Cost/benefit linkage is high, as contributors know what land is protected. The concept helps to
protect land use revenues, such as from timber. Land reclamation banks allow the public or nonprofit
sector to take liability risks that private businesses may be unwilling to assume.
Limitations: Staffing land trusts and managing land assets over time can be very costly, trust
administrators must have adequate resources for land management activity, which may be up to one-third
of acquisition costs. Use of volunteers reduces needs somewhat. Land management also may result in
considerable controversy, for example, over timber cutting, burning or recreational access. If proceeds
fromthe lease or sale of remediated property are insufficient to cover remediation cost, investment of public
funds may be required. Localities will suffer a loss of tax revenues.
Reference for Further Information: Souder, Jon A. and Fairfax, Sally K.,State Trust Lands: History,
Management and Sustainable Use, University Press of Kansas, 1996; The Trust for Public Land, Land
and People, Vol. 10, No.l. San Francisco, Spring 1998.
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MINI BONDS FOR STREAM RESTORATION
Description: Small denomination bonds sold directly to tiie general public to finance capital projects, such
as free planting, that promote stream restoration. First proposed by the Maryland Governor's Blue Ribbon
Panel that prepared Financing Alternativesfor Maryland's Tributaries Strategies. Please see also the
closely related tool in Section 2.A., Mini Bonds.
Actual Use: None known by the authors as of this date specifically for stream restoration purposes,
although small denominational general revenue bonds (e.g., $500.00 at par) have been sold by a number
of governments.
Potential Use: Very promising, because it would provide the general public a tangible and politically
popular personal opportunity to invest in general and/or specific environmental activities and improvements
Advantages: Use of this innovative financing tool broadens the base of public support for stream
restoration by directly connecting individual investments with environmental improvements).
Limitations: Administrative costs may be high due to the large number of bond holders.
Reference for Further Information: See "Financing Alternatives for Maryland's Tributaries
Strategies. Report from the Governor's Blue Ribbon Panel (1993). See cross reference with the writeup
in Section 2.A., Mini Bonds.
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MITIGATION LANDS AND BANKING
Description: Mitigation land is a publicly-owned and managed natural site that has been purchased or
protected with public or private funds, in Hie form of direct payments, vbluntaiy land donations and/or
required mitigation credits to permittees for set fees, which may be banked. Mitigation banking was begun
to meet wetlands mitigation requirements for development impact. Mitigation occurs off-site, but usually
in the same area. Wetlands mitigation fees are based on impaired acreage or wetlands value, and
sometimes, credits may be sold to other permit applicants. The mitigationidea is used by governments to
acquire any valuable natural area, perhaps unrelated to the impacted area, to compensate for negative
construction consequences. Here, the mitigation bank is the special account to support the property. Public
agencies may require mitigation from other public agencies.
Actual Use: Wetlands mitigation banking fulfills mitigation requirements under federal and State
regulations when on-site solutions are not possible. Mitigation is often required by CWA Section 404
wetlands permits (and by State programs such as Oregon's Removal-Fill Permit Program) to compensate
for adverse removal or fill activities. It is used widely by States and localities to protect a variety of natural
areas such as farmlands, forests, ranches and watersheds. Public agencies such as those in California and
Florida are growing more innovative in designing mitigation packages. Escondido, California bought a
3,000 acre ranch as an off-site mitigation bank, with sales of credits for approved projects funding
acquisition and management. Florida acquired a 3,636 acre ranch and a 6,700 acre property to build the
Suncoast Parkway with public funds and toll revenues (brokered by the Trust for Public Lands). In South
Carolina, 17,000 acres of sensitive watershed was bought as highway mitigation, with The Nature
Conservancy managing the $12 million bank. Corporations such as Disney and paper/pulp companies
make voluntary mitigation donations to green their image.
Potential Use: States and localities may operate multiple mitigation banks, with the bank serving as the
account for a particular parcel of mitigation land. The concept could be extended to brownfields, with
publicly-owned sites generating credits for private developers to use in other areas.
Advantages: Requiring compensatory mitigation is consistent with, and advertises, the goal of protecting
natural areas including wetlands. Mitigation banking offers a potentially more efficient and beneficial
approach than conventional case-by-case, off-site mitigation, by providing larger mitigation parcels,
partnerships between government and conservation groups, attention to ongoing management, and
interagency cooperation. Mitigation may reduce costly development delays.
Limitations: Ongoing management of mitigation lands is costly, and must be factored into revenue
projections. Some mitigation packages are still too small for ecological protection.
Reference for Further Information: The Trust for Public Lands, GreenSense: Financing Parks and
Conservation, Phyllis Myers, editor, Fall 1996 and Spring 1997, San Francisco, CA; USEPA, Wetlands
Hotline, 1-800-832-7828.
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MUNICIPAL UTILITY ASSET SALES
Description: Local governments and special authorities use.these sales to tap the large capital potential
locked up in die valuable municipal facility assets that they already own. These public entities then use the
revenues generated to fund community-based watershed management activities, particularly nonpoint
source pollution projects. Under this approach, the municipal utility would sell the capital asset(s) such as
water mains, pumping stations, and storage tanks to private investors interested in reducing their tax
burdens.
Actual Use: The editors are aware of no public municipal utility examples at this time. Any such examples
of Ibis funding tool provided by Guidebook users would be welcomed. Private utilities including telephone
and electric companies have traditionally depreciated their facility assets such as telephone and electric
power transmission lines and generating stations over an established period of 1heir useful lives (usually 30
years or more).
Potential Use: The environmental municipal utility asset could be sold to large profitable companies and
other wealthy investors who would use the asset's depreciation schedule to reduce their tax liabilities over
a number of years. The use and maintenance of the capital asset would remain with the municipal utility and
ownership could revert to the utility at the end of the asset's depreciated life.
Advantages: New source of private investment that can be used to fund public environmental projects
and activities would be generated. The mechanism taps into, and leverages, the previously unrealized value
of already existing, major public capital assets.
Limitations: This new investment strategy would probably require legislative approval at some level of
government. If approved, it could result in a net loss of tax revenues to federal and State treasuries over
time. Any program would need to be financed, developed, and marketed to potential private investors.
Reference for Further Information: USEPA document, Identifying, Planning, and Financing
Beneficial Use Projects Using Dredged Materials: Beneficial Use Manual, 1996. USEPA, Office of
Water, Oceans and Coastal Protection Division, 401 M Street, SW, Washington, DC 20460 (mail code:
4504F). Telephone Number: 202-260-1962. Fax Number: 202-260-8742.
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"" NON-PROFIT ORGANIZATION
Description: Non-profits, such as foundations and trusts, are defined as non-governmental organizations
(NGOs) that accrue no profit to individual members, but spend resources pursuing specific goals. NGOs
can be formed for many purposes, including natural lands acquisition, land management, environmental
monitoring compliance, research, education, (discussed separately) and other activities. They include
independent private foundations, 501 C (3) community foundations, (discussed separately) operating
foundations which make grants to pre-selected organizations, and public foundations funded by government
(see also Section 7., Foundations: Program-Related).
Actual Use: Environmental non-profit organizations are a fast growing and important mechanism in terms
of cooperative activity with all levels of government AnNGO such as the Chesapeake Bay Foundation
can mix public and private donations to support governmental goals. Organizations such as The Nature
Conservancy, Ducks Unlimited, and The Trust for Public Lands may acquire and manage valuable natural
lands in lieu of government, or until governments can afford to purchase them, Others raise funds for air
pollution, recycling, and contaminated sites. Many States fund nonprofits, e.g., since 1987, New Jersey
voters have approved $45 million for nonprofit projects.
Potential Use: The potential use of NGOs to pursue quasi-governmental environmental activities in lieu
of governments, or on their behalf, is growing. NGOs constitute a logical place for governmental out-
souring for technical, resource management, training and other work. While NGOs cannot perform any
legal functions pertaining to environmental enforcement or represent governmental policy, they can perform
innumerable activities on highly cost-effective basis.
Advantages: Nonprofits can leverage more monetary donations, volunteer manpower, resources and in-
kind services, than can public agencies. This is due to their tax-exempt status, but also because they
provide a safe and seemingly unbiased focal point that draws attention to the resources protected and
environmental issues addressed. Many governments match private donations. NGOs may perform tasks
more quickly and efficiently than government, since they are less bureaucratic, can effectively cross
jurisdictions for greater ecosystem protection, and can act as "honest brokers".
Limitations: Revenue generation may be quite unpredictable. Since nonprofits are controlled by their
individual membership and boards, they may evolve over time and cannot always be held accountable by
government, potentially undercutting the cost/benefit relationship. Some nonprofits are criticized for using
too large a portion of donations for internal, administrative purposes.
Reference for Further Information: USEPA, The Use of Nonprofit Organizations to Support
Comprehensive Conservation and Management Plans, Office of Water, Washington, DC, 1993; The
Nature Conservancy, Ecosystem Initiative Strategy, Arlington, VA, 1993; Water Environment
Federation, Water Quality 2000 Project, A National Water Agenda for the 21st Century, Alexandria,
VA, November 1992.
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POINT SOURCE/NONPOINT SOURCE TRADING
Description: Although it can take many different forms, point source/nonpoint source trading in principle
involves point sources financing reductions in nonpoint source pollution in lieu of undertaking more
expensive point source pollution reduction.
Actual Use: hi North Carolina's Tar-Pamlico watershed, the Tar-Pamlico Basin Association (a coalition
of point source dischargers) and State and regional environmental groups proposed a two-phased nutrient
management strategy that incorporates point source/nonpoint source trading. The plan obligates
Association members to finance nonpoint source reduction activities in the Basin if their nutrient discharges
exceed a base allowance.
Potential Use: Several conditions appear necessary if a point source/nonpoint source trading program
is to achieve ambient water quality objectives. The water body must be identifiable as a watershed or
segment There must be a combination of point sources and controllable nonpoint sources each
contributing a significant portion of the total pollutant load, and accurate and significant data to establish
targets and measure reductions. There must be significant load reductions for which the marginal cost (cost
per pound reduced) for nonpoint source controls are lower than for upgrading point source controls.
Finally, point sources must be facing requirements to either upgrade facility treatment capabilities or trade
for nonpoint source reductions in order to meet water quality goals.
Advantages: Point source/nonpoint source trading programs increase the potential for cost-effective
reduction in pollutant loading, since nonpoint source reductions funded by trading are typically achieved
at lower cost per unit of pollutant than point source reductions. Under ideal conditions, a trading program
should produce both cost savings to point source dischargers and improved water quality. Including both
point and nonpoint sources in a single management strategy tends to force the development of a watershed-
wide or basin-wide approach to pollution reduction.
Limitations: Implementing trading programs may require cooperation and information sharing between
agencies without previous cooperative experiences (e.g., regulatory agencies with water quality authority
and farmer assistance programs.) Technical limitations between point source and nonpoint source controls
can make it difficult to arrive at an appropriate trading ratio. Administrative costs are also incurred for
review and approval of individual trades.
Reference for Further Information: Office of Water, Office of Policy, Planning and Analysis, USEPA,
Incentive Analysis for Clean Water Act Reauthorization: Point Source/Nonpoint Source Trading for
Nutrient Discharge Reductions, April, 1992. Provides an analysis of trading programs, including case
studies of trading programs in North Carolina and Colorado.
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SPECIAL DISTRICTS
(Special Purpose Districts, Regional Authorities)
Description: A special district is an independent government entity formed to provide and finance
governmental services for a specific geographic area Residents of special districts pay taxes to finance the
improvements feat they will benefit from. For example, a sewage special district might tax residents to
finance extension of wastewater treatment services.
Actual Use: Primarily at the local level. Examples include:
• Sewer Districts;
• Water Districts;
• Stormwater Management Districts;
• Regional Solid Waste Authorities;
• Water Resource Authorities;
Regional Port Authorities; and
• Regional Air Quality Management Districts.
Special districts target costs and benefits of services to a particular population. For example, a drinking
water district might be formed to finance extending municipal drinking water services to anewly-developed
area. Special districts may issue revenue bonds in a number of States. Local governments use special
districts to finance capital facilities independently, relieving the burden on general debt capacity. For
example, a regional port authorities issue revenue bonds to finance port construction and/or renovatioa
Consortiums of local governments form special districts to address common problems. Examples include
regional air quality and solid waste management authorities.
Potential Use: Special districts could be formed from nonattainment areas classified by the Clean Air
Act Amendments, so that special taxes in these areas could finance air quality control programs.
Advantages: Costs are borne only by taxpayers who will benefit from improvements. Regional special
districts can provide more specialized services than smaller governments (e.g., a regional solid waste
authority may be more able to finance a solid waste facility than any one county.) Special districts can issue
bonds, which reduces debt load on the general purpose government
Limitations: Special districts are not directly accountable to the electorate—most special district officials
are appointed, not elected. May require special legislation in some areas.
Reference for Further Information: Porter, Douglas R_, Lin, Ben C, Peiser, Richard B. Special
Districts: A Usejul Technique for Financing Infrastructure, Washington, D.C., Urban Land Institute.
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TAX INCREMENT FINANCING - CBEP
Description: Tax increment financing (TIP) provides for the temporaiy allocation of 1he increased tax
proceeds in a carefully designated area generated by increases in assessed property values. TIP uses the
increased tax revenues stimulated by redevelopment to pay for the capital improvements required to induce
the development hi a basic TIP, property assessments are frozen at a pre-development level in the
specified area Bonds are then issued to finance a portion of the redevelopment. As property values and
assessments in the area increase, the municipality uses the added increment in tax revenues to meet the debt
service on those bonds. The technique requires the creation of a special district and the maintaining of two
separate sets of tax records.
Actual Use: Tax increment financing has been used for many years by local governments across the
country for a wide variety of economic development projects. It is a particularly effective financing tool
for projects that provide measurable specific benefits to select, well defined groups of taxpayers. More
than thirty States nationwide have TIP laws on the books at the present time.
Potential Use: Tax increment financing could be used to help direct development away from sensitive
environmental areas and to guide community-based development in economically and environmentally
sustainable ways. It could also be used to help finance brownfields cleanup and redevelopment (see the
closely related tool writeup in Section 9., Tax Increment Financing).
Advantages: Tax increment financing makes development serf-financed. TIP is very flexible. Local
control is retained and in most cases no local government debt limitation applies. With TIP, the
development risks are shifted from taxpayers to the bondholders. The revenue potential and generation is
very clear and very specific.
Limitations: TIP bonds pose a greater risk to investors and, thus, bear higher interest rates than general
obligation bonds. TIFs are complex. Financial, development, engineering, and other technical expertise
are necessary.
Reference for Further Information: Baker & Danish, Local Government Funding Sources, Seventh
Edition, July 1995, Baker & Daniels, 300 North Meridian Street, Suite 2700, Indianapolis, Indiana46204.
Telephone Number: 317-237-0300. This excellent handbook describes a variety of local government
funding sources, focusing on Indiana USEPA Environmental Financial Advisory Board Brownfields
Report No. 3: Financing Strategies for Brownfields Redevelopment, March 1996. USEPA, 401 M
Street, SW, Washington, DC 20460. Mail Code:2731R. Contact: EFAB staff member: Timothy
McProuty at mcprouty.timotfay@epa.gov
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Description:
Actual Use:
Potential Use:
Advantages:
Limitations:
OTHER
Reference for Further Information:
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COMPARISON MATRIX FOR COMMUNITY-BASED PROTECTION
Criteria/
CBEP
Tool
Adopt-an-
Animal/Habitat
Programs
Affinity
Merchandise
"Agriculture: FSA
Conservation
Reserve Program
Agriculture:
NRCS Wetlands
Reserve Program
Assurances
*Capital
Improvements
Program
"Community
Foundations
"Conservation
Easements
"Conservation
Partnerships
"Contributions
of Land
Actual
Use
Mod.
High
High
Mod-
High
Low
High
High
High
High
High
Revenue
Size
Low
Low
High
Mod.-
High
Low
High
Mod.
High
Mod.
High
Admini-
strative
Ease
Mod.
High
Mod.
Mod.
Low-
Mod.
Mod.
Mod.
Mod.
Low-
Mod.
High
Equity
High
High
Mod.
Mod.
Low -
Mod.
High
High
Mod.
Mod.
Mod.
Financial
Leveraging
Low
Low
High
Low
High
High
High
High
High
Mod.
Environ-
mental
Benefits
Mod.
Mod.
High
High
High
Mod.
Mod.
High
Mod.
Mod.
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COMPARISON MATRIX continued
Criteria/
CBEP Tool
Cost-Sharing
for Livestock
Waste Storage
Programs
* Dedicated
Government
Trust Funds
Ecotourism
Emissions
Trading
Environmental
Lotteries
Environmental
Revolving Funds
Green Credit '••
Card
^Individual .
and Corporate
Donations
*Land Trusts
and Reclamation
Banks •
Mini Bonds
For Stream
Restoration
Actual
Use
-\
Low
High
Mod.
Low
Low
Mod.
Low
High
High
Low
Revenue
Size
Low v
High
Low
Low-
Mod.
Mod.
High
Low
High
High
Low
Admini-
strative
Ease
Mod.
Mod.
Mod.
Low
Mod.
Mod.
Low
High
Low-
Mod.
Low-
Mod.
Equity
Low-
Mod.
Mod.
Low
Mod.
Low
Mod. -
High
Mod.
High
High
High
Financial
Leverag-
ing
High
High
Mod.
Mod.
Low
High
Mod-High
High
High
Mod.
Environ-
mental
Benefits
High
High '
Mod.
Mod.
Mod. -
High
High
High
High
High
High
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COMPARISON MATRIX continued
Criteria/
CBEP Tool
^Mitigation
Lands and
Banking
Municipal
Utility Asset
Sales
*Non-Profit
Organizations
Point/
Nonpoint
Source
Trading
^Special
Districts
"Tax Increment
Financing -
CBEP
Actual
Use
High
Low
High
Low
High
Mod.
Revenue
Size
Mod. -
High
High
High
Low
High
Mod.
Admini-
strative
Ease
Mod.
Low
Mod.
Low
Mod.
Mod.
Equity
Mod.
Mod.
High
Mod.
Mod.
High
Financial
Leverag-
ing
High
Mod. -
High
High
Mod. -
High
Mod.
Mod.
Environ-
mental
Benefits
High.
Low-
Mod.
High
High
High
High
High - High use (over 25 States/many localities); criteria score high (e.g., program is specific,
manageable, accessible, cost/effective, etc.)
Mod.- Moderate use (10-25 States/some localities); criteria score in medium range
Low- Low or rare use; scope is limited; one or more major implementation problems exist
*Star indicates best rated mechanisms
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9. TOOLS FOR
FINANCING
BROWNFIELDS
REDEVELOPMENT
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TOOLS FOR FINANCING BROWNFIELDS REDEVELOPMENT
INTRODUCTION
The term, "brownfields", refers to any abandoned, idled, or under used site (whether, urban, rural, industrial
or non-industrial) where expansion or redevelopment is complicated by real or perceived contamination.
This term distinguishes them from "greenfields", or undeveloped properties located mainly in suburban or
rural areas. Although the full extent of the problem of environmental contamination is not known, the United
States General Accounting Office estimated in 1996 that there are about 450,000 brownfields sites across
1he country.
While many factors can influence economic development decisions, the existence or fear of contamination,
oftensteeis development to greenfields. This promotes the use of undeveloped land, contributing to urban
sprawl, increased traffic congestion, and habitat destruction. It also limits the reuse of brownfields, hurting
economic growth in cities. Since many brownfields are located in poor and minority communities, such
economic decisions may also raise environmental justice concerns. Failure to address the brownfields issue
will relegate substantial portions of our cities to environmental and economic wastelands.
The Environmental Protection Agency believes a "environmental cleanup is abuilding block, notastumbling
block, to economic development," and that cleaning up brownfields properties must go hand-in-hand with
bringing economic vitality to communities. Environmental policy makers must understand the major role
of finance in brownfields redevelopment Similarly, the development community must understand fee
importance of environmental requirements. Without adequate linkages between environmental and
financing realities, sustainable brownfields redevelopment will remain problematical. Most of the financing
tools presented here are deeply rooted in local community goals, and combine both the public and private
sectors in a variety of different kinds of financing arrangements.
This section evaluates financing tools which fee federal government, States, communities, and the private
sector can use to finance brownfields cleanup and redevelopment Twenty-three ways of raising revenues,
lowering costs, and influencing behavior are discussed. The tools include traditional governmental
assistance programs, bold new initiatives that target brownfields sites and disadvantaged communities,
innovative private sector arrangements, risk limitation techniques, powerful tax incentives, and use of the
Drinking Water and Wastewater State Revolving Funds, hi addition to the tools discussed in other parts
of fee Guidebook, including special taxes, fees, bonds, loans, credit enhancements, technical assistance,
and community-based environmental financing mechanisms.
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LIST OF TOOLS FOR FINANCING BROWNFIELDS REDEVELOPMENT
(In Alphabetical Order)
*1. Brownfields Cleanup Tax Deduction
*2. Clean Land Fund (Revolving Fund)
*3. Community Development Financial Institutions
*4. Empowerment Zones/Enterprise Communities
*5. Environmental Insurance
*6. Environmental Liability Releases/Agreements
7. EPA: Brownfields Assessment Demonstration Pilots
- 8. EPA: Brownfields Workforce Development
9. EPA: SRF Brownfields Loans (Clean Water)
10: EPA: Superfund Trust Fund
* 11. Environmental Risk-Management (Real Estate)
*12. Federal Assistance Programs
13. Industrial Development Funds
14. Land Reclamation Banks
15. Land Recycling Companies
16. Property Parcelization
* 17. Qualified Empowerment Zone Facility Bonds
18. Real Estate Investment Trusts
* 19. State Voluntary Cleanup Programs
*20. Tax Abatements
*21. Tax Incentives
22. Tax Increment Financing
23. Transferable Development Rights
* Stars indicate most highly rated mechanisms as described in tile Comparison Matrix at the end of the
narratives. See Introduction to the Guidebook for a description of the criteria used. Ratings of "High",
"Moderate", "Low" are for comparison purposes only, as some ratings are necessarily subjective and data
are incomplete.
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BROWNFIELDS CLEANUP TAX DEDUCTION
Description: The Taxpayer Relief Act of 1997 broadened the concept of the increased Section 179
deduction (see also Section 6., Expensing of Assets) to include qualified environmental cleanup costs
bolh inside and out of empowerment zones and enterprise communities. A qualified business can elect to
deduct costs paid or incurred after August 5,1997, to abate or control a hazardous substance as defined
by sections 101(14) and 102 of the Comprehensive Environmental Response, Compensation, and Liability
Act of 1980, but not covered by Section 104(a)(3) at a qualified contaminated site in the tax year of the
costs. Expensing rather than capitalizing such costs (adding them to the basis for depreciation) can be a
major benefit, depending on otherwise taxable income. Targeted areas include census tracts with poverty
rates of at least 20%, census tracts with populations of less than 2,000 and more than 75% of their land
zoned for commercial or industrial use and a common border with one or more tracts having poverty rates
ofatleasttwenty percent, empowermentzones, supplemental empowerment zones, enterprise communities,
and EPA brownfields pilot project sites. A qualified contaminated site must be held for use in a trade or
business, for the production of income, or as inventory and there has to have been a release, threat of
release, or disposal of a hazardous substance at or on the site. Sites on EPA's Superfund National
Priorities List are excluded. A maximum dollar limit is not imposed but Ihere is a limit on property used in
connection with abatement or control of hazardous substances.
Actual Use: Use has been less than hoped since the deduction was made available in 1997.
Potential Use: The deduction can be used to reduce taxable income and federal tax liability.
Advantages: This change in federal tax law allows purchasers of qualified contaminated property to
deduct their environmental remediation expenses. The value of the deduction depends on the extent to
which it reduces income tax liabilities. Because cleanup costs can be deducted, brownfields property can
be more likely to be redeveloped as well as more valuable in the real estate market
Limitations: The deduction may have to be recaptured as ordinary income under Section 1245 when the
property is sold. Expenditures paid or incurred after December 31, 2000, are not covered.
Reference for Further Information: Consult a tax practitioner and the State environmental agency
regarding certification of a property as eligible. U.S. EPA, Office of Solid Waste and Emergency
Response, Oulreach and Special Projects Staff, Washington, DC 20460, Telephone: 202-260-3525,
http://www.epa.gov/swerosps/bf/ Internal Revenue Service, 1111 Constitution Avenue, NW,
Washington, DC 20224, Telephone: 800-829-1040 or 703-321-8020, Fax: 703-368-9694,
www.irs.ustreas.gov/. See Revenue Procedure 98-17 for directions on requesting written guidance on
die tax treatment of environmental cleanup costs for projects spanning several years.
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CLEAN LAND FUND
Description: The Clean Land Fund is a private sector, non-profit environmental organization dedicated
to providing financing for brownfields revitalization. The Fund is a collaborative effort between businesses,
communities, and environmentalists. It is structured as a sustainable, leveraged revolving fund and will
make loans for financing the acquisition, remediation, and reuse of brownfields properties. The Fund will
make these loans to non-profit and for profit brownfields owners and/or developers and will manage the
environmental and financial risks associated with these types of real estate development projects.
Actual Use: The Clean Land Fund is in the developmental state and plans to be operational in the near
future. A number of localities already have set up revolving loan funds to finance a variety of local
infrastructure projects. The Economic Development Administration and the United States Environmental
Protection Agency are supporting the creation of revolving funds in cities around the nation to finance
economic development and brownfields cleanup projects respectively.
Potential Use: Credit-worthy non-profit and for-profit borrowers located in the Northeast and Mid-
Atlantic will be able to access loan monies from ihe Clean Land Fund when it is operational. Sources of
projects to be financed will include small and medium-sized companies and municipalities, and possibly
some financial institutions. The brownfields revolving fund concept is potentially replicable by States, cities,
communities, and/or non-profit organizations nationwide. Loans could be combined with Clean Water SRF
loans and other funding sources.
Advantages: The Clean Land Fund will be financed by contributed capital leveraged by debt capital and
does not require a commitment of federal resources. The Fund's credit enhancements will leverage
additional monies into a diversified loan pool to reduce risks. The non-profit nature of the Fund will reduce
the interest rates needed on loans to protect its financial stability.
Limitations: The Fund will only be able to provide loans at good taxable rates in line with its own capital
borrowing and investments. Loan interest rates must be set at ahigh enough level to cover the interest costs
of the debt capital of the Fund.
Reference for Further Information: William J. Perm, Environmental Financial Advisor, P O. Box 725,
Block Island, RI02807, Telephone/Fax: 401-66-2065. E-rhail: 102024.2544@.CompuServe.com.
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COMMUNITY DEVELOPMENT FINANCIAL INSTITUTIONS
Description: Community Development Financial Institutions (CDFI's) are specialized private financial
institutions that fill niches in the market that banks and other traditional financial organizations do not serve.
CDFI's focus on economic development by providing capital and technical expertise to communities in
Ihese market niches. Because of the broad needs of these communities, CDFI's include such diverse
entities as community development banks and intermediaries, credit unions, housing funds, loan funds,
micro-loan funds, and venture capital funds.
Actual Use: CDFI's of various types have been in existence for more than 30 years. The South Shore
Bank in Chicago and the Community Preservation Corporation in New York are two notable examples.
The number of CDFI's have increased significantly since 1980's. CDFI's have taken innovative and lead
roles in facilitating development and creating jobs in distressed communities.
The CDFI concept received new stimulus with the creation of a CDFI Fund at the U.S. Department of
Treasury (see Section 10.B., Treasury: Community Development Financial Institutions Fund). In
Fiscal Year (FY) 1997, Treasury issued 48 awards obligating over $37 million in grants. For FY 1998,
Treasury issued 50 awards obligating aaestimated $62 million. Award amounts ranged from $78,500 to
$3,200,000 and averaged $797,902. Organizations funded have included community development banks,
credit unions, loan funds, venture capital funds, micro-loan funds, community development intermediaries,
housing funds and multi-purpose CDFI's. The Rural Community Assistance Corporation described
in Section 5.A. was one of those organizations so named.
Potential Use: These CDFI's could take lead in promoting the cleanup and redevelopment of the many
brownfields properties located in distressed communities across the nation. They could serve as
intermediaries for leveraging and delivering a variety of public and private incentives, capital and financial
outreach services to these areas.
Advantages: Many CDFI's have extensive community development expertise and experience in applying
that expertise in economically distressed areas. These institutions have earned the trust of the residents of
distressed areas and understand their special needs and concerns.
Limitations: CDFI's are often small, under-capitalized institutions and may have to rely heavily on public
subsidies. They may be limited in experience with brownfields and/or in the number of development
projects, brownfields or otherwise, that they can sustain at any one time.
Reference for Further Information: U.S. Department of the Treasury, Community Development
Financial Institutions Fund, 1500 Pennsylvania Avenue, NW, Washington, DC 20220. Telephone: 202-
622-8662.
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EMPOWERMENT ZONES/ENTERPRISE COMMUNITIES
Description: Empowerment Zones and Enterprise Communities (EZ's/EC's) are designated geographic
areas,-usually distressed, to which special incentives and monies are targeted for development purposes.
EZ's/EC's may be set up by city, State, or federal governments and may receive benefits ranging from
financial to regulatory to technical assistance from these governments.
Actual Use: The federal government created a national EZ/EC Program in 1993 to revitalize distressed
urban and rural communities. The program seeks to create economic opportunities; improve physical,
environmental, community, and human resources; and build partnerships between governments. All levels
of governments have important roles. The federal government removes regulatory barriers, simplifies rules,
coordinates programs, and allocate part of their private activity bond caps. Local governments involve
communities, develop plans, leverage private resources with public capital, and streamline local actions.
In 1995, nine empowerment zone and ninety-eight enterprise community winners were selected. The
federal assistance included over $1 billion in grants, special tax benefits, and priority funding/special
consideration under other federal programs. Independent of this federal initiative, more than thirty States
administer their own enterprise zone programs to spur investment in distressed areas: Many of these
programs have been operating since the 1980's, and States have designated over 1,400 zone areas as of
this date. . ,
Potential Use: The federal government proposes to designate 15 new urban EZs in 1999.' These new
EZs would receive tax incentives and proposed funding is $10 million per year for each EZ for a period
of ten years. Significant brownfields problems have been identified in many EZ's/EC's. There exists in the
context of federal and State programs to revitalize all of these communities opportunities to channel benefits
to brownfields assessment, cleanup and redevelopment activities.
Advantages: The EZ/EC idea targets and concentrates on federal, State, and local resources and benefits
on communities wilh great needs, including environmental ones. This increases chances for impact and
success in these efforts.
Limitations: The EZ/EC concept by it's very nature cannot reach the great majority of
communities/citizens because it targets resources and benefits to a limited number of areas.
!
Reference for Further Information: U.S. EPA Environmental Financial Advisory Board (EFAB) report,
Financing Brownfields Redevelopment: Linkages to the Empowerment Zone/Enterprise Community
Program, Contact: Timothy McProuty at mcprouty.timothy@epa.gov. U.S. Department of Housing
and Urban Development (HUD), Office of Community Planning and Development, 451 7th Street, SW,
Washington, DC 20203, Telephone: 202-401-1020. U.S. Department of Agriculture (USDA), Office of
Community Development, 300 7th Street, SW, Washington, DC 20024, Telephone: 202- 619-7981.
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ENVIRONMENTAL INSURANCE
Description: Environmental insurance can be a cost-effective way to limit the risk of having to pay for
unforseen environmental cleanup. Such insurance is an environmental management tool for managing a
party's environmental liability by transferring some of the associated financial risk to another parry (under
the very limited provisions of the policy). Essentially, it is an agreement that in return for premium
payments) and/or payment of a set negotiated deductible amount, the insured party is provided some
protection against unanticipated costs, third party, claims, the acts or omissions of other parties, and
impairment of property values. Environmental insurance policies may facilitate (make possible) some real
property transactions and help resolve environmental liability disputes.
Actual Use: Through years of hard-earned experience, the insurance industry has gradually developed
environmental insurance as a discrete subset of property and casualty insurance. There can be many
different names for environmental insurance policies, but the most three common types that apply to
brownfields and other contaminated properties include property transfer insurance, cleanup cost cap or
stop loss insurance, and owner-controlled insurance. These policies are offered by a growing number of
firms with typical coverage ranging from $2 to $10 million. Minimum coverage for most policies starts at
$100,000 and maximum coverage for policies can reach $40 million. In 1996, environmental insurance
premiums averaged $5,000 per $ 1 million of coverage.
Potential Use: Environmental insurance is increasingly available and desirable for any and all real
estate/business projects involving the assessment, cleanup and redevelopment of brownfields and other
contaminated properties.
Advantages: Environmental insurance can transfer certain carefully-defined, environmental risks, hi
brownfields projects, it may substitute for, or shore up, indemnities and hold-harmless agreements lessening
the purchaser's need to worry about the seller's financial condition. It may also eliminate the need to report
brownfields as environmental liabilities. Some environmental insurance policies
require the insurer to pay covered costs up-front and not on a reimbursement basis after cleanup.
Limitations: Environmental insurance policies may require a substantial up-front premium payment, have
'substantial deductibles, and set strict caps on monetary payouts. These policies may be prohibitively
expensive for some brownfields owners and developers.
Reference for Further Information; U.S. EPA publication 500-R-96-001, Potential Insurance
Products for Brownfields Cleanup and Redevelopment, U. S. EPA, Office of Emergency and Remedial
Response, 40 M Street, SW, Washington, DC 20460, Mail Code (5101), Telephone: 202- 260-4610,
Fax: 202-260-3527. There are many environmental insurance sites and home pages on the World Wide
Web. They can be accessed using the commonly offered web browsers.
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ENVIRONMENTAL LIABILITY RELEASES/AGREEMENTS
Description: An environmental liability release agreement is a benefit (concession) granted by federal,
State, and/or local governments to owners or operators of facilities of businesses (including commercial real
estate properties) that frees them from all or part of responsibility for environmental cleanup costs under
federal, State, and/or local laws. These liability agreements may be structured in advance for prospective
purchasers of properties or negotiated between the public sector and private owners/developers with
specified conditions delineating the extent of liability relief granted and the degree of private contribution
to any planned and/or unanticipated cleanup effort.
Actual Use: More lhan thirty State governments offer some type release of environmental liability within
the context of voluntary cleanup or other programs to remediate contaminated properties. While these
liability agreements generally focus on the less contaminated properties known as brownfields, they have
also been used at sites that are on the federal Superfund National Priority List The most common types
of environmental liability agreements offered by State governments include covenants-not-to-sue, no-
further-action letters, and certificates-of-release.
Potential Use: All fifty States could incorporate environmental liability agreements within voluntary cleanup
programs or other State efforts to support brownfields redevelopment as well as hazardous waste cleanup
efforts. During Superfund preauthorization, protections in environmental liability agreements may be
reexamined, clarified, and/or expanded with regard to municipalities, prospective purchasers, innocent
landowners, small businesses, and other private parties.
Advantages: Environmental liability agreements may provide considerable comfort to potential owners,
developers, lenders, and investors with regards to contaminated or potentially contaminated properties.
To the extent that these releases can help control and quantify the risks associated with investment in
brownfields and other contaminated properties, they will help spur the cleanup and redevelopment of those
sites.
Limitations: The liability agreements envisioned are rarely total, and coordination between all levels of
government is often not uniform or necessarily easy. Every liability release granted to a public or private
party currently or potentially responsible for environmental contamination cleanup costs represents
resources that must be found elsewhere.
Reference for Further Information: State Voluntary Cleanup Programs. U.S. EPA, Office of Solid
Waste and Emergency Response, 401 M Street, SW, Washington, DC 20460, Mail Code: 5101,
Telephone: 202-260-4610, Fax: 202-260-3527. U.S. EPA Environmental Financial Advisory Board
(EFAB) report: Financing Brownfields Redevelopment, U.S. EPA 401 M Street, SW, Washington,
D.C. 20460, Fax: 202-565-2587.
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ENVIRONMENTAL PROTECTION AGENCY
BROWNFIELDS ASSESSMENT DEMONSTRATION PILOTS
Description: Brownfields Assessment Demonstration Pilots are an important part of the Environmental
Protection Agency's (EPA) Brownfields Economic Redevelopment Initiative. These pilots are designed
to empower State, communities, and other stakeholders in economic redevelopment to work cooperatively
in a timely manner to assess, cleanup, and sustainable reuse brownfields properties. The pilots seek to test
redevelopment models, remove regulatory barriers without sacrificing protection, and facilitate coordinated
public and private efforts at the federal, State, and local levels.
Actual Use: Through March 1999, EPA had awarded 227 Brownfields Demonstration Assessment Pilots
(170 National Pilots and 57 Regional Pilots) distributing more than $42 million to a wide range of States,
cities, towns, counties and Tribes. These pilots are funded through cooperative agreements that offer
assistance of up to $200,000 over a two-year period. In addition, EPA awarded 24 of the Assessment
Pilots further assistance in the form of Brownfields Cleanup Revolving Loan Fund grants of up to $350,000.
All told, these grants have leveraged over $1 billion for redevelopment and created over 2,500 jobs.
Potential Use: EPA expects to select up to 100 additional National Assessment Pilots in Fiscal Year
1999. The Agency estimates that it will obligate up to $66 million in cooperative agreements during Fiscal
Year 1999 for all types of brownfields projects - including Assessment Pilots, Cleanup Revolving Loan
Fund Pilots, and Job Training and Development Demonstration Pilots-
Advantages: For the States, local governments, and tribes awarded EPA Brownfields Pilots, the
assistance provided through these two Programs can help them overcome the barriers that brownfields
assessment and cleanup cost may represent. Funding recipients may be able to use this federal assistance
to leverage additional money, both public and private, from other sources.
Limitations: This type of federal funding assistance for brownfields projects is limited to fewer than 100
governmental jurisdictions. The funding available is only large enough to help fund the assessment and
cleanup of a small percentage of Ihe total number of brownfields sites nationwide.
Reference for Further Information: U.S. EPA, Office of Solid Waste and Emergency Response,
Outreach and Special Projects Staff, 401 M Street, SW, Washington, DC 20460, Telephone: 202-260-
1223. U.S. EPA, Brownfields Applications, Superfund Document Center (5201G), 401 M. Street, SW,
Washington, DC 20460. The Brownfields web site located on the U.S. EPA Home Page at
http://www.epa.gov/swerosps/bf/pilots.htmhas information on applying for the pilot programs, as well
as other mechanisms for funding brownfields cleanup and redevelopment
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ENVIRONMENTAL PROTECTION AGENCY
BROWNFIELDS WORKFORCE DEVELOPMENT
Description: The Environmental Protection Agency (EPA) seeks to build partnerships wilh States, cities,
local job training organizations, community colleges, and other federal agencies to foster job training and
workforce development in brownfields communities. These efforts help ensure that communities have the
trained workforce needed to revitalize contaminated properties and that community members have a
chance to compete in the economic mainstream. The Agency seeks to facilitate cleanup and prepare
trainees for employment in environment fields (e.g., sampling, analysis and site remediation.
Actual Use: EPA funded eleven Brownfields Environmental Job Training and Development
Demonstration Pilot Projects in 1998, at an average of $200,000 each for two years. EPA and the
Department of Labor's (DOL's) Employment and Training Administration (ETA) are supporting pilot
projects in which ETA provides information and technical assistance to state Job Training Partnership Act
(JTPA) liaisons and community-based JTPA programs. EPA is also working with the Department of
Health and Human Services' (HHS') National Institute of Environmental Health Sciences (NIEHS) and
Office of Community Service (OCS) to ensure (hat Minority Youth Worker Training Program grants are
tied closely to ongoing activities in brownfields pilot cities. EPA and the Department of Education's Office
of Vocational and Adult Education are identifying outreach mechanisms for local public schools regarding
brownfields efforts. EPA and the Department of Veterans Affairs are working to establish policies and
procedures aimed at providing trained veterans to work in brownfields projects.
Potential Us e: While job training and workforce development in and around brownfields communities can
make essential contributions to cleanup and redevelopment, it also can equip those trained with knowledge
and skills required for further employment dealing with hazardous chemicals and environmental
contamination problems.
Advantages: EP A's Brownfields Economic Redevelopment Initiative is designed to prove that economic
development and the environment can co-exist
Limitations: Interagency and intergovernmental coordination tends to be time-consuming and can be
difficult Eligibility for this effort is limited to 121 brownfields pilot cities and EPA's staff resources limit its
applicability beyond these locations.
Reference for Further Information: U.S. EPA, Office of Solid Waste and Emergency Response,
Outreach and Special Projects Staff, Mail Code:5101, Washington, DC 20460, Telephone: 202-260-
6285, Fax: 202-260-6606, Internet: http://www.epa.gov/swerosps/bf/.
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ENVIRONMENTAL PROTECTION AGENCY
SRF BROWNFIELDS LOANS
(Clean Water)
Description: There are fifty-one Clean Water State Revolving Fund (CWSRF) programs (one in each
State and Puerto Rico). These programs are capitalized through federal and State contributions,
and operate as banks making low or no interest loans to communities and olher eligible public recipients
for water quality projects. The loans are repaid over terms as long as twenty years and repayments are
recycled to fund other water quality projects. See also the related writeup in Section 2.B.,
Environmental Protection Agency State Revolving Fund - Clean Water
CWSRF resources may in certain circumstances be available to augment the resources available under the
Environmental Protection Agency's (EPA's) Brownfields Initiative to assess, cleanup, and redevelop
brownfields. Brownfields are abandoned or are under-utilized former industrial and commercial sites that
are or may be environmentally contaminated. There are more than 450,000 of Ihese brownfields sites
nationwide.
Actual Use: The CWSRFs in some States may already be making loans to communities for eligible
brownfields-related water quality projects. However, the authors are currently (April 1999) not aware of
any firm loan information in that regard.
Potential Use: Examples of brownfields mitigation activities that correct or prevent water quality problems,
and may be eligible for CWSRF funding include the abatement of polluted runoff, control of stormwater
runoff, correction of groundwater contamination, and remediation of petroleum contamination.
Advantages: The CWSRFs have more than $27 billion in assets and fund nearly $3 billion in projects a
year. They are established entities with proven environmental and financial track record.
Disadvantages: The total costs of the water quality needs ofapplicants far exceed the loan resources of
fee CWSRFs; Any eligible brownfields project must compete with all other water quality projects for a
place on the particular State's CWSRF priority funding list.
Reference for Further Information: The Clean Water State Revolving Loan Funds programs in each
State and Puerto Rico. U.S. EPA, Office of Water, The Clean Water State Revolving Fund Branch, 401
M Street, SW, Washington 20460, Mail Code: 4202, Telephone: 202-260-7359, Fax: 202-260-1827,
Internet http//www.epa.gov/owm U.S. EPA, Office of Solid Waste and Emergency Response, Outreach
and Special Projects Staff, 401 M Street, SW, Washington, DC 20460, Mail Code: 5101, Telephone:
202-260-4039, Fax: 202-260-6606, Internet: www.epa.gov.brownfields.
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ENVIRONMENTAL PROTECTION AGENCY
SUPERFUND TRUST FUND
Description: The Supeifund Trust Fund, also known as the Hazardous Substance Response Trust Fund,
was established in 1990 to pay for cleanup and enforcement activities at waste sites. This dedicated trust
fund has historically been financed primarily by petroleum excise taxes, chemical feedstock excise taxes,
and environmental income taxes. The fund has also received monies through cost recoveries from parties
determined responsible for contaminating particular sites, penalties, income taxes, and interest income.
Actual Use: The Superfund Program has cleanup activities, short-term removal actions and/or long-term
remedial actions, underway or planned for toe approximately 1300 seriously contaminated sites on the
Environmental Protection Agency 's (EPA's) National Priority List Actions at Orphan Sites, where no
responsible party can be identified, are funded by the Trust Fund. The Trust Fund also funds actions begun
at sites wife responsible parties but prior to a final determination and acceptance of liability. More than 400
of these seriously contaminated sites have been brought to die "construction complete phase" - an
advanced milestone in the cleanup process.
Superfund Trust Fund monies are also being used to fund brownfields national demonstration pilots as part
ofUSEPA's Brownfields Economic Redevelopment Initiative (see Section 9., Brownfields Assessment
Demonstration Pilots).
Potential Use: Use of the Trust Fund to fund brownfields projects similar to the pilot projects in the
Brownfields Economic Redevelopment Initiative could be further expanded to include sites in communities
across the nation.
Advantages: The Trust Fund is potentially a large source of monies for the cleanup of hazardous waste
sites, including brownfields. The Trust Fund's use in this effort could be further leveraged through
traditional credit enhancement mechanisms such as leveraged revolving loan funds.
Limitations: There are statutory restrictions on the use of monies in Ihe Superrund Trust Fund monies.
In addition, any resources committed to brownfields sites represent resources unavailable for use at the
more seriously contaminated sites found on flie National Priority List.
»
Reference for Further Information: U.S. EPA, Office of Solid Waste and Emergency Response,
401M Street, SW, Washington, DC 20460, Mail Code: 5101, Telephone: 202-260-4610, Fax: 202-260-
3527. U.S. EPA Environmental Financial Advisory Board (EFAB) report, Leveraging the Superjund:
Ideas and Opportunities, USEPA, 401 M Street SW, Washington, DC 20460, Mail Code: 2731R,
Contact: Tim McProuty at mcprouty.timothy@epa.gov.
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ENVIRONMENTAL RISK-MANAGEMENT (REAL ESTATE)
Description: The real estate industry faces serious environmental uncertainties, representing potential
financial risks, that can negatively affect the willingness and ability of property owners, purchasers,
developers, investors, and lenders to participate in brownfields redevelopment. The environmental risks
at these properties fall into three categories: cleanup, property value impairment, and personal injury.
Parties involved in brownfields real estate transactions can reduce or eliminate these risks using a number
of environmental risk-management techniques. The techniques either absorb risks, transfer risks among
involved parties, or transfer risks to a third party. They include:
• Indemnification - The seller agrees to cover costs to the purchaser resulting from specific risks.
» Price Adjustment - The seller reduces the property price to reflect potential contamination risks.
• Self-Insuring - The purchaser sets aside monies to cover the costs of potential environmental risks.
Third-Party Insurance - The seller/purchaser buys insurance to cover potential environmental risks.
Actual Use: These techniques are used by private parties to make real estate transactions work.
hidenmification has been used for a long time, but may be giving way to other techniques. Price
adjustments may be the most common private technique used in brownfields transactions. Self-insuring is
used most often by large and/or economically strong firms, or by firms confident of their environmental
assessment hi addition, the use of environmental insurance is increasing (see Section 9., Environmental
Insurance).
Potential Use: Environmental insurance is increasingly available and affordable. Its use may be expected
to continue to grow. All of these tools will continue to be used to some extent, especially in transactions
that do not entail significant contamination or in support of public sector assistance.
Advantages: Given favorable circumstances, all of these risk-management techniques can fully transfer
risks and make otherwise unworkable brownfields redevelopment transactions occur.
Limitations: Many sellers and buyers may be too small to be indemnitors. An indemnity is worth only as
much as the indemnitor. Regulatory agencies will pursue a party regardless of indemnification. Price
reductions and risk assumptions may be too large for some parties or exceed the value of transactions.
Transferring risks between parties may lead to contract disputes, or parties may be unwilling or unable to
meet their obligations. Insurance may not be affordable.
Reference for Further Information: Hollingshead, Susan, M, Environmental Insurance for Real
Estate Valuation, "Brownfields 96" Conference Presentation, September 1996, Pittsburgh, PA. U.S.
EPAreport, Potential Insurance Products for Brownfields Cleanup and Redevelopment, U.S. EPA,
Office of Emergency and Remedial Response, 1235 Jefferson Davis Highway, Arlington, VA 22203,
Telephone: 703-603-8960, Fax: 703-603-9146.
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FEDERAL ASSISTANCE PROGRAMS
Description: The federal government through its departments, agencies, and other establishments offers
a broad range of programs, projects, services, and activities Inat provide assistance to eligible parties for
eligible purposes. This assistance may take the form of direct payments, grants, loans, credit enhancements,
technical support, etc. Brownfields assessment, cleanup, and redevelopment activities are, or may be,
eligible activities under a substantial number of these federal efforts.
Actual Use: During tiie past two years, the Environmental Protection Agency (EPA) has awarded $ 13.2
mUlionin grants to 76 States, cities, towns, counties, and Tribes nationwide to fund Brownfields Assessment
Demonstration Pilots. EPA plans to award another 25 Assessment Pilots in 1997 and up to 300
Brownfields Pilots over the next four years (see page 9-4, Brownfields Assessment Demonstration Pilots),
The Department of Housing and Urban Development (HUD) approved in 1996 a $50 million project to
cleanup and redevelop a number of brownfields sites in Chicago. This is the first brownfields project
financed by a loan guarantee using entitlements under HUD's Community Development Block Grant
(CDBG) Program as'collateral.
Potential Use: Federal programs that may have the potential to contribute additional and/or new funding
to brownfields activities include:
• Appalachian Regional Commission Supplemental Grants Program - see Section 2.C.;
CDBG Programs - see pages in Section 2.C.;
. Economic Development Administration Grant Programs - see pages in Section 2.C.;
» Empowerment Zone/Enterprise Community Program - see Section 9.;
« Rural Business-Cooperative Service Grant and Loan Programs - see Sections 2.B. and 2.C.;
Rural Utilities Service Grant Programs - see pages in Section 2.C.; and
• Rural Housing Service Loan Programs - see Section 2.B..
Advantages: Federal grants provide State and local governments with the means of meeting many
national goals. They may provide funds otherwise unavailable to State or local programs, 1hus enhancing
equity, environmental incentives, and financial leveraging considerations. \
Limitations: Funds must be targeted to specific statutory goals. Brownfields activities must compete for
limited funds and follow federal rules, terms and conditions. Grants may be very specific, limiting State and
local flexibility. .'
i
/
Reference for Further Information: Catalog of Federal Domestic Assistance. Its World Wide Web
site is at http://aspe.os.dhhs.gov/cfda/index.htm Requests for magnetic tapes, diskettes, or CD-ROM
should go to the Federal Domestic Assistance Catalogue Staff (MVS), General Services Administration,
300 7lh St., SW, Washington, DC 20407, Telephone: 202-708-5126.
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INDUSTRIAL DEVELOPMENT FUNDS
Description: Industrial Development Funds are special funds established by State and local governments
for the purpose of improving real estate properties in order to make them suitable for industrial
development. These funds are economic development tools that governments use to attract or retain
industry. Industrial Development Funds may be structured as direct pass-through funds or as special
purpose revolving funds. They draw funding through a variety of mechanisms including special property
and other taxes, industrial development bonds, unappropriated surpluses in Ihe controlling government's
budget, and the proceeds fromlhe sale of real estate and other property.
Actual Use: Many States, cities, towns, and counties have laws establishing Industrial DevelopmentFunds
or related economic development funds. These funds may be operated by established government
economic development agencies or they may fall under the jurisdiction of special-purpose authorities or
corporations. One example of this latter form are quasi-governmental, non-profits corporations that answer
to the controlling government through an appointed board.
Potential Use: Industrial Development Funds and related economic development funds are ideally suited
to working with brownfields properties. They may already have experience in assessing, cleaning up, and
redeveloping brownfields properties, or they may just need to expand their existing expertise acquired in
improving less-contaminated properties. These funds could either handle brownfields properties as part
of their overall real estate portfolio, or they could be reconstituted as brownfields development funds
handling only brownfields properties.
Advantage: These funds are well-established and familiar economic development tools. Their purpose
and expertise are closely tied to many of the same types of activities and goals that are necessary in
successful brownfields redevelopment.
Limitation: The addition of brownfields properties may degrade an Industrial Development Fund's real
estate portfolio. Such funds may not be economically viable if they handle only brownfields properties.
Legislation may be needed to establish an Industrial Development Fund and/or the sources of financial
capital required to operate it.
Reference for Further Information: Baker & Daniels document, Local Government Funding
Sources, Seventh Edition, July 1995, Baker & Daniels, 300 North Meridian Street, Suite 2700,
Indianapolis, IN 46204, Telephone: 317-237-0300. This book describes various funding sources for local
governments, focusing quite naturally on Indiana
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LAND RECLAMATION BANKS
Description: Land reclamation banks are publicly funded or capitalized trust funds that actively acquire,
manage, assess, cleanup, and develop properties, including brownfields, on behalf of a State or local
government These banks may be financed in wide variety of ways, including tax-increment financing, land
transfer taxes, land registration fees, and property sales and leases. Land reclamation banks may take title
to properties via tax foreclosure, eminent domain, or purchase. Once properties are cleaned up and
developed, Ihe bank sells or leases Ihem to generate income for future development projects.
Actual Use: The Minneapolis LightlndustryLandAcquisitionProgramis an exampleofalandreclamation
bank. The program on behalf of the City of Minneapolis spends about $5 million per year to acquire,
assess, cleanup, and redevelop potentially contaminated industrial sites. Funds for the program are
generated by tax-increment financing plan and used for both site purchase and cleanup. The City assumes
all liability for cleanup and resells the land to private purchasers following completion of redevelopment
Potential Use: Land reclamation banks could be used in cities and communities across the country able
and willing to fund or capitalize their start up costs. They could prove especially valuable in cleaning up and
redeveloping properties when used in combination with other financing concepts such as EZ/EC programs.
They could be specifically structured as brownfields reclamation banks to focus and direct local efforts
toward brownfields cleanup and redevelopment.
Advantages: Land reclamation banks combine planning, financing, management, cleanup, and
redevelopment functions in a single organization allowing local efforts to be focused. Land reclamation
banks may elect to assume environmental and financial liability risks that the private sector is unwilling to
bear.
Limitations: Legislation may be necessary to establish a land reclamation bank. Considerable
funding/capitalization may be necessary for a bank's startup and operational costs. There may be
institutional pressure against consolidating many functions and authorities in a single agency or entity. If not
run efficiently and successfully, they may be a resource drain on the public treasury.
Reference for Further Information: U.S. EPA Environmental Financial Advisory Board (EFAB)
report, Strategies for Financing Brownfields Redevelopment, March. 1996, U.S. EPA, 401 M Street,
SW, Washington, DC 20460, Mail Code: 2731R, Fax: 202-260-0710, Contact: Tim McProuty at
mcprouty.timothy@epa.gov.
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LAND RECYCLING COMPANIES
Description: Land Recycling Companies are 501(c)(3) non-profit organizations that seek to provide an
innovative and energetic response to the problems of potentially contaminated brownfields properties that
affect communities across the country. These organizations identify brownfields properties, serve as
information clearinghouses, seek to bring together members of the communities, government agencies,
financial institutions, and Ihe other private parties necessary to make brownfields redevelopment work.
Land Recycling Companies may also help finance brownfields assessment and cleanup activities.
Actual Use: Land Recycling Companies have been formed and begun work in a number of States. For
example, the Pennsylvania-based Phoenix Land recycling Company focuses on reducing brownfields
uncertainties by using its own resources to conduct assessments and develop cleanup plans. Phoenix was
founded by Clean Sites, Inc., a respected, national environmental organization, with funding support from
the Vira I. Heinz and Howard Heinz Endowments, as well as other philanthropic organizations. The
California Center for Land Recycling provides a somewhat different model for this tool. The California
Center focuses on identifying brownfields development opportunities and works to assemble the public and
private partners needed to carry out successful projects. It will also serve as an educational partner by
documenting and publicizing the lessons learned during these projects. The California Center for Land
Recycling is run by the Trust for Public Land and was begun with a $2 million grant from the James Irving
Foundation
Advantages: These types of companies can bring innovative and flexible approaches to brownfields
assessment, cleanup, and redevelopment. They offer the opportunity to leverage not only their own
environmental expertise and financial resources, but also the public and private resources that they may
attract to specific brownfields projects.
Limitations: Land Recycling Companies may be limited by their size to involvement in a small number of
pilot-type brownfields projects. State legislation and time may be needed to permit Land recycling
Companies to effectively participate in brownfields redevelopment
Reference for Further Information: The Trust For Public Land, 116 New Montgomery Street, Fourth
Floor, San Francisco, CA 84105, Telephone: 415-495-4014, Fax: 415-495-4103, World Wide Web
home page — http://www.rpLorg/tpl/.
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PROPERTY PARCELIZATION
Description: The "parcelization" of real property that includes a hazardous waste site is a potential solution
to an often significant financial problem for Ihe property owner. Tlie remediation of environmentally
distressed real properties can be financially facilitated by delisting and selling clean portions of toe
properties to obtain the financing necessary to remediate the remaining environmentally impacted portions
of the properties. Cooperation from the appropriate regulatory agencies is essential and some portions of
the clean properties probably will have to be devoted to buffer zones, thereby reducing the market value
of the properties (see Section 9., Brownfields Cleanup Tax Deduction).
Actual Use: Parcelization is a relatively little utilized financing technique for a variety of reasons, including
the practical requirement that the real property in question must be of an appropriate size and configuration
lhat permits its division into two or rhore economically and legally viable parcels. However, interest in the
possibilities of using parcelization with regards to brownfields clean-up' and redevelopment has been
increasing.
Potential Use: This real estate/financing technique could be applied to any environmentally distressed
property situation in which the original parcel is large enough to be divided so that there is a marketable,
clean portion which can be sold or leased to help pay for cleaning up the remaining contaminated portion,
and an acceptable buffer zone.
Advantages: When parcelization works, the approach solves a major financial problem which otherwise
could keep property tied up for a protracted clean-up period and impose a substantial cash flow burden,
even in situations where only part of the property is contaminated.
Limitations: The parcelization approach can work only for properties that contain significant portions
which are environmentally clean. Local zoning and subdivision ordinances may prevent the division of
parcels and/or current property values may be too low to make parcelization a worthwhile alternative.
Reference for Further Information: See "Financing Remediation by Delisting and Selling Clean Portions
of Affected Property", Nestor & Adamowski, Remediation, Summer 1995, John Wiley & Sons, 605 3rd
Ave., New York, NY 10158-0012, Telephone: 800-825-7750.
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QUALIFIED EMPOWERMENT ZONE FACILITY BONDS
Description: Private activity bonds are bonds issued by State or local governments for public purposes.
To qualify for tax-exempt status, at least 90 percent of bond proceeds must be used by the State or local
government, and no more than 10 percent of the debt service on the bond may be derived from, or secured
by, a trade or business. Each State may only issue private activity bonds in amounts whose cumulative
value in any year does not exceed $50 per capita or $150 million (Ihe volume cap), whichever is greater.
In creating the federal Empowerment Zone/Enterprise Community (EZ/EC) Program, Ihe 1993 Budget
Reconciliation Act also created a new. category of tax-exempt private activity bonds for use in the
designated EZs and ECs, "Qualified EZ Facility Bonds." At least 95 percent of the net proceeds of a
Qualified EZ Facility Bond must go to finance property or land in the EZ or EC used by a qualified business
in Ihe EZs. The value of such bonds per qualified business may not exceed $3 million for each EZ/ or EC.
Also, total bond financing for each principal user may not exceed $20 million for all EZs and ECs.
Qualified EZ Facility Bonds are subject to State volume caps.
Actual Use: Information on the use of these Qualified EZ Facility Bonds in Ihe eight previously existing
urban empowerment zones is not clear. We are checking with the EZs/ECs themselves to update this
information and plan to include it in the write-up of this tool on Ihe Internet version of toe Guidebook as
soon as possible.
Potential Use: The federal government could (and plans to do so) name additional communities as EZs
and/or ECs and extend eligibility for these bonds to qualified businesses in those locations. The bonds
could be used to assist in the purchase, rehabilitation, and redevelopment of brownfields properties and
the structures and facilities located on them Federal law could be changed so that EZ facility bonds do
not count against State volume caps, or count against the caps at a reduced rate.
Advantages: Used in combination with other incentives available in EZs and ECs, Ihese facility bonds
provide a potentially powerful economic inducement to invest in these areas.
Limitations: EZ facility bonds by definition can only be used in federally designated EZs and ECs, and
only by qualified businesses in those locations.
Reference for Further Information: Omnibus Budget and Reconciliation Act of 1993, Public Law 103-
66. US. Department of Housing and Urban Development (HUD), Office of Community Planning and
Development, 451 7th Street, SW, Washington, DC 20203, Telephone: 202-401-1020. U.S. EPA,
Environmental Financial Advisory Board (EFAJB) report: Financing Brownfields Redevelopment-
Linkages to the Empowerment Zone/Enterprise Community Program, U.S. EPA, 401 M Street, SW,
Washington, DC 20460. Mail Code: 2731R
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REAL ESTATE INVESTMENT TRUSTS
Description: A real estate investment trust (REIT) is a privately or publicly-traded investment corporation
(whose shareholders may include either or both retail and institutional investors) that specializes in buying,
improving, managing and selling real estate properties. A REIT is essentially a mutual fund that specializes
in pooled investments in real estate. Most REITs have a particular real estate investment focus such as
residential housing, industrial properties, general commercial properties, shopping centers, etc.
Actual Use: Hundreds of REITs exist across the country providing investment vehicles for billions of
dollars in real estate properties located in thousands of communities. They are a major force in the
development of apartment housing and shopping centers. REITs as an industry have been in existence for
more than thirty years and they are the vehicle for billions of dollars in real estate investments each year
($6.5 billion in 1992).
Potential Use: REITs focusing on industrial and commercial real estate could begin to include select
brownfields properties in their portfolios. New REITs could be established that focus on buying, assessing,
cleaning up, redeveloping, and/or selling brownfields properties. They could also be structured to focus
investments on real estate properties located in empowerment zones and enterprise communities.
Advantages: REITs are fully integrated companies with professional management and staff that put real
estate planing, acquisition, development, management, and sales under one roof. With their investment
focus, REITs can assemble a diverse portfolio of real estate properties to spread and reduce financial risks.
REIT dividend earnings can be tax-exempt for tax-exempt investors such as pension funds.
Limitations: REITs can be complex to develop and establish and they require skilled management and
staff to operate. They traditionally promise fairly high rates of financial returns to participating investors
which may be difficult to manage with brownfields properties in their portfolio.
Reference for Further Information: U.S. EPA Region 5 Great Lakes Environmental Finance Center
(GLEFC), The Urban Center at Cleveland State University, Economic Development Program, UB- 215,
Cleveland, Ohio 44115, Telephone: 216-687-6947, Fax: 216-687-9227, World Wide Web site;
http://www.csuohio.edu/glefc/ Other good sources include National Real Estate Investor and Urban
Land magazines, which frequently have articles on REITs.
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STATE VOLUNTARY CLEANUP PROGRAMS
Description: State Voluntary Cleanup Programs are structured to address the environmental and financing
problems associated with brownfields and other contaminated properties. These programs seek to
encourage the cleanup of such sites in a timely manner by eliminating many of the procedural and economic
barriers to cleanup and reuse. They provide a variety of incentives for private companies and developers
to voluntarily clean up sites. These programs set clear environmental standards and provide protection from
future environmental liability. They include oversight, review, and approval mechanisms to ensure that
cleanup standards are met While every program is unique, many contain most or all of the following
elements: consolidated permits, land use-based cleanup standards, flexible and clear cleanup procedures,
liability release mechanisms, professional certifications, proportional liability provisions, tax incentives, and
voluntary agreements.
Actual Use: Since Minnesota set up the first State Voluntary Cleanup Program in April 1988, more than
thirty States nationwide have established similar programs. Moreover, the pace at which these programs
are being established is accelerating, hi the last two years alone, twelve States have set up Voluntary
Cleanup Programs. The Environmental Protection Agency (EPA) has developed interim policies for
denning its relations with these programs and offers official recognition via memoranda of agreement
(MOAs). To date, EPA has signed MOAs with ten States and is negotiating MO As with eight others.
Potential Use: All fifty States, Puerto Rico, Territories, and Indian Tribes could develop Voluntary
Cleanup Programs offering some or all of the features described above to help cleanup and redevelop
brownfields and other contaminated properties, hi addition, these entities could define their programs'
relationships with USEPA through MOAs.
Advantages: These programs offer participants the possibility of considerable savings in terms of time and
money. They offer at least partial (sometimes considerable) protection from environmental liability. They
make contaminated site cleanup easier and more understandable by standardizing cleanup procedures and
streamlining State programs. Lenders may feel more comfortable (may lend money to finance cleanup) with
properties processed through a State Voluntary Cleanup Program.
Limitations: EPA does not have to recognize State Voluntary Cleanup Programs and/or honor any
liability protection they provide. Some cleanups cost more under these programs than if property owners
do it themselves. Once a properly owner enters a program, they may not be able to opt out
Reference for Further Information: U.S. EPA, Office of Solid Waste and Emergency Response, 401
M Street, SW, Washington, DC 20460, Telephone: 202-260-4610, Fax: 202-260-3527. U.S. EPA,
Office Enforcement and Compliance Assurance, Ariel Rios Building, 1200 Pennsylvania Avenue, NW,
Washington, DC 20044, Telephone: 202-564-2440.
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TAX ABATEMENTS
Description: A tax abatement is a temporary moratorium on charging the usual tax rate on a new
investment It may take the form of a full-or partial exemption from taxes such as tangible personal property
and/or real estate. The exemption will only be in effect for a specific period of time such as five or ten
years. The tax abatement granted may be restricted to new development in special designated areas such
as empowerment zone/enterprise community, or it may be targeted on a case-by-case basis to particularly
desirable individual development. Tax abatements are individually tailored regarding time and scope to
allow the State or local government to calculate the exact cost of the tax change, and thus, the exact tax
benefit offered as well.
Actual Use: States and communities across the country use various forms of tax abatements to
encourage and support economic development. For example, Ohio, New York, and Minneapolis,
Minnesota, are currently using tax abatements to attract economic development to specific locations,
including brownfields properties.
Potential Use: Many additional communities nationwide could direct the use of this type of tax incentive
toward brownfields redevelopment and realize substantial environmental and economic benefits. If more
States and communities nationwide used this financial tool in this way, it could become a major force in
spurring increased brownfields cleanup and redevelopment.
Advantages: Tax abatements can make otherwise uneconomical projects attractive to property owners,
developers, and financial supporters. These abatements can often provide a substantial incentive for all
parties to participate in particular projects. If the new development is properly structured and successful,
the community tax base will grow at a rate, and to a size, that more than offsets the loss of taxes due to the
abatement
Limitations: Tax abatements detract from the resource base of States and communities. If given when
investment would have occurred anyway, they represent the waste of an incentive and an unnecessary loss
of resources. The granting of tax abatements only to select projects may raise concerns about equity.
Reference for Further Information: U.S. EPA Environmental Financial Advisory Board (EFAB)
report, Financing Strategies for Brownfields Redevelopment, March 1996, U.S. EPA, 401 M Street,
SW, Washington^ DC 20460, Mail Code: 2731, Contact: Timothy McProuty at mcprouty.timothy
@epa.gov. See also, Berger, Robert S., Campbell, Patricia, C., Crolle HI, James, A, Marsh, Wendy A.,
et al., Recycling Industrial Sites in Erie County: Meeting the Challenge of Brownfleld
Redevelopment, Buffalo Environmental Law Journal, Volume 3,1995.
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TAX INCENTIVES
Description: There are three basic types of tax incentives offered by federal, State, and local governments
-r exemptions, credits, and deductions. Exemptions provide a release from taxation. Credits provide
dollar-for-dollar reductions in taxes owed. Deductions allow certain costs or expenses to be subtracted
from income over one (exspensing) or more years (depreciation). Governments offer incentives to
encourage behavior deemed desirable for economic, social, or other reasons. Incentives help to level the
economic playing field between brownfields and greenfields.
Actual Use: A number of States use tax incentives to promote brownfields redevelopment. The
Massachusetts Economic Development Incentive Program offers tax benefits to businesses in blighted
areas. Benefits provided to eligible projects (including brownfields requiring cleanup) include a 5% State
Investment Tax Credit, a 10% Abandoned Building Tax, priority for State capital funding and special
municipal tax assessment Ohio's Brownfield Site Clean-up Tax Credit Program provides franchise or
income tax credits for the voluntary cleanup of contaminated sites. The basic tax credit is 10% of eligible
costs or $500,000, whichever is less, hi designated areas, the credit is 15% of eligible costs or $750,000,
whichever is less. The credits are only available to companies who have participated in the State Voluntary
Action Program and received a "Covenant Not to Sue."
Potential Use: There are a number of other tax incentives being considered by the States and the federal
government to promote brownfields redevelopment (see Section 9., Brownfields Cleanup Tax
Deduction which permits non-responsible parties, including owners and prospective purchasers, to fully
expense cleanup costs in the year incurred). This particular proposal provides a potential $2 billion in
incentives over seven years and be targeted to existing and proposed empowerment zones/enterprise
communities, Environmental Protection Agency (EPA) brownfields pilots, and areas with high poverty
rates. Another proposed incentive is a tax credit equal to 75 % of the costs of cleanups approved by
federal or State agencies. Finally., some have proposed making brownfields cleanup activities eligible for
tax-exempt industrial bond financing.
Advantages: Tax incentives make it less costly for businesses to undertake brownfields redevelopment
activities. They may be combined with other incentives such as liability releases, grants/loans, and
insurance to leverage significant private investment They may also motivate investment by signaling to
businesses that the development is desired and will get special attention
Limitations: Tax incentives represent a direct loss to the resource base of governments. They may be
so costly that they can be offered to only a limited number of special areas or projects. If tax incentives
are given when not absolutely needed, they can be a significant waste of resources.
Reference for Further Information: Northeast-Midwest Institute 218 D Street, SE, Washington, DC
20003, Telephone: 202-544-5200, Fax: 202-544-0043.
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TAX INCREMENT FINANCING
Description: Tax increment financing (TIP) provides for Ihe temporaiy allocation to carefully defined
redevelopment districts the increased tax proceeds in an allocation area generated by increases in assessed
property values. TIP utilizes tfie increased tax revenues stimulated by redevelopment to pay for the capital
improvements required to induce the development. In a basic TIP, property assessments are frozen at a
pre-development level in the specified area. Bonds are Ihen issued to finance a portion of the
redevelopment. As property values and assessments in the area increase, the TIP authority or the city use
the increment in tax revenues to meet the debt service on those bonds.
Actual Use: Tax increment financing has been used by local governments nationwide for years for a wide
variety of economic development projects. The technique was originally used to raise the local share or
match required for urban renewal proj ects. It is most often used for economic development projects tiiat
provide specific, measurable benefits to a select, well defined group of taxpayers. TIP laws are on the
books in more than thirty States. The City of Cleveland, Ohio, has used this type of financing in a
specifically defined geographic area containing a number of contaminated properties.
Potential Use: Tax increment financing could be used across the nation as one more incentive offered
by cities to encourage and supportthe cleanup and redevelopment of contaminated brownfields properties.
TIP also might be used by State and local governments to direct development away from environmentally
sensitive areas (see the closely related tool in Section 8., Tax Increment Financing - CBEP).
Advantages: Tax increment financing makes development self-financed. TIP is very flexible and very
focused. Local control is retained and no debt limitation usually applies. Redevelopment risks are shifted
from taxpayers to the bondholders.
Limitations: TIP bonds pose a greater risk to investors and, thus, bear higher interest rates than general
obligation bonds. TIFs are complex and require considerable financial, development, engineering, and
other expertise.
Reference for Further Information: Baker & Daniels documentyLoco/ Government Funding Sources,
Seventh Edition, July 1995, Baker & Daniels, 300 North Meridian Street,; Suite 2700, Indianapolis, IN
46204, Telephone; 317-237-0300. This booklet describes numerous local government funding sources,
focusing on Indiana. See also, U.S. EPA Environmental Financial Advisory Board (EFAB) report,
Financing Strategies for Brownfields Redevelopment, March 1996, U.S. EPA, 401 M Street, SW,
Washington, DC 20460, Mail Code: 2731R, Contact: Timothy McProuty at
mcprouty.timothy@epa.gov.
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TRANSFERABLE DEVELOPMENT RIGHTS
Description: In traditional transferable development rights (TDK) programs, rural property owners are
allocated a specified number of TDRs in exchange for agreeing not to develop, or to limit development on
their land. These mostly rural property owners are permitted to sell these TDRs to real estate developers,
who are then permitted to use them to exceed zoning requirements on properties they own in other more
developed areas.
Actual Use: TDRs have been used by local governments to preserve land for agricultural uses, as forests,
or as nature preserves. Fauquier County, Virginia, and Montgomery County, Maryland, have long standing
TDR programs whose purpose are to preserve land but not to generate revenues. Since the landowners
receive all funds related to the purchase of development rights, existing TDR programs are either revenue-
neutral or are operated at-costto local governments.
Potential Use: If local governments took a percentage of each TDR transaction, enough funds might be
raised to use for land purchases and development. TDR programs might be adapted to encourage
brownfields redevelopment, thus protecting greenfields from development. Under a brownfields TDR
system, developers that agree to redevelop brownfields could be given additional zoning credits that let
themexceed density or height requirements, or provide some other flexibility. These credits could be used
at the brownfields site or on other properties owned by die developer.
TDRs could also be used within the context of a community-based environmental protection program to
distribute and direct growth in a designated geographical area such as a watershed. Development could
might be precluded on strips of land adjoining main waterways and tributaries.
Advantages: Properly structured TDR programs would allow local governments to better control and
direct growth. They would enable landowners whose properties will not be developed to receive full value
for their land, and permit development to be redirected to already-developed areas.
Limitations: As currently structured, TDR programs are not a revenue-generating mechanism. Even with
ins incentive, landowners and developers may not want governments dictating what they do with properties
that they own and want to sell and/or develop.
Reference for Further Information: Financing Alternatives for Maryland's Tributary Strategies:
Innovative Financing Ideas to Restore the Chesapeake Bay, Report of the Governor's Blue Ribbon
Panel, December 1994; The Growth Dilemma: The Chesapeake in the 21st Century (Conference
Proceedings), Maryland November 1989. Contains good description of TDR programs and rules of thumb
for implementing successful TDR programs.
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Description:
OTHER
Actual Use:
Potential Use:
Advantages:
Limitations:
Reference for Further Information:
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COMPARISON MATRIX FOR FINANCING BROWNFIELDS REDEVELOPMENT
Criteria/
Brownfields Tool
Brownfields Clean-
up Tax Deduction
*Clean Land Fund
(Revolving Fund)
"Community
Development
Financial
Institutions
*Empoweraient
Zones/Enterprise
Communities
^Environmental
Insurance
"Environmental
Liability Releases/
Agreements
EPA: Brownfields
Assessment
Demonstration
Projects
EPA: Brownfields
Workforce
Development
EPA: SRF
Brownfields Loans
(Clean Water)
Actual
Use
Low
Low
Mod.
High
High
High
Mod.
Low
Low
Revenue
Size
Mod.
Mod.
Mod.
High
High
High
Low-
Mod.
Low
Mod-
High
Admini-
srative
Ease
High
Mod.
Mod.
Mod.
Mod.
Mod.
Low
Low
High
Equity
High
Mod-
High
High
Mod.
Low
Mod.
Low
Low
Mod.
Financial
Lever-
aging
Mod.
High
High
High
Mod-
High
Mod-
High
Mod.-
High
High
High
Environ-
mental
Benefits
High
High
Hgh
Mod.
Mod-
High
Mod-
High
High
High
High
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'April 1999
COMPARISON MATRIX continued
Criteria/
Brownfields Tool
EPA: Superfund
Trust Fund
^Environmental
Risk Management
(Real Estate)
^Federal Assistance
Programs
Industrial
Development Funds
Land Reclamation
Banks
Land Recycling
Companies
Property
Parcelization
'Qualified >
Empowerment Zone
Facility Bonds
Real Estate
Investment Trusts
*State Voluntary
Qeanup Programs
*Tax Abatements
Actual
Use
Mod.
High
Mod.
Mod.
Low
Low
Low
Low
Low
High
Mod.
Revenue
Size
Low-
Mod.
High
High
Mod.
Low
Low
Low
Mod.
Mod.
Mod.-
High
Mod.
Admini-
strative
Ease
Low-
Mod.
Mod.
Mod.
Mod.
Mod.
Mod.
Mod.
High
Low-
Mod.
High
High x
Equity
Low-
Mod.
Low-
Mod.
Mod.
Low
Mod.
High
Mod.
Mod.
Mod.
Mod.
Low-
Mod.
Financial
Leverag-
ing
High
High
High
Mod.
Mod.
High
High
High
High
Mod.
Mod.
Environ-
mental
Benefits
High
High
High
High
High
High
Mod.
Mod.
Mod.
High
High
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COMPARISON MATRIX continued
Criteria/
Brownfields Tool
*Tax Incentives
Tax Increment
Financing
Transferable
Development
Rights
Actual
Use
High
Low
Low
Revenue
Size
High
Mod.
Low
Admini-
strative
Ease
Mod.
Low-
Mod.
Mod.
Equity
High
Mod.
Mod.
Financial
Leverag-
ing
High
Mod.
Low
Environ-
mental
Benefits
High
Mod.
Low-
Mod.
High - High use (over 25 States, many localities); other criteria score high (e.g., specific, easy to use,
available, flexible, highly leveraged and almost always results in actual redevelopment)
Mod. - Moderate use (10-25 States, some localities); criteria score in medium range, may not always
result in project completion
Low - Low or rare use thus far; one or more major implementation problems exist
*Star indicates best-rated mechanisms
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10. TOOLS TO ACCESS
FINANCING
FOR
SMALL BUSINESSES
AND THE
ENVIRONMENTAL GOODS AND
SERVICES INDUSTRY
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10. TOOLS TO ACCESS FINANCING FOR SMALL BUSINESSES AND THE
ENVIRONMENTAL GOODS AND SERVICES INDUSTRY
INTRODUCTION
The United States is the largest producer and consumer of environmental goods and services in the world.
The U.S. Government defines the environmental goods and service industry (EGSI) as those environmental
technology companies selling specialized goods and services used for pollution prevention, abatement and
remediation. For example, EGSI businesses sell goods to water and wastewater treatment facilities such
as in pumps, instruments, and treatment chemicals, and services such as engineering construction and
environmental monitoring and testing. EGSI companies also produce "green" products, or environmentally
friendly alternatives to traditional products such as chlorine, or new production processes such as sludge
dewatering or handling facilities. For solid and hazardous waste, EGSI firms sell recycled paper products,
and biotechnology products or processes for waste reduction. For air pollution control, they sell product
alternatives to dry cleaning solvents or metal finishing, and indoor air pollution reduction equipment Energy
reduction and alternative products for agricultural production also are included in the definition of EGSI
technology.
A small business is often described as a business having under 50 employees. In this country, small
businesses account for over 90 percent of all businesses but produce a clear minority of goods and
services. However, in the past five years, they accounted for most of the growth in the economy.
While large and medium-sized EGSI companies are prospering in this country, small environmental goods
and services businesses still present financing challenges. In general, small businesses traditionally are
difficult and costly to capitalize adequately because of weak credit considerations, inadequate experience,
poor economies of scale, the lack of established markets and other factors, all of which increase the cost
of capital. Small EGSI businesses remain relatively small in number, particularly for "green" products
compared to specialized services, and small EGSI businesses must compete against much larger engineering
and technology companies with market niches, in-house research and development, and years of operating
experience, including overseas.
Whether the small EGSI business sector remains fledgling because of a scarcity of capital or inability to
access financing or other services is debatable. Some traditional lending institutions such as commercial
banks report that even when they offer special programs to lower lending costs or waive other credit
requirements to assist small EGSI businesses, the supply of financing appears to exceed the demand. In
contrast, others argue that financial and environmental risk factors inhibit the flow of capital to small EGSI
businesses. Also included in the definition of tie problems of small businesses is their access to EGSI
technology and services. For example, a small dry cleaning facility may find it difficult to learn about new
wet cleaning processes, and/or may find acquisition of such new technology unaffordable,
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This Section of the Guidebook has been expanded to a considerable degree in the 1999 revision. The
tools presented in the Section continue to include both equity mechanisms such as venture capital, grants
and private placements, and debt mechanisms such as loans. A number of non-capital mechanisms/tools
such as the use of business plans and networking devices also continue to be presented. However, for
the first time, government programs administered by the U.S. Department of Commerce's Small Business
Administration and other federal agencies are covered in some depth.
Readers also should note that in addition to the tools presented in this Section, a considerable number of
tools presented in other Sections may prove useful to small businesses and the EGSI. For example, many
of the types of information exchange tools described in Section 5: Tools for Delivering Financial
Outreach are very applicable to these businesses. In addition, some of the tools (and/or the concepts they
embody) presented inSection 2: Tools for Acquiring Capital, Section3: Tools for Enhancing Credit,
and Section 6: Tools for Lowering Costs may prove helpful to small businesses and the EGSI.
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10.A. EQUITY CAPITAL
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10. A. EQUITY CAPITAL
Description: Equity capital is investment in a business made by external sources, and generally entails
some ownership and/or partnership arrangement Equity contributions also may be made via special grants
or credit enhancements, or in-kind contributions. As contrasted with the financial interest created by
borrowing which creates a debt by the business to the lender, equity investments may not result in added
financial liability reflected on a firm's balance sheet. Most start-up small EGSI businesses require some
equity investment, since 100% debt financing is too risky for most lenders. However, equity investments
usually are combined with debt tools in funding packages.
Equity investment is a highly creative, entrepreneurial activity in this country, and in periods of economic
growthmay account for ahigh proportion of business growth. Equity investments in small EGSI businesses
can come from a variety of sources, including individuals, other companies such as venture capital
companies or parent companies, governments, and via the stock exchanges. Non-monetary equity
contributions can be made with contributions of land, buildings and equipment, goods and personnel, and
the use of a larger company's name, technology, business plan or markets (including franchising and
strategic alliances between businesses). A number of management tools such as investment forums and
networks, and the use of business plans for marketing purposes are presented.
Advantages: The greater the equity investment in a small business, tie less debt that must be incurred.
Equity investments can be more flexible than debt structuring, as terms are negotiated on a case-by-case
basis. Such investments may leverage additional monies by opening the doors to more traditional credit
sources. Small business managers sometimes can benefit greatly from the expertise and personal
commitment of equity investors. These investors may allow small businesses to survive short-term solvency
problems, unlike debt instruments which must be regularly repaid.
Disadvantages: Equity investors will demand some return on their money, ranging from normal interest,
dividends, and profit distributions to a large ownership stake, perhaps even a controlling position, in a
company. They may demand repayment in a relatively short time period, for example, from three to five
years. Arranging equity investment is difficult and time consuming from the point of view of the small
business, particularly since investment terms vary considerably, and outside advice such as attorney fees
can be very expensive. Different States have different laws pertaining to partnerships. Many investors,
particularly large investors, avoid investing in start-up companies or in high risk situations. Small businesses
may lose their sense of ownership or identity if outside equity contributors assume controlling positions or
become difficult to handle: The overall economic climate substantially influences the amount and kind of
equity investment.
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Summary: Hie equity tools presented here entail considerable initiative on the part of the small or EGSI
business, but are widely available. With the exception of government grants, equity investments also are
highly expandable and frequently highly leveraged, and result in the kind of entrepreneurial innovation
representing the best of the American enterprise.
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LIST OF EQUITY TOOLS
(In Alphabetical Order)
*1. Agriculture: Alternative Agricultural Research and Commercialization Corporation
*2. Angels (Personal Investors)
*3. Business Plans
*4. Commerce: Small Business Administration (SBA) - Angel Capital Electronic Network
5. Commerce: SBA - Small Business Innovation Research Program
*6. Commerce: SBA - Small Business Investment Companies
7. Environmental Capital Network
8. Environmental Opportunity Funding Corporation
*9. Franchising
10. Investment Forums
*11. Investment Networks
*12. Joint Ventures
*13. Private Placements
14. Public Offerings
*15. Strategic Alliances
*16. Venture Capital
* Stars indicate most highly rated mechanisms as described in the Comparison Matrix at the end of the
narratives. See Introduction to 1he Guidebook for a description of the criteria used. Ratings of "High",
"Moderate", and "Low" are for comparison purposes only, as some ratings are necessarily subjective and
data are incomplete.
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DEPARTMENT OF AGRICULTURE
ALTERNATIVE AGRICULTURAL RESEARCH AND
COMMERCIALIZATION CORPORATION
Description: The Alternative Agricultural Research and Commercialization (AARC) Corporation is a
federal-govemment-owned corporation which reports to the Secretary of Agriculture and is authorized to
receive annual appropriations from Congress. It is a venture capital firm that makes investments in
companies to help commercialize environmentally friendly biobased industrial products (non-food and non-
feed) made from agricultural and forestry materials and animal by-products. The corporation's investments
typically include an equity position and/or a royalty on sales. Preference is given to funding pre-
commercializalion activities in companies that already have marketable products. Any private individual
or company can apply for an investment Applicant's must demonstrate management, technical, marketing,
and financial expertise and are expected to provide at least one-to-one match.
Actual Use: Investments range from $100,000 to $ 1 million and the average initial investment in a
company has been $300,000. In its first five years the Corporation invested $33 million in 70 projects in
33 states, leveraging $105 million in private funds. Innovations brought to market include kenaf fiber
erosion mats, soy-based cleaning products, and biodegradable, seed-based automotive engine and
transmission lubricants.
Potential Use: AARC Corporation investments can enable a firm to bring to market innovative,
environmentally friendly products which other venture capitalists night not be willing to fund.
Advantages: The 1996 Farm Bill established a federal procurement preference for products produced
in partnership with the Corporation. This gives companies receiving AARC Corporation investments and
advantage in marketing their products to the federal government
Limitations: This is not a grant program. It is a source of venture capital investment for which the
Corporation expects to receive a premium in return for the risk incurred. The AARC Corporations is a
relatively small player in Ihe $35 billion organized venture capital market
References for Further Information: Contact Alternative Agricultural Research and Commercialization
Corporation, U.S. Department of Agriculture, 0156 Soulh Building, 1400 Independence Avenue, SW,
STOP 0401, Washington, D.C. 20250-0401, Telephone: 202- 690-1633,
Fax: 202-690-1655, Internet: www.usda.gov/aarc/.
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ANGELS
(Personal Investors)
Description: An angel is an individual who as a private investor buys into a company usually in its early
stages. Many of these adventurous investors are highly paid professionals such as doctors, dentists,
lawyers, accountants, etc. Other types of angel investors can include, middle managers, entrepreneurs,
associates, friends, and even relatives. While angels include wealthy, sophisticated millionaire investors,
the average income of an angel is around $100,000. Angels are distinguished by the fact that they are
investing only tiieir own money, not other people's money. The average angel investment is less than
$50,000.
Actual Use: Angels are the largest source of risk investment capital in the United States. Reliable
estimates place the number of investor angels in the country at nearly one million strong. These angels invest
over $27 billion in business ventures each year with about half of that amount going to fund early-stage
businesses. Moreover, 90 per cent of this informal venture capital goes to financing of less than $1 million
and 82 per cent to financing under $500,000. Angel investors review more than two million proposals for
capital ayear and fund about 20 per cent Thus, they provide financing to 400,000 small businesses ayear.
Potential Use: For small businesses and environmental firms, investor angels represent the greatest single
source of capital. They are ideal for start-up companies who are too new to qualify for bank loans,
expanding companies with growth potential who are too small to attract traditional venture capital, and
companies needing only a small amount of money.
Advantages: More than 85 per cent of angel investors do not seek voting control of the businesses that
they finance. Angels are willing to make small investments. As a group, angels invest 60 per cent of their
money in start-up businesses. They also often invest in other types of risky business deals. Angel investors
are local, numerous, and they are everywhere.
Limitations: It is difficult to raise more than $500,000 from angel investors. Angels are expensive, often
wanting a return on Iheir money ranging from 20 to 40 per cent Alternatively, they may demand 10 to 30
per cent or iriore of the company. Further, angels expect to get Iheir investment back relatively quickly
(four years). Most invest only in companies that are physically located within 50 miles of where they live
or work.
Reference for Further Information: Blechman, Bruce Jan, and Levinson, Jay Conrad, Guerrilla
Financing: Alternative Techniques to Finance Any Business, Houghton Mifflin Company, 2 Park
Street, Boston, Massachusetts 02108, November 1991.
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BUSINESS PLANS
Description: A business plan is a detailed, written description that outlines what Ihe company's activities,
goals, progress to date, plans for growth, and financial projections. The plan is both a strategic and an
operating document It should include a detailed blueprint for action to which the enterprise's management
team has voluntarily committed The business plan is the most important document that a company will
ever produce as a means to obtain financing. Every potential equity investor will want to see a detailed
business plan which informs them as to what management intends to do with its monetary and human
resources. The plan may include information on what Ihe company seeks from investors and what it is
willing to give, what the potential returns are for investors, and who management is and why they are the
right people to run the company.
Actual Use: Business plans are used by almost every firm, large or small, in the private sector, and in
larger non-profit agencies. Their use is expanding to the public sector. Some local government
privatization or contracting-out initiatives resulted from the development of formal or informal business
plans. These documents identified the "business" of the organization as the provision of a high quality
environmental service, and that the responsibility of the operations side of the business was to implement
this in the most effective and cost-efficient manner, which does not in all cases require public employees
to deliver the service. Business plan software also is widely available.
Potential Use: Business plans can be used by any organization as a means to identify and integrate its
operations around its core services or products. Recently, business plans have been suggested as a way
for smaller and medium-size environmental and other utilities to bolster their financial, managerial and
technical capacities to deliver services. Business plans can also be used by governments to spur 1he optimal
in-house provision of environmental and other services.
Advantages: The business plan requires the managers and/or operational staff to identify the "business"
they are engaged in, and to articulate the directions in which they wish to proceed. It encourages managers
and employees to think in a more efficient, cost-effective and strategic manner by placing day-to-day
operational functions in the context of a detailed plan based on carefully defined goals and objectives.
Limitations: Requires the analytic, financial, personal, and time commitments of management and staff
to honestly examine the business (products and/or services provided), develop the detailed business plan,
and then implement it
Reference for Further Information: Brandt, Steven C, Guide for Preparing a Business Plan,
Gainer & Associates, 863 H Street, Suite A, Arcata, California 95521, Telephone: 707-822-4448, Fax:
707-822-4457. A good example of software is BizPlan Builder. JIAN 1996,1975 W. El Camino Real,
Mountain View, CA 94040, http://www.jian.com/.
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DEPARTMENT OF COMMERCE
SMALL BUSINESS ADMINISTRATION
ANGEL CAPITAL ELECTRONIC NETWORK
Description: The Angel Capital Electronic Network (ACE-Net) is a nationwide Internet-based listing
service that provides information to accredited investors on small businesses seeking $250,000 to $5 million
in equity financing. Sponsored by the Small Business Administration's (SBA's) Office of Advocacy, ACE-
Net requires companies seeking capital to submit a completed Small Corporate Offering Registration
(SCOR) Form U-7 and pay an annual $450 subscription fee. Entrepreneurs first must complete and sign
an entrepreneur enrollment form and send it to Hie nearest Network Operator, who will then issue a
password to allow online completion of required forms. Entrepreneurs must be prepared to provide
detailed business plans and financial statements to potential private investors. Investors also must complete
an investor subscription form and mail it to the nearest Network Operator. The system is designed for
companies to use the Accredited Investor Exemption for offerings under Regulation A or Regulation D
(Rule 504). Accredited investors must have a net worth of $1,000,000 orhave an annual income of more
than $200,00.
Actual Use: ACE-Net was announced in October 1996.
Potential Use: Firms in a position to raise funds under Regulation A or Rule 504 might use ACE-Net as
a method for contacting potential investors. ACE-Net is planned to become a private, independent, not-
for-profit organization.
Advantages: ACE-Net offers a formalized method for small, entrepreneurial firms to contact potential
investors. It operates on a'secure server meant to safeguard confidential information from unauthorized
access.
Limitations: Internet access is required. Postings of SCOR forms on ACE-Net are securities offerings
and entrepreneurs should consult witha securities attorney regarding possible requirements to make certain
filings with the SEC prior to listing on ACE-Net. Legal and other costs probably make it impractical for
companies to seek less than $250,000.
Reference for Further Information: Consult a securities law practitioner. Contact ACE-Net on the
Internet at: http://www.sba.gov/advo/acenethmil. Contact the U.S. Department of Commerce, Small
Business Administration, Office of Advocacy, 409 Third Street, SW, Washington, D.C. 20416, Phone:
202-205-652, Fax: 202-205-6928, Internet: www.sbaonline.sba.gov/ADVO.
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DEPARTMENT OF COMMERCE
SBA SMALL BUSINESS INNOVATION RESEARCH PROGRAM
Description: The Small Business Administration (SBA) Small Business Innovation Research (SBIR)
Programis ahighly competitive federal award system It seeks to stimulate technological innovations in the
private sector, strengthen the role of small business in meeting federal research and development needs,
increase private commercialization of innovations derived from federally supported research and
development efforts, and foster participation in technology innovation by women-owned and socially and
economically disadvantaged small business firms. It has three phases, the first two-of which involve
contract or grant funding agreements between participating federal agencies (listed below) and qualified
small businesses. A qualified small businesses is a for-profit firm which, including its affiliates, has no more
than 500 employees, is independently owned and operated, and is at least 51% owned by U.S. citizens
or permanent resident aliens. Phase I funding is up to $100,000 for up to six months, to conduct a
feasibility study to evaluate scientific and technical merit of an idea Phase II funding is up to $750,000 for
up to two years, to expand on the results of, and further pursue development of, Phase I. Phase III relies
on other federal or private funds to support the commercialization of Phase III results. SBA's
Commercialization Matching System helps SBIR awardees locate funding sources needed to bring their
innovations to market.
Actual Use: Technical abstracts of previously funded Phase I and II projects are available from agencies,
including some on Internet sites.
Potential Use: The program could help firms in the environmental goods and services industry.
Advantages: Phase I and II funds are grants. However, commitment of private funds for Phase in
increases the likelihood of Phase II funding.
Limitations: The program is extremely competitive. Some agencies offer less funding than others (e.g.,
USDA offered $65,000 for Phase I in fiscal 1998).
Reference for Further Information: SBA, Office of Technology (for federal-govemment-wide SBIR
program information and tips on proposal preparation), Telephone: 202-205-6450. Federal contacts
include Department of Agriculture, Telephone: 202-401-4002, Fax: 202- 401-6070; Department of
Commerce, Telephone: 301-713-0829; Department of Defense, Telephone: 800-382-4634, Fax: 800-
462-4128; Department of Education, Telephone: 202-219-2004; Department of Energy, Telephone: 301-
903-1414; Department of Health and Human Services, Telephone: 202-206-9385, Fax: 301-206-9722;
Department ofTransportation, Telephone: 617-494-2051; Environmental Protection Agency, Telephone:
800-490-9194, Fax: 202-565-2447; National Science Foundation, Telephone: 703-306-1390, Fax: 703-
306-0298; National Aeronautics and Space Administration, Telephone: 703-281-1745 or 301- 918-
1980.
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DEPARTMENT OF COMMERCE
SBA SMALL BUSINESS INVESTMENT COMPANIES
Description: Small Business Investment Companies (SBICs) are privately organized and privately
managed investoentfirais licensed by tiie Small Business Administration (SBA). Using private capital and
capital borrowed at favorable rates via the federal government, SBICs channel monies to small, fast-
growing companies, both new and established. They provide equity capital, long-term loans, and expert
management assistance to qualifying businesses. As profit-motivated entities, SBICs expect to share in the
success of the small businesses in which they invest There are two types of SBICs, regular SBICs and
Specialized Small Business Investment Companies (SSBICs). SSBICs are targeted to theneeds of socially
or economically disadvantaged entrepreneurs.
Actual Use: SBA requires a minimum private capital investment of $5 million froih an SBIC or SSBIC,
and a $10 million investment if they intend to utilize participating securities. An SBIC or an SSBIC in good
standing may receive leverage equal to 300 percent of its paid in private capital. To obtain leverage,
SBICs issue market rate debentures which are guaranteed by the SBA. There are 271 SBICs nationwide
with $3.5 billion in private funding and $1 billion in federal monies to invest or lend. Some SBICs are
general-purpose in nature, while other focus on specific industries, geographic areas, or types of borrowers.
,. Some industries sponsor SBICs to encourage innovation. SSBICs focus on women, minorities, and other
--- -•*£-, socially or economically disadvantaged groups.
I
Potential Use: An SBIC could be formed forthe express purpose of providing capital to small businesses
in the environmental goods and services industry, and/or to specific sub-segments of that industry. The
SBIC could focus its investment on start-up companies and/or on promoting environmental technology
innovation.
Advantages: SBIC funds can open the door to other more traditional financing such as lines of credit
SSBICs support businesses that cannot qualify for investments from regular SBICs and venture capitalists.
SBICs benefit from government leverage and enjoy certain tax advantages. SBICs specialize in small
business financing and have considerable experience/expertise in that area, SBIC may make investments
or loans in cooperation with other public or private parties.
Limitations: SBIC funds have more requirements and involve government officials. SBICs may have
limited monies to invest and not be able to help in future financings. They are restricted in the kinds of real
estate investments they can make, and may invest no more than one-third of their portfolios in real estate.
SBICs may not invest in businesses whose main activity involves relending or reinvesting.
Reference for Further Information: U.S. Small Business Administration, 409 3rd Street, SW,
Washington, DC 20416, Telephone: 202-205-6600.
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ENVIRONMENTAL CAPITAL NETWORK
Description: The Environmental Capital Network (ECN) is a project of the Center for Environmental
Policy, Economics and Science, a 501 (3) not-for-profit, tax-exempt corporation. The ECN offers
services to bring together environmental companies and investors. Its goal is to help individual,
professional, corporate and institutional investors access early-stage and expansion companies
commercializing environmental and "green" technologies, products and services, thereby aiding such
companies in more efficiently and effectively raising capital. Its Services include a monthly Investor's
Bulletin, periodic Capital Forums, a Business Plan Review program, and an Environmental Business Capital
Access Site (EBCAS) Internet site in conjunction with the Angel Capital Electronic Network (ACE-Net)
(see Section 10.A., Angel Capital Electronic Network).
The Investors' Bulletin, mailed to registered investors, provides key information about companies seeking
capital. Companies must complete a questionnaire and sign an application and pay a $350 fee for three
distributions of the company profile in Ihe bulletin over twelve months. The Capital Forums periodically
give entrepreneurs a direct audience wilh potential investors for a registration fee of $245. The Business
Plan Review program requires three copies of the company's business plan and a $500 fee. The business
plan is reviewed by two independent, knowledgeable investors and its marketing/sales section is analyzed
by an independent business development center. The Environmental Protection Agency's (EPA's) Office
of Pollution Prevention and Toxics helps pay for this service. The EBCAS will provide a gateway to the
ACE-Net service for environmental and energy technology companies and investors. EBCAS is supported
by an EPA grant and is a joint venture with the Michigan Energy and Resource Research Association, a
regional network operator for ACE-Net.
Actual Use: This is a relatively new effort to use the Internet to facilitate contacts between potential
investors and entrepreneurial environmental companies.
Potential Use: If it attracts enough favorable attention from investors, ECN could be extremely valuable
to both entrepreneurs and venture investors.
Advantages: The partial funding by EPA cuts the cost to companies for the business plan review.
Limitations: Internet access is needed. ECN is not registered as an investment advisor or securities
broker-dealer wilh Ihe federal Securities and Exchange Commission But, it is registered as an investment
advisor conducting business as a finder pursuant to the Michigan Uniform Securities Act
Reference for Further Information: Environmental Capital Network, 416 Longshore Drive, Ann
Arbor, MI 48105, Telephone: 734-996-8387, Fax: 734-996-8732, E-mail: mccabe@recycle.com,
Internet: http://bizserve.com/environmental.capital.network/.
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ENVIRONMENTAL OPPORTUNITY FUNDING CORPORATION
Description: The Environmental Opportunity Funding Corporation (EOFC) is a flexible funding
mechanism designed to broker capital packages for environmental businesses and environmental projects,
both public and private, where capital is not otherwise available from conventional sources. The EOFC
will be primarily used by the Environmental Protection Agency-funded Environmental Finance Centers
(EFCs) to help package and meet the capital requirements of their small business clients (see the individual
pages for the EFCs in Section 5 A.: Institutional Arrangements). The EOFC will charge fees for its
services and after an initial injection of public/private donated capital resources will become self-sufficient
within a reasonable period of time.
Actual Use: The Environmental Opportunity Funding Corporation is in the planning and developmental
stage, and as such, is not currently operational.
Potential Use: The EOFC will be established by an EFC or a group of EFCs as a non-profit 501(c)(3)
corporation under the laws of a State, probably in California The EOFC will function nationwide and
locate an office or offices only as needed to provide prompt and efficient services to its clients. For
example, it could use the offices of individual EFCs on an as needed basis. The Corporation's main tools
will be indirect financial incentives such as loan guarantees, surely bond guarantees, letters of credit, interest
rate increments, or subsidies. These incentives will help to provide (he inducements needed to motivate
private capital investments. The EOFC will help develop financial packages that provide flexibility to the
recipient businesses and reasonable rates of return to investors.
Advantages: The Environmental Opportunity Funding Corporation will focus its efforts on small
businesses in the environmental goods and services industry. Its brokering efforts and financing assistance
will be highly leveraged, using secondary financing mechanisms such as credit guarantees to attract private
capital. The EOFC will operate nationwide in a flexible manner with exceptionally low overhead costs.
Limitations: The EOFC is not yet operational and is still exploring ways to raise the needed start-up
capital. Until the EOFC is fully operational and earning fees for its services, it will be limited in the amount
of assistance it can provide to small environmental businesses.
Reference for Further Information: USEPA Region 9 Environmental Finance Center, Urban
Environmental Research and Education Center, California State University at Hayward, Building 7,
Alameda Point, 851 West Midway Avenue, Alameda, California 94501, Telephone 510-749-6867, Fax:
510-749-6862, Internet/World Wide Web: http://www.greenstart.org/efc9.
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f
FRANCHISING
Description: Franchising is a partnership where one party, the franchiser, grants a second party, the
franchisee, ihe right to use the franchiser's trade name, trademark., or advertising to market/distribute the
franchiser's goods and/or services in a particular territory. The franchiser usually provides expertise on
a proven business plan to the franchisee through training and ongoing support The franchisee may
prescribe a marketing plan or allow the franchisee to participate in group distribution. The franchisee pays
the franchiser for the right to become and remain a distributor or dealer. This may involve an up front cash
payment, as well as payments) above and beyond the wholesale price of inventory or goods. Besides
money, 1he franchisee brings to Ihe partnership an owner's motivation to make the business a success.
Actual Use: Franchising comprised over $800 billion dollars in sales in 1992 and ibis figure is projected
to reach $1 trillion by the year 2000 (International Franchise Association figures). More than 40% of all
retail sales are generated by franchise companies and one out of every twelve businesses is a franchise.
Perhaps, the most famous franchise in the world is MacDonald's, but Ihere are many others in all fields of
business, including environmentally-related ones. For example, Ehvironmental Air Services is a franchise
firm that seeks to reduce the contamination in air distribution systems. The firm was started in 1992 and
has thirty franchised units and one company-owned unit Roto-Rooter Corporation, the well-known
plumbing and drain care services firm, is a franchise operation with over 600 locations worldwide.
Potential Use: Franchising could be used to help provide any kind of service or product that can be
marketed and sold in a wide number of locations based on a standardized plan of operations. The concept
can be applied to almost any category of business from water leak detection services to marketing
environmentally-friendly hair care and other personal products.
Advantages: Franchising permits entrepreneurs to participate in a proven business using the business'
already-recognized name and already developed business and marketing plans. It leverages the
franchiser's expertise with the franchisee's money and hard work.
Limitations: The franchiser must come up with the money to buy the franchise and then generate enough
revenues to pay any continuing fees. The business concept may not be equally applicable in all areas. The
franchisee must carefully investigate the franchiser and its business concept
Reference for Further Information: International Franchise Association, 1350 New York Avenue,
NW, Suite 900, Washington, DC 20005, Telephone: 202-628-8000, Fax: 202-628-0812, World Wide
Web site: http://www.franchise.org/.
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INVESTMENT FORUMS
Description: Investment forums are special events designed to bring businesses together with investors,
economic development officials, and investment intermediaries (underwriters, venture investment bankers,
finance consultants, financial planners, loan brokers, venture clubs, etc.) for their mutual benefit These
forums are typically annual events in which selected businesses make presentations to a group of investors
and investment intermediaries. Forum organizers also arrange networking opportunities for the businesses
and investors during these one to three day events. Finally, organizers provide keynote speakers who
discuss issues of interest to the private investors.
Actual Use: Annual investment forums may select high growth companies likely to appeal to venture
capitalists, corporate investors, and sophisticated individual investor angels (see Section 10.A., Angels).
These forums usually serve a State or region. Examples of investor forums wilh an environmental focus
include the Northeast Recycling Forum in Brattteboro, VT; the Southeast Recycling Investment Forum in
Columbia, SC; and file Midwest Recycling Forum in Lincoln, ME. The first National Environmental
Capital Forum took place in New York City, NY. Privatization forums are numerous, however, most
investment forums are more generic events looking to aid many types of businesses, including small
businesses.
Potential Use: Investment forums could be held that focus on small businesses in the environmental goods
and services industry (EGSI). They might even be narrowly focused on an EGSI sub-sector such as firms
working on biotechnology approaches to environmental remediation. There may be a largely untapped
market of imddermined size in this regard. The geographic range of businesses invited to forums could be
broadened to improve investment opportunities to better attract investors.
Advantages: These forums can be efficient and cost-effective ways to bring fast-growing, under-
capitalized, small businesses together with equity capital investors and supporting financial intermediaries.
Investment forums can heighten investor and financial institution interest in a particular group of firms and
industry by educating Ihem on the variety of investment opportunities. They also educate businesses about
investor priorities and highlight barriers to business expansion.
Limitations: Investment forums bring limited number of businesses (1(MO) and potential investors
together at a time. The forums provide no financial assistance to attending businesses and do not participate
in business-investor discussions or negotiations once contacts have been made. Many are limited in the
geographic scope from which they draw businesses and investors.
Reference for Further Information: U.S. EPA Publication-30-R-96-012, A Financing Guide for
Recycling Businesses: Investment Forums, Meetings and Networks, September 1996. U.S. EPA,
Office of Solid Waste and Emergency Response, Municipal and Industrial Solid Waste Division, 2805
Crystal Drive, Arlington, Virginia 22202, Telephone: 703-308-8254, Fax: 703-308-8686.
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INVESTMENT NETWORKS
Description: Investment Networks are for-profit or non-profit business services that match the interest
of investors with companies seeking capital. These networks operate very much like a computer dating
service (which is in fact what they are for firms and investors). The match-making processes used by these
services usually have four steps:
1.) Companies submit business summary information, financial projections, and business profile
applications. At the same time, investors submit investment preference profiles. Both companies
and investors pay a fee to be listed on the network(s).
2.) The data from bom parties are entered in a computer database, interest matches made, and investors
sent summary business profiles of companies that meet their stated investment requirements: At
mis point in the dating process, investor and company names are held confidential by the network.
3.) Investors review company profiles and contact the networks to indicate whether or not they are
interested in meeting with any of the companies. If investors indicate interest in meeting, the
Investment Network provides both parties with information on how to contact each other.
4.) Once introductions have been made between investors and companies, both parties can begin
investment discussions. From this point on, it is up to them where the negotiations go.
Actual Use: There are a growing number of Investment Networks around the nation. Most are State or
regional in scope, but at least five are national in scope: the Technology Capital Network (MIT) in
Cambridge, MA; the Seed Capital Network in Knoxville, TN; the Investor's Circle in Chicago, IL; the
Capital Network in Austin, TX; and the Environmental Capital Network in Ann Arbor, MI.
Potential Use: There appears to be room for more regional Environmental Investment Networks.
Specialized ones could be formed for specific types of environmental businesses such as recycling
companies, pollution prevention enterprises, and environmental remediation technologies firms.
Advantages: Investment Networks provide an easy, structured way for new investors to enter the
venture capital markets. They also provide a confidential way for companies and investors to efficiently
broaden their range of business contacts. Participating in them can help business owners learn how to
improve their companies and their presentations to attract investment capital.
Limitations: Investment Networks do not provide financial assistance themselves and usually do not
provide any consulting assistance. They have no role in the actual business negotiations.
Reference for Further Information: U.S. EPA Publication-30-R-96-012,>l Financing Guide for
Recycling Businesses: Investment Forums, Meetings and Networks, September 1996. U.S. EPA,
Office of Solid Waste and Emergency Response, Municipal and Industrial Solid Waste Division, 2805
Crystal Drive, Arlington, Virginia 22202, Telephone: 703-308-8254, Fax: 703-308-8686.
i
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JOINT VENTURES
Description: A joint venture differs from either a corporate venture investment or a strategic alliance,
although all three are known as corporate venturing. It is a separate legal organization (corporation or
partnership), often with a separate management team, while a strategic alliance is a collaboration that
typically uses a research contract and marketing or licensing agreements, rather than equity or debt
transactions (see Section 10A., Strategic Alliances). A joint venture that has a speculative purpose in
addition to an expectation of profits is sometimes called a 'joint adventure".
In a joint venture, a partnership is established to take advantage of tax deductions for the partner ship
losses, then, after fee research and development efforts are completed, t/he organization is switched to a
corporate form. There may be collateral restraints such as agreements between the parties to limit
competition between themselves in certain areas. The joint venture agreement should include provisions
governingtennination, withdrawal, and buyout procedures. Some common termination procedures include
a put, which requires one venture partner to purchase the interest of the other, a call, which requires one
partner to sell its interest to the other, liquidation, which is an option simply to dissolve the venture, an offer
to buy or sell, or a right of first refusal. Under a research contract, a company performs research for the
sponsoring corporation for cash. However, there is an issue of ownership of rights to the technology
developed. Unless it receives exclusive rights, the sponsormay demand stock warrants as an equity kicker.
Under a marketing or licensing agreement, a company gets ah up-front payment or a future payment
stream in return for giving an exclusive or nonexclusive right to another firm to produce or sell the former's
product as the latter's own.
Actual Use: Joint ventures are a relatively common "off-balance-sheet" financing technique among firms
seeking to bring new products to market
Potential Use: A joint venture can offer a small firm an opportunity to bring an environmentally friendly
technology or products to market
Advantages: A rapidly growing company with limited resources can use a joint venture with a larger
corporate partner to exploit its technology in an identifiable market
Limitations: An ill-designed joint venture can be financially disastrous.
Reference for Further Information: Consult an attorney on applicable State and federal laws. Contact
the U.S. Department of Commerce, Small Business, Administration at 800-827-5722 for referral to the
nearest Small Business Development Center, to ask general questions about joint venture techniques.
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PRIVATE PLACEMENTS
Description: A private placement is the sale of a limited number of shares of stock in a company directly
to a relatively small number of pre-selected buyers, often institutional investors. While private placements
are exempt from most of the procedural hurdles that apply to major public offerings, they still fall under
Regulation D of the Securities and Exchange Act of 1933. These regulations limit the number and type of
investors who can participate in a private placement (usually 35). The most common type of private
placement is the limited partnership. Atypical limited partnership involves one general partner who holds
full authority for all business decisions and a number of limited partners who serve as angel investors (see
Section 10. A., Angels).
Actual Use: Private placements are used by new companies that must raise a significant amounts of
money, but are not likely to attract a single investor to come up with the entire amount They are also used
by established businesses that need money but do not want to expose themselves to the scrutiny, expense,
and/or other difficulties of a public offering.
Potential Use: Private placements could be used very, successfully by small and environmental businesses
nationwide. They offer the real opportunity for firms such as these to raise substantial investment capital
withamoderate level of difficulty. There is significant roomfor growth in Ihe use of this financial instrument.
i
Advantages: Private placements require much less paperwork and they are faster, easier, and less costly
to complete than public offerings. They do not require a business to distribute substantial profits to a large
number of investors. They access capital from a number of investors with very limited ownership interests.
Private placements are normally very effective in raising anywhere from $100,000 to $1,000,000, and
sometimes even more.
Limitations: Successful private placements require a very good business plan. They also require that the
entrepreneur be a very good salesperson for iheir business. Private placements fall under both federal
Securities and Exchange Commission regulations and State laws (which vary significantly from State to
State). They may require a good attorney and an experienced business plan consultant
Reference for Further Information: Blechman, Bruce Jan, and Levinson, Jay Conrad, Guerrilla
Financing: Alternative Techniques to Finance Any Business, Houghton Mifflin Company, 2 Park
Street, Boston, Massachusetts 02108, November 1991. There are numerous sources on the World Wide
Web for inforrnation on private placements and capital investments. Log on and use one of the generic
search engines such as Lycos, Infoseek, Yahoo!, Excite, etc. to locate sites under these and related terms.
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PUBLIC OFFERINGS
Description: A public offering (PO) is the selling of acompany's shares to the public in the form of stock.
It requires registration with the Securities and Exchange Commission (SEC) and with State regulators. The
first time a company sells shares to the public is known as an initial public offering or IPO. Small Corporate
Offering Registrations allow smaller companies to raise less than $5 million with fewer regulations.
Actual Use: A few successful IPOs have been completed with companies that focus on environmentally-
related technologies. The companies involved in these IPOs include Shaman Pharmaceuticals, Molten
Metals, and Recycling of America
Potential Use: Most environmental firms are growing only as fast as their own capital, venture capital,
or bank loans will allow. Public offerings of environmental firms represents an area with enormous growth
potential over the next twenty years as more environmental industries and technologies are created and
introduced worldwide. Small Corporate Offering Registrations offer the most potential for raising money
for small businesses through public offerings.
Advantages: Public Offerings are a good way for companies with well-established records of successful
performance to raise a lot of money to invest in product development, marketing and business expansion.
Through these offerings, companies normally raise at least $5 million, often raise tens of millions, and can
sometimes raise in the hundreds of millions of dollars.
Limitations: Public Offerings open up the internal company operations to intense, ongoing scrutiny from
die SEC and State regulators (as well as to regulation), the financing community, the media, and the general
public. These offerings can be time-consuming, expensive, and distract management attention from running
the business enterprise. They usually require outside professional expertise in the form of investment
bankers, a top-notch accounting firm, and a good securities attorney.
Reference for Further Information: Securities and Exchange Commission, 455 5th Street, NW,
Washington, DC 20549, Telephone: 202-942-4150. The Small Corporate Offering Registration Network
(Scor-Net) offers information on SEC regulations and venture capital, as well as links to attorneys,
brokers, and investors. Scor-Net is located on the World Wide Web at http://www.scor-net.coin/. The
Venture Capital Resource Library has information on the addresses of State regulators, the offices of fee
SEC, and securities law. It is located on the World Wide Web at http:// www.vfinance.com/.
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STRATEGIC ALLIANCES
Description: A strategic alliance is a partnership or agreement with another company who shares
common goals to undertake business activities together for mutual benefit. There may be some exchange
of equity in these corporate partnerships but both companies continue to operate as independent entities.
Strategic alliances are typically used in research contracts, marketing and licensing agreements, but they
can also be used for financing, product distribution or many other business activities. The strategic ally or
partner may share the same market, but provide a related product or service. They may have excess
demand or need the first company's help in serving their client base. A strategic partner may provide
financing in some situations. This financing can be structured as an investment, a loan, prepayment for work
to be performed, or as an exchange or sharing of resources such as space, personnel, and equipment.
Actual Use: More and more small businesses are forming strategic alliances with larger companies to get
their products or services to the market faster. Larger companies are increasingly investing in innovative
small businesses, or sharing resources and facilities, in return for a piece of the smaller firm. This investment
approach has been, and remains, particularly popular in many high technology industries such as
electronics, computer software design, Pharmaceuticals, and bioremediation technology.
Potential Use: Over the next ten to twenty years, there should be very good and increasing opportunities
for high technology, environmental businesses to find and pursue corporate alliances, if they so desire.
Prospects for corporate alliances should also be good for any small business with products or specialized
personnel lhat larger firms want
Advantages: Strategic partnerships can allow companies to enter markets, grow stronger, and expand
much faster than they could on their own. It can be much less risky to use a corporate partner to help
finance a business as such partners often do not insist on control, but rather accept some business service
in exchange.
Limitations: Corporate alliances must be mutually beneficial and the partners must share common goals.
Corporate partners must carefully screened each other, or there is the real risk that one may .be able to
economically damage or take over the other. Good corporate partnerships depend to a great degree on
mutual trust
Reference for Further Information: Blechman, Bruce Jan, and Levinson, Jay Conrad, Guerrilla
Financing: Alternative Techniques to Finance Any Business, Houghton Mifflin Company, 2 Park
Street, Boston, Massachusetts 02108, November 1991.
i
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VENTURE CAPITAL
Description: Venture capital is any money invested in business enterprises, particularly at early stages.
Traditional venture capitalists are individual investors or groups (partnerships) who provide equity financing
to under-capitalized businesses. Venture capitalists also may provide expert business and strategic advice
and support In return for financing or other assistance, the venture capital firm usually receives an equity
or ownership stake in the company. Some may become active owners, while others may take stock or
stock options assuming more of a lender profile, allowing the original owner to run the company provided
a certain level of financial performance is achieved.
Actual Use: There are fewer than 1,000 traditional venture capital firms in the United States, These
companies fund about 2,000 businesses each year investing $3 billion of the $30 billion in total annual
venture capital. Start-up businesses represent around 15% of their total investments, or fewer than 250
businesses. Traditional venture capital firms require applicants to have a detailed business plans, and may
also require extensive additional information about the concern and its principals. Traditional venture
capitalists are highly selective. There are a limited number of green venture capital firms. For example, the
Environmental R&D Capital Corporation was begun in 1994 to invest in emerging growth opportunities
in and related to the environmental industry. Pauley Financial invests in environmental and high technology
companies. A larger number of other firms such as Hambrecht & Quist and Ventures West include
environmental businesses as one of a number of investment specialities.
Potential Use: Traditional venture capitalists will be interested in any small and/or environmental business
with a potentially valuable idea, product and/or service that has a good business plan and the management
skills to successfully implement it There is room for growth in the number of green venture capital firms
or venture capital firms with environmental investments as a speciality.
Advantages: Most venture capital firms can provide a quick answer to a business seeking financing
assistance. Such companies can provide substantial financial assistance, usually exceeding $500,000.
Limitations: Traditional venture capital companies invest mainly in businesses with extremely high growth
potential offering the opportunity for substantial investment returns within 3-5 years. Venture capitalists
may demand large ownership stakes in return for risking their capital on new or unproven products or
owners. They rarely invest in a service business as profit margins are too low.
Reference for Further Information: Blechman, Bruce Jan, and Levinson, Jay Conrad, Guerilla
Financing: Alternative Techniques to Finance Any Business, Houghton Mifflin Company, 2 Park
Street, Boston, Massachusetts 02108, November 1991. See also Guerilla Selling and Guerilla
Marketing, Levinson et al., 1992 and 1993.
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OTHER
Description:
Actual Use:
Potential Use:
Advantages:
Limitations:
Reference for Further Information:
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COMPARISON MATRIX FOR SMALL BUSINESS/EGSI -
EQUITY CAPITAL
a
Criteria/
Equity tool
*Agriculture:
Alternative Agricul-
tural Research and
Commercialization
Corporation
*Angels
(Personal Investors)
"Business Plans
"Commerce: SBA
Angel Capital
Electronic Network
Commerce: SBA
Small Business
Innovation
Research Program
"Commerce: SBA
Small Business
Investment
Companies
Environmental
Capital Network
Environmental
Opportunity
Funding
Corporation
Actual
Use
High
High
High
Mod.
Mod.
High
Low
N.A.
Revenue
Size
Mod. -
High
High
High
Low
Mod.
High
Low
Low
Admini-
strative
Ease
Mod.
Mod.
Mod. -
High
Mod.
Mod.
Mod.
High
Mod.
Equity
Mod.
Mod. -
High
High
High
High
High
Mod.
Mod.
Financial
Leverag-
ing
High
Mod.
High
High
High .
High
High
Mod.
Environ-
mental
Benefits
High
High
Mod.
High .
High
High
Mod.
Mod.
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EFAB/EFC Guidebook
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COMPARISON MATRIX continued
Criteria/
Equity Tool
"Franchising
Investment
Forums
"Investment
Networks
* Joint Ventures
"Private Placements
Public Offerings
"Strategic
Alliances
"Venture Capital
Actual
Use
High
Mod.
High
High
High
High
High
High
Revenue
Size
High
Low
High
Mod-
High
High
High
High
High
Admini-
strative
Ease
Mod.
High
High
Low-
Mod.
Mod.
Low
High
High
Equity
Mod.
Low-
Mod.
High
Mod.
Mod.
Low
Low-
Mod.
Mod.
Financial
Leverag-
ing
High
Low
Low
High
High
High
High
'High
Environ-
mental
Benefit
High
Low-Mod.
Mod-
High
High
High
High
High
Mod-
High
High- Used by amajority of small businesses; other criteria score high (e.g., investors willing to incur risk
or lend expertise; relatively simple and flexible, available at reasonable interest costs; highly
leveraged and influences success/stabilily of business)
Mod.- Used by many small businesses; other criteria score in medium range
Low - Low or rare use so far; risk-adverse, complicated, and expensive; one or more major
implementation problems exist
*Star indicates best rated mechanisms
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4%;
10.B. DEBT
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10.B. DEBT
Description: Debt financing for small business and the Environmental Goods and Services Industry (EGSI)
includes loans, notes, lines of credit, bonds, leases, and various credit enhancements. Debt financing is the
most traditional method of financing, but is less creative and flexible lhan equity financing. Under debt
arrangements, the lender or creditor acquires a prior claim to the income, earnings or assets of the
borrower for interest and principal repayment, which must be paid before equity investors/owners are
repaid. Borrowing may be short- or long-term, secured or unsecured.
Advantages: Debt financing may be a relatively low cost in times of low interest rates and for established,
credit-worthy customers. Moreover, many interest costs are deductible from taxable income. Debt
financing also entails no dilution of equity in the business, since creditors are entitled only to the rate of
interest specified and repayment of principal when due. Likewise, creditors have no voice in the conduct
of Ihe business, except to the extent lhat restrictive provisions might be included, for example, in bond
covenants. Some forms of debt financing may be more readily available than equity financing, since major
institutional investors such as banks and life insurance companies invest only or mainly in bonds and notes
and, in good economic times, represent stable and "rich" sources of funding.
Disadvantages: The disadvantages of debt financing are that the quantity and quality of institutional
lending is influenced by swings in general economic conditions. Debt financing also is much less predictable
and more costly as a source of funding for small, start-up businesses than for larger, established
corporations. Interest on debt is a fixed charge that must be paid even when earnings decline. If a business
suffers an operating deficit, its loss will be increased by the need to pay interest and these losses also will
offset any advantages to interest deductibility from taxes. Fixed interest charges limit managerial discretion
in formulating business policies, and in difficult economic times the need to maintain interest payments may
lead to a decline in business investment in operations and maintenance and strategic initiatives. There is
always the threat that default may occur, and foreclosure ensue. Many enterprises find it advantageous to
preserve their borrowing power as a last recourse, but small businesses often do not have this option.
Summary: The debt mechanisms described here range form traditional commercial loans and bonds, new
types of leasing arrangements and amultitude of federally-sponsored programs such as those of the Small
Business Administration, credit unions, and even international programs. Small business, in particular, may
wish to combine debt and equity financing. Government grants and loans may be less intrusive than equity
financing, since lenders may require only repayment and not any other personal stake in the recipient's
company. Other debt financing and State/local government methods are available including personal loans
and loan guarantees, some of which are described in Section 2.B.: Loans.
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LIST OF DEBT TOOLS
(In Alphabetical Order)
1. Agriculture: Rural Business-Cooperative Service - Intermediary Relending Program
*2. Bank/Insurance Financing
*3. Commerce: Small Business Administration (SBA) - Business Development Corporations
*4, Commerce: SBA - LOWDOC and FASTRAK Loans
'*5. Commerce: SBA - Minority and Women's Prequalification Pilot Loans
6. Commerce: SBA - Section 504 Certified Development Companies
*7, Commerce: SBA - Section 7(a) Loan Guarantees
*8. Commerce: SBA - Section 7(m) Microloans
9. Commerce: SBA - Short Term Loans and Revolving Lines of Credit
10. Community Reinvestment Act
*11. Convertible Debt
*12. Credit Analysis
13. Credit Cards
*14. Export-Import (EX-IM) Bank
15. Foundations: Program-Related Investments
*16. Leasing
*17. Mezzanine Financing
18. Micro-Loan Funds
19. National Cooperative Bank
20. National Credit Union Administration: Community Development Revolving Loans
21. Receivables Factoring (Accounts Receivable Financing)
*22. Surety Bonds
23. Treasury: Community Development Financial Institutions Fund
* Stars indicate most highly rated mechanisms as described in the Comparison Matrix at the end of the
narratives. See Introduction to the Guidebook for a description of the criteria used. Ratings of "High",
"Moderate", "Low" are for comparison purposes only, as some ratings are necessarily subjective and data
are incomplete.
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DEPARTMENT OF AGRICULTURE
RURAL BUSINESS-COOPERATIVE SERVICE
INTERMEDIARY RELENDING PROGRAM
Description: The Intermediary Reloading Program (IRP) provides loan funds for business facilities and
community development projects in rural areas. Intermediary recipients include private non-profit
corporations, public agencies, Indian groups, and rural cooperatives, which provide loans to ultimate
recipients. The maximum loan to any one intermediary is $2 million. The maximum loan maturity is 30
years and the interest rate is fixed at one percent per annum. A reserve for bad debts of six percent of
outstanding loans must be accumulated over three years and then maintained. Loans made by an
intermediary to an ultimate recipient are limited to no more than 75 percent of the financed project costs
or no more lhan $150,000. Both intermediaries and ultimate recipients (borrowers) must be unable to
obtain the loan at reasonable rates and terms through commercial credit or olher federal, State or local
programs.
Actual Use: This is not a new federal program, but it has been administered by the Department of
Agriculture only since 1995. Loans have ranged from $250,000 to $2 million and have average $773,810.
hi Fiscal Year (FY) 1997, 77 loans were approved from 135 applications and loan obligations totaled
$37.6 million. The Department estimates that loan obligations will be $37.1 million and $35 million in FYs
1998 and 1999, respectively..
Potential Use: Pollution control and abatement are eligible purposes for loans by intermediaries to ultimate
borrowers.
Advantages: The purpose of the program is to provide below-market interest rate loans to businesses
unable to finance the proposed project through commercial credit or other government programs at
reasonable rates and terms. Loans to intermediaries are at a very low fixed interest rate of one percent
Limitations: This is not a grant program, but a federal loan to the intermediary, which cannot use loan
funds for administrative or technical assistance expenses. Applications for potential intermediaries are
considered in a quarterly national competition. An ultimate recipient cannot be located in a city with a
population of 25,000 or more.
Reference for Further Information: See pages 6045-6063, Volume 63, Number 25, Federal Register,
February 6,1998. U.S. Department of Agriculture, Rural Business-Cooperative Service, Room 6321,
South Agriculture Building, Washington, DC, Telephone: 202-690-4100, Internet:
http://www.rurdev.usda.gov/rbs/index.html.
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BANK/INSURANCE FINANCING
Description: Banks extend credit (commonly through loans and lines of credit) to businesses and
individuals for a wide variety of reasons. A bank typically loans money for a specific period of time with
the borrower paying a fixed payment each month that consists of a portion of the amount borrowed plus
an interest charge. The interest charge covers the bank's expenses and the risk it assumes in making the
loan. There are two types of bank loans, secured and unsecured. For secured loans, the borrower puts
up collateral such as real estate, stocks, business assets, or something else of value that the bank can take
if the borrower defaults on the loan. Unsecured loans are based on the credit of fee borrower and often
have a higher interest rate. Lines of credit are open accounts that can be drawn upon as needed up to their
limit They have a higher interest rate than most loans.
Actual Use: There are over 9,000 federally insured commercial banks in the United States. These banks
make fee majority of business loans in fee country. Banks usually extend credit to stable, profitable
businesses and individuals to help pay for business operations and expansion. They finance just about any
asset for any business reason except for most types of business starts-ups. Bank loans for small businesses
may range in size from a few thousand dollars to a few hundreds of thousand. Small business lines of credit
generally have a smaller upper limit than loans.
Potential Use: Bank financing is a good option for established businesses that are profitable and have a
good credit record. This generalization should hold true for any small businesses and any business in the
environmental goods and services industry that fits this profile.
Advantages: Banks will make loans and offer lines of credit at reasonable interest rates to established
businesses/people who need money for good reasons. Banks often lend to franchise businesses even as
start-ups. Bank loans are a good source of financing for specific large purchases or business activities that
will increase profitability. Banks may offer conveniences to their customers such as telephone or online
funds transfers, single-account credit cards and checks, and detailed record keeping on accounts.
Limitations: Banks rarely lend to start-up businesses and to businesses in financial difficulties. For
example, banks will usually not loan money to cover business operating losses." Banks may be hesitant to
loan money to even profitable businesses in industries that are in a recession. Lines of credit are generally
more expensive than loans.
Reference for Further Information: American Bankers Association (ABA), 1120 Connecticut Avenue,
NW, Washington, DC, Telephone: 202-663-5221, Internet/World Wide Web site:
http://www.aba.com/abatoo!/showme_rel.html?location=homepage or http://www.aba.coin/.
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DEPARTMENT OF COMMERCE
SMALL BUSINESS ADMINISTRATION
BUSINESS DEVELOPMENT CORPORATIONS
Description: Business development corporations or BDCs are special-purpose institutions owned by
private investors, financial institutions or large corporations, that are chartered and licensed by States to
make loans to small businesses with the primary goal of job creation. Funding for BDCs is generally
provided by participating financial institutions and corporations who interests are tied to making small
business loans and increasing the availability of jobs.
Actual Use: As of 1996, fifteen States had BDCs including Arkansas, Georgia, Iowa, Kansas, Maine,
Massachusetts, Mississippi, Montana, Nebraska, New Hampshire, New Mexico, New York, Norm
Dakota, South Carolina, and Wyoming. BDCs can make conventional loans, enter into
purchase/1 easebacks, make SBA-guaranteed loans, and provide venture capital.
Potential Use: Business development corporations could be used to support or create small businesses
working directly in, or in support of, 1he environmental goods and services industry. Alternatively, they
might support an industry sub-sector such as environmental remediation firms involved in the assessment
and cleanup of brownfields properties. BDCs could potentially be developed and established in all fifty
States. In addition, some Indian Tribes may wish to adopt this particular financing strategy.
Advantages: BDCs generally qualify as lenders under the Small Business Administration's 501 program,
which means they can make loans 90% guaranteed by the SBA. Some BDCs own and operate their own
Small Business Investment Companies, enabling ihemto provide venture investment capital along with debt
financing.
Limitations: Business development corporations are limited to the States supporting the concept and BDC
assistance is limited to small businesses.
*
Reference for Further Information: U.S. Small Business Administration, 409 3rd Street, SW,
Washington, DC 20416, Telephone: 202-205-6600. Association of Small Business Development Centers,
1050 Seventeenth Street, NW, #810, Washington, DC 20036, Telephone: 202-887-5599. State
Departments of Commerce or Economic Development are also a good source of information about BDCs.
Informationon these and other State agencies can be accessed on the World Wide Web using FinanceNet,
the Internet's home for public financial management information. FinanceNet is located at
http://www.financenet.gov.
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DEPARTMENT OF COMMERCE
SMALL BUSINESS ADMINISTRATION
LOWDOC AND FASTRAK LOAN PROGRAMS
Description: The LowDoc (low documentation) and FASTRAK loan programs are streamlined variations
of the Section 7(a) Loan Guarantee Program limited to loans of no more than $100,000, LowDoc offers
a simple, one-page application form (Form-4-L) and quick turnaround on loan reviews. The applicant must
first satisfy all of the lender's requirements, then the lender may request a LowDoc guaranty, up to 80%
of the loan amount Completed applications are usually processed by SB A within two or three days of
receipt from the lender. Consequently, the loan decision process relies heavily upon the strength of the
applicant's character and credit history. Business startups and firms with fewer than 100 employees and
average annual sales not exceeding $5 million for the past three years are eligible.
FASTRAK is a pilot program with a limited number of lenders who are authorized to use their existing
documentation and procedures to make, service and liquidate SBA guaranteed loans. There are no
additional forms and no waiting for SBA loan approval. Under this program SBA may guarantee up to 50
percent of the loan but the terms, interest rates and uses are the same as for any 7(a) loan. Maturities of
term loans are usually 5 to 7 years for working capital and up to 25 years for real estate or equipment.
Revolving credits must have a termination date not more than 5 years after the first disbursement The
interest rate on a fixed rate loan must not exceed the Prime rate plus 2.25 percent if the maturity' is less than
seven years and Prime plus 2.75 percent if fee maturity is seven years or longer. However, for loans of
less than $25,000 the maximum interest rate . The SBA optional peg rate for variable rate loans is
calculated and published quarterly in the Federal Register.
Actual Use: In Fiscal Year 1997, the SBA made 14,738 LowDoc loans and 4,103 FA$TRAK loans,
although relatively few lenders have been certified for FASTRAK
Potential Use: Small firms can use a LowDoc or FASTRAK loan to pay for needed environmental
equipment
Advantages: Because the loan decision process relies heavily upon the strength of fee principal's character
and credit history, good ideas may be given less weight
Limitations: SBA limits on firm size are lower for LowDoc guarantees and fee percentage of fee loan
guaranteed is lower under FASTRAK
Reference for Further Information: U.S. Small Business Administration, 409 Third Street, SW,
Washington, DC 20416, Telephone: 800-827-5722, Internet: www.sbaonline.sba.gov/.
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DEPARTMENT OF COMMERCE
SMALL BUSINESS ADMINISTRATION
MINORITY AND WOMEN'S PREQUALIFICATION PILOT LOAN PROGRAMS
Description: As variations on the Section 7(a) loan guarantee program, the Minority and Women's
Prequalificaition Pilot Loan Programs use non-profit and for-profit intermediaries to assist prospective
minority and woman borrowers in developing viable loan application packages. To be eligible, a business
must be at least 51% owned and operated by racial/ethnic minority or women. It also must employ 100
or fewer and have had $5 million or less annual sales for the past 3 years. Once the loan package is
assembled, it is submitted to the SBA for expedited consideration. The focus is on credit history, ability
to repay, and probability of success. A decision usually is made within three days. If Ihe application is
approved, the SBA issues a letter of prequalification stating the SBA's intent to guarantee the loan. The
maximum amount for loans under the programs is generally $250,000, although some districts set other
limits for minority loans. SBA will guarantee up to 80% of loans no larger than $100,000 and 75% of loans
up to $250,000. The intermediary then helps the borrower locate a lender offering the most competitive
interest rates. Intermediaries (usually small business development centers) may charge a reasonable fee
for loan packaging. Generally, fees charged by for-profit organizations will be higher than those charged
by non-profits. Two different forms are used, Form MPQ-APPL for minorities and Form WPQ-APPL1
for women.
Actual Use: The minority program has operated since April 1995, with over $26 million in guaranteed
loans. Both programs are pilots but appear likely to be retained.
Potential Use: Woman and minority owned firms can use SBA guaranteed loans to pay for needed
environmental equipment
Advantages: The use of intermediaries to assist potential borrowers in developing viable loan packages
has allowed SBA to expedite consideration of applications.
Limitations: The minority program is available at 16 pilot sites and the women's program is available
statewide in 6 states and elsewhere in 11 metropolitan cities. Limitations of the Section 7(a) guarantee
program apply to both programs.
Reference for Further Information: U.S. Small ;Business Administration, 409 Third Street, SW,
Washington, DC 20416; Telephone: 800-827-5722 or 202-205-6673, Fax: 202-205-7064, Internet:
www.sbaonline.sba.gov/.
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DEPARTMENT OF COMMERCE
SMALL BUSINESS ADMINISTRATION
SECTION 504 CERTIFIED DEVELOPMENT COMPANIES
Description: Under Section 504 of the Small Business Investment Act, the Small Business Administration
(SBA) guarantees debentures issued by private nonprofit Certified Development Companies (CDC's) to
provide up to 40 percent of a long-term, fixed-rate financing package for major fixed assets. The
guaranteed loans are to assist small businesses in the acquisition of land and building, construction,
expansion, renovation and modernization, machinery and equipment Typically, the small business must
provide at least ten percent equity and a private-sector lender must provide fifty percent of project cost,
in return for a senior lien The maximum SBA-guaranteed debentures generally is $750,000, but may be
up to $1 million. Interest rates are pegged to an increment above the current market rate for five-year and
ten-year U.S. Treasury issues. Maturities of ten and twenty years are available. Fees approximate three
percent of the face amount of the debenture and may be financed with the loan. The project assets being
financed are used as collateral and personal guaranties of the principal owners are also required.
Actual Use: There are about 290 Certified Development Companies that can participate. SBA guarantees'
have averaged approximately $350,000 and have been as much as $1 million. In Fiscal Year (FY) 1997
guaranteed loan obligations were $2.65 million. SBA guaranteed loan obligation estimates for FYs 1998
and 1999 are $1.7 million and $3 million, respectively.
Potential Use: Section 504 debentures can be used in conjunction with senior private lending to finance
maj or fixed assets needed to meet environmental requirements.
Advantages: The SBA-guaranteed portion of a total financing package serves as a credit enhancement
CDC's work with private sector lenders to make loan financing deals feasible.
Limitations: For fiscal 1998 the estimated program volume is only $1.73 million. SBA expects one job
to be created, on average, for every $35,000 guaranteed. The business cannot have atangible net worth
in excess of $6 million and cannot have an average net income in excess of $2 million after taxes for fee
preceding two years. In addition, the business cannot be engaged in speculation or investment in rental real
estate.
Reference for Further Information: Contact Office of Loan Programs, Small Business Administration,
409 Third Street, SW, Washington, DC 20416, Telephone: 202-205-6485 or 800-)827-5722, Fax: 202-
205-7064, Internet: www.sbaonline.sba.gov/financing/.
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DEPARTMENT OF COMMERCE
SMALL BUSINESS ADMINISTRATION
SBA SECTION 7(a) LOAN GUARANTEES
Description: Section 7(a) of the Small Business Act authorizes the Small Business Administration (SBA)
to guarantee commercial loans to small businesses that cannot get financing on reasonable terms via normal
lending channels. Eligibility is determined by the type and size of business, use of ihe loan, and certain
special circumstances. As a rule, an independently owned and run business which is not dominant in its
industry will be eligible. The SBA has developed industry-specific size standards in terms of number of
employees or sales revenues. Holders of at least 20% ownership in a business usually must guaranty the
loan The basic loan guaranty program is used for long-term loans to qualified firms for purposes such as
real estate acquisition, working capital, or purchase of inventory or equipment. The SBA can guarantee
75% of the loan amount up to $750,000 and 80% of loans of $100,000 or less. The interest rate on a
fixed-rate loan of $50,000 or more is not to exceed 2.75 over the prime lending rate. Maturities are for
up to 10 years for working capital and up to 25 years for fixed assets; however, they may be shorter,
depending on the borrower's ability to repay. Equipment loan maturities cannot exceed the life of the
equipment. SBA charges lenders a guaranty fee of 2% of the guaranteed portion of the loan when it is
$80,000 or less; 3% of the guaranteed portion of the loan if it is more than $80,000 but less than
$250,000; 3.5% of the next $250,000, up to $500,000; and 3.875% of the guaranteed portion over
$500,000. All loans have a 0.5% annualized servicing fee on the outstanding balance of SBA's guaranteed
portion of the loan.
Actual Use: Section 7(a) guaranteed loans account for more than 95% of the dollar volume of SBA's
lending activity. The SBA approved 34,610 loans totaling $7.8 billion in Fiscal Year 1997. SBA loan
estimates for Fiscal Years 1998 and 1999 are $8.9 billion and $10 billion, respectively.
Potential Use: SBA guaranteed loans could be used to buy equipment needed to meet environmental
requirements and for purposes related to producing and marketing environmentally friendly goods.
Advantages: The SBA guarantee gives small firms access to loan funds not otherwise available by
protecting lenders against loss.
Limitations: A bank may not be interested in processing an application for an SBA-guaranteed loan
because of the limited interest rate. SBA guaranteed loans cannot be used for real estate held primarily for
investment Also, SBA size standards for small businesses limit eligibility to firms below certain revenue
or employment levels, as a general rule. There is a $500,000 loan limit
Reference for Further Information: U.S. Small ;Business Administration, 409 Third Street, SW,
Washington, DC 20416, Telephone: 800-8-ASK-SBA, Internet: vmw.sbaonline.sba.gov/or www.
business.gov/. See also: www.sbaonline.sba.gov/regulations/siccodes for SBA small business size
standards by Standard Industrial Classification (SIC) codes.
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DEPARTMENT OF COMMERCE
SMALL BUSINESS ADMINISTRATION
SECTION 7(ra) MICROLOANS
Description: Under Section 7(m) of the Small Business Act, the Small Business Administration (SBA)
uses non-profit organizations with experience in lending and technical assistance as intermediary landers
to make short-term loans of fro under $100 up to $25,000. Although microloans may not be used to
purchase real estate or pay existing debts, they may be used for working capital and to buy machinery and
equipment, furniture and fixtures, inventory, and supplies. Virtually all types of for-profit businesses that
meet SBA eligibility requirements can qualify for a microloan and complete applications can usually be
processed in less than one week. The average loan size has grown from $10,000 to $ 10,500 and the loan
maturity may be as long as six years. Interest rates are pegged to no more than four percent over the prime
rate, hi most cases, any assets bought with the microloan serve as collateral and the personal guaranties
of the business owners are required.
Actual Use: Started as a demonstration program in 1992, the program has become a regular part of
SBA's complement of tools. In Fiscal Year (FY), the program made available approximately $19.5 million
for direct loans, $24.6 million for loan guarantees, and $12.9 million for technical assistance grants available
in fiscal 1998. Program estimates for FY 1999 are $60 million in direct loans, $11.9 million in loan
guarantees, and $12 million in technical assistance grants:
Potential Use: SBA microloans have a maximum loan amount large enough for very small firms to pay
for many types of environmental measures which might be required or to provide working capital needed
by a small environmental services venture.
Advantages: Microloans can provide needed capital to start an environmental services business or
produce/market environmentally friendly goods.
Limitations: Interest rates are not subsidized and borrowers risk losing personal property based on
required personal guarantees if they cannot pay back loans. Also, relatively easy availability of microloans
can cause some businesses to borrow less than they really need.
Reference for Further Information: U.S. Small Business Administration, 409 Third Street, SW,
Washington, DC 20416, Telephone: 800-827-5722 or 202-205-6485, Fax: 202-205-7064, Internet:
WwvVfSfraQniine.sba.gov/
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DEPARTMENT OF COMMERCE
SMALL BUSINESS ADMINISTRATION
SHORT TERM LOANS AND REVOLVING LINES OF CREDIT (CAPLines)
Description: A line-of-credit, or bank line, is a moral, as opposed to a contractual commitment, to make
loans to a borrower up to a set maximum during a set period, usually a year (see Section 3., Letter of
Credit/Lines of Credit). It is not typical to charge a commitment fee but it is common to require that
compensating balances be kept on deposit. A revolving line-of-credit is an agreement between a bank and
a customer whereby the bank extends a line-of-credit during the term of the agreement, usually a year or
more. The customer can convert it to a term loan by borrowing as needed. As the borrower repays the
loan, an amount equal to the repayment can be borrowed again under the terms of the agreement In
addition to interest on loans, the bank charges a fee for the commitment to hold funds available. A
compensating balance also may be required.
CAPLines is the SBA collection of five programs for helping small businesses meet short-term and cyclical
working capital needs. Most of the regulations governing the Section 7(a) loan guarantee program govern
CAPLines. Except for the Small Asset-Based Line, SBA usually can guarantee up to $750,000 from a
commercial lender. Seasonal Liens are revolving or non-revolving working-capital advances against
anticipated inventory and accounts receivable during peak seasons for firms that experience seasonal
fluctuations. Contract Lines pay the direct labor and material cost of performing assignable contracts.
Builders Lines finance direct labor and material costs, with a commercial or residential construction or
rehabilitationproject as collateral. Standard Asset-Based Liens are revolving lines of credit for firms unable
to-meet credit standards associated with long-term credit Small Asset-Based Lines are asset-based
revolving lines of credit of up to $200,000.
Actual Use: Lines-of-credit are common in commercial bank lending, particularly to meet customers'
working capital needs. Guarantees of working capital account for a significant percentage of SBA's
Section 7(a) funds.
Potential Use: Guarantees or Ikes of credit can provide the capital needed by small firms to meet payroll,
acquire inventory or pay oHier costs involved in producing environmental goods/services.
Advantages: SBA guarantees let companies obtain otherwise unavailable or unaflbrdable capital
Limitations: SBA limits on firm size could preclude some growing environmental goods and services
companies from eligibility.
Reference for Further Information: U.S. Small Business Administration, 409 Third Street, SW,
Washington, DC 20416, Telephone: 800-827-5722 or 202-205-6485,'Fax: 202-205-7064, Internet:
www.sbaonline.sba.gov/ or www.business.gov/.
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COMMUNITY REINVESTMENT ACT
Description: The Community Reinvestment Act (CRA) of 1977 requires federally insured banks and thrift
institutions to make capital available in low- and moderate-income communities. Regulations are issued
and compliance audits are performed by the Comptroller of the Currency and Office of Thrift Supervision,
the Federal Reserve Board, and Hie Federal Deposit Insurance Corporation (FDIC). Institutions are
required to prepare CRA Statements indicating Ihe types of credit they offer in their local communities and
to maintain a file of public comments on their CRA performance. They are evaluated by the regulatory
agencies on twelve assessment factors relating to ascertainment of community credit needs, types of credit
offered and extended, discrimination and other illegal credit practices, and participation in community
development. Possible performance ratings range from substantial noncompliance to outstanding. Federal
regulators are required to consider institutions' CRA records in their reviews of applications for expansions
or restructuring. Although there is a tendency to emphasize economic development, the definition of
community development includes environmental clean-up or redevelopment of an industrial site as part of
an effort to revitalize the low or moderate income community in which the properly is located.
Actual Use: All federally chartered or insured depository institutions that grant credit to the public in the
ordinary course of business are covered by a continuing and affirmative obligation to help meet the credit
needs of their entire communities. Some institutions have better records than others.
Potential Use: The CRA requirement can be used to help persuade regulated financial institutions to
participate meaningfully in environmental clean-up. This can be helpful to small firms needing bank loans
to finance environmental equipment or pay for environmental services.
Advantages: Regulated lenders tend to be more responsive to credit needs in the communities they serve.
Many are more receptive to participation in federal programs such as Small Business Administration loan
guarantees.
Limitations: Credit unions are not covered and small institutions are not required to collect CRA
information or report their community reinvestment activities.
Reference for Further Information: Comptroller of the Currency, Compliance Management Division,
250 E Street, SW, Washington, DC 20219. Federal Deposit Insurance Corporation, Office of Consumer
Affairs, 550 Seventeenth Street, NW, Washington, DC 20429, Internet address: www.fdic.gov/; Board
of Governors of the Federal Reserve System, Division of Consumer and Community Affairs, 20th &
Constitution Avenue, NW, Washington, DC 20551; Office of Thrift Supervision, Compliance Programs,
1700 G Street, NW, Washington, DC 20552; Federal Financial Institutions Examination Council, 2100
Pennsylvania Avenue, NW, Suite 200, Washington, DC 20037. See also EPA's web site at:
www.epa.gov/swerosps/bfi1itml-doc/cra.htm.
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CONVERTIBLE DEBT
Description: Convertible debt is loan instrument obtained from a potential capital investor that can be
converted to equity in the business under certain conditions at some future date. The lender earns interest
on the loan until it is either paid off or the conversion option exercised. The decision regarding whether or
not to convert the debt to equity usually rests with the lender. Convertible debt offers lender/investors
flexibility by permitting them to control some of the risks and rewards of their investment. The lender or
potential investor may be a venture capital firm, a financial institution, a Small Business Investment
Corporation, or individual angel investors.
Actual Use: The most common forms of convertible debt issued by businesses are securities such as
debentures or bonds and stock options. Many businesses, including small companies, use convertible debt
as a means of raising capital to finance business start-ups and/or expansion. In 1996 alone, U.S.
companies raised approximately $13 billion dollars through the issuance of an ever expanding array of
convertible securities. At the current pace, securities convertible into stock alone should constitute three
to four percent of the total capital raised by all companies nationwide.
Potential Use: The growing use of convertible debt is projected to continue over the next few years
although maybe not at such dramatic rates as enjoy ed in 1996. Convertible debt is a valuable financing tool
that has die potential to help any business. Small businesses in the environmental goods and services
industry should certainly evaluate this alternative when looking to raise capital.
Advantages: Convertible debt is an option that is often suggested by the lender making its eventual
implementation more likely to succeed. This financing option is a way that potential investors can control
some of their risk when they may not feel totally confident about an investment. It also affords the business
fee opportunity to negotiate down the future equity offer in return for higher debt interest returns on the debt
up-front
Limitations: Convertible debt is still debt and will be reflected on a company's balance sheet. This may
make it difficult for the company to borrow in the future until the convertible debt is repaid or converted
to equity. Convertible debt is usually more expensive lhan a straight business loan and more complicated
than a straight investment.
References for Further Information: INC. Magazine Archives, INC. Online. This source is located
onthe World Wide Web athttp://www jnc.com/incmagazine/. Another good source is CFOMagazine
located on the Web at http://www.cfonet.com/.
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CREDIT ANALYSIS
Description: A credit analysis is the process of measuring a credit applicant's ability and willingness to
repay debt It is an assessment of the probability that a potential customer will pay on time and in full. The
standard framework for credit analysis that has developed over a number of years includes the 'four C 's
of credit," capacity, capital, character, and conditions. The definition of these terms as they apply to credit
applicants, both individual and businesses, are:
Capacity: a measure of ability to pay debts out of discretionary income (salary less living expenses
and other debt) under normal conditions;
. Capital: the difference between the assets and liabilities (their equity or savings);
• Character; the desire to meet or fulfill responsibilities based on references and prior debt-
repayment record; and
. Conditions: any special circumstances that are beyond the control of credit applicants and will be
temporary in nature.
r
The information in these four areas is gathered through a review and analysis of the applicant's credit
history (including payment practices), financial statements (looking at liquidity and solvency), and records
on file with credit reporting companies (such as Dun and Bradstreet)/ bureaus; discussions with bankers
and suppliers; and applicant interviews. The detail of the credit analysis will be based on a ongoing
comparison of the value of information obtained with the benefits gained
Actual Use: Credit analyses of one form or another are performed routinely by banks, savings and loans,
other financial institutions, investors, businesses, and individuals whenever extending credit to a business
or individual. The intensity of tfie credit analysis is directly related to the amount of money involved.
Potential Use: If small and/or environmental businesses seek credit from an established professional
financing source, they will likely undergo a credit analysis, whether they know it or not
Advantages: A credit analysis helps protect the lending party from poor credit risks. If shared with the
applicant, credit analysis information can reveal valuable facts about their business or finances.
Limitations: A credit analysis does not provide answers, only information. The credit decision must be
made by the lending party and only time will tell whether the right decision is made.
Reference for Further Information: The credit department of any bank, savings and loan, finance
company, or other lending institution. Basic financial management texts in local libraries.
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CREDIT CARDS
Description: Millions of credit cards are issued to individual and businesses each year by banks and other
financial institutions. These cards, both personal and corporate, represent de facto lines of credit or
potential debt They can be used to pay for almost any expense within the credit limits of the particular
account Credit cards may be revolving accounts that roll over debt on a monthly basis while charging
interest rates of up to 21 percent or more. Alternatively, they may be the equivalent of simple cash
advances that must be repaid in full each month.
Actual Use: Small, medium, and even large-sized companies frequently use credit cards on a frequent
and ongoing basis to meet a wide variety of business needs ranging from travel and accommodation
expenses to the purchase of office supplies and small equipment Many entrepreneurs/small businesses
use credit cards (sometimes extensively) to help finance their business start-ups. The financial entities that
issue credit cards also frequently supply their card holders with special checks dial can be drawn against
their credit card accounts. These checks can even be used to pay some business suppliers who normally
might not accept a credit card.
Potential Use: Properly used, credit cards will continue to represent a good source of modest amounts
of debt capital for small- and other-sized businesses. These cards will remain an excellent choice for
meeting any business expenses that can, and will be, repaid in a short period of time (less than two
months). The use of credit cards for business-related travel is one area that is expected to continue to
enjoy strong growth. Many airlines, hotels, car rental agencies, and other travel-related businesses are
increasingly showing preference for travelers who use credit cards.
Advantages: Credit cards can be obtained even by start-up businesses that cannot get other types of
credit. Credit cards are a good supplemental source of money for meeting unexpected expenses and
making needed but unplanned emergency purchases. These cards are a good tool to use when you need
to isolate and/or itemize in detail certain specific types of business expenses such as travel and office
supplies.
Limitations: Credit cards are normally not a good tool for financing large amounts of debt Financing
business expenses with credit cards can be extremely costly if the debt incurred is not repaid promptly.
Credit cards must be used responsibly (with restraint) by businesses and employees or serious financial
problems may develop. Misuse of credit cards can seriously impair the credit rating of businesses and
individuals.
Reference for Further Information: Credit Crossroads is a credit library with information on credit
cards, credit reports, bankruptcy, and credit repair. For information on Credit Crossroads., contact by
E-mail: moester@perdue.cdu, Telephone: 765-494-8718, Fax: 765-494-0869.
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EXPORT-IMPORT (EX-IM) BANK
Description: The Export-Import (Ex-Im) Bank is responsible for assisting the export financing of U.S.
goods and services through loan, guarantee programs. Two assistance priorities are sm all business and
environmental exports. The Environmental Exports Program includes a short-term loan and guarantee
programs. The Environmental Export Insurance Policy provides multi-buyer or single -buyer coverage.
It protects the exporter against loss for up to 180 days with 95 percent commercial and 100 percent
political coverage, no deductible, and a "hold-harmless" assignment of export receivables. Exports
generally considered eligible include toxic material handling devices, effluent pollution control devices,
effluent pollution control devices, and instruments to measure or monitor air or water'quality. Loan
repayment terms are the maximum permissible under Organization for Economic Cooperation and
Development (OECD) guidelines. Generally, available financial assistance includes the Working Capital
Guarantee Program, Export Credit Insurance, and Direct Loans and Guarantees. Working capital
guarantees cover 90 percent of the principal and interest on commercial loans to creditworthy small and
medium-size companies that need funds to buy or produce U. S. goods or services for export. Guarantees
of commercial loans to foreign buyers of U.S. goods or services cover 100 percent of principal and interest
against both political and commercial risks of nonpayment Direct loans provide foreign buyers with
competitive, fixed-rate financing for their purchases from the U.S.
Actual Use: Ex-Im Bank programs are used extensively to support U.S. exports to higher risk foreign
markets, including nations where there are no political risks.
Potential Use: Ex-Im Bank programs can assist firms in exporting environmental goods and services by
substantially reducing risks which might otherwise preclude their involvement in exporting.
Advantages: Encouraging and assisting environmental exporting, particularly by small firms, is an Ex-Im
Bank priority.
Limitations: Ex-Im Bank generally will not assist exports of most military-related goods and services or
insure export sales of goods with more than 50 percent foreign content Only firms qualifying as small
businesses under Small Business Administration guidelines are eligible for the short-term Environmental
Export Insurance Policy.
Reference for Further Information: The Export-Import Bank has a U. S. toll-free number, 800- 565-
3946, to provide information on the availability and use of working capital guarantees, export credit
insurance, direct loans and guarantees, and other programs. The toll-free number can be used for fax
retrieval by pressing 1, then 2, at the voice prompts. The mailing address is 811 Vermont Avenue, NW,
Washington, DC 20571, and the Internet address is www.exim.gov. Regional offices are located in New
York City, Miami, Chicago, Houston, and Long Beach.
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t
FOUNDATIONS: PROGRAM-RELATED INVESTMENTS
Description: A program-related investment is a loan or other investments made by a foundation to a for-
profit or non-profit organization for a project related to the foundation's stated purpose and interests.
Foundations make program-related investments mainly to maximize the impact of their programs, provide
an alternative form of financing when grant making is inappropriate or insufficient, and recycle dollars to
increase funding availability. Program-related investment tools include loans, which are used most, and loan
guarantees, equity investments, asset purchases, and linked deposits. Investments are often made from a
revolving fund and may involve loan guarantees, purchases of stock or other kinds of financial support in
addition to loans. The foundation generally expects to get its money back with limited, or below-market,
interest, which will then provide additional funds for loans to other organizations. Half of program-related
investment dollars are used to provide capital to intermediary organizations, such as loan funds and
development banks, which in turn lend funds to development agencies and service providers. A small
number of foundations use program-related investments to acquire or improve property held for charitable
purposes. Less than 8 percent of program-related investment dollars go for environmental purposes;
however, the share of support for the environmental doubled between 1990 and 1995.
Actual Use: Only about 250 foundations make program-related investments and the Ford Foundation is
by far the largest player in Ihe field, accounting for perhaps a third of the total. The next largest, the John
D. and Catherine T. MacArthur Foundation, has loaned or invested less than a third of the Ford
Foundation's amount. Other top program-related investors include the Met Life Foundation, Packard
Foundation, Prudential Foundation, and George Gund Foundation.
Potential Use: Program-related investments can be asource of low cost debt or equity capital to support
an organization's environmental projects. Although only about 15% of foundations making these
investments have made equity investments, most provide cash flow or bridge financing.
Advantages: Program-related investments offer a technique for foundations to assist for-profit entities
either directly or indirectly. Nearly athirdofthosemaldngprogram-relaiedmvestmmtshavebeminvolved
in capitalizing and earned income venture.
Limitations: Program-related investments are not grants. Although profit on the investment is not the
objective, foundations expect to get their principal back so it can be reused. The number of foundations
making program-related investments in any one year is relatively small and fluctuates form year to year.
Evidence indicates that investments increase when the stock market inflates foundations' asset values. The
median investments tend to be around $250,000.
Reference for Further Information: Contact The Foundation Center, 79 Fifth Avenue, New York, NY
10003-3076, Telephone: 800-424-9836 or 212-620-4230, Internet: www.fdncenter.org/.
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LEASING
Description: A lease is a rental contract covering a specific period of time during which the owner of an
asset (lessor) allows another party (lessee) to use the asset according to set terms in return for a series of
regular fixed payments, there are two general types of leases, operating leases and capital leases. The
former is a short-term (five years or less) instrument offered by equipment manufacturers that can frequently
be canceled by the lessee before the expiration of its term. Maintenance and insurance are typically
included in the operating lease payments. A capital, or finance lease, generally extends over a longer term
equal to the useful economic life of the asset and cannot be canceled by the lessee. In this second type of
lease, the lessee is responsible for personal property taxes, maintenance, and insurance.
Actual Use: Leasing is used by many businesses and its popularity is growing. U.S. Department of
Commerce figures for 1995 reveal that twenty-eight percent of the estimated $571.1 billion spent by
businesses on productive assets, was used for leasing. Lease financing is available from banks, finance
companies, specialized leasing companies, and equipment manufacturers or retailers.
Potential Use: Leasing could be used by any environmental and other business that has to make
important investments, but does not want to tie up large amounts of money. It could be a very efficient
way for high technology environmental firms to acquire and use equipment that may soon become obsolete.
These firms must have a good enough cash flow to make the lease payments.
Advantages: Leasing does not require alarge up-front cash outlay. It can protect a firm against equipment
obsolescence and inflation. Lease approvals can be much faster than loan approvals. Leases terms can
be very flexible and customized to specific situations. Lease payments can be deducted as an operating
expense and written off faster than depreciation of owned equipment
Limitations: Leasing can result in the loss of a substantial depreciation tax deduction over time. Leasing
eliminates any salvage.value for equipment that might be realized when purchased equipment is finally sold
Interest rates for leases can be very high. You cannot borrow money in the future against the value of the
lease as you can against equipment that is owned. The asset may be repossessed if a lease payment is
missed.
Reference for Further Information: Great Lakes Environmental Finance Center Draft Report (prepared
for U.S. EPA), An Inventory and Assessment of Pollution Control and Prevention Financing
Programs, December 1996. Great Lakes EFC, The Urban Center, Cleveland State University, UB 215,
Cleveland, OH 44115, Telephone: 216-687-4590, Fax: 216-687-9277, World Wide Web site:
http://www.csuohio.edu/glefc/.
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§
MEZZANINE FINANCING
Description: Mezzanine financing is interim financing which fills the gap that often exists in small business
finance between equity capital and conventional, secured lending by banks and other senior lenders. Since
it is usually subordinated to debt owed to senior lenders, mezzanine finance can make a company with an
otherwise weak balance sheet more attractive to banks and other sources of financing. Private placements
of subordinated debt for non-investment grade companies generally require an internal rate of return to the
lender based on the lender's costs of capital and perceived credit risk. This can be achieved by various
structures. To compensate for the greater risk involved in their usually junior or unsecured status,
mezzanine loans typically carry an interest rate one to three percentage points above senior, secured loans
and often include an equity kicker such as stock warrants or convertibility.
Companies that have outgrown the start-up phase but are not yet large enough for traditional corporate
finance are candidates for mezzanine financing if they have strong management, identifiable growth
opportunities, and stable or growing cash flow. Mezzanine financing is not permanent, typically lasting five
years, although subordinated debt may last seven to nineyeais. The minimum termmay be as little as three
years and ihe maximum is very rarely over twelve. The amount financed may be as much as $ 100 million.
Actual Use: Mezzanine financing is a common financial tool for rapid expansions, management buy-outs,
spin-ofls of subsidiaries, and bridges to initial public offerings. Some Small Business Investment Companies
(SBIC's) specialize in mezzanine financing (see Section 10.A., SBA: Small Business Investment
Companies). When used for leveraged acquisition financing it usually is accompanied by senior debt
provided by banks or institutional investors, as well as the issuance of common or preferred stock. When
used for growth capital it may be used exclusively or in conjunction with equity securities as a component
of a more comprehensive debt restructuring.
Potential Use: Mezzanine finance can be an excellent source oflong-term growth capital, in that Attends
to be less restrictive than bank debt and less delusive and costly than equity capital.
Limitations: Mezzanine finance is essentially private placement of subordinated debt, although it may
involve some rights to equity. The cost of debt financing increases as Ihe proportion of debt in the capital
structure increases.
Reference for Further Information: Contact the Small Business Administration Answer Desk at (800)
827-5722 for the location of the closest Small Business Development Center, which can provide
infomnation on ihe use of mezzanine financing.
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MICRO-LOAN FUNDS
Description: Micro-loans are relatively small loans, generally below the size traditional business lenders
have tended to make or even consider making because of Iheir transaction costs and overhead burdens.
Micro-loans funds have been established primarily by non-traditional financial intermediaries, such as
community development corporations, to provide resources for loans in a range from a few hundred dollars
to a few thousand dollars. These lenders tend to target their micro-loans to low-income communities.
Their borrowers tend to be low-income entrepreneurs who do not have access to the credit resources
typically used by their middle-income counterparts, who tend to take out second mortgages on their homes,
run up their credit card balances, or borrow from friends and family members for similar sums. Micro-
lending tends to be based on character rather than collateral. The sources of micro-loan funds include not
only federal programs, but also program-related investments by foundations and equity equivalent
investments and lines of credit from commercial banks, leveraged by state linked deposit programs and the
Community Reinvestment Act (see Section 9., Community Development Financial Institutions;
Section 10.B., Community Development Financial Institutions Fund; Section 10.B., Section 7(m)
Micro-loans; and Community Development Block Grant topics in Section 2.C.: Grants).
Actual Use: Since the Ford, Rockefeller, and Charles Stewart Mott Foundations funded one in 1983,
micro-loan funds have enjoyed increasing support. Over a hundred micro-loan funds have been set up
specifically to serve low-income women. Most states now have numerous micro-lenders. For example,
the Indiana Small Business Development Corporation uses four intermediaries for micro-loans.
Potential Use: Micro-loans have been enough to start service businesses such as environmental consulting.
The also may be sufficient for some small pollution prevention projects needed to comply with federal or
state requirements.
Advantages: Micro-loan funds provide a source of debt financing otherwise generally not available to low-
income entrepreneurs.
Limitations: Micro-loans are debt which lenders expect to be repaid. Relatively small loans may prove
to be sufficient, leaving the enterprise under-financed.
Reference for Further Information: National Congress for Community Economic Development, 11
Dupont Circle, NW, Suite 325, Washington, DC 20036, Telephone: 202-234-5009; Council for Urban
Development, 1730 K. Street, NW, Suite 700, Washington, DC 20006, Telephone: 202-223-4735, Fax:
202-223-4745, Internet: www.cued.org.
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NATIONAL COOPERATIVE BANK
Description: The National Cooperative Bank (NCB) and its subsidiaries — the NCB Development
Corporation, Cooperative Funding Corporation and NCB Savings Bank FSB - were set up to assist with
the creation and support of cooperatives (see also Section 5.A., Cooperatives). NCB's programs for
independent retailer-owned cooperatives provide loans at relatively attractive rates to the members of such
cooperatives to enlarge or renovate their existing stores, buy new stores, and purchase equipment,
inventory and fixtures. Loans can be used to acquire real estate as part of store acquisition or development
NCB's private placement program with SPP Hambro, an investment banking firm dedicated exclusively
to the execution of private placements, sells cooperatives' debt security offerings directly to institutional
investors. Offerings can be secured or unsecured senior long-term notes, mezzanine financing, or
subordinated debt The NCB Development Corporation (NCBDC) provides capital to start-up and
existing member-owned businesses directly or via developers and intermediary organizations. NCBDC
participates in the life cycle of development, offering business planning advances, short-term lines of credit,
interim loans, and permanent financing. NCBDC provides technical assistance to community development
organizations and serves as a financial intermediary. The Cooperative Funding Corporation is a limited-
purpose, registered broker-dealer. It provides corporate financing advisory services with a primary focus
on asset securitization. NCB Savings Bank FSB is a federally chartered thrift institution providing deposit
and banking services to cooperatively-structured businesses.
Actual Use: NCB and its subsidiaries have provided significant financing and technical assistance to
numerous business cooperatives.
Potential Use: Because they are owned by their members, cooperatives can help small businesses that
form them to solve environmental, logistical, and marketing problems.
Advantages: Cooperatives can give small, independent businesses advantages of larger scale and market
power in financing, risk management, advertising, and certain logistical functions.
Limitations: The NCB and its subsidiaries assist only cooperatives. However, other forms of business
can establish a cooperative to meet their common needs.
Reference for Further Information: National Cooperative Bank, Washington, DC, Telephone: 800-
266-7562. NCB Development Corporation, 1401 Eye St., NW, Suite 700, Washington, DC 20005,
Telephone: 202-336-7680, Fax: 202-336-7804. Cooperative Funding Corporation, 1401 Eye Street,
NW, Suite 700, Washington, DC 20005, Telephone: 202-336-7788, Fax: 202-336-7659. NCB Savings
Bank FSB, 139 South High Street, Hillsboro, OH 45133, Telephone: 800-322-1251 or 937-393-4246,
Fax: 937-393-4064, Internet: wwwjicb.com/. SPP Capital Partners, LLC, 330 Madison Avenue, 28th
Floor, NY, NY 10017, Telephone: 212-455-4500, Fax: 212-455-4545.
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NATIONAL CREDIT UNION ADMINISTRATION
COMMUNITY DEVELOPMENT REVOLVING LOANS
Description: The National Credit Union Administration (NCUA) has crealed an Office of Community
Development Credit Unions to provide counseling to credit unions serving low-income residents of
distressed and financially under-served areas and administer agency's loan and technical assistance
programs. The NCUA may lend up to $300,000 at below-market interest rates to a designated low-
income credit union and may make technical assistance grants and contract with outside providers to render
technical assistance to both federal and state-chartered credit unions serving low-income communities. The
purpose of the Community Development Revolving Loan Program for Credit Unions is to help credit unions
serving low-income communities to provide needed financial services and stimulate the economy in the
community served. Designated federal credit unions serving predominantly low-income members also may
receive deposits, called shares, share drafts and share certificates, from nonniembers, such as foundations,
state agencies and commercial banks.
Actual Use: There are over 11,200 credit unions with $351.2 billion in assets and approximately 1,500
of these are federally insured community development credit unions, about 350 of which have been
designated as 'low-income". In 1996 NCUA made 21 community development loans for $3 million and
made 78 technical assistance grants for $151,746. Grants have been used to purchase office equipment,
provide salary assistance to hire qualified managers, train staff and volunteers, and secure professional
audits of financial records.
Potential Use: NCUA loans can bolster credit unions' abilities to meed loan demand In turn, community
development credit unions can assist their members in financing home improvements needed to meet
environmental health standards and can provide business loans to members who have small,
environmentally oriented businesses. • ' '
Advantages: Credit unions tend to charge lower fees than commercial or savings banks.
Limitations: Credit unions can lend only their members and there are legal restrictions on membership
eligibility. Also, small credit unions have limited loan capacity and those serving low-income communities
have difficulty maintaining professional management
Reference for Further Information: National Credit Union Administration, Office of Community
Development Credit Unions, 1775 Duke Street, Alexandria, VA22314, Telephone: 703-518-6610, Fax:
703-518-6619, E-mail: cdcumail@ncuagov, Internet: wwwjicua.gov/. NCUA regional offices are
located in Albany, NY.
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RECEIVABLES FACTORING
(Accounts Receivable Financing)
Description: Receivables factoring is a type of financing common to some private industries in which
items or payments receivable to the business are sold to a special lender, the factor. The business gets its
money from the factor when it bills or invoices its customers. The factor buys the receivables at a
discounted percentage of their face value, usually at somewhere between 75 and 90 per cent. The factor
usually assumes the credit risks related to the receivables and takes responsibility for collection. The
factor's primary concern is not with the creditworthiness of the business, but rather the creditwoithiness
of the receivables (those businesses owing money for the receivables).
Actual Use: Factors are common in businesses with substantial lag times between orders placed and
receipt of payment Examples of such businesses include the apparel/garment industry, retail firms, seasonal
manufacturers, and any other business that is cyclical in nature and/or experiences unusual cash flow
patterns. The Guidebook developers are not currently aware of any extensive use of this financing
technique in the environmental goods and services industry, and would welcome information in that regard
from readers.
Potential Use: Factoring may be a viable financing approach for environmental firms that have a hot
product with numerous orders, but are experiencing temporary production difficulties. Its use would tend
to be dictated by very industry- and company -specific considerations.
Advantages: Factors will .finance start-up companies and companies with poor credit that have
creditworthy customers. Factoring creates no official debt on the business balance sheet Factoring can
be self-financing in that the more a firm's sales grow, the more money there is available to finance the
business. Factors usually provide credit and collection services, at which they are experts.
Limitations: Factoring is very expensive and significantly reduces profit margins. It generally cannot be
used by businesses with low profit margins. Factors will not want to do business with firms whose
customers are poor credit risks.
Reference for Further Information: Most factors can be found in the Yellow Pages of the local
telephone book under 'Tactors" or "Finance." Banks should also have lists of local factors. There are
numerous sources on the world wide web/Intemet for information on factors/factoring and related terms
such as accounts receivable financing. Log on and use one if the generic search engines such as Lycos,
Infoseek, Yahoo!, Excite, etc. to locate sites under these terms. Blechman, Bruce Jan, and Levinson, Jay
Conrad, Guerrilla Financing: Alternative Techniques to Finance Any Business, Houghton Mifflin
Company, 2 Park Street, Boston, Massachusetts 02108,11/91.
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SURETY BONDS
Description: Surely bonds are a type of financial or credit guarantee underwritten by insurance and other
companies. They are not insurance, but three party agreements where tiie surety provider agrees to stand
in place of the principal (contractorX if Ihe principal cannot meet its financial or performance obligations
to a third party, the obligee (owner). The obligee is the one who requires a principal to obtain a surety
bond before hiring it to undertake a project. In order to obtain a surety bond, the principal must prove to
Ihe surety company that it can meet the obligation in question. The surety company expects no losses and
will seek reimbursement from the principal if a loss occurs.
Actual Use: Surety bonds are widely used in the United States for large construction-related projects.
For federal public works projects, their use has been mandated for more than 100 years (since Ihe Heard
Act of 1894). The three most common types of sureties are bid bonds, performance bonds, and payment
bonds. Each type provides guarantees, as appropriate, that contract obligations will be met,, parties
properly paid, and obligees will suffer no financial loss. Surety bonds are increasingly being used in
environmentally-related areas as such as landfill closures, waste and tire hauling, mining reclamation, and
remediation projects (petrochemicals, asbestos, lead, PCBs, etc.). While not generally used by start-up
companies, surety bond use is growing with regard to small businesses. Industry records indicated there
were 137 companies writing security bonds for small construction companies (sales of $2 million or less)
in 1995, an increase of 25 from 1993.
Potential Use: The potential for growth in the use of surety bonds appears to be strong in environmental
areas, particularly regarding remediation Sureties may be very helpful in ensuring the successful assessment
and cleanup of brownfields properties. There also appears to be room for continued growth in writing
sureties for small construction businesses.
Advantages: Surety bonds guarantee project completion and protect obligees against loss. They remain
in force for the entire life of Ihe contract and provide 100 percent financial coverage. Surety bonds have
litfle impact on the principal's credit rating as they are typically issued on an unsecured basis. Surety.
companies will monitor projects on a continuous and independent basis, and investigate any complaints as
they occur.
X.
Limitations: Surety bonds can be expensive. Principals requiring surety bonds must undergo a pre-
qualincation process in which all aspects of their businesses, particularly their financials, are examined in
great detail. The surety business is risky and contract losses may be large.
Reference for Further Information: National Association of Surety Bond Producers, 5301 Wisconsin
Avenue, NW, Washington, DC 20015-2015. Telephone: 202-686-3700. Fax: 202-686-3656, World
Wide Web site: http://www.nasbp.org/.
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DEPARTMENT OF THE TREASURY
COMMUNITY DEVELOPMENT FINANCIAL INSTITUTIONS FUND
Description: The Community Development Financial Institutions (CDFI) Fund, created by the Riegle
Community Development Regulatory Improvement Act of 1994, promotes economic revitalization and
community development by providing greater access to capital for communities that face serious social and
economic problems. The Fund is a wholly-owned federal government corporation within the Treasury
Department whichmay provide technical assistance and make equity investments, grants, loans, or deposits
on a matching basis. All financial assistance must be matched on a t least a one-to-one basis with non-
federal tunds which are at least comparable in form and value.
Eligible community development financial institutions are private for-profit and non-profit financial
institutions with community development as their primary mission (e.g., community development banks and
credit unions, non-profit loan funds, micro-enterprise loan funds, and community development venture
capital funds). CDFI Fund investments become part.of the leveragible capital base of these institutions.
The CDFI Fund also has a Bank Enterprise Award (BEA) Program intended to encourage insured
depository institutions (banks and thrifts) to increase their lending and services in distressed communities
and to invest in and support CDFI's.
Actual Use: In fiscal 1997 Ihe CDFI Fund awarded $38.3 million in financial and technical assistance.
In total, it has awarded $75 million to nearly eighty institutions.
Potential Use: With support from the CDFI Fund, community development financial institutions can
increase financing for small businesses producing or marketing environmentally friendly goods or services.
Advantages: Community development financial institutions are particularly well suited for involvement in
brownfields redevelopment
Limitations: The CDFI Fund requires a one-to-one match, which means that applicants must have
substantial non-federal support.
Reference for Further Information: U.S. Department of Treasury, Community Development Financial
Institutions Fund, 601 Thirteenth Street, NW, Suite 200 South, Washington, DC 20005, Telephone: 202-
622-8662, Fax: 202-622-7754, Internet: http://www.treas.gov/cdfi/.
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Description:
OTHER
Actual Use:
Potential Use:
Advantages:
Limitations:
Reference for Further Information:
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COMPARISON MATRIX FOR SMALL BUSINESSES AND EGSI -
DEBT TOOLS
Criteria/
Debt Tool
.Agriculture:
RB-CS
Intermediary
Relending
Program
^Bank/Insurance
Financing
*Conimerce:
SBA Business
Development
Corporations
'"Commerce:
SBA LOWDOC
& FASTRAK
Loans
Commerce:
SBA Minority &
Women's
Prequalification
Pilot Loans
Commerce:
SBA Sect. 504
Certified Develop-
ment Companies
"Commerce: SBA
Section 7(a) Loan
Guarantees
Actual
Use
Low
High
Mod.
Mod.
Low
Low
Mod.
.
Revenue
Size
Low
High
Mod.
Low-
Mod.
Low
Low
High
Admini-
strative
Ease
Mod.
Mod.
Mod.-
High
High
High
Mod.
Mod.
Equity
Mod.
Mod.
High
Mod-
High
High
Low-
Mod.
Mod-
High
Financial
Leverag-
ing
Mod.
Mod.
High
High
High
High
'High
Environ-
mental
Benefits
High
High
High
Mod-
High
Mod.
Mod.
Mod-
High
176
-------
EFAB/EFC Guidebook
April 1999
COMPARISON MATRIX continued
Criteria/
Debt Tool
""Commerce:
SBA Section
7(m) Microloans
Commerce: SBA
Short-Term Loans
& Revolving Lines
of Credit
Community
Reinvestment Act
^Convertible
Debt
*Credit Analysis
Credit Cards
^Export-Import
(EX-IiM) Bank
Foundations:
Program-Related
Investments
* Leasing
*Mezzanine
Financing
Micro-Loan
Funds
Actual
Use
Mod.
Mod.
High
Mod..
High
High
Mod.
Mod.
High
High
Low-
Mod.
Revenue
Size
Low-
Mod.
Low
Mod.
Mod.
N.A.
Low
Mod-
High
Low
Low
High
Low-
Mod.
Admini-
strative
Ease
High
Mod.
Mod.
Low-
Mod.
High
High
Mod-
High
Mod.
High
Low-
Mod.
Mod.
Equity
Mod-
High
Mod-
High
Low-
Mod.
Mod.
High
Low
Mod-
High
High
Mod.^
Low-
Mod.
High
Financial
Leverag-
ing
High
High
Mod.
Low-
Mod.
Mod.
N.A.
High
Mod.
High
High
Mod.
Environ-
mental
Benefits
Mod-
High
Mod-
High
Mod.
Mod.-
High
N.A.
Mod
Mod.
Mod
High
High
Mod.
177
-------
EFAB/EFC Guidebook
April 1999
\
COMPARISON MATRIX continued
Criteria/
Debt Tool
National
Cooperative Bank
National Credit
Union Administra-
tion: Community
Development
Revolving Loans
Receivables
Factoring
*Surety
Bonds
Treasury:
Community
Development
Financial
Institutions
Actual
Use
Mod-
High
Mod.
Low
Low
Low-
Mod.
Revenue
Size
Mod.
Low-
Mod.
Low
Low
Low-
Mod.
Admini-
strative
Ease
Mod.
High
Mod.
Mod.
Mod.
Equity
Mod. -
High
Mod.
Low
Mod.
Mod-
High
Financial
Leverag-
ing
Mod.
Mod.
Mod.
High
High
Environ-
mental
Benefits
Mod.
Mod.
Mod.
Mod-
High
Mod.
High - High use (majority of States/small businesses); average credit over $1 million per business;
other criteria score high (e.g., creditors provide additional advice or assistance; easy to arrange;
reasonable interest costs; highly leveraged and influences success/stability of small businesses)
Mod.- Moderate use (10-25 States/many small businesses); average credit $500,000 - $1 million per
business; criteria score in medium range
Low- Low or rare use thus far; average credit under $500,000 per business; one or more major
implementation problems exist
*Star indicates good mechanism for future use
178
-------
April 1999
INDEX
TOOLS 1-5
a
-------
April 1999
\
CATEGORICAL INDEX
(INDEX FOR TOOLS 1-5.PDF)
SECTION 1. TOOLS FOR RAISING REVENUE
P.I
P.3
P.4
P.5
P.6
P.9
P.10
P.ll
P.12
P.13
P.14
P.15
P.16
P.17
P.18
P.19
P.20
Tools for Raising Revenues - Introduction
TAXES
Taxes - Discussion
GENERAL TAXES
General Taxes - Discussion
List of General Taxes
Corporate Gross Receipts Taxes
Corporate Income Taxes
Death and Gift Taxes
Individual Income Taxes
Local Sales Taxes
Personal (Tangible) Property Taxes
Real (Ad Valorem) Property Taxes
State Sales and Use Taxes
Value Added Taxes
Other
Comparison Matrix for General Taxes
P.21
P.22
P.23
P.24
P.25
P.26
P.27
P.28
SELECTIVE SALES TAXES
Selective Sales Taxes - Discussion
List of Selective Sales Taxes
Alcoholic Beverage Taxes
Amusement Taxes
Energy Taxes
Fertilizer/Pesticide Taxes (Agricultural Chemicals)
Green Product Taxes
-------
April 1999
SECTION 1. TOOLS FOR RAISING REVENUE (continued)
P.29 Hard-to-Dispose Taxes
P.30 Hotel and Resort Taxes
P.31 Insurance Premium Taxes
P. 32 . Litter Control Taxes
P.33 Marine and Aviation Taxes
P. 34 Miscellaneous Selective Sales Taxes
P.34 Motor Fuel Taxes
P.36 Motor Vehicle Sales and Registration Taxes
P.37 Petroleum Products Taxes
P.38 Real Estate Transfer Taxes
P.39 Rental Car Taxes
P.40 Tobacco Taxes
P.41 Watercraft Sales Taxes
P.42 Other
P.43 Comparison Matrix for Selective Sales Taxes
P.45 FEES
P.46 Fees - Discussion
P.48 List of Fees
P.49 Access Rights
P.50 Bond Issuance Fees
P. 51 Connection Fees
P.52 Construction Fees
P.53 Franchise Fees
P. 54 Inspection/Monitoring/Testing Fees
P.55 Licensing and Recreational Fees
P. 5 6 Local Aquifer Protection Fees
P.57 Local Water/Wastewater Utility User Fees
P.58 Permitting Fees
P.59 Product Registration Fees
P.60 Professional Certification Fees
P.61 Septic System Impact Fees
P.62 Solid Waste Disposal Fees (Tipping Fees, Septage/Sludge Fees)
P.63 State Public Water Supply Withdrawal Fees
P. 64 Tolls
P.65 Transporter Fees
-------
April 1999
\
SECTION 1.
P.66
P.67
P.68
P.69
P.71
P.72
P.74
P.75
P.76
P.77
P.78
P.79
P.80
P.81
P.82
P.83
P.84
P.85
P.86
P.87
P.89
P.90
P.91
P.92
P.93
P.94
TOOLS FOR RAISING REVENUE (continued)
Water Rights Application Fees
Well Permit/Pumping Fees
Other
Comparison Matrix for Fees
SPECIAL CHARGES
Special Charges - Discussion
List of Special Charges
Direct Water Use Charges
Effluent Charges
Emission Charges
Exactions
Feedstock Charges
Impact Fees
Severance Taxes
Special Assessments
Waste-End Charges (Special Industry Fees)
Other
Comparison Matrix for Special Charges
FINES AND PENALTIES
Fines and Penalties - Discussion
List of Fines and Penalties
Environmental Benefit Projects (Supplemental Environmental Projects)
Monetary Payments
Reimbursements (Superrund Liability Cost Recoveries)
Other
Comparison Matrix for Fines and Penalties
-------
April 1999
i
SECTION 2. TOOLS FOR ACQUIRING CAPITAL
P.95 TOOLS FOR ACQUIRING CAPITAL
P. 96 Tools for Acquiring Capital - Introduction
P. 98 , BONDS
P.99 Bonds - Discussion
P. 100 ' List of Bonds
P. 101 Advance Refunding Bonds
P. 102 Anticipation Notes
P. 103 Appropriation-Backed Bonds
P. 104 Asset-Backed Revenue Bonds
P. 105 Capital Appreciation and Zero Coupon Bonds
P. 106 Certificates of Participation
P. 107 Derivatives
P. 108 Double-Barrel Bonds
P. 109 General Obligation Bonds
P. 110 Mandate Bonds (Environmental)
P.I 11 Mini/Baby Bonds
P. 112 Moral Obligation Bonds
P. 113 Mortgage Lease-Back Revenue Bonds
P. 114 Private Activity Bonds
P. 115 Revenue Bonds
P. 116 Short-Term Municipal Bonds
P. 117 ^ Special Assessment Bonds
P. 118 Special Tax Bonds
P, 120 State Revolving Fund (SRF) Revenue Bonds
P. 121 Structured Municipal Bonds
P. 122 Tax Increment Bonds
P. 123 Other
P. 124 Comparison Matrix for Bonds
P. 126 LOANS
P. 127 Loans - Discussion
P. 129 List of Loans
-------
April 1999
\
SECTION 2. TOOLS FOR ACQUIRING CAPITAL (continued)
P. 130 Agriculture: Rural Business-Cooperative Service — Economic
Development Loans
P. 131 Agriculture: Rural Housing Service (RHS) - Community Facilities Loans
P. 132 Agriculture: RHS - Housing Site & Self Help Housing Land Development
Loans
P. 133 Agriculture: Rural Utilities Service - Water and Waste Disposal Systems Loans
P. 134 CoBank (National Bank for Cooperatives Loan Program)
P. 135 Co-Funding
P. 136 Commercial Loans
P. 137 Direct Source (Equipment) Financing
P. 138 EPA: State Revolving Funds-Clean Water
P. 139 EPA: State Revolving Funds-Drinking Water
P. 140 Federal Financing Bank
P. 141 Federal Loan Programs
P. 142 North American Development Bank
P. 143 Private Investment
P. 144 State Loan Programs
P. 145 State Revolving Fund (SRF) Pre-Financing and Short-Term Loans
P. 146 SRF Private Beneficiary Loans - Clean Water
P. 147 Other
P. 148 Comparison Matrix for Loans
P. 150 GRANTS
P. 151 Grants - Discussion
P. 153 List of Grants (In Alphabetical Order)
P. 155 Agriculture: Forest Service - Cooperative Forestry Assistance
P. 156 Agriculture: Forest Service - Economic Action Programs
P. 157 Agriculture: Forest Service - Landowner Assistance Programs
P. 158 Agriculture: Forest Service - Urban and Community Forestry Program
P. 159 Agriculture: NRCS - Environmental Quality Incentives Program
P. 160 Agriculture: Rural Business-Cooperative Service - Business Enterprise Grants
P. 161 Agriculture: Rural Business-Cooperative Service — Economic Development
Grants
-------
< April 1999
SECTION 2. TOOLS FOR ACQUIRING CAPITAL (continued)
P. 162 Agriculture: Rural Utilities Service - Distance Learning and Telemeditine
Grants
P. 163 Agriculture: Rural Utilities Service - Water and Wastewater Disposal Systems
Grants
P. 164 Appalachian Regional Commission Supplemental Grants
P. 165 Commerce: EDA — Public Works and Infrastructure Development Grants
P. 166 Commerce: EDA - Special Economic Development & Adjustment Assistance
Grants
P. 167 Commerce: NOAA - Coastal Services Center Cooperative Agreements
P. 168 Commerce: NOAA - Coastal Zone Management Administration
Implementation Awards
P. 169 Defense: Army Corps of Engineers - Civil Works Projects
P. 170 EPA: Environmental Education and Training Grants ^
P. 171 EPA: Environmental Justice Grants to Small Community Groups
P. 172 EPA: Environmental Monitoring for Public Access & Community Tracking
(EMPACT) Grants
P. 173 EPA: Performance Partnership Grants
P. 174 EPA: Program Grants
«P.177 EPA: Section 319 Nonpoint Source Pollution Control Grants
P. 178 EPA: Superrund Technical Assistance Grants
P. 179 EPA: Sustainable Development Challenge Grants
P. 180 EPA: Underground Storage Tank Trust Fund Program Grants
P. 181 EPA: Wetlands Protection Development Grants
P. 182 Environmental Technology Initiative
P. 183 FEMA: Flood Mitigation Assistance
P. 184 FEMA: Hazard Mitigation Assistance
P. 185 Foundation and Corporate Giving
P. 186 HUD: Community Development Block Grants - Economic Development
Initiative Grants
P. 187 HUD: Community Development Block Grants - Entitlement Grants
P. 188 HUD: Community Development Block Grants - Small Cities Program
Nonentitiement Grants
P. 189 HUD: Community Development Block Grants - States' Grants Program
Nonentitiement Grants
P. 190 Interior: Fish and Wildlife Service » National Coastal Wetlands Conservation
Grants
P. 191 Interior: Fish and Wildlife Service - North American Wetlands Conservation
Act Grants
-------
April 1999
\
P. 192
SECTION 2.
State Grant Programs
TOOLS FOR ACQUIRING CAPITAL (continued)
P. 193
P. 194
P. 195
P. 196
State Revolving Fund (SRF) Drinking Water Principal Subsidies
Transportation: Federal Transit Administration ~ Livable
Communities Initiative
Transportation: Transportation Equity Act for the 21st Century (TEA-21)
Other
SECTION 3.
P. 197
P. 198
P. 199
P.200
P.201
P.202
P.204
P.205
P.206
P.207
P.208
P.209
P.210
P.211
P.212
P.213
P.215
P.216
P.217
P.218
TOOLS FOR ENHANCING CREDIT
TOOLS FOR ENHANCING CREDIT
Tools for Enhancing Credit - Introduction
List of Tools for Enhancing Credit
Association Pooling
Commerce: Small Business Administration - Surety Bond Program
Commercial Insurance and Guarantees
Environmental Due Diligence
Financial Due Diligence
Grant-Backed Credit Enhancements
HUD: Community Development Block Grants - Section 108 Loan Guarantees
Letter of Credit/Lines of Credit
Performance Bonds
Senior and Subordinate Debt Structuring
State Bond Banks
State Guarantees and Insurance
State Revolving Fund (SRF) Bond Leveraging
SRF Common Bond Pools and Cross-Collateralization
SRF Interest Rate Subsidies
Other
Comparison Matrix for Credit Enhancement Mechanisms
a
-------
t
April 1999
X SECTION 4. TOOLS FOR BUILDING PUBLIC-PRIVATE PARTNERSHIPS
X,
P.220 TOOLS FOR BUILDING PUBLIC-PRIVATE PARTNERSHIPS
P.221 Tools for Building Public-Private Partnerships - Introduction
P.223 PUBLIC-PRIVATE PARTNERSHIP ARRANGEMENTS
P.224 Public-Private Partnership Arrangements - Discussion
P.226 List of Public-Private Partnership Arrangements
P.227 Asset Sales (Under Executive Order 12803)
P.228 Build/Operate/Transfer or Build/Transfer/Operate (New Facility Construction,
Operation and/Ownership)
P.229 Contract Services: Operations and Maintenance (Private Services Contract)
P.230 Contract Services: Operations, Maintenance, and Management (Private
Services Contract)
P.231 Developer Financing
P.232 Lease/Develop/Operate or Build/Develop/Operate (Existing Facility
Lease and Renovation)
P. 233 Lease/Purchase (New Facility Construction)
P.234 Long-Term Lease (Under Executive Order 12803)
P. 235 Merchant Facility •
P. 236 Privatization
P.237 Sale/Leaseback
P.238 Self-Regulation (Inspection and Monitoring)
P.239 Tax-Exempt Lease
. P.240 Turnkey (New Facility Construction)
P.241 Other
P.242 Comparison Matrix for Public-Private Partnership Arrangements
P.244 EFAB PUBLIC-PRIVATE PARTNERSHIP AND
OPTIMIZATION CASE STUDIES
P. 245 EFAB Public-Private Partnership and Optimization Case Studies - Discussion
P.246 List of EFAB Public-Private Partnership and Optimization Case Studies
P.247 Charlotte, North Carolina
P. 248 Indianapolis, Indiana
P.249 Jersey City, New Jersey
.£fe
-------
April 1999
SECTION 4. TOOLS FOR BUILDING PUBLIC-PRIVATE PARTNERSHIPS
(continued)
P.253 Miami Conservancy District, Ohio r
P.255 New Orleans, Louisiana
P.257 North Brunswick Township, New Jersey
P.259 Oklahoma City, Oklahoma
P.261 Philadelphia, Pennsylvania
P.263 West New York, New Jersey
P.265 Wilmington, Delaware
P. 267 Wixom, Michigan
P.269 Other
SECTION 5. TOOLS FOR DELIVERING FINANCIAL OUTREACH
P.270 TOOLS FOR DELIVERING FINANCIAL OUTREACH
P.271 Tools for Delivering Financial Outreach - Introduction
P.272 INSTITUTIONAL ARRANGEMENTS
P.273 Institutional Arrangements - Discussion
P.274 List of Institutional Arrangements
P.275 Border Environmental Cooperation Commission
P.276 Circuit Riders
P.277 Cooperatives
. P.278 Cooperative Extension Systems
P.279 Drinking Water SRF Capacity Development
P.280 Environmental Finance Center (EFC) Network
P.281 Region 6 EFC at the University of New Mexico
P.282 Region 3 EFC at Hie University of Maryland
P.283 Region 2 EFC at the Maxwell School, Syracuse University
P.284 Region 9 EFC at California State University at Hayward
P.285 Region 5 Great Lakes EFC at Cleveland State University
P.286 . Region 10 EFC at Boise State University
P.287 Region 4 EFC at tiie University of North Carolina
P.288 Region 4 EFC at the University of Louisville
P.289 EPA: Environmental Finance Program
P. 290 EPA: Environmental Financial Advisory Board
10
-------
April 1999
SECTION 5. TOOLS FOR DELIVERING FINANCIAL OUTREACH (continued)
«
P.291
P.292
P.293
P.294
P.295
P.296
P.297
P.298
P.300
P.301
P.303
P.304
P.305
P. 306
P.307
P.308
P.309
P.310
P.311
P.3I2
P.313
P.314
Finance Charrettes
National Technical Assistance Programs (Non-profit)
Retired Volunteers
Rural Community Assistance Corporation
Self-Help
West Virginia University Environmental Services and Training Division
Other
Comparison Matrix for Institutional Arrangements
ELECTRONIC SERVICES
Electronic Services - Discussion
List of Electronic Services
Catalog of Federal Domestic Assistance
EPA: Environmental Finance Program Home Page
EPA: Environmental Financing Information Network
EPA: Home Page
FinanceNet
. Long Distance Learning
Rate Models
The Environmental Hotline: Earth's 911
World Wide Web
Other
Comparison Matrix for Electronic Services
11
-------
t
-------
INDEX
TOOLS 6-10
-------
CATEGORICAL INDEX
(INDEX FOR tools6-10.PDF)
SECTION 6. TOOLS FOR LOWERING COSTS
P.I
P.2
P3
P.4
P.5
P.6
P.7
P.8
P.9
P.10
P.ll
P.12
P.13
P.14
P.15
P.16
P.17
P.18
P.19
P.20
P.21
P.22
P.23
P.24
P.25
P.26
P.27
P.28
P.29
P.30
P.31
P.32
P.33
TOOLS FOR LOWERING COSTS
Tools for Lowering Costs - Introduction
List of Tools for Lowering Costs
Accelerated Depreciation
Activity-Based-Costing (ABC)
Amortization of Pollution Control Facilities
Appropriate Technology
Barter and Payment-In-Kind
Benchmarking
Capital Planning and Budgeting
Comparative Risk Ranking
Cost-Benefit Analysis
Cost-Effectiveness Analysis
Deduction of Agricultural Conservation Expenses
Discounting (Economic)
Employee Stock Ownership Plans
EPA: Common Sense Initiative
EPA: Project XL
Expensing of Assets
Financial Capability Analysis
Fiscal Impact Analysis
Full-Cost Pricing
Life-Cycle Assessment/Costing/Design
Pay-As-You-Go
Pollutant Loading Allocation
Refinancing Loans
Reforestation Tax Credit and Amortization
Regionalization
Rehabilitation Tax Credits
Risk Management and Insurance
Value Engineering
Other
Comparison Matrix for Tools for Lowering Costs
-------
SECTION?. TOOLS FOR ENCOURAGING POLLUTION
PREVENTION AND RECYCLING
P.36 TOOLS FOR ENCOURAGING POLLUTION
PREVENTION AND RECYCLING
P. 3 7 Tools for Encouraging Pollution Prevention and Recycling - Introduction
P. 3 8 List of Tools for Encouraging Pollution Prevention and Recycling
P. 3 9 Assurance/Performance Bonding
P.40 Demand-Side Management Pricing
P.41 Deposit-Refund Systems
P.42 Development Rights Purchases
P.43 Differential Pricing
P.44 Energy: NICE 3
P.45 EPA: Pollution Prevention Grants
P.46 Environmental Self-Auditing
P.47 Full-Cost Environmental Accounting
P.48 Green Code of Conduct (ISO 14000 Voluntary Environmental Standards)
P.49 Green Investments
P.50 Liability Assignment
P. 51 Pollution Charges
P.52 Private Forest Banking
P.53 State Pollution Prevention (P2)/RecycIing Loan Programs
P.54 Tax Incentive Programs
P.55 Transit Pass Subsidy Programs
P.56 Other
P.57 Comparison Matrix for Pollution Prevention/Recycling
SECTION 8. TOOLS TO PAY FOR COMMUNITY-BASED
ENVIRONMENTAL PROTECTION
P.59 TOOLS TO PAY FOR COMMUNITY-BASED
ENVIRONMENTAL PROTECTION
P.60 Tools to Pay for Community-Based Environmental Protection -
Introduction
P.62 List of Tools to Pay for Community Based Environmental Protection
P.63 Adopt-An-Animal/Habitat Programs
P.64 Affinity Merchandise (License Plates, Stamps)
P.65 Agriculture: Farm Service Agency - Conservation Reserve Program
P. 66 Agriculture: Natural Resources Conservation Service - Wetlands Reserve
Program
P. 67 Assurances
-------
SECTION 8. TOOLS TO PAY FOR COMMUNITY-BASED
ENVIRONMENTAL PROTECTION (continued)
P.68
P. 69
P. 70
P.71
P.72
P.73
P.74
P.75
P.76
P.77
P.78
P.79
P.80
P.81
P.82
P.83
P. 84
P. 85
P. 86
P. 87
P.88
P.89
P.90
Capital Improvements Program
Community Foundations
Conservation Easements
Conservation Partnerships
Contributions of Land
Cost-Share for Livestock Waste Storage Systems
Dedicated Government Trust Funds
Ecotourism
Emissions Trading
Environmental Lotteries
Environmental Revolving Funds
Green Credit Card
Individual and Corporate Donations
Land Trusts and Reclamation Banks
Mini Bonds for Stream Restoration
Mitigation Lands and Banking
Municipal Utility Asset Sales
Non-Profit Organizations
Point Source/Nonpoint Source Trading
Special Districts (Special Purpose Districts, Regional Authorities)
Tax Increment Financing - CBEP
Other
Comparison Matrix for Community-Based Protection
SECTION 9. TOOLS FOR FINANCING BROWNFIELDS REDEVELOPMENT
P.93 TOOLS FOR FINANCING BROWNFIELDS REDEVELOPMENT
P.94 Tools for Financing Brownfields Redevelopment - Introduction
P. 95 List of Tools for Financing Brownfields Redevelopment
P.96 Brownfields Cleanup Tax Deduction
P.97 Clean Land Fund (Revolving Fund)
P. 98 Community Development Financial Institutions
P. 99 Empowerment Zones/Enterprise Communities
P. 100 Environmental Insurance
4
-------
**
SECTION 9. TOOLS FOR FINANCING BROWNFIELDS REDEVELOPMENT
(continued)
P. 101 Environmental Liability Releases/Agreements
P. 102 EPA: Brownfields Assessment Demonstration Pilots
P. 103 EPA: Brownfields Workforce Development
P. 104 EPA: SRF Brownfields Loans (Clean Water)
P. 105 EPA: Superfund Trust Fund
P. 106 Environmental Risk-Management (Real Estate)
P. 107 Federal Assistance Programs
P. 108 Industrial Development Funds
P. 109 Land Reclamation Banks
P. 110 Land Recycling Companies
P. 111 . Property Parcelization
P. 112 Qualified Empowerment Zone Facility Bonds
P. 113 Real Estate Investment Trusts
P. 114 State Voluntary Cleanup Programs
P. 115 Tax Abatements
P. 116 Tax Incentives
P. 117 Tax Increment Financing
P. 118 Transferable Development Rights
P.I 19 Other
P. 120 Comparison Matrix for Financing Brownfields Redevelopment
SECTION 10. TOOLS TO ACCESS FINANCING FOR SMALL BUSINESSES &
THE ENVIRONMENTAL GOODS AND SERVICES INDUSTRY
P. 123
P. 124
SECTION 10A.
P. 126
P. 127
P. 129
P.130
TOOLS TO ACCESS FINANCING FOR SMALL BUSINESSES &
THE ENVIRONMENTAL GOODS AND SERVICES INDUSTRY
Tools to Access Financing for Small Businesses and the Environmental
Goods and Services Industry - Introduction
EQUITY CAPITAL
EQUITY CAPITAL
v -•
Equity Capital - Discussion
List of Equity Tools
Agriculture: Alternative Agricultural Research and Commercialization
Corporation
-------
SECTION 10, TOOLS TO ACCESS FINANCING FOR SMALL BUSINESSES*
THE ENVIRONMENTAL GOODS AND SERVICES INDUSTRY
(continued)
P. 131 Angels (Personal Investors)
P. 132 Business Plans
P. 133 Commerce: Small Business Administration (SBA) - Angel Capital Electronic
Network
P. 134 Commerce: SBA — Small Business Innovation Research Program
P. 135 Commerce: SBA - Small Business Investment Companies
P. 136 Environmental Capital Network
P. 137 Environmental Opportunity Funding Corporation
P. 138 Franchising
P. 139 Investment Forums
P. 140 Investment Networks
P. 141 Joint Ventures
P. 142 Private Placements
P. 143 Public Offerings
P. 144 Strategic Alliances
P. 145 Venture Capital
P. 146 Other
P. 147 Comparison Matrix for Small/EGSI Business Equity Capital
P. 149 DEBT
P. 150 Debt - Discussion
P. 151 List of Debt Tools
P. 152 Agriculture: Rural Business-Cooperative Service - Intermediary Relending
Program
P. 153 Bank/Insurance Financing
P. 154 Commerce: Small Business Administration (SBA) - Business Development
Corporations
P. 155 Commerce: SB A - LOWDOC and FASTRACK Loans
P. 156 Commerce: SBA — Minority & Women's Prequalification Pilot Loans
P. 157 Commerce: SBA — Section 504 Certified Development Companies
P. 158 Commerce: SBA--Section 7(a) Loan Guarantees
P. 159 Commerce: SBA - Section 7(m) Microloans
P. 160 Commerce: SBA — Short-Term Loans & Revolving Lines of Credit
P. 161 Community Reinvestment Act
-------
SECTION 10. TOOLS TO ACCESS FINANCING FOR SMALL BUSINESSES &
THE ENVIRONMENTAL GOODS AND SERVICES INDUSTRY
(continued)
P. 162 , Convertible Debt
P. 163 Credit Analysis
P. 164 Credit Cards
P. 165 Export-Import (EX-IM) Bank
P. 166 Foundations: Program-Related Investments
P. 167 Leasing
P. 168 Mezzanine Financing
P. 169 Micro-Loan Funds
P. 170 National Cooperative Bank
P. 171 National Credit Union Administration: Community Development
Revolving Loans
P. 172 Receivables Factoring (Accounts Receivable Financing)
P.173 Surety Bonds
P. 174 Treasury: Community Development Financial Institutions Fund
P. 175 Other
P. 176 Comparison Matrix for Debt Tools
-------
-------
t
April 1999
ALPHABETICAL INDEX
Page 1 of 11
-------
f
April 1999
Section
Page Term
6 4 Accelerated Depreciation
1 49 Access Rights
6 5 Activity-Based-Costing (ABC)
8 63 Adopt-An-Anima3/Habitat Programs
2 101 Advance Refunding Bonds
8 64 Affinity Merchandise (License Plates, Stamps)
10 130 Agriculture: Alternative Agricultural Research and Commercialization
Corporation
8 65 Agriculture: Farm Service Agency - Conservation Reserve Program
2 155 Agriculture: Forest Service - Cooperative Forestry Assistance
2 156 Agriculture: Forest Service - Economic Action Programs
2 157 Agriculture: Forest Service - Landowner Assistance Programs
2 158 Agriculture: Forest Service - Urban and Community Forestry Program
2 159 Agriculture: NRCS - Environmental Quality Incentives Program
8 66 Agriculture: NRCS - Wetlands Reserve Program
2 160 Agriculture: Rural Business-Cooperative Service - Business Enterprise Grants
2 161 Agriculture: Rural Business-Cooperative Service - Economic Development
Grants
2 130 Agriculture: Rural Business-Cooperative Service - Economic
Development Loans
10 152 Agriculture: Rural Business-Cooperative Service - Intermediary Relending
Program
2 131 Agriculture: Rural Housing Service - Community Facilities Loans
2 132 Agriculture: Rural Housing Service - Housing Site & Self Help Housing
Land Development Loans
2 162 Agriculture: Rural Utilities Service - Distance Learning and Telemedicine
Grants
2 163 Agriculture: Rural Utilities Service - Water and Wastewater Disposal Systems
Grants
2 133 Agriculture: Rural Utilities Service - Water and Wastewater Disposal
Systems Loans
1 24 Alcoholic Beverage Taxes
6 6 Amortization of Pollution Control Facilities
1 25 Amusement Taxes
10 131 Angels (Personal Investors)
2 102 Anticipation Notes
Page 2 of 11
t
-------
April 1999
Section Page Term
2 164 Appalachian Regional Commission Supplemental Grants
6 7 Appropriate Technology
2 "103 Appropriation-Backed Bonds
2 104 Asset-Backed Revenue Bonds
4 227 Asset Sales (Under Executive Order 12803)
3 200 Association Pooling
7 39 Assurance/Performance Bonding
8 67 Assurances
10 153 Bank/Insurance Financing
6 8 Barter and Payment-In-Kind
6 9 Benchmarking
1 50 Bond Issuance Fees
5 275 Border Environmental Cooperation Commission
9 - 96 Brownfields Cleanup Tax Deduction
4 228 BuiloYOperatefTransfer or Build/Transfer/Operate (New Facility
Construction, Operation and/or Ownership)
10 132 Business Plans
2 105 Capital Appreciation and Zero Coupon Bonds
8 68 Capital-Improvements Program
6 10 Capital Planning and Budgeting
5 304 Catalog of Federal Domestic Assistance
2 106 Certificates of Participation
5 276 Circuit Riders
9 97 ' Clean Land Fund (Revolving Fund)
2 134 CoBank (National Bank for Cooperatives Loan Program)
2 135 Co-Funding
2 165 Commerce: EDA - Public Works and Infrastructure Development Grants
2 166 Commerce: EDA - Special Economic Development & Adjustment Assistance
Grants
2 167 Commerce: NOAA- Coastal Services Center Cooperative Agreements
2 168 Commerce: NOAA- Coastal Zone Management Administration
Implementation Awards
10 133 Commerce: SBA - Angel Capital Electronic Network
10 154 Commerce: SBA - Business Development Corporations
10 155 Commerce: SBA - LOWDOC and FASTRAK Loan Programs
10 156 Commerce: SBA - Minority and Women's Prequalification Pilot Loan
Programs
Page 3 of 11
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April 1999
Section
10
10
10
10
10
10
3
3
2
9
8
10
6
1
$
8
1
4
Page Term
157
158
159
160
134
135
201
202
136
98
69
161
11
51
70
71
52
229
230
8
10
5
5
1
1
6
6
8
10
10
1
8
6
2
7
72
162
211
278
10
11
12
13
73
163
164
12
74
14
169
40
Commerce: SBA - Section 504 Certified Development Companies
Commerce: SBA - Section 7(a) Loan Guarantees
Commerce: SBA - Section 7(m) Microloans
Commerce: SBA - Short Term Loans and Revolving Lines of Credit
Commerce: SBA - Small Business Innovation Research Program
Commerce: SBA - Small Business Investment Companies
Commerce: SBA - Surety Bond Program
Commercial Insurance and Guarantees
Commercial Loans
Community Development Financial Institutions
Community Foundations
Community Reinvestment Act
Comparative Risk Ranking
Connection Fees
Conservation Easements
Conservation Partnerships
Construction Fees
Contract Services: Operations and Maintenance (Private Services
Contract)
Contract Services: Operations, Maintenance, and Management
(Private Services Contract)
Contributions of Land
Convertible Debt
Cooperatives
Cooperative Extension Systems
Corporate Gross Receipts Taxes
Corporate Income Taxes
Cost-Benefit Analysis
Cost-Effectiveness Analysis
Cost-Share for Livestock Waste Storage Programs
Credit Analysis
Credit Cards
Death and Qft Taxes
Dedicated Government Trust Funds
Deduction of Agricultural Conservation Expenses
Defense: Army Corps of Engineers- Civil Works Projects
Demand-Side Management Pricing
Page 4 of 11
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April 1999
Section Page Term
7 41 Deposit-Refund Systems
2 107 Derivatives
4 231 Developer Financing
7 42 Development Rights Purchases
7 43 Differential Pricing
2 137 Direct Source (Equipment) Financing
1 75 Direct Water Use Charges
6 15 Discounting (Economic)
2 108 Double-Barrel Bonds
5 279 Drinking Water SRF Capacity Development
8 75 Ecotourism
1 76 Effluent Charges
1 77 Emission Charges
8 76 Emissions Trading
6 16 Employee Stock Ownership Plans
9 99 Empowerment Zones/Enterprise Communities
7 44 Energy: NICE 3
1 26 Energy Taxes
1 90 Environmental Benefit Projects (Supplemental Environmental Projects)
10 136 Environmental Capital Network
3 205 Environmental Due Diligence
5 280 Environmental Finance Center (EFC) Network
5 281 Region 6 EFC at the University of New Mexico
5 282 Region 3 EFC at the University of Maryland
5 283 Region 2 EFC at the Maxwell School, Syracuse University
5 284 Region 9 EFC at California State University at Hayward
5 285 Region 5 Great Lakes EFC at Cleveland State University
5 286 Region 10 EFC at Boise State University '
5 287 Region 4 EFC at the University of North Carolina
5 288 Region 4 EFC at the University of Louisville
4 246 EFAB Public-Private Partnership and Optimization Case Studies
4 247 Charlotte, North Carolina
4 248 Indianapolis, Indiana
4 249 Jersey City, New Jersey
4 253 Miami Conservancy District, Ohio
4 255 New Orleans, Louisiana
4 257 North Brunswick Township, New Jersey
Page 5 of II
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April 1999
Section
Page Term
4
4
4
4
4
9
9
10
9
9
6
2
5
5
5
5
2
2
2
7
2
6
2
9
2
2
2
9
2
2
2
8
9
7
2
1
259
261
263
265
267
100
101
137
102
103
17
170
305
290
306.
307
171
172
173
45
174
18
177
104
138
139
178
105
179
180
181
78
106
46
182
78
Oklahoma City, Oklahoma
Philadelphia, Pennsylvania
West New York, New Jersey
Wilmington, Delaware
Wixom, Michigan
Environmental Insurance
Environmental Liability Releases/Agreements
Environmental Opportunity Funding Corporation
EPA: Brownfields Assessment Demonstration Pilots
EPA: Brownfields Workforce Development
EPA: Common Sense Initiative
EPA: Environmental Education and Training Grants
EPA: Environmental Finance Program Home
EPA: Environmental Financial Advisory Board
EPA: Environmental Financing Information Network
EPA: Home
EPA: Environmental Justice Grants to Small Community Groups
EPA: Environmental Monitoring for Public Access & Community Tracking
(BMP ACT) Grants
EPA: Performance Partnership Grants
EPA: Pollution Prevention Grants
EPA: Program Grants
EPA: Project XL
EPA: Section 319 Nonpoint Source Pollution Control Grants
EPA: SRF Brownfields Loans (Clean Water)
EPA: State Revolving Funds - Clean Water
EPA: State Revolving Funds - Drinking Water
EPA: Superfund Technical Assistance Grants
EPA: Superfund Trust Fund
EPA: Sustainable Development Challenge Grants
EPA: Underground Storage Tank Trust Fund Program Grants
EPA: Wetlands Protection Development Grants
Environmental Revolving Funds
Environmental Risk-Management (Real Estate)
Environmental Self-Auditing
Environmental Technology Initiative
Exactions
Page 6 of 11
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April 1999
Section Page Term
6 19 Expensing of Assets
10 165 Export-Import (EX-IM) Bank
9 107 Federal Assistance Programs
2 140 Federal Financing Bank
2 141 Federal Loan Programs
1 79 Feedstock Charges
1 27 Fertilizer/Pesticide Taxes (Agricultural Chemicals)
2 183 FEMA: Flood Mitigation Assistance
2 184 FEMA: Hazard Mitigation Assistance Grants •
5 291 Finance Charrettes
5 308 FinanceNet
6 20 Financial Capability Analysis
3 205 Financial Due Diligence
6 21 Fiscal Impact Analysis
2 185 Foundation and Corporate Giving
10 166 Foundations: Program-Related Investments
1 53 Franchise Fees
10 138 Franchising
7 47 Full-Cost Environmental Accounting
6 22 Full-Cost Pricing
2 109 General Obligation Bonds
3 206 Grant-Backed Credit Enhancements
7 48 Green Code of Conduct (ISO 14000 Voluntary Environmental Standards)
8 79 Green Credit Card
7 49 Green Investments
1 28 Green Product Taxes
1 29 Hard-to-Dispose Taxes
1 30 Hotel and Resort Taxes
2 186 HUD: Community Development Block Grants-Economic Development
Initiative Grants
2 187 HUD: Community Development Block Grants-Entitlement Grants
3 207 HUD: Community Development Block Grants-Section 108 Loan Guarantees
2 188 HUD: Community Development Block Grants-Small Cities Program
Nonentitiement Grants
2 189 HUD: Community Development Block Grants-States' Granis Program
Nonentrdement Grants
1 80 Impact Fees
,T
Page 7 of 11
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April 1999
Section Page Term
8 80 Individual and Corporate Donations
1 13 Individual Income Taxes
9 108 Industrial Development Funds
1 54 Inspection/Monitoring/Testing Fees
1 31 Insurance Premium Taxes
2 190 Interior: Fish and Wildlife Service - National Coastal Wetlands Conservation
Grants
2 191 Interior Fish and Wildlife Service - North American Wetlands Conservation
Act Grants
10 139 Investment Forums
10 140. Investment Networks
10 141 Joint Ventures
9 109 Land Reclamation Banks
9 110 Land Recycling Companies
8 81 Land Trusts and Reclamation Banks
4 232 Lease/Develop/Operate or Build/Develop/Operate (Existing Facility Lease
and Renovation)
4 233 Lease/Purchase (New Facility Construction)
10 167 Leasing
3 208 Letters of Credit/Lines of Credit
7 50 Li ability Assignment
1 55 Licensing and Recreational Fees
6 23 Life-Cycle Assessment/Costing/Design
1 32 Litter Control Taxes
1 56 Local Aquifer Protection Fees
1 14 Local Sales Taxes
1 57 Local Water/Wastewater Utility User Fees
5 309 Long Distance Learning
4 234 Long Term Lease (Under Executive Order 12803)
2 . 110 Mandate Bonds (Environmental)
1 33 Marine and Aviation Taxes
4 235 Merchant Facility
10 168 Mezzanine Financing
10 169 Micro-Loan Funds
2 111 Mini/Baby Bonds
8 82 Mini Bonds for Stream Restoration
1 34 Miscellaneous Selective Sales Taxes
Page 8 of 11
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April 1999
Section Page Term
8 83 Mitigation Lands and Banking
1 91 Monetary Payments
2 112 Moral Obligation Bonds
2 113 Mortgage Lease-Back Revenue Bonds
1 34 Motor Fuel Taxes
1 36 Motor Vehicle Sales and Registration Taxes
8 84 Municipal Utility Asset Sales
10 170 National Cooperative Bank
10 171 National Credit Union Administration: Community Development
Revolving Loans
5 292 National Technical Assistance Programs (Non-profit)
8 85 Non-Pfofit Organizations
2 142 North American Development Bank
6 24 Pay-As-You-Go
3 209 Performance Bonds
1 58 Permitting Fees
1 15 Personal (Tangible) Properly Taxes
1 37 Petroleum Products Taxes
8 86 Point Source/Nonpoint Source Trading
6 25 Pollutant Loading Allocation
7 51 Pollution Charges
2 114 Private Activity Bonds
7 52 Private Forest Banking
2 143 Private Investment
10 142 Private Placements
4 236 Privatization
1 59 Product Registration Fees
1 60 Professional Certification Fees
9 111 Property Parcelization
10 143 Public Offerings '
9 112 Qualified Empowerment Zone Facility Bonds
5 310 Rate Models
9 113 Real Estate Investment Trusts
1 38 Real Estate Transfer Taxes
1 16 Real (Ad Valorem) Property Taxes
10 172 Receivables Factoring (Accounts Receivable Financing)
6 26 Refinancing Loans
Page 9 of 11
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April 1999
V
Section
Page Term
6
6
6
1
1
5
2
6
5
4
5
4
3
1
1
2
1
2
1
8
2
3
2
3
2
7
1
3
3
2
3
2
2
2
1
9
10
27
28
29
92
39
293
115
30
294
237
295
238
210
61
81
116
62
117
82
87
118
211
192
212
144
53
63 .
213
215
193
216
145
146
120
17
114
144
Reforestation Tax Credit and Amortization
Regionalization
Rehabilitation Tax Credits
Reimbursements (Superfund Liability Cost Recoveries)
Rental Car Taxes
Retired Volunteers
Revenue Bonds
Risk Management and Insurance
Rural Community Assistance Corporation
Sale/Leaseback
Self-Help
Self-Regulation (Inspection and Monitoring)
Senior and Subordinate Debt Structuring
Septic System Impact Fees
Severance Taxes
Short-Term Municipal Bonds
Solid Waste Disposal (Tipping Fees, Septage/Sludge Fees)
Special Assessment Bonds
Special Assessments
Special Districts (Special Purpose Districts, Regional Authorities)
Special Tax Bonds
State Bond Banks
State Grant Programs
State Guarantees and Insurance
State Loan Programs
State Pollution Prevention (P2)/Recycling Loan Programs
State Public Water Supply Withdrawal Fees
SRF Bond Leveraging
SRF Common Bond Pools and Cross-Collateralization
SRF Drinking Water Principal Subsidies
SRF Interest Rate Subsidies
SRF Pre-Financing and Short-Term Loans
SRF Private Beneficiary Loans - Clean Water
SRF Revenue Bonds
State Sales and Use Taxes'
State Voluntary Cleanup Programs
Strategic Alliances
>Tx
Page 10 of 11
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••=•7
April 1999
Section Page Term
2 121 Structured Municipal Bonds
10 173 Surety Bonds
9 115 Tax Abatements
7 54 Tax Incentive Programs
9 116 Tax Incentives
2 122 Tax Increment Bonds
9 117 Tax Increment Financing
8 88 Tax Increment Financing-CBEP
4 t 239 Tax-Exempt Lease
5 311 The Environmental Hotline Earth's 911
1 40 Tobacco Taxes
1 64 Tolls
9 118 Transferable Development Rights
7 55 Transit Pass Subsidy Program
2 194 Transportation: Federal Transit Administration Livable Communities Initiative
2 195 Transportation: Transportation Equity Act for the 21st Century (TEA-21)
1 65 Transporter Fees
10 174 Treasury: Community Development Financial Institutions Fund
4 240 Turnkey (New Facility Construction)
1 18 Value Added Taxes
6 31 Value Engineering
10 145 Venture Capital
1 83 Waste-End Charges (Special Industry Fees)
1 66 Water Rights Application Fees
1 41 Watercraft Sales Taxes
1 67 Well Permit/Pumping Fees
5 296 West Virginia University Environmental Services and Training Division
5 312 World Wide Web
.!**&•
Page 11 of 11
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I
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April 1999
i
INDEX OF NEW AND SUBSTANTIALLY REVISED
TOOLS FOR THE APRIL 1999 REVISION
Activity-Based-Costing (Related to Full-Cost Environmental Accounting, in Section 7)
Department of Agriculture
Alternative Agricultural Research and Commercialization (AARC) Corporation
Forest Service, Cooperative Forestry Assistance
Forest Service, Economic Action Programs
Forest Service, Landowner Assistance Programs
Forest Service, Urban and Community Forestry Program
Natural Resource Conservation Service, Environmental Quality Incentives Program (EQIP)
Rural Business-Cooperative Service, Intermediary Relending Program -
Rural Utilities Service, Distance Learning and Telemedicine Loans and Grants
Wetlands Reserve Program
Appropriate Technology
Barter and Payment-In-Kind
Capital Appreciation and Zero Coupon Bonds
Capital Planning and Budgeting
Co-Funding
Department of Commerce
National Oceanic and Atmospheric Administration (NOAA)
Coastal Services Center Cooperative Agreements
Coastal Zone Management Adrninistration/Implementation Awards
Community Foundations
Community Reinvestment Act
Conservation Easements
Cooperative Extension Systems
Corps of Engineers, Civil Works Projects
Development Rights Purchases
Differential Pricing - Replaces Previous Version, See Section 7
Direct Source (Equipment) Financing
Discounting (Economic)
Environmental Capital Network (ECN)
Page 1 of 4
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April 1999
INDEX OF NEW AND SUBSTANTIALLY REVISED TOOLS
(continued)
Environmental Due Diligence
Environmental Protection Agency (EPA)
Brownfields Workforce Development
Environmental Education and Training Grant Programs
Environmental Justice Initiative and Small Grants Program
Environmental Monitoring For Public Access and Community Tracking (EMPACT) Grants
Program
Underground Storage Tank Trust Fund Program Grants
Section 319 Nonpoint Source Pollution Control Grants
Superfimd Technical Assistance Grants
Wetlands Protection Development Grants
Export-Import (Ex-Im) Bank
*" S
Mood Mitigation Assistance
Hazard Mitigation Assistance
Financial Due Diligence
Fiscal Impact Analysis
Foundations: Program-Related Investments
Franchise Fees
Green Code of Conduct, ISO 14000 Voluntary Environmental Standards
Department of the Interior
Fish and Wildlife Service, National Coastal Wetlands Conservation Grants Program
Fish and Wildlife Service, North American Wetlands Conservation Act Grant Programs
Joint Ventures
Life-Cycle Assessment/Costing/Design
Local Aquifer Protection Fees
Local Sales Taxes
Mezzanine Financing
Page 2 of 4
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April 1999
t
INDEX OF NEW AND SUBSTANTIALLY REVISED TOOLS
(continued)
Micro-Loan Funds
Mini/Baby Bonds (Replaces Mini Bonds in Section 2A, not Mini Bonds for Stream Restoration in
Section 8)
Miscellaneous Selective Sales Taxes
National Cooperative Bank
National Credit Union Administration
Pay-As-You-Go
Property Parcelization
Real (Ad Valorem) Property Taxes
Refinancing Loans and Bonds
Regionalization
Risk Management and Insurance
Small Business Administration (SBA)
Angel Capital Electronic Network
Section 7(a) Loan Guarantees
Short Term Loans and Revolving Lines of Credit (CAPLines)
LowDoc and FASTRAK Loan Programs
Minority and Women's Prequalification Pilot Loan Program
Section 7(m) Microloans
Section 504 Certified Development Companies
Surety Bond Program
Small Business Innovation Research Program
SRF Clean Water Private Beneficiary Bonds
SRF Drinking Water Principal Subsidies
State Grant Programs
Structured Municipal Bonds
Tolls
i
Department of Transportation
Federal Transit Administration, Livable Communities Initiative
Transportation Equity Act for the 21st Century (TEA-21)
V
Department of the Treasury
Community Development Financial Institutions Fund
Page 3 of 4
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April 1999
ENDEX OF NEW AND SUBSTANTIALLY REVISED TOOLS
(continued)
Internal Revenue Service
Accelerated Depreciation
Amortization of Pollution Control Facilities
Brownfields Cleanup Tax Deduction
Deduction of Agricultural Conservation Expenses
Employee Stock Ownership Plans (ESOP)
Expensing of Assets
Reforestation Tax Credit and Amortization
Rehabilitation Tax Credits
Value Analysis/Engineering/Management
Page 4 of 4
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April 1999
A. PROPOSED TOOLS FOR THE NEXT
GUIDEBOOK
This Guidebook of Financial Tools is intended as a basic reference document for public and private
officials with environmental responsibilities. The editors want the Guidebook to remain a dynamic
document — with revisions, refinements, and expansions taking place on a reoccurring basis (every two
years or so). In the interim between Guidebook revisions, many new financing tools are being developed,
tested, and implemented in the real-world by innovative officials in bolh the public and private sectors.
This Appendix provides users and readers during the time between Guidebook revisions some of those
exciting new financing tools (and existing tools not included in this revision). The Appendix's primary
function is to provide a site for the new tools in the electronic version of the Guidebook that is located on
the World Wide Web/Intemet at http://www.epa.gov/efinpage/guidbk98/indexJitm
f
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i
April 1999
BETTER AMERICA BONDS
(Tax Credit Bonds)
Description: Better America Bonds areaform of environmental tax credit bond. The term of 1hese bonds
would be fifteen years. They would be issued by State and local governments (including Indian tribal
governments and U.S. possessions) to help address the problems created by urban sprawl. The holders
of the bonds would receive annual tax credits in the place of interest payments. Because the tax credits
compensate the bond holder for lending money, they would be taxed.
Actual Use: The proposed Better American Bonds program is part of the Clinton Administration's
initiative to build livable American communities. The Administrator of the Environmental Protection Agency
(EPA) would be authorized to oversee the program and to allocate $1.9 billion in tax credit authority each
year for five years, beginning in foe year 2000.
Potential Use: The proceeds from the bonds would be used to finance State and local programs which
address problems such as traffic congestion, lost farmland, Ihreatened water quality, shrinking parkland and
abandoned industrial sites, or Brownfields. These bonds would give local communities increased flexibility
and access to cheaper financing to help meet these environmental needs. ^fc^1
Advantages: This program would provide a significant financial incentive for State and local governments
and other qualified parties to issue Better America Bonds, as well as incentives for investors to purchase
Ihe bonds. Issuers would pay no interest on the bonds and would not have to make principal payments
for fifteen years. Purchasers of the bonds would receive an annual tax credit equivalent to foe interest
earned on taxable double AA corporate bonds and repayment of their principal.
Limitations: State and local governments and other eligible parties must apply to foe EPA for authority
to issue foe bonds as part of an annual competition. The competition for these bonds could be intense and
some communities would have advantages in terms of resources and knowledge ofhow to apply for federal
programs. In some cases, foe tax-credit bond financing might not provide a large enough subsidy to induce
State and local governments to undertake beneficial environmental infrastructure projects. Finally, foe
program must be authorized by foe Congress before it can be implemented.
Reference for Further Information: U.S. Environmental Protection Agency, Office of foe Comptroller,
EnvironmentalFinance Program, 401M Street, SW, Washington, DC 20460, Telephone: 202-564-4998,
Fax: 202-565-2587, E-Mail: ames.george@epagov. For information purposes, U.S. EPA plans in foe
near future to set up a Better America Bonds site on its World Wide Web home page at
http://www.epa.gov.
i.i.i
f
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April 1999
ENVIRONMENTAL PROTECTION AGENCY
ENVIRONMENTAL BOND GUARANTEE FUND PROGRAM
Description: The Environmental Protection Agency (EPA) has proposed creating an Environmental Bond
Guaranty Program (EBGP) to enhance the credit of municipal bonds issued for environmental infrastructure
projects in nations worldwide. The proposal is modeled on the U.S. financial guaranty insurance industry
and has been adapted to emerging bond markets. It envisions a program whose funds would be managed
in die United States and invested in high grade securities. All of EBGP's assets would be pledged to each
obligation guarantied. The EBGP would determine the optimum structure for its guaranties (i.e., credit
insurance, financial guaranty insurance, letter of credit, direct guaranty, etc.) in each country in which it
operates. Guaranties would provide for full and timely payment. Guaranties, once issued, would be
irrevocable, unconditional and uncancelable.
Actual Use: The program remains a proposal under discussion at this time.
Potential Use: The EBGP would be capitalized wilh up to $ 100 million which would enable it to guaranty
up to $3 billion of municipal bonds over a 10 year period. The EBGP would guaranty financial obligations
undertaken by regional or local governments (or those acting on behalf of such governments) for capital
projects to provide or improve environmental infrastructure which serves the general public. Projects could
include works to provide drinking water purification or distribution, wastewater treatment or collection, the
disposal of solid or hazardous waste, the efficient generation of energy, and the abatement of air pollution.
Advantages: The EBGP would help regional and municipal governments enter their own national credit
markets, as well as the international financial market It would do so by enhancing, not supplanting, the
credit of these governments who would remain the primary obligors on all bonds guarantied. The interest
savings on the bonds to the people of the countries involved could exceed
$900 million. The EBGP would benefit more than the environment It would; promote the export of U.S.
environmental technology; bring fiscal discipline, transparency and openness to local government; and
hasten the overall decentralization process. The program would promote investment in Hie environment,
strong financial markets, and the rule of law.
Limitations: Governments must have enacted appropriate reforms and demonstrated the capability to
manage tfieir operations on a market basis in order to qualify for the EBGP's guaranty. To obtain the
EBGP guaranty, issuers may also be required to make additional pledges of specific revenues payable to
it by, or from it to, higher levels of government including the central government
Reference for Further Information: U.S. EPA Office of International Activities, 401 M Street, SW,
Washington, DC 20460, Mail Code: 2650R; 202-564-6406, Contact: William Freemen, E-mail:
..II.
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April 1999
freeman.bill@epa.gov.
ENVIRONMENTAL PROTECTION AGENCY
CLEAN AIR PARTNERSHIP FUND
*
Description: The Clean Air Partnership Fund is aproposed grants program, and is part of the Fiscal Year
2000 EPA Budget This Partnership Fund is a $200 million program that would provide financing for
smart, multi-pollutant control strategies that will reduce air pollution as well as greenhouse gases. Funds
would be available for projects demonstrating simultaneous reductions in smog, soot or air toxics. The
program would give cities, States and tribes the opportunity to partner with the private sector, the federal
government, and each other to provide healthy clean air to their residents. The fund would also extend its
assistance projects involving electric utilities and the transportation sector.
Actual Use: The Clean Air Partnership Fund remains a proposal at this.time.
Potential Use: Businesses and municipalities face significant cost-restraints which discourage them from
investing in short-term single pollutant strategies. The Clean Air Partnership Fund would seek to encourage
many industries to develop and demonstrate long-range comprehensive pollution reduction strategies. The
Fund would financially support bringing the most creative ideas and innovations for cleaning the air to
communities. It would provide communities across the nation wilh a cleaner environment and help to
protect our health and climate.
Advantages: The Clean Air Partnership Fund would encourage the development of innovative, low-cost
approaches to air pollution control. It would provide badly needed new assistance to State and local
parties attempting to address the nation's significant air pollution challenges.
Limitations: The Partnership Fund has not yet received approval from the Congress. The environmental
and financial needs of the eligible recipients in the area of air pollution control dwarf the amount of funding
requested for the Fund.
Reference for Further Information: Summary of the 2000 Budget, U.S. EPA, Office of the Chief
Financial Officer, January 1999. EPA 205-S-99-001. This document is also available on U.S. EPA's
Web site at: http://www.epa.gov/ocfo/budget.htin U.S. EPA, Office of Air and Radiation, 401 M
Street, SW, Washington, DC 20460, Mail Code: 6101, Telephone: 202-260-7400, Fax: 202-260-5155.
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April 1999
,1,1.
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April 1999
B. MORE INFORMATION ON THE
ENVIRONMENTAL FINANCIAL
ADVISORY BOARD
(EFAB)
EFAB Advisory Committee Charter
EFAB Membership Roster
EFAB Publications and How To Order
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April 1999
UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
ADVISORY COMMITTEE CHARTER
ENVIRONMENTAL FINANCIAL ADVISORY BOARD
1. PURPOSE AND AUTHORITY. This Charter renews the Environmental Financial' Advisory Board,
which was originally established on February 25, 1991, in accordance with the provisions of the Federal
Advisory Committee Act, 5 U.S.C. App.2 §9 (c).
The purpose of (he Advisory Board is to provide authoritative analysis and advice to the EPA
Administrator regarding environmental finance issues to assist EPA in carrying out its environmental
mandates. It is determined that this Board is in ''the public interest in connection with the performance of
duties imposed on the Agency by law. \
Environmentallegislation reauthorized or proposed by Congress in recent years has placed significant
additionalresource requirements on all levels of government, increasing their infrastructure and administrative
costs. At the same time, limited budgets and changes in Federal tax laws have constrained traditional sources
of capital. Growing needs and expectations for environmental protection, as well as increasing demands in
all municipal service areas, make it increasingly difficult for state and local governments to find the resources
to meet their needs. The resulting strain on the public sector jeopardizes the quality and delivery of
environmental services.
2. OBJECTIVES AND SCOPE OF ACTIVITIES. EFAB is assigned the role of providing advice on
the critical environmental financing issues facing our nation, consistent with current Federal tax laws.
Objectives consistent with this role:
Reducing the cost of financing environmental facilities and discouraging polluting behavior;
Creating incentives to increase private investment in the provision of environmental services and
removing or reducing constraints on private involvement imposed by current regulations;
Developing new and innovative environmental financing approaches and supporting and encouraging
the use of effective existing approaches;
Identifying approaches specifically targeted to small community financing;
Assessing government strategies for implementing public-private partnerships, including privatization
and operations and maintenance issues, and other alternative financing mechanisms; and
Reviewing governmental principles of accounting and disclosure standards and how they affect
environmental programs.
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April 1999
ADVISORY COMMITTEE CHARTER
The activities of EFAB will include analyzing problems, conducting meetings, presenting findings, and other
activities necessary for the attainment of its objectives. Scope of activities include:
Focusing upon environmental finance issues at the Federal, State, and local levels, particularly with
regard to their impact upon local governments and small communities;
Addressing the capacity issue of state and local governments to cany out their respective
environmental programs under current Federal tax laws;
Endeavoring to increase the total investment in environmental protection by facilitating greater
leverage of public and private environmental resources to help ease the environmental financing
challenge facing our nation.
Local governments must pay for the construction* and operation of environmental facilities, such as
wastewater treatment plants, solid waste facilities, and drinking water facilities. Their need for resources,
both financial,and technical, particularly in the face of the growing demand for increasingly expensive
environmental services, calls for support from all levels of government and from the private and non-profit
sectors. At the same time, Federal and state resources for environmental programs are expected to remain
fairly constant relative to the growth in costs associated with new legislative and program requirements.
3. COMPOSITION AND SUBCOMMITTEES. The Board will consist of approximately .
twenty-five (25) members appointed by the EPA Deputy Administrator. Members will be selected from
among, but is not limited to, independent experts drawn from all levels of government, including elected
officials; the finance, banking, and legal communities; business and industry; and national organizations. Most
members will be appointed as representatives of non-federal interest.
EFAB is authorized to form subcommittees or workgroups for any purpose consistent with this
Charter. Such subcommittees or workgroups shall report back to the full Board. Subcommittees or
workgroups have no authority to make decisions on behalf of the full Board nor can they report directly to
the Agency. Subgroups that do not function independently of the parent advisory committee ate subject to
all FACA requirements except separate chartering.
4. MEETINGS AND BUDGET. It is expected that EFAB will meet approximately two (2) times each
year, and more often if deemed necessary by the Designated Federal Officer (DFO). EPA shall designate
a Federal Officer or employee, who may be either full-time, or permanent part-time, to be the DFO. EFAB
and its'subgroup meetings will be called, announced, and held in accordance with FACA. EPA may pay
travel and per diem expenses when necessary and appropriate.
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April 1999
ADVISORY COMMITTEE CHARTER
Budgetary support for EFAB will be provided through the Office of the Comptroller. The estimated
annual operating costs is approximately $133,900.00, which includes 1.55 work years of staff support
5. DURATION. EFAB may be needed on a continuing basis. This charter will be in effect for two years
from the date it is filed with the Congress. After that two-year period, the charter may be renewed for
another two years, as authorized in accordance with Section 14 of the Federal Advisory .Committee Act.
Agency Approval Date
GSA Consultation Date
Date Filed With Congress
I.I,.
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April 1999
ENVIRONMENTAL FINANCIAL ADVISORY BOARD MEMBERSHIP
AND EXPERT WITNESSES
April 1999
CHAIR
Robert O. Lenna, Executive Director
Maine Municipal Bond Bank
45 University Drive, Box 2268
Augusta, ME 04338-2268
DESIGNATED FEDERAL OFFICIAL
Mr. John C. Wise
Director
Strategic Planning Division
U.S. EPA, Region IX
75 Hawthorne St.
San Francisco, CA 94105
CONGRESSIONAL
Honorable Pete V, Domenici
United States Senate
328 Hart Senate Office Building
Constitution Avenue & 2nd Street, NE
Washington, DC 20510
STATE, LOCAL, and TRIBAL
Ms. Terry Agriss, President
New York State Environmental
Facilities Corporation
50 Wolf Road
Albany, NY 12205
Mr. Pete Butkus, Executive Director
Washington State Public Works Board
P.O. Box 48319
01ympia,WA 98504-8319
Mr. Stephen Mahfood, Director
Missouri Department of Natural Resources
P.O. Box 176
Jefferson City, MO 65102
Mr. Langdon Marsh, Director
Oregon Department of
Environmental Quality
811S.W. 6th Avenue
Portland, OR 97204
Mr. Arthur W. Ray, Deputy Secretary
Maryland Department of the Environment
2500 Broening Highway
Baltimore, MD 21224
Mr. Joseph L. Young
Forest County Potawatomi Tribal Attorney
4693 Young Road
Vesper, WI 54489
BUSINESS and INDUSTRY
Mr. Michael Deane
1202 South Washington St.
No. 328-C
Alexandria, VA 22314
Mr. George A. Raftehs
Raftelis Financial Consulting, PA
511 East Boulevard
...Mil,,.
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April 1999
Charlotte, NC 28203
Dr. Jim J. Tozzi
Multinational Business Services, Inc.
11 Dupont Circle, Suite 700
Washington, D.C. 20036
Ms. Elizabeth Ytell
Elizabeth Ytell Associates
1228 N. Street, Suite 9
Sacramento, CA 95814
BANKING. FINANCE & LEGAL
Mr. George H. Butcher, Vice President
Municipal Finance
Goldman, Sachs & Co.
85 Broad Street
New York, NY 10004
Mr. Michael Curley, Chairman
General Trade Assistance Corp
111 Mount Carmel Road
Parkton,MD21120
Ms. Linda Descano, Vice President
Environmental Affairs
Salomon Smith Barney, 43rd Floor
Seven World Trade Center
New York, NY 10048
Mr. Michael C. Finnegan
Managing Director
J.P. Morgan Securities
60 Wall Street, 33rd Floor
New York, NY 10260
Mr. Evan Henry, Senior Vice President
Environmental Services #24122
Bank of America
4000 MacArthur Blvd., Suite 100
Newport Beach, CA 92660
Ms. Anne Pendergrass-Hill, Esq.
2639 S.W. 28th Drive
Portland, OR 97219
Ms. Sonia M. Toledo
Lehman Brothers
Public Finance Department
3 World Financial Center, 20lh Floor
New York, NY 10285
ASSOCIATIONS and ORGANIZATIONS
Mr. Peter M. Emerson
Senior Economist
Environmental Defense Fund
44 East Avenue, Suite 304
Austin, TX 78701
Mr. John McCarthy, Program Director
Northeastern Rural Community
Assistance Program
218 Central Street, Box 429
Winchendon, MA 01475
Ms. Deeohn Ferris, President
Global Environmental Resources Inc
P.O. Box 90624
Washington, DC 20090
Ms. Heather L. Ruth, President
The Bond Market Association
40 Broad Street, 12th Floor
New York, NY 10004-2373
Ms. Mary Ellen Whitworth
Executive Director
Bayou Preservation Association
3201Allen Parkway, Suite 200
Houston, TX 77019
JL.II
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April 1999
EXPERT WITNESSES
Mr. George Brewster,
Executive Director
California Center for Land Recycling
455 Market St., Suite 1100
San Francisco, CA 94105
Ms. Sarah Diefendorf, Director
Environmental Finance Center
Building 7, Alameda Point
851 West Midway Avenue
Alameda, CA 94501
Ms. Heather Himmelberger, Director
Environmental Finance Center University of
New Mexico
New Mexico Engineering Research Institute
901 University Blvd.
Albuquerque, NM 87106-4343
Dr. Jack Greer, Director
Environmental Finance Center
University of Maryland
Costal & Environmental Policy Program
0112 Skinner Hall
College Park, MD 20742
Mr. William Jarocki, Director
Environmental Finance Center
at Boise State University
1910 University Drive
Boise State University
Boise, ID 83725
Mr. Robert D. Morgan
Executive Vice President
Clean Earth Technologies, LLC
1814 S. 3rd Street
St. Louis, MO 63104'
Mr. Raffael E. Stein, Program Analyst
Annual Planning and Budget Division
Environmental Protection Agency
401 M Street, SW (2732)
Washington, DC 20460
Mr. William J. Sullivan, Director
Environmental Finance Center
Syracuse University, The Maxwell School
219 Maxwell Hall
Syracuse, NY 13244-1090
Mr. Donald lannone, Director
Great Lakes EFC (UB 215)
Cleveland State University
Maxine Goodman Levin College
of Urban Affairs
Cleveland, OH 44115
Mr. Russ Bamett
Kentucky Institute for the
Environment and Sustainable Development 203
Patterson Hall
University of Louisville
Louisville, KY 40292
Mr. Keith Hinds
Infrastructure Development Services, Inc.
2701 San Pedro, NE, Suite 8
Albuquerque, NM 87110
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April 1999
Mr. Ralph H. Sullivan, Advisor
Environment, Infrastructure and
International Trade " •
1004 Loxford Terrace
Silver Spring, MD 20901
Dr. Michael I. Luger, Chairman
Office of Economic Development
CB #3435
Public Policy Analysis
University of North Carolina
Chapel Hill, NC 27599-3435
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April 1999
ENVIRONMENTAL FINANCIAL ADVISORY BOARD
EFAB PUBLICATIONS
(in chronological order)
NOTE: These documents have not been reviewed for approval by the U.S. Environmental
Protection Agency: and hence, the views and opinions expressed in them do not necessarily
represent those of the Agency or any other agencies in the Federal Government.
REPORTS. ADVISORIES. LETTERS
$
A Guidebook of Financial Tools. The April 1999 revision of the Guidebook is uploaded. It will be
updated, based on comments and the additions of new tools.
Brownfields Tax Incentive Letter Report, Letter to the Administrator, October 1998.
Comments on die OLA Draft Proposal for the NIS Environmental Bond Guaranty Program,
letter to the Assistant Administrator for International Activities, August 1998.
Funding Privately Owned Water Providers through the Safe Drinking Water Act State
Revolving Fund, July 1998.
Cost-Effective Environmental Management Case Studies, January 1998.
State Revolving Fund: A Decade of Successful SRF Performance, 1987-1997, Council of
-------
April 1999
Infrastructure Financing Authorities, Environmental Financial Advisory Board, January 1998.-
Expediting Clean-Up and Redevelopment of Brownfields: Addressing the Major Barriers to
Private Sector Involvement - Real or Perceived, Advisory, December 1997.
Why Longer Loan Terms are Prudent for SRF's, Technical Report. November 1997.
Applications of the Cross-Collateralization Language to Various State Revolving Fund
Structures, November 1997.
Letter to EPA Administrator on Improving Small Business Access to Capital for
Environmental Projects, July 1997.
Follow-up EFAB Letter Regarding Cross-Collateralization, June 1997.
Letter to EPA Administrator on Recommendations Based on EFAB's Five Brownfields
Reports, March 1997
Barriers and Incentives to Financing Brownfields Cleanup and Reuse. Brownfields Report No.
5, February 1997.
Evaluation of the Transferability Provisions in the Safe Drinking Water Act as a Means for
Cross-Collateralization, February 1997.
Common Sense Initiative Access to Capital "Charrette", January 1997, an Environmental
Financial Advisory Board/Environmental Finance Center collaborative effort.
Cross-Collateralization Issues Affecting the State Revolving Fund Program, November 1996.
EFAB Indianapolis Meeting on Financing Brownfields Redevelopment. Brownfields Report No.
4, March 1996.
Financing Strategies for Brownfields Redevelopment. Brownfields Report No. 3, March 1996.
Financing Brownfields Redevelopment: Linkages to the Empowerment Zone/Enterprise
Community Program. Brownfields Report No. 2, March 1996.
Leveraging the Superfund: Ideas and Opportunities. Superfund Report No. 2, March 1996.
i>
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April 1999.
Information Needs of Capital Providers in Brownfields Redevelopment. Brownfields Report
No.l, September 1995.,
Increasing Flexibility for Financing the Cleanup of Contaminated Sites. Superfund Report No.
1, September 1995.
Creating a Viable Finance Program for the Border Environmental Cooperation Commission
and the North American Development Bank Under the North American Free Trade
Agreement, August 1994.
Implementing the Environmental Finance Aspects of the North American Free Trade
Agreement, April 1994.
Financing the Remediation of Hazardous Waste Sites Under me North American Free Trade
Agreement, April 1994.
Financing Environmental Infrastructure along the United States- Mexican Border and in
Eastern Europe and the Former Soviet Republics, My 1993.
Urban Environmental Policy: Steps Toward Environmental Equity, Reduced Environmental
and Health Risks, and Urban Revitalization, March 1993.
The Clean Air Act of 1990: A Guide to Public Financing Options, Fall 1992. (This report was
prepared in collaboration with the Clean Air Act Advisory Committee).
Alternative Financing Mechanisms for Environmental Programs - Final Draft Produced by the
Environmental Finance Program for the State Capacity Task Force, Technical Review by the
Environmental Financial Advisory Board (EFAB), August 1992.
Narrowing the Gap: Environmental Finance for the 1990s, May 1992. (Progress Report of the
EFAB)
Public Sector Options to Finance Environmental Faculties, March 1992.
Private Sector Participation in the Provision of Environmental Services: Barriers and
Incentives, November 1991
Incentives for Environmental Investment: Changing Behavior and Building Capital, August
-------
\
.1-
** . April 1999
1991.
Small Community Financing Strategies for Environmental Facilities, August 1991.
For more information on Brownfield Reports and the Guidebook of Financial Tools, contact:
Tim McProuty
Environmental Finance Program
mcprouty.timothy@epa,gov
For more information on the other reports, contact:
Alecia Crichlow
Environmental Finance Program Lead
crichlow. alecia@epagov
To order reports, contact:
(GCI contractor)
Internet Librarian
-------
April 1999"
B. MORE INFORMATION ON THE
ENVIRONMENTAL FINANCIAL
ADVISORY BOARD
(EFAB)
EFAB Advisoiy Committee Charter
EFAB Membership Roster
EFAB Publications and How To Order
i
is
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t
April 2999
UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
ADVISORY COMMITTEE CHARTER
ENVIRONMENTAL FINANCIAL ADVISORY BOARD
t
1. PURPOSE AND AUTHORITY. This Charter renews the Environmental Financial Advisory Board,
which was originally established on February 25, 1991, in accordance with the provisions of the Federal
Advisory Committee Act, 5 U.S.C. App.2 §9 (c).
The purpose of the Advisory Board is to provide authoritative analysis and advice to ihe EPA
Administrator regarding environmental finance issues to assist EPA in carrying out its environmental
mandates. It is determined that this Board is in the public interest in connection with the performance of
duties imposed on the Agency by law.
Environmentallegislation reauthorized or proposed by Congress in recent years has placed significant
additionalresource requirements on all levels of government, increasing their infrastructure and administrative
costs. At the same time, limited budgets and changes in Federal tax laws have constrained traditional sources
of capital. Growing needs and expectations for environmental protection, as well as increasing demands in
all municipal service areas, make it increasingly difficult for state and local governments to find the resources
to meet their needs. The resulting strain on the public sector jeopardizes the quality and delivery of
environmental services.
2. OBJECTIVES AND SCOPE OF ACTIVITIES. EFAB is assigned the role of providing advice on
the critical environmental financing issues facing our nation, consistent with current Federal tax laws.
Objectives consistent with this role:
Reducing the cost of financing environmental facilities and discouraging polluting behavior;
Creating incentives to increase private investment in the provision of environmental services and
removing or reducing constraints on private involvement imposed by current regulations;
Developing new and innovative environmental financing approaches and supporting and encouraging
the use of effective existing approaches;
Identifying approaches specifically targeted to small community financing;
Assessing government strategies for implementing public-private partnerships, including privatization
and operations and maintenance issues, and other alternative financing mechanisms; and
19
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April 1999 V
Reviewing governmental principles of accounting and disclosure standards and how they affect
environmental programs.
20
f
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t
April 1999
ADVISORY COMMITTEE CHARTER
The activities of EFAfi will include analyzing problems, conducting meetings, presenting findings, and other
activities necessary for the attainment of its objectives. Scope of activities include:
Focusing upon environmental finance issues at the Federal, State, and local levels, particularly with
regard to their impact upon local governments and small communities;
Addressing the capacity issue of state and local governments to carry out their respective
environmental programs under current Federal tax laws;
Endeavoring to increase the total investment in environmental protection by facilitating greater
leverage of public and private environmental resources to help ease the environmental financing
challenge facing our nation.
Local governments must pay for the construction and operation of environmental facilities, such as
wastewater treatment plants, solid waste facilities, and drinking water facilities. Their need for resources,
both financial and technical, particularly in the face of the growing demand for increasingly expensive
environmental services, calls for support from all levels of government and from the private and non-profit
sectors. At the same time, Federal and state resources for environmental programs are expected to remain
fairly constant relative to the growth in costs associated with new legislative and program requirements.
3. COMPOSITION AND SUBCOMMITTEES. The Board will consist of approximately
twenty-five (25) members appointed by the EPA Deputy Administrator. Members will be selected from
among, but is not limited to, independent experts drawn from all levels of government, including elected
officials; die finance, banking, and legal communities; business and industry; and national organizations. Most
members will be appointed as representatives of non-federal interest.
EFAB is authorized to form subcommittees or workgroups for any purpose consistent with this
Charter. Such subcommittees or workgroups shall report back to the full Board. Subcommittees or
workgroups have no authority to make decisions on behalf of the full Board nor can they report directly to
the Agency. Subgroups mat do not function independently of the parent advisory committee are subject to
all FACA requirements except separate chartering.
4. MEETINGS AND BUDGET. It is expected mat EFAB will meet approximately two (2) times each
year, and more often if deemed necessary by the Designated Federal Officer (DFO). EPA shall designate
a Federal Officer or employee, who may be either full-time, or permanent part-time, to be me DFO. EFAB
and its subgroup meetings will be called, announced, and held in accordance with FACA. EPA may pay
21
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April 1999
travel and per diem expenses when necessary and appropriate.
ADVISORY COMMITTEE CHARTER
Budgetary support for EFAB will be provided through the Office of the Comptroller. The estimated
annual operating costs is approximately $133,900.00, which includes 1.55 work years of staff support.
5. DURATION. EFAB may be needed on a continuing basis. This charter will be in effect for two years
from the date it is filed with the Congress. After that two-year period, the charter may be renewed for
another two years, as authorized in accordance with Section 14 of the Federal Advisory Committee Act.
Agency Approval Date
GSA Consultation Date
Date Filed With Congress
22
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April 1999
ENVIRONMENTAL FINANCIAL ADVISORY BOARD MEMBERSHIP
AND EXPERT WITNESSES
April 1999
I
CHAIR
Robert O. Lenna, Executive Director
Maine Municipal Bond Bank
45 University Drive, Box 2268
Augusta, ME 04338-2268
DESIGNATED FEDERAL OFFICIAL
Mr. John C. Wise
Director
Strategic Planning Division
U.S. EPA, Region IX
75 Hawthorne St.
San Francisco, CA 94105
CONGRESSIONAL
Honorable Pete V. Domenici
United States Senate
328 Hart Senate Office Building
Constitution Avenue. & 2nd Street, NE
Washington, DC 20510
Mr. Pete Butkus, Executive Director
Washington State Public Works Board
P.O. Box 48319
01ympia,WA 98504-8319
Mr. Stephen Mahfood, Director
Missouri Department of Natural Resources
P.O. Box 176
Jefferson City, MO 65102
Mr. Langdon Marsh, Director
Oregon Department of
Environmental Quality
811S.W. 6th Avenue
Portland, OR 97204
Mr. Arthur W. Ray, Deputy Secretary
Maryland Department of the Environment
2500 Broening Highway
Baltimore, MD 21224
Mr. Joseph L. Young
Forest County Potawatomi Tribal Attorney
4693 Young Road
Vesper, WI 54489
STATE, LOCAL, and TRIBAL
Ms. Terry Agriss, President
New York State Environmental
Facilities Corporation
50 Wolf Road
Albany, NY 12205
BUSINESS and INDUSTRY
Mr. Michael Deane
1202 South Washington St.
No. 328-C
Alexandria, VA 22314
Mr. George A. Raftelis
23
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April 1999
t
Raftelis Financial Consulting, PA
511 East Boulevard
Charlotte, NC 28203
Dr. Jim J. Tozzi
Multinational Business Services, Inc.
11 Dupont Circle, Suite 700
Washington, D.C. 20036
Ms. Elizabeth Ytell
Elizabeth Ytell Associates
1228 N. Street, Suite 9
Sacramento, CA 95814
BANKING. FINANCE & LEGAL
Mr. George H. Butcher, Vice President
Municipal Finance
Goldman, Sachs & Co.
85 Broad Street
New York, NY 10004
Mr. Michael Curley, Chairman
General Trade Assistance Corp
111 Mount Carmel Road
Parkton, MD 21120
Ms. Linda Descano, Vice President
Environmental Affairs
Salomon Smith Barney, 43rd Floor
Seven World Trade Center
New York, NY 10048
Mr. Michael C. Finnegan
Managing Director
J.P. Morgan Securities
60 Wall Street, 33rd Floor
New York, NY 10260
Mr. Evan Henry, Senior Vice President
Environmental Services #24122
Bank of America
4000 MacArthur Blvd., Suite 100
Newport Beach, CA 92660
Ms. Anne Pendergrass-Hill, Esq.
2639 S.W. 28lh Drive
Portland, OR 97219
Ms. Sonia M. Toledo
Lehman Brothers
Public Finance Department
3 World Financial Center, 20th Floor
New York, NY 10285
ASSOCIATIONS and ORGANIZATIONS
Mr. Peter M. Emerson
Senior Economist
Environmental Defense Fund
44 East Avenue, Suite 304
Austin, TX 78701
Mr. John McCarthy, Program Director
Northeastern Rural Community
Assistance Program
218 Central Street, Box 429
Winchendon, MA 01475
Ms. Deeohn Ferris, President
Global Environmental Resources Inc
P.O. Box 90624
Washington, DC 20090
Ms. Heather L. Ruth, President
The Bond Market Association
40 Broad Street, 12th Floor
New York, NY 10004-2373
Ms. Mary Ellen Whitworth
Executive Director
Bayou Preservation Association
3201Allen Parkway, Suite 200
Houston, TX 77019
^j£j2J*S
24
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April 1993
EXPERT WITNESSES
Mr. George Brewster,
Executive Director
California Center for Land Recycling
455 Market St., Suite 1100
San Francisco, CA 94105
Ms. Sarah Diefendorf, Director
Environmental Finance Center
Building 7, Alameda Point
851 West Midway Avenue
Alameda, CA 94501
Ms. Heather Himmelberger, Director
Environmental Finance Center University of
New Mexico
New Mexico Engineering Research Institute
901 University Blvd.
Albuquerque, NM 87106-4343
Dr. Jack Greer, Director
Environmental Finance Center
University of Maryland
Costal & Environmental Policy Program
0112 Skinner Hall
College Park, MD 20742
Mr. William Jarocki, Director
Environmental Finance Center
at Boise State University
1910 University Drive
Boise State University
Boise, ID 83725
t
Mr. Robert D. Morgan
Executive Vice President
Clean Earth Technologies, LLC
1814 S. 3rd Street
St. Louis, MO 63104
Mr. Raffael E. Stein, Program Analyst
Annual Planning and Budget Division
Environmental Protection Agency
401 M Street, SW (2732)
Washington, DC 20460
Mr. William J. Sullivan, Director
Environmental Finance Center
Syracuse University, The Maxwell School
219 Maxwell Hall
Syracuse, NY 13244-1090
Mr. Donald lannone', Director
Great Lakes EFC (UB 215)
Cleveland State University
Maxine Goodman Levin College
of Urban Affairs
Cleveland, OH 44115
Mr. Russ Bamett
Kentucky Institute for the
Environment and Sustainable Development 203
Patterson Hall
University of Louisville
Louisville, KY 40292
Mr. Keith Hinds
Infrastructure Development Services, Inc.
25
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April 1999
2701 San Pedro, NE, Suite 8
Albuquerque, NM 87110
Mr. Ralph H. Sullivan, Advisor
Environment, Infrastructure and
International Trade
1004 Loxford Terrace
Silver Spring, MD 20901
Dr. Michael I. Luger, Chairman
Office of Economic Development
CB #3435
Public Policy Analysis
University of North Carolina
Chapel Hill, NC 27599-3435
I
26
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April 1999
f
ENVIRONMENTAL FINANCIAL ADVISORY BOARD
EFAB PUBLICATIONS
(in chronological order)
NOTE: These documents have not been reviewed for approval by the U.S. Environmental
Protection Agency: and hence, the views and opinions expressed in them do not necessarily
represent those of the Agency or any other agencies in the Federal Government.
REPORTS. ADVISORIES. LETTERS
A Guidebook of Financial Tools. The April 1999 revision of the Guidebook is uploaded. It will be
updated, based on comments and the additions of new tools.
Brownfields Tax Incentive Letter Report, Letter to the Administrator, October 1998,
Comments on the OIA Draft Proposal for the MS Environmental Bond Guaranty Program,
letter to the Assistant Administrator for International Activities, August 1998.
Funding Privately Owned Water Providers through the Safe Drinking Water Act State
Revolving Fund, July 1998. »
Cost-Effective Environmental Management Case Studies, January 1998.
State Revolving Fund: A Decade of Successful SRF Performance, 1987-1997, Council of
Infrastructure Financing Authorities, Environmental Financial Advisory Board, January 1998.
Expediting Clean-Up and Redevelopment of Brownfields: Addressing the Major Barriers to
27
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April 1999
Private Sector Involvement — Real or Perceived, Advisory, December 1997.
Why Longer Loan Terms are Prudent for SRF's, Technical Report. November 1997.
Applications of the Cross-Collateralization Language to Various State Revolving Fund
Structures, November 1997.
Letter to EPA Administrator on Improving Small Business Access to Capital for
Environmental Projects, My 1997.
Follow-up EFAB Letter Regarding Cross-Collateralization, June 1997.
Letter to EPA Administrator on Recommendations Based on EFAB's Five Brownfields
Reports, March 1997
Barriers and Incentives to Financing Brownfields Cleanup and Reuse. Brownfields Report No.
5, February 1997.
Evaluation of the Transferability Provisions hi the Safe Drinking Water Act as a Means for
Cross-Collateralization, February 1997.
Common Sense Initiative Access to Capital "Charrette", January 1997, an Environmental
Financial Advisory Board/Environmental Finance Center collaborative effort.
Cross-Collateralization Issues Affecting the State Revolving Fund Program, November 1996.
EFAB Indianapolis Meeting on Financing Brownfields Redevelopment. Brownfields Report No.
4, March 1996.
Financing Strategies for Brownfields Redevelopment. Brownfields Report No. 3, March 1996.
Financing Brownfields Redevelopment: Linkages to the Empowerment Zone/Enterprise
Community Program. Brownfields Report No. 2, March 1996.
Leveraging the Superfund: Ideas and Opportunities. Superfund Report No. 2, March 1996.
Information Needs of Capital Providers in Brownfields Redevelopment. Brownfields Report
No.l, September 1995.
I
28
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i
April 1999
Increasing Flexibility for Financing the Cleanup of Contaminated Sites. Superfund Report No.
1, September 1995.
Creating a Viable Finance Program for the Border Environmental Cooperation Commission
and the North American Development Bank Under the North American Free Trade
Agreement, August 1994.
Implementing the Environmental Finance Aspects of the North American Free Trade
Agreement, April 1994.
Financing the Remediation of Hazardous Waste Sites Under the North American Free Trade
Agreement, April 1994.
Financing Environmental Infrastructure along the United States- Mexican Border and in
Eastern Europe and the Former Soviet Republics, July 1993.
Urban Environmental Policy: Steps Toward Environmental Equity, Reduced Environmental
and Health Risks, and Urban Revitalization, March 1993.
The Clean Air Act of 1990: A Guide to Public Financing Options, Fall 1992. (This report was
prepared in collaboration with the Clean Air Act Advisory Committee).
Alternative Financing Mechanisms for Environmental Programs - Final Draft Produced by the
Environmental Finance Program for tiie State Capacity Task Force, Technical Review by the
Environmental Financial Advisory Board (EFAB), August 1992.
Narrowing me Gap: Environmental Finance for the 1990s, May 1992. (Progress Report of the
EFAB)
Public Sector Options to Finance Environmental Facilities, March 1992.
Private Sector Participation in the Provision of Environmental Services: Barriers and
Incentives, November 1991
Incentives for Environmental Investment: Changing Behavior and Building Capital, August
1991.
Small Community Financing Strategies for Environmental Facilities, August 1991.
29
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April 1995
For more information on Brownfield Reports and tiie Guidebook of Financial Tools, contact:
Tim McProuty
Environmental Finance Program
mcprou1y.timo1hy@epa.gov
For more information on the other reports, contact:
Alecia Crichlow
Environmental Finance Program Lead
crichlow. alecia@epagov
To order reports, contact:
Diane Doyle (GO contractor)
Internet Librarian
efln@epa.gov
I
30
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April 1999
C. MORE INFORMATION ON THE
ENVIRONMENTAL FINANCE CENTER
(EFC) NETWORK
EFC Network Contacts Directory
EFC 1998 Annual Report - Executive Summary
I
31
.
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April 1999
ENVIRONMENTAL FINANCE CENTER NETWORK
CONTACT DIRECTORY
EFC/Syracuse University, The Maxwell School of Citizenship and Public Affairs.
EPA Region 2, New York City EFC established in 1994
William J. Sullivan, Director, Midcareer and Executive Education Programs
206 Maxwell Hall wjsulliv@maxwell.syr.edu (315)443-3759 fax (315) 443-5330
Kim Collins kjcoll01@maxwell.syr.edu
(315)443-9438 fax (315) 443-5330
EFC/Syracuse University, The Maxwell School, 219 Maxwell Hall,
Syracuse, New York 13244-1090
Website: www.rnaxwell.syr.edu/exed/efc/
Focus: Initially, the EFC dealt with risk and finance issues, including a survey of NY communities of
varying size to determine how they factor risk assessment into their environmental funding decisions. The
EFC sponsored and hosted a conference examining the issue of full cost pricing of environmental projects,
and is conducting a year-long rate model demonstration and training program for local government
officials. The Center conducted an extensive study of alternative financing strategies for water
infrastructure for EPA's Office of Water.
Regional contact: Robert Gill
EPA Headquarters lead: Timothy McProuty
mcproury.timothy@epa.gov
(212) 637-3884 fax (212) 637-3772
(202) 564-4996 fax (202) 565-2587
2.
EFC/University of Maryland, Coastal and Environmental Policy.
EPA Region 3, Philadelphia EFC established in 1993
Dr. Jack Greer, Director, Coastal and Environmental Policy Program
greer@mdsg.umd.edu (301) 405-6377 fax(301) 314-9581
Elizabeth Hickey, Project Coordinator(301) 405-6383 fax(301) 314-9581
hickey@mdsg.umd.edu
Jeremy Haas
jhass@mdsg.umd.edu
(301) 405-6384
EFC/University of Maryland, Coastal and Environmental Policy
t
32
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April 1999
0112 Skinner Hall
College Park, Maryland 20742
Website: http://www.mdsg.uind.edu/MDSG/EFC/index.htinl
Focus: Charrettes as a technique to help communities on an individual basis to obtain information on the
nature of finance issues facing communities in Region 3. Maryland's Governor recently selected the
EFC to produce a report for the state blue ribbon commission on ways to pay for clean up of nonpoint
source pollution.
Regional grant manager: Mindy Lemoine (215) 814-2736 fax (215) 814-2201
EPA Headquarters lead: VeraHannigan (202)564-5001 fax (202) 565-2587
hannigan.vera@epa.gov
3. Great Lakes EFC/Cleveland State University, Urban Center
EPA Region 5, Chicago EFC established in 1995
Don lannone, Director (216) 687-4590 (assistant: Olga Lee (216) 687-6947)
d.i@wolf.csuohio.edu
Kirstin Toth - Brownfields Outreach
Dr. Ziona Austrian, Assistant Director (216)687-3988 (330)528-3237
ziona@urban.csuohio.edu Adina Swirsky - Pollution Prevention
(216)687-5489
Great Lakes EFC/Cleveland State University, Economic Development Program UB 215
Maxine Goodman Levin College of Urban affairs
Cleveland State University, Cleveland, Ohio 44115 fax (216) 687-9277
Website: http ://www .csuohio.edu/glefc/
Focus: Brownfield site redevelopment and industrial pollution financing. The initial focus of this EFC is
on financial issues affecting the availability of credit and financial tools and incentives to spur investment
in abandoned commercial and industrial sites. The objective of the pollution prevention project is to build
regional networks to stimulate additional pollution prevention activities by small and medium size
manufacturers., and facilitate financing for these deals.
Regional contacts: Jennifer Manville (616) 922-4769 (tribal) fax (616) 922-4499
James VanderKloot (312) 353-3161 (brownfields) fax (312) 353-5541
KearyCragan (312)353-5669 (brownfields) fax (312) 353-5541
EPA Headquarters lead: Timothy McProuty (202) 564-4996 fax (202) 565-2587
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mcprouty.timothy@.epa.gov
4.
EFC/University of New Mexico, New Mexico Engineering Research Institute (NMERI)
EPA Region 6, Dallas EFC established in 1992.
(505) 272-7357 fax (505).272-7203
Heather Himmelberger, P.E., EFC Director
headxerh@unm.edu
Susan Butler, Program Manager [sbutler@unm.edu]
Lorri Skeie-Catnpbell, Program Coordinator
campbell@unm.edu
EFC/University of New Mexico/NUMERI
901 University Blvd., SE Suite 200
Albuquerque, NM 871064339
Website: http://nmerLunm.edu/efc/efc.htm
(505) 272-7356 fax (505) 272-7203
(505)272-7356 fax (505) 272-7355
Focus: technical assistance to federal, state, and local governments and public and private entities,
specifically in capacity development in small water systems. The UNM-EFC has a particular
commitment to identifying financing options and promoting low-cost, alternative, and appropriate
technologies for projects that will encourage sustainable development, pollution prevention, and sources
reduction - at affordable and viable levels. Ongoing relationships with several bi-national agencies
developed from previous border work have been maintained.
Regional Contact: Freda Wash (mc6WQ-AT)
EPA Headquarters lead: Timothy McProuty
mcprouty.timothy@epagov
(214) 665-8342 fax (214) 665-6490
'(202) 564-4996 fax (202) 565-2587
5.
EFC/California State University at Hayward, Urban Environmental Research and
Education Center.
EPA Region 9, San Francisco • EFC established in 1995
Sarah Diefendorf, Executive Director,
Environmental Finance Center IX
Building 7, Alameda Point
851 West Midway Avenue
Alameda, CA 94501
email: diefendorf@greenstart.org (510)749-6867 fax (510) 749-6862
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Web site:
http://www.greenstart.org/efc9
Focus: Development of successful models for public-private partnerships financing environmental
systems, emphasizing greaterparticipation of small and medium size businesses. The EFC will implement
a pilot green project to demonstrate a proposed partnership model.
Regional contacts: Anna Hachenbracht
Cheryl Filart (me PMD-7)
EPA Project Officer: Vera Hannigan
hannigan.vera@epa.gov
(415) 744-1634 fax (415) 744-2499
(415)744-1705 fax (415) 744-1678
(202)564-5001 fax (202) 565-2587
6.
EFC/ Boise State University, Idaho
EPA Region 10, Seattle
EFC established late 1995
Bill Jarocki, EFC Director Carrie Applegate, Secretary
(208)385-4293 fax (208) 385-4370 (208)385-1567 cappleg@boisestate.edu
bjarock@boisestate.edu
Environmental Finance Center at Boise State University
1910 University Drive, Boise State University, Boise, Idaho 83725
Website:
http://sspa.boisestate.eda/efc/index.html
Focus: Coordinate analysis and training/outreach activities relative to the viability assessment of
drinking water systems. The Idaho EFC will focus on developing and testing a variety of methods by
which system viability can be determined.
Regional contacts:
Clark Gaulding
Jim Werntz
Susan Morales
7.
EPA Headquarters lead: Vera Hannigan
hannigan.vera@epaniail.epa.gov
EPA's Environmental Finance Website:
(206)553-1849
(206) 553-2634
(206) 553-8580
fax (206) 553-8338
fax (206) 553-8338
fax (206) 553-8338
(202)564-5001 fax (202) 565-2587
http ://www.epa.go v/efinpage
Current as of June 29, 2000
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April 1999
Executive Summary
1998
Annual Report
of the
EFC Network
FOREWORD
It is our great pleasure to present the 1998 Annual Report of EPA's Environmental Finance Center
Network, including the introduction of a new EFC in Region 4 for 1999. This report updates all
principal activities of the Universily-based Environmental Finance Centers (EFCs) through 1998 and is
a continuation of the information contained in the 1997,1996 and 1995 Annual Reports. Copies of
these earlier reports are available on EPA's Environmental Finance website at
www.epa.gov/efinpage/.
The Environmental Protection Agency provided seed funding in 1992 for the first EFC at 1he New
Mexico Engineering Research Institute of the University of New Mexico. Soon thereafter, Centers
were established at the University of Maryland and Syracuse University. A fourth Center was added in
1994 at California State University at Hay ward. Two more EFCs were added in 1995; one at
Cleveland State University early in the year, and the other established later in the year at Boise State
University in an alliance with the University of Idaho and Idaho State University. Finally, a new Center
was established for 1999 in Region 4 at the University of North Carolina at Chapel Hill. With seven
EFCs strategically located at major universities throughout the country, the Network has become a
significant force to assist local governments and small businesses in meeting environmental standards.
Indeed, the EFC Network was a semifinalist in the 1999 Innovations in American Government Awards
Program sponsored by the Ford Foundation and Harvard University. Essentially, the EFCs provide
finance training, educational, and analytical services designed around tie "how to pay" issues of
environmental compliance.
A central goal of the EFCs is to help create sustainable environmental systems in the public and private
sectors. Sustainable systems have the financial, technical, and institutional resources and capability to
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operate indefinitely in compliance with environmental requirements and in conformance with generally
accepted environmental practices. Creating and maintaining sustainable systems is a formidable
challenge facing smaller local governments and businesses. Costs of needed public and private
purpose systems and improvements often outstrip available resources. Yet paying for environmental
protection has been and will continue to be primarily a responsibility of local governments and the
private sector.
For their part, the financial outreach services of the EFCs seek to help meet environmental needs by
focusing on identifying ways of increasing efficiencies by avoiding costs, lowering costs, and shifting
costs, as well as increasing private sector investment in environmental systems. The reader will find in
the following pages many innovative and traditional activities the EFCs have undertaken in
accomplishing these objectives. Their work, however, is an ongoing process, and the sum total of its
benefits will make an important contribution to environmental progress in tiiis country. Information on
the Environmental Finance Center Network can also be found on our website on EPA's Environmental
Finance Program homepage at http://www.epa.gov/efinpage/.
We welcome your comments and suggestions: Thank you
Michael W. S. Ryan, Comptroller, U. S. Environmental Protection Agency
EFC Executive Summary Reports
EFC at Syracuse University, Region 2
Executive Overview
The United States Environmental Protection Agency's (EPA) Region 2 Environmental Finance Center
(EFC) at Syracuse University's Maxwell School of Citizenship and Public Aflfaiis was established in
October, 1993. Since its establishment, the Maxwell EFC has aggressively undertaken a wide range of
environmental financing projects and activities, and built a considerable record of accomplishment The
focus of the EFC has included full-cost pricing of environmental services, the value of intergovernmental
cooperation in addressing environmental improvement projects, collaborative planning among public and
private environmental service providers, and the coordination of technical assistance services available to
rural communities. In each of these areas, the EFC has either provided customized assistance to
communities or facilitated the coordination and delivery of services from public and private agencies. The
EFC is making information available on the World Wide Web at http://www.maxwell.syr.edu/exed.efc
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Sumtnaiy of Accomplishments
During 1998 Ihe EFC continued to assist communities with the use of an EPA supported windows-based
computer software program for setting financially responsible water and wastewater rates. This
computerized rate model was developed for use by local water and wastewater systems. Other
presentations focused on topics of public finance, capacity development, capital budgeting, and topics
relative to the broader area of environmental governance. The highlight of EFC activities in 1998 was the
planning and execution of the EFC Network Forum, a two-day event that brought other EFC
representatives to Syracuse for the purpose of demonstrating Iheir areas of expertise and sharing expert
advice with representatives from rural New York communities. The Forum was well-received and has
resulted in numerous requests for a similar program to be conducted in the future. Furthermore, the Forum
served as the impetus for additional Network collaborations to ensue. Currently, the Maxwell EFC is
collaborating with EFC 10 and EFC 6 to assist the New York State Department of Health in developing
a strategic plan to meet the capacity development requirements of the Safe Drinking Water Act.
The EFC continued to participate in and further establish collaborative relationships with other government-
supported programs, public agencies, institutions of higher learning, and environmental technical service
providers. These relationships have continuously fostered new and exciting opportunities for the EFC to
enhance the strength of its program and the capacity is has to deliver much needed services to local
governments. Rural communities have become a particular focus of the EFC, particularly since the
relationship with the New York State Rural Development Council has developed into a dynamic
partnership of great activity in the past year.
The EFC also collaborated with the City of Syracuse to plan a pollution prevention education program and
participate in its planning for the redevelopment of area brownfields.
Currently, the EFC and its various partners are planning a network of projects that will prove to assist
communities in planning environmental improvement and infrastructure activities. Syracuse University
faculty and students have also begun participating in specific EFC projects. Faculty member Stuart
Bretschneider, a world renowned expert in the forecasting field, is leading the planning of a survey project
to assess the experiences of rural businesses with environmental regulations. It is anticipated that up to six
agencies or organizations will fund the survey. Several faculty members, with expertise in international
affairs and public finance, have assisted the EFC in the development of a proposal to provide environmental
financial technical assistance training to government managers in the Newly Independent States, China, and
other regions of the globe. The proposal is scheduled for submission to the EPA Office of International
Activities in January, 1999. In May, 1998, six Master of Public Administration students from the Maxwell
School dedicated three intense weeks to researching the criteria used to determine the eligibility of
communities for environmental funding programs. The Rural Development Council and the New York
State Department of State sponsored the research which will be built upon by anew set of students in May,
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1999.
The EFC expects 1999 to be a year in which the efforts of all past and present activities will bear results
that will serve to further stimulate partnerships and generate enduring programs and, thus, enhance the
services it provides to EPA Region 2.
I
Summary of Activities
Conferences, Special Projects, and Presentations
December, 1997-December, 1998, prepared "Environmental Financial Technical Assistance Program"
as a proposal for submission to the EPA Office of International Activities. The proposal involves the
delivery of environment-related pubic finance training to government managers in countries seeking to
pursue environmental remediation and infrastructure projects.
December, 1997-February, 1998 collaborated with economists and environmental experts from Cornell
University and State University of New York College of Environmental Science and Forestry to prepare
a proposal to provide assistance to five economically depressed counties in the Catskills Watershed region
on New York.
In February, 1998, collaborated with the Water Industry Council and the New York State Conference of
Mayors and Municipal Officials to conduct a survey of municipal decision-makers regarding their interest
in privatization of water systems.
February-June, 1998, collaborated with the Rural Utility Service of the United States Department of
Agriculture to assist a small township in developing plans to create a water district and build a new water
system.
In March, 1998, in collaboration with the Water Resource Institute of Cornell University and the State
University of New York at Buffalo, presented, "Critical Review of Water Resource Development Plans"
to the Genesee County Legislature in Batavia, New York. The presentation was the result of a study
undertaken by the three academic institutions to assess five separate approaches to build a new water
system in western New York. The EFC portion of the study was presenting alternative strategies of cost
recovery for each engineering approach.
InMay, 1998, presented, "Environmental Resources for Rural Communities in New York: An Assessment
of the Funding Process" to the New York State Department of State and the Rural Development Council.
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The presentation was the research product of six Master of Public Administration students who studied the
eligibility criteria of environmental improvement funding programs in New York State. Included in the study
was an assessment of the extent to which municipalities meet the eligibility criteria and actually use the
programs.
In June, 1998, planned and facilitated the EFC Network Forum, a dynamic two-day event that brought
together four other EFCs to demonstrate their areas of expertise and to provide assistance to community
leaders attending the forum.
In June, 1998, collaborated with the City of Syracuse Department of Community Development, Division
ofNeighborhood Planning to propose for funding, "Pollution Prevention Education Program", in response
to an EPA Environmental Justice Program request for proposals.
In June, 1998, collaborated with State University of New York College of Environmental Science and
Forestry, New York State Rural Water Association, Atlantic States Rural Water Association, and New
Jersey Rural Water Association to prepare a proposal for a small water systems project.
In July, 1998, facilitated a discussion between City of Syracuse representatives and neighborhood leaders
regarding the planning of a brownfields redevelopment project.
In August, 1998, responded to a request from the Bushwick Economic Development Corporation in
Brooklyn, New York, to provide assistance in planning a brownfields redevelopment project
InSeptember, 1998, participated with technical service providers in a panel discussion about environmental
programs serving communities throughout the country. The discussion was facilitated by the Maxwell
Career and Alumni Services Department at Syracuse University.
InSeptember, 1998, collaborated with the Environmental Facilities Corporation, the Tug Hill Commission,
Rural Community Assistance Program, and the Rural Development Council to plan a program to
coordinate environmental technical assistance providers in New York. Aproposal for funding evolved and
was submitted to the New York State Rural Planning Federation, with awards to be announced by the end
of December.
In September, 1998, presented, "Water and Wastewater Rate Setting" and "Capital Budgeting" at two
separate training conferences sponsored by the New York Rural Water Association.
In October, 1998, presented, "The EFC Network", totheNational Securities Studies Program at Syracuse
University. Students of tie program were high-ranking military leaders and Senior Executive Officers of
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the United States Department of Defense.
•s.
In October, 1998, facilitated "Economic Development and Community Partnerships", a segment of an
environmental conference sponsored by the State University of New York College of Environmental
Science and Forestry.
In November, 1998, presented, "Water and Wastewater Rate Setting" and "Capital Budgeting" at two
separate training conferences sponsored by flie New York Rural Water Association,
In November, 1998, demonstrated EPA-supported software used for water and wastewater rate setting
to officials from the City of Batavia
In December, 1998, facilitated the first Capacity Development Planning Committee meeting for Ihe New
York State Department of Health.
* • r
On-Going Programs and Projects
Attendance at professional association meetings and presentations on capital planning and financing; the
concepts of water and wastewater rate setting; environmental governance; intergovernmental cooperation;
collaborative planning; capacity development; sustainable community .issues; and brownfields
redevelopment.
Maintaining database of past EFC program attendees, prospective clients, and technical service providers.
Participating in planning prospective projects with the Rural Development Council (RDC). In 1997 the
EFC facilitated the creation of physical space at the Maxwell School facilities for the RDC to locate its
headquarters. The close proximity has resulted in a continuous flow of information exchanges, mutually
beneficial professional consultation sessions, and the creation of prospective collaborative projects.
Supporting the New York State Department of Health in preparing a Strategic Plan for the capacity
development component of the Safe Drinking Water Act The EFC is committed to facilitating the process
by hosting all meetings, conducting follow-up tasks, and ensuring that all interests are included and their
input into the plan is elicited.
Collaborating with the Tug Hill Commission to develop projects that address issues of economic
sustainability and capacity development within a 62 township area
Collaborating with the United States Department of Agriculture's Rural Utility Services to provide
assistance to rural communities seeking to address environmental problems.
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Serving as a content provider to government and non-profit organizations that conduct workshops for
municipal decision-makers.
Continued emphasis on collaborating wilh other universities and non-profit organizations to develop
proposals addressing environmental concerns.
Continue to host and facilitate meetings and programs on behalf of the Infrastructure Working Group of
the Rural Development Council.
Developing a scientific survey with public and private partners to assess the experiences rural businesses
have with environmental regulations.
Syracuse £FC Organization
Management
William J. Sullivan
Director
Environmental Finance Center
Maxwell School of Public Affaire
Kimberly J. Collins
Director of Projects and Initiatives
Environmental Finance Center
Maxwell School of Public Affairs.,
Syracuse University
EFC/Syracuse University
219 Maxwell Hall
The Maxwell School
Syracuse University
Syracuse, NY 13244
EFC/Syracuse University
219 Maxwell Hall
The Maxwell School
Syracuse University
Syracuse, NY 13244
Phone (315) 443-3759
fax (315)443-5330
wjsulliv@maxwell.syr.edu
Phone (315) 443-9438
fax (315)443-5330
kjcollOl @maxwell.syr.edu
William P. Kittredge
Research Associate
Environmental Finance Center
Maxwell School of Public Affairs,
Syracuse University
EFC/Syracuse University
219 Maxwell Hall
The Maxwell School
Syracuse University
Syracuse, NY 13244
Phone (315) 443-4881
fax (315)443-5330
wpkittre@maxwell.syr.edu
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April 2999
Kevin T. Farrell
Research Associate
Environmental Finance Center
Maxwell School of Public Affairs,
Syracuse University
Magdelin T. Montenegro
Research Associate
Environmental Finance Center
Maxwell School of Public Affairs,
Syracuse University
Bradley Meutren
Research Associate
Environmental Finance Center
Maxwell School of Public Affairs,
Syracuse University
EFC/Syracuse University
219 Maxwell Hall
The Maxwell School
Syracuse University
Syracuse, NY 13244
EFC/Syracuse University
219 Maxwell Hall
The Maxwell School
Syracuse University
Syracuse, NY 13244
EFC/Syracuse University
219 Maxwell Hall
The Maxwell School
Syracuse University
Syracuse, NY 13244
Phone (315) 443-4881
fax (315)443-5330
ktfarrel@maxwell.syr.edu
Phone (315) 443-4881
fax (315)443-5330
mtmonten@maxwell.syr.edu
Phone (315) 443-4881
fax (315)443-5330
bmeurren@maxwell.syr.edu
I
EFC at University of Maryland, Region 3
Executive Overview
The United States Environmental Protection Agency's (EPA) Region 3 Environmental Finance Center
(EFC) at The University of Maryland Environmental Finance Center is now one of only eight Environmental
Finance Centers in the Country. The EFC's efforts have focused on both point-source pollution issues,
such as alternative methods for financing waste treatment facilities and innovative utility rate structures, as
well as nonpoint-source pollution issues, such as storm water management, stream corridor buffers and
agricultural best management practices. The EFC is making information available on the World Wide Web
at http://www.mdsg.umd.edu/MDSG/
EFC/indexJionl
Facilities and Expertise
The challenge of environmental finance and management requires an integrated, interdisciplinary, and even
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transdistiplinary approach. The University of Maiyland's Coastal and Environmental Policy Program
(CEPP) provides a powerful network for mounting such an approach. The CEPP is comprised of five units
of Ihe University System of Maryland: Ihe Maryland Sea Grant College (home of the Environmental
Finance Center), the School of Public Affairs, the Center for Environmental Studies, the College of
Agriculture and die School of Law.
CEPP's investigation into environmental finance and the formation of the Environmental Finance Center
(EFC) began in 1993 with support from the U.S. EPA The University of Maryland Environmental Finance
Center is now one of only eight Environmental Finance Centers in the Country. The EFC's efforts have
focused on both point-source pollution issues, such as alternative methods for financing waste treatment
facilities and innovative utility rate structures, as well as nonpoint-source pollution issues, such as storm
water management, stream corridor buffers and agricultural best management practices.
Summary of Accomplishments
Charrettes
Part of the EFC's goal is to provide assistance and act in an advisory capacity to state and local
governments on issues related to environmental finance. One way to achieve that goal is to advise local
officials in a "charrette" format The charrette process, pioneered by the University of Maryland EFC,
employs an advisory panel of finance, planning and engineering experts as well as federal and state officials
who provide local officials with solutions to their environmental finance problems. The charrettes provide
a forum for frank discussions between local officials and experts about financing, planning and management
challenges experienced by communities in meeting environmental and quality-of-life demands. The charrette
process is a cost-effective way to address unfunded mandates and further the Agency's strategic initiative
on Partnerships. In addition, it was one of EPA's key proposals for the National Program Review.
Since its establishment in 1992, the EFC has arranged charrettes that have expanded its understanding of
issues related to nonpoint-source pollution, such as urban storm water runoff and agricultural nutrient runoff.
Many charrette participants have been faced with the challenge of identifying cost-effective and equitable
financing solutions to environmental concerns that will not impede economic development in their
community. Indeed, die question of economic viability and environmental sustainability is a key focus of the
EFC's work. One of the important challenges found during the charrettes is convincing businesses and
homeowners to "pay now" rather than to "pay later," recognizing that paying later will certainly mean higher
costs.
An important result of the charrettes is the renewed commitment by communities to dedicate additional time
to their environmental finance problems. The EFC has found that, frequently, a charrette's highest and best
purpose is to facilitate a meeting of the stakeholders of an environmental finance issue that might not
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otherwise take place. The EFC receives many compliments about its ability to convene a meeting of
disparate stakeholders, and we expect to continue to provide this vital service to local governments.
Chanrette Examples
Starlit Ponds Homeowners Association^ Fairfax County Virginia
On January 29, the EFC planned and conducted a charrette with the Homeowners Association for the
private community of Starlit Ponds. The charrette, held in Fairfax County, Virginia, addressed the needs
of a small private community confronted with the challenges of deteriorating storm water ponds and the
larger issue of failing ponds throughout Fairfax County.
Cuckold Creek Watershed. St. Mary's County. Maryland
On July 21, die EFC planned and conducted a charrette for the Cuckold Creek watershed in St. Mary's
County, Maryland. Charrette participants discussed management techniques which could be used during
the development process to reduce or eliminate tiie erosion and gullying of soils within file Cuckold Creek
watershed.
Other Charrette Initiatives
In addition, during the year, the EFC continued to solicit interest in conducting charrettes with other local
governments in the Bay watershed. As always, it is important to work closefy with communities to ensure
that a charrette is the right tool for a community during its policy-making and implementation process.
Below is a summary of the local governments with which we are currently working.
Location: Northampton County, Virginia
Issue: Financing Phase n of a Sustainable Technologies Industrial Park
One of the most exciting and challenging initiatives undertaken by the citizens of the region is the
construction and management of one of the nation's first "eco-induslrial parks"—the Port of Cape Charles
Sustainable Technologies Industrial Park. In 1994, the President's Council on Sustainable Development
chose the county as the site for one of four model facilities to demonstrate the potential of energy-efficient,
water conserving, and non-polluting industry.
In its attempt to address challenges such as poverty and unemployment while protecting sensitive natural
resources, Northampton County representatives contacted the EFC more than a year ago. It has been the
desire of the community to pursue many different yet interrelated issues surrounding economic revitalization
and environmental sensitivity.
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Location: Port Towns of Anacostia, Prince George's County, Maryland
Issue: Urban revitalization and environmental protection
The 'Tort Towns of Anacostia," Bladensburg, Colmar and Cottage City, have a rich history whichhas been
overshadowed by decades of urban decay and neglect In an effortto revitalize, foe towns have completed
a vision and action plan which includes a section on environmental and recreational opportunities which
could be pursued. How to finance some of these activities is a pressing question which the county would
like to address in a charrette.
After several exploratory meetings witii the EFC, it has been suggested that the EFC could conduct a
charrette focusing on ways in which to fund the design and construction of improvements within the
Bladensburg Industrial area, creating an "eco-industrial park."
Location: Chesapeake City, Maryland
Issue: Environmental infrastructure financing and "smart growth" practices
Chesapeake City is bisected by the Chesapeake and Delaware canal, which provides an important shipping
channel from the Delaware Bay to the Port of Baltimore. A consequence of the canal is that the city
requires two separate sets of water and sewer infrastructure to serve regions on either side of the canal.
This system has created inefficiencies, and now the southern section is reaching capacity. The southern
section, however, is the historic downtown area and has recently been rezoned to prevent sprawl-type
growthby accommodating concentrated growth in atraditionalneighborhooddevelopmentformat Adding
to the city's infrastructure challenges is a burdensome debt and fears that without generating new revenue,
the city will be unable to meet its contractual obligations to fee private firm that operates the city's water
and sewer systems. At the suggestion of the town manager, the water commission has requested that the
EFC conduct a charrette to assess alternatives for finding solutions to 1he water problems. In addition, the
City has expressed interest in rate-design assistance.
Location: Octotaro Lakes Community, Cecil County, Maryland.
Issue: Failing pond infrastructure and threat to freshwater rivers
In a situation resembling a previous charrette held for the Starlit Ponds community in Fairfax County,
Virginia, the community, of Octotaro Lakes, in Cecil County, Maryland, has been struggling to repair a dam
on the community's signature 7.5 acre lake. The lakes were originally converted by the developer of the
community from existing agricultural ponds, and according to state officials, the dam was improperly built
In 1995, however, a County Court ruled that the community's homeowners are responsible for tie repair
of the dam. The community then planned to use a low-interest loan from the state to cover the costs of
repairs, at a cost of $1,500 per homeowner. Plans have been stalled because of mis-communication
between the state, the homeowners association board and the residents. Now the problem is imminent
t
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because a house has been built directly below the unsafe dam and, as a result, the state has ordered repairs
to begin or it will drain the lakes.
Location: The Towns of Northern Caroline County, Maryland
Issue: Regional water and waste water management financing
The towns of Goldsboro, Henderson, Marydel and Templeville are located in northern Caroline County
on Maryland's Eastern Shore, adjacent to the Delaware state line. All four towns have problems with their
on-site, individual waste water disposal systems, and many of their wells are contaminated Small lot sizes
and high groundwater tables are the reasons for the failure of the septic systems and contamination of the
wells. During 1997, Federal, state and local representatives met to explore the viability of approaching the
waste water and drinking water needs in these four towns collectively and to seek a regional solution. In
coordination wilh the Maryland Rural Development Corporation, the Maryland Environmental Service and
others, the EFC has been invited to conduct a charrette with stakeholders to explore financing options for
a regional solution.
Location: West Virginia charrette initiatives
In an attempt to expand our community assistance efforts to West Virginia, the EFC continues to discuss
charrette opportunities with community representatives and public agency personnel. During the year, the
EFC has held many discussions with officials and others in West Virginia about local government
environmental financing issues.
The EFC will continue to discuss chairette opportunities with communities in West Virginia Currently,
there are a variety of sources that provide technical assistance to communities in West Virginia For
example, the West Virginia Infrastructure Council reviews proposed community infrastructure projects and
offers advice on financing mechanisms. The EFC could partner wilh this organization in offering a financing
charrette. Another possibility is that the EFC would partner with the Public Service Commission or Rural
Water Association to provide technical assistance on financing mechanisms for local government
environmental projects.
Charrette Partnering Opportunities: Countryside Stewardship Exchange Program
The International Countryside Stewardship Exchange Program (Exchange) brings experienced
professionals from Europe and the United States to meet with local community leaders to address concerns
about development, conservation and other related issues. The experts visit a community for one week
then deliver a set of recommendations for the community to consider in their attempts to harmonize
community growth and environmental protection. Since 1993 communities in the Chesapeake Bay region
have been participating in the Exchange through the coordination of the Alliance for the Chesapeake Bay
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(Alliance) and the Chesapeake Bay Program.
In 1996 the Exchange experts visited the Chesapeake Bay communities in the Spring Creek watershed in
Pennsylvania and the Wicomico watershed in Maryland. As the communities within these watersheds
attempt to implement the recommendations from the Exchange, they face challenges similar to those that
the Environmental Finance Center has helped others address.
During the summer and fall, the EFC discussed with the Chesapeake Bay Program's Land Growth and
Stewardship Subcommittee (LOSS) several opportunities to help the communities within the Spring.Creek
(PA) and the-Wicomico (MD) watersheds implement the recommendations of the Exchange. Most of the
recommendations fall into two groups: 1) "visioning" types where the community leaders decide on certain
core paths to pursue in order to meet their goals; and 2) "concrete" steps to take to solve certain problems
and threats. Both of these types of issues can be addressed through the charrette process. As part of the
EFC's collaboration with the LOSS and the Alliance, the EFC has proposed several ideas, including:
Spring Creek, Pennsylvania:
Two concerns, which were raised by the community, included "which lands should be set aside for
development," and "which lands should be set aside in order to preserve ecological biodiversity." If the
watershed association has access to GIS information, the EFC hopes to work with them on options for
preserving important parcels while directing development to appropriate areas.
Another recommendation generated by the Exchange experts was to reuse industrial water. Currently, the
EFC is working with two communities about financing eco-industrial parks (e.g., Port Towns, MD and
Northampton County, VA). The EFC's work has identified and analyzed funding ideas for this type of
project, which might be applicable to the Spring Creek case.
Lastly, agricultural land preservation was a common theme in several recommendations, and the EFC may
be able to assist in the establishment of a transfer-of-development-rights (TDK) program or other financing
mechanisms that may be appropriate for preserving agricultural lands.
Wicomico River Watershed:
The Exchange experts recommendations initially revolve around a community visioning process, which the
EFC may be able to help coordinate. In addition, there are a few specific areas where the EFC can
provide assistance, including-
»• Developing alternative transportation systems within the watershed to link communities and
residential areas with job centers;
*
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Directing growth towards "village centers." The EFC may be able to assist the communities in
selecting smart growth incentives, such as tax incentives, information about alternative septic
systems, and other planning tools.
In addition, there was a recommendation to develop apian for preserving forest and agricultural lands. The
EFC may be able to conduct a charrette to identify funding ideas for land preservation.
The EFC continues to coordinate with the Alliance, the LOSS, and representatives from the communities
to identify the most appropriate action. We anticipate a spring event for one of these communities.
List of Charrettes
Since 1993, the University of Maryland EFC has conducted sixteen charrettes addressing such issues as
waste water and drinking water facility upgrades/expansions, determining sites for new landfills, storm water
management, access to capital for investment in pollution prevention practices, urban revitalizab'on and uses
for revolving funds. The charrettes arid their topics are listed below. The full text of the case studies drawn
from these charrettes can be found in past EFC Annual Reports as well as on the University of Maryland
EFC website at www.mdsg.uind.edii/MDSG/EFC/ or at the Environmental Finance Branch website at
www.epagov/efinpage
Charrette Video
Using tiie EFC's experience conducting twenty charrettes, the EFC is developing a handbook and
accompanying video as an educational resource for communities and organizations interested in using the
charrette process as a problem solving tool. There are many potential users of the handbook and video
because the charrette process can be used to solve problems on many scales, from neighborhood-based
issues to national issues. It is particularly effective when various groups of people in a community gather
to resolve common problems, such as watershed-based issues, which can benefit from the assistance of
outside experts.
Along with conducting charrettes, the EFC has conducted a participant survey from which it received
important information from communities regarding the structure and usefulness of the charrettes. This
information will also be incorporated into the handbook and video, which will
cover topics from the entire charrette process. The handbook and video, made available as a set, will be
distributed to a wide audience through a marketing plan which will include the EFC web site and brochures,
local government associations, university public education programs, citizen groups and business
organizations.
Training, Technical Assistance and Education
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Utility Rale Design Workshop: Rate setting and financial planning for water and wastewater utilities
As local governments continue to shoulder increased responsibility for everything from environmental
infrastructure to environmental protection, budgets are stretched to capacity. To help ensure that clean
water is available for both human consumption and wildlife habitat, these systems must not be a drain on
local government budgets, but should be financially self-supporting. Utility rates are one way in which to
capture most of the costs of operating and maintaining water and waste water systems. Knowledge of
alternative financing mechanisms available to communities and an understanding of how these mechanisms
can be used to pay for new system improvements is also important in the rate design process.
The EFC participated in the Pennsylvania Rural Water Association's Annual Conference. The EFC
presented a session describing innovative utility rate structures to effectively manage water resources. The
session also included a presentation by the director of our sister EFC at Boise State University, who has
conducted similar presentations, as well as training workshops, throughout the country.
As a result of the success of our first Rate Design Workshop, the EFC has been invited by the Pennsylvania
Rural Water Association to conduct future workshops throughout Pennsylvania, and to develop and
moderate a session in (he Association's upcoming spring Annual meeting.
In addition, and as a result of the first workshop, the EFC was invited by the Maryland Rural Water
Association to design and develop a series of training seminars for water and wastewater systems in
Maryland, which they conducted in two areas of the state, Frederick (serving central Maryland) and
Fruitland (serving the Eastern Shore). The seminars presented basic financial management information, such
as proper accounting techniques, important financial ratios to manage, and characteristics of responsible
rate design. In addition, the seminars explored ways in which utilities could better communicate important
information, which could help conserve water while maintaining their system's viability and health. As a
follow-up to the seminars, the Maryland Rural Water Association has invited the EFC to develop and
conduct a series of utility rate design workshops for the spring of 1999.
The EFC has also been in contact with the West Virginia Rural Water Association and the Virginia Rural
Water Association about future workshops in their states.
Site Planning Demonstration Project
In order to change the direction of conventional design, pattern and density of development and its impacts
on local quality of life and the environment, there must be on-the-ground examples of development
techniques that local governments and the development community can embrace. As part of its ongoing
involvement with the Center for Chesapeake Communities and in coordination with the Chesapeake Bay
Program, the EFC has joined the Site Demonstration Project, which aims to demonstrate the benefits of
smart growth and sustainable development in the Chesapeake Bay region.
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Workshop: Identifying Solutions to Creating SustainaMe Communities
The Maryland EFC participated in a series of workshops entitled Identifying Solutions to Creating
Sustainable Communities. The workshop, organized by the Center for Chesapeake Communities and
supported by the Alliance for the Chesapeake Bay, the Chesapeake Bay Program's Citizen Advisory
Committee and the Local Government Advisory Committee, was the first in a series of six workshops held
throughout the Bay watershed. The goals of the workshops are to identify the impediments and barriers,
as well as the solutions, to promoting sustainable communities. The results of the workshops will be used
to establish the agenda for a watershed-wide Summit Toward a Sustainable Chesapeake planned for
March 1999.
Presentation of Tributary Strategies to School Teachers in the Patuxent Watershed
The Patuxent River is the largest river that is completely within Maryland. The river drains 930 square miles
and parts of seven counties before entering the Chesapeake Bay. The river supports more than 100
species of fish and is an important commercial and recreational blue crab fishery. In addition, the
watershed is used for nesting and overwintering by bald eagles. Because the watershed is one of the fastest
growing areas in the state, part of the Bay tributary strategy includes how to accommodate growth while
preserving watershed and community goals. Threats to water quality include air degradation and resultant
water deposition, polluted storm water runoff, failing septic system groundwater infiltration and runoff,
agricultural nutrient and pesticide runoff and loss of forests and wetlands.
In order to better integrate the concepts of watershed management into the lives of Bay-area citizens, the
EFC is often invited to speak to citizen stakeholder groups. At the request of the Patuxent River
Commission (a watershed association) the EFC gave a presentation to Maryland high school teachers that
described the tributary strategy approach to watershed management. Issues addressed during the
presentation included how the prevention of pollution can be incorporated into the everyday lives of
citizens, especially its children. The presentation allowed teachers to understand the current Bay clean-up
effort and encouraged them to involve" Bay restoration and watershed management ideas in their classroom
lessons.
Expansion of the State Revolving Fund (SRF)
As part of another effort entered into last year, the EFC helped pass legislation in the Maryland General
Assembly to expand its State Revolving Loan program (SRF) to the private sector for nonpoint source
pollution control activities.
Continuing our advisory work, the EFC worked with Maryland's Departments of Agriculture, Environment
and Natural Resources to modify the State's SRF to allow for an innovative "linked deposit" program,
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which encourages participation by private lending institutions to assume the lion's portion of administering
the SRF's loans to private individuals, such as farmers interested in funding agricultural best management
practices. These practices have demonstrated a marked reduction in nutrients running off farmland, and
hold promise in improving water quality and stream corridor restoration, Maryland Senate Bill 0177, the
Linked Deposit bill, passed, and is now in effect
Publications
Stream Corridor Restoration Punting Matrix
The EFC occasionally takes the initiative in responding to an identified need by developing a new product.
Such is the case with the Stream Corridor Restoration Funding Matrix. Developed over the last year, the
matrix identifies over Ihirty-five Federal, state and local funding programs which could be used by public
as well as private landowners interested in preserving water quality.
Community Solutions for Environmental Finance: Charrettes
The EFC printed a 40-page booklet Community Solutions for Environmental Finance: Charrettes.
The booklet contains information for communities seeking solutions to their environmental finance problems,
including a discussion of the charrette process and summaries of 16 charrettes held for communities in
Delaware, Maryland, Pennsylvania and Virginia. The booklet presents recommendations implernented by
charrette communities, as well as a discussion of the complexities faced by communities as they struggle
to address conflicting demands. In addition, the booklet lists local and national governmental and nonprofit
resources available for communities facing environmental finance challenges.
Issues in Environmental Finance: Highly Valued Lands
During the year, the EFC added another fact sheet to its Issues in Environmental Finance series. The
factsheet,/%/i/_y Valued Lands, describes alternative techniques for improving water quality by protecting
and restoring highly valued lands, such as wetlands, forests, meadows and lands bordering water resources.
This fact sheet is a complement to the Stream Corridor Restoration Funding Matrices because these
techniques can be used in conjunction wilh Federal and state assistance programs described in 1he matrix
to help achieve water quality improvements. Because of the often high cost of removing pollution from
water resources, it is often cheaper to prevent pollution in the first place. Thus, those techniques lhat strive
to reduce Ihe amount of pollution entering the waterways can be thought of as financing techniques.
Olher Training OoDortunities throueh Conference Forums and Sessions
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Pamsvlvania Rural Water Association's Annual Conference
The EFC participated in the Pennsylvania Rural Water Association's Annual Conference.. The EFC
presented a session describing characteristics of good financial management and innovative utility rate
structures to effectively manage water and waste water systems. The session was a collaborative effort
between the Maryland EFC and the director of the EFC at Boise State University. Our plan is to generate
interest in conducting a series of training workshops for local officials interested in the full-cost pricing of
environmental services. Full-cost pricing of environmental services allows local governments to better
manage environmental resources to protect habitat and human health.
As a result of this workshop, the Pennsylvania Rural Water Association invited the EFC to conduct a Utility
Rate Design Workshop (described in a previous section of this report) for Pennsylvania utility operators.
Team Wetlands Conference
The EFC was invited to moderate a problem-solving roundtable entitled Development and Wetlands:
Making them Compatible, at The Terrene Institute's Team Wetlands Conference, in Arlington, Virginia
The EFC presented the Starlit Ponds charrette as a case study addressing failing storm water ponds and
the possibility of converting them to wetlands. After the presentation, the EFC Coordinator moderated a
discussion for participants interested in options for retrofitting or converting ponds for enhanced water
quality. Participants from Utah, Michigan and Maryland engaged in a lively discussion about pond functions
beyond storm water management, such as community public space and wildlife habitat
Best Management Practices (BMP) Selection for Urban Storm Water Management workshop
The EFC participated in a workshopj-fflWP Selection for Urban Storm Water Management inDumfiies,
Virginia The workshop was sponsored by the Chesapeake Bay Program Nutrient Subcommittee and was
attended by over 100 people from the public and private sector. The Maryland EFC presented an exhibit
highlighting financing alternatives for funding urban storm water BMPs through a mix of Federal, state and
local program and non-regulatory initiatives such as recognition programs. The Funding Matrices and the
Fact Sheet Highly Valued Lands, were used as the basis for the exhibit
4
Conservation of Biological Diversity Confergice
i»
At the conference Conservation of Biological Diversity held in Annapolis, Maryland, the EFC was
selected to present a poster titled "Funding for Water Quality: Stream Corridor Restoration Projects." The
poster provided planners and other decision makers with tools or ideas to help them better manage stream
corridors for water quality and wildlife habitat
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Marland Municial ue Convention
At the 1 998 Convention of the Maryland Municipal League), attended by 1 53 municipal governments and
over 500 local government representatives, the EFC designed and presented an exhibit which outlined
approaches to watershed-based financing techniques for environmental projects, in particular those
involving water quality. Hie purpose of the convention is to allow municipal governments to exchange ideas
and information. Our exhibit encouraged local government representatives to think about watershed-based
approaches to solving environmental quality problems that cross jurisdictional borders.
Wetlands '98: Integrating Wetland / Floodplain Ecosystems in to Water Resources / Watershed
Management
During the fall, the EFC was invited to speak at the conference Wetlands '98: Integrating Wetland/
Floodplain Ecosystems into Water Resources / Watershed Management ,. This national conference,
held on September 21-24, 1998 in St. Louis, Missouri, was co-sponsored by the Institute for Wetlands
Science and Public Policy and the Association of State Wetland Managers.
Urban Revitalizfltifn and Regional Prosperity: Opportunities for Partnership
The EFC was invited to develop a panel and moderate a session at the 12th Annual Conference of the
National Council for Public Private Partnerships, held in Atlanta The subject of the panel was the
challenge of re-integrating under-utilized and even. abandoned properties into the economic web of a
community, utilizing public-private partnerships.
Maryland Environmental Service/Maryland Department of the Environment Co-Sponsored Conference
The EFC co-sponsored, with Maryland Environmental Service and Maryland Department of the
Environment, a conference How toMake Dollars and Sense out of Federal and State Environmental
Grants and Loans. The EFC Coordinator opened the conference with a presentation, "Thinking Outside
the Box: an Overview of Broad-based Funding Support." The presentation began by acknowledging that
water and waste water systems and other environmental services go beyond providing communities with
human health protection, but are primary providers of other benefits, including:
•• Conservation, preservation and enhancement of water quality
*• Protection and restoration of habitat including source water protection and wetlands management
» Aesthetics, recreation, cultural identity through management of water resources
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Global Programme of Action Coalition for the Gulf of Maine
Although the EFC Network does not have a Center in Region 1 at this time, the Maryland EFC, supported
by NOAA, has been collaborating with a Gulf of Maine initiative—the Global Programme of Action for
the Protection of the Marine Environment from Land Based Activities for the Gulf of Maine
(GPAC). In 1996 the Gulf of Maine (GOM) was chosen by the Commission for Environmental
Cooperation (CEC) as the site of a pilot project to help North American countries implement an
international program to protect their marine and coastal areas from land-based activities. CEC was
created as a result of NAFTA negotiations to facilitate cooperation and public participation and to foster
conservation, protection and enhancement of the North American environment In the GOM region, the
CEC has brought together a diverse group of individuals, known as GPAC, to develop a project of their
own design. The EFC has played an important role in advising GPAC on environmental finance matters.
New Initiatives
Urban Environmental Quality and Public Health: An EFC Network Collaboration
The Maryland EFC's proposal to the USEPA, on urban environmental quality, has been accepted.
Submitted on behalf of the Environmental Finance Center Network, the collaborative project will address
the issue of sustainable urban growth and regional vitality.
Riparian Forest Buffers* Opportunity costs and opportunities lost
The Chesapeake Bay Program has compiled information about the effectiveness of riparian buffers and
wetlands to protect surface water quality. This information is based on scientific research conducted within
the Bay watershed and has been distributed in various forms to students, state agencies, policy makers and
government officials. As a result, the Bay states, as signatories to the Chesapeake Bay Agreement, have
pledged to increase riparian forest cover by the year 2010. To reach this goal, the states have developed
draft implementation plans.
At the local level concerns have been raised by local officials, the development community and others,
about limiting development in the riparian zones by taking high-priced streamside land out of the tax base.
Of primary concern for local elected officials is preventing a decrease in revenue generation and resulting
operating budget deficits. The fear of decreasing the local tax base is therefore hindering realization of the
buffer goals of the Chesapeake Bay Agreement.
In order to address these concerns, the Environmental Finance Center will provide examples of ways to
recoup costs associated with limiting development in the riparian zones. Along with the scientific results
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from 1he Bay Program, this information will help local government officials persuade their constituents that
preserving die stream buffer area will not negatively affect the local economy.
Land Trust Assistance: Creative Financing Of Sensitive Areas
Land trusts often acquire property with the goal of preserving a particular natural, historical or cultural
feature. In the Chesapeake Bay region there are a large number of land trusts, with over 41 in Maryland
alone (the largest concentration in the country). Some trusts function with full-time staff and a coordinated
acquisition plan, but the majority of land trusts are small. In addition to the lack of an acquisition plan, many
small land trusts lack the staff necessary to identify and secure funding necessary to meet their goals. Based
on suggestions from the Chesapeake Bay Program, the Canaan Valley Institute (WV) and various land
trusts in the region, the EFC will develop a collection of "tools" to assist land trusts in their efforts to
preserve important lands.
Program for Community Partnership
The EFC has joined with a group of University System partners and State agency representatives to
develop capacity at the local level to manage local challenges using a variety of techniques and resources.
The initiative, called the Program for Community Partnership (PCP), is a collaborative effort between
the University System of Maryland, the State of Maryland and the Fannie Mae Foundation, and is
supported by Fannie Mae with a three-year $1.0 million grant The plan is to identify three pilot
communities, representing an inner city urban neighborhood, an aging suburb, and a rural community, and
work with them over three-years to help them solve their most critical problems. The objective is to
provide intensive exposure to techniques and skills for enhancing community problem-solving viainnovative
workshops, role-playing and other collaborative efforts.
Financin Coastal Watershed Efforts
An abstract from the EFC was selected for an oral presentation at the Coastal Zone '99 national
conference in July, 1999. Over 600 submissions on topics of coastal zone management were reviewed.
The EFC will discuss the "Community Quilt Concept of Environmental Financing," which stresses the use
of multiple financing techniques, including local government initiatives, the use of grants and loans, and
pollution prevention, when addressing environmental problems within acoastal watershed. The conference
will be attended by hundreds of participants, and the Maryland EFC will seek to include the work of other
EFCs in our presentation.
Utility Rate Design Workshops
The EFC has tentatively scheduled a series of utility rate design workshops in coordination with the
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Maryland Rural Water Association. These workshops, scheduled for May and June, 1999, will introduce
the concepts of good financial management as well as develop rate structures for utility system participants.
Using RateMod Pro software developed with the support of USEPA, participants will create sample rate
structures for their systems using Iheir own data In addition to a rate proposal, participants will finish the
workshop with a better understanding of how rates should be set,'and how to persuade elected officials
and rate payers of 1he benefits of a self-supporting system
The EFC is also coordinating with the Pennsylvania Rural Water Association and Maryland Environmental
Service (a public agency charged with managing over 150 water and waste water systems in Maryland)
to bring utility rate design workshops, and olher financial management training, to clients and members.
Toward A Sustainable Chesapeake Summit
The EFC is part of an Advisory Team dedicated to developing an engaging agenda and bringing together
exciting speakers and participants for a summit on sustainable communities in the Chesapeake region. The
Summit, to be held in Baltimore on March 22 & 23,1999, will address:
Promoting innovative site planning
Preparing watershed management plans
Nurturing sustainable economic growth
Building community capacity
Environmental Fin^fficg Center Public Outreach Brochure
To ensure that communities in the Chesapeake Bay Region understand how the EFC can assist them in
finding ways to fund Iheir environmental projects, the Center is developing an EFC marketing packet to
be sent to local governments and others in the Chesapeake Bay Region. This brochure will highlight ways
in which the Center can assist local governments, businesses, land trusts, nonprofit organizations and others.
For example there will be a section describing how an EFC charrette gives small communities access to
technical and financial experts from the public, private, and academic sectors to discuss their issue.
Development of a Web Page for the Environmental Finance Center
The EFC continues to update and revise its presence on the web with a series of pages which present some
of our work, including charrette summaries and the Stream Corridor Restoration Funding Matrices
(http:/AvH^jndsg.umd.edu/MDSG/EFC/index.html).
Fact Sheets
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The EFC continues to develop one-page, targeted fact sheets that address important environmental finance
issues. In addition to Ihe Stream Corridor Restoration Funding Matrices, which are expanded fact sheets,
the Issues in Environmental Finance fact sheet series includes:
Community Solutions: Charrettes As a Useful Tool in Public Policy
Highly Valued Lands
Future fact sheets may include such issues as equitable and self-sustaining utility rate structures, user fees
and their application, and non-regulatory techniques such as recognition and award programs. A fact sheet
on land trust financing options for preserving lands in also being developed
Network Collaborations
The Maryland EFC has cooperated with and benefitted from the other EFCs in the national network. Here
are several highlights from those collaborations:
The Director of the EFC at Boise State has been extremely helpful in advising us on waste water and
drinking water issues, especially rate-setting. He has already helped establish contacts between our EFC
and other clients in our region (Region III), and he has served as instructor and advisor on several rate
setting workshops. He has also traveled to the region to co-present at training seminars and conferences.
The Director of the Maryland EFC traveled to the EFC at Syracuse University to participate in aNetwork-
wide forum. The Director moderated a charrette for the New York village of Long Eddy, which has
resulted in the award of grant money for the community's waste water system upgrades.
The Maryland EFC facilitated a Network-wide discussion on urban and regional development patterns,
which resulted in a Network-wide proposal to the USEPA. The proposal, discussed elsewhere in this
report, has been funded and will begin in 1999.
In addition to specific collaborations., the Region IE EFC is in constant contact with the other EFCs in the
network, via monthly conference calls and numerous information-sharing activities.
Maryland EFC Organization
Management
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April 1999
Dr. Jack Greer, Director
Environmental Finance Center
Coastal and Environmental Policy
University of Maryland
EFC/Univeisity of Maryland
Coastal and Environmental Policy
0112 Skinner Hall
College Park, MD 20742
Phone (301) 405-6377
fax (301)314-9581
greer@mdsg.umd.edu
Elizabeth Hickey
Project Coordinator
Environmental Finance Center
Coastal and Environmental Policy
Univeisity of Maryland
EFC/University of Maryland
Coastal and Environmental Policy
0112 Skinner Hall
College Park, MD 20742
Phone (301) 405-6383
fax (301)314-9581
hickey@mdsg.umd.edu
Jeremy Haas
Research Associate
Environmental Finance Center
Coastal and Environmental Policy
Univeisity of Maryland
EFC/University of Maryland
Coastal and Environmental Policy
0112 Skinner Hall
College Park, MD 20742
Phone (301) 405-6384
fax (301)314-9581
jhaas@mdsg.umd.edu
Great Lakes EFC at Cleveland State University, Region 5
Executive Overview
The Great Lakes Environmental Finance Center was established at Cleveland State University in 1994. The
Center serves public arid private sector clients in Federal Region 5, which includes the states of Ohio,
Michigan, Indiana, Illinois, Wisconsin, and Minnesota. The GLEFC has a current focus in three
environmental policy areas: 1) Brownfields cleanup and redevelopment; 2) Industrial pollution prevention;
and 3) Sustainable development, especially in Native American communities. Future priorities will include
providing water rate modeling services for smaller communities, and developing market-based solutions
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to air quality management The Center's brownfields work is expected to focus increasingly on urban
sprawl and smart growth management in the future. The EFC is making information available on the World
Wide Web at http://www.csuohio.edu/glefc/
Introduction
This annual report describes the maj or accomplishments of the Great Lakes Environmental Finance Center
(GLEFC). The report also provides a perspective of future priorities for the Center's work in 1999 and
beyond. The Great Lakes Environmental Finance Center was established at Cleveland State University in
1994. The Center serves public and private sector clients in Federal Region 5, which includes Ihe states
of Ohio, Michigan, Indiana, Illinois, Wisconsin, and Minnesota
Expertise and Resources
GLEFC is housed within The Urban Center at Cleveland State University, which is a nationally recognized
public policy research institute. The Urban Center is engaged in a wide range of research, technical
assistance, and training activities related to urban and regional development Over 30 fuUtime staff
professionals work in The Urban Center's ongoing programs in economic development, environmental
management, housing and neighborhood development, public management and finance, urban design, and
regional development policy.
The Urban Center serves as the research and outreach arm of the Maxine Goodman Levin College of
Urban Affairs, rated in 1997 as one of the top ten public policy schools in the United States by US News
and World Reports Magazine, The College of Urban Affairs offers advanced training in Ihe fields of public
administration, urban planning, urban studies, and environmental studies.
The GLEFC has a current focus in three environmental policy areas:
1. Brownfields cleanup and redevelopment;
2. Industrial pollution prevention; and
3. Sustainable development, especially in Native American communities.
Future priorities will include providing water rate modeling services for smaller communities, and developing
market-based solutions to air quality management The Center's brownfields work is expected to focus
increasingly on urban sprawl and smart growth management in Ihe future.
SUMMARY OF ACCOMPLISHMENTS
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There are three parts to this section of GLEFC's annual report: 1) Brownfields Cleanup and
Redevelopment; 2) Industrial Pollution Prevention; and 3) Native American Communities Initiative.
Brownfields Cleanup and Redevelopment
» Completed four community site visits, providing on-site assistance and consultation on brownfield
redevelopment projects.
• General technical assistance and information related to brownfields redevelopment to Great Lakes
communities and organizations.
• Prepared useful research and planning materials that helps communities solve brownfields
redevelopment problems
Community_SJte Visits and Other Brownfields Outreach Activities
Kenosha. jVisconsin Community Technical Assistance Project
The Great Lakes EFC conducted a one-day intensive strategy-building workshop to address the
redevelopment of the Harborpark site. Harborpark was once the home of the Simmons Box Company
and later became a major automotive plant for Chrysler Corporation. The GLEFC facilitated a workshop
to address specific redevelopment issues for discussion by local community stakeholders. Local
developers, civic leaders and real estate professionals came together to more fully exchange ideas about
the planning and redevelopment of the Harborpark site and to share the complexity of decision-making
required of each stakeholder in order to complete the project. GLEFC's final report identified 6 action
recommendations:
• Summarize the existing report into an easy-to-read public document, making environmental issues
easier to understand.
• Engage die local community in more public education and information gathering.
Investigate and benchmark similar redevelopment projects in other cities.
• Convene a private developers' roundtable to further explore developer interest in the site.
Utilize environmental insurance only if warranted on parts of the site, if at all, and investigate
feasibility.
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• Select a qualified developer orpartaercbeforetalkingto lenders. Environmental issues are only one
of many variables in the financing of a real estate development deal.
These and other recommendations were made as the result of a participatory process enjoyed by 18
community members in the workshop. The Harborpark site is now under final demolition and a site plan
has been developed. The City is actively engaging developers in dialogues about the redevelopment plan
and potential for a variety of projects on the site.
Ohio Communi Technical Assistance Proect
The GLEFC conducted an intensive strategy-building session for the Port Authority for Brownfields
Redevelopment in Cincinnati and Hamilton County. This newly rercreated port authority sought to better
define its mission and vision as a new entity established to focus specifically on brownfield redevelopment
Port Authority board members, the Brownfield Community Advisory Council and other civic and
community leaders came together to participate in this workshop. Other organizational issues were
addressed as well for this one-year old Port Authority, and one of the first in the country to be solely
dedicated to brownfield redevelopment The GLEFC's final report has been published and includes
recommendations in the areas of organizational goal-setting, site prioritization and work planning, and
strategy implementatioa
Peoria. Illinois Community Technical Assistance Project
The Great Lakes Environmental Finance Center (GLEFC) conducted a consulting workshop for the City
of Peoria, Illinois. The purpose of the workshop was to assist the City of Peoria in its efforts to develop
actions leading to the successful redevelopment of the Darst Street site. Particular emphasis was placed
on strategies pertinent to properties with a history of environmental contamination, often characterized as
brownfields. Redevelopment of the site and the prospect for a variety of users was the major focus of the
discussion and produced some enlightening and refreshing options for the City to consider. The key issues
that the Advisory Team addressed were to: 1 ) determine the highest and best use of the site; and 2) identify'
and overcome barriers to redevelopment.
Cleveland, Ohio Community Technical Assistance Project
The GLEFC helped facilitate the kick-off meeting of the Cleveland West Side Economic Development
Initiative. The GLEFC participation is part of a two-session consultation providing research and advisory
services to WIRE-Net, a non-profit community development organization that is managing the national
Brownfield Pilot project for the City of Cleveland.
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The first meeting's purpose was to develop a complete and prioritized list of site selection criteria in order
to decide from 20 sites which would be included in the final redevelopment design for the pilot The goal
was to devise six or seven criteria to apply to all of the possible sites. From this analysis, also largely
provided in by the GLEFC, the ten-member Working Group will determine the final six to eight sites that
will undergo Phase I and Phase n environmental assessments leading to final redevelopment planning. This
second major step in the site prioritization process occurred at a strategy-building session facilitated by the
GLEFC.
Pocatello and Boise, Idaho Community Technical Assistance Projects
Under the auspices of the Boise State University EFC, the GLEFC provided technical assistance and
information to the cities of Pocatello and Boise, Idaho. GLEFC representatives traveled to the City of
Pocatello and provided a national brownfield redevelopment perspective, and helped to facilitate atwo-day
strategy-building session for the City's public officials and community leaders. The Advisory Team of the
Boise EFC and the GLEFC helped the City to determine approaches to tackling their brownfield
properties. Specific attention was paid to developing implementation of redevelopment planning and a
national brownfield pilot application for four sites: the Volkswagen "graveyard"; the Harrison-West site;
First Street East; and Kraft Road.
For the City of Boise, the Boise State University EFC conducted a half-day conference on brownfield
redevelopment for public and private officials in the City of Boise. The GLEFC presented a major
overview of brownfield redevelopment activities in the US and the Great Lakes region, and answered
numerous questions from the audience. The statewide/cfo/zo Statesman newspaper covered the event and
published an article about the GLEFC perspective and information
Other Brownfields Outreach and Assistance Projects
North Span Inc. (Duluth, MN): Major planning and assistance was provided to North Span Inc., in
Duluth, MN, to prepare them for a strategy-building session on revolving loan fund administration for
brownfields. North Span is working as the contractor for the City of Duluth and the Minnesota Pollution
Control Agency (MNPCA) in administering a brownfields revolving loan fund grant awarded to fee
MNPCA. Information and referrals were provided to North Span, as well as initial economic research
that was complied in preparation for a workshop. The City of Duluth and North Span have postponed a
session with the GLEFC pending administrative restructuring at the City as well as at the MNPCA's
brownfield area.
Olney, Illinois: The county's development agency in Olney, Illinois was assisted by the GLEFC with
information and referrals on environmental insurance.
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Minnesota Pollution Control Agency: The Minnesota PCA received information and referrals for their
Water Quality Funding Conference in December of 1997.
Brownfields Presentations
• The EFC Syracuse Forum held June 25-26,1998: provided a major overview of brownfield
redevelopment and research findings for New York state and city officials in addition to other EFC
representatives. (Kirstin Toth)
The National Council of Public-Private Partnerships October 15,1998, Atlanta, GA. EFC was
a Panelist and presenter.
• Region 5 EPA, Chicago: EFC provided major overview and findings of brownfield advisory
service to EPA and state officials.
• Brownfield Finance Partnership, Ohio Water Development Authority, Columbus, Ohio. EFC
presented the Cincinnati project and discussion.
• Brownfields 1998, Los Angeles, CA. EFC presented results of annual brownfields community
benchmark survey, and other research results related to brownfields strategies at two sessions.
Brownfields Meeting Participation/Representation
Council of Infrastructure Financing Authorities/State Revolving Funds, Atlanta, GA:
Ft Wayne/USEPA Brownfields National Partnership Workshop.
• National Association of State Development Agencies, Washington, DC.
Brownfields Research and Resource Materials Development
Brownfields Financing and Redevelopment Planning Guidebook
GLEFC prepared a detailed resource guidebook to assist community and state officials in planning solutions
to brownfield sites. The guidebook contains valuable information and spreadsheets on how to estimate the
costs of cleanup and redevelopment of brownfields. Several case studies are included that illustrate the
process associated with residential, commercial, and industrial properties.
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Brownfields Community Benchmark Survey
This is the second year that GLEFC has surveyed 100 Midwestern communities to assess their progress
in cleaning up and redeveloping brownfields. Over 60 communities responded to the 1998 survey, which
examined clean up methods, costs, redevelopment performance measures, and a host of other key issues
associated with local brownfields redevelopment efforts. The survey results are described in a summary
report, and are available at GLEFC website.
Turning Brownfields Into Greenbacks Book
The EFC has prepared a new book on brownfields redevelopment for the Urban Land Institute in 1998.
While the project was funded by ULI, and therefore is ULI property, the work is identified with GLEFC's
brownfields activity. The book can be purchased from ULI in Washington, DC.
GLEFC Internet Website
This is the second year of operations for GLEFC website, which can be located at:
http://www.csuohio.edu/glefc. The website receives about 75-100 visits per month on average from a
wide cross-section of organizations and individuals. The site has been updated on a regular basis in 1998.
Several new reports and report summaries are available for downloading at the site. At this point, the
website is primarily asource of information about brownfields redevelopment, but the amount of information
about Native American environmental issues, pollution prevention, and other issues is growing.
In 1998, GLEFC received more than 50 follow-up phone calls for information and assistance from those
initially browsing the GLEFC website. Most were minor information requests.
t ' \
New GLEFC Services Brochure
A new GLEFC services brochure was produced in 1998 to increase visibility of the center to Great Lakes
and national clients. About 150 copies of the brochure were distributed at Brownfields 1998 in Los
Angeles. Another 125 copies were distributed at the National Public-Private Partnership Conference in
Atlanta in October 1998. A mailing to brochures to 100 environmental resource organizations is planned
in early 1999.
Pollution Prevention Project
Introduction
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The GLEFC completed its two-year pollution prevention project/ntegra#«gPollution Prevention with
Community-Based Economic Development. This project was funded by a grant from the U.S. EPA's
Division of Pollution Preventioa During 1998, two industry-specific demonstration proj eels were held in
the Cleveland and San Francisco areas. The Cleveland demonstration project, conducted by GLEFC,
focused on the metal finishing industry in northeast Ohio. The San Francisco project, conducted by EFC9,
concentrated on the dry cleaning industry in the San Francisco Bay area. The final report, issued to Ihe
U.S. EPA in December 1998, describes the achievements of these demonstration projects and the steps
that would be taken beyond mis grant
Accomplishments
Pollution Prevention Project Highlights
The project's findings can be summarized in four areas: 1) conclusions from research undertaken during
Ihe first year of the grant, 2) key points from Ihe Northeast Ohio demonstration project, 3) leading findings
from Ihe San Francisco demonstration projects, and 4) the project's contribution to economic
development. -
Findings
Small business access to capital in general and to banks' loans in particular is enhanced by the latest
financial changes, such as loan standardization, credit scoring, and securitization that address many
traditional barriers. Banks do not specialize in loans for pollution control or pollution prevention and most
do not request details regarding the use of the funds being loaned.
The assessment of financing programs for pollution control and pollution prevention revealed that existing
pollution control and/or prevention financing programs experience low demand relative to expectations and
available funds. Interviews with many financing programs' directors, bankers, economic development
programs, technical assistance programs, and others revealed that the lack of financing is not the main
barrier preventing manufacturers from undertaking more pollution prevention investments. Moreover, it was
suggested by many that pollution prevention is not a high priority for small businesses. Information gathered
on Capital Access Programs (CAPs) led to the suggestion to extend the use of CAPs to address financing
of pollution prevention investments.
Northeast Ohio Demonstration Project: Metal Finishers Industry
The Great Lakes Environmental Finance Center (GLEFC) decided to focus its demonstration on the local
metal finishing industry, based on meetings with local stakeholders, conversations with others, and a mail
survey. The GLEFC has been working with the Surface Finishers Committee as representatives of the
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industry in Northeast Ohio. Working wi
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characterized as a highly profitable business, it has relatively low start-up costs. It is attractive for those
individuals with limited capital and a willingness to substitute labor for capital. There are many dry cleaner
trade associations in the Bay Area with jurisdictions varying from local, regional, and ethnic to national and
international. There are also governmental regulatory agencies as well as nonprofit organizations lhat
promote pollution prevention.
Conclusions
The project overall concludes faatfinancing is not the main barrier preventing small- and medium-
sized companies from undertaking pollution prevention projects. This is a very significant issue,
because the hypothesis going into this project was that the lack of financing is one of the main barriers to
pollution prevention and that closing the financing gap would increase pollution prevention activities. This
conclusion was reached three ways: in the assessment of selected environmental financing programs across
the country that showed relatively low demand to these funds and in each of the two demonstration projects
that identified other barriers as more critical than financing. The more important task became how to
encourage small businesses to think about and consider pollution prevention investments in their facilities.
The two demonstration projects focused on individual industries in their efforts to develop a plan for
stimulating more pollution prevention.
Both Environmental Finance Centers (GLEFC and EFC9) are planning to continue to work with the
industries they worked with in this project, to continue to advance technology verification for metal finishers
in Northeast Ohio and contribute to the shift to wet cleaning in the San Francisco Bay Area
Native American Sustainable Communities Building Project
Need
Tribes in the Great Lakes region are struggling with serious environmental degradation problems and other
challenges that threaten the vitality and sustainability of their communities and the unique cultures found
there. Many tribes are actively working to address these issues and needs. This project will help increase
the tribes* success in building sustainable communities in the future. The restoration of ecological balance
in these communities is essential to their preservation and future development.
Guiding Principles
This project will follow six guiding principles ensuring that appropriate outcomes are achieved through
GLEFC's work with the tribes:
» All work will be done at the specific request of tribal officials.
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> Work completed will be consistent with tribal values and culture.
» Tribal officials will lead all community planning project efforts.
i • i
•• A desired outcome from this project will be to reconnect Native American communities with their
surrounding natural environment and other resources that encourage sustainable community
development.
* Balanced and integrated communily solutions will be pursued.
•• Work will be conducted in partnership with 1he tribes, EPA, and other appropriate resources.
Overall Goal
Assist tribal leaders to restore ecological balance in Native American communities in the Great Lakes
region by assisting them in using culturally-appropriate comprehensive planning, sustainable development,
and ecological design services. This project will expand local capacity within the tribes to develop more
sustainable communities.
Accomplishments
1998 marked the initiation of the Native American Communities Project. Funding was received from
USEPA to begin tribal assistance efforts in June 1998. GLEFC has made considerable progress in
accomplishing Phase 1 activities. These accomplishments include:
• Participated in EP A's General Assistance Grant (GAP) training program in March 1998 for Great
Lakes tribes. The GAP Meeting was held in Chicago at Region 5 EPA Offices. Made a
presentation on GLEFC services and how these services could benefit tribes. Representatives from
all 34 tribes were present at the presentation. GLEFC was present, along with the Idaho EFC
(Region 10) and the New Mexico EFC (Region 6).
• . Participated in the 4th Annual National Indian Environment Conference in Redwing, MN. Made
a presentation on GLEFC services, and managed an exhibition booth on GLEFC and the EFC
Network. Over 500 people attended the conference, which was held on the Prairie Island Indian
Reservation, near Redwing.
• Presented a proposal to EPA for funding the Native American Communities Project, which was
successfully funded by EPA's Region 5 Office over a three-year period. The Idaho and New
Mexico EFCs were helpful to GLEFC during the proposal marketing process in the Spring 1998.
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• Visited three reservations (Oneida, Menominee, and Mole Lake) conducted a day-long planning
meeting with officials from six Wisconsin-based tribes. 15 tribal officials attended the meeting.
Prepared a visit report outlying future assistance priorities with Wisconsin tribes in 1999.
• Visited two reservations (Grand Traverse Bay and Little Traverse Bay) and conducted a day-long
planning meeting with officials from nine Michigan -based tribes. 19 tribal officials attended ihe
meeting. Prepared a visit report laying out future assistance priorities with Michigan tribes in 1999.
• Visited two reservations (Bois Forte and Fond du Lac) and ran a day-long planning meeting with
officials from ten Minnesota-based tribes. 29 tribal officials attended the meeting. Prepared a visit
report outlying future assistance priorities with Minnesota tribes in 1999.
• Prepared aplanforthreetrainingworkshopstobeconductedfortribal officials in the Great Lakes
region during the February-April 1999 time period. The workshops will address strategic issues
identified1hroughGLEFC'ssitevisi1sandgroupmeetingswilhtribes. Top priorities are: l)housing
improvement; 2) ecological design; 3) comprehensive community planning; 4) green business
development; and 5) innovative financing for environmental and sustainable development projects.
• Prepared a first draft of a guidebook to be used in the three tribal workshops planned for early
1999. The guidebook focuses on the key issues discussed in the workshops, and it provides
relevant resource material to aid future planning by tribal officials.
NEW INITIATIVES
Water Rate Model Assistance
GLEFC plans to initiate assistance efforts in the rate modeling arena in 1999. Bill Jarocki, Director of the
Idaho EFC, visited GLEFC and provided initial training in model operation and use this past year. Smaller
communities in the Great Lakes region are Ihe target audience for these services.
Air Quality Emissions Trying
GLEFC hopes to contribute to the air quality arena in 1999. Because of the increased importance of
permit trading, GLEFC hopes to help Great Lakes metropolitan areas to prepare for new developments
in this area
EFC NETWORK COLLABORATION
Pollution Prevention
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The demonstration projects' phase of the pollution prevention project involved collaboration between
GLEFC and the California EFC in Region 9. EFC9 was a subcontractor to GLEFC under the pollution
prevention grant Although each demonstration project was conducted independently, the goals and
objectives guiding the projects were the same. Both worked with specific industries to understand the
barriers to pollution prevention and plan on how to overcome these barriers.
Smart Growth Initiative Proposal
GLEFC helped the University of Maryland EFC prepare a network proposal to USEPA to encourage
smart growth of US metropolitan areas. The proposal is pending a funding decision by USEPA
Native American Communities Project
GLEFC collaborated with the EFC Network, especially the Idaho EFC and the New Mexico EFC, in
preparing a GLEFC proposal to EPA Region 5 to establish the Native American Communities Project
The proposal was successful in producing funds for GLEFC assistance to the 34 Federally recognized
tribes in the Great Lakes states.
1998 EFC Annual Meeting
GLEFC hosted the EFC Network Annual Meeting in September in Cleveland. The two new Region 4
Centers at the University of Louisville and North Carolina, Chapel Hill were represented. The meeting was
productive in advancing the EFC Network Strategic Plan, and in discussing future organizational options
for the Network.
Great Lakes EFC Organization
Management
Don lannone Great Lakes Environmental Phone (216) 687-4590
Director Finance Center Fax (216) 687-9277
Great Lakes Environmental Finance Maxine Goodman Levin College
Center of Urban Affairs di@wolf.csuohio.edu
Cleveland State University Cleveland State University
Cleveland, OH 44115
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Dr. Ziona Austrian
Associate Director
Great Lakes Environmental Finance
Center
Cleveland State University
Great Lakes Environmental
Finance Center
Maxine Goodman Levin College
of Urban Affairs
Cleveland State University
Cleveland, OH 44115
Phone (216) 687-3988
Fax (216) 687-9277
ziona@urban.csuohio.edu
OlgaLee
Staff Assistant
Great Lakes Environmental Finance.
Center
Cleveland State University
Great Lakes Environmental
Finance Center
Maxine Goodman Levin College
of Urban Affairs
Cleveland State University
Cleveland, OH 44115
Phone (216) 687-6947
Fax (216) 687-9277
olga@urban.csuohio.edu
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EFC at University of New Mexico, Region 6
Mission Statement
To promote and facilitate effective and efficient environmental infrastructure through innovative
financial and engineering techniques.
Executive Overview • :
Established as the first EFC in 1992 at 1he New Mexico Engineering Research Institute, the University of
New Mexico Environmental Finance Center (EFC) promotes innovative environmental financing techniques •
by blending the disciplines of environmental engineering and finance. Serving USEPA Region 6, the EFC
facilitates efficient environmental infrastructure through innovative and alternative engineering techniques and
provides state and local officials with education and training, advisory services, publications, and analyses
of financing trends and techniques. The EFC documents and disseminates information about innovative and
cost-effective environmental financing alternatives and disseminates information on cost-effective
management techniques, such as, public-private partnerships and internal optimization. The EFC initially
began with an emphasis on the application of public-private partnerships, particularly public water and
wastewater utility systems. With Ihe anticipation of NAFTA, the EFC expanded its technical assistance
to border communities on ways to reduce costs for basic sanitary and public health services. Additionally,
the EFC researched financing alternatives for environmental infrastructure along Ihe US-Mexico Border,
which later served as a guide to feasible choices for public policy decision making. The EFC field-tested
a water and wastewater rate model with several New Mexico communities during 1995. Training in the
use of the rate model is a mainstay of the EFC's financial outreach program throughout Region 6 states.
Current efforts primarily focus on assistance to state agencies with the capacity development requirements
(technical, financial, and managerial) of the Safe Drinking Water Act, specifically as Ihey relate to federal,
state, tribal, and local governments and public and private small water systems. New efforts include
assisting residents in northern New Mexico in developing a Unified Source Water Protection Plan, a pilot
project initiative with EPA and USDA Rural Utilities Service. Identifying affordable and viable financing
options and promoting low-cost, alternative, and appropriate technologies for system capacity projects is
an ever present goal of the EFC. The EFC is making information available on the World Wide Web at
http:/Aimeri.unm,edu/ta/efc.htm
EFC Expertise and Organizational Structure
Located at the University of New Mexico Research and Technology Park, the University of New Mexico
Environmental Finance Center is a division of the New Mexico Engineering Research Institute (NMERI)
and serves the US Environmental Protection Agency's Region 6 states. The EFC directoris aregistered
Professional Engineer in the states of New Mexico and Pennsylvania and holds a master's degree in
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environmental engineering. Educational backgrounds of 1he staff include master degrees in environmental
engineering, water resources administration, and community planning / public administration The EFC also
employs five graduate students in Ihe areas of engineering, planning, and business administration and one
engineering undergraduate.
Since its inception in the 1960s, NMERI, a multi-disciplinary research and development extension of the
UNM School of Engineering has continued its research, development, and education services both locally
and abroad. Serving the needs of both Ihe private and public sectors, NMERI focuses strategic research
efforts in the areas of sustainable development; global environmental technology; fire science; and non-
conventional energy systems. Additional capabilities and expertise are available to the EFC through close
working relationships maintained with UNM faculty, staff, and graduate students from the Schools of
Architecture and Planning, Engineering, Law, and Public Administration; the Institute for Public Policy, the
Latin American Institute; the Bureau of Economic and Business Research; the Earth Data Analysis Center;
and the Water Resources Administration Program.
COMPLETED INITIATIVES
Capacity Development - Increasing Drinking Water Viability
August 1996 - December 1998
The EFC has been involved in several projects in the last four years relating to assessing and increasing the
capacity of small drinking water systems. In addition to capacity development projects, the EFC staff
continues to serve as technical staff to the New Mexico Drinking Water Advisory Group.
The EFC completed a capacity development project, "Increasing Drinking Water Viability In New
Mexico," which expanded from New Mexico to all the states within Region 6 during the its project
duration. This Assistance Agreement had three main components:
• Section 1: New Mexico Capacity Development Strategy
• Section 2: Rate Model Workshops and Demonstrations
• Section 3: Meetings with Region 6 States (Clearinghouse and Outreach).
Section 1: New Mexico Capacity Development Strategy
The EFC worked closely with the New Mexico Environment Department (NMED) in support of the
changes that resulted from the 1996 Amendments to the Safe Drinking Water Act (SDWA). The EFC
hosted a public meeting for NMED on the New Mexico Safe Drinking Water Program and State Revolving
Loan fund.
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Section 2: Rate Model Workshops and Demonstrations
The EFC demonstrated the utility of and presented ways in which the EFC could assist agencies with
RateMod Pro™, a water/wastewater utility rate setting software program, through several day-long training
sessions. Strategic planning and an in-depth discussion regarding how the model can be used to meet the
heeds of the state regulatory and funding agencies was also part of the day's agenda The use of the model
was demonstrated on two levels: for water and wastewater utility operators., managers, and owners; and,
for regulatory funding. For a more detailed description of rate setting using RateMod Pro, please refer to
Water Utility Rate Model Presentations and Training Demonstrations.
Section 3: Capacity Development Clearinghouse and Outreach
One of the initial activities was a review of existing and on-going capacity development efforts in other
states. Contact with other states was maintained throughout tiie duration of the project regarding capacity
development efforts throughout tiie nation. This allowed the EFC to share information regarding those
programs with Region 6 states and to present information regarding other successes and failures. The EFC
still maintains this capacity development information to serve as a Clearinghouse for Region 6 states. In
addition, the EFC attended meetings and conferences related to capacity development efforts in New
Mexico, other states wuhin EPA Region 6, other states outside of EPA Region 6, and national initiatives.
This attendance has enhanced the EFC's ability to act as a resource for EPA Region 6 states and to EPA
Region 6 itself.
The EFC director worked with EPA Region 6 representatives to develop a Capacity Development
Assistance Program for Arkansas, Louisiana, and Oklahoma. The EFC met with agency representatives
from these states to present the capacity development efforts of New Mexico and Texas. They discussed
EPA requirements, requirements for EPA Region 6 approval of the strategy, and state flexibility in the
strategy. Meetings were held for two days in each of the states. Discussions with individual states focused
on their determinations and perceptions of the greatest need in tiie formulation of a Capacity Development
Strategy.
Water Utility Rate Model Presentations and Trainina Demonstrations
Ongoing
Background
The model was developed in cooperation with the U.S. Environmental Protection Agency and the
Environmental Finance Center Network to enhance the financial and managerial capacity of small to
medium-size water and wastewater systems. The model incorporates EPA user fee guidelines and methods
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recommended by the American Water Works Association and the Water Environment Federation. The
model is designed to be flexible and easy to use while applying accepted rate setting guidelines and
methodologies. It is capable of being customized for each utility system's unique design, customer, and
financial characteristics, and accommodates abroad range of common accounting and budgeting practices.
Small users may enter very limited data, select the model's defaults and obtain results with minimum effort.
Alternatively, larger systems, and those requiring more advanced rate setting techniques, may input very
detailed information in order to take advantage of all the model's features.
Model Use
The model is berth a rate setting and a financial planning tool that has the ability to:
• perform a cost-of-service analysis;
develop demand-based user rates; and
prepare a six-year budget, rate, and financial forecast on a desktop personal computer.
The model is useful on two levels. The EFC demonstrated the utility of foe model for both of the following
levels:
• water and wastewater utility operators, managers, and owners; and
regulatory and funding agencies to:
improve project underwriting;
determine necessary and appropriate amount of financial assistance; .
assess repayment capacity of individual systems;
schedule capital improvements; and
evaluate financing alternatives.
New Mexico Finance Authority Request for Proposal Preparation
The New Mexico Finance Authority (NMFA) contracted with the EFC to prepare a Request for Proposal
(RFP) for environmental reviews, engineering services, and construction services for the SDWA SRF loan
program. Prior to the SRF program, the NMFA had not had a need for RFPs since it did not typically
need these types of services.
Survev of Water Svstem ODeratins Permits throughout United States
•
In the fall of 1998, the EFC staff conducted atelephone survey of all 50 states to find out which states issue
operating permits for public drinking water systems. Specific states were questioned in depth to understand
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how Ihe operating permit system works in an effort to link permits to requirements under the Safe Drinking
Water Act Amendments.
Survey and Database of GIS Usage in New Mexico
February 1998 - September 1998
Under the cooperative program between the University of New Mexico and the State of New Mexico
General Services Department - Information Systems Division (GSD-ISD), the EFC staff conducted a
telephone survey and mailing list compilation of geographic information system (GIS) specialists and
administrators from New Mexico municipalities, counties, and regional economic development
organizations. The same survey was conducted on state agencies, tribal chapters, and federal governments
with local offices in New Mexico. The database will be used for the distribution of RGIS' newsletters,
information, and announcements about future RGIS-produced CD-ROMs.
Texas Capacity Development Strategy Implementation
As a follow-up to the Texas Capacity Development Strategy completed in August of 1997, the EFC
assisted the Texas Natural Resource Conservation Commission with the implementation of the strategy.
There are numerous steps and phases of the implementation process and full implementation may take up
to three years due to the need for a revised computer database program and a revised sanitary survey
deficiency score process.
CURRENT INITIATIVES
Smfljj Water System Capacity Development
The EPA defines capacity as "the ability of a water system to consistently provide quality service at
an affordable cost." This encompasses the technical, financial, and managerial capability of a system to
consistently comply with all state and federal regulations. Capacity can also be seen in a much broader
context than merely regulating compliance; it can involve economic development, population growth, and
the role of the government and private sector in providing public inftastructure.
Increasing system capacity is a two-step process. The first step is the assessment of overall system
capacity, and the second step is the enhancement of system capacity through direct technical assistance.
System capacity exists along a continuum and information about present and firture needs of water systems
must be incorporated in the process in order to encompass the long term requirements of a sustainable
system.
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The EFC devotes a majority of its time to capacity development endeavors. At present, capacity
development work is performed under three separate USEPA contracts:
> Capacity Development for Native American Tribes and Pueblos
»• Capacity Development Assistance to States and Native American Tribes
Subcontract Agreement with EFC-10
»• Capacity Development Assistance to Region 6 States
Native American Capacity Development: EPA Region 6 Tribes and Pueblos
Sponsor: EPA Region 6
The Reauthorization of the Safe Drinking Water Act in August of 1996 included the establishment of the
Native American Revolving Fund for Native American Tribes, Pueblos, and Alaskan Native Villages. The
fund is administered by EPA Regional Offices and is similar to the state-administered revolving loan funds
in that it was established to provide resources in the form of monetary and technical assistance to small and
medium community drinking water systems. But in the case of the Native American Revolving Fund, the
funds are in the form of grants rather than loans. The EFC is focusing its initial Native American efforts on
adapting the concept of capacity development to fit within the institutional framework of the Tribes and
Pueblos in New Mexico.
In addition, the EFC has established the Tribal Set-Aside Task Force. Because of the importance of
stakeholder involvement in the process of developing and implementing a drinking water system capacity
program, the Task Force includes people who represent abroad range of Tribal and Pueblo interests. Task
Force meetings are held quarterly.
Capacity Development Strategies: Assistance to States and Native American Tribes
Sponsor EPA Headquarters
This collaborative project with the Environmental Finance Center at Boise State University (EFC-10) is
funded through a grant from the USEPA Office of Ground Water and Drinking Water. Although both
Centers are doing equally proportionate work, the EFC-10 is the designated grantee while the EFC-6 is
a subcontractor for the grant.
The EFC-6 is currently providing direct assistance to two states in Region 6 and one in Region 2, in
addition to the Native American Tribes located in Region 6 to assist these entities in meeting capacity
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development strategy requirements of the 1996 SDWA Amendments. The states involved include New
Mexico and Texas in Region 6 and New York in Region 2. Four additional states will be selected based
on interest and need. '
New Mexico: Expanding the Effectiveness of a Capacity Development Strategy
The EFC is completing a study of past recipients of water system funding to determine if there is significant
difference between the capability of a system prior to and after funding based on the type of funding. This
project is designed to assist the State in expanding the role and effectiveness of the overall capacity
development strategy described in further detail later in this section. The systems are being compared to
themselves before and after funding to note any differences or improvements, to the extent feasible given
Ihe limited information that is currently kept for systems. In addition, similar size and type systems that
completed similar projects are being compared based on funding type (grant, grant/loan, loan) to examine
whether any of the systems requested additional'funding during the selected time period.
The study of past grant and loan recipients ties into Section 1420(c)(2)(B) of the Safe Drinking Water Act.
A major impairment to capacity development in New Mexico is the wide availability of "free" money, i.e.,
grants, and other sources of loan funds. If the capacity development strategy ties only to the DWSRF and
not to these other funding sources, it will be very difficult for the State to improve overall viability of drinking
water systems throughout the state. In fact, systems may intentionally avoid the DWSRF if they know they
have to follow viability criteria verses other moneys that do not require a capacity review. Therefore, this
study will be a component in the State's efforts to link all of the funding sources under the umbrella of the
capacity development program. This linkage would be a tremendous enhancement to overall capacity
development efforts within New Mexico.
Texas Capacity Development Strategy Implementation
The EFC assisted the Texas Natural Resource Conservation Commission (TNRCC) with the
implementation of the capacity development strategy it developed for them during the summer of 1997.
Implementation activities are listed under the Completed Initiatives section of this report
Native American Tribes in Region 6: Capacity Development Assessment Tool
The EFC developed a capacity development assessment tool for Native American Tribes within Region
6 for use in evaluating Ihe capacity of tribal water systems. Customized for tribal water systems, the tool
was developed with input from tribal representatives based on ongoing dialogue the EFC maintains with
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Tribal officials and task force members. The draft assessment tool is under revision and will be sent to EPA
Region 6 and tribal task force members for comment early in 1999.
•
Capacity Development Strategy Assistance to Region 6 States
Sponsor: USEPA Region 6
1998 - Present
The overall goal of this assistance agreement is to assist the Region 6 states of Arkansas, Louisiana, New
Mexico, and Oklahoma in the development of a capacity development strategy as required by the Safe
Drinking Water Act Amendments of 1996. This proj ect is intended to help states meet SDWA deadlines
and to prevent them from having funds withheld from the SRF for a failure to do so.
The EFC is assisting Arkansas, Louisiana, Oklahoma, and New Mexico in preparing a Capacity
Development Strategy as required under the 1996 Safe Drinking Water Act The EFC does not propose
to complete the entire capacity development strategy for each of the four states, but intends to assist each
state in several tasks that will lead the state to the completion of a strategy.
Services Related to the Establishment of Reasonable Water Rates for Regulated Utilities
Sponsor: Texas Natural Resources Conservation Commission
1998 - Present
This project is divided into three sections: 1) Establishment of Reasonable Water Rates for Regulated
Utilities, 2) Development of Characteristics of Well Run Water Systems, and 3) Affordability of Water
Treatment Alternatives. For details, see 1998 Annual Report.
Unified Source Water Protection Plan Pilot Project
Sponsors: USEPA Headquarters and USDA Rural Utilities Service
1998 - Present
The objective of this project is to establish a Unified Source Water Protection Plan (USWPP) for
communities located near the Village of Mora and within the Mora County portion of the North-Central
New Mexico Enterprise Community (La Jicarita EC). This project will build upon applied research and
projects conducted by the project team which includes the University of New Mexico Environmental
Finance Center (UNM-EFC), the Rural Community Assistance Corporation (RCAC), and the La Jicarita
EC. For details, see 1998 Annual Report.
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Restoring Ecological Balance in Native American Communities through Comprehensive
Community Planning, Sustainable Development, and Ecological Design
Sponsor: USEPA Region 6
1998-Present
The objective of this project is to assist Native American communities in identifying ways to restore
ecological balance through the appropriate use of comprehensive community planning and ecological design
techniques. The intent is to assist six Native American communities over the next three years to help them
define methods to redesign and redevelop themselves in greater harmony with their surrounding ecosystems
and habitats. These six communities would then be used as role models to inform other Native American
communities about how to accomplish similar sustainable community development goals.
This project exemplifies how the Environmental Finance Center Network; Native American tribal
organizations; governmental entities; and other resource providers and experts can work as a team in
helping Native American communities restore ecological balance through the appropriate use of
comprehensive community planning, sustainable development, and ecological design techniques. All work
efforts will be undertaken at the specific request of Tribal authorities within EPA Region 6. The work will
be consistent with the Tribes' cultural values and governmental policies. The work will also be coordinated
/ with other state and federal agencies involved in Tribal environmental issues, including, but not limited to,
the EPA, the Indian Health Service, and the Bureau of Indian Affairs. The EFC will ensure that the efforts
of this project will complement, not duplicate, efforts of these other agencies. For details, see 1998 Annual
Report.
Cost-Effective Environmental Management
Ongoing
Public-Private Partnership Studies for the Environmental Financial Advisory Board:
Cost-Effective Environmental Management Case Study Compendium
The Director of the EFC served as vice-chair of the Cost-Effective Environmental Management workgroup
of the Environmental Financial Advisory Board. The Environmental Financial Advisory Board (EFAB) is
a federal chartered advisory committee that consists of independent experts from all levels of government,
including: elected officials; the finance, banking, and legal communities; business and industry; and national
organizations who advise EPA on environmental finance issues.
PROPOSED INITIATIVES
Technical Assistance to Nizhnii Tagil, Vodokanal, Russia
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Submitted to: Syracuse University Environmental Finance Center (EFC-2)
lead Center, for an EPA assistance agreement
This proposed effort entails implementation of a capacity development project for the Nizhnii Tagil
Vodokanal in Nizhnii Tagil, Russia The UNM-EFC proposes to complete two project components:
. managerial and financial strengthening; and technical strengthening. For details, see 1998 Annual Report
Task]. Managerial and Financial Strengthening- Study Tour and Capacity Development Workshop
The UNM-EFC proposes to arrange, organize and support a 13-day study tour in the United States for
Ihe Director of Ihe Nizhnii Tagil Vodokanal and two additional people. This tour would include visits to
Washington, DC; Dallas, Texas; Albuquerque, New Mexico; and Denver, Colorado.
Task 2. Technical Strengthening
The UNM-EFC proposes to order specific equipment and ship this equipment to Nizhnii Tagil, Russia.
The equipment includes flow meters for water systems and laboratory equipment for water quality testing.
The specific equipment list is based on discussions with USEPA
Infrastructure Planning Conference for the Navajo Nation
Submitted to: The Navajo Nation Office of Engineering Services
The Navajo Nation approached 1he EFC to organize an infrastructure planning conference in Gallup,
New Mexico for the Navajo Nation. The purpose of the conference is public education and awareness
targeted to Chapter officials and to a grassroots level public audience. For details, see 1998 Annual
Report
Small Water System Capacity Development for Native American Tribes and Pueblos -
Amendment
Sponsor: USEPA Region 6
In Support of: EPA Region 6 Native American Revolving Loan Fund for Drinking Water
Developing a capacity development program for the Native American communities, in conjunction with
the Native American Revolving Fund, presents unique challenges. One factor is the governmental
structure. Each Tribe and Pueblo has its own governmental structure and there is often rapid turnover
in Tribal leaders, which may create a continuily problem in terms of program implementation. The
Tribes and Pueblos have varying capacities in terms of environmental programs. Some have quite
extensive programs with many employees and much expertise, while others are just beginning the
process of establishing environmental agencies. Many of the water systems lack meters, which creates
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\ difficulties in terms of establishing adequate rate structures or implementing water conservation
programs. Many of the systems lade trained operators to run Ihe systems. Traditionally, the clean
water revolving funds set up by congress have not extended to Ihe Native Americans, therefore, there is
f not a past history of implementing such a program in Native American communities as there is within the
States.
With the additional funding, Ihe EFC intends to add a third component - direct assistance to tribes in
, technical, managerial, and financial capacity development and direct assistance with Tribal SRF grant
preparation. For details, see 1998 Annual Report.
North American Development Bank Assistance Work Plan: Financial Capacity Assistance
along the US-Mexico Border Region
Submitted to: North American Development Bank and EPA Office of International Activities
One of the greatest problems along the U.S. Mexico Border in terms of financing water and
wastewater infrastructure is the ability to set sustainable and equitable rates and the unwillingness of
- people in the communities to pay the necessary rates. Although this problem is not unique to the border
Y * area, it is particularly common and pronounced along both sides of the border. Part of this problem
•' relates to a lack of understanding of how to set rates and what elements should be included in a
sustainable and equitable rate. Another part of this problem is a lack of appreciation within the
community regarding the need to pay for water or wastewater treatment.
This proposal is being submitted to provide a means to address some of these issues in border
communities. Another component would be improving the financial capacity of communities along the
border region by assisting Ihe NADBank-in its efforts to fund environmental infrastructure projects
along the US-Mexico Border through assistance to the NADBank and directly to communities. To
achieve this end, the EFC would partner with a Mexican partner and the EFC Network, as
appropriate, to provide education in rate setting on both sides of the border.
Sustainable Urban Areas: Guiding Growth
Submitted to: EPA OAQPS as an EFC Network proposal
Urban sprawl comprises one aspect of a larger issue: regional patterns of development. Regional
development frequently occurs in fragmented patterns, with little coordination between levels of
government, between public and private sectors, or between different disciplines including economics,
landscape ecology, and natural resource management. However, in reality, these issues are all
interconnected: land use, brownfields redevelopment, transportation, and economic vitality are all
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interrelated with habitat restoration, water and air quality, and natural resource protection. Feasible,
more cost-effective solutions to ensure sustainable urban areas lie in a multi-governmental, multi-issue
problem solving process. The challenge is how to integrate this process into local decision making. To
address this challenge, the EFC Network proposes to conduct a series of charrettes, which would
explore 1he long-term sustainabiiity of urban areas through a process of 'interconnectedness of issues"
and between levels of government and die private sector. The charrettes would begin by recognizing
the traditional ways in which policy makers approach local challenges. Each charrette would not only
focus on issues of local concern, but also demonstrate how a single issue is connected to broader issues
and broader geography.
The UNMEFC would concentrate on transportation issues and its effect on sprawl development,
including consequences of new roads, land use decisions, and transportation choices by local and
regional entities. Specifically, the UNMEFC charrette would examine proposed road construction of a
new road through National Park land, which would facilitate growth on the west side of the park. The
location of this type of road construction would be a national precedent.
EFC NETWORK COLLABORATIONS
Collaborative Projects
Capacity Development Strategies: Assistance to States and Native American Tribes
University of New Mexico EFC-6 working with:
Environmental Finance Center at Boise State University (EFC-10)
Water/Wastewater Utility Rate Model Demonstration for USEPA Region 6 Agencies
University of New Mexico EFC-6 working with:
Environmental Finance Center at Boise State University (EFC-10)
Restoring Ecological Balance
University of New Mexico EFC-6 working with:
Great Lakes Environmental Finance Center at Cleveland State University (EFC-5)
Environmental Finance Center at Boise State University (EFC-10)
Collaborative Proposals
Sustainable Urban Areas: Guiding Growth
s
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University of New Mexico EFC-6 working with:
University of Maryland Environmental Finance Center (EFC-3), lead Center,
Environmental Finance Center Network
Capacity Development Assistance for the Nizhnii Tagil, Vodokanal, Russia
University of New Mexico EFC-6 working wilh:
Syracuse University Environmental Finance Center (EFC-2), lead Center
NADBank Assistance Work Plan: Financial Capacity Assistance along the US-Mexico
Border Region ,-
University of New Mexico EFC-6, lead Center, with:
Environmental Finance Center Network
Environmental Financial Advisory Board
Collaborative Meetings/Conferences/Workshops
Rate Model Workshops . . .
March 1998 in Albuquerque, NM
University of New Mexico EFC-6 with:
Environmental Finance Center at Boise State University (EFC-10)
Meeting on Ecological Design in Tribal Settings
April, 1998 in Chicago, IL
University of New Mexico EFC-6 with:
Great Lakes Environmental Finance Center at Cleveland State University (EFC-5)
Environmental Finance Center at Boise State University (EFC-10)
Environmental Finance Center Network Forum
June, 1998 in Syracuse, NY .
University of New Mexico EFC-6 with:
Syracuse University Environmental Finance Center (EFC-2) - host Center
Environmental Finance Center Network
Association of State Drinking Water Administrators National Conference
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I
October 1998 in Keystone, CO
University of New Mexico EFC-6 with:
Environmental Finance Center at Boise State University (EFC-10)
TECHNICAL PRESENTATIONS-CONFERENCES, MEETINGS, and TRAINING
EFC Presentations - Conferences
Event
Training for Tribes in EPA Region
5
Workshop on Capacity
Development Requirements for
New Water Systems and State
Revolving Loan Applicants for
Arkansas Department of Health
Meeting with Representatives
from Angel Fire, New Mexico
New Mexico Rural Water
Association Training and
Workshop for Water System
Operators
Meeting of New Mexico
Municipal League Zoning Official
Association of State Drinking
Water Administrators Annual
Conference:
Middle Rio Grande Conservancy
District Meeting
New Mexico Environmental
Health Conference
Date
4/1/98
5/12-13/98
8/25/98
9/24/98
9/24/98
10/5-8/98
10/6/98
10/13-15/98
Location
Chicago, IL
Little Rock, AK
Albuquerque,
NM
Tucumcari, NM
Taos, NM
Keystone, CO
Albuquerque,
NM
Albuquerque,
NM
Description
Presentation at tribal training on capacity
development Issues with EFC 's 5 and 10
Training meeting facilitated by EFC and
attended by 20 staff members of
Arkansas Dept. of Health representatives
from EPA Region 6
Demonstration of Resource Geographic
Information System
EFC presentation and training on Utility
Rate Setting and RateModPro
EFC presentation on the use of
Geographic Information Systems
Presentation and Exhibit Table
EFC presentation on Resource
Geographic Information and GIS support
Presentation on Texas Rate Study Project
and Exhibit Table
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April 1599
E-91 1 Overview and NMGIC
Meeting
Meeting of Council of State
Community Development
Agencies
Louisiana Regional AWWA
Meeting
10/15-16/98
10/28-30/98
12/15-16/98
Portland, OR
Alexandria and
Baton Rouge,
LA
Presentation on Blending Engineering '
and Financing to Assist Small
Communities
Presentation on Blending Engineering
and Financing to Assist Small Water
Systems
EFC Meetings
Event
Meeting with Representative from
EPA Office of International
Activities
Meeting with Bohannan Houston
and Lodestar Project Team
Meeting with Texas Natural
Resource and Conservation
Commission
EFAB Meeting; EFC Directors
Meeting
Meeting with Indian Health
Service and other providers of
infrastructure support >
Meeting with New Mexico
Environment Department
Oklahoma Department of
Environmental Quality,
Stakeholders Meeting on
Capacity Development
New Mexico Drinking Water
Advisory Group Meeting
Date
1/8/98
2/4/98
2/4-5/98
2/9-12/98
2/23/98
2/26/98
3/2/98
3/5/98
Location
Albuquerque,
NM
Albuquerque,
NM
Austin, TX
Washington,
DC
Santa Fe,NM
Santa Fe,NM
Oklahoma City,
OK
Santa Fe.NM
Description
Discussion of potential EFC assistance
along US/Mexico Border
Discussion of water issues
Discussion of capacity development
implementation
Discussion on capacity development for
Tribes
Discussion of capacity development
issues in New Mexico
Meeting facilitated by EFC. Attendees
included representatives from various
stakeholder groups, EPA, and Oklahoma
DEQ
Discussion of capacity development
issues for medium and large systems, and
Source Water Protection Program
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April 1999
Meeting on Funding Tribal
Drinking Water Infrastructure
Improvements
Meeting with New Mexico
Environment Department
Meeting with Representatives
from Nambe Pueblo
Meeting with New Mexico
Environment Department
Meeting with EPA and Cadmus
Group
Meeting of New Mexico
Geographic Information Council
Tribal Drinking Water Set-
AsideTask Force Meeting
New Mexico Drinking Water
Advisory Group Meeting
Meeting with Texas Natural
Resource Conservation
Commission
New Mexico Drinking Water
Advisory Group Meeting
Meeting with Representatives
from Sandia National Laboratory
and Navajo Nation
EFC Forum for Funding Agencies
and Communities in New York
Meeting with EPA Region 6
The Third Annual New Mexico
Infrastructure Finance
Conference
3/17/98
3/24/98
4/7/98
4/14/98
4/16/98
4/17/98
4/28/98
5/14/98
6/10-12/98
6/11/98
6/15/98
6/25-26/98
7/6/98
7/12-14/98
Albuquerque,
NM
Santa Fe,NM
Albuquerque,
NM
Santa Fe,NM
Washington,
DC
Albuquerque,
NM
Albuquerque,
NM
Santa Fe.NM
Austin, TX
Santa Fe,NM
Albuquerque,
NM
Syracuse, NY
Dallas, TX
Albuquerque,
NM
.Meeting sponsored by EPA Region 6 and
facilitated by EFC
Discussion of capacity development
issues in New Mexico
Discussion of Tribal Set-Aside Program
Discussion of capacity development
issues in New Mexico
Discussion of coordination of assistance
providers to states on capacity
development issues
Discussion of Tribal Set-Aside Program
Discussion of Safe Drinking Water
Program and Operator Certification
Program
Discussion of capacity development
implementation issues
Discussion of proposed application
process for loans, upcoming public
meetings and subcommittee meetings
Discussion of potential use of Smart
Sampling on Navajo Nation for hazardous
waste cleanup
Discussion of Tribal Set-Aside Task .
Force, priority list, ranking system, and
date of availability of grant funds
EFC Exhibit Table
t
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Meeting with Rural Community
Assistance Corporation and La
Jicarita
New Mexico Drinking Water
Advisory Group
Tribal Drinking Water Set-Aside
Task Force Meeting
Meeting with Texas Natural
Resource Conservation
Commission
New Mexico Drinking Water
Advisory Group
EFC Network Director's Meeting
Meeting with New Mexico
Environment Department,
Drinking Water Bureau
Meeting with Representatives
from Nambe Pueblo
Navajo Nation Infrastructure
Planning Conference Meeting
New Mexico Drinking Water
Advisory Group Meeting
Meeting with Representatives
from Zia Pueblo
Middle Rio Grande Conservancy
District Meeting
Meeting with New Mexico
Environment Department and
EPA-6
Meeting with EPA Region 6
Meeting with Rural Community
Assistance Corp
7/15/98
7/29/98
7/22/98
8/3-6/98
8/12/98
9/13-15/98
9/17/98
9/21/98
9/24/98
9/29/98
10/2/98
10/6/98
11/9/98
11/10/98
11/13/98
Mora,NM
Santa Fe,NM
Santa Fe, MM
Austin, Texas
Santa Fe, NM
Cleveland, OH
Santa Fe.NM
Albuquerque,
NM
Albuquerque,
NM
Santa Fe,NM
Albuquerque,
NM
Santa Fe.NM
Albuquerque,
NM
Santa Fe.NM
Discussion of proposal development for
Unified Source Water Protection Project
in Mora County
Meeting of Capacity Development
Subcommittee
Discussion of implementation of rate
study
Capacity Development Subcommittee
Meeting
Discussion of New Mexico Capacity
Project
Discussion and Review of Capacity
Development Assessment Form
Discussion of potential project to
develop and facilitate conference on
infrastructure planning and financing
Discussion of capacity development
issues
EFC presentation on Resource
Geographic Information and GIS support
Discussion of capacity development
program in New Mexico
Discussion of EFC activities
Discussion of Unified Source Water
Protection Project in Mora County
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April 1999
Meeting with Louisiana
Department of Health &
Hospitals, Office of Public Health
New Mexico Drinking Water
Advisory Group Meeting
Meeting with Rural Community
Assistance Corporation and La
Jicarita
New Mexico Drinking Water
Advisory Group
Meeting with Rural Community
Assistance Corporation
11/16-17/98
12/2/98
12/16/98
12/17/98
12/18/98
Baton Rouge,
LA
Santa Fe,NM
Mora,NM
Santa Fe.NM
Albuquerque,
NM
Discussion of capacity development
program and business plan requirements
for Louisiana
Discussion of state- wide needs survey of
water systems and water conservation
program
Team Meeting for Unified Source Water
Protection Project in Mora County
Source Water Protection Subcommittee
Discussion of EFC participation in Tribal
Conference in Reno, NV
EFC Training Workshops
Event
EPA Region 4 and 6/States Training
on Capacity Development
UNM Civil Engineering Graduate
Seminar
Colorado Rural Water Association
Annual Conference
Workshop on Utility Rate Setting
and RateModPro
Workshop on Capacity
Development Requirements for New
Water Systems and State Revolving
Loan Applicants for Louisiana
Department of Health and
Hospitals, Office of Public Health
Workshop on Capacity
Development Requirements for New
Water Systems and State
Revolving Loan Applicants for
Arkansas Department of Health
Date
1/12-14/98
1/29/98
2/19/98
3/23/98
4/22-23/98
5/12-13/98
Location
Dallas, TX
Albuquerque,
NM
Colorado
Springs, CO
Albuquerque,
NM
New Orleans,
LA
Little Rock, AK
Description
EFC presentation on different aspects of
capacity for public drinking water
systems
Presentation on the role of engineering
in capacity development
EFC presentation and training on Utility
Rate Setting and RateModPro
Meeting with EFC Region 10 and
presentation and training of
representatives from water systems in
Colorado
Workshop facilitated by EFC and
attended by Louisiana Dept. of Health
and Hospitals Staff and Representatives
from EPA
Region 6
Meeting facilitated by EFC and
attended by 20 staff members of
Arkansas Dept. of Health
representatives from EPA Region 6
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April 1399
EFC Forum for Funding Agencies
and Communities in New York
Landfill Bioreactors and Biogas
Seminar hosted by City of
Albuquerque
ESRI Annual Conference and
Training
Demonstration of RateModPro
Meeting with representatives from
Bloomfield, New Mexico
New Mexico Rural Water
Association Workshop and
Training for Water System
Operators
Technology Demonstration by
National Laboratories and EPA
Introduction to Hydrology Course
at Southwestern Indian Polytechnic
Inst.
Arc View GIS Course
6/25-26/98
6/26/98
7/27-30/98
8/1 1/98
8/17/98
8/27/98
9/13-25/98
11/16-20/98
11/23-24/98
Syracuse, NY
Albuquerque,
NM
San Diego, CA
Albuquerque,
NM
Albuquerque,
NM
Socorro, NM
Albuquerque,
NM
Albuquerque,
NM
Albuquerque,
NM
Attended seminar
Attended conference
EFC demonstration and training of El
Dorado Water System
Demonstration of Resource Geographic
Information System
EFC Training on Utility Rate Setting and
RateModPro
Hosted by NMERI/EFC
Taught Course
Taught Course
AVAILABLE PUBLICATIONS
D Survey andDatabase Summary Report on GIS Usage in New Mexico, September 1998
D Evaluation of a Subs urface Flow Wetland and Evaporation Pond for a Single
Family Dwelling in the East Mountain Are ofBernalillo County, Final Report April
1998
D Report on Issues in the Development of a County Utility Department: Final
Report to Dona Ana County, New Mexico, November 1997
D Cost-Effective Environmental Management Case Studies, October 1997
D Ecological Baseline Model for the U.S. -Mexico Border, Final Report September 1997
D Capacity Development Strategy Report for Texas Natural Resource Conservation
Commission, Final Report August 1997
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April 1999
f
D Civil Engineering Options Assessment for the Enchanted Skies Park, Draft Report July
1997
D Biqflotation Treatment Unit Demonstration Project, Final Report Jury 1997
D Examples of Capacity Development Assessment Tools & Business Plans from
Various States, July 1997
D A Guidebook of Financial Tools, prepared by the EFAB and EFC Network, June 1997
D Environmental Finance Center Network 1996 Annual Report, January 1997
D Management and Financing Options for Small Community Water Systems on the US-
Mexico Border Region: Final Report to Dona Ana County, New Mexico, July 1996
D A State Survey of Capacity Building Tools, November 1996
D A State Viability Survey, August 1996
D The Otero County Small Water System Restructuring Project, November 1995
D North Valley Wastewater Options Study: Final Report for Bernalillo County, New Mexico
and Village of Los Ranchos de Albuquerque, June 1995
D Meeting Financial Responsibility Requirements on Tribal Lands, October 1994
D Public-Private Partnerships for Environmental Facilities: The Management
Challenge for Local Governments, October 1993
D Water and Wastewater User Charge Guide for Small Municipalities, September
1991
ADDITIONAL WORK
The EFC staff also performs contractual work under the Engineering and Environmental Finance Center
Division of NMERI (New Mexico Engineering Research Institute). Most of this work consists of
research-based projects under contract with state and local governments and other university
departments.
New Mexico Resource Geographic Information System
On-going
The New Mexico Resource Geographic Information System (RGIS) Program is a cooperative
program between the University of New Mexico and the State of New Mexico General Services
Department Representatives from three UNM public service and research units comprise the RGIS
Team including the EFC director representing the New Mexico Engineering Research Institute, Earth
Data Analysis Center, and the Bureau of Business and Economic research. Program components
include the RGIS Clearinghouse -a publicly accessible resource, database development, technical
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support, training, geographic information coordination, and project support for state agencies and local
government
RGBS facilitates the use of CIS in New Mexico in three ways: mapping, communicating, and educating.
First, it provides counties and municipalities with public maps in a format appropriate for the most
commonly used G1S software. Second, it assists state and local governments with interactive
communication and cooperation in the use of CIS. Third, it educates public organizations about the
advantages of GIS and trains them in its use. Thus, RGIS promotes statewide-use of GIS for planning
and spatial analysis of current and historical trends throughout the state. For more information refer to
the RGIS web page at http://rgis.unm.edu:8080.
LodeStar Project: Civil Engineering Options Assessment Report
The EFC provided ongoing civil engineering support services to the LodeStar Projects Enchanted
Skies Park and Observatory, which will be a public access park dedicated principally to providing a
balanced program of education, research, and public outreach. The Civil Engineering Options
Assessment Report (August 1997) overviewed factors requiring consideration regarding water source,
wastewater treatment and disposal, and other infrastructure decisions at the Enchanted Skies Park.
Water usage rates were estimated based on the facility information and a survey of similar parks and
monuments where low flow systems and other conservation measures have been implemented. Several
different wastewater treatment options were considered and evaluated for engineering difficulties,
f construction costs, .and maintenance costs. The report also included information on geology,
hydrology, water supply, and wastewater treatment options. Other issues addressed in the report
include legal rights, permitting requirements, construction considerations, facilities and exhibits
considerations, and safety and emergency considerations.
ArcView GIS Certified Training Instruction
Ongoing
EFC staff completed the certification process to become an ESRI Authorized ArcView GIS
(geographic information system) instructor. The Introduction to ArcView GIS course provides
instruction in the basic skills needed to use the software's display editing, analysis, and presentation
mapping functions. Classes are typically offered quarterly.
Visiting Faculty at the Southwest Indian Polytechnic Institute (SIPI)
Ongoing
EFC staff taught a five-day course at the Southwestern Indian Polytechnic Institute in Basic Hydrology.
SIPI is a National Indian Community College located in Albuquerque, NM. The Basic Hydrology
course supports the Environmental Science, Industrial Hygiene, and Water Technology Programs. The
5-day course covered introductory material, surface water processes, groundwater processes, well
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design and construction, water quality, water pollution, and water management and legislation. Hie
EFC team taught the water management section of the course.
•**,
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New Mexico EFC Organization
Management
April 1999
i
Heather G. Himmelberger, PE
Director
Environmental Finance Center
University of New Mexico
Susan Butler
Program Manager
Environmental Finance Center
University of New Mexico.
Margie Krebs-Jesperson
Research Engineer
Environmental Finance Center
University of New Mexico
University of New Mexico
Environmental Finance Center
New Mexico Engineering Research
Institute
901 University Boulevard, SE
University of New Mexico
Environmental Finance Center
New Mexico Engineering Research
Institute
901 University Boulevard, SE
University of New Mexico
Environmental Finance Center
New Mexico Engineering Research
Institute
901 University Boulevard, SE
Phone (505) 272-7355
fax (505)272-7203
heatherh@unm.edu
Phone (505) 272-7356
fax (505)272-7203
sbutier@unm.edu
Phone (505) 272-7365
fax (505)272-7203
krebs@nmeri.unm.edu
Lord Skeie-Campbell
Program Coordinator
Environmental Finance Center
University of New Mexico
University of New Mexico
Environmental Finance Center
New Mexico Engineering Research
Institute
901 University Boulevard, SE
Phone (505) 272-7351
fax (505)272-7203
campbell@nmeri.unm.edu
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EFC at California State University, Hayward, Region 9
Executive Overview
The Environmental Finance Center, Region 9 (EFC9), is a University-based Center providing expertise on
environmental financing and economic issues. EFC9 is affiliated with California State University, Hayward
(CSUH), and is supported by the U.S. Environmental Protection Agency (EPA). The Mission of EFC9 is
to promote support and sustain the environmental goods and services industry through a variety of programs
and services including but not limited to: small business outreach, environmental business directories,
environmental industry Charrettes, environmental export assistance, pollution prevention assistance and
Charrettes, technology transfer and an environmental business information clearinghouse. The EFC is making
information available on the World Wide Web at http://www.greenstart.org/efc9
EFC9's mission to help small business is derived from recent research revealing 1he poor performance of the
environmental goods and services industry in the US. The current worldwide market for the environmental
goods and services industry (EGSI) is about $450 billion (1997) and 1he largest national market, comprised
primarily of small and medium-sized firms, is Ihe United States, accounting for roughly 35 percent of the world
trade. Nevertheless, the US industry is starting to mature in most sectors, and is expected to grow at a slower
rate than the rest of the world market. In addition, the EGSI faces numerous barriers to future growth
including uncertainty in the regulatory process, uneven enforcement, multiple testing requirements and lack of
financing for technology commercialization and beyond.
Pollution prevention technology has been identified as the key to success for the EGSI. Pollution prevention
technology is the fastest growing and most innovative sector in the environmental industry. Because it reduces
or eliminates waste production, it is considered by most experts to be the future and natural path of the
industry. However, like the environmental industry as a whole, there are several barriers to pollution
prevention implementation, from a lack of equity capital to a lack of appropriate test sites for new
technologies.
As a result, EFC9's mandate is threefold:
«• Help small business,
•• Advance the environmental industry, and
* Promote pollution prevention.
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1998 In Review
EFC9 completed a series of tasks in 1998 including five workshops at the National Marketplace for the
Environment Conference in Los Angeles, the San Francisco Pollution Prevention Demonstration Proj ect which
included two Charrettes focused on alternatives to dry cleaning, an expansion of the 1997 directory,
Financing Environmental Technology: A Funding Directory for the Environmental Entrepreneur, and
an environmental finance workshop held at the National Energy Conference on the Future of Alternative and
Sustainable Technologies in Nevada The following is an overview of the EFC's major accomplishments in
the past year.
National Marketplace for the Environment Conference - Los Angeles:
May 6-8,1998
On May 6 through 8, the Environmental Finance Center (EFC9) presented five Environmental Finance
Workshops at the National Marketplace for the Environment Conference in Los Angeles. The three day
Marketplace for the Environment Conference was a national conference hosted by Eco Expo and die
Environmental Education Foundation, and included a number of informative sessions and workshops as well
as an exhibit hall of over 100 innovative environmental technologies. The conference included seven theme
tracks consisting of five sessions each. The conference themes included, 1) Transportation, 2) High
Performance Buildings & Energy Efficiericy, 3) Pollution Prevention: H2O/Air, 4) Green Purchasing, 5) Waste
Management/Recycling, 6) The Hazards and Opportunities ofDe-Regulation, and 7) Environmental Financing.
The Environmental Finance Center in Region 9 was a Charter Sponsor of the event.
The conference attracted over 1,000 participants and was an extremely high-profile event for the
Environmental Finance Center. In addition to its workshops, EFC9 hosted its own booth on the exhibition
hall floor where hundreds of small business owners, and local, state, federal and international agencies were
provided with information on the Center and the EFC Network. Finally, EFC9 hosted the following
workshops
Workshop #1: Wednesday, May 6 - Pulling Yourself Up: Bootstrapping And Beyond
Workshop 1 offered information on more creative, less known options for funding a small environmental
business through private sourcing opportunities.
Workshop #2: Wednesday, May 6 - Getting Government Financing
Workshop 2 included a variety of state and local program representatives who presented public financing
opportunities for small environmental businesses.
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Workshop #3: Thursday, May 7 - Investment Opportunities in Energy and The Environment
(Equity Financing, Venture Capital and Angels)
Workshop 3 provided information on a variety of equity options for the environmental entrepreneur.
Workshop #4: Thursday, May 7 - Small Business Hatcheries: Environmental Incubators
Workshop 4 allowed the audience to meet environmental incubator directors and their tenants.
Workshop #5: Friday, May 8 - Accessing Foreign Markets: Financing and Services for Export
Workshop 5 was designed to help the environmental entrepreneur find programs and funding opportunities
to guide them into the export market
San Francisco Pollution Prevention Demonstration Project C Dry Cleaning Charrettes
In the Fall of 1997, Hie Environmental Finance Center for EPA Region 9 (EFC9) received a grant from the
Environmental Finance Center for EPA Region 5 (EFC5), in conjunction with the US EPA to target a specific
industry and produce apian for stimulating more Pollution Prevention (P2) activities in that San Francisco Bay
Area industry. After consultation with EFC5, EPA Region 9 and the Bay Area Hazardous Waste Reduction ""
Committee, EFC9 determined that the dry cleaning industry would make the most suitable target
As a result, between December 1997 and October 1998, EFC9 conducted numerous informal interviews
withregional, county and local government agencies including economic development agencies, small business
organizations and representatives, community organizations, dry cleaners, environmental non-profit
organizations, and industry insiders concerning the dry cleaning industry. In addition, EFC9 organized and held
two Charrettes to identify future pollution prevention approaches and strategies to use with East Bay dry
cleaners. The goal of these informal interviews and Charrettes, more specifically, was to solicit the help of dry
cleaners, regulatory agencies, local governments and environmental non-profit organizations to determine
effective ways to encourage dry cleaners to reduce perchloroethylene (perc) usage, a chlorinated hydrocarbon
synthetic solvent, without reducing their profits.
Expanding The Environmental Finance Directory
In 1997, EFC9 completed research on a number of sources of debt and equity capital potentially available
to environmental businesses in California These results were compiled in a comprehensive Directory on
financing for environmental technology development and commercialization. This Directory is entitled:
Financing Environmental Technology B A Funding Directory for the Environmental Entrepreneur.
Because of the ensuing popularity of the original volume, EFC9 prepared a 1998 Directory Update which
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includes expansions and updates of old sections and several new sections including areview of funding sources
throughout Region DC The 1998 Directory has fee following chapter headings:
*• An Environmental Industry Overview
> General Funding Options
f Venture Capital Investment in the Environmental Industry
;
•• Finding Angels
>• Technology Incubators
•• Private Funding Sources (including):
- Online Networks
- Forums and Fairs
- Socially Responsible/Environmental Investment Funds
- Environmental Investment Management Firms
- Environmental Venture Capital
- Socially Responsible Banks and Credit Unions
> Federal Government Programs
»• Programs in California, Nevada, Hawaii and Arizona, and
» International Opportunities.
EFC9 Workshop: Global Energy Futures Exchange - National Energy Conference on the Future of
Alternative and Sustainable Technologies
EFC9 conducted an environmental finance workshop at the Global Energy Futures Conference in Las Vegas
on October 28. The conference, national in scope, was hosted by the Nevada Test Site Development
Corporation, and was sponsored by numerous national organizations including:
• US Department of Energy,
• Lawrence Livermore National Laboratory,
• Los Alamos National Laboratory,
• Oak Ridge National Laboratory,
• Sandia National Laboratory, and
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• President's Council on Sustainable Development,
The title of our workshop was "Renewables: From Concept to Commercialization" and the focus was finance
for small environmental businesses from start-up phases to commercialization. ITie event was designed to
provide information on opportunities for finance through little-known resources.
For full details, please see the 1998 Annual Report.
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California State, Hayward EFC Organization
Management •
April 1999
Sarah Diefendorf
Director
Environmental Finance Center
California State University,
Hayward
Environmental Finance Center
California State University, Hayward
Building 7, Alameda Point
851 West Midway Avenue
Alameda, CA 94501
Phone (510) 749-6867
fax (510)749-6862
diefendorf@greenstait. org
Susan Blachman
Associate Director
Environmental Finance Center
California State University,
Hayward
Environmental Finance Center
California State University, Hayward
Building 7, Alameda Point
851 West Midway Avenue
Alameda, CA 94501
Phone (510) 749-6867
fax (510)749-6862
blachman@greenstart.org
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EFC at Boise State University, Region 10
Executive Overview
The Region 10 Environmental Finance Center at Boise State University was created in 1995 and first received
finding in the fall of 1996. The EFC at BSU, Region 10, is contained within the Department of Public Policy
and Administration of the College of Social Sciences and Public Affairs. It serves the communities in the
Pacific Northwest and Intermountain states of Oregon, Washington, Idaho and Alaska The mission of the
Region 10 EFC is to help communities and the states with the "how to pay11 issues of environmental protection.
The BSU EFC is taking the lead nationally in designing and testing drinking water system capacity assessment
methodologies required by the 1996 Amendments to the Safe Drinking Water Act. The Center at BSU is also
assisting the states in improving institutional capacity and in formulating and implementing drinking water
program capacity development strategies required by SDWA. Addressing the needs of public water systems
and wastewater systems to improve financial and managerial capacity is also an important component of the
Center's services. The EFC is making information available on the World Wide Web at
http://sspa.boisestate.edu/efc
Summary Introduction:
The Environmental Finance Center at Boise State University concentrates its resources in performing the
following tasks and activities:
• Developing and delivering educational programs including workshops, conferences, training seminars
and formal education programs to improve the ability of public and private sector leaders and
managers in addressing and resolving environmental finance dilemmas.
• Developing new tools to improve the financial management and management capabilities of small
public, private and private not-for-profit water systems.
• Preparing and disseminating practical guides, handbooks and reports on financial and management
issues relative to the public sector and environmental system needs.
• Assisting local and tribal governments and other public water and wastewater systems to increase their
use of alternative and innovative approaches to financing environmental protection; particularly
approaches that provide alternatives to traditional taxation methods.
• Offering training, education, facilitation and policy initiatives that will improve the ability of regional,
state and local officials in meeting the challenges of the capacity development requirements relative to
the SDWA Amendments of 1996.
• Providing federal and state policy makers with information about the particular needs of small
communities for financing assistance and financial tools necessary for meeting regulatory compliance
standards. The EFC informs the policy debate regarding the financing of environmental infrastructure
projects and flie utility of conventional infrastructure financing mechanisms. The EFC also tests and
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then suggests new tools and assistance mechanisms that could be utilized at die local, state and federal
government levels.
Summary of Core Activities
The Environmental Finance Center at Boise State University has focused on delivering tools to local
government and other community water and wastewater system officials for creating sustainable environmental
infrastructure operations.
In 1998 the EFC staff conducted six. utility rate design workshops within Region 10. The workshops were
organized based upon local demand for assistance. Fifty officials from communities in Oregon, Washington
and Idaho participated in the EFC's full-day training sessions.
EFC staffalso provided utility rate setting and financial managernenttraining at several workshops, conferences
and training seminars during 1998.
Developing EFC Network Capabilities for Delivering Utility Rate Setting Training
One of the important side benefits of the EFClO's investment in utility rate design training has been the
development of staff capability within the EFC network to share information about the use of 1his important
tool. In 1998, EFClO's Director provided technical assistance and training to staff at three sister
EnvironmentalFinance Centers; EFC2 at Syracuse University, EFC3 at the University of Maryland and EFC5
at the University of New Mexico.
Safe Drinking Water Act Capacity Development
In 1996, S. 1316 amended Title XTV of the Public Health Service Act, commonly known as Ihe Safe Drinking
Water Act In part, S. 1316 seeks to improve the capacity of regulated public water systems in meeting
compliance standards and the general standards of operational efficiency and effectiveness.
i
A central goal of each of the EFCs is to help create sustainable environmental systems in the public and private
sectors. Sustainable systems have the financial, managerial, and technical capabilities to operate in compliance
with federal and state environmental protection and health protection requirements. Since 1992, the EFC
network has provided training, educational, and analytical services designed to address the "how to pay"
issues of environmental compliance.
In 1998, with significant financial support from the EPA Office of Ground Water and Drinking Water, the
EFC 10 joined the Environmental Finance Center at the University of New Mexico (EFC6) to continue
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assisting state drinking water programs in USEPA Regions 2,6,7,8,9, and 10; and Native American Tribal
Governments located within USEPA Region 6 in fashioning capacity development strategies required by the
1996 Safe Drinking Water Act (SDWA) Amendments [Section 1420(c)]. Through this work -- begun in the
summer of 1997 — the EFCs are adding capacity to either assist in the development of new capacity
development strategies, or to make a maj or contribution to capacity development strategic work already under
way.
To date, the EFC10 has assisted the states of Oregon and Idaho in facilitating the citizen/stakeholder process
of presenting findings of fact that will contribute to establishing state capacity development strategies. The
EFC has advised the State of Alaska in the formulation of rules setting technical, financial and management
standards for new public water systems.
California's Drinking Water Programreceived assistance in developing atool for assessing financial capability,
as well as specific training for the program's field staff on financial and management capacity. Approximately
two hundred officials attended a two-week series of training workshops in Sacramento, Berkeley, Santa Ana
and Madera.
At the end of 1998, the EFC began assisting two states in Region 7; Missouri and Iowa Both states
requested the EFC's help in facilitating the citizen/stakeholder advisory processes. Missouri asked for
additionalhelp in drafting rules establishing technical, financial and management standards for new public water
systems.
SDWA Capability Analysis and DWSRF Loan Application Technical Assistance
As mentioned earlier, significant amendments were made to the Safe Drinking Water Act (SDWA) in 1996;
notably in regard to the responsibility of the primacy agencies to improve the capacity of public water systems
(PWSs) to comply with safe drinking water standards. For the first time, Congress also ensured that states
would receive financial resources in the form of capitalization grants for Drinking Water State Revolving Funds
(DWSRFs). These funds are to be made available in the form of loans to public water systems, both privately
and publicly owned, to both help assure long-term compliance with SDWA and provide safe drinking water
to the public.
" Assistance to the State of Idaho: Since Ihe establishment of the Drinking Water State Revolving Fund
(DWSRF), the EFC 10 has assisted the Idaho State Drinking Water Program in developing a
capability screening mechanism for DWSRF loan applications as well as providing technical review
of loan applications based on that screening mechanism.
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f Assistance to Ihe State of Alaska: The EFC at Boise State University provides ongoing assistance to
DWSRF administrators in Ihe State of Alaska on SRF issues. For example, the EFC produced a
white paper on the issue of depreciation.
Region 10 Lower Boise River Water Pollution Trading Demonstration Project
' In the fall of 1997, the State of Idaho was selected as the site of an experimental study on pollution trading
by the Region 10 office of Innovation. Idaho's proposal to study the feasibility of pollution trading was
;"' selected from three state proposals offered by Region 10 slates. The pollution trading feasibility project is
„ focusing on the potential for water pollution trading among point and non-point sources in Ihe lower Boise
* River watershed area This project, directed by the Region 10 Office of Innovation and the Idaho Division
of Environmental Quality will provide needed information to states and communities as they strive to meet
water pollution control targets or total maximum daily loading limits (TMDLs) of critical waterways.. TMDLs
are usually set in order to meet beneficial use conditions for those waterways.
The examination of water pollution trading has created excellent opportunities for the EFC10 to participate
in the policy discussions as well as the financial analysis necessary to determine least cost financing options for
meeting pollution control targets.
SUMMARY OF NEW PROJECTS
Charrettes
In 1998 the EFC at Boise State University took its first steps in emulating the success of the EFC at the
University of Maryland by conducting four charrette events. Based on this experience and the establishment
of staff capabilities for conducting these events, it is expected that charrettes will be a standard service offering
of tiie EFC in the future.
• Confederated Tribes of the Siletz Indians Charrette
• South Lake Water and Sewer District Charrette
City of McCall Water System Financing Charrette
• City of Pocatello Brownfields Project Charrette
AWWA PNS Financial Management Practices Survey
In 1997, the Finance Committee of the Pacific Northwest Section of AWWA (AWWA PNS) collected data
from a selected sample of member water systems in Oregon as part of a two-stage effort to develop detailed
information regarding water system financial practices. AWWA PNS asked the EFC to submit a project
proposal addressing the completion of the second stage of this survey research effort; a survey of AWWA
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member water systems in Washington and Idaho. Additionally, this stage includes a compilation of the survey
data and a detailed analysis and report of findings.
City of Eagle - Sewer Consolidation Study
In 1998 the City of Eagle, Idaho asked if the Environmental Finance Center at Boise State University could
assist the City of Eagle in evaluating the feasibility of consolidating the services provided by the Eagle Sewer
District under the City. The City identified the crucial question to be, "Would the citizens of Eagle be belter
served, politically and financially, if the sewer district were to go under Ihe jurisdiction of the city of Eagle".
A list of questions was provided to the EFC by the city of Eagle for consideration in development of a scope
of work. The EFC agreed to conduct the study that will provide a list of advantages and disadvantages to
consolidation for citizens of the city of Eagle, but will not recommend specifically a proposed action. The
advantages and disadvantages will be described within the areas of finance, management and capacity.
Capital Improvement Planning and Financing Tool
The EFC, in cooperation with the BSU College of Engineering, began the development of capital improvement
planning and financing tool for small water and wastewater utilities. The goal is to offer a tool that will help
small utilities assess their capital facilities and on the basis of that assessment, prepare a multi-year financing
plan. This financial infonnation will greatly aid small water and wastewater systems in meeting the full-cost
pricing needs of their operations. Beta testing of the tool is planned for the summer of 1999. Multi-state
testing of the model should occur in late 1999.
EFC Network Collaborations
The EFC at Boise State University relies upon the partners in the EFC Network to offer assistance to
communities, the states and the regional entities in Region 10 EPA The following are some examples of
collaborative efforts with EFC partners:
* Pocatello Brownfields Conference and Charrette. Great Lakes EFC's recognized expert in
Brownfields redevelopment joined Boise State EFC staff in conducting two Brownfields mini-
conferences and a charrette in Region 10.
• The BSU EFC joined its network partners in Syracuse for the first annual EFC Forum organized by
the EFC at Syracuse University. EFC at BSU Director conducted two workshops on financial
capacity building and participated in a charrette addressing the financing challenges of the Hamlet of
Long Eddy, New York.
• The EFCs at BSU and the University of New Mexico are partners in delivering assistance to states
in the area of drinking water system capacity building strategies.
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• The Boise State University EFC is providing assistance to the Great Lakes EFC at Cleveland State
University relative to their work wilh Tribal governments in the Midwest
• EFC Director assisted the EFC at the University of Maryland in conducting financial management
training workshops for officials in Pennsylvania and Maryland
Boise State EFC Organization '
Management
Bill Jarocki
Director
Environmental Finance Center
Environmental Finance Center
Boise State University
1910 University Drive
Phone (208) 426-4293
fax (208) 426-3967
Sharon Burke
Project Associate
Environmental Finance Center
Environmental Finance Center
Boise State University
1910 University Drive
Phone (208) 426-4366
fax (208) 426-3967
SamanlhaZeimet
Research Assistant
Environmental Finance Center
Paul Woods
Research Assistant
Environmental Finance Center
University of New Mexico
Lauren McLean
Research Assistant
Environmental Finance Center
Environmental Finance Center
Boise State University
1910 University Drive
Environmental Finance Center
Boise State University
1910 University Drive
Environmental Finance Center
Boise State University
1910 University Drive
Phone (208) 426-1075
fax (208) 426-3967
Phone (208) 426-1075
fax (208) 426-3967
Phone.(208) 426-1075
fax (208)426-3967
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Carrie Applegate
Administrative Assistant
Environmental Finance Center
Boise State University
Phone (208) 426-1567
fax (208) 426-3967
D. MORE INFORMATION ON EFIN
Accessing the EFIN Database
EFIN Search Form Instructions
EFIN Keyword Index
EFIN Abstracts - Publications and Case Studies
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ENVIRONMENTAL FINANCING INFORMATION NETWORK
ACCESSING THE EFIN DATABASE
THROUGH THE EPA'S ONLINE LIBRARY SYSTEM WEB SITE:
The EFIN database is available via the OLS Web site. There are two access points:
1. Go to die OLS Web site at http://www.epa.gov/naflibra/olsJitmand click on Search OLS.
- Go to the list for Special Collections, click on the Environmental Financing Information
Network.
2. Go directly to the EFIN Search page via the Web site at: http://www.epa.gov/efinpage/efindata.htm
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For assistance searching the EFIN database, call the EFIN Infoline at (202) 564-4994.
The searching instructions and EFIN Keyword Index are also available via the above Web page. See also
the OLS Help page for additional instructions.
For technical assistance, call EPA's National Computer Center at 1-800-334-2405 or (919)
541-7862 (outside the U.S.).
Ordering documents:
All of the records in the EFIN database include ordering information for the documents. The
EFIN Center distributes EPA publications produced by:
* the Environmental Finance Program (EFP),
* the Environmental Financial Advisory Board (EFAB), and
* the Environmental Finance Centers (EFCs)
For those EPA documents that are not published by the above mentioned offices of EPA, the
EFIN center will refer callers to the appropriate EPA source for the document Note: The EPA
Public Information Center (PIC) has been closed and incorporated in the Headquarters
Information Resource Center. Those EFIN database records that feature publications produced by
non-EP A sources provide directions for obtaining those publications from the appropriate source.
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SEARCH FORM
The following are Ihe primary search fields on the Search Form There are boxes with options for
each field For Text Fields, the search engine has the options "all the words", "exact phrase" and .
"any words". The Record Number field has the options "equals" and "is not". The Year Published
field includes tfie options "=", "less than" and "greater than".
Record Number:
Enter record number, if known.
Usually used when a record is cross-referenced.
Ex:123-EFIP
Keywords:
Enter keyword(s) to be searched. See the EFIN Keyword Index.
Ex: stormwater
Ex: wastewater treatment
Main Title:
Enter one or more words from Ihe title excluding words like "a" or "the".
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Ex: brownfields financing
Description:
Enter one or more words to be searched in the description of the document
Ex: municipalities
Ex: financing mechanisms
Author:
Enter any known portion of the author's name.
This includes organizations or individuals.
Word order is not important.
Ex:EFAB
Ex: Environmental Financial Advisory Board
Publisher:
Enter the publishers name, must be specific. For example entering EPA gives a different
number of results than entering Environmental Protection Agency.
Year Published:
Enter the year of publication or a range of years.
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Ex: 1995
Ex: 1992:1995
Contact:
\ • Enter any word or words from the name of Ihe organization responsible for distributing the
I document.
Ex: Environmental Finance Program
Note: The OLS Web site also provides the records in a bibliographic format.
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EFIN Keyword Index
ACCESS fees
ACCOUNTABILITY
regulatory ACTIVITIES
private ACTIVITY bonds
AGGRESSIVE leveraging
cooperative AGREEMENTS
AIR pollution •
indoor AIR pollution
tax ALLOCATION bonds
• ALTERNATIVE financing mechanisms
ALTERNATIVE funding
economic ANALYSIS
financial ANALYSIS
APPROPRIATIONS
ASBESTOS
environmental ASSESSMENT
credit ASSISTANCE
financial ASSISTANCE
state ASSISTANCE
technical ASSISTANCE
BANKRUPTCIES
bond BANKS '
infrastructure BANKS
BENEFITS
BLOCK grants
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BOND banks
BOND pools
BONDS
general obligation BONDS
industrial development BONDS
municipal BONDS
private activity BONDS
registered BONDS
revenue BONDS
tax allocation BONDS
tax exempt BONDS
BROWNFIELDS
BUDGETING
BUSINESS
volume CAP
financial CAPABILITY
. state CAPACITY
CAPITAL funding
CAPITAL improvements
CAPITAL planning
CAPITALIZATION grants >
CASE studies
CERTIFICATION fees
operator CERTIFICATION
user CHARGE systems
effluent CHARGES
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user CHARGES
CHARRETTE
CHARRETTES
COASTAL resource protection
COMBINED sewer overflow
COMBINED sewers
rural COMMUNITIES
small COMMUNITIES
urban COMMUNITIES
COMMUNITY development
interjurisdictional COMPETITION
COMPLIANCE
COMPLIANCE costs
COMPOSTING
COMPUTER models
public CONFIDENCE
CONNECTION fees
CONSERVATION
CONSTRUCTION grants
CONTACT
CONTRACTS
pesticide CONTROL
pollution CONTROL
COOPERATIVE agreements
public private partnerships COORDINATOR
regional COORDINATOR
COST effectiveness
COST recovery
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COST reduction
COST sharing
COSTS
compliance COSTS
service COSTS
COVENANTS
CREATIVE financing
CREDIT assistance
tax CREDITS
environmental DATA
DEBT financing
DECISION making
DEDICATED tax
y DEFAULTS
community DEVELOPMENT
DEVELOPMENT
industrial DEVELOPMENT bonds
DEVELOPMENT fees
federal DIRECT loans
DIRECTORY
solid waste DISPOSAL
DRINKING water
DRINKING water facilities
ECONOMIC analysis
ECONOMIC impact
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cost EFFECTIVENESS
EFFICIENCY
energy EFFICIENCY
EFFLUENT charges
EFFLUENT tax
ENERGY efficiency
ENERGY technology
ENFORCEMENT
infrastructure ENHANCEMENT
ENTREPRENEURS
ENVIRONMENTAL assessment
ENVIRONMENTAL data
EROSION
EQUITY
ESTUARIES
EXACTIONS
tax EXEMPT bonds
tax EXEMPTIONS
EXCISE tax
sewer EXTENSIONS
drinking water FACILITIES
. solid waste FACILITIES
wastewater FACILITIES
FACILITIES management
FEDERAL direct loans
FEDERAL funding
FEDERAL grants
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FEDERAL programs
fiscal FEDERALISM
FEDERAL program
FEDERAL programs
FEES
access FEES
certification FEES
connection FEES
development FEES
\
impact FEES
laboratory FEES
license FEES
maintenance FEES
operating FEES
permit FEES
tipping FEES
user FEES
public FINANCE
public FINANCE survey
FINANCIAL analysis
FINANCIAL assistance
FINANCIAL capability
FINANCIAL incentives
FINANCIAL management
FINANCIAL planning
FINANCING
creative FINANCING
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debt FINANCING
infrastructure FINANCING
alternative FINANCING mechanisms
FINANCING strategies
FINES
FISCAL federalism
FISCAL impact
capital FUNDING
federal FUNDING
state FUNDING
FUNDING
alternative FUNDING
FUNDRAISING
state revolving FUNDS
GENERAL obligation bonds
GENERAL revenues
GOVERNMENT programs
local GOVERNMENTS
GRANTS
block GRANTS
capitalization GRANTS
construction GRANTS
federal GRANTS
supplemental GRANTS
GREEN lights
GROUNDWATER
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loan GUARANTIES
HAZARDOUS waste
self HELP
economic IMPACT
fiscal IMPACT
IMPACT fees
capital IMPROVEMENTS
financial INCENTIVES
INCOME tax
INDOOR air pollution
INDUSTRIAL development bonds
• INFORMATION management
INFRASTRUCTURE
INFRASTRUCTURE banks
INFRASTRUCTURE enhancement
INFRASTRUCTURE financing
public INFRASTRUCTURE
INTEREST rates
INTERGOVERNMENTAL organizations
INTERGOVERNMENTAL relations
INTERJURISDICTIONAL competition
legal ISSUES
LABORATORY fees
LANDFILLS
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LEASE purchasing
LEGAL issues
LEVERAGING
aggressive LEVERAGING
LIABILITY
bruited LIABILITY
LICENSE fees
LIMITED liability
green LIGHTS
LOAN guaranties
LOANS
federal direct LOANS
LOCAL governments
LOCAL programs
MAINTENANCE
MAINTENANCE fees
decision MAKING
MANAGEMENT
facilities MANAGEMENT
financial MANAGEMENT
information MANAGEMENT
solid waste MANAGEMENT
stormwater MANAGEMENT
MANDATES
MARINE waters
alternative financing MECHANISMS
MODELS
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computer MODELS
MUNICIPAL bonds
NEEDS
NONPOINT source pollution
NONPOINT sources
NPDES permits
general OBLIGATION bonds
OCCUPANCY tax
OPERATING fees
OPERATIONS
OPERATOR certification
intergovernmental ORGANIZATIONS
OUTREACH
combined sewer OVERFLOW
public private PARTNERSHIPS
public private PARTNERSHIPS coordinator
tribal PARTNERSHIPS
PERMIT fees
npdes PERMITS
PESTICIDE control
PLANNING
capital PLANNING
financial PLANNING
POINT source pollution
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air
indoor air
nonpoint source
point source
water
bond
pollution
waste
unit
public
public
federal
government
local
state
voluntary
research
resource recovery
coastal resource
wellhead
POLLUTION
POLLUTION
POLLUTION
POLLUTION
POLLUTION
POLLUTION control
POLLUTION prevention
POOLS
PREVENTION
PREVENTION
PRICING
PRIVATE activity bonds
PRIVATE partnerships
PRIVATE partnerships coordinator
PRIVATIZATION
PROGRAM
PROGRAMS
PROGRAMS
PROGRAMS
PROGRAMS
PROJECTS
PROJECTS
PROPERTY tax
PROTECTION
PROTECTION
PUBLIC confidence
PUBLIC finance
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PUBLIC finance survey
PUBLIC infrastructure
PUBLIC private partnerships
PUBLIC private partnerships coordinator
PUBLIC services
PUBLIC works
lease PURCHASING
water QUALITY
water QUALITY fees
RADON
RATE structure
interest RATES
sewer RATES
wastewater RATES
water RATES
RECLAMATION
cost RECOVERY
resource RECOVERY projects
RECYCLING
urban REDEVELOPMENT
cost REDUCTION
source REDUCTION
tax REFORM
REGIONAL coordinators
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REGISTERED bonds
REGULATORY activities
intergovernmental RELATIONS
site REMEDIATION
urban RENEWAL
RESEARCH projects
coastal RESOURCE protection
RESOURCE recovery projects
water RESOURCES
REVENUE bonds
REVENUE sharing
REVENUES
general REVENUES
state REVOLVING funds
RULES
RURAL communities
SALES tax
SELF help
SEPTIC systems
SERVICE costs
public SERVICES
SEWAGE treatment
combined SEWER overflow
SEWER extensions
SEWER rates
SEWER systems
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combined SEWERS
cost SHARING
revalue SHARING
SITE remediation
SLUDGE treatment
SMALL communities
SMALL systems
SOLID waste
SOLID waste disposal
SOLID waste facilities
SOLID waste management
nonpoint SOURCE pollution
point SOURCE pollution
SOURCE reduction
nonpoint SOURCES
revenue SOURCES
STATE
STATE assistance
STATE capacity
STATE funding
STATE programs
STATE revolving funds
STATISTICS
STATUTES
underground STORAGE tanks
STORMWATER
STORMWATER management
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financing STRATEGIES
rate STRUCTURE
case STUDIES
toxic SUBSTANCES
SUPERFUND
SUPPLEMENTAL grants
water SUPPLY
SURFACE water
public finance SURVEY
SURVEY
septic SYSTEMS
sewer SYSTEMS
small SYSTEMS
user charge SYSTEMS
underground storage TANKS
dedicated TAX
excise TAX
effluent TAX
income TAX
occupancy TAX
property TAX
sales TAX
TAX allocation bonds
TAX credits
TAX exempt bonds
TAX exemptions
TAX reform
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TAXES
TECHNICAL assistance
energy TECHNOLOGY
TIPPING fees
TOXIC substances
TRAINING
sewage TREATMENT
sludge TREATMENT
wastewater TREATMENT
TRENDS
TRIBAL partnerships
UNDERGROUND storage tanks
UNIT pricing
URBAN communities
URBAN redevelopment
URBAN renewal
USER charge systems
USER charges
USER fees
UTILITIES
wastewater LrnLITlES
water UTILITIES
UTILITY rehabilitation
c VOLUME cap
VOLUNTARY programs
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hazardous WASTE
solid WASTE
solid WASTE disposal
solid WASTE facilities
solid WASTE management -,
WASTE prevention
WASTEWATER facilities
WASTEWATER rates
WASTEWATER treatment
WASTEWATER utilities
WATER
drinking WATER
drinking WATER facilities
surface WATER
well WATER
WATER pollution
WATER quality
WATER rates
WATER resources
WATER supply
WATER utilities
marine WATERS
WATERSHEDS
WELL water
WELLHEAD protection
WETLANDS
public WORKS
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NOTE: YOU MAY ALSO SEARCH BY STATE NAME
EF1N ABSTRACTS - Publications and Case Studies
These titles can be accessed on the Environmental Finance Program's World Wide Web site at
http://www.ppa.gov/ermpaoe/titics.htnt
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E. GLOSSARY
Accelerated Cost Recovery System (ACRS): The tax depreciation, or cost recovery, method for
Internal Revenue Service (IRS) purposes, was introduced by the 1981 Economic Recovery Tax Act and
was effective for all depreciable property placed in service after December 31,1980 and before January
1,1987. ACRS replaced the Asset Depreciation Range (ADR) system and was replaced by the
Modified Accelerated Cost Recovery System (MACRS) of the 1986 Tax Reform Act.
Accelerated Depreciation: Any depreciation method that allows for greater deductions or charges in the
earlier years of an assets depreciable life, with charges becoming progressively smaller in each successive
period. Examples would include the double declining balance and sum-of-the-years digits methods.
Accountant's Equation: The equation which is the basis of a balance sheet It is as follows: Assets=
Liabilities + Owners' Equity.
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Accounts Receivable: An asset account reflecting amounts owing on open account from private
persons or organizations for goods and services furnished by a government (but not including amounts due
from other funds of the same government). Although taxes and special assessments receivable, are
covered by this term, they should be recorded and reported separately in Taxes Receivable and Special
Assessments Receivable accounts respectively. Amounts due from other funds or from other governments
should also be reported separately.
Accrual Accounting Method: A form of reporting profits or losses based on: the consummation of a
transaction being accepted by form of contract or invoice without the realization of cash or an expense that
has been incurred but has not yet been disbursed.
Accrual Basis: The practice of record keeping by which income is recorded when earned and expenses
are recorded when incurred, even though the cash may be received or paid out until later.
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Acid-Test Ratio: Also called the quick ratio, Ihe ratio of current assets minus inventories, accruals, and
prepaid items to current liabilities.
Administrative Feasibility: A measure of the difficulty of administering an alternative financing
mechanism (AFM). Factors affecting administrative feasibility include whether the implementing
government can take advantage of existing administrative structure, whether any data required are
available (for example, for a commodity tax whether sales of the commodity are easy to track), and the
number of employees required to administer the mechanism,
Ad Valorem Tax: A tax based on the assessed value of property. Counties, school districts, and
municipalities usually are authorized to levy ad valorem taxes. Special districts can also be authorized to
levy ad valorem taxes.
Advance Payments: Payments made by the Lessee at Ihe inception of a leasing transaction.
Advance Refunding: The replacement of debt prior to the original call date via the issuance of refunding
bonds.
Advance Refunding Bonds: Bonds issued to refund an outstanding bond issue prior to the date on
which the outstanding bonds become due or callable. Proceeds of the advance refunding bonds are
deposited-in escrow with a fiduciary, invested in U.S. Treasury Bonds or other authorized securities, and
used to redeem the underlying bonds at maturity of call date and to pay interest on the bonds being
refunded or the advance refunding bonds.
AFM: See Alternative Financing Mechanism [also Financial Tools].
Alternative Financing Mechanism (AFM): Refers to any technique used to fund environmental
programs or services, including both capital and operating costs, at the state and local level.
Amortization: A breakdown of periodic loan payments into two components - a principal portion and an
interest portion. The gradual reduction of a debt by means of equal periodic payments sufficient to meet
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current interest and liquidate the debt at maturity. When the debt involves real property, often the periodic
payments include a sum sufficient to pay taxes and hazard insurance.
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Angel: An individual who buys into a company at its very beginning.
Angel Lender: An individual who provides funds in 1he form of a loan to someone of which he is very
close and generally does not require rules and restrictions of a formal lender. More commonly, an angel
lender is friend, family member or close acquaintance of the borrower.
Annual Percentage Rate (APR): The nominal or effective rate of interest for a specified period (usually
a year).
Annualization: The process of adjusting a utility company's annual historical information to reflect a full
12-month period for known changes reasonably expected to continue into the future. Annualization
adjustments are routinely made in developing a utility company's total cost of service.
Annual Percentage Rate (APR): The effective rate taking into account compounding and other fees.
The nominal rate of interest for a specific period (usually one year).
Appreciation: The increase in the value of an asset in excess of its depreciable cost which is due to
economic and other conditions, as distinguished from increases in value due to improvements or additions
make to it.
Arbitrage: The investment of low interest bond or note proceeds at higher interest rates. Arbitrage
earnings are fully taxable with few exceptions. Municipal issuers are allowed to make arbitrage profits
under certain restricted conditions, but Section 103© of the Internal Revenue Code prohibits the sale of
tax-exempt bonds primarily for the purpose of making arbitrage profits.
Asset: Anything owned by an individual or a business, which has commercial or exchange value. Assets
may consist of specific property or claims against others, in contrast to obligations due others. (See also
Liabilities).
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Asset Based Lending: A loan to an individual or company collateralized by a specific asset or group of
assets. Typically asset based loans do not require real property as collateral.
Asset Sate: An asset sale is the transfer of ownership of government assets, commercial-type enterprises,
or functions to the private sector. In general, ihe government has no role in the financial support,
management, or oversight of a sold asset. However, if the asset is sold to a company in an industry with
monopolistic characteristics, the government may regulate certain aspects of the business, such as utility
rates.
Assurance/Performance Bonding: Performance or assurance bonding is a requirement that users of
environmental resources place in an escrow account a sum of money adequate to cover potential future
environmental damages.
Authority (Lease Revenue): A bond secured by the lease between the authority and another agency.
The lease payments from the "city" to the agency are equal to the debt service.
Balance Sheet: A balance sheet is an itemized statement which lists the total assets and the total liabilities
of a given business to portray its net worth at a given moment of time. The amounts shown on a balance
sheet are generally the historic cost of items and not their current values.
Banking Program: See economic incentive programs.
Basis Point: One one-hundredth of a percent (.01%).
Basis Risk: The uncertainty about the basis at the time a hedge may be lifted. Hedging substitutes basis
risk for price risk.
Beneficiary Pays Principle: See equity.
Business Plan: A written document that gives an overview of your company, its future and its financials.
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Business Risk: The risk that the cash flow of an issuer will be impaired because of adverse economic
conditions, making it difficult for the issuer to meet its operating expenses.
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Betterment: An addition made to, or change made in, a fixed asset that is expected to prolong its life or
to increase its efficiency over and above that arising from maintenance, and tiie cost of which is therefore
added to the book value of 1he asset. The term is sometimes applied to sidewalks, sewers, and highways,
Bond: An interest-bearing certificate issued by governments and corporations when they borrow money.
The issuer agrees to pay a fixed principal sum on a specified date (the maturity date) and at a specified
rate of interest In measuring municipal bond volume, a bond is a security maturing more than one year
from issuance; shorter-term obligations are usually termed notes or commercial paper.
Bond Anticipation Note (BAN): A note issued by public agencies to secure temporary (often partial)
financing for a project that will eventually be fully financed (and the BAN repaid) through the sale of
bonds.
Bond Bank: A state-chartered organization that purchases the bonds of local governments and secures
its own debt with the pool of local bonds. This arrangement cuts borrowing costs for the local issuers
because the bond bank's debt usually carries higher ratings than that of the municipalities, whose issues are
usually too small to be rated anyway. Credit enhancements, such as bond insurance, are also cheaper
when purchased for larger issues. Localities' use of the bond bank is voluntary.
Bond Counsel: A lawyer who reviews the legal documents and writes an opinion on the security,
tax-exempt status and issuance authority of a bond or note.
Bond Discount: The excess of the face value of a bond over the price for which it is acquired or sold.
The price does not include accrued interest at the date of acquisition or sale.
Bond Election: The process by which voters approve or reject bond issues.
Bond-Equivalent Yield* The annualized yield to maturity computed by doubling the semiannual yield.
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Bond Fund: A fund formerly used to account for the proceeds of general-obligation bond issues. Such
proceeds are not accounted for in a capital-projects fund
Bond Indenture; The contract that sets forth the promises of a corporate bond issuer and the rights of
investors.
Bond Insurance: Insurance that can be purchased by an issuer for either an entire issue or specific
maturities, which guarantees the payment of principal and/or interest. This security usually provides a
higher credit rating and thus a lower borrowing cost for an issuer.
Bond Issued: Bond sold.
Bond Premium: The excess of the price at which a bond is acquired or sold over its face value. The
price does not include accrued interest at the date of acquisition or sale.
Bond Proceeds: The money the issuer receives from its bond sale.
Bonded Debt: That portion of indebtedness represented by outstanding bonds.
Bonds Authorized and Unissued: Bonds that have been legally authorized but not issued and which
can be issued and sold without further authorizatioa This term must not be confused with the terms
"margin of borrowing power" or "legal debt margin," either one of which represents the difference between
the legal debt limit of a government and the debt outstanding against it
Bonds, Debenture: A form of long-term loan included in debt capital, which is secured by the general
credit worthiness of the utility.
Bonds, Mortgage: A form of long-term loan, included in debt capital, which is secured by the utility's
property. :
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Book Value: An accounting term, which usually refers to a business' historical cost of assets less
liabilities. The book value of a stock is determined from a company's records by adding all assets
(generally excluding such intangibles as goodwill), then deducting all debts and other liabilities, plus the
liquidation price of any preferred stock issued. The sum arrived at is divided by the number of common
shares outstanding and the result is 1he book value per common share. Book value of the assets of a
company may have litde or no significant relationship to market value.
Bridge Financing: A form of interim loan, generally made between a short term loan and a long term
loan, when the borrower requires more time before taking on long term financing.
Bubble Program: See economic incentive programs.
Budget: A budget is an itemized listing of the amount of all estimated revenue which a given business
anticipates receiving, along with a listing of the amount of all estimated costs and expenses that will be
incurred in obtaining the above mentioned income during a given period of time. A budget is typically for
one business cycle, such as a year, or for several cycles (such as a five year capital budget).
Callable Bond: A bond that can be redeemed by the issuer prior to ite maturity. Usually a premium is
paid to the bond owner when the bond is called.
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Capacity Credit: A reservation of future capacity in a public facility purchased generally by private real
estate developers prior to the construction of that facility. Typically, the revenue generated from selling
capacity credits is used to finance facility construction. For example, some communities have built new
wastewater treatment facilities by selling capacity credits.
Capital: Funds necessary to establish or operate a business.
Capitalization: Also called financial leverage ratios, ratios that compare debt to total capitalization and
thus reflect the extent to which a corporation is trading on its equity. These ratios can be interpreted only
in Ihe context of the stability of industry and company earnings and cash flow.
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Capital Budget: This is the estimated amount planned to be expended for capital items in a given fiscal
period. Capital items are fixed assets such as facilities and equipment, the cost of which is normally written
off over a number of fiscal periods. The capital budget, however, is limited to the expenditures which will
be made within the fiscal year comparable to the related operating budgets.
Capital Costs: Expenditures that typically result in the acquisition or addition to fixed assets that have a
useful life of over one year and a cost greater than a threshold value established by the owner. Capital
costs include expenditures for replacements and major additions, but not for repairs.
Capital Lease: A lease that meets at least one of the following criteria, and therefore must be treated
essentially as a loan for book accounting purposes: title passes automatically by the end of the lease term;
lease contains a bargain purchase option; lease term is greater that 75% of estimated economic life of the
equipment; present value of lease payments is greater than 90% of the equipment's fair market value.
Capital Outlay: Expenditures that result in the acquisition of or addition to fixed assets.
Capital-Projects Fund: A fund created to account for financial resources to be used for the acquisition
or construction of major capital facilities (other than those financed by proprietary funds., special funds, and
trust funds).
Cash Basis: The practice of recording income and expenses only when cash is actually received or paid
out.
Cash Flaw: This term may have different meanings depending upon who is using the term and in what
context. Bankers usually define it as net profits plus all non cash expenses, but it can also be defined as
the difference between cash receipts and disbursements over a specified period of time.
Cash Flow Loan: A loan that is made to an individual or a company over a short period of time, typically
12 months or less.
CERCLA: Comprehensive Environmental Response, Compensation and Liability Act
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Certificates of Participation (COP): Financing whereby an investor purchases a share of ihe lease
revenues of a program rather than the bond being secured by those revenues. Usually issued by
authorities through which capital is raised and lease payments are made. The authority usually uses the
proceeds to construct a facility that is leased to the municipality, releasing the municipality form restrictions
on the amount of debt that they can incur.
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Collateral: Assets pledged as security against a loan in case of default The intangible or tangible
property given as security to the lender by the account credit for any obligations and indebtedness of
account creditor.
Collateral Trust Bonds: A bond in which the issuer (often a holding company) grants investors a lien
on stocks, notes, bonds, or other financial asset as security. Compare mortgage bond.
Commercial Loan: A loan from a privately-owned bank at market rates.
Common Stock: Capital stock, other than preferred, which is bought by utility shareholders and
becomes part of a utility's equity. Its value is determined in the marketplace, and its return is not a
contracted rate as with preferred stock.
Community Water System: A water system which supplies drinking water to 25 or more of the same
people year-round in their residences.
Conditional Sale Lease: See tax-exempt lease.
Connection Fee: A charge assessed to new users of a utility system to cover the costs of constructing
capacity for their use.
Contracting Out: Contracting out is the hiring of private-sector firms or non-profit organizations to
provide goods or service for the government. Under this approach, the government remains the financier
and has management and policy control over the type and quality of goods or services to be provided.
Thus, the government can replace contractors that do not perform well.
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Conventional Mortgage: A loan neither insured by tiie FHA nor guaranteed by the VA.
Cost of Capital: The weighted-average cost of funds lhat a firm secures frombolh debt and equity
sources in order to fund its assets. The use of a firm's cost of capital is essential in making accurate capital
budgeting and project investment decisions.
Cost of Equity: The return of an investment required by the equity holders of a firm. Cost of equity can
be calculated using any number of different theoretical approaches and must take into consideration the
current and long-term yield requirements of a firm's cost of capital is essential in making accurate capital
budgeting and project investment decisions.
Counterparty Risk: The risk that the other party to an agreement will default, hi an options contract, the
risk to the option buyer that the option writer will not buy or sell the'underlying as agreed.
Coupon Rate: The interest rate specified on interest coupons attached to a bond. The term is
synonymous with nominal interest rate.
Covenant: A written agreement or restriction on the use of land or promising certain acts. Homeowner
Associations often enforce restrictive covenants governing architectural controls and maintenance
responsibilities. However, land could be subject to restrictive covenants even if there is no homeowner's
association.
Coverage: The ratio of not revenue available for debt service to Ihe average annual debt service
requirements of an issue of revenue bonds.
Credit Enhancement: Credit enhancements enable a state or local government to improve its credit
rating and/or acquire capital by providing additional assurance of repayment. Some forms of credit
enhancement are subsidized, such as the Rural Development Administration's loan guarantees. Others,
such as commercial bond insurance, require the debtor government to pay a fee for the credit
enhancement.
Credit Guaranty: A form of guarantying a debt from the debtor in the event of debtor insolvency.
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Credit Risk: The risk of default on a bond or a loan.
Current Assets: current assets are those assets of a company which are reasonable expected to be
realized in cash or sold, or consumed during the normal operating cycle of the business (usually one year).
Such assets include cash, accounts receivable and money due usually within one year, short-term
investments, US government bonds, inventories, and prepaid expenses.
Current liabilities: Liabilities to be paid within one year of the balance sheet date.
CWA: Clean Water Act.
Debenture Bonds: See Bonds, Debenture.
Debt: An obligation resulting from the borrowing of money or from Ihe purchase of goods and services.
Debts of governments include bonds, time warrants, and floating debt -_
Debt to Equity Ratio: A return on investment; an investment created by a form of debt, i.e., bank loan,
investor funds, etc. of which is converted to profit than retained in earnings which is referred to as "owner"
or "stockholder" equity.
Debt Financing: Raising funds for a business by borrowing, often in the form of bank loans.
Debt Limit (Ceiling: The legal maximum debt-incurring power of a State or locality. Debt limits are
often imposed by constitutional, statutory, or local charter provisions.
Debt, Long-term: Debt that is payable more than one year from the date it was incurred.
Debt Per Capita: Bonds divided by population. When compared with other jurisdictions, this statistic
serves as an indicator of the use of public debt capacity in the area in question.
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Debt Ratio: The ratio of an issuers debt outstanding to a measure of property value.
Debt Service: The amount of money necessary to pay interest and principal charges on an outstanding
debt
Debt Service Fund: A fund created by a bond indenture and held by the trustee, usually amounting to
principal and interest payment for one year, and used only if normal revenues are not sufficient to pay debt
service.
Debt Service Fund Requirements: The amount of revenue that must be provided for a debt service
fund so that all principal and interest payments can be made in full on schedule.
Debt Service Requirements: The amount of money required to pay interest on outstanding debt, serial
maturities of principal for serial bonds, and required contributions to accumulate monies for future
retirement of term bonds.
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Debt Service Reserve Fund: A fund created by a bond indenture and held by the trustee, usually
amounting to principal and interest payment for one year, and used only if normal revenues are not
sufficient to pay debt service.
Debt, Short-term: Debt that falls due in a period of under a year.
Declining balance method: An accelerated method to depreciate property. The General Depreciation
System (GDS) of MACRS uses the 150% and 200% declining balance methods for certain types of
property. A depreciation rate (percentage) is determined by dividing the declining balance percentage by
the recovery period for the property.
Default: The failure to make timely payment of interest or principal on a debt instrument; or the
occurrence of an event as stipulated in the indenture of trust resulting in an abrogation of that agreement
An issuer does not default until it fails to make a payment
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Depreciation: The amount of expense charged against earnings by a company to write off the cost of a
plant or machine over its useful live, giving consideration to wear and tear, obsolescence, and salvage
value. If 1he expense is assumed to be incurred in equal amounts in each business period over the life of
the asset, the depreciation method used is straight line (SL). If the expense is assumed to be incurred in
decreasing amounts in each business period over the life of the asset, the method used is said to be
accelerated. Two commonly used variations of Hie accelerated method of depreciating an asset are Ihe
sum-of-years digits (SYD) and the double-declining balance (DDB) methods. Frequently, accelerated
depreciation is chosen for a businesses' tax expense but straight line is chosen for its financial reporting
purposes.
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Direct Cost: A cost that can be economically traced to a single cost object.
Direct Net Debt: Gross direct debt less debt that is self-supporting (revenue bonds) and double-barrel
bonds (general-obligation bonds secured by earmarked revenues that flow outside the general fund).
Discount Rate: The time value of money or the rate of interest a company wants to earn on its
investments.
Divestiture: Divestiture involves the sale of government-owned assets or commercial-type functions or
enterprises. After divestiture, the government generally has no role in the financial support, management,
regulation, or oversight of the divested activity.
Double-Barreled Bond: A bond with two pledged sources of revenue, generally earmarked monies
from a specific enterprise or aid payments and the general obligation taxing power of the issuer.
Due Diligence: Process undertaken by venture capitalists, investment bankers or others to investigate a
company before financing it; required by law before securities are offered for sale.
EA: See Environmental Assessment.
Easement: In most states, an easement is a legal restriction contained within a deed that prohibits certain
land uses in perpetuity. For example, an easement might prohibit development of more than one house on
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twenty acres of oceanftont property. Private landowners who place easements on their property for
natural resources protection can take a tax write-off representing the value lost on the property due to the
deed restrictions.
Earmarking: Statutory or constitutional dedication of revenues to specific government proj ects or
programs.
Economic Impact: Refers to the effects of AFM implementation on state and local economies. Some
AFMs could have a disproportionate impact on a particular area or population. For example, a tax on
watercraft sales might affect 1he competitiveness of a particular state's shipbuilding industry. Other AFMs
can have a diffuse economic impact on a large population. For example, a motor vehicle license fee may
have a small impact on a large population.
Economic Incentive Programs: Economic incentive programs use market-based tools to encourage
reduction in polluting behavior. The programs can be structured in a variety of ways. "Bubble" programs
treat multiple pollution sources as if they were included in an imaginary bubble, allowing existing sources to
adjust pollutant levels within the bubble as long as an aggregate limit is not exceeded. "Offset" programs •
« allow new sources to obtain credits from existing sources to offset pollutant emissions, while "netting"
programs allow sources within a single plant undergoing modifications to avoid new source review
processes if plant-wide emissions are reduced. "Banking" programs allow sources to store pollution
reduction credits for future use or sale.
Economic Life of Leased Property: The estimated period during which the property is expected to be
economically usable by one or more users, with normal repairs and maintenance for the purpose for which
it was intended at the inception of the lease.
Elasticity: Elasticity is an economic measure of consumer response to price changes. A product or
service has an elastic demand if the demand for the product will decrease very quickly as the price
increases. Concert tickets typically have an elastic demand - as prices increase, fewer consumers buy
tickets. A product or service has an inelastic demand if the demand for the product is not sensitive to
price change. Alcohol and tobacco typically have inelastic demands; consumers will be less sensitive to
price changes on these products and are more likely to continue buying them When considering
implementing taxes or fees on products that will be sold, state and local governments need to consider the
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elasticity of demand, in order to determine whether the tax or fee will reduce sales, and thereby reduce
revenues.
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Electronic Bulletin Board: An information service operated from a central computer that allows
information to be transmitted electronically to multiple users who dial in with a computer modem.
Emissions: Pollution discharged into the atmosphere from smokestacks, other vents, and surface areas of
commercial.or industrial facilities; from residential chimneys; and from motor vehicle, locomotive, or
aircraft exhausts.
Emissions Trading Programs: Emissions trading programs allow sources of air pollutants to trade
pollutants in some fashion, either geographically, over time, or among other sources. See economic
incentive programs.
Encumbrances: A lien or any form of indebtedness owed against real or personal property. An
encumbrance is also recognized as an unearned equity.
Environmental Assessment: A written environmental analysis that is prepared pursuant to the National
Environmental Policy Act (NEPA) to determine whether Federal action would significantly affect the
environment and thus require preparation of a more detailed Environmental Impact Statement (EIS).
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Environmental Cost Accounting: The addition of environmental cost information into existing cost
accounting procedures and/or recognizing embedded environmental costs and allocating them to
appropriate products and processes.
EPA: Environmental Protection Agency.
EPCRA: Emergency Planning and Community Right-to-Know Act.
Estimated Useful Life: The period in which an asset is expected to be useful in trade or business.
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Estoppel: The act of being prevented from denying or asserting something on tiie ground lhat to do so
contradicts what has already been admitted or denied either in works or by actions.
Eurodollar Bonds: Eurobonds denominated in U.S. dollars.
Exactions: Exactions are money, land, or construction services and materials provided by a developer
or property owner to a public jurisdiction. Also known as proffers, exactions are sometimes required in
order for developers or homeowners to gain public approval for building. Local governments can use
exactions to require developers to extend wastewater treatment, solid waste management, and other
environmental services to new areas.
External/Societal/Social Costs: Costs resulting from impacts on the environment and society for which
firms are not held financially responsible, these can include environmental degradation and adverse health
impacts. Such costs are intangible in nature and need to be valued by nontraditional methods. Some
private costs can also be less tangible.
Equity: Equity reflects the fairness of ihe distribution of the funding burden for an AFM among
individuals. Equity can be approached from two directions - those who create or contribute to
envkonmental problems should bear the funding burden (the "polluter" pays), or those who benefit from
program activities should bear the funding burden (the "beneficiary" pays.)
Equipment leasing: Contracting to pay monthly fees to use equipment, instead of buying it.
Factor: Factors buy current receivables at a discount rate, typically 10% to 25%.
Factoring: The outright purchase of accounts receivable.
Fair market value (FMV): The price for which a wiling seller will sell, and a willing buyer will buy, in
an arm's length transaction when neither is under compulsion to sell or buy and both have reasonable
knowledge of relevant facts.
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Fair market value lease: A lease which includes an option for the lessee to renew the lease at a fair
market value at the end of the lease term Though often referred to as tax leases, not all so qualify.
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Fee: A fee is generally a charge for services rendered. Although laws vary widely, many states require
that fees be set at rates that will cover only the costs of the services provided.
Finance Lease: A lease used to finance the purchase of equipment; not a true lease. Finance leases are
generally considered to be capital leases from an accounting perspective and non-tax leases from a tax
perspective.
Financial Statement: Written account of the financial condition of your company; includes a balance
sheet and income statement
Fines and Penalties: Fines and penalties require offenders to pay monetary damages for violating
government laws or regulations.
Fixed assets: Those assets of a permanent nature required for the normal conduct of a business, and
which will not normally be converted into cash during the ensuring fiscal period. For example, furniture,
fixtures, land, and buildings are all fixed assets. However, accounts receivable and inventory are not.
Fixed cost: Fixed costs are operating expenses that are incurred to provide facilities and organization
which are kept in readiness to do business without regard to actual volumes of production and sales. Fixed
costs remain relatively constant until changed by managerial decision Within general limits they do not
vary with business volume. Examples of fixed costs consist of rent, properly taxes, and interest expense.
Franchising of External Services: Under Ihe franchising of external services, the government grants a
concession or privilege to a private sector entity to conduct business in a particular market or geographical
area-for example, operating concession stands, hotels, and other services provided in certain national
parks. The government may regulate the service level or price, but users of the service pay the provider
directly.
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Franchising of Internal Services: Under the franchising of internal services, government agencies
provide administrative services to other government agencies on a reimbursable basis. Franchising gives
agencies the opportunity to obtain administrative services from another governmental entity instead of
providing them for themselves. In the federal government, these arrangements are often called inter-
service support agreements (ISSA).
Full Cost Accounting: A method of financial and management accounting that allocates all direct and
indirect historical costs to a product or process.
Full Cost Recovery: Full cost recovery means charging fees to completely cover costs incurred by a
particular activity or service. Some state and local governments, as well as local utilities, are beginning to
practice full cost recovery by legislatively requiring that fees be set to cover the complete cost of services
rendered.
Full Faith and Credit: The pledge of the general taxing power of a government to pay its debt
obligations.
Full Payout Lease: A lease in which the total of the lease payments pay back to the lessor the entire
cost of the equipment including financing, overhead, and a reasonable rate of return, with litfle or no
dependence on a residual value.
Fund: A fiscal and accounting entity with a self-balancing set of accounts recording cash and other
financial resources, together with all related liabilities and residual equities or balances, and changes
therein, which are segregated for the purpose of carrying on specific activities or attaining certain
objectives in accordance with special regulations, restrictions, or limitations.
Fungible commodity: A commodity of a nature that one part may be used in place of another part
General Obligation Bond: A security backed by the full faith and credit of a state or locality. In the
event of default, the holders of general obligation bonds have the right to compel a tax levy or legislative
appropriation in order to satisfy the debt obligation.
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Government-Sponsored Enterprises (GSE): GSE's are federally established, privately owned
corporations designed to increase the flow of credit to specific economic sectors. GSE's typically receive
1heir financing from private investment, and fee credit markets perceive that GSE's have implied federal
financial backing. GSE's issue capital stock and short-and long-term debt instruments, issue mortgage-
backed securities, fund designated activities, and collect fees for guarantees and other services. GSE's
generally do not receive government appropriations.
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Grant: A monetary sum awarded to a State or local government or non-profit organization that does not
need to be repaid. Typically, grants are awarded by the federal government to State or local
governments, or by States to local governments, to finance a particular activity or facility.
Grant Anticipation Notes (GAN): Notes issued by public agencies to secure temporary financing for
projects awaiting the receipt of permanent funding through governmental grants. The GAN is repaid from
grant proceeds.
Greenhouse Effect: The theory that continued burning of fossil fuels will increase concentrations of
carbon thereby trapping dioxide in the atmosphere, adding heat and moisture. Some scientists theorize
that in time this could create a hothouse effect, raising the temperature of the earth, causing glaciers to melt
and the sea level to rise. In 1983, estimates for carbon emissions in millions of tons were: United States
and Canada 1,245; Western Europe 753; USSR and Eastern Europe, 1,279 developing nations of Asia,
Latin America and Africa, 738; China and Central Asia, 482; and Central Japan and Australia, 287.
Gross Direct Debt: The total amount of bonded debt of a government (general obligation bonds plus
revenue bonds).
Guarantee, loan: Promise to take responsibility for payment of part or all of a debt if the person
borrowing the money fails to pay off the loan.
Guaranty or Guaranty Agreement: The agreement of a third party to pay debt service on a debt in
the event of default by the issuer.
Hazardous Waste: A subset of solid waste, which can create a risk to the safety or health of people or
the environment. Any solid waste that is ignitable, explosive, reactive or toxic and which may pose a
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substantial or potential hazard to human health and safety or to the environment when improperly
managed. Reactive refeis to the ability to enter into a violent chemical reaction that may involve explosion
or fumes. (Use of this term is often highly imprecise).
Home Equity: The difference between the market value of the property and the homeowners mortgage
debt.
Impact Fee: A fee assessed against private developers in compensation for the new capacity
requirements their projects impose upon public facilities.
Incubator: Building or complex housing start-up or young businesses, where an entity, often the
government, subsidizes rent, utilities and other overhead costs.
Industrial-Revenue Bonds: Bonds issued by governments, the proceeds of which are used to
construct facilities for a private business enterprise. Lease payments made by the business enterprise to
the government are used to service the bonds. Such bonds may be in the form of general-obligation
bonds, combination bonds, or revenue bonds.
Income Taxes: A tax charged against individual or corporate income.
Initial Public Offering: The first time a company's stock is sold to the general public (other than by a
limited offering) through the stock market or over-the-counter sales.
Installment Sale: Selling property and receiving the sales price over a series of payments, instead of all
at once at the close of the sale, is an installment sale. Unless you elect out, you will report the gain on that
transaction as you receive it through the series of payments.
Institutional Investor: An organization that buys and sells large volumes of securities, such as a mutual
fund, pension fund or bank.
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Insured Bond: A municipal braid backed both by the credit of the municipal issuer and by commercial
insurance policies.
Interest: The charge or cost of borrowing money, measured in terms of a percentage per annum of the
principal amount.
Internal Rate of Return: A return on an investment greater lhan the amount described in a contract or
any other investment instrument The internal rate-of-retum is measured by the ability .of the investor to
reduce internal expenses during the course of managing the investment; which means the investor actually
makes more than what is outlined in the contract or other investment instrument.
Investment Banker: The firm that acts as an intermediary between a company issuing securities and the
public; an underwriter or agent who also advises the company issuing the stock.
IPO: Initial Public offering.
Issuance Costs: The costs incurred by bond issuers in connection with bond offerings. These include
underwriter spread, feasibility studies, and various professional fees.
Junk Bond: A bond with a speculative credit rating of BB or lower is a junk bond. Such bonds offer
investors higher yields than bonds of financially sound companies. Two agencies, Standard & Poor's and
Moody's investor Services, provide the rating systems for companies' credit
Land Trusts: Land trusts are trust funds that can actively acquire, manage, and protect natural lands and
resources on behalf of a state or local government Land trusts can be financed by a variety of revenue
sources, although many localities choose to dedicate land-related taxes, such as land transfer taxes, to this
purpose.
Lease: A contract trough which an owner of equipment (the lessor) conveys the right to use its
equipment to another party (the lessee) for a specified period of time (the lease term) for specified periodic
payments.
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Lease Purchase: Full payout, net leases structured with a term equal to the equipment's estimated useful
life. Because many Lease Purchases include a bargain purchase option for the lessee to purchase the
equipment for one dollar at the expiration of the lease, 1hese leases are often referred to as dollar buyout
or buck-out-leases. Lease purchases are generally considered to be Capital Leases from an accounting
perspective and non-tax leases from a tax perspective due to their bargain purchase option and length of
lease term.
Lease Rental Bonds: Bonds for which the principal and interest are payable exclusively from rental
payments from a lessee. Rental payments are often derived from earnings of an enterprise that may be run
by the lessee or the lessor. Rental payments may also come from taxes levied by the lessee.
Lease Schedule: A schedule to a Master Lease agreement describing the leased equipment, rentals and
other terms applicable to the equipment.
Lessee: The party to a lease agreement who is obligated to pay the rentals to the lessor and is entitled to
use and possess the leased equipment during the lease term.
Lessor: The party to a lease agreement who has legal or tax title to Ihe equipment (in the case of a true tax
lease), grants the lessee the right to use the equipment for the lease term and is entitled to receive the rental
payments.
Letter of Credit: A contractual obligation by a bank to pay principal and interest in the event of an
issuer default.
Leverage: Debt in relation to equity.
Leveraging: The use of grant or loan funds as reserve funds for the issuance of debt Leveraging is used
by several states participating in the Water Pollution Control State Revolving Fund program to increase the
amount of funds available for loans.
Liability: Claim on the assets of a company.
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Liability Assignment: Li ability assigned Ihrough common law or statute, whereby individuals or
companies may be held financially responsible for environmental damage resulting from their activities.
Lien: An attachment, voluntary or involuntary. A lender will apply a lien to encumber real or personal
property. The lien can be granted by an abstract judgment rendered by a court of law.
Life Cycle Costing (LCC): A systematic process of evaluating the life-cycle costs of a product, product
line, process, system, or facility by identifying life-cycle consequences and assigning monetary values to
those consequences. Also called Life Cycle Cost Assessment (LCCA).
Life-cycle Assessment/Analysis (LCA): A holistic approach to identifying the environmental
consequences of a product, process, or activity through its entire life cycle and to identifying opportunities
for achieving environmental improvements. EPA specifies four major stages in a life-cycle of a product,
process, or activity: raw materials acquisition, rnanufacturing, consumer use/reuse maintenance, and
recycle/waste management LCA focuses on environmental impacts not costs.
Limited-tax general obligation bond: A general obligation bond that is limited as to revenue sources.
Line of Credit: Lines of credit assure potential lenders that a debtor government will be able to draw on
a specified sum of money from another source in the event of default. Unlike letters of credit, lines of
credit can be used for any purpose, so debt holders have no guarantee that the debtor will not use the line
of credit for other purposes. Availability of funds by the lender based on the account debtor's ability to
pay.
Long-Term Debt: Debt that is payable more than one year from the date it was incurred.
Managed Competition: Under managed competition, a public-sector agency competes with private-
sector functions or services under a controlled or managed process. TTiis process clearly defines the steps
to be taken by government employees in preparing their own approach to performing an activity. The
agency's proposal for providing the service, which includes a bid proposal for cost-estimation purposes, is
useful in competing directly with private-sector bids.
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Mandate Bond (MIFs): A new category of tax-exempt bonds known as Mandated Infrastructure
Facility(MIF) Bonds. Under a proposal by the Government Finance Officers Association (GFOA), the
bonds could be issued to finance facility construction, acquisition., renovation, or rehabilitation required by
federal statutes or regulations. The proposal would essentially allow more private participation in such
projects than is currently allowed for tax-exempt bonds.
Market Timing Costs: Costs that arise from price movement of the stock during the time of the
transaction which is attributed to other activity in the stock.
Master Lease: A continuing lease arrangement whereby additional equipment can be added from time to
time merely by describing that equipment in a new lease schedule executed by the parties. The original
lease contract terms and conditions apply to all subsequent schedules. In contrast to a lease contract for
a single transaction involving a specific unit of equipment, a Master Lease is essentially a line of credit to
' draw from over time in order .to purchase equipment
Moral Obligation Bond: A state or municipal bond that is not backed by the full faith and credit of the
issuer. The issuer of a moral obligation bond asserts the intent of the legislative body to make
appropriations sufficient to cure any deficiency in monies required to meet debt service, but the issuer has
no legally enforceable obligation to do so. .
Mortgage Bonds: See Bonds, Mortgage.
Municipal Bond: A debt obligation issued by a state, state agency or authority, or a political subdivision,,
such as county, city, town or village. They may be issue for general governmental needs or special
projects. Issuance must be approved by referendum or by an electoral body.
Municipal bond insurance: Insurance policies that protect investors if a municipal bond should
default-the bonds will be purchased from investors at par. The insurance may either be purchased by the
issuer or the investor. Two major insurers of municipal bonds are the Ambac Indemnity Corporation and
the Municipal Bond insurance Association (MBIA). Insured municipal bonds usually have the highest
ratings. Subsequently, the bond's marketability increases, which lowers the costs to their issuers.
However, the yield on an insured bond is usually lower than similarly rated uninsured bonds-the cost of the
insurance is passed on to the investor. To obtain the extra degree of safety, many investors do not care if
the yields are slightly lower.
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Municipal Improvement Certificates: Certificates issued in lieu of bonds for the financing of special
improvements. As a result, these certificates are placed in the contractor's hands for collection from the
special assessment payers.
Municipal lease: A lease designed to meet the special needs of state and local governments. The lease
contains a non-appropriation clause which states that the only condition under which the entity may be
released from its payment obligations is when the legislature or funding authority fails to appropriate funds.
Since the lessee is a municipality or an organization supporting the government, it is exempt from paying
federal income taxes. For this reason, the IRS does not charge the lessor income taxes on leases to these
customers.
National Pollutant Discharge Eliminating System (NPDES): A provision of the CWA, which
prohibits discharge of pollutants into the waters of the United States unless a special permit is issued by
EPA, a state, or (where delegated) a tribal government on an Indian reservation.
Municipal Securities Rulemaking Board (MSRB): A self-regulatory organization of the municipal
securities industry that was created in 1975 under an amendment to the Securities Exchange Act of 1934.
Its primary responsibility is to develop rules and regulations to govern the activities of municipal securities
dealers, and to provide arbitration facilities to broker-dealers and bank dealers in municipal securities.
Net Financing Costs: Also called the cost of carry or, simply, carry, fee difference between the cost of
financing the purchases of an asset and the asset's cash yield Positive carry means that the yield earned is
greater than the financing cost; negative cany means that the financing cost exceeds the yield earned.
Net Present Value: The total discounted value of all cash inflows and outflows from a project or
investment
Netting Program: See economic incentive programs.
Non-Point-Source Pollution: Pollutants emanating from an unconfined or unchannelled source,
including agricultural runoff, drainage or seepage and air contamination from landfills or surface
impoundments.
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Non-Recourse: Generally, accounts purchased by the lender remains with the lender. The lender
accepts full credit risk for any and all accounts for which it purchases.
Non-Transient, Non-Community Water System: A water system which supplies water to 25 or more
of the same people at least six months per year in places other than their residences. Some examples are
schools, factories, office buildings, and hospitals which have their own water systems.
Notes: Interest-bearing certificates of governments or corporations that come due in a shorter time than
bonds.
Off Balance Sheet Financing: A lease that qualifies as an Operating Lease for the lessee's financial
accounting purposes. They are referred to as off-balance sheet financing due to exclusion from the
balance sheet asset and debt presentation, except for the portion of payments due in the current fiscal
period. Full disclosure of transactions is usually made in the auditor's notes to the financial statements.
Periodic payments are recorded as expense items on the lessee's income statement
Offset Program: See economic incentive programs.
Operating Costs: Costs that are directly related to rendering of services, sale of merchandise,
production and disposition of commodities, collection of revenues, and other ongoing activities.
Operating Lease: A lease which is treated as a true lease (as opposed to a loan) for book accounting
purposes. As defined in FASB 13, an operating lease must have all of the following characteristics.
lease term is less than 75% of estimated economic life of the
equipment
present value of lease payment is less than 90% of the
equipment's fair market value
lease cannot contain a bargain purchase option (i.e., less than
the fair market value)
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ownership is retained by the lessor during and after the lease
term.
An operating lease is accounted for by 1he lessee without showing an asset (for the equipment) or a liability
(for the lease payment obligations) on his balance sheet Periodic payments are accounted for by the
lessee as operating expenses of the period.
Opportunity Costs: The difference in the performance of an actual investment and a desired investment
adjusted for fixed costs and execution costs. The performance differential is a consequence of not being
able to implement all desired trades.
Original Issue Discount (OID): When a long-term debt instrument is issued at a price that is lower than
its stated redemption value, the difference is called Original Issue Discount (OID).
Partnership: A partnership is an unincorporated business that has more than one owner. It is different
from a sole proprietorship in that a sole proprietorship can have only one owner.
Payment-in-kind (PIK) Bond: A bond that gives the issuer an option (during an initial period) either to
make coupon payments in cash or to give 1he bondholder a similar bond.
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Performance Bonding: See Assurance Bonding.
Performance Guaranty: An "assurance" lhat if the duties prescribed by a contract are not performed the
guarantor assumes said responsibility for the contract's completion.
Personal Loan: A loan from someone you know.
Point-Source Pollution: Any pollution from a confined and discrete conveyance such as a pipe, ditch,
channel tunnel, well, fissure, container, rolling stock, concentrated animal-feeding operation or vessel or
other floating craft. The return flow from irrigated agriculture is generally not considered point-source
pollution
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Point Source/Non Point Source Trading: Point sources discharge pollutants in a well-defined
geographic location. Municipal and industrial outfalls (pipes) that discharge into lakes and rivers are
examples of point sources. Non-point source pollution is diffuse, and results from a variety of human
activities tiiat take place over a wide geographic area For example, fertilizer or other agricultural
chemicals that are washed into rivers are classified as non-point source pollution sources. Point
source/non-point source trading in principle involves point sources financing reductions in non-point source
pollution in lieu of undertaking more expensive point source pollution reduction.
Polluter Pays Principle: See equity.
Pollution: Contamination of air, water, land or other natural resources that will or is Rely to create a
nuisance or render such resources harmful to public health or which is harmful to domestic, municipal,
commercial, industrial, agricultural, recreational or other legitimate beneficial uses, or to livestock, wild
animals, birds, fish or other life.
Pooled Collateral: A form of security provided to a lender for the purpose of a short term or long term
loaa Assets are grouped together and pledged to the lender for a single loan.
Potentially Hidden Costs: Costs that are obscured in overhead accounts or overlooked in business
• decision-making, including costs of up-front, operational, and back-end activities undertaken to comply
with environmental laws.
Present Value: The discounted value of a payment or stream of payments to be received in the future,
taking into consideration of specific interest or discount rate. Present Value represents a series of future
cash flows expressed in today's dollars.
Prime Rate: The interest rate banks charge their best customers.
Priority Lien: First position; the senior lender in a transaction.
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Privatization (Public-Private Partnership): Under a public-private partnership, sometimes referred to
as a joint venture, a contractual arrangement is finned between public and private-sector partners that can
include a variety of activities that involve the private sector in the development, financing, ownership, and
operation of a public facility or service. It typically includes infrastructure projects and/or facilities. In such
a partnership, public and private resources are pooled and responsibilities divided so that the partners'
efforts complement one another. Typically, each partner shares in income resulting from the partnership in
direct proportion to the contracting in that the parivate-sector partner usually makes a substantial cash, at-
risk, equity investment in the project, and the public sector gains access to new revenue or service delivery
capacity without having to pay the private-sector partner. Leasing arrangements can be used to facilitate
public-private partnerships.
Private Placement: The sale of stock in a company directly to a pre-selected buyer, often an institutional
investor.
Property Tax: A tax levied on both real and personal property.
Public Offering: The offering of a company's shares to the general public.
Public-Private Partnership: These partnerships involve a variety of techniques and activities to promote
more sector involvement in providing traditional government services. They can include involving a private
partner in construction, financing, operation, and/or ownership of a facility.
Public Water System (PWS): Any water system which provides water to at least 25 people for at least
60 days annually. There are more than 170,000 PWS's providing water from wells, rivers and other
sources to about 250 million Americans. The others drink water from private wells. There are differing
standards for PWS's of different sizes and types.
Purchase Option: An option given to the lessee to purchase the equipment from the lessor, usually as of
a specified date.
Ratings: Credit quality evaluation of bonds and notes made by independent rating services and
brokerage firm analysts. Generally, a higher bond rating lowers the interest rate expected by debtors for
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repayment, and therefore overall capital costs. State and local governments can improve their bond
ratings by using credit enhancement mechanisms.
RCRA: Resource Conservation and Recovery Act.
Real Estate: Land and anything permanently affixed to it, and those filings attached to the building.
Real Estate Investment Trusts (REIT): A method of investing in real estate in a group, with certain tax
advantages.
Real Property: Real estate collateral that can only be perfected by a note and a Deed of Trust.
Receivables: Money owed for goods or services already rendered.
Recourse: A type of borrowing in which the borrower (as a lessor funding a lease) is full at risk to the
lender for repayment of the obligation. The recourse borrower (lessor) is required to make payments to
the lender whether or not the lessee fulfills its obligation under the lease agreement
Recovery period: The number of years over which the basis (cost) of an item of property is recovered.
Refunded Bonds: Also called a prerefunded bond, one that originally may have been issued as a
general obligation or revenue bond but that is now secured buy an "escrow fund" consisting entirely of
direct U.S. Government obligations that are sufficient for paying the bondholders.
Return on Assets (ROA): A common measure of profitability based upon the amount of assets invested;
ROA is equal to the ratio of either 1) net income to total assets or 2) net income available to common
stockholders to total assets.
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Return on Equity (ROE): A measure of profitability related to the amount of invested equity; ROE is
equal to the ratio of either 1) net income to owner's equity or 2) net income available to common
stockholders to common equity.
Revenue Anticipation Notes (RANs): Notes issued in anticipation of non-tax revenues, generally from
other governmental entities (i.e., state aid to a school district).
Revenue Base: The revenue base is the value of the product, income, properly, or the number of
population against which a fee or tax is charged. For example, the revenue base for a state tax per ton of
fertilizer sold would be Ihe tons of fertilizer sold in the state, while the revenue base for a motor vehicle
license fee would be the number of vehicles licensed in the state. The size and characteristics of the
revenue base, along with the rate of the fee or tax, determine the revenue potential of fee and tax
programs.
Revenue Bonds: Bonds whose principal and interest are payable exclusively from earnings of a public
enterprise.
Revenue Potential: A measure of the amount of money that can be raised by a particular financing
mechanism For fee and tax programs, revenue potential is a function of the rate of the fee or tax and the
size of Ihe revenue base. State and local governments need to consider the revenue potential of an AFM
in iheir jurisdiction in order to determine if it meets their financing needs.
Revenue Stability: Revenue stability refers to the pattern of revenues from a particular revenue source.
Some sources provide revenues in stable amounts annually. Other revenue sources are unstable, providing
only one-time or erratic revenues from year to year. State and local governments should match ongoing
program costs to stable revenue sources, while non-recurring costs can be matched to less stable revenue
sources.
Revolving Fund: A revolving loan fund program may consist of several accounts or revolving funds that
make loans or other types of assistance available for various projects. Typically, the fund is initially
capitalized by appropriations, grants, or other monies. After the initial loans are made, future loans are
supported by repayments, making the fund "revolving."
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Risk:
Basis Risk: The uncertainty about the basis at the time a hedge may be lifted. Hedging substitutes
basis risk for price risk.
Business Risk: The risk that the cash flow of an issuer will be impaired because of adverse economic
conditions, making it difficult for the issuer to meet its operating expenses.
Counterparty Risk: The risk that the other party to an agreement will default. In an options contract, the
risk to the option buyer that 1he option writer will not buy or sell the underlying as agreed.
Default Risk: Also referred to as credit risk (as gauged by commercial rating companies), the risk that
an issuer of a bond may be unable to make timely principal and interest payments.
• Event Risk: The risk that the ability of an issuer to make interest and principal payments will change
because of (1) a natural or industrial accident or some regulatory change or (2) a takeover or corporate
restructuring.
Exchange Rate Risk: Also called currency risk, the risk of an investments value changing because of
currency exchange rates.
Financial Risk: The risk that the cash flow of an issuer will not be adequate to meet its financial
obligations.
Inflation Risk: Also called purchasing-power risk, the risk that changes in tiie real return the investor will
realize after adjusting for inflation will be negative.
Interest Rate Risk: For a bond, the risk that a rise in interest rates will decrease the bond's price. For a
depository institution, also called funding risk, the risk that spread income will suffer because
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Liquidity Risk: The risk that arises from .the difficulty of selling an asset It can be thought of as the
difference between the " true value" of the asset and the likely price, less commissions.
Price Risk: The risk that the value of a security (or a portfolio) will decline - in the future.
Regulatory Pricing Risk: Risk that arises when regulators restrict the premium rates that insurance
companies can charge.
Reinvestment Risk: The risk that proceeds received in the future will have to be reinvested at a lower
potential interest rate.
Risk Assessment: The qualitative and quantitative evaluation performed in an effort to define the risk
posed to human health and/or the environment by the presence or potential presence and/or use of specific
pollutants.
Risk Indexes: Categories of risk used to calculate fundamental beta, including (1) market variability, (2)
earnings variability, (3) low valuation and unsuccess, (4) immaturity and smallness, (5) growth orientation,
and (6) financial risk.
Systematic Risk: Also called undiversifiable risk or market risk, the minimum level risk that can be
obtained for a portfolio by means of diversification across a large number of randomly chosen assets.
Related: Unsystematic Risk
Unsystematic Risk: Also called the diversifiable risk, residual risk, or company-specific risk, the risk
that is unique to a company such as a strike, the outcome of unfavorable litigation, or a natural catastrophe.
Sale/Leaseback: A lease in which a company sells an asset to another entity in exchange for cash, then
leases back the same asset
SARA: Superfund Amendments and Reauthorization Act
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SBA: Small Business Administration.
SBIC: Small Business Investment Company.
SEC: Securities and Exchange Commission.
Serial Bonds: Bonds whose principle is repaid in periodic installments over the life of the issue.
Corporate bonds arranged so that specified principle amounts become due on specified dates. Related:
Term Bonds.
7(a): The name for the biggest category of SBA-backed loans.
Service Shedding: Divestiture through service shedding occurs when the government reduces the level of
service provided or stops providing a service altogether. Private-sector businesses or non-profit
organizations may then step in to provide the service if there is a market demand.
Severance Taxes: Severance taxes are charged for the extraction of natural resources from the land or
waters of a state. Examples of severance taxes include water and groundwater withdrawal taxes, oyster
and shellfish taxes, timber taxes, and fuel and mineral taxes.
Shareholder: An owner of shares in a corporation.
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Short-Term Debt: Debt that falls due in a period of under a year.
Small Business Administration: The federal agency that aims to assist small businesses with advice,
financing, and other business development aid. The SBA itself does not make loans, but guarantees
repayment of loans made by a bank or finance company.
Small Business Investment Company: Companies, affiliated with the SBA, that channel private
investors' money, combined with some government money, to small, fast-growing companies.
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Sole Proprietorship: A sole proprietorship is a form of business organization. The distinguishing
characteristics of Ihis form are only one owner for the business and the business is unincorporated.
Special Annuity Bonds: Serial bonds in which annual installments of bond principal are arranged so
that the combined payments for principal and interest are approximately the same each year.
Special Assessment: A charge imposed against certain properties to defray part or all of the cost of a
specific improvement or service deemed to primarily benefit those properties.
Special Assessment Bonds: Bonds payable from the proceeds of assessments imposed against
properties which have been specially benefitted by the construction of public improvements.
Special Assessment Fund: A fund used to account for the financing of public improvements or services
deemed to benefit primarily the properties against which special assessments are levied.
Special Districts: An independent unit of local government organized to perform a smgle governmental
function or a limited number of related functions. A single purpose or local taxing district can be organized
for a special purpose such as a road, sewer, irrigation or fire district Special districts usually have the
power to incur debt and levy taxes.
Special District Bonds: Bonds issued by a special district.
Special Tax Bond: A bond that is secured by a special tax^such as a liquor tax.
Step-up Bond: A bond that pays a lower coupon rate for an initial period which then increases to a higher
coupon rate. Related: Deferred-Interest Bond, Payment-In-Kind Bond.
Straight line method: A way to figure depreciation for property that ratably deducts the same amount
for each year in the recovery period. The rate (in percentage terms) is determined by dividing 1 by the
number of years in the recovery period
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Strategic Partner: An agreement witii another company to undertake business endeavors together on
each other's behalf.
Subordinate: To assign one's collateral position whether in full or in part to another to exchange one's
security interest over another.
Subordinated Debenture Bond: An unsecured bond that ranks after secured debt, after debenture
bonds, and often after some general creditors in it claim on assets and earnings. Related: Debenture
Bond, Mortgage Bond, Collateral Trust Bonds.
Superfund: The program operated under the legislative authority of CERCLA and SARA that funds and
carries out the EPA solid waste emergency and long-term removal activities. These activities include
establishing the National Priorities List (N.L.), investigating sites for inclusion in the list, determining the
priority level on the list, and conducting and/or supervising the ultimately determined cleanup and other
remedial actions.
Superior Lien: A lien issued by a Federal Court; generally the Federal Court issues superior lien rights to
lenders during the course of post bankruptcy petition financing. If approved, the Federal Court will place
the lender in front of all other creditors with the intent to benefit all the creditors.
Sustainable Development: The concept of using resources in an ecologically sound manner so that they
will be sustainable over the long term. Put another way, by the Executive Secretary of the U.N. Economic
and Social Commission for Asia and the Pacific, it is "an approach to progress that meets the needs of the
present without compromising the ability of future generations to meet their needs".
Tax: A tax is generally a charge against sales, income or property. Unlike fees, most jurisdictions do not
require that there be a direct relationship between a tax and the use of funds.
Tax Anticipation Notes (TANs): Short-term debt that will be retired with taxes to be collected at a
later date. > '
\
Tax Base: See revenue base.
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Tax Credit: A special provision of 1he law that results in a dollar-for-dollar reduction in tax liabilities that
would otherwise be due.
I
Tax-Exempt Lease: A lease in which 1he lessee has 1he option of applying lease payments to the
purchase of a facility for a reduced price. The lessee is owner for tax purposes. Also known as a
conditional sale lease.
Tax Lease: A generic term for a lease in which the lessor takes the risk of ownership (as determined by
the IRS) and, as the owner, is entitled to the benefits of ownership, including tax benefits.
Tax Increment Financing: The dedication of incremental increases in real estate taxes to repay an
original investment in improved public facilities that created increased real estate values. '
Tax Limit: The maximum rate of taxation which a local government may levy.
Tax Rider: A tax rider allows a locality to "piggy-back" on an existing state tax by charging an additional
levy. State laws vary, but most states require the authorization of the state legislature before a locality is
permitted to enact a rider on a state tax.
Tax Surcharge: An increased percentage or dollar amount charged by a taxing authority on an existing
tax. Temporary surcharges can be a good method for financing non-recurring needs.
Term Bonds: Often referred to as bullet-maturity bonds or simply bullet bonds, bonds whose principal is
payable at maturity. Related: Serial Bonds.
Term interest: A life interest in property, an interest in property for a term of years, or an income interest
in a trust It generally refers to a present or future interest in income from property or the right to use
property which terminates or fails upon the lapse of time, the occurrence of an event or 1he failure of an
event to occur.
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Term Loan: A loan made to an individual or a company for over 12 months or more.
The Three C's of Banking: Credit, Capacity and Character. These are the three primary areas on
which a bank focuses before lending to its borrower.
Total Cost Accounting: A hybrid term sometimes used as a synonym for either of the definitions given
to "full cost accounting," or "Total Cost Assessment".
Transferable Development Rights (TDR) Programs: These programs let owners of rural or
undeveloped land sell an set number of development rights to developers at a mutually-agreeable price.
The developers can then use the rights purchased to exceed height and density limitations in other,
already-developed areas. Ideally, a TDR program is intended to preserve rural and undeveloped land
while allowing landowners to reap the full value for flieir property.
Transient, Non-Community Water System: A system which provides water in a place such as a gas
station or campground where people do not remain for long time periods. These systems do not have to
test or treat tiieir water for contaminants which pose long-term health risks because fewer lhan 25 people
drink the water over a long period. They still must test for microbes and several chemicals.
Trust Fund: Funds created by State and local governments to receive revenues generated by a tax or
other mechanism, and disburse funds for 1he purposes for which the revenues are coDected.
TSCA: Toxic Substances Control Act.
Turnkey Arrangement: A public-private partnership in which a public agency contracts with a private
vendor to build a complete facility with specified performance standards agreed to between the agency
and the vendor. Since ownership remains with the private partner.until construction is complete, generally
the private partner will not be bound by public procurement regulations, which often enables the facility to
be completed in significantly less time and for less cost than could be accomplished under traditional
construction techniques.
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Unadjusted depreciable basis: The basis of an item of property for purposes of figuring gain on a sale
without taking into account any depreciation taken in earlier years but with adjustments for amortization,
Ihe section 179 deduction, any deduction claimed for clean-fuel vehicles or clean-fuel vehicle refueling
property, and any electric vehicle credit
USAGE: United States Army Corps of Engineers.
Useful life: An estimate of how long an item of property can be expected to be usable in trade or
business or to produce income. Under MACRS, you recover die cost of property over a set period. The
recovery period is based on your property's property class. Your property's class is usually determined
by its class life. The class life for most property is set and listed in IRS Appendix B.
User Fees: User fees require those who use a government service to pay some or all of Ihe cost of the
service, rather than having the government pay for it through revenues generated by taxes. The fees
charged for entry into public parks are an example of a user fee.
Value: A term which defines the worth of a thing. Value is usually preceded by a word(s), such as Fair
or Fair Market, and defined in the document where found. Not all value for an item is the same.
Venture Capital: Money invested in new enterprises.
Venture Capitalist: An individual or firm who invests money in new enterprises.
V.C.: Volatile organic compound.
Volunteer Activities: Volunteer activities are performed via a formal agency volunteer program or a
private non-profit organization. An activity in which volunteers provide all or part of a service and are
organized and directed by a government entity can also be considered a form of outsourcing.
Warrant: A security entitling the holder to buy a proportionate amount of stock at some specified future
date at a specified price, usually one higher than current market. This "warrant" is then traded as a
I
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security, the price of which reflects the value of the underlying stock. Warrants are usually issued as a
"sweetener" bundled with another class of security to enhance the marketability of the latter. Warrants are
like call options, but with much longer time spans - sometimes years.
Water Pollution: The introduction of substances that make water impure compared wife undisturbed
water. Usually this comes from soil erosion, introduction of poisonous chemicals from industries and spills
and introduction of domestic sewage or industrial and agricultural wastes.
Watershed: The land area from which water drains into a stream, river, or reservoir. •
Wetlands Mitigation Banking: Wetlands mitigation banking programs allow developers to purchase
credits in a publicly-owned and managed wetlands site that has been enhanced, restored, or created by a
public agency. The developers may use these credits to fulfil wetlands mitigation requirement for impacts
in other locations, generally within the same watershed or habitat area
Working Capital: The cash available to a company for fee on-going operations of the business.
Workload Analysis: A workload analysis details the cost of carrying out particular programs or
activities. An analysis generally includes estimates of the time required to perform such activities
as permit processing arid review, compliance inspections, and enforcement activities. Workload analyses
help state and local governments estimate costs for program implementation.
Zero-Coupon Bonds: Zero-coupon bonds are bonds priced at a large discount from face value. The
bonds mature at full face value so the difference between the original issue price and the face value
represents interest income. The issuer of the zero coupon bond saves on cash flow since the interest isn't
paid out until the end of the bond holding period.
?*•
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F. REQUEST FOR COMMENTS
AND SUGGESTIONS
This Guidebook of Financing Tools is intended as a basic reference document for public and private
officials with environmental responsibilities. It provides a compendium of information on more than 340
financing tools that federal, State, and local governments and the private sector can and do use to pay for
environmental programs, systems, and activities. The Guidebook is divided into ten major sections
ranging from traditional financing concepts such as raising capital and enhancing credit to important
USEPA priorities such as pollution prevention and community-based environmental protection. Within
this arrangement, each financing tool has a one-page write-up that includes a description of the tool,
current and potential uses, advantages and limitations, and information sources. The Guidebook does not
recommend the use of any particular tool - leaving that decision to the responsible officials familiar with
Iheir particular circumstances.
We welcome and encourage comments and suggestions regarding the Guidebook and the financing tools
themselves. We are particularly interested in receiving suggestions for new tools and completed one-page
write-ups of new tools in the Guidebook format. To encourage and facilitate that end, we have provided
blank one-page write-up forms for suggested new tools at the back of each major section and sub-section.
We have also included ten blank one-page write-up forms in this Appendix immediately following this
page. All completed write-ups submitted for consideration will be reviewed, edited for format consistency
and accuracy, and included in the next update of the Guidebook, as appropriate. Editorial corrections of
current write-ups will be handled in the same way.
Thank You.
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Description:
Actual Use:
NAME OF TOOL:
Potential Use:
Advantages:
Limitations:
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Reference for Further Information:
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Description:
Actual Use:
Potential Use:
Advantages:
Limitations:
April 1999
NAME OF TOOL:
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Reference for Further Information:
Description:
Actual Use:
Potential Use:
Advantages:
Limitations:
NAME OF TOOL:
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April 1999
Reference for Further Information:
NAME OF TOOL:
Description:
Actual Use:
Potential Use:
Advantages:
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Limitations:
Reference for Further Information:
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Description:
Actual Use:
Potential Use:
*
Advantages:
Limitations:
April 1999
NAME OF TOOL:
Reference for Further Information:
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DOE/EIA-0608(2Q03)
Voluntary Reporting
of Greenhouse Gases
2003
February 2005
Energy Information Administration
Office of Integrated Analysis and Forecasting
U.S. Department of Energy
Washington, DC 20585
This publication is on the WEB at;
www.eia.doe.gov/oiaf/1605/vrrpt/index.html.
f
This report was prepared by the Energy Information Administration, the independent statistical and
analytical agency within the Department of Energy. The information contained herein should be
attributed to the Energy Information Administration and should not be construed as advocating or
refecting any policy position of the Department of Energy or of any other organization.
-------
For More Information
Individuals or members of organizations wishing to
report reductions in emissions of greenhouse gases
under the auspices of the Voluntary Reporting of Green-
house Gases Program can contact the Energy Informa-
tion Administration (ElA) at
Voluntary Reporting of Greenhouse Gases
Energy Information Administration
U.S. Department of Energy
Forrestal Building
EI-81, Room 2F-081
1000 Independence Avenue, SW
Washington, DC 20585
Telephone: 1-800-803-5182 or 202-586-0688
FAX: 202-586-3045
e-mail: infoghg@eia.doe.gov
For reporting purposes, EIA has both a long form
(EIA-16G5) and a short form (EIA-1605F.Z} available,
as well as an electronic version of the form. They are
available upon request or on EIA's web site at
rt>ww.eitt.doe.gav/oiaf/l 6Q5/fc rms. h tml.
The reports submitted to EIA are compiled into a date-
base that can be obtained on CD-ROM by contacting the
Voluntary Reporting of Greenhouse Gases Program
Communications Center at 1-800-803-5182 or can be
downloaded from EIA's web site at vnow.eia.doe.gffo/0iaf/
1605/database.html.
Genera] or specific technical information concerning
the contents of this report may also be obtained by con-
tacting the Voluntary Reporting of Greenhouse Gases
Program.
f
Energy information Administration / Voluntary Reporting of Greenhouse Gases 2003
-------
i
Preface
Title XVI, Section 1605(b) of the Energy Policy Act of
1.992 (HPACT) directed the Energy Information Admin-
istration (EIA) to establish a mechanism for "the volun-
tary collection and reporting of information on ...
annual reductions of greenhovise gas emissions,and car-
bon fixation achieved through arty measures, including
fuel switching, forest management practices, tree plant-
ing, use of renewable energy, manufacture or use of
vehicles with reduced greenhouse gas emissions, appli-
ance efficiency, methane recovery', regeneration, chloro-
fluorocarbon capture and replacement, and power plant
heat rate improvement...."
The legislation further instructed EIA to create forms for
the reporting of greenhouse gas emissions and reduc-
tions, and to establish a database of the information vol-
untarily reported under this subsection of EPACT. The
reporting Forms BIA-16Q5 and EIA-I605EZ, "Voluntary
Reporting of Greenhouse Gases," were first made avail-
able to the public in July 1995, providing a vehicle for
voluntary reporting on activities that occurred before
and during 1994. This publication summarizes data
reported for 2003, the tenth year of data collection for the
Voluntary Reporting of Greenhouse Gases Program.
The data reported to the Program are available through
several media. All nonconfidential reports received by
the Program are compiled into a Public Use Database,
available on CD-ROM or by download from the Inter-
net. The software is interactive and modular by design,
allowing the user to select, view, or print the reports
filed by the voluntary reporters, for each year of their
participation. The user can also connect to and query the
database with Microsoft Access 97 (or later versions) or
other software that supports 32-bit open database con-
nectivity (ODBC).
The Public Use Database and the current reporting soft-
ware are also available at the Program's FTP (File Trans-
fer Protocol) site on the Internet at http://wiviv.cia.doe.gov/
maf/1605/database.html. Interested parties are encour-
aged to visit the Program's home page at hitp://www.
eia.cloe.gov/oiaf/1605/frntvrgg.htin! for more information
and background on the Program. Software, additional
copies of this report, paper reporting forms, and techni-
cal support information can be downloaded from that
web site or obtained from the Voluntary Reporting of
Greenhouse Gases Communications Center by e-mail at
infoghg@eia.doe.gffu, toll-free at 1-800-803-5182, or locally
a 1202-586-0688.
This report was prepared under the guidance of John
Conti, Director of EIA's Office of Integrated Analy-
sis and Forecasting. Significant contributions to the
Program, the current software, and the preparation of
this report have been made by Paul McArdle, Stephen
Calopedis, Matthew Aberant, Keith Forbes, Kristin
Franks, Laura Gehlin, Sarah Goldstein, William
La Perch, Michael Mondshine, Dick Richards, Charles L,
Smith, and Peggy Wells.
EIA would like to express special thanks to the volun-
tary reporters, without whom this program would not
be possible.
Energy information Administration /Voluntary Reporting of Greenhouse Gases 2003
-------
I
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Contents
s
Page
Executive Summary ix
1. Voluntary Reporting 2003: An Overview 1
Introduction 1
Benefits of the Voluntary Reporting Program 1
Who Reported? ' 2
What Was Reported? 4
Status of Policy Initiatives 13
2. Reducing Emissions from Electric Power ,. 19
Electric Power Industry '19
Projects Reported 19
Reductions Reported 20
3. Reducing Emissions from Energy End Use 29
Introduction 29
Reducing Emissions from Stationary Soxirces 29
Reducing Emissions from Transportation 36
4. Carbon Sequestration . — 41
Background 41
Projects Reported 41
5. Reducing Methane Emissions 49
Introduction 49
Overvlew of Projects Reported 49
Reducing Methane Emissions from Waste Treatment and Disposal...; 50
Reducing Emissions from Energy Production arxd Consumption 51
Reducing Emissions from Agriculture 54
Federal Voluntary Programs To Reduce Methane Emissions 54
6.HFCs,PFCs,and Sulfur HexafJuoride 55
U,S, Emissions of HFCs,PFCs, and Sulfur Hexafluoride ". 55
Projects Reported 55
Emission Reductions by Gas .' 56
7. Entity-Level Reporting and Future Commitments 59
Overview ,... 59
Entity-Level Reporting 59
Future Commitments To Reduce Emissions 64
8. Project-Level Reporting on Form EIA-1605EZ 69
Who Reported on Form EIA-1605E2 69
What Was Reported onFormEIA-1605EZ 69
Glossary 73
Energy Information Administration / Voluntary Reporting of Greenhouse Gases 2003 . v
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Special Topics Page
The Energy Policy Act of 1992, Sections 1605(1)) and (c) 2
Global Warming Potentials Used to Calculate Carbon Dioxide Equivalent Emissions 7
The Global Climate Change Initiative 14
Recommendations for Imp roving the Voluntary Reporting of Greenhouse Gases Program 15
Electricity Supply Carbon Reduction Projects: Definitions and Terminology 23
Efficiency Projects: Definitions and Terminology 25
Load Shape Effects: Definitions and Terminology 32
Materials Management Projects 52
Tables
ESI. Reporting Indicators for the Voluntary Reporting of Greenhouse Gases Program, Data Years 1994-2003 ix
ES2. Forms Filed by Standard Industrial Classification, Data Years 1994-2003 , xi
1. Forms Filed by Standard Industrial Classification, Data Years 1994-2003 3
2. Distribution of Projects by Reduction Objective, Project Type, and Form Type, Data Year 2003 5
3. Geographic Scope of Reports Received and Locationof Emission Reduction Projects, Data Years 1994-2003 ... 6
4. Summary of Reported Project-Level Emission Reductions and Carbon Sequestration
by Reduction Objective and Gas, Data Year 2003 .' 8
5. Summary of. Reported Project-Level Emission Reductions and Carbon Sequestration by Gas,
Data Years 1994-2003 ." 10
6. Number of Projects Reported on Form EIA-1605 by Reduction Objective, Project Type,
and Reference Case Employed, Data Year 2003 11
7. Reported Emission Reductions and Sequestration for Projects Reported on Form EIA-1605
by ReductionObjective,ProjectType,Source,andRefefenceCaseEmployed,Data Year 2003 12
8. Number of Entities Reporting at the Entity Level, Reported Emissions by Source, Emission Reductions
by Source and Type of Reference Case Employed, and Sequestration, Data Years 1994-2003 12
9. Number of Electric Power Projects and Emission. Reductions Reported on Form EIA-1605
by Project Type and Reduction Type, Data Year 2003 20
10. Number of Energy End-Use Reporters, Projects, and Emission Reductions Reported on Form EIA-1605,
Data Years 1994-2003 30
11. Number of Projects and Emission Reductions Reported on Form ETA-1605
for Energy End-Use Projects by Project Type, Data Year 2003 32
12. Number of Projects and Emission Reductions Reported on Form EIA-1605
for Transportation Projects by Project and Reduction Type, Data Years 1994-2003 37
13. Emission Reductions Reported on Form EIA-1605 for Transportation Projects
by Project and Reduction Type, Data Years 1994-2003 37
14. Number of Projects, Carbon Sequestered, and Net Reductions Reported on Form EIA-1605
for Sequestration Projects, Data Years 1994-2003 42
15. Number of Sequestration Projects Reported on Form EIA-1605 by Project Type, Data Years 1994-20Q3 42
16. Carbon Sequestration Reported on Form El A-1.605 by Project Type, Data Years 1994-2003 43
17. Projects Reported on Form EIA-1605 with Methane Reductions as the Principal Outcome
by Project Type, Data Years 1994-2003 50
18. Total Methane Emission Kedxictions Reported on Form EIA-1605, All Project Types, Data Years 1994-2003 50
19, Methane Emission Reductions from Waste Treatment and Disposal Projects Reported
on Forxn EIA-1605, Data Years 1994-2003 53
20. Methane Emission Reductions from Natural Gas Systems and Coal Mining Reported
on Form EIA-1605, Data Years 1994-2003 53
21. Number of Reported. Methane Reduction. Projects Associated with. Other Federal Voluntary Programs,
Data Years 1994-2003 54
22. Number of Projects Reported on Form EIA-1605 for Hydrofiuorocarbon, Perfluorocarbon,
and Sulfur Hexafluoride Emissions, Data Years 1994-2003 56
23. Reductions of Hydrofiuorocarbon, Perfluorocarbon, and Sulfur Hexafluoride Emissions
Reported on Form EIA-1605, Data Years 1994-2003 56
24. Largest Project-Level Direct Reductions of Sulfur Hexafluoride Emissions Reported
on Form EIA-1605 by Reporter, Data Year 2003 58
25. Total Reported Entity-Level Emissions of Greenhouse Gases Other Titan Carbon Dioxide
by Type of Emissions, Data Year 2003 60
vi Energy Information Administration / Voluntary Reporting of Greenhouse Gases 2003
s
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s
Tables (Continued) Page
26. Total Reported Entity-Level Carbon Dioxide Emissions by Type and Source, Data Year 2003 60
27. Largest Reported Entity-Level Direct Carbon Dioxide Emissions by Reporter and Source, Data Year 2003 61
28. Largest Reported Entity-Level Direct Emissions of Greenhouse Gases Other Than Carbon Dioxide
by Reporter and Emissions Source, Data Year 2003 61
29. Total Reported Entity-Level Reductions in Emissions of Greenhouse Gases by Gas and Source,
Data Year 2003 62
30. Total Reported Entity-Level Carbon. Dioxide Emission ReductionsbyTypeandSource,DalaYeai'2003 63
31. Largest Individual Reported Entity-Level Direct Emission Reductions by Gas, Source,
ancfTypeofReference Case Employed, Data Year 2003 64
32. Largest Individual Reported Entity-Level Indirect Emission Reductions by Gas, Source,
and Type of Reference Case Employed, Data Year 2003 65
33. Largest Reported Individual Entity-Level Commitments To Reduce Greenhouse Gases
by Gas and Type of Reference Case, Data Year 2003 66
34. Largest Reported Individual Project-Level Commitments To Reduce Greenhouse Gas Emissions,
Data Year 2003 - 67
35. Largest Reported Individual Entity-Level Financial Commitments To Reduce Greenhouse Gas Emissions,
Data Year 2003 .' 68
36. Reported Entity-Level Financial Expenditures To Reduce Greenhouse Gas Emissions, Data Year 2003 68
37. Number of Projects Reported on Form EIA-1605EZ by Reduction Objective arid Project Type,
Data Years 1994-2003 '. 70
38. Emission Reductions Reported on Form EIA-1605EZby Reduction Objective and Project Type,
Data Years 1994-2003 ' 70
39. Carbon Dioxide and Methane Emission Reductions Reported on Form EIA-1605EZ
by Reduction Objective and Project Type, Data Year 2003 71
40, Number of Projects Reported on Form EIA-1605EZ Associated with Other Federal Voluntary Programs,
Data Years 1994-2003 ." 71
Figures
ESI. Number of Projects Reported to the Voluntary Reporting of Greenhouse Gases Program by Project Type,
Data Year 2003 xii
1. Electric Power Sector and Other Entities Submitting Reports to the Voluntary Reporting of
Greenhouse Gases Program, Data Years 1994-2003 4
2. Number of Reports Received by Form. Type, Data Years 1994-2003 5
3. Number of Entities Reporting Commitments Associated with Voluntary Programs in Data Year 2003,
by Program 13
4. Number of Electric Power Providers Reporting on Form ElA-1605, by Entity Type, Data Years 1994-2003 19
5. Electric Power Projects and Total Projects Reported on Form EIA-1605, Data Years 1994-2003 20
6. Electric Power Projects Reported on Form EIA-1605 Reducing the Carbon Content of Energy Sources,
by Project Type, Data Years 1994-2003 21
7. Reported Transmission and Distribution Projects Reported on Form EIA-1605 by Type,
Data Years 1994-2003 27
8. Sources of U.S. Carbon Dioxide Emissions by Sector, 2003 29
9. Energy End-Use Projects Reported on Form E!A-1605by Size and Type of Emission Reduction,
Data\ear 2003 ". 30
10. Demand-Side Management Projects Reported on Form EIA-1605 by Loud Shape Objective, Data Year 2003 ... 31
11. Energy End-Use Projects Reported on Form EIA-1605 by Sector, Data Years 1994-2003 31
12. Carbon Sequestration Projects Reported on Form EIA-1605 by Amount of Carbon Sequestered,
Data Year 2003 ' 43
13. Methane Emission Reduction Projects Reported on Form EIA-1605 by Type and
Sizeof Reduction, Data Year 2003 51
14. Estimated U.S. Emissions of HFCs, PFCs, and Sulfur Hexafluoride, 1990-2003 55
Energy Information Administration / Voluntary Reporting of Greenhouse Gases 2003 vii
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Executive Summary
Introduction
The Voluntary Reporting of Greenhouse Gases Pro-
gram, required by Section 1605(b) of the Energy Policy
Act of 1992, records the results of voluntary measures to
reduce, avoid, or sequester greenhouse gas emissions.
For the 2003 reporting year, 234 U.S. companies and
other organizations reported to the Energy Information
Administration (EIA) that they had undertaken 2,188
projects to reduce or sequester greenhouse gases in 2003.
The reported greenhouse gas emission reductions for
the projects reported included 268 million metric tons
carbon dioxide equivalent of direct reductions, 81 mil-
lion metric tons of indirect reductions, 7 million metric
tons of reductions from carbon sequestration, and 16
million metric tons of unspecified reductions (Table
ESI). Total U.S. greenhouse gas emissions in 2003 are
estimated at 6,936 million metric tons carbon dioxide
equivalent.1
For definitional purposes, direct reductions are emission
reductions from sources owned or leased by the report-
ing entity; indirect reductions are emission reductions
from sources not owned, or leased by the reporting entity
but: that occur as a result of the entity's activities; carbon
sequestration reductions represent the removal of atmo-
spheric carbon to a carbon sink; and unspecified rechic-
tions represent emission reductions reported on Form
Table ES1. Reporting indicators for the Voluntary Reporting of Greenhouse Gases Program,
Data Years 1994-2803
indicator
Number of Entities Reporting
Number of Projects Reported
Number of Entity-Level Reports Received
1994 | 1995 | 1996
108 142 150
634 960 1,040
40 51 56
1997
162
1,288
60
1998 [ 1999
207
1,549 1
76
207
,722
83
2000
236
2,088
108
2001 |
232
1,897
114
2002
234
2,055
119
2003
234
2,188
126
Project-Level Reductions Reported (Million Metric Tons Carbon Dioxide Equivalent)
Direct"
Modified Reference Case"
Basic Reference* Case'-
Indirect"
Modified Reference Caseb
Basic Reference Casec
Sequestration8
Unspecified'
63 63 90
59 76 75
4 13 15
5 52 53
5 52 51
0 1 3
1 1 9
466
95
88
7
38
36
2
10
9
148
127
21
43
38
5
12
19
155
126
29
57
51
6
10
13
211
176
35
62
57
5
9
12
247
209
38
72
61
11
8
15
265
257
8
80
78
2
7
17
2S8
26!
7
81
75
6
8
16
""Direct" emission reductions are reductions in releases of greenhouse gases "on site." For the purpose of completing Form
EIA-1605, "on site" is defined as any source owned (whoiiy or in part) or leased by the reporting entity.
bln a "modified reference case." actual emissions (or sequestration) ate compared to an estimate of what emissions (or sequestra-
tion) would have been in the absence of the project.
c!n a "basic reference case." actual emissions (or sequestration} are compared with an estimate of historical emissions (or seques-
tration) in a particular base year or art average of up to 4 years.
""Indirect? emission reductions are reductions in emissions from sources not owned or leased by she reporting entity but that occur,
whoiiy or in part, as a result of the entity's activities (for example, an automobile manufacturer's investment in increased automotive
fuel economy can result in decreased emissions from vehicles owned by individuals or managed fleets).
""Sequestration" is the fixation of atmospheric carbon dioxide in a carbon sink through biological or physical processes, such as
photosynthesis.
'"Unspecified" emission reductions represent quantities reported on the short form (Form EIA-160SE2) for which the reporting
entity did not specify whether the emission reduction or carbon sequestration was direct or indirect.
(R) = revised.
Notes: 2002 data have been revised to include reports that were submitted after the filing deadline. It is expected that the 2003
data will also be revised upward in next year's report with the inclusion of late 2003 reports. Totals for direct and indirect reductions
may not equal sum of components due to independent rounding.
Source: Energy information Administration, Forms EIA-1605 and EIA-1605EZ.
1 Energy Information Administration, Emissions tf Greenhouse Gases in the United States 2003, DOE/EIA.-0573(2003) (Washington, DC,
December 2004), web site www.eia.doe.gov/oiaf/16C5/ggrpt.
Energy information Administration / Voluntary Reporting of Greenhouse Gases 2003
IX
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EIA-1605EZ, on which the reporting entity cannot spec-
ify whether the emission reduction was a direct or indi-
rect reduction.
To calculate reported emission rediictions, reporters are
allowed to use a "basic" reference case or a "modified"
reference case, A reference case is an emissions or
sequestration level against which actual emissions are
compared in order to estimate emission reductions. In a
"basic" reference case, actual historical emissions (or
sequestration) in a specific year, or an average of a range
of years, are used. In a "modified" reference case, an esti-
mate is made of what emissions or sequestration would
have been in the absence of the project.
Generally, as illustrated in Table ESI, most reductions
are reported relative to a modified reference case. For
2003,261 million metric tons, or 97 percent, of the total
268 million metric tons carbon dioxide equivalent of
reported direct reductions was based on modified refer-
ence cases. Similarly, for reported indirect reductions, 75
million metric tons, or 92 percent, of the total 81 million
metric tons carbon dioxide equivalent of reported indi-
rect reductions was based on modified reference cases.
The number of entities (234) reporting to the Voluntary
Reporting Program for 2003 is the same as the number
that reported for 2002; however, the number of reporters
for 2002 has been revised upward to include 6 additional
entities that filed late reports, after the 2002 database
was closed. EIA also expects a similar upward revision
of the number of 2003 reporters in next year's report, to
reflect late reporters in the 2003 reporting cycle. As of
February 7, 2005, EIA had received 6 additional 2003
reports and 1 additional 2002 report since the 2003 data-
base was closed for preparation of this 2003 arnnial
report.2
The number of entities reporting to the program has
grown by 117 percent from its inception in 1994, when
108 entities reported. The number of projects reported
has grown at a more rapid rate than the number of
reporters, because the number of projects reported by
repeat reporters has increased. The 2,188 projects
reported for 2003 represent an increase of 245 percent
over the 634 projects reported in 1994 and a 7-percent
increase from the final tally of 2,055 projects reported for
2002.
Of the 234 organizations reporting for 2003, 126 pro-
vided entity-level reports, which include estimates of
emissions and/or emission reductions for their entire
organizations—7 more than die number (119) that sub-
mitted entity4evel reports in 2002. In addition, 89 of the
reporters for 2003 recorded commitments to take action
to reduce emissions, mostly during the 2000 to 2005 time
frame.
Of the 126 organizations reporting at the entity level, 120
calculated their 2003 entity-level greenhouse gas emis-
sions. These entities reported direct greenhouse gas
emissions of 889 million metric tons carbon dioxide
equivalent, equal to about 14 percent of total U.S. green-
house gas emissions in 2Q03.3 Also reported by these
organizations was 105 million metric tons carbon diox-
ide equivalent of indirect emissions, equal to 2 percent of
total U.S. greenhouse gas emissions in 2003. Of the 126
entity-level reporters, 117 also reported emission reduc-
tions, including 214 million metric tons carbon dioxide
equivalent of direct emission reductions, 42 million met-
ric tons carbon dioxide equivalent; of indirect emission
reductions, and 7 million metric tons; carbon dioxide
equivalent of emission reductions resulting from.carbcm
sequestration projects.
Reports for 2003 were received from participants in 27
different industries or services, as compared with the 29
different industries or services for 2002. The number of
different industries represented continues to be higher
flhan it was in the first year of the program (1994 data
year), when the 108 reports received included partici-
pants in 9 different industries or services (Table ES2). In
the early years of the program, reporting was dominated
by the electric power sector. In the first: reporting year,
the 95 submissions from electric power producers repre-
sented 88 percent of die 108 reports received (Figure
ESI). Since then, the program has seen an influx of new
participants from outside the. electric power sector, rep-
resenting a diverse set of other industries. In addition,
several mergers and acquisitions involving reporters to
the Program have accompanied the ongoing restructur-
ing of the electric power industry. Many of these merged
entities have submitted single, consolidated reports,
thus reducing die number of reports received from elec-
tricity producers. As a result, only 42 percent of die orga-
nizations reporting to the Program for 2003 (98 firms)
were from the electric power sector.
Although the number of reporters from other individual
industries remains relatively small, in many cases,
reports were received from key companies in those
other industries: for example, DaimlerChrysler Corpo-
ration, General Motors, the Ford Motor Company, and
2The deadline for submitting reports to EIA /or inclusion in each annual edition of the Public Use Database is June 1. EIA typically grants
reporters extensions to the deadline, usually until early July, before closing the database h.o new reports to allow analysis of the information
for the annual report. EFA includes reports received after the database has been closed in the next annual edition of the Public Use Database
ami revises the data for that reporting year in the corresponding annual report, to reflect the addition of late reports.
3Based on totai emissions from Energy Information Administra lion, Ettrissions of Greentmuse Cases, in the United States ?M3, DOE/EIA-
0573(2003) (Washington, DC, December 2004), web site wvvw.eia.doe.gov/oiaf/16C-5/ggrpt.
I
Energy information Administration / Voluntary Reporting of Greenhouse Gases 2063
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Table ES2. Forms Filed by Standard Industrial Classification, Data Years 1994-2003 (Number of Reports)
I
SIC
Coda
01
08
12
13
14
20
22
23
24
25
26
27
28
29
30
32
33
34
35
36
37
38
39
40
4U
49
57
63
65
'67
72
80
82
OS
87
88
89
91
97
99
!
• Description | 1994
Agricultural Production: Crops —
Foiestry 1
Coai Mining 1
Oil snc! Gas Extraction —
Nonmetaflic Minerals, Except Fuels —
Food and Kindred Products
Textile Miii Products
Apparel and Other Textile Products —
Lumber ttnsH Wood Products ..'.., —
Furniture and Fixtures
Paper and Aliied Products
Printing and Publishing
Chemical and Allied Products 1
Petroleum Refining and Other Related industries. .' —
Rubber and Miscellaneous Plastic Products
Stone, Clay, Glass, and Concrete Products
Primary Metals Industries 2
Fabricated Meta! Products, Exceot Machinery and
Transportation Equipment. . ,
Industrial and Commerciai equipment and
Components —
Electronic and Other Electrical Equipment t
Transportation Equipment , 1
instruments and Related Products —
Miscellaneous Manufacturing Industries —
Railroad Transportation
Communications
Electric, Gas, and Sanitary Services 95
Furniture and Home Furnishings Stores —
Insurance Carriers
Real Estatn
Holding end Other Investment Offiess —
Persona' Services —
Health Services
Educational Services 1
Membership Organizations . . , —
Engineering ant! Management Services —
Private Households 2
Services Not Elsewhere Classified
Executive. Legislative, and General . ,
National Security and international A«airs —
Noneiassifiable Establishments —
Total Number of Reporters* ' 108
Number of 2 -Digit SIC Codes Represented 9
[ 1985 [
—
2
2
—
__
....
„..
—
—
....
1
3
—
....
2
2
—
1
1
—
1
....
121
—
1
—
—
2
_
—
1
....
—
—
142
13
1996
—
1
2
—
—
....
....
—
—
....
....
2
2
1
4
1
—
2
1
—
1
....
125
—
1
1
—
2
—
2
1
....
.....
—
—
150
16
| 1997 |
—
1
1
—
—
.....
.....
—
—
1
3
3
.....
4
4
1
—
4
2
—
__
....
129
_
1
1
—
2
1
2
1
1
.....
—
—
162
18
Data Year
1998 11939"
1
3
4
—
1
.1
....
—
—
....
8
8
....
12
5
3
—
4
3
2
2
133
2
1
1
—
1
....
1
2
1
1
1
—
—
207
24
—
3
3
1
1
2
1
„
—
....
1
1
5
8
.....
13
5
t
—
4
S
—
2
1
135
1
1
1
—
....
2
1
1
1
3
2
—
—
207
27
"J200011"
—
1
4
1
__
6
5
1
1
1
1
1
11
7
2
•r
5
1
1
9
a
•!
1
.....
151
1
1
1
•(
.....
1
—
1
2
2
1
—
236
31
1 2001""] 20021"1!
1
....
e
i
_.
4
11
1
—
1
. —
....
9
e
2
. 5
11
1
1
3
?
1
1
....
145
—
1
1
1
....
—
1
1
1
2
_
—
232
27
—
1
7
1
__
4
12
2
_
1
....
11
6
2
5
11
1
1-
8
9
1
1
1
138
1
....
1
2
1
....
1
—
1
1
1
—
1
. 234b
29b
2003
_
2
4
1
_
4
14
2
_
....
....
11
5
2
5
11
1
2
e
10
1
1
1
1
141
1
1
, 2
1
....
—
—
1
1
1
—
—
234
27
a"f ot3ls may be greater than tha sum of reporters in each SiC code, because confidential reporters are excluded from the latter.
blndudes 6 late reports for the 2M2 data year. Tha 2003 total wiil also ba revised upward in next year's report with the inclusion of late 2003
reports. As of February 22,2005, EtA had received 6 late 2003 reports, which are not incluciec! irs this report's 2003 database.
(R) - Revised.
Source: Energy Information Administration, Forms EiA-1605 and EIA-1605EZ.
Energy information Administration /Voluntary Reporting of Greenhouse Gases 2003
XI
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Toyota North America in the automotive products
industry; Noranda and an operating division of Alcan's
Primary Products in the metals industry; Sunoco, Inc.,
ChevronTexaco Corporation, and BP America in the
petroleum industry; Johnson & Johnson and The Dow
Chemical Company in the chemicals industry; Roils
Royce in the aerospace industry; Bristol-Myers Squibb
Company and Pfizer Pharmaceuticals, LLC, in the
Pharmaceuticals industry; and Advanced Micro
Devices, Inc., and IBM in the electronic equipment
industry.'5
Projects Reported
Electric power sector reporters (including independent
power producers) accounted for 1,485 (68 percent) of the
projects reported for 2003. Also reporting were alterna-
tive energy providers (446 projects), industrial concerns
(245 projects), and agriculture and forestry organisa-
tions (3 projects). Organizations in other sectors (gov-
ernment, commercial, and residential) submitted
reports on 9 projects.
Most of the projects reported for 2003 affected energy
supply or use. The electric power sector reported 514
projects that were related to the generation, transmis-
sion, or distribution of electricity (Figure IS I)- Another
450 were related to energy end use, 76 were transporta-
tion projects, and 21 were cogenerarion projects. Other
projects reduced emissions of methane from waste treat-
ment and disposal facilities (467 projects), from oil and
natural gas systems and coal mines (43 projects, many of
which included the displacement of fossil fuels through
the use of methane as a fuel), and from agricultural
activities (4 projects). Other projects (109) included the
reuse of fly ash in concrete and materials recycling,
which reduce emissions in part by reducing energy con-
sumption. The largest reductions were reported for pro-
jects that improved the performance of nuclear power
plants. The non-energy-related projects reported fell
into two major categories: sequestration of carbon, usu-
ally in forests (460 projects); and recycling, reuse, or
destruction of halogenated substances, such as
hydrofluorocarbons (MFCs), perfluorocarbons (PFCs),
and sulfur hexafluoride (SFg) (44 projects).
Figure ES1. Number of Projects Reported to the Voluntary Reporting of Greenhouse Gases Program
by Project Type, Data Year 2003
j^siftry:;^):!:!:::!:;:::!:;:!:!:!:!:!:!:!:!
!:ji§^ssyg?g%^^%wSBSj&byd!jgJ&«;i
ilpsi(76pi:i:i:Ei:Ei:E;:;:;:i:E;
rha: Disposal:; Mflfe^i ^
MeJrian e; i#si NtltatJ s: Oxicie;! (A }:
iihlrsg: iMstharie ;(43) :i
H
:^^n^^)]:!:i:;:;:j:;:i:j:;:;:j:i:i:!:;:H!:;:;:!:;:;:!:;:^
]|p:itiBieJ|pi^i^:^i^):H±i±i:i:B:i:i:i:i:i:^
P
1 i E i T
0 100 200 300 400 500 600
Number of Projects
Source: Energy Information Administration, Forms EIA-1605 and EIA-16Q5EZ.
4A complete listing of a!l 2003 reporter will be provided in Appendix B, Table 81 of the full report. Voluntary Reporting of Greenhouse s^m*.
Gases 20aVDOE/ETA-0608(2003) (Washington, DC, February 2005), which will be available from web site www.eia.doe.gov/oiaf/1605/ "™x
vrrpt. Tabls: B8 in Appendix 8 of the report lists reporters by sector and Standard Industrial Classification (SIC) code.
I
xn
Energy Information Administration / Voluntary Reporting of Greenhouse Gases 2QQ3
-------
t
Reductions Reported
Electric Power
For 2003, 485 electric power and regeneration projects
were reported on Form EIA-1605.5 Total emission reduc-
tions horn, electric power and regeneration projects
reported on Form EIA-1605 (the long form) included 158
million metric tons carbon dioxide equivalent from
direct sources and 18 million metric tons from indirect
sources, A total of 257 projects that reduced the carbon
content of fuels used to generate electricity were
reported, with emission reductions totaling 147 million
metric tons carbon dioxide equivalent from direct
sources and 13 million metric tons from, indirect sources.
Reported emission reductions for projects increasing
energy efficiency in generation, transmission, and distri-
bution included 16 million metric tons carbon dioxide
equivalent from direct sources and 4 million metric tons
from indirect sources. Another 50 electric power and
cogeneration projects were reported on Form EIA-
1605EZ for 2003, with reported emission reductions
from unspecified sources that totaled 11 million metric
tons carbon dioxide equivalent.6
Energy End Use and Transportation
For 2003,375 energy end use and transportation projects
were reported on Form EIA-1605, with total reported
emission reductions of 25 million metric tons carbon
dioxide equivalent from, direct sources and 10 million
metric ions from indirect sources. Nearly all (93 percent)
of the energy end-use reductions were reported for sta-
tionary-source applications, such as building shell
improvements, lighting and lighting control, appliance
improvement or replacement, and heating, ventilation
and air conditioning (HVAC) improvements. Much
smaller reductions were reported for the 66 transporta-
tion projects reported on the long form, including 2.5
million metric tons carbon dioxide equivalent from
direct sources and 0.1 million metric tons from indirect
sources. Another 86 energy end-use and transportation
projects were reported for 2003 on Form EIA-1605BZ,
with total emission reductions of 0.4 million metric tons
carbon dioxide equivalent.
Carbon Sequestration
There were 446 carbon sequestration7 projects submit-
ted on Form EIA-1605 for 2003, with total reported
sequestration of 8 million metric tons carbon dioxide
equivalent. Most of the reported reductions resulted
from afforestation, reforestation, urban forestry, forest
management, and forest preservation efforts. Another
14 carbon sequestration projects were reported on Form
EIA-16Q5EZ, for which about 29,000 metric tons carbon
dioxide equivalent of sequestered carbon was reported.
Methane and Nitrous Oxide Emissions
Emission reductions for the 470 methane and nitrous
oxide abatement projects reported for 2003 on Form
EIA-1605 included 69 million tons carbon dioxide equiv-
alent from direct sources and 40 million metric tons from
indirect sources. The three most frequently reported
sources of methane reductions were municipal waste
landfills (412 projects), natural gas systems (28 projects),
and coal mines (13 projects). In addition to reducing
methane emissions, projects that involved the recovery
and use of methane for energy also reduced carbon diox-
ide emissions by displacing fossil fuels, such as oil and
coal, that have higher carbon contents and thus produce
more carbon dioxide when burned. Another 44 methane
or nitrous oxide reduction projects were reported on
Form EIA-1605EZ for 2003, with reported reductions of
methane or nitrous oxide emissions that totaled 4 mil-,
lion metric tons carbon dioxide equivalent.
Hydrofluorocarbons, Perfiuorocarbons,
and Sulfur Hexafluoride
A total of 66 projects were submitted on Form EIA-1605
for 2003 that reported reductions in emissions of HFCs,
PFCs, and SF6. Reductions reported for these projects
. included 6.1 million metric tons carbon dioxide equiva-
lent from direct sources and 2.4 million metric tons from
indirect sources. Tire largest reported reductions were
direct reductions of perfluoromethane (a type of PFC)
(3.0 million metric tons carbon dioxide equivalent), SF6
(2.6 million metric tons carbon dioxide equivalent), and
perfluoroethane (a type of PFC) (0.6 million metric tons
carbon dioxide equivalent). Reductions of PFCs and SF6
totaling 29 thousand metric tons carbon dioxide equiva-
lent were reported for one project on Form. B1A-1605EZ.
s
•'•The Voluntary Reporting of Greenhouse Cases Program allows reporting on two forms: EIA-1605 and REA-.1605EZ. EIA-1605, the long
form, allows reporters to create an. in-depth, multi-year, public record of emission reduction efforts for an entire organization and/or for
individual projects, including information ori activities conducted outside the United States and commitments to reduce greenhouse gas
emissions in the future. EJA-1605EZ, the short form, allows reporters only lo provide brief summaries of greenhouse gasprojects for the cur-
rent reporting year; it does not allow reporting of activities outside: the United States or of future emission reduction commitments.
6The emission reductions reported on Form E1A-1605EZ are unspecified, because the form does not ask the reporter to distinguish
between direct and indirect reductions.
'''Carbon sequestration is the fixation of atmospheric carbon dioxide in a carbon sink through biological or physical processes.
Energy information Administration / Voluntary Reporting of Greenhouse Gases 2003
X11I
-------
t
s
-------
1. Voluntary Reporting 2003: An Overview
Introduction
The Energy Policy Act of 1992 (EPACT) directed the U.S.
Department of Energy (DOE), with the Energy Informa-
tion Administration (EIA) as the implementing agency,
to develop a program to document voluntary actions
that reduce emissions of greenhouse gases or remove
greenhouse gases from the atmosphere (see box on page
2}.1 DOE's Office of Policy and International Affairs
developed the Guidelines to the Voluntary Reporting of
Greenhouse Gases Program2 in consultation with Hie
U.S. Environmental Protection Agency (EPA) and other
Federal agencies, as well as through a public comment
process. In addition to providing recognition for entities
that reduce greenhouse gas emissions or sequester car-
bon voluntarily, the program serves to identify innova-
tive and effective ways of reducing emissions.
This report presents information on the tenth reporting
cycle of the Voluntary Reporting Program, including
reported information on emissions, emission reduc-
tions, and carbon sequestration activities through 2003.
The report is divided into eight chapters. This chapter
provides an overview of participation in the Voluntary
Reporting Program, a perspective on the composition of
activities reported, and a review of some key issues in
interpreting and evaluating achievements associated
with reported emission mitigation initiatives.
Chapters 2 through 6 provide a more detailed review of
project-level emission reduction initiatives reported to
the Program. Chapter 2 examines projects in the electric-
ity sector that reduce carbon dioxide emissions through
thermal efficiency improvements or switching to lower
emitting fossil fuels. Chapter 3 considers improvements
in end-use efficiency and fuel switching in the residen-
tial, commercial, industrial, and transportation sectors.
Activities to improve or expand carbon sinks throxigh
such activities as reforestation, afforestation, and forest
preservation are the subject of Chapter 4. Emission
reduction initiatives associated with methane and
halogenated substances are examined in Chapters 5 and
6, respectively.
Chapter 7 reviews emissions reports from participants
who provided data on aggregate entity emissions,
Chapter 8 summarizes information on emission reduc-
tions and carbon sequestration projects reported in brief
on the short form (Form EIA-1605EZ). Appendixes
(available on web site ivmv.eia.doe.gOV/ow.f/16G5/Drrpt)
provide information on the development and structure
of the data collection instrument, a discussion of issues
in the interpretation of .the data, and tabular summaries
of the participating reporters and the information they
reported.
The reports submitted to EIA are compiled into a data-
base that can be obtained on CD-ROM by contacting the
Voluntary Reporting of Greenhouse Gases Program
Communications Center at 1-800-803-5182 or down-
loaded from EIA's web site at www.eia.doe.gov/oiaf/16Q5/
databa.ies.html
Benefits of the Voluntary
Reporting Program
The Voluntary Reporting Program is unique among the
many voluntary programs initiated during the early
1990s in its diversity of project types, participation, and
approaches. The Voluntary Reporting Program's data-
base provides abundant examples of the types of con-
crete actions that organizations can undertake to reduce
greenhouse gas emissions. Some of the most important
societal benefits of the Voluntary Reporting Program
are:'5
•The program has served to teach staff at many of the
largest corporations in the United States how to esti-
mate greenhouse gas emissions and has educated
them on a range of possible measures to limit
emissions.
1Title XVI of the Energy Policy Act, Public Law 102-486 (October 24, 1992), in Section 16t!5(a) called for an annual report on national
aggregate emissions of greenhouse gases. iETA bus issued the report—Emissions of Greenhouse Gases in the United States—every year since
199.7. Section 1605(b) called for the establishment of & database of annual emissions and reductions of emissions reported on a voluntary
basis.
zSee U.S. Department of Energy, General Guidelines to the Voluntary Reporting of Greenhouse. Gases Program, and, $eclor-$ptciflc Issue* And
Reporting Methodologies Supporting the General Guidelines for Ihe Voluntary Reporting afGrtativntse Gases (Washington, DC 1994), web site
www.eia .doe.gov/oiaf/ 1605/guidelns.htmI.
•'Testimony of Jay Hakes, former ELA Administrator, on March 30,2000, before the Senate Committee on Energy and Natural Resources
on Senate Bills S. 882 and S. 1.776 and their potential impacts on EIA's Programs. The fail text of the testimony is available on EIA's web site
at wwrvxria.dac.gov/neic/speeches/hrtesi3-30-00/testiinony3.htm.
Energy information Administration / Voluntary Reporting of Greenhouse Gases 2003
-------
•The program has helped to provide concrete evi-
dence for the evaluation of activities reported to the
many government voluntary programs launched
since 1993.
•Reporters have been able to learn about innovative
emission reduction activities from the experiences of
their peers.
•The program has created a "test" database of
approaches to emission reductions that can be used
to evaluate future policy instruments aimed at limit-
ing emissions.
•The program has helped to illuminate many of the
poorly appreciated emissions accounting issues Sliat
must be addressed in designing any future
approaches to emission limitations.
Who Reported?
Reports for the 2003 date year were received from 234
participants in 27 different industries or services
(defined by the two-digit Standard Industrial Classifica-
tion code), a decrease from the 29 different industries
represented among 2002 reporters. In comparison,
reports for the 1994 data year—the first year of the pro-
gram—were received from 108 participants in 9 differ-
ent indu srries or services (Table 1). .
In the early years of the program, reporting was domi-
nated by the electric power sector. In the first reporting
year (data year 1994), the 95 submissions from electric
power producers represented 88 percent of the 108
reports received (Figure 1). Since then, the program has
seen an influx of new participants from outside the
: The Energy Policy Act of 1 992, Sections: 1605(b) and (c)x x ::x x x : : x : x : :
(b) Voluntary Reporting.— : ::::.: :::::.: : : : x-x-x .-. x
i :-:•:•:-•••-.• •:•.-: :-: :•••:• •:•:-.-: :•:-:•:•••:•.-.-: :-:-: :•'•:•:•.-: : .-: : •-••:•••.•:•.-. : :•• :•••••:-.•: :-.-: :-
:::::•: :f8:mbnihsafter:thedatebf -the-enacttnentb£:th'is •: :•:•
: •:• : '•: •:• .'• Act, jhe Secretary' shall^after opportunity. : for X:;
• • • -public comment; issue -guidelines for- the vouin-. .
:-.- :-:•:•:•' : tary collection and reporting.bf information on
i: :-x-x-x : sources of greenhouse : gases. Such -.guidelines'.-: :•:-:
ix-x-x-x : shall establish procedures for: the accurate vol-x : x
: x ::•::•: : uhtary-r:e'pbrrLhg:bf .infbrmatibn-on-i-H : : : •:.-::.: :••-:•:
!. .- • •.• • •.-.•.•.-. ,' .- -.'.•.-.•.-. .- -.-.- • • -.-, .-.-,-. -• •.'.•.•.'.-.•. .• -.'.- -.•.-,-, .-,-.'-• -.'.-.-. .-.-.
: .- • •.-.-.•,•-•.- -• • -.- •.-.•.'.- . .- •.•--.•.•. .-. . .-.•.'.•.• . .- •.•.-.-.•.•.-. • . - '.',-. . .-. .•
:x.;x-x-:-.-:(A):-^eenThpi^:gas.awssiptis:r^;:X-x::-.;:. ;X.: •'•'•:•.•:. x.:.
':• •::•.•:.-: :-:
{•-". ,•.--'-' ' *.'
!•;•'•' '•'•' !• ^-
j: :-•-:•:•'-:-. : .
i ,•- .• •-'.' • •.•
!•:•:• •: :-:•:•:-:
! '-• • '.•-•. .-.-.
•:; xO): for the ba«>Jlne. period of. .1987;: through': : •:••:
'.•'•'.• •.-.-. srtt^ tifl * - t? carbon: Capture '••: and: :: replacement, : arid x x x
x. ::povv-ei: plant heat :rate. improvement; :x :V: x> x :
!: :: : :::: x:(C) ^reductions:: ir^RgreenhbuseRjjas ReinissibniS :x-x-:
-.- -.-.•.;. .-. . -achieved- as-a result of — :•. : . •• •-• • • •• • • •• • •••••:•.
••::-.•:..: . •' : :(i}.- voluntary .reductions;. : :•••: : •::•.:..•:• :•:-.-::
•:•::-.-: :-.- : :(ii): plant bi- facility clbsihgs; and-: :•:•::-.: :-.-: .-••:•:•:
I :• x:: ::.:x:.:: :: :'(iii) State ibr Federal requii'emehts;:ahd' :: -x:: : ::: :
.-.-.•.-. (D):an aggregate calculanon of -greenhouse ;a's-
::x :•-:.-: : .'•:'••'• ^missions by eadi-repofting-entitv,-'- :• •: • : :
•: x x x Such gxiidelines shall: also > establish procedvi :es
:•::-.-:.. for taking into account the 'differential radiat ve •
•:•:-.-: :•: -activity-: and:-: -atmospheric--, lifetirries-: bf :e<:ch
• •: :-:-: :-'-:-greenhduse gas:-'-:-:-.-: : :-•-:-.-"-:•.-:-: :•:-'•:-.• •:-: :•:-: :•:•'•: •:•:• •
: :.::•:••: tratbr • of 'the ; Energy : Iiif ormatibn: : 'Admiiiistra- .
.'•:'•' •'• •:••:. .tibn-x shall'x develop :• forms x> for X; voluntary;:
•'•:• •.-.-.-. .- reporting -under, the: .guidelines .established
:;:. :.::'::::• under :'paragTap'h:::(J),x and-: shall; make:. -such::
:: : ::x x:f6rms::ayaUable:to:entities::\vlsWng:tb:repbrt;
•: -.-: :•: :• -such ihforhiati6n:-Persbhs reporting uiider. this:-
-.•:•.-. : x subsection: shall: xeriify : -the : accuracy-: of: :the:
.-. • •.• -.'.--itxforrjnatibn repbrtect' •-'-'•-•'•-.•. . .- - '-•-- -.•.•-•. . -• • •-• ••• ••-.
; x :Xf3):CONFIDBKmALI1T.--Trade;secret:ahd:com-::
••-..- • m'ercial or financial .information that is-iprivi---
x:--::..-: .leged or Vcbnfidential: :shall: be- protected -as .
:x: ; : x o provided': in Section 552(b)(4):bf:.title:5,:United. :
x-:-.-.-: .-. : States-CcVde":-x-:-x x-'-i-x-:-:-.-: :-'---:-x-x-:-.-. : :-x :-x-x.:-xJ
x ':: : ^ESTABLISHMENT: :OF : DATA: xBASE^^-Nbt :
.•-•:-. •.-.-.•. .later than.18.rtibnths after. -the date of the enact-..
•:•: • ::;x: ment :bf :this- Act,': the: Secretary: :through :the>
: Administrator of . :the Bnergv Information
•x-x-x : '-Administration shall-establish a data basexbm-:
:..::: prised:: of information xvoluritarilv: ^reported.
.- . .-. . .-. under this subsectibh. Such information mav be
•:•:• •:.-.: : used-:by. :the:-repbftih^-: entity: to: demonstrate:
•:-:.-. : : :-achieved reductibns:6f gteenh'buse:gaseSi: •::•:••
••:•' : In carrying out this section, the Secretary shall con- :
:'•: :• -:sult, -as: appropriate, -ivi'lrthe: Administrator of :'h<5-
;x;x;Envi[-onmental.Protecrttoh'Agericy;x:;xx.^^
0
t
Energy Information Administration /Voluntary Reporting of Greenhouse Gases 2003
-------
Table 1. Forms Filed by Standard Industrial Classification, Data Years 1994-2003
{Numtjer of Reports)
t
SIC
Code*
01
03
i t «
12
13
1-1
20
22
23
24
25
26
27
28
29.
-'\
30,
32
33
34'
'35
3G
37
38
39
40
48
49
57
63
65
67
•72
80
82
86
87
83
89
91
97
99
i
i Description
Agricultural Production; Crops '.
Forestry
Coal Mining ,
Oil snc! Gas Extraction —
Nonmetallic Minerals, Except Fuels
Food and Kindred Products
Textile Mils Products
Apparer and Other Vextiie Products
Lumber and Wood Products
Furniture and Fixtures
Paper and Aliicd Products
Printing and Publishing
Chemicals and Allied Products
Petroleum Refining and Other Related
industries
Rubber and Miscellaneous Piastic Products . .
Stone, Clay, Glass, and Concrete Products . .
Primary Metals Industries
Fabricated Metal Products, Except Machinery
and Transportation Equipment
industrial and Commercial Equipment and
Componants
Electronic and Other Electrical Equipment . . .
Transportation Equipment
instruments anci Reialed Products
Miscellaneous Manufacturing industries
Railroad Transportation
Communications . . . .'
Ei«ctric, Gas, and Sanitary Services
Furniture and Moma Furnishings Stores ...'..
insurance Carriers
Real Estate
Holding and Other Investment Offices
Persona! Services
Health Sarvioes
Educational Services
Membership Organizations . .•
Enqineerinq and Management Services
Private Households
Services Not Elsewhere Classified
Executive, Legislative, and General
National Security and Internationa) Affairs . . .
Nonciassifisalfl Establishments
Total Number of Reporters"
Number of 2-Digit SIC Codes Represented
Data Year
1994
0
1
1
0
0
0
0
0
0
0
0
0
1
0
0
0
2
0
0
1
1
0
0
0
98
0
0
0
0
0
0
1
0
0
2
0
0
0
0
108
9
,......,„*,.„,
1995
0
2
2
0
0
0
0
0
0
0
0
1
3
0
0
0
2
2
0
1'
1
0
1
0
0
123
0
0
1
0
0
0
2
0
0
1
0
0
0
0
142
13
1996
0
1
2
0
0
0
0
0
0
0
0
0
2
2
0
2
4
1
0
2
1
0
1
0
0
125
0
0
1
1
0
0
2
0
2
1
0
0
0
0
150
16
T
i 1997
0
1
1
0
0
G
0
' 0
0
0
0
1
3
3
0
4
4
1
0
4
2
0
0
0
0
129
0
0
1
1
0
0
2
1
2
1
1
0
0
0
162
18
1998 ] 1099 [ 200,5*9 \ 2901^ ] 2002^'f
1
3
4
0
1
1
0
0
0
0
0
0
6
8
0
12
5
4
0
4
3
2
2
0
. 0
138
2
0
1
1
0
1
0
1
2
1
1
1
0
0
207
24
0
3
4
1
1
2
1
0
0
0
1
1
5
8
0
13
5
2
0
4
5
0
2
0
1
135
1
0
1
1
0
0
2
1
1
1
3
2
0
0
207
27
0
1
4
1
0
6
5
1
1
1
1
1
11
7
2
7
5
2
1
9
6
1
1
0
0
151
1
0
1
1
1
0
0
1 •
0
1
2
2
1
0
236
31
1
0
6
1
0
4
11
1
1
1
0
0
9
6
2
5
11
1
1
9
7
1
1
0
. 0
145
0
0
1
1
1
0
0
0
1
1
1
2
0
0
232
• 27
0
1
7
1
0
4
12
2
0
1
0
0
11
6
2
5
11
1
1
8
•• 9
1
1
0
1
138
1
0
1
2
1
0
0
1
0
1
1
1
0
1
234e
29*
'2003
0
2
4
1
0
4
14
2
0
0
0
0
11
5
2
5
11
1
2
6
10
1
1
1
1
141
1
1
0
2
1
0
0
0
0
1
1
1
0
- 0
234
27
I
The Voluntary Reporting of Greenhouse Gases database was designed in 1S94-1995, when the Standard industrial Classification (SSC) system
was s;i!t in use.
Totals may be greater than the sum of reporters in each SIC code, because confidential reporters are excluded from the latter.
""includes 6 late repons for the 2002 data year. The 2003 total will also tie revised upward in next year's report with the inciuraon of due 2003
reports. As of February 22,2005. EIA had received 6 late 2003 reports, which are not included in this report's 2003 database.
(R) = Revised.
Source: Energy Information Administration, Forms EIA-1605 and EIA-1605EZ.
Energy Information Administration /Voluntary Reporting of Greenhouse Gases 2003
-------
electric power sector, representing a diverse set of
industries. In addition, several mergers and acquisitions
involving reporters to the program, have reduced Hie
number of reports received from electricity producers.
As a result, only 42 percent of the organizations report-
ing to the program for data year 2003 were from the elec-
tric power sector.
Although the number of reporters from other individual
industries remained relatively small, in many cases,
reports were received from key companies in those
other industries: for example. General Motors, Ford
Motor Company, DaimlerChtysler Corporation, Nissan
North America, Inc., and Toyota Motor North America,
Inc., in the automotive products industry; Noranda and
an operating division of Alcan in the metals industry; BP
America, Sunoco, Inc., and ChevronTexaco Corporation
in the petroleum industry; Johnson & Johnson and The
Dow Chemical Company in the chemicals industry;
Rolls Royce in the aerospace industry; Bristol-Myers
Squibb Company and Pfizer Pharmaceuticals, LLC, in
the Pharmaceuticals industry; and Advanced Micro
Devices, Inc., and IBM in the electronic equipment
industry. A complete listing of all 2003 reporters is pro-
vided in Appendix B, Table Bl.*
Figure 1, Electric Power Sector and Other Entities
Submitting Reports to the Voluntary
Reporting of Greenhouse Gases
Program, Data Years 1994-2003
Number of Entities
300
250 -!:
200
199-1
1997
2000
2003
(R) = revised.
Notes: Betiric power sector includes eiectric utilities and
independent power producers;. 2002 data year inducies 6 kite
reports that were not included in the totals presented in last
year's annual report and database.
Source: Energy Information Administration, Forms EiA-1605
and EIA-16Q5EZ.
Most reporters indicated that their projects were affili-
ated with one or more government-sponsored voluntary
programs. Of the 2,188 projects reported for 2003,1,066
were affiliated with the DOE's Climate Challenge Pro-
gram, 381 with the EPA's Landfill Methane Outreach
Program, 94 with the various DOE/EPA ENERGY
STAR5 programs (including ENERGY STAR Buildings,
ENERGY STAR Computers, and ENERGY STAR Tram-
formers), 50 with the EPA's Climate Wise Recognition
Program, 39 with the U.S. Initiative on joint Implemen-
tation, 23 with the EPA's Natural Gas STAR Program, 16
with the EPA's Green Lights Program, 11 with the EPA's
Sulfur Hexafluoride Emissions Reduction Partnership, 9
with the EPA's WasteWise, 7 with DOE's Compressed
Air Challenge, and 6 with die EPA's Coalbed Methane
Outreach Program. Other voluntary programs cited
included the EPA's Voluntary Aluminum Industrial
Partnership and DOE's Motor Challenge, Rebuild
America, and Cool Communities Program. Not all par-
ticipants in the various voluntary programs provided
information to the Voluntary Reporting Program.
What Was Reported?
The Voluntary Reporting Program permits three distinct
types of reporting:
•Project-level reporting, defined as the reporting on
the emission reductions or carbon sequestration
achieved as a result of a specific action or group of
actions
•Entity-level reporting, defined as the reporting on
emissions, emission reductions, and carbon seques-
tration for of an entire organization, usually defined
as a corporation
•Commitments to take action to reduce emissions in
the future.
Of the 234 reports received for 2003, 200 (85 percent)
were submitted on Form EIA-1605 (the long form)
(Figure 2). The long form allows reporters to create an
in-depth, multi-year, public record of emission reduc-
tion efforts for an entire organization and/or at the pro-
ject level, including information on activities conducted
outside the United States and commitments to reduce
future greenhouse gas emissions. The remaining reports
were submitted on Form EIA-1605EZ (the short form),
which allows reporters only to provide brief summaries
of greenhouse gas projects for the current reporting year
and does not allow the reporting of activities outside the
United States or of future emission reduction commit-
ments. The proportion of reporters using the short form
9
4Appendixes for this report will be available in the near future from web site www.eia.doe.gov/oiaf/1605/vrfpt.
5ENERGY STAR is a joint program of the U.S. Department of Energy and the U.S. Environmental Protection Agency. See web site
wrvvw.energystar.gov.
4
Energy Information Administration /Voluntary Reporting of Greenhouse Gases 2003
-------
t
I
has declined front 32 percent in the first year of the pro-
gram (1994 data year) to 15 percent in the 2003 data
reporting cycle, EIA believes that reporters are choosing
the long form in order to document their e?nission
reductions more thoroughly. Also, for the same reason,
Figure 2. Number of Reports Received by Form
Type, Data Years 1994-2003
Number of Entities
300 •
250-
200-
1SO-
100-
SO -
Blong Form (1605) 236 232 234 234
2Q7 207
1994
1997
2000
2003
(R) =: revised.
Notes: Electric power sector includes electric utilities and
independent power producers. 2002 data year includes 6 late
reports that were not inciiided in the totals presented i.i last
years annual report and database.
Source: Energy information Administration, Forma EiA-1605
and eiA-16D5EZ.
several voluntary programs (such as the Landfill Meth-
ane Outreach Program) encourage participants to use
the long form.
For the 2003 reporting year, 177 program participants
(76 percent of the total) reported project-level reduc-
tions, and 126 reported entity-level emissions and/or
red 11 ctions: 70 reported at both the entity and project lev-
els, 107 submitted only project-level reports, and 57
reported only entity-level information. In addition, 89
reporters provided information on their commitments
to reduce emissions or increase sequestration in the
future, including one program participant that reported
only commitments without reporting on past activities.
Sources of greenhouse gas emissions and emission
reductions reported to die Voluntary Reporting Pro-
gram are characterized as direct, indirect, sequestration,
or unspecified. The unspecified category includes all
reductions and sequestration reported on the short form
because the short form does not allow a reporting entity
to specify whether an emission reduction is direct or
indirect. Because of concern about possible double
counting of emissions and reductions, particularly
between direct and indirect emissions, EIA does not
aggregate reported emissions or emission reductions
across these four categories.
Project Level
Reporters provided information on a total of 2,188 pro-
jects for 2003 (Table 2). Most (1,969 or 90 percent) were
Table 2. Distribution of Projects by Reduction Objective, Project Type, and Form Type, Data Year 2003
| Number of Projects
Reduction Objective and Project Type
Reducing Carbon Dioxide Emissions
Electricity Generation, Transmission, and Distribution
Cogeneration snc! Waste Heat Recovery
Energy End Use
Transportation and Offroad Vehicles
Reducing Methane and Nitrous Oxide emissions
Wasta Treatment snct Disposal (Methane)
Aoricultiire (Methane and Nitrous Oxide)
Qii and Natural Gas Systems and Coal Mining (MeShane'i
Carbon Sequestration
Hslogenatad Substances
Other Emission Reduction Projects
Entity-Level Reporting Oniy (No Projects}
Commitment Reporting Only (No Projects or Entity-Level Data)
Total
j Long ] Short j
! Form I Form |
925 136
464 50
2.1 0
374 76
66 10
470 44
^425 42
4 0
41 2
446 14
43 1
85 24
NA NA
NA NA
1,969 219
Total
1,061
514
21
450
76
514
467
. 4
43
460
44
109
NA
NA
2,188
Number of Reporters
Long
Form
93
68
13
67
35
71
54
3
22
51
29
46
57
0
200
Short ]
Form j Total
29 122
23 91
0 13
20 87
6 41
6 77
5 59
0 3
2 24
12 63
1 30
10 56
NA 57
NA 0
34 234
NA = not applies bte.
Notes: The tola! number of reporters is smaller than the sum of the number of reporters for each project type, because most reporters provided
information on more than one project. Table excludes projects submitted in confidential reports.
Source: Energy Information Administration, Forms EIA-1605 and EIA-1605EZ.
Energy Information Administration /Voluntary Reporting of Greenhouse Gases 2003
-------
reported on the long form. The total number of projects
reported increased by 133, or 6 percent, compared with
the previous reporting cycle,6 Most of the 2,188 projects
reported for 2003 were also among the 2,055 projects
reported for 2002, because they continued to yield emis-
sion reductions in 20Q3, Projects often yield emission
reductions over an extended period; for example, an
availability improvement project at a nuclear power
plant typically involves the adoption of new mainte-
nance and refueling programs that, once in place, are
followed over a multi-year period. Likewise, the refores-
tation of an area in one year can result in the sequestra-
tion of carbon in many subsequent years, even if no
additional trees are planted. Reporters continue to
report the annual emission reductions and carbon
sequestration achieved by such long-lived projects on a
yearly basis.
The principal objective of the majority of projects (1,061
or 48 percent) reported for 2003 was to reduce carbon
dioxide emissions (Table 2). Most reduced carbon diox-
ide either by reducing fossil fuel consumption or by
switching to lower emitting sources of energy. Many
also achieved small reductions in emissions of other
gases. Other project objectives cited included reducing
methane and nitrous oxide emissions (514 or 23 percent),
increasing carbon sequestration (460 or 21 percent}, and
reducing emissions of halogenated substances (44 or 2
percent). Projects that also primarily reduced carbon
dioxide emissions included the 109 "other" emission
reduction projects, most of which involved either the
reuse of fly ash as a cement substitute in concrete or the
recycling of waste materials.
Most projects involve actions within the United States;
however, some are conducted in foreign countries,
designed to test various concepts of joint, implementa-
tion with other nations (Table 3). Of the 94 foreign pro-
jects reported for 2003, 60 represented shares in two
forestry programs in Belize and Malaysia sponsored by
the electric power industry.
Total project-level emission reductions reported
included 268.3 million metric tons carbon dioxide equiv-
alent in direct reductions, 81.1 million metric tons car-
bon dioxide equivalent in indirect reductions, 7.7
million metric tons carbon dioxide equivalent in carbon.
sequestration, and 16.4 million metric: tons carbon diox-
ide equivalent in unspecified reductions (Table 4). EIA
uses global warming potentials (GWPs) from the Third
Assessment Report of the Intergovernmental Panel on
Climate Change (IPCC) to calculate carbon dioxide
equivalents (see box on page 7).
Projects whose reduction objective was to red vice carbon
dioxide emissions reported direct reductions of 1.93.1
million metric tons carbon dioxide equivalent, indirect
reductions of 39.0 million metric tons carbon dioxide
equivalent, and unspecified reductions of 12.4 million
metric tons carbon dioxide equivalent. The vast majority
of the reported emission reductions were carbon dioxide
reductions.
A variety of efforts to reduce emissions of gases with
high GWPs were also reported, including 514 projects
with the objective of reducing methane and nitrous
oxide emissions. These projects focused on waste
Table 3. Geographic Scope of Reports Received and Location of Emission Reduction Projects,
Data Years 1994-2003
Year
1994
1995
19S6
1937
1998
1999
2000
2001
2003
Reports Received i
U.S.
Long Form
65
82
83
90
118
12S
153
155
156
157
Only
Short Form
34
40
41
40
47
39
36
32
35
34
! Both U.S.
Foreign ! and
Only i Foreign
2
2
1
1
1
4
1
1
3
2
4
16
24
31
40
37
45
43
39 .
40
Total"
108
142
150
162
207
207
236
232
234
234
Projects Reported**
I U.S. Only I
|. , |
i Long Form j Short Form i
.500
760
828
1,017
1,212
1,397
1,761
1.5S6
1.708
1.873
125
164
179
201
252
237
229
210
253
219
Foreign
Only
o
36
33
70
35
37
93
91
94
96
Total*
634
960
1,040
1,288
1,543
1,721
2,089
1,897
2,055
2,188
aTolals are greater than the sum of the components because the latter exclude information from confidential reports.
"Excludes projects submitted in confidential reports.
(R) = revised.
Noses: The number of reports received for 2002 was reviser; to reflect the receipt of 6 reports after the finaiization of the Public Use Database for
last year's annual report. The number of projects reportec for 2002 has also tiesn revised to reflect the projects Inducted in those reports.
Source: Energy Information Administration, Forms EIA-1605 arid EIA-1605EZ.
6The total number of projects reported for 2002 has increased from 2,027 to 2,055 with the receipt of 6 add i Lional reports after the dii tabase
used to prepare the annual report and Public Use Database for 2002 was finalized. Set note to Table 3.
ff
I
6
Energy information Administration / Voluntary Reporting of Greenhouse Cases 2003
-------
management systems, animal husbandry operations, oil
and gas systems/ or coal mines. Reported net direct
emission reductions from these projects totaled 68,6 mil-
lion metric tons carbon dioxide equivalent, which repre-
sents 26 percent of the total direct reductions reported
for 2003. The estimate of net reductions includes 76,6
million metric tons carbon dioxide equivalent in direct
reductions of methane emissions along with 8.0 million
metric tons carbon dioxide equivalent in carbon dioxide
and nitrous oxide emissions increases. Indirect reduc-
tions reported for projects that reduced methane ami
nitrous oxide emissions totaled 39.8 million metric tons
carbon dioxide equivalent. Unspecified reductions
reported on the short form totaled 3.9 million metric
torus carbon dioxide equivalent.
Almost all of the 460 carbon sequestration projects
reported on either the long form or the short form
increased the amount of carbon stored in sinks through
various forestry measures, including afforestation,
reforestation, urban forestry, forest preservation, and
modified forest management techniques. These activi-
ties accounted for 21 percent of the projects reported for
2003; however, 284 of the reported carbon sequestration
projects represented shares in 10 projects conducted by
the UtiliTree Carbon Company, which were reported by
28 participating electric xitilities. Carbon sequestration
projects reported on the long form for 2003 totaled 7.7
million metric tons carbon dioxide equivalent in carbon
sequestration achieved.
Projects with the objective of reducing emissions of
halogenated substances—including perfluorocarbons
(PFCs), sulfur hexafluoride (SF6), and hydrofluoro-
carbons (HFCs)—reported direct reductions of 6.1 mil-
lion metric tons carbon dioxide equivalent for 2003,
which included 3,5 million metric tons carbon dioxide
equivalent of PFC emissions and 2.6 million metric tons
carbon dioxide equivalent of SF6 emissions, as well as
indirect reductions of 2.2 million metric tons carbon
dioxide equivalent, me vast majority of which was SF6.
Global Warming Potentials Used to Calculate Carbon Dioxide Equivalent Emissions
Global warming potentials (GWPs) are used to com- The UNFCCC Guidelines on Reporting and Review,
pare the abilities of different greenhouse gases to trap adopted before the publication of the Third Assess-
neat in ftie atmosphere. GWPs ,ire bused cm the r.sdia- ment Report, require emission estimates to be based on
live efficiency (heat-absorbing abili ly) of each gas rela- the GWPs in the IPCC Second Assessment Report. This
tive to that of carbon dioxide (CO2), as well as the decay will probably continue in the short term, until the
rate of each gas (the amount removed from the atmo- UNFCCC" reporting rules are changed.
sphere over a given number of years) relative to that of .
CO,. The GWP provides a construct for converting 100-Year GWP Estimates from the IPCC's Third
emissions of various gases into a common measure, <2001> Assessment Reports
which allows climate analysts to aggregate the radia-
tive impacts of various greenhoiise gases into a uni-
form measure denominated in carbon, or carbon
dioxide equivalents. The table at the right presents the
G WP& published in the Third Assessment Report of the
Intergovernmental Panel on Climate Change {IPCQ.
In analyzing greenhouse gas emissions and emission
reductions reported to the Voluntary Reporting of
Greenhouse Cases Program, EIA attempts to employ
the most current data sources. For lhat reason, and
because the IPCC is generally considered the authorita-
tive source for GWPs, EiA uses the IPCC's mostrecent
GWP values, from the Third Assessment "Report, to
convert reported greenhouse gas emissions to the car-
bon dioxide equivalent units used in this report. It is
important to point out, however, that countries report-
ing to the United Nations. Framework Convention on
Climate Change (UNFCCC), including the United
States, have been compiling estimates based on the
GWPs from the IPCC's Second Assessment Report.
^Intergovernmental Panel or. Climate Change. Climatf Citatige 2Wi
Cambridge University Pro*, 2001).
Gas
Methane
Nitrous Oxide-. ,
HFC-23
HFC-32
HFC-125
HFC-1348
HFC-143a
HFC-152a
HFG-227ea . .
HFC-236fa
PerfiuoroiTethane {CF4). . . .
Perfiuoroetriane {C2F6)
PerfsKoropropane (C3F"X}
Sulfur HexsfluGfide (SF.)
The Scientific Basis. Summary for
2001
IPCC GWP«
23
286
12,000
550
3,400
1,300
4,300
120
3,500
9,400
. . . , 5,700 i
11,900
11,900'
22.200
Mkytnakd-s (Cambridge, UK:
'
Energy information Administration / Voluntary Reporting of Greenhouse Gases 2003
-------
Table 4. Summary of Reported Project-Level Emission Reductions and Carbon Sequestration
by Reduction Objective and Gas, Data Year 2003
^Metric Tons Carbor> Dioxide Ecjuivaient)
Gas
Reductions by Project Objective
Reduce
Carbon Dioxide
Emissions
Reduce
Methane and
Nitrous Oxide
Emissions
increase
Carbon
Sequestration
Reduce
Emissions of
Kaiogenated
Substances
1
1
Total
Reductions
Direct
Carbon Dioxide
Methane
Nitrous Oxide,.
HFCs..
PFCs
Total Direct..
Indirect
Carbon Dioxids?,
Methane
Nitrous Oxide...
HFCs
PFCs
Total Indirect
Sequestration
Carbon Dioxide,
Methane
Nitrous Oxide..,
HFCs
PFCs
193,113.253
347,122
32.778
25,536
193,518,689
38,461,582
264,331
66.049
236,823
39,018,835
-7,975,336a
76,645,627
-23,899a
68,646,392
16,977,303
22,737,072
121,374
39,835,749
1,932
1.932
3,524,969
2,611.910
6,136,879
38,702
567
2,184,750
2,224,018
7,730,969
185,139,849
76,992.749
8,879
0
3,550,504
2,611,310
263,303,892
55,438,884
23,001,453
177,423
38,702
237,380
2,184,750
81,078,602
7,730,969
Total Sequestration.
Unspecified15
Carbon Dioxide
Methane
Nitrous Oxide
HFCs
PFCs
12,427,175
21,456
39,057
3,813,915
7,730,969
28,576
7,730,969
12,494,809
3,835,371
1.910 — — — 1,910
SF5 22,154 ----- 6,495 28,649
Tptamnspecified ... .1MT.?.'.??.4. M?.?.'.?.?.?. ?!z5!£ ?."4?.5 .!? £60,738
"Negative reductions represent increases in emissions.
bUnspecified emission reductions represent quantities reported on the short form (Form EIA-1603EZ}, 'where reporters are not
asked lo specify whether the emission reduction ot sequestration is direct or indirect,
Noies: CFCs, HCFCs, and methyl chloroform are not included in ihe totals because of the uncertainty associated with estimates of
net giobal warming potential for these gases. Their direct warming effects {radiative forcing) are offset by indirect cooling effects
(destruction of stratospheric ozone, another greenhouse gas). Direct, indirect, and unspecified emission reductions and sequestra-
tion have not been totaled to avoid double counting of reductions or sequestration that have been reported by more Irian one entity.
Source: Energy Information Administration, Forms EIA-16Q5 and EIA-16Q5EZ.
f
Energy Information Administration / Voluntary Reporting of Greenhouse Gases 2003
-------
t
Total direct emission reductions reported for 2003
increased by 1 percent over the reductions reported for
2002, to 268.3 million metric tons carbon dioxide equ iva-
lent (Table 5), and have quadrupled since the first year of
the program (data year 1994). Reported direct reduc-
tions of carbon dioxide emission increased by 6,7 million
metric sons, while direct reductions of methane emis-
sions decreased by 3.1 million metric tons.
Indirect emission reductions reported for 2003, at 81 mil-
lion metric tons carbon dioxide equivalent, were 1.0 mil-
lion metric tons carbon dioxide equivalent (1.2 percent)
higher man those reported for 2002. Largely responsible
for the increase was a new reporter. Xenon Specialty
Gas, which reported indirect reductions of SF6 emissions
equal to 2.2 million metric tons carbon dioxide
equivalent.
Reported sequestration, after peaking at 12.5 million
metric tons carbon dioxide equivalent for 1998, has
fallen below 1.0 million metric tons carbon dioxide for
the past 5 years. This decline was caused by the decline
in, or nonrecurrence of, sequestration reported for sev-
eral large forest preservation projects. Also, American
Forests, which reported sequesfration for 164 reforesta-
tion projects for 2000, has not reported for subsequent
years. Unspecified reductions reported for 2003, which
include reductions and sequestration reported on the
short form, totaled 16.4 million metric tons carbon diox-
ide equivalent a decrease of 5.2 percent from 2002.
Project-Level Reference Cases
Beginning with the 2000 annual report, EIA began divid-
ing project-level data according to the reference case
employed, in calculating reported project-specific emis-
sion reductions. A "reference case" is an emissions or
sequestration level against which actual emissions are
compared to estimate emission reductions. In a "basic"
reference case, actual historical emissions (or sequestra-
tion) in a specific year, or an average of a range of years,
are used as the reference case. In a "modified" reference
case, an estimate is made of what emissions or seques-
tration would have been ir>. the absence of the project,
and that estimate serves as the reference case.
Of the projects reported for 2003 on Form EIA-1605, 95
percent xised modified reference cases (Table 6). A
modified reference case is generally preferred for pro-
ject-leve! analysis, because this approach attempts to
isolate the effect of the action taken by the reporter from
other factors that may have affected the reporter's emis-
sions sitice the action was taken. The use of basic refer-
ence cases for 2003 was greatest for projects that
reported reducing emissions of halogenated substances
(42 percent of those projects), because the techniques for
evaluating reductions for the projects are particularly
suited to the use of a basic reference case. Emissions are
determined using inventory management data, with
emissions of a particular substance being equal to the
amount purchased during the year to replace quantities
emitted. Annual reductions can be calculated by sub-
tracting the emissions in the years after emission abate-
ment measures have been instituted from the emissions
in. the year before the measures were instituted.
In terms of emission reductions and sequestration
reported for 2003,2,61 million metric tons carbon dioxide
equivalent in direct reductions {97 percent of total direct
reductions), 74.8 million metric tons carbon dioxide
equivalent in indirect reductions (92 percent of total
indirect reductions), and 7.8 million metric tons carbon
dioxide equivalent in sequestration (94 percent of total
sequestration) were reported as having been estimated
using modified reference cases (Table 7). The halo-
genated substance category was the only project cate-
gory for which a significant proportion (92 percent or 5.6
million metric tons carbon dioxide equivalent) of the
reported direct reductions was estimated using a basic
reference case.
Entity Level
Most of the 126 reporters providing entity-level infor-
mation included data on emissions as well as emission
reductions or sequestration. In addition, 9 reporters pro-
vided entity-level data or. emissions only, and 6 report-
ers provided entity-level data on emission reductions or
sequestration only.
Total entity-level direct emissions reported for 2003
were 888.8 million metric tons, representing a 0.1-
percent decrease from the direct emissions reported for
2002 (Table 8). Total entity-level indirect emissions
reported for 2003 were 6 percent lower than those
reported for 2002, at 1.04.7 million metric tons carbon
dioxide equivalent. Total direct emission reductions
reported at the entity level for 2003 (214.2 million metric
tons carbon dioxide equivalent) were 8 percent lower
than those reported for 2002 (231.6 million metric tons
carbon dioxide equivalent). For 2003,182.4 million met-
ric tons carbon dioxide equivalent (85 percent) of the
reported direct reductions were estimated using modi-
fied reference cases, and 31,8 million metric tons carbon
dioxide equivalent (15 percent) were estimated with
basic reference cases.
Reported entity-level indirect emission reductions for
2003 totaled 42.6 million metric tons carbon dioxide
equivalent, 19 percent higher than the total reported for
2002. Reported indirect reductions of 45.6 million metric
tons carbon dioxide equivalent calculated with modified
reference cases were offset by -3.2 million metric tons
carbon dioxide equivalent of indirect reductions (i,e., a
net increase in emissions) calculated with basic refer-
ence cases. Entity-level sequestration reported for 2003
Energy Information Administration / Voluntary Reporting of Greenhouse Gases 2003
-------
Table S. Summary of Reported Project-Level Emission Reductions and Carbon Sequestration by Gas,
Data Years 1994-2003
(Metric Tons Carbon Dioxide Equivalent)
I I
Year [ Carbon Dioxide j
Direct
1994
1995
19S6 ....
199?
1998 ....
1999
2000 ....
2001
2002. . .
2003
Indirect
1994 ....
1995
1996 ....
1997
1938 ....
1999
201X1 ....
2001 ....
2002i*'. . .
2003
Sequestration
1994 ....
1995 ....
1996 ....
1997 ....
19S8 ....
1999 ....
2000 ....
2001 ....
2002<*!. . .
2003 ....
Unspecified*
1994 ....
1995 ....
1996
1997 ....
1998
1999
2000 ....
2001
20025R'. .
. 2003 ....
58,'1 13,709
85,419,479
77,601,577
82,269,837
112,038,605
115,366,719
144,096,233
159.129,312
178,393,155
185,139,849
2,694,405
27,063,660
26,207,705
23,848,951
27,968,865
37,233,635
41,276.444
43,2;35,932
55,347,688
55,438,834
746,545
1,190,754
8,676,591
9,849,607
12.490,927
9,623,599
9,011,117
7.936,823
7,295,516
7,730,969
3,721,04?
4.959,366
4,4 36,523
6,688,175
16.499,427
9,607,428
9,125,506
10.855,046
12,820,322
12,494,809
i • • " •• •• i
Methane J_ Nitrous Oxide !
576,808
194,350
9,411.042
8,705,355
31,720,732
35,9§4,G30
61.945,794
61,569.042
80,073,702
76.S92J4S
2.360,734
24,777,246
26,512,1 14
11.630,239
15,152,664
19,027,769
20,641,700
23,216,19?
24,555,786
23.001,453
_
—
....
....
__
—
—
....
__
—
864,022
1,162,752
1,232,174
1.825,383
2,918,818
3,273,878
3.127,762
3,360,348
4,295,112
3,835.371
339,485
-438,673
•423,599
86,294
109,560
62,111
114.198
711,633
-4.713
8,873
2,243
630,358
616,075
102.639
105,598
270,531
115,639
154,566
164,214
177,423
—
_
....
—
— ,
....
....
—
—
....
—
—
....
.....
—
_.
....
—
_
MFCs | PPCs [
-29 3,199,648
-43 ' 2,962,416
1S.193 3.345,811
-42 3,318,600
-1,738 3,504,380
-1,738 3,425,480
3,233,612
— 3.606,813
— 3,562,893
3,550,504
— .. —
_ __
....
- , 3,631
— 6,068
— 5,855
35,459
— 34,31^
47 36,705
33,702 237,390
*
_ __
— —
....
— —
— —
.....
—
— —
_ _
....
— —
_ _
123.049
....
— —
4,046
— 130,930
— 1910
Sulfur i
Hexafluorkte i Total
. 83,579
186,382
-69,985
516,732
624,786
595,379
1,407,347
2,475,144
3,043,682
2,611,910
—
7,653
....
81
81
31
81
91
81
2.184,750
—
—
1
....
—
—
....
—
—
..„
__
—
.....
....
4,783'
20,744
20,261
10,201
28.649
62,613,201
88,323,910
89.880,033
94,896,824
147,996,326
155,441,981
210,797,186
247,491,944
265,068,719
268,303,892
5,357,381
52,478,917
53,435,898
37,585,541
43,233,274
56,537,872
62,069,372
71,661,094
80,104,520
81,078,602
746,545
1,190,764
8,676,561
9,849.807
12,490,927
9,623,599
9,011,117
7.956,823
7,296,516
7,730,969
4,285,069
6,112,117
5,668,697
8,636,607
19.418,245
12,886,089
12,274,012
14,839,701
17,256,565
16,360,738
(R) - revised.
"Unspecified emission reductions represent quantities reported on !hs short form (Form E1A-1605EZ), which does not distinguish between direct
and indirect emission reductions or sequestration.
Notes: Reductions of OFCs, HCFCs, and methyl chloroform are not Included in ihfi totals because of the uncertainty associated with estimates of
their net global warming potential. Their direct warming effects (positive radiat-vo forcing) are offset by indirect cooling effects (destruction of strato-
spheric ozone, another greenhouse gas). Totals may not equal sun of components
-------
totaled 6.9 million metric tons carbon dioxide equiva-
lent, 1 percent more than was reported for 2002.
Commitments '
For 2003, formal commitments to reduce emissions, take
specific action to reduce emissions, or provide financial
support for activities related to greenhouse gas reduc-
tions were reported by 89 entities,7 nearly one-third (30
percent) of which were electricity generators participat-
ing in FJOE's Climate Challenge Program (Figure 3).
Other voluntary programs represented among the com-
mitments reported for 2003 included the EPA's Climate
Wise, the EPA's Voluntary Aluminum Industrial Pro-
gram, the U.S. Initiative on joint Implementation, the
EPA's Green Lights Program, the EPA's Landfill Meth-
ane Outreach Program, DOE's Motor Challenge, the
EPA's Sulfur Hexafluoride Emissions Reduction Part-
nership for Electric Power Systems, DOE's Cool Com-
munities Program, DOE/EPA ENERGY STAR
Buildings, EPA's Natural Gas Star, and DOE's Renew-
able Energy Commercialization Program.8
There are three forms of future commitment in the
Voluntary Rt'porting Program: entity commitments.,
financial commitments, and project commitments.
Entity and project commitments roughly parallel the
entity and project aspects of emissions reporting: an
entity commitment is a commitment to reduce the emis-
sions of an entire organization; a project commitment is
a commitment to take a particular action that will have
the effect of reducing ttie reporter's emissions through a
specific project. A financial commitment is a pledge to
spend a particular sum of money on activities related to
emission reductions, without a specific promise as to the
emissions consequences of the expenditure.
For 2003, 55 firms made 60 specific promises to reduce,
avoid, or sequester future emissions at the entity level.
Some of those entity-level commitments were to reduce
emissions below a specific, baseline, others to limit ttie
growth of emissions per unit of output, and others to
limit emissions by a specific amount relative to a base-
line emissions growth trend. In their reports for 2003,
companies reported commitments to reduce entity-level
emissions by a total of 86 million metric tons carbon
dioxide equivalent, including 14 commitments, repre-
senting 68 million metric tons carbon dioxide equivalent
or 79 percent of the emission reductions promised, that
Table 6. Number of Projects Reported on Form EIA-16Q5 by Reduction Objective, Project Type,
and Reference Case Empioyed, Data Year 2003
(Nurnbef of Projects)
Nu
Reduction Objective and Project Type Pi
Reducing Carbon Dioxide Emissions.
Electricity Generation, Transmission, at
Cogeneralion and Waste Heat Recovet
' Fnergy Fnd Use
Transportation and Offroad Vehicles . .
Reducing Methane and Nitrous Oxide
Waste Treatment and Disposal (Methai
Agriculture (Methane and Nitrous Oxid<
Oil and Natural Gas Systems and Coal
Carbon Sequestration ,.,..,.... . .
Halogenated Substances
Other Emission Reduction Projects . .
Total
ici Distribution
Emissions
ie)
Jl ,
Mining (Methane). .
Type of Reference Case
Modified j Bas
rnber of ; Number of
ojects Percent I Projects j
867 94 56
458 98 4
19 90 2
328 88 46
62 94 4
463 99 7
421 99 4
4 100 0
38 83 3
429 96 17
25 58 18
74 88 10
1,858 95 108
Percent
6
. 1
10
12 '
6
1
1
0
7
4
42
12
5
Total .
Number of
Projects
923
462
21
374
66
470
425
4
41
446
43
84
1,966
Notes: Excludes projects reported on the short form (Form EIA-1 605EZ), which does not collect information on the reference case
employed. Excludes two projects reported on the iong form (Form EtA-1605) for which no reference case was specified because
reductions were not estimated. Table excludes projects submitted in confidential reports.
Source: Energy Information Administration, Forms EEIA-1605.
^Formal commitments in one or more of the entity-level, project-level, or financial categories accommodated by Form EIA-1 605 were
reported by 81 companies. Descriptions of future activities were provided by 8 companies its the Additional Information section of Schedule
IV.
8In 2001, the Climate Wise and Green Lights voluntary programs were incorporated ir.ro ENERGY STAR, a joint program of the U.S.
Department of Energy and the U.S. Environmental Protection Agency.
Energy information Administration / Voluntary Reporting of Greenhouse Gases 2003
11
-------
were to be fulfilled by 2003 or earlier. The 12 other
entity-level commitments, which promised reductions
totaling 18 million metric tons carbon dioxide equiva-
lent, were to be fulfilled by 2004 or later.
Commitments to undertake 116 individual emission
reduction projects were reported by 22 companies. Some
of the commitments were linked to results from projects
already underway and forming part of the reporters'
submissions. Others were for projects not yet begun.
Reporters indicated that the projects were expected to
reduce future emissions or increase carbon sequestra-
tion by 73 million metric tons carbon dioxide equivalent.
In addition, 20 firms made 40 financial commitments.
Hie total amount of funds promised was $50 million, of
which $4 million was spent in 2003.
Table 7. Reported Emission Reductions and Sequestration for Projects Reported on Form EIA-1605
by Reduction Objective, Project Type, Source, and Reference Case Employed, Data Year 2003
(Millioni jyigtric Tons Carbon Dioxide Equivalent)
Direct Reductions
Reduction Objective and Project Type
Reducing Carbon DioxEcte Emissions ,
Electricity Generation, Transmission,
and Distribution
CoQeners'iofl and Was*e H££tt Rscovsry
Energy End Use , , . . . .
Transportation and Offroact Vehicles
Reducing Methane and Nitrous Oxide Emissions.
Waste Tteatrnent and Disposal (Methane)
Agriculture (Mpth^ne ?nd Nitrous OxidQ) . , .
Oil and Natural Gas Systems
and Coai Mining (Me'hane)
Carbon Sequestration
Halogenated Substances
Other (Emission Reduction Projects
Total
Modified !
184.4
157.2
0.1
24,7
2.5
68.2
47.6
*
20.6
0.0
o.s
7.8
261.0
Basic
1,3
O.S
*
0.(>
*
0.4
0.4
NA
*
NA
5.6
NA
7.3
• Indirect Reductions
I Modified i
27.8
14.7
3.1
9.4)
0.1
38.6
38.6
*
*•
NA
2.2
6.1
74.8
Basic
0.1
*
f
0.1
*
1.2
1.2
NA
NA
NA
NA
5.0
6.3
I Sequestration
I Modified i
NA
NA
NA
NA
NA
NA
NA
NA
NA
7.3
NA
NA
7.3
Basic
NA
NA'
NA
NA
NA
NA
NA
NA
NA
.0.5
• NA
NA
0.1
No'.e: Excludes -eductions and sequestration for projects reported on the short form (Form EIA-1605EZ}, which does not collect information on the
reference case employed. Excludes projects submitted in confidential reports.
Source: Energy Information Administration, Form £ I A-1603.
Table 8. Number of Entities Reporting at the Entity Level, Reported Emissions by Source, Emission
Reductions by Source and Type of Reference Case Employed, and Sequestration, Data Years
1994-2003
(Miillort Metric Tons Carbon Dioxide Equivalent)
Year
1994
1995....
1996
1997....
1993....
1B99
2000 ....
2001'^ . .
2002'?-' . .
2003 ....
Number of
Entities
Reporting
39
SO
55
60
76
83
109
113
119
126
Emts
Direct
752.7
875.8
1,183.1
1 ,006.6
1,110.7
967.9
1,068.2
7S9.6
889.3
888.8
sions
indirect
494.9
499.6
461.5
525.8
473.5
481.0
111.7
111.5
111.2
104.7
Emission Reductions by Type of Reference Case
Modified ]
38.2
56.0
65.4
73.7
105.8
1 14.7
123.6
121.4
148.4
182.4
Direct
Basic |
22.6
39.3
44.6
20.3
22.6
3S.3
83.0
90.4
83.3
31.8 4
Total
60.8
95.3
•110.0
94.0
128.4
150.0
206.7
211.9
231.6
214.2
Modified j
1,6
46.0
42.9
24.8
28.3
30.3
34.8
38.9
44.2
45.6
Indirect
[
Basic I Tote! ]
1.2
2.7
5.7
3.4
13.2
8.4
-7.8
-6,7
-8.3
-3.0
2.8
48.6
48.6
28.2
41.6
38.7
27.0
32.2
35.9
42.6
Seques-
tration
0.5
0.8
7,9 .
7.1
11.2-
8.4
7.5
7.5
6.8
6.9
(R) = revised.
Notes: 2002 data year includes laie reports that were not received in time to be included in last year's annual report and database.
Negative reductions represent -increases in emissions.
Source: Energy Information Administration, Form EIA-1605.
t
12
Energy information Administration / Voluntary Reporting of Greenhouse Gases 2003
-------
Figure 3. Number of Entities Reporting
Commitments Associated with Voluntary
Programs in Data Year 2003, by Program
Climate Chaiienge
Climate Wis 8
LMOP
USiJi
Others
ENERGY STAR
Green Lights
Natural Gas STAR
SFERP
" Vifeste Wls
-------
partners with the Federal Government and have issued
letters of intent to meet specific targets for reducing
greenhouse gas emissions intensity. These Climate
VISION partners, which include some of the largest
companies in America, representa broad range of indus-
try sectors: oil and gas production, transportation, and
refining; electricity generation; coal and mineral produc-
tion and mining; manufacturing (automobiles, cement,
iron and steel, magnesium, aluminum, chemicals, and
semiconductors); railroads; and forest products. In
December 2004, as parr of its Climate VISION commit-
ment, the electric power industry pledged to reduce col-
lectively the power sector's greenhouse gas emissions
intensity by the equivalent of 3 to 5 percent (measured as
carbon emissions per unit of electricity produced) beiow
2000-2002 baseline levels, measured over the 2010-2012
period.
Climate Leaders. Climate Leaders is a voluntary indus-
try-government partnership that encourages companies
to establish and meet clear greenhouse gas emission
reduction targets. EPA established Climate Leaders in
February 2002 and has recruited 62 partners, 27 of which
have established greenhouse gas reduction goals. By
joining Climate Leaders, the partners commit them-
selves to documenting their emissions of the six major
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14
Energy Information Administration / Voluntary Reporting of Greenhouse Gases 2003
-------
greenhouse gases (carbon dioxide, methane, nitrous
oxide, MFCs, PFCs, and SF-6) on a company-wide,, facil-
ity-level basis (including, at a minimum, all their domes-
tic facilities). Partners are required to develop an
Inventory Management Plan (IMP) and report their
annual corporate level emissions by emission source
type to the EPA, using the EPA's Annual GHG Inven-
tory Summary and Goal Tracking Form.9
In October 2004, the EPA issued updated guidance for
corporate greenhouse gas inventories based on the exist-
ing protocol developed by the World Resources Institute
(WRT) and the World Business Council for Sustainable
Development (WBCSD), described below. The EPA has
finalized guidance covering design principles and
cross-sector core guidance covering direct emissions
from stationary combustion, indirect emissions from
sales and purchases of electricity and s team, direct emis-
sions from mobile sources, and direct emissions of HFCs
and PFCs from refrigeration and air conditioning sys-
tems. The EPA has also completed draft sector-specific
guidance for core emissions from the following indus-
tries: cement, manufacture of refrigeration and air con-
ditioning equipment (HFC and PFC emissions), iron and
steel, and municipal solid waste landfilling. The EPA
is currently developing sector-specific guidance for
aluminum production, pulp and paper production,
semiconductor manufacturing, and SF6 from electricity
distribution.
California. The California Climate Action Registry
(CCAR), established by the California Legislature in
2000, is a voluntary program for reporting and register-
ing greenhouse gas emissions that occur inside or out-
side the State of California. CCAR issued reporting
protocols and began enrolling members in October 2002
and, in December 2003, released an online reporting
tool, the California Action Registry Reporting On-line
Tool (CARROT), in order to simplify the inventorying
and reporting of greenhouse gas emissions by program
participants. CCAR requires third-party verification of
reported emissions and has pledged to protect partici-
pants' reported reductions under possible future regula-
tory programs. As of November 2004, CCAR had
enrolled 43 organizations and companies.10 In October
2004, CCAR released a protocol for the' accounting of
carbon emissions and reductions associated with forest
conservation, improved management practices, and
reforestation and issued revised guidance for calculat-
ing greenhouse gas emissions from electric power
generation.
Wisconsin. Wisconsin has developed a registry for
recording reductions in emissions of greenhouse gases
Recommendations for improving the Voluntary Reporting of Greenhouse Gases
Program
The Secretaries of Energy, Commerce, and Agriculture
j and the SPA Administrator on July S, 2002, submitted
j to the White Mouse the following recommendations for
] improving and .jxpanding the Voluntary Rqjorting of
Greenhouse Gases Program:
•Develop fair, objective, and practical methods for
reporting baselines, reporting boundaries, calculat-
ing real results, and awarding transferable credits'
for actions that lead to real reductions
•Standardize widely accepted, transparent account-
ing methods
•Support independent verification of registry
reports
•Encourage reporters to report greenhouse gas
intensity (emissions per unit of output) as well as
emissions or emission reductions
•Encourage corporate or entity-wide reporting
•Provide credits for actions to remove carbon diox-
ide from tihe atmosphere (e.g., sequestration activi-
ties) as well as for actions to reduce emissions
•Develop a process for evaluating the extent to
which past reductions may qualify for credits
• Ensure thai the Voluntary Reporting Program will
be an effective tool to assist in reaching the goal of
an 18-percent reduction in greenhouse gas intensity
•Factor in international strategies as well as State-
level efforts
•Minimize transactions costs for reporters and
administrative cos's for the Government, where
possible, without compromising the recommenda-
tions above.
t
9U.S. Environmental Protection Agency, Climate Leaders Program, "Annual GHG Inventory Summary and Goal Tracking Form," web
site www.epa.gcw/clitnateleadera/summaryfonTLxls. For information on Climate Leaders Program reporting requirements, see web site
www.epa.gov/ciima feleaders/r.eportreq.htmi.
1!^See web site www.elimatei'egislry .org/mentbers. Seven of the organizations have at one time or another submitted reports to the Vol-
untary Reporting Program, including the following reporters for 2003: BP America., Los Angeles Department of Water and Power, PG&F.
Corporation, Sacramento Municipal Utility District, and Southern California Edison.
Energy Information Administration / Voluntary Reporting of Greenhouse Gases 2003
15
-------
and other pollutants. To date, 7 organizations have reg-
istered emission reductions, 3 of which include reduc-
tions of carbon dioxide totaling over 310,000 metric tons.
Northeastern. States. The six New England States and
the Eastern Canadian Provinces (New Brunswick, New-
foundland and Labrador, Nova Scotia, Prince Edward
Island, and Quebec) are engaged in a joint effort to
develop a regional greenhouse gas registry, as specified
in the New England Governors and Eastern Canadian
Premiers (NEG/ECP) Climate Change Action Plan,
which was issued in 2001. Tn the United Slates, the
Northeast States for Coordinated Air Use Management
(NESCAUM), an interstate association of air quality con-
trol divisions from the New England States, New York,
and New Jersey, has spearheaded this effort."
In October 2003, as part of a New England States'
NEG/ECP Climate Action Plan commitment,
NESCAUM launched the Regional Greenhouse Gas
Registry (RGGR), which has adopted the emissions
accounting and reporting protocols developed by
WRI/WBCSD and is collaborating with the California
Climate Action Registry to ensure that the registries will
be compatible.12 In May 2001, the Connecticut legisla-
ture passed a bill that requires any entity that reports
other air emissions to report direct greenhouse gas emis-
sions to the RGGR beginning in July 2006. All entities
whose direct and indirect emissions of greenhouse gases
exceed 10,000 metric tons carbon dioxide equivalent will
be required to report those emissions to the RGGR
beginning in July 2008.13 NESCAUM is also initiating
Phase II of the Greenhouse Gas Emissions Trading Dem-
onstration Project, which will include further examina-
tion of baseline scenarios and multi-pollutant caps and a
comprehensive assessment of early actions to reduce
greenhouse gas emissions reported to the Voluntary
Reporting of Greenhouse Gases Program.14
West Coast States. In September 2003, the governors of
Washington, Oregon, and California announced a joint
initiative to address climate change by developing pol-
icy recommendations on a range of issues that require
regional cooperation, includ ing the development of pro-
tocols and standard accounting methods for greenhouse
gas emissions reporting.15 In November 20Q4, the gover-
nors approved a series of recommendations stemming
from this initiative. The recommendations identified a
market-based carbon allowance program as an area
holding significant promise for achieving regional
greenhouse gas reductions. The governors have directed
their State agencies to continue the initiative in 2005.'6
Georgia. In May 2004, the Georgia legislature enacted
the Georgia Carbon Sequestration Registry Act, which
establishes a voluntary registry for carbon sequestration
projects that offset greenhouse gas emissions. The State
Forestry Commission is responsible for developing ihe
rules for the program, and the Georgia Superior Court
Clerks' Cooperative Authority will administer the regis-
try, which will include a State-wide uniform automated
electronic information system.17
Other States. Other States, including Illinois, Iowa,
Maine, and Texas, have taken initial steps toward the
development of State-level registries of greenhouse gas
emissions.
WRI/WBCSD Greenhouse Gas Protocol Initiative. The
WRI/WBCSD Greenhouse Gas Protocol initiative is an
international program for developing accounting and
reporting standards for greenhouse gas emissions and
reductions that can be adopted by other reporting pro-
grams and registries. WRI/WBCSD has developed a
corporate protocol for entity-level reporting, which was
revised in 2004, and several calculation tools to support
the preparation of corporate greenhouse gas invento-
ries.'18 WRI/WBCSD continued to develop a project
module in 2004.19
World Economic Forum Global Greenhouse Gas Reg-
ister. In December 2003, the World Economic Forum
^Conference of New England Governors arid Eastern Canadian Premiers, Report to the Near England Gevarnars and Eastern Canadian Pre-
miers an Climate Change Projects (August 2003), web site www.cap-cpma.ca/images/pdi/eng/2003RepCKtCiinuite.pdf.
'^Regional Greenhouse Gas Registry, "About, the Project," web sits www.rggr.us.
l3State of Connecticut, "An Act Concerning Climate Change," Public Act No. 04-252, web site www.cga.ct.gov/2004/act/Pa/
2004PA-00252-IiOQSB-00595-PA.htm. ' '
'^Northeast States for Coordinated Air Use Management, "Overview of the NESCAUM Greenhouse Qas Emissions Trading Demon-
stration Protect: Phase II," web site www.nescaum.org/Greenhowsc-.
15"Statement of the Governors of California, Oregon and Washington on Regional Action tTo Address Global Warming" (September 22,
2003), web site www.dimatesolutions.org/pubs/pdfs/Govemors Siatement.pdf.
'"West Coast Governors' Climate Change Initiative, "West Coast States Strengthen Joint Climate Protection Strategy," Joint
News Release (November 18, 2004), web site www.eTiergy.ca.?ov/global_cHmate_change/westcoastgov/releases/2004-11-l8_JOINT_
KELEASE.PDK
1'Georgia General Assembly, SB 356, "Georgia Carbon Sequestration Registry-Act," web site www.legis,staie.ga.iis/Segis/2003._04/ver-
siotis/sb356...LC..25.3622S_>ss.7-htm.
*8World Business Council for Sustainable Development and World Resources Institute, Greenhouse Gas Protocol Initiative Newsletter, No.
11 (April 2004), web site www.ghgprotocol.osg/docs/GHGJProlocol J>Jev«leller_No_ll .pdl:.
"World Business Council for Sustainable Development and World Resources Institute, Greenhouse Gas Protocol Initiative Newsletter, No.
13 (N'evetnber 2004), web site w\vw.ghgprotocol.org/docs/GHG_Protoco!_N«vsletter_No_l 3.pdf,
t
16
Energy Information Administration /Voluntary Reporting of Greenhouse Gases 2003
-------
t
announced the creation of a Global Greenhouse Gas
Register to provide a transparent, internationally consis-
tent framework for companies to report emissions
inventories and reduction targets. In 2004,5 more com-
panies (Alcan, Alcoa, Holcim, Santos, and Vitro) com-
mitted to participation in the registry,20 joining the 8
founding members (Anglo American, Cemex,
Hewlett-Packard, Lafarge, RAO Unified UESR, RWE,
ScottishPower, and Vattenfail).21 The Global Green-
house Gas Register intended to begin accepting reports
in January 2004, using reporting software based on
CCAR's CARROT software." As of November 2004,
two participants (Cemex and Hewlett-Packard) had
submitted annual emissions summary reports.23
Federal Legislation on Voluntary
Greenhouse Gas Reporting
The second session of the 108th Congress, which con-
vened in January 2004, produced little new action on leg-
islation addressing the reporting of greenhouse gas
emissions, emission reductions, and carbon sequestra-
tion by individual entities. The major exception was the
introduction of the Climate Stewardship Act of 2004
(H.R. 4067) in the House of Representatives by Rep.
Wayne Gilchrest (R-MD) find 19 cosponsors. The bill is a
slightly revised version of the McCain-Lieberman
Climate Stewardship Act of 2003 (S. 139), which was
rejected by the Senate in a 45-53 floor vote in October
2003.24
H.R, 4067 would require covered entities (those with
annual greenhouse gas emissions of more than 10,000
metric tons carbon dioxide equivalent) to submit an
inventory of their emissions for the preceding year,
beginning in 2008. The bill would limit greenhouse gas
emissions by establishing a system of tradable emissions
allowances, similar to the cap-and-trade system that has
been used to limit sulfur dioxide emissions from electric
power plants. Beginning in 2010, covered entities would
be required to submit to the EPA allowances for emis-
sions of greenhouse gases from stationary sources. Pro-
ducers and importers of HPCs, PFCs, and SF6 and
producers and importers of fossil fuels used for trans-
portation would also be required to submit to the EPA
allowances for the products they sell that result in emis-
sions of greenhouse gases. The objective of the legisla-
tion is to reduce emissions by the covered entities to 2000
levels by 2010. The bill also includes provisions for vol-
untary reporting of greenhouse gas emission reductions
achieved between 1990 and 2010- Allowance allocation
credits would be awarded to the reporters of emission
reductions.
I
20World Economic Forum, "Greenhouse Gas Register," web site www.weforam.org/sue/homepuWic.nsf/CoTitenf/GlobaH
21 World Economic Forum, "Global Greenhouse Gas Register Launched" (Press Release, January 12, 2001), web site www.wefonun.org/
site/iwmepublici'isi:/Content/Global+Greei'irioivse+Gasi-Regi»ter+Laui\ched.
^•California Climate Action Registry, "CA Registry's Online Tool To Serve as Foundation for Global Greenhouse Gas Register" (Press
Release, Deosmber 9, 2003), web site w\vw.dimateregistry.org/docs/PRESS/GHGRegister120903.pdf.
^Worid Economic Fonun, "Public Annual Emission Summary Report," web site www.ghgr.org/pttblkVPubJicAnniiaiSuBAtnary
Rrport.aspx.
24"Senate 15efeats Climate Bill, But Proponents See Silver Lining," New York Times (October 31, 2003).
Energy information Administration / Voluntary Reporting of Greenhouse Gases 2003 1 7
-------
t
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2. Reducing Emissions from Electric Power
Electric Power Industry
The electric power industry emitted approximately
2,279.3 million metric tons of carbon dioxide in 2003,
38.8 percent of total US. carbon dioxide emissions.25
Carbon dioxide emissions result from the combustion of
fossil fuels—coal, oil, and natural gas—during electric-
ity generation. For example, coal, which accounted for
83.5 percent of electric power industry carbon dioxide
emissions in 2003, is the primary energy source for U.S.
electricity generation (providing 51 percent of total gen-
eration in 2003) and has the highest rate of carbon diox-
ide emissions per unit of energy used among fossil
fuels,26
Since 1990, carbon dioxide emissions from the electric
power industry have increased by 491.4 million metric
tons or 27,5 percent, a trend that reflects U.S. economic
growth (gross domestic product grew by about 46 per-
cent between 1990 and 2003) and corresponding
increases in fossil energy consumption in the electric
power sector. From 2002 to 2003, carbon dioxide emis-
sions from the electric power industry increased by 1.0
percent. Contributing to the increase in emissions in
2003 were a 0.6-percent increase in total electricity gen-
eration and a 1,8-percent increase in emissions from
coal-fired generation.
Projects Reported
For the 2003 reporting year, 81 electric power providers
reported to the Voluntary Reporting Program on Form
EIA-1605 (Figure 4)—a decrease from, the peak of 87
electric power providers reporting on the long form in
2000 but a 29-percent increase from, the 63 reporters for
the first reporting year, 1994. Since 1997, merger activity
in the electric power industry has reduced the pool of
electric utilities able to report to the Voluntary Reporting
Program.27
Electric power providers made up 46 percent of the total
178 project-level reporters for data year 2003, Of the 81
electric power industry reporters, 48 were private-sector
organizations, including 43 investor-owned utilities
(lOUs) arid 5 independent power producers (IPPs);
and 33 were public-sector or nonprofit organizations,
including electric cooperatives, municipal utilities, and
other public-sector entities, such as the Tennessee Valley
Authority (TVA).
The 485 electric power projects reported for 2003 (Figure
5) represent a 16-percent increase from the 2002 report-
ing year total of 417 and a 155-percent increase from the
190 projects reported for 1994. Electric power projects
were the most numerous project type reported to the
Voluntary Reporting Program, accounting for 25 per-
cent of all projects reported on Form EIA-1605 for 2003.
Electric power projects are reported in two categories:
(1) carbon content reduction; and (2) increasing energy
efficiency in generation, transmission, and distribution.
Carbon content reduction projects include availability
improvements, fuel switching; and increases in lower
emitting capacity. Increased efficiency through genera-
tion, transmission, and distribution projects includes
Figure 4. Number of Electric Power Providers
Reporting on Form EIA-1605, by Entity
Type, Data Years 1994-2003
Number of Entitle?
150 i — i
df
-------
such activities as heat rate improvements, cogeneratiort
and waste heat recovery, high-efficiency transformers,
and reductions in line losses associated with electricity
transmission and distribution. In 2003, 257 carbon con-
tent reduction projects were reported, and 255 projects
for increased energy efficiency in generation, transmis-
sion, and distribution were reported.28
Figure 5. Electric Power Projects and Total
Projects Reported on Form EIA-1605,
Data Years 1994-2003
Number of Projects
jH-liil«i;:R^
0
1994 1997 2000 2003
Source; Energy Information Administration, Form EIA-1605.
Reductions Reported
Total reported emission reductions from the 485 electric
power projects reported for data year. 2003 (Table 9)
included 158.0 million metric tons carbon dioxide equiv-
alent from direct sources and 17,8 million metric tons
from indirect sources. The 257 projects in the category
"reducing carbon content" reported emission reduc-
tions of 146.9 million metric tons carbon dioxide equiva-
lent from direct sources and 13.5 million metric tons
from indirect sources. The 255 projects included in the
category "increasing energy efficiency in generation,
transmission, and distribution" reported emission
reductions of 15.5 million metric tons carbon dioxide
equivalent from direct sources and 4.1 million metric
tons from indirect sources.
Many of the largest projects reported to the Voluntary
Reporting Program are electric power projects. In 2003,
27 electric power projects reported direct reductions of 1
million metric tons carbon dioxide equivalent or more,
representing 55 percent of all the projects that reported
direct emission reductions exceeding 1 million metric
tons carbon dioxide equivalent. About three-fourths of
those reported electric power projects were related to
nuclear power..
Table 9. Number of Electric Power Projects and Emission Reductions Reported on Form EIA-1605
by Project Type and Reduction Type, Data Year 2003
Numbe
Proje<
Reduction Objective and Project Type \ Repor
Reducing Carbon Content 257
Availability Improvements 44
Fuel Switching 47
Increases in Lower Ern«1jng Capacity 115
Other Carbon R
-------
Reducing the Carbon Content of Energy
Sources
Projects involving fuel switching, power plant availabil-
ity improvements for lower than average carbon-emit-
ting plants, increases in low- or zero-emitting generation
capacity, and other similar activities typically reduce the
amount of carbon consumed to generate a unit of elec-
tricity. For 2003,257 such projects were reported, includ-
ing some of the largest projects reported to the
Voluntary Reporting Program (Figure 6). The emission
reductions reported for "carbon content reduction" elec-
tric power projects in 2003 totaled J46.9 million metric
tons carbon dioxide equivalent from direct sources and
13.5 million metric tons from indirect sources. Some car-
bon content reduction projects an: in fact "hybrids,"
combining efficiency improvements with measures
such as availability improvements or increases in lower
emitting capacity (see box on page 23).
Availability Improvements
There were 44 availability improvement projects
reported for data year 2003—1 more than the 43
reported for 2002 and 24 more than the 20 reported for
1994. Availability improvement projects accounted for
emission reductions of 70.2 million metric tons carbon
dioxide equivalent from direct sources and 7.4 million
metric tons from indirect sources in 2003. Of the -14 avail-
ability improvement projects reported, 33 involved
nuclear power plants. As in previous reporting years,
availability improvement projects, especially those
undertaken at nuclear facilities, produced some of the
largest reported reductions in carbon dioxide emissions.
Mainly through significant advances in operating, main-
tenance, and refueling procedures, capacity factors at
some nuclear plants have increased and, thus, have dis-
placed some fossil-fuel-based power generation that
would have been used in the absence of th« availability
improvements.
Because nuclear power plants are invariably large
baseload facilities, even a fairly small improvement in
plant availability can lead to a sizable reduction in car-
bon dioxide emissions through the displacement of fos-
sil-fueled generation. For example, the Southern
Company is committed to the continued enhancement
of operational performance and efficiency improve-
ments at Plant Voglie. These improvements are targeted
W
Figure 6. Electric Power Projects Reported on Form EIA-1605 Reducing the Carbon Content of Energy
Sources, by Project Type, Data Years 1394-2003
Number of Projects
300
250
200 -J
150
100 -
50 -
•Lower Emitting Capacity
! Switching
abliJsy improvements
1994 1995 1996 1997 1998 1999 2000 ZOO"! 2002 ' 2003
Note: The sum of projects in many project categories exceeds the totai number of projects reported, because more than one pro-
ject type may be assigned to a single project.
Source: Energy'Information Administration, Form EIA-1605.
Energy Information Administration I Voluntary Reporting of Greenhouse Gases 2003
21
-------
to safely reducing costs and increasing capacity factors
by reducing outage lengths and forced outages, To
achieve these improvements, a complex strategy con-
sisting of many operational, maintenance, and out-
age-related activities continues to be implemented at the
plants. Steam generator instrumentation upgrades at
Southern Company's nuclear plants have minimized
incidents in which a unit is automatically taken out of
service. The results have been dramatic at the Vogtle
plant, where megawatthours generated have increased
and outage lengths have decreased since the 1990 base-
line year of the project.
Several major performance records have been set in the
nuclear industry in recent years, and major progress has
been made in reducing the length of scheduled refueling
outages. Factors that have contributed to the decrease in
outage durations include: (1) online maintenance, with
some activities that previously were performed during
refueling outages now beitig performed while the unit is
online, if it can be done safely; (2} optimum scheduling;
and (3) use of robotic inspection equipment for steam
generator and reactor inspection activities. Since 1991,
total annual generation at the Vogtle plant has risen by
approximately 20 percent For 2003, Southern Company
reported that 1,705/088 megawatthours of generation
that would have come from fossil fuels was instead gen-
erated from nuclear power because of the project, reduc-
ing the company's emissions by 1,572,753 metric tons
carbon dioxide equivalent. Southern Company has per-
formed similar availability improvements at other
nuclear power plants, with similar results.
Fuel Switching
A total of 47 fuel-switching projects were reported for
2003, the same number reported for 2002 and 27 more
than the 20 reported for 1994. Switching from coal or oil
to natural gas lowers carbon dioxide emissions because
of the lower carbon content of natural gas relative to
other fossil fuels. For example, switching from bitumi-
nous coal to natural gas can reduce carbon dioxide emis-
sions per unit of energy consumed by approximately 43
percent. Although other reported actions., such as
switching from oil to gas, may not lead to reductions of
the same magnitude, they also reduce greenhouse gas
emissions. The fuel-switching projects reported for 2003
accounted for emission reductions totaling 17.7 million
metric tons carbon dioxide equivalent from direct
sources ami 0.01 million metric tons from indirect
sources.
National Energy & Gas Transmission (NEGT), reported
a fuel-switching program that added the ability to use
natural gas as a boiler fuel for startup and co-firing to
three coal-fired units at its Brayton Point Station in
Somerset Massachusetts.29 The plant's Unit No. 1 first
used natural gas in June 1994, Unit No. 2 in November
1994, and Unit No. 3 in April 1995. Natural gas is used as
a startup fuel (ignition and warmup) and is co-fired with
coal to help control emissions of nitrogen oxides from
the units. In 2003, the project decreased the plant's coal
use by more than 150,000 million British thermal units
(Btu) and residual fuel oil use by more than 53,000 nvil-
lion Btu. The fuel switching resulted in a reported reduc-
tion in emissions of 7,394 metric tons carbon dioxide
equivalent ir> 2003,
Increases in Lower Carbon Emitting Capacity
Projects involving die construction of new, lower emit-
ting power plants or increases in the capacity of existing
lower emitting plants were among the most numerous
electricity supply projects reported. For 2003, 115 such
projects were reported, up from 103 reported for 2002.
Most of the projects reported for 2003 involved increases
in nuclear {23 projects), hydropower (1.8 projects), pho-
tovoltaic (2"i projects), natural gas (13 projects), and .
wind capacity (36 projects). Emission reductions
reported for increases in lower emitting capacity pro-
jects in 2003 totaled 62.1 million metric tons carbon diox-
ide equivalent from direct sources and 6.8 million metric
tons from indirect sources.
For 2003, Exelon Corporation reported on a new project
that entails an increase in lower emitting capacity,
ComHd (a subsidiary of Exelon), the City of Chicago, !he
Illinois Department of Commerce and Economic Oppor-
tunity, the International Brotherhood of Electrical
Workers, Chicago Public Schools, and Spire Solar Chi-
cago have pooled funding and expertise to create the
Chicago Solar Partnership to develop solar resources
and to help increase the development of solar generation
in Chicago. The increase in zero emitting generation will
help to offset grid electricity generated from higher
emitting sources. The project had 5 major photovoltaic
installations in 2001, 8 in 2002, and 8 in 2003, for a total
capacity around the city of 524 kilowatts, which trans-
lates to 386,849 kilowatthours of generation annually. Tn
2003, Exelon reported on 41 percent of this project,
which equated to reported emission rediictions of 287
metric tons carbon dioxide equivalent.
29This project was originally sponsored by New England Power Company and reported by its parent, New England Electric System
(NEES) Company. In August 1998, USGen New England, Inc. (USGenNE) completed the acquisition of NEE5 Company's hydroelectric and
fossil power generatkm business previously operated by New England Power. As part of the. acquisition, the rights to the emission reduc-
tions and carbon sequestration achieved by this and other projects were transferred to USGenNE. For 2000 through 2002, the activities previ-
ously reported by USGenNE were incorporated into the report submitted by Us parent, PG&rE Corporation. For 2003, this project was
included in a separate report submitted by NEGT, formerly known as PG&E National Energy Group, a subsidiary of PG&E Corporation.
22
Energy Information Administration /Voluntary Reporting of Greenhouse Gases 2003
-------
Other Carbon Reduction Projects
Sixty-five "other carbon reduction" projects were
reported for 2003,14 more than reported for 2002 and 18
more than reported for 1994. Hie category of "other"
projects includes projects that decrease higher emitting
capacity, make dispatching changes only, or increase
power purchases from lower or zero emitting capacity.
In 2003,34 projects used low or zero emitting power pur-
chases to reduce emissions. This category was added to
the Voluntary Reporting Program for the 1999 data year
to classify electric power producer/supplier purchases
of power from low or zero emitting generation sources
for resale, replacing generation or purchases of power
from more carbon-intensive generation sources.
Another 4 projects reported for 2003 involved decreases
in higher emitting capacity, and 2 involved changes in
the dispatching of power plants. Changes in dispatch
order can reduce carbon dioxide emissions if lower
emitting plants are used more frequently. For 2003,
reported emission reductions from "other carbon reduc-
tion" projects totaled 29/t million metric tons carbon
dioxide equivalent from direct sources. An emission
reduction of 1.0 million metric tons carbon dioxide
equivalent was reported from indirect sources.
Xcel Energy reported a new project in 2003 to reduce
emissions in the Denver metropolitan area through a
decrease in high emitting capacity. Units 1 and 2 of the
Arapahoe plant were voluntarily retired at the end of
December 2002. Their retirement was part of the Xcel
Energy commitment to the Denver Metropolitan Emis-
sion Reduction Program (MERP), a program established
through the Colorado Department of Public Health and
Environment. Between 1999 and 2002, the average net
generation of Units 1 and 2 was 365,272 megawatthours.
Xcel reported a red-action of 607,814 metric tons carbon
dioxide equivalent with Ihe removal of these two high
emitting generation units.
There were only two projects reported in 2003 that fell
into the "dispatching changes only" category. One is the
"Merger Dispatch Savings" project reported by Cinergy.
The oilier is the "Renewable Energy Purchases - Small
Hydro" project reported by Southern California Edison
Company. Southern California Edison'sproject changed
the dispatch order to increase the use of hydroelectric
power over natural-gas-fired generation, leading to a
reported direct reduction of 1,270 metric tons carbon
dioxide equivalent in 2003.
Emission reductions were achieved from Cinergy's pro-
ject through the economic dispatch of Gnergy's generat-
ing facilities. Before the merger of the Cincinnati Gas &
Electric Company and PSI Energy, the same generating
facilities were dispatched according to the demands of
each operating company. After the merger, the units
from both operating companies were operated and
dispatched in coordination with each other. This
method of operation and economic dispatch is estimated
ro provide a 1-percent efficiency gain in the operation of
Electricity Supply CarbpnReductipn
Projects: Definitions and Termihblpigy
:e ;heal .fp't;.
v;'causes;: greenhou^e: gas:. ^iriis-:
r:!substantiai:releases:pf:carbpn:
.dioxide;,.: • iassil: •: fuel: \ :com biisiipii:: «lsp:: emits:; other.
: ef fluerite,: wcludm^
: i\itrbu^;oxide.;Carb6n content reduction proj^tts^typi-
;'cally:'reduce : greenhouse gas:'emissipns:by. replacing.
: fuels; with- relatively ..high; 'carbon': dioxide: emissions:
: (such as coal).with "fuels thai. have:16wer:carbon dipx-
• ide:emissi6n^ :(such;as.naturargas); or no -net'carbon.
^
•Ayailability |:Jmp.roy«nc:eiJ.s.^Byxradu^gxtihe:jfi.fr:
; qiVency and; 1 eng th of pi anne'd and: unplaniied power:
. plant: outagesj: availability; imprpyement:prpjbets can;
: result; in. mcreased :use;'of; a .p6iyer|ptar(t.;:EmissiPixs:
:lpwei'.::carbo.t>;: e'rnittihg;; plant ::cUspIaces;: gen'eiratipn.
• from a .higher :car bpri :emittin.g' plant; -Power p taint ti tfc:
: defined as :|h:e:ratip' of the average: load-pii:
• byer^^.a:giy6n;pei.i.jid 'id.its [totalc.ipa!dty.:Fpjr.ExaiTriple;:
: if;a: 200 .-megawattplant iOperates:(on;average):at:75:
perceni: :pf: i
Energy Information Administration / Voluntary Reporting of Greenhouse Gases 2003
23
-------
the system. The efficiency gain is realized because the
more recently built generating units, which are the most
efficient units, are the first dispatched to meet customer
demands for electricity. Therefore, the most efficient
generating units are operating more than the older, less
efficient units. In 2.003, Cinergy reported a decrease in
consumption of 279/165 short tons of bituminous coal
and direct emission reductions of 601,736 metric tons
carbon dioxide equivalent.
Ailiant Energy reported three new "low or zero emitting
power purchase" projects in 2003, Although all three of
these projects began in 1998, Ailiant began reporting
them for data year 2003. In two of the projects, Alliant
purchased hydroelectric energy and transmitted it to
Towa and Wisconsin. Total hydroelectric power pur-
chased for these two projects was 90,691 megawatt-
hours. In the third project, Alliant purchased power
produced from biomass by BFC Gas & Electric in Cedar
Rapids, Iowa, which converts industrial, agricultural,
and construction waste into renewable energy. The facil-
ity recycles the biomass materials into a low-Btu biogas
through gasification. Some of the materials recycled
include sawmill waste; iight paper mill rejects; construc-
tion demolition wood; energy crops, such as switch-
grass, sweet sorghum, and poplar trees; crop residues
sxich as corn stalks, corncobs, and seed cord; and
unrccyclable low-grade paper. Total electricity pur-
chased from this biomass source in 2003 was 22,576
megatvatthours, and total direct reductions for the three
"low or zero emitting power purchase" projects were
88,702 metric totis carbon dioxide equivalent.
increasing Energy Efficiency in Electricity
Production and Distribution
Projects involving improvements in the efficiency of
electricity generation, transmission, and distribution
reported for 2003 produced much smaller emission
reductions on average than projects reducing carbon
content. Efficiency improvement tends to be an ongoing
effort by electricity suppliers, yielding a continuous
stream of small, incremental improvements rather than
one-time dramatic increases in efficiency. For example,
heat rate improvement projects often are undertaken in
response to normal plant deterioration. As power plants
age, efficiency tends to erode gradually. Operators seek
to maintain heat rates by replacing or refurbishing old,
worn-out equipment. Similarly, new energy-efficient
transformers are often installed gradually over a period
of years, as old transformers fail.
For 2003, 255 "increasing energy efficiency" projects
were reported, including some hybrid projects that com-
bined efficiency improvements with measures such as
availability improvements. The efficiency improvement
projects fall into two main categories: (1) generation,
involving efficiency improvements in the conversion of
fossil fuels and other energy sources into electricity; and
(2) transmission and distribution, involving reduced
losses in the delivery of electricity from the power plant
to the end user (see box on page 25).
Generation Projects
Efficiency Improvements. Improvements in generating
efficiency were the most numerous type of efficiency
project reported for 2003. There were 170 such projects
undertaken in 2003. Heat rate improvements at
coal-fired power plants are a commonly reported means
of increasing efficiency and reducing carbon dioxide
emissions. There are numerous opportunities for
improving efficiency at existing power plants., but the
efficiency gains, and hence reductions in fuel consump-
tion and emissions, are limited by technology and tend
to be marginal. Emission reductions reported for gener-
ation efficiency improvement projects in 2003 totaled
11.2 million metric: tons carbon dioxide equivalent from
direct sources and 0.7 million metric tons from indirect
sources.
For 2003, Entergy Services Inc. reported 30 new effi-
ciency improvement projects. The projects included
equipment replacement or control system improve-
ments on 14 different units at 7 different facilities. The
equipment replacements included air preheater and
bypass seal replacements, condenser vacuum pump
replacements, neural net installations, cold-end
preheater basket replacements, installation of newly
designed condenser tube plugs, drip pump and bypass
line replacements, and more. Control systems affected
by the improvements included burner management sys-
tems, temperature control systems, boiler feedwater
control systems, RheoVac air in-lcakage monitoring sys-
tems, and condensaie filtration systems. Each improve-
ment was reported as a separate project, for a total of 30
efficiency improvements in all. The projects produced a
combined, total reduction of 427,695 metric tons carbon
dioxide equivalent in 2003.
Cogeneration and Waste Heat Recoveiy. A total of 21
cogeneration and waste heat recovery projects were
reported for 2003, 2 more than the 19 reported in 2002.
Emission reductions reported for cogeneration and
waste heat recovery projects in 2003 were, on average,
larger than those reported for the other types of effi-
ciency improvement projects but less than the average
for carbon content reduction projects. Reported end uses
of the thermal energy included electricity generation,
process heat applications, space heating and cooling,
humidificatkm, and cooking. The emission reductions
reported for cogeneration and waste heat recovery pro-
jects in 2003 totaled 163,821 metric tons carbon dioxide
equivalent from direct sources and 3.2 million metric
tons from indirect sources.
t
24
Energy Information Administratfon / Voluntary Reporting of greenhouse Gases 2003
-------
The direct reductions reported for cogeneration projects
are low, because the City of Klamath Palls, Oregon,
reported a negative direct reduction (or increase) in
emissions of more than 2.3 million metric tons carbon
dioxide equivalwent, The increase was attributed to car-
bon dioxide released during the combustion of natural
EffidentyPhpj£<;is: Definitions
: G eriera tion ;Prpj ;mdxuse: ofxthermal:;
: '• energy :tha t wpu lei ofcherwise be .wasted,' ;i t; reduces: the.
xainburitof fbsisil:fael:that tttustbebiu^ed tomefi:elbc^:
^tricafiandjtherma^
: ft : -is : neith'er ; tf teore ''ioally : no r. : practical ly ; poss ibki : . to ; :
:.conyerf .jilt the !.y^rnwl:OT:b^hwv^ergy.p'r^uce'd'i^;:QT:'
: consumed, by/ £T:ppwer:pIaiit:intp; elesctricjalehergy/pr:
.^^
: than • cpijy ertod :: Typ iciilj y/ tT>'S|: s tea m^eleijitic genera tr : :
te:at^
'meaning::Ehat: tyw^thirds. ^of the: thermal energy-: jpro-.:
• duced is lost. !S6rne :more adyaiKed pp.wer plants have::
.higher; •effici''
:plants (in:.which;the;waste:heat '
:PifpjecjtS;X:X;::x|:;X: j: :-x
•'ansmissi on: arid :d istny
Srecoyered/tb prpduce; stieai:rv;tp
xelectrical:; curterit-m:}
: .components .of• .the:transmission: arid idistributipn• sys-.
,:tern:'caiises.'a:p6rtion-pf thei energy.^(typically.about;7;
:eitlverby:reduciKg;me;: ambU
'
plant;efficieiicies'
.IpstjdunngY
:ror:sub$equeht a
' ' '•'
.
ing;*^
'.'.of trie generation process; efficier.cy^mprb:yemeritpro-:
:• jects'at fbssii^fuel-fired'ppwer.piants reduce: the plants';
//ie«if>:afi'xdefeed;as;the;ampunt;pf
^
' ° ' ' '
ojiig^rEffidijncyTfnnsfpnner^^
;: e:ha nge- the :ypl tage \ betw een '• d ifferent • segtrientsX'i-the^
:::tTat^miss:ic>a;:andj:distributiprvsyste^
• :syste!hilbsses.::Trarisfbriner:ipsses':Pdcur;as:a resttltof;!
'•: impiedancc": tp: tiie: if Ipyy.'of: current :in :.the •tran^fbrmer:;
:\yind ings; and because;pf hysteresJs:3Ad^di;ly:Currents:!
: iiv\the:steelicb'fe:;6f: tri^^lTarisfpr^e'r::lAf^n: ex feting:;
xtrahstprfliets-are/replJiced 'w|i^ higiyefficie'ncjrtrans-:;
:ra
f uel fthat mtis't :be :biirned : to; meit: ^
other!greenhouse:gas) emission.'?!:Efficiency; improve-';'
sl'a't; nbhfpssil; (e.:g;,;:hydr.pelectricj;power.:plai\ts;
reduce: "gj-eenhptise^ gas; emissions. Emission •:
: an ; increase. ;iii: -tlie ; aJrk>unr :pf :elcctrid^
nt,:w^
t:mustb^
:(fbs5ii fuel) '
'''
:Gogeheratipii.: Only: a: port Jon-of.: the heat; j
r;fps.sii'fuels-can :be:cpny^rted|;
t';;the.remamder is generaliy:;ipsfc':
.:ilecpnductpringv: l,ike;;tran$fpiriii^rs^ 'cpnductbrs>(iri-:
:• eluding feeders and .transitiissipri. lines) are a-sourcepif:
. ;:{-ransmissib:tv and •idisftibuHpri •systetnilosses.^M-gisti-:
>era!,.:the smaller:te:diameteY^
•: ^reater;its resistance:tb the fl6>v:of electric diirrent and:
,:'the;greater. the-consequent Iine:lp3ses .due::to:heating;:
::Recondudbnng:inyo!v^
erationfacili-':
Sy|:emplpy ;:eithe'r:; (ppping: or': bottpming;:
'is:first:usedtp:
Subsequent;
•applicaKotis;.Top^mg:cycTes are widely used- it) .iridus-:
• try 'its Vvejltas^at^iectric'pp^r -p.%nts tli'a't sell electricity:;
;:cbiidu'ctbrs:: :>v'i.t]v:;largerxidiameter: :cor»dyctb;rs:;:;b(%;
: rediic'ed:' resistancexma'fef;alsX:{i-ei,Xsup^rcpndiictivej
•:'rhatefials), :whidi'not bnly reduces-lirie.;!psses 'oilt|a|so.:
failovysioT an:i.Ticre
-------
gas hi the city's cogeneration plant. Emissions from
higher carbon emitting generation sources usually offset
these combustion-related emissions; however, accord-
ing to the City of Klamath Falls, the electricity produced
by the plant displaced other natural-gas-fired genera-
tion with an equivalent emissions rate. The project still
resulted in a net reduction in emissions, because the
cogeneration plant also produced steam that reduced
indirect emissions by displacing fossil-fired steam pro-
duction at the steam customer's facility. Without this
project, direct reductions associated with the cogenera-
tion projects reported for 2003 would be about 2.5 mil-
lion metric tons carbon dioxide equivalent.
The Southern Company reported an example of a
cogeneration project for a new cogeneration facility that
its subsidiary, the Alabama Power Company, began
operating in 2000 in Theodore, Alabama. The facility
fires only natural gas to produce electricity, for INEOS
Phenol, and process steam for Degussa, AG- The
cogeneration facility consists of a 170-megawatt com-
bustion turbine with a supplementaily fired (duct
bxirner) heat recovery steam generator, a 40-megawatt
steam turbine, and two package boilers. The package
boilers did not replace any existing boilers. Degussa pro-
duces its own steam and supplements it with steam
from the Theodore cogeneration facility. The heat rate
for the cogeneration facility unproved from 7,083 mil-
lion Btu per megawatthour in 2002 to 6.882 million Btu
per megawatthour in 2003, leading to a total direct
reduction of 669,857 metric tons carbon dioxide equiva-
lent. In addition, a small indirect reduction probably
was also achieved, because the steam supplied to
Degussa was produced with newer and more efficient
boilers than the older Degussa boiler; however, details
about the Degussa boiler are not known.
Another example of a cogeneration project is a tur-
bine-generator owned by Minnesota Power (MP) but
located at the SAPPI Ltd paper mill in Cloquet, Minne-
sota. The MP unit, with 23 megawatts net capacity, was
placed in a process steam line where steam previously
had been throttled to lower pressure for process use.
Consequently, electricity is produced with an overall
process efficiency of 83 percent using steam produced
from boilers fueled with 50 percent natural gas and 50
percent wood waste (biomass) from mill processes. MP
estimates that the cogeneration application heat rate is
4,112 Btu per net kilowalthour of electricity generation.
Through 2002, MP assumed that its generator displaced
generation that would otherwise have been produced
from conventional subbituminous coal. For 2003, MP
assumed that the unit displaced generation that would
have come from the Mid-Continent Area Power Pool
(MAPP). Therefore, a MAPP number of 0.92 metric tons
carbon dioxide per megawatthour was xised. to calculate
carbon dioxide reductions- The 0.92 value was provided
by the Minnesota Pollution Control Agency. This project
was responsible for a direct emission reduction of 87,187
metric tons carbon dioxide equivalent.
Transmission and Distribution Projects
Transmission and distribution projects, although not as
numerous as generation projects, were nonetheless
reported in significant, nixmbers. For 2003, 65 transmis-
sion and distribution projects were reported. Unlike
generation projects, which typically have discrete start
and completion dates, efforts such as upgrading con-
ductors and replacing transformers are ongoing activi-
ties by electric power producers. Consequently, most of
the transmission and distribution efficiency improve-
ments reported for 2003 were reported as continuations
of long-standing projects rather than as new projects.
The national average energy loss from transmission and
distribution is about 7 percent of generation, in terms of
average emission reductions, transmission and distribu-
tion projects typically ace somewhat smaller than gener-
ation projects; however, reductions can still be
significant. There are numerous opportunities for
improving efficiencies in the delivery of electricity, but:
the efficiency gains generally are smaller than those
from generation projects.
For 2003, the most frequently reported types of trans-
mission and distribution projects (Figure 7) were high-
efficiency transformers (including improved silicon
steel and amorphous core transformers); reconductor-
ing (replacing existing conductors with large-diameter
conductors to reduce line losses); and distribution volt-
age upgrades (increasing the voltage at which the vari-
ous segments of the system operate to reduce line
losses). The other transmission and distribution project
category includes projects that involve more than one
type of activity, as well as such activities as transmission
line improvements and capacitor installations. In 2003,
31 high-efficiency transformer projects were reported, 3
more than the 28 reported for 2002 and 15 more than the
16 reported for 1994. Many of the reported projects were
"hybrids," combining high-efficiency transformer
installation with one or more other transmission and
distribution activities (e.g., reconductoring).
Another 27 projects involving reconductoring and 28
projects involving distribution voltage upgrades (again,
often in combination with other activities) were
reported for 2003—the same numbers that were
reported in those categories for 2002. The reporters clas-
sified 15 projects as "general" or "other" transmission
arid distribution, 3 more than reported for 2002. Emis-
sion reductions reported for transmission and distribu-
tion projects in 2003 totaled 4.2 million metric tons
carbon dioxide equivalent from direct sources and 0.3
million metric tons from indirect sources.
t
26
Energy Information Administration / Voluntary Reporting of Greenhouse Gases 2003
-------
Xcel Energy reported a new high-efficiency transformer
project in 2003. Effective November I, 2003, Public Ser-
vice Company of Colorado, a subsidiary of Xcel Energy,
reduced transformer losses by 3.5 megawatts when a
new transformer configuration was implemented at the
Denver Zuni Terminal Substation. With the new config-
uration in full operation for 2 months of 2003, 5,124
megawatthours of energy was saved, leading to reduc-
tions in emissions of carbon dioxide, methane, and
nitrous oxide that totaled 4,497 metric tons carbon diox-
ide equivalent.
American Electric Power, Inc. reported on a continuing
project that fits into both the reconductoring and distri-
bution voltage upgrade categories. Typical operation of
the American Electric Power distribution system
requires that improvements be made on a continuing
basis for the purpose of rehabilitation and reinforcement
ro distribute power efficiently and reliably to customers.
Improvements to the distribution system, which
increase peak capacity and reduce line losses, include:
voltage conversion of stations and circuits; circuit volt-
age conversions; primary line reconductoring; load
transfers between phases to balance circuit loading; pri-
mary line additions and multiphasing; installation of
more efficient distribution system devices; and installa-
tion of shunt capacitors on distribution circuits. For
2003, American Electric Power reported reduced elec-
tricity demand of 1,042,179 megawatthours and emis-
sion reductions of 835,020 metric tons carbon dioxide
equivalent.
Figure 7. Reported Transmission and Distribution Projects Reported on Form E1A-1605 by Type, Data Years
1994-2003
Number of Projects
1994 1395 1996 1597 1998 1999 2CQO 2001 2002 2003
Note; The sum of projects in a project category may exceed the total number of projects reported, because .more than one project
type may be assigned lo a single project.
Source: Energy Information Administration, Form EIA-1805.
Energy information Administration / Voluntary Reporting of Greenhouse Gases 2003
27
-------
-------
3. Reducing Emissions from Energy End Use
Introduction
Greenhouse gas emissions from energy end use include
emissions from both stationary and mobile sources.30 In
2003, the industrial, commercial, and residential sectors
combined to emit 3,907 million metric tons carbon diox-
ide (68 percent of total U.S. carbon dioxide emis-
sions)—nearly all from stationary sources (Figure 8).
Emissions from stationary sources are produced both
directly by the combustion of fossil fuels (e-g-/ natural
gas consumption for home heating) and indirectly from
the consumption of electricity (e.g., for commercial
lighting). In 2003, the transportation sector accounted
for 1,875 million metric tons carbon dioxide, nearly all
from, mobile sources, and represented approximately 32
percent of U.S. carbon dioxide emissions.
Reducing Emissions from
Stationary Sources
Emissions from stationary sources in 2003 included
2,276 million metric tons carbon dioxide from the gener-
ation, of electricity that was ultimately consumed in the
industrial, commercial, and residential sectors. Industry
was responsible for the largest share of total station-
aTy-source emissions at 43 percent, followed by the resi-
dential sector at 31 percent and the commercial sector at
26 percent. '
Between 1990 and 2003, carbon dioxide emissions asso-
ciated with industrial, commercial, and residential
energy use increased by 14.5 percent. Of the stationary
sources, the commercial sector has the fastest-growing
emissions, registering a 32.0-percent increase in emis-
sions between 1990 and 2003. Emissions from the resi-
dential sector increased by 27.9 percent over the same
period, and industrial sector emissions declined by 1.0
percent,31
Projects Reported
Reported emission reduction projects affecting station-
ary sources include fuel switching (e.g., from fuel oil to
natural gas); light bulb replacement (e.g., substituting
compact fluorescent bulbs for incandescents): heating,
ventilation, and air conditioning (HVAQ system
upgrades (e.g., maintenance or replacement with more
efficient units); appliance replacement (e.g., retiring old
appliances for ENERGY STAR32 products); motor and
motor drive upgrades; and industrial power system
improvements. For 2003,67 entities reported 374 energy
end-use projects on Form EIA-1605 (Table 10). These 374
projects accounted for 19 percent of all the projects
reported on the long form.
For the 2003 reporting year, the. number of entities
reporting energy end-use projects, the number of energy
end-use projects reported, and the total reported direct
and indirect emission reductions resulting from energy
end-use projects all were higher than for the 2002 report-
ing year (Table 10). Energy end-use reporters increased
from 65 in 2002 to 67 in 2003, the number of projects
reported rose from 339 to 374, reported direct reductions
increased from 24.7 million metric tons to 25.2 million
Figure 8. Sources of U.S. Carbon Dioxide
Emissions by Sector, 2003
Industrial
Residential
Ccmrtisrciai
Transportation
0 500 1,000 1,600 2,000
Million Metric Tons Carbon Dioxide
Notts: The industrial sector includes agriculture; the residen-
tial and commercial sectors exclude transportation.
Source: Energy Information Administration, Emissions of
Gmentiouse Gases in tfjs United Stales 2003, DQE/EIA-
0573(2003) (Washington, DC, December 2004).
30Stationaty sources include emission sources at fixed locations, such as power plains, factories, refineries, mines, and heating plants or
waste conversion facilities, among others. Mobile sources include transportation sector emissions from non-fixed locations, such as motor
vehicles, aircraft, trains, and ships, among others.
31 Energy Information Administration, Emissions of Greenhouse Gases in the United States 2003, DOE/EIA-0573(20Q3) (Washington, DC,
December 7.004), web site www.eia.doe.gov/oiaf/1605/ggrpt.
^ENERGY STAR is a jomtprogram of the U.S. Department of Energy and the US. Environmental Protection Agency helping businesses
and indii'tctuals protect the environment through increased energy efficiency. See web site www.energystar.gov.
Energy information Administration /Voluntary Reporting of Greenhouse Gases 2003
29
-------
metric tons carbon dioxide equivalent, and reported
indirect reductions increased from 9.1 million metric
tons to 10.0 million metric tons carbon dioxide
equivalent.
Among the 67 entities that reported energy end-vise pro-
jects for 2003 on Form. EIA-1605, 46 (69 percent) were
electric utilities, of which 19 were publicly owned, 26
were privately owned, and 1 was an independent power
producer. Companies in. the industrial energy end-use
sector, comprising 11 percent of all reporters for 2003,
included 6 automobile arid other transportation equip-
ment manufacturers (9 percent), 5 cement companies (7
percent), 3 pharmaceutical and health care product com-
panies, 2 electronic companies, 2 holding and other
investment companies, 1 flood and kindred products
company, 1 communications company and 1 oil
company.
Emission reductions reported for individual energy
end-use projects ranged from less than '! metric ton to
almost 4.2 million metric tons carbon dioxide equiva-
lent, because some reporters included information on
each individual end-use initiative separately, whereas
others aggregated information on a range of activities
into single projects. For example, an electric power dis-
tributor may report on a demand-side management
(DSM) project that achieves direct emission reductions
through multiple supplemental approaches, such as
encouraging their residential, commercial, and indus-
trial customers to change light bulbs, temporally shift
electric loads, implement urban forestry projects, and
upgrade appliances, building shells, and HVAC
systems.
Among projects for which direct emission reductions
were reported for 2003,82 percent had reductions of less
than 100,000 metric tons carbon dioxide equivalent
(Figure 9). Similarly, among projects for which indirect
emission reductions were reported, 94 percent had
reductions of less than 100,000 metric tons carbon diox-
ide equivalent. Only seven energy end-use projects
reported emission reductions greater than 1 million met-
ric tons each for 2003, which was one less than for 2002.
In terms of emission reductions achieved in 2003,5 of the
6 large* t projects reported were aggregated electric com-
pany DSM programs. DSM projects may focus on one or
Figure 9, Energy End-Use Projects Reported on
Form EiA-1605 by Size and Type of
Emission Reduction, Data Year 2003
Metric Tons Carbon Dioxide Equivalent
More Than
1,000,000
100,000 to
1,000,000
10,000 to
100,000
1,000 to
10,000
Less Than
1.000
0 50 100 150
*
Number of Projects
Source: Energy Information Administration, Form EIA-1605.
Table 10, Number of Energy End-Use Reporters, Projects, and Emission Reductions Reported on
Form EIA-1605, Data Years 1934-2003
Data Year
1994
1995
1996
1897
1998
1999
2000
2001
20Q2 Revised data.
Notes: More than one project type may be assigned to a single project; therefore, the sums of the projects and reductions in each
project type category may exceed the total numbers of projects and reductions in the totals and subtotals. Table excludes data from
confidential reports.
Source: Energy Information Administration, Form EIA-1605.
t
30
Energy information Administration / Voluntary Reporting of Greenhouse Gases 2003
-------
t
t
more load shape objectives (see box on page 32).
Although the most common load shape objective of
reported DSM projects for 2003 was increased energy
efficiency (345 projects), electric utilities also attempted
to balance their load profiles with various other load
shape objectives, including peak clipping (67 projects),
Figure 10. Demand-Side Management Projects
Reported on Form EIA-1605 by Load
Energy Efficiency
Psak Clipping
Load Shifting
Load Building
Valley Filling
345
35 i
20:
0
400
.100 200 300
Number of Projects
Notes: Some projects may tie counted in more than one cat-
egory. Figure excludes data from confidential reports.
Source: Energy Information Administration, Form EIA-1605.
load shifting (35 projects), valley filling (17 projects), and
load building (20 projects) (Figure 10).
Energy end-use projects can be carried out anywhere
energy is consumed. Reporters indicate whether their
energy end-use projects affect emissions in the indus-
trial, commercial, residential, or agricultural sector. For
2003, 236 projects were reported to have reduced emis-
sions in the industrial sector, 126 in the residential sec-
tor,. 125 in the commercial sector, and 19 in the
agricultural sector. More end-use projects were reported
for each sector for 2003 than were reported for 2002,
except for the agricultural sector. The total number of
end-use projects reported was 10 percent above the total
for 2002 (Figure 11). It should be noted that many pro-
jects—particularly electric company DSM programs-
affect more than one end-use sector and are included in
each applicable sector for the purposes of counting types
of projects reported.
Project Types
None of the 16 new reporters to the 1605b program, in
2003 reported energy end-use projects; however, many
of the repeat reporters to the program did report new
energy end-use projects along with their ongoing pro-
jects. Of the 374 energy end-use projects reported, 32
percent (120 projects) involved two or more project
types. The most frequently reported type of energy
Figure 11. Energy End-Use Projects Reported on Form EIA-1605 by Sector, Data Years 1994-2003
Number of Projects
600
500 -
400 ™
300 -
200 -
industrial
1994 1995 1996 19S7 1998 1939 2000 2001 2002 2003
Notes: Some projects target more than one sector and may be counted in multiple categories. Figure excludes data from confiden-
tial reports.
Source: Energy Information Administration, Form EIA-1605.
Energy Information Administration / Voluntary Reporting of Greenhouse Gases 2002
31
-------
end-use project for 2003 was equipment and appliance
replacement/improvements (157 projects)., followed by
lighting and lighting controls (153 projects) and HVAC
020 projects) (Table VI). Because of the varied levels of
data aggregation in reports by different entities, it is not
possible to calculate average emission reductions by
project type or to draw conclusions about the most
effective energy end-use project types in terms of total
emission reductions achieved.
Equipment and Appliances
Replacements of equipment and appliances with more
energy-efficient units (e.g., ENERGY STAR products) to
reduce greenhouse gas emissions are frequently
s
Table 11. Number of Projects and Emission Reductions Reported on Form E1A-16Q5 for Energy End-Use
Projects by Project Type, Data Year 2003
Project Type
Equipment/Appliances
Lighting/Lighting Controls
HVAC
Load Contra):
Building Sheii
Mofor/Moto' Drivs
Other9
Fuel Switching
Energy Effects of Urban Forestry . .
industrial Power Systems
Total
Number of
Projects
Reported
157
153
120
64
63
S8
31
26
8
4
374
Number of Projects
Reporting Emission Reductions
[ [ Both Direct
Direct j indirect j and indirect
85 94 22
78 85 10
69 62 12
40 34 10
41 29 7
36 31 9
20 17 6 "
17 13 4
822
3 1 0
194 224 46
Emission Reductions Reported
(Million Metric Tons
Carbon Dioxide Equivalent)
Direct ! indirect
16.9 8.1
20.1 7.8
19.7 6.1
14.4 3.6
15.7 5.8
14.4 4,7
2.0 0.5
6.7 1.6
4.9
0.6 0,0 x
2S.2 10.0
"Includes ai! projects thai cannot meaningfully be included in any of the specific project type categories.
"Less than 0.05 million meiric torts.
Note: Project totals and emission reductions do not equal sum of components, because some projects are counted in more than
one category.
Source: Energy Information Administration, Form EIA-1605.
Energy; Bificieney;: Prbjecte^
nt :<>f:: spm
Such;projec& usualiy.reduce .overall/energyiconstimp-:'x :X.operate: at:, night: ..(during..:.the: ';company's: 'offrpealc
;ti0n;xbfte^':>\rjthout>e^
:jeci-induced:savih2{^G^ :x:.':J:x.;Xv x^;::Xx.^:;x::x::o::x: :^: :x:x;x:.:x
'. •. •,.;.:. :; ,y. . -; : ? -. -. •:. v •..:.<' - ,e^.....,,?:::...:: : Peak Chppmg.:Pro]ects:that reduce 'energy demand at:
achieved:through the substitution or. technically-more:-:::::.-:,:.•••."*;.. fc •'••'••'^••••'.••-. • v, •:•:--•:: i.: :?• • -:.-.vx-x-xo
:•: f,-. '•': '•'. ••• •'.'..-: :-:-••"• x '.,•:'.- • :•:•:;.-.: :.:•-::-.-:.-.:: -x-x-x-x-.: : • : .-certain critical times,-typicauv when the electiic system
efnc!ent:measures.(i;e.;:eauipment, systems; or operat-:- •:.-.:,-.: :-::•::-.-: :•:-: :•••:•: .-'.•-.•ri^r.-'.-••:•.•.*..:•:-:;: ••:.-.-:: .,1: '••*•'••• •'•••'••',••'•
.:•:•.:•:.-.-: :-Xv -.•:-.-s-:;-: ••:•••••.-.-. t.-:^.;'-: -: •:•:'•.::•: :•:••••;:•.•>-.-:r,:•:•••:•.-:•:-.-.: expur)ences:peaks.-.These projects -generally have -only:
•tng.procedures) -to produce, the same level of end-use: :•:-: x ::•:•„:.;/••;:•:.•.: :-••: :• v,:-.-:-.1: :-::•: :r:t,' ::-r :,.•::•,: ••••::•
0 r •-••:• :::..: , ,. *•:•.-:: : : v, \.::.:-'-: ^ x •.-.-: .-.•::-:::.;:.-::: small erfects on overall energy use butiocus sharply on
-g.y liehbng;or-waimth).wttn !essenersv:use.:•::-::: ,: •::••-• .: :: :;::o°V;X ,.,::; v.>^:r: v
~ ° .-,'-';•:• •• xpeak-cHpping differ^
:tion;:gerierally::vvithout:regar(i; to :l.be:timing: of :thex; i:y th^
>:htia^electric:spaee:he^
;:i2le^
: ;. const! tnp i>ioiv :^ (
I. Load. SM£tmg.;P.rpjects^;^
j;"fr6m:bneiime:to another'(tisualiy: dum\^
j:. For ;example, >vater-feater timers; typically, tum.^^
32
Energy Information Administration I Voluntary Reporting of Greenhouse Gases 2003
-------
t
t
reported energy end-use projects. For 2003, no new
reporters to the Voluntary Reporting Program submit-
ted reports on equipment and appliance projects; how-
ever, a number of repeal reporters submitted reports on
new equipment and appliance projects. Exelon Corpora-
tion reported 2 new projects for 2003 that increased its
efforts to reduce residential energy consumption.
Exelon's Low Income Usage Reduction Program has
provided SI .3 million to establish the installation of 150
solar water-heating systems for low-income residential
customers with the potential for additional savings on
their energy costs. The pilot was extended to allow for an
additional 60 installations. The company also incorpo-
rated an education component to promote participation,
as well as addressing any concern associated with the
technology. This project, originally started in 1999, was
reported for the first time in 2003. Annual savings for
each household are projected to be 82.5 kilowatthours,
for a total savings of 17.3 megawatthours of electricity
consumption and total emission reductions of 4.4 metric
tons carbon dioxide equivalent.
From April 15 through July 15, 2003, Exelon's Clothes
Washer Rebate Program offered customer incentives,
along with manufacturer's rebates, for a total of $100 off
the purchase of an ENERGY STAR qualified clothes
washer. The program, coordinated by the Midwest
Energy Efficiency Alliance (MEEA), granted 1,100
rebates to ComEd customers at 110 participating retail-
ers. A typical household does nearly 400 loads of laun-
dry per year, using aboxst 40 gallons of water per full
load with a conventional washer. In contrast, a full-sized
ENERGY STAR qualified clothes washer uses 18 to 25
gallons per load. ENERGY STAR clothes washers use up
to 40 percent less energy and up to 50 percent less water
than standard-efficiency washers. They are projected to
save as much as 238 kilowatthours and 16 therms33 of
natural gas per year when used with an electric dryer
and a gas water heater. Potential water savings are esti-
mated at up to 7,000 gallons annually, The projected sav-
ings from these 1/100 energy- and water-efficient clothes
washers over their expected 12-year lifespan are 371.9
megawatmours of electricity, 36,087 therms of natural
gas, and 11.1 million gallons of water. Estimated emis-
sion reductions from this project in 2003 totaled 13 met-
ric tons carbon dioxide equivalent.
Lighting and Lighting Controls
Lighting and lighting control projects, such as installing
compact fluorescent bulbs and occupancy sensor light- •
ing controls, have consistently been popular projects in
the Voluntary Reporting Program. The U.S. Environ-
mental Protection Agency (EPA) Green Lights Utility
Ally Program promotes cooperation between utilities
and the EPA in publicizing the environmental,
economic, and quality benefits of energy-efficient light-
ing technologies. Allergan, Inc., has reported to the
Voluntary Reporting of Greenhouse Gases Program on
its participation in the Green Lights Utility Ally Pro-
gram. In an ongoing project, existing fluorescent light-
ing has been upgraded at several Allergan facilities,
including 40-watt tubes being replaced with energy-
efficient 32-watt tubes, and conventional ballasts being
replaced with energy-efficient and/or electronic bal-
lasts. These upgrades are generally conducted in areas
undergoing renovation or incorporated info new build-
ing designs. This project reportedly reduced the com-
pany's overall electricity consumption by 250
megawatthours in 2003, resulting in total emission
redu ctions of 193 metric tons carbon dioxide equivalent.
For 2003, the Estee Lauder Company reported 4 new
lighting projects and also, for the first time, reported 11
lighting and lighting control projects that commenced in
2002. Three of the four new projects reported for 2003
involved the installation of newOcbron lighting fixtures,
consisting of Octron fluorescent lamps, electronic bal-
lasts, and specular reflectors, in place of T-12 fluorescent
lamps. The final project was an upgrade from metal
halide lights to pulse-start ion metal halide lights. The 4
new projects reportedly reduced the company's 2003
energy consumption by 1,654.9 megawatthours, leading
to a reduction in indirect emissions from purchased
power of 948 metric tons carbon dioxide equivalent.
Heating, Ventilation, and Air Conditioning (HVAC)
HVAC projects involve the reduced use or upgrade of
HVAC systems in homes, businesses, offices, or indus-
trial plants. Although there were no new reporters in the
HVAC category, a number of new projects were
reported for 2003. The-majority of the new projects were
not specifically HVAC projects but had HVAC compo-
nents included in larger DSM efforts.
Both Allergan and the Estee Lauder Company reported
new projects that were strictly HVAC. AHergan reported
on 5 projects that included upgrades to HVAC system
equipment, including a water pump, a cooling water
pump, an air handler fan, hot water pumps, and a
high-efficiency chiller. These improvements accounted
for a total indirect emissions reduction of 667 metric tons
carbon dioxide equivalent. The Estee Lauder Company
reported on a project that incorporated solar panels into
the HVAC system a! its Avcda facility. A 1,270-square-
foot solar wall system was installed on the high bay
south wall, which extends above the lower roof of the
office. Fresh air is drawn in through the cladding into a
heat pump and distributed in the building though
dueling. The preheated ventilation has lead to a better
standard of indoor air quality and a reduction in energy
3° A therm is equivalent to 100,000 British thermal units (Btu) of energy.
"Energy information Administration / Voluntary Reporting of Greenhouse Gases 2003
33
-------
consumption. This project reportedly reduced natural
gas consumption by 757.5 million Btu and electricity use
by 14.1 megawattbours, leading to total indirect and
direct emission reductions of 51 metric tons carbon d iox-
ide equivalent
Building Shell
Building shell projects improve the energy efficiency of
buildings through upgrades to ceilings, walls, floors,
windows, or doors (e.g., insulation, air sealing, or effi-
cient materials), A large share of the projects reported in
the building shell category for 2003 involved DSM pro-
grams .by electric power providers. The Platte River
Power Authority, a joint action public power utility
owned by four Colorado cities (Estes Park, Fort Collins,
Longmortt, and Loveland) offered Fort Collins a design
assistance program. Under this program, Platte River
Power Authority paid for a portion of the additional
design costs of a high-performance building, based on
the recognition that constructing a highly energy-
efficient building takes more up-front design time and
cost. Daylighring and/or energy-efficiency consultants
are often hired to assist in the design process. Customers
receiving assistance are expected to achieve at least a
25-percent improvement in energy efficiency relative to
a building that meets the current Fort Collins building
code.
The methodology used to estimate energy and green-
house gas savings from building shell projects uses com-
puter models to compare different building designs. In
the design phase, computer models are developed to
establish a "base" building, which is compliant with the
Fort Collins building code, and an "actual" building,
which is representative of the high-performance build-
ing constructed. Model results were used to estimate the
energy use and greenhouse gas emission savings of the
new building design relative to the base building, based
on actual electric company bills. In 2003, the program, led
to a reported reduction in electricity use of 508.6
megawatthours and a reduction in indirect emissions of
215 metric tons carbon dioxide equivalent.
Load Controls
Load controls are energy management techniques for
minimizing—either overall or at specific times of the
day—the load demands on electric power providers.
Power companies ihemselves can use load management
options and, through DSM programs, encourage their
customers to apply load controls. Independently, power
consumers can employ load controls to reduce their
energy consumption, shift their demand to non-peak
hours, reduce their consumption during peak hours,
and reduce energy costs. Load control options include
energy efficiency projects, load building, load shifting,
peak clipping, and valley filling (see box on page 32).
For 2003, Cinergy Corporation reported a load control
project, the 'Thermal Energy (Cool) Storage Project.
Thermal Energy Storage (TES) is designed to reduce
summer peak electric loads for space and process cool-
ing applications by shifting those loads to off-peak peri-
ods, and to reduce energy use through off-peak system
operations. Cooling energy is stored in cooled water,
eutectic salts, or ice systems by the operation of electric
chillers during off-peak periods and then used during
on-peak periods, resulting in a reduction of on-peak
electricity demand. Application of off-peak cooling sys-
tems can also reduce energy consumption by rejecting
heat at lower ambient temperatures.
Cinergy's target market for its TES program includes
schools, churches, arid commercial or industrial office
buildings, encompassing both new construction and
retrofits of buildings that have relatively large cooling
needs and operating hours that are conducive to
ice-making during off-peak hours. Industrial process
applications represent additional market potential for
the TES system. The Cinergy program is designed to
stimulate the market and help facility owners over the
obstacles typically associated with new technologies;
cost premiums over conventional HVAC systems; per-
ception that the technology is new and/or complex; and
reliability relative to existing systems. In 2003, this pro-
ject reportedly reduced electricity consumption by 15.8
megawatthours, leading to a direct emissions reduction
of 14,272 metric tons carbon dioxide equivalent.
Motor and Motor Drive
High- or ultra-high-efficiency motors and variable-
speed or variable-frequency motor drives are more
energy efficient than regular motors and motor drives,
In addition, controls can be used to reduce electricity
consumption by adjusting motor speeds or turning off
motors when appropriate. Motor and motor drive pro-
jects are generally reported in the commercial and
industrial categories, and often they are components of
DSM programs, as is the case for all the new motor and
motor drive projects reported for 2003.
Allegheny Energy, Inc., reported a motor and motor
drive project in 2003 that has been an ongoing effort.
Adjustable-speed drives (ASDs) on electric motors have
the potential to save energy and demand where motor
load is not constant. Allegheny, through its former oper-
ating company in Virginia, Potomac Edison, conducted
a cooperative research project with an industrial cus-
tomer and the Electric Power Research Institute (EPRI)
to evaluate the use of ASDs on plastic injection molding
machines. ASDs were installed on IS motors for 7 differ-
ent molding machines. Measured savings were 38 per-
cent for total electrical motor load and 23 percent for
total molding machine load. This project represents a
good example of DSM activities aimed at industrial
t
34
Energy Information Administration /Voluntary Reporting of Greenhouse Gases 2003
-------
t
f
customers. Electricity savings from the project were
reported to be 689 megawatthours, resulting in a total
emissions reduction of 705 metric tons carbon dioxide
equivalent.
Fuel Switching
Switching from high-carbon to low-carbon fuels reduces
carbon dioxide emissions generated during combustion.
There were no new reporters in the fuel switching
energy end-use category for 2003. Minnesota Power con-
tinued to report in 2003 on an ongoing project that
expanded the use of renewable biomass as a fuel. Minne-
sota Power operates the M.L. Hibbard / Duluth Steam
District No. 2 steam plant for the City of Duluth. The
facility provides process steam to a paper mill and a
recycled fiber plant. Acceptable fuels at the facility
include coal, natural gas, and wood waste. The plant has
sought to maximize use of renewable waste wood as a
fuel since 1991 and will continue the effort to the extent
thai: appropriate fuel is economically available. When
natural gas is economically available, natural gas is also
used to reduce consumption of subbituminous coal. Met
carbon dioxide emissions from burning wood waste are
significantly less than those from burning coal, because
the wood waste would otherwise be placed in landfills
or left to rot in the field. Hence, Minnesota Power
assumes that net carbon dioxide emissions from burning
waste wood in fids application are zero. Indirect emis-
sions are also significantly reduced, because waste wood
can form methane gas under moist, anaerobic landfill
conditions (however, avoided methane production from
waste wood decay was not reported for 2003}.
An additional benefit from the use of wood waste in the
M.L. Hibbard / Duluth Steam District No, 2 boilers is
that the ash formed during combustion of the wood
waste is an agriculturally beneficial product. Potassium
and alkalinity in !he wood ash make it useful as a fertil-
izer on farmers' fields. In this manner, most of the Hib-
bard facility ash produced while burning wood waste is
"disposed of" as a substitute for agricultural chemicals.
(Again, avoided indirect emissions from this agricul-
tural application of boiler ash were not reported for
2003.)
Minnesota Power also generates electricity at the M.L.
Hibbard facility. The high proportion of wood waste
burned at the facility results in lower carbon dioxide
emissions from Hibbard generation compared to many
coal-fired generation alternatives. Minnesota Power
sells renewable biomass sourced electricity to Wisconsin
Electric Power Company for use in its "Energy for
Tomorrow" program, Wisconsin Electric is presuming a
net zero carbon dioxide emissions base from its Hibbard
renewable biomass energy purchases. In reporting its
expanded use of renewable hiomass, Minnesota Power
increases the heat input from wood waste by the portion
used to generate power for Wisconsin Electric.
Minnesota Power, claims no benefit for this renewable
generation, allowing Wisconsin Electric to claim the
benefit based on avoided emissions from its other poxver
supply resources. For 2003, this project was reported to
have reduced coal usage by 812,072 million Btu and
direct carbon dioxide emissions by 76,252 metric tons.
Energy Effects of Urban Forestry
Urban forestry is the planting and maintenance of indi-
vidual trees within a city or community. Urban forestry
projects can reduce both carbon dioxide emissions and
energy expenditures for urban heating and cooling
requirements. General examples of such projects include
the planting of shade trees to reduce cooling require-
ments and windbreaks to reduce heating requirements.
Urban forestry projects can also sequester carbon, as dis-
cussed in Chapter 4.
There were no new urban forestry projects reported in
2003, although all 8 of the urban forestry projects
reported in 2002 continued to be reported, including
Pacificorp's Salt Lake City Urban Forestry Project, which
has been responsible for the planting of trees in residen-
tial areas that will provide shade to buildings and
reduce energy use for cooling. Approximately 900 large
trees and 400 small trees were planted throughout the
project. At maturity, the trees will be between 45 and 75
feet tall. In total, 112 trees were planted around sin-
gle-family homes with 2 trees per home, 962 trees were
planted around single-family homes with 1 tree per
home, and 170 trees were planted around multi-family
dwellings and a school. The energy savings from this
urban forestry program probably would not have
occurred in the absence of the program. Although many
homeowners plant trees on their own. it is unlikely that
they would plant trees to optimize energy savings. For
2003, Pacificorp reported that the project produced
direct emission reductions of 106 metric tons carbon
dioxide equivalent.
Industrial Power Systems
Industrial power system projects are designed to reduce
emissions from industrial power systems through effi-
ciency improvements sxich as boiler system upgrades
and replacements and turbine optimization. There were
no new reporters or projects in the industrial power sys-
tem category for 2003.
Other
There was one new project in the other project type cate-
gory for the 2003 reporting year. The other project cate-
gory captures the effects of energy end-use projects that
cannot be meaningfully included in another category.
Lehigh Cement Company (formerly Lehigh Portland
Cement Company) reported a new project that involved
the modernization and reconfiguration of its kilns. Two
Energy Information Administration / Voluntary Reporting of Greenhouse Gases 2003
35
-------
long-dry kilns were converted to two one-stage pre-
heater kilns, which produce more heat and are more
energy efficient. This project was reported to have
reduced coal use by 376,260 million Btu and direct emis-
sions by 22,854 metric tons carbon dioxide equivalent.
Another project in the "other" category is an invest-
ment project reported by Ameren Corporation. The
EnviroTech Investment Fund was created to support
development and disbursement of energy-efficient tech-
nologies. Advent International Corporation manages
EnviroTech in cooperation with the Edison El ectric Insti-
tute. Advent International evaluates and underwrites
the development of promising energy' efficiency tech-
nologies. Union Electric (an Ameren Corporation com-
pany) has committed to invest tip to $5 million in this
program, which is currently 1.5.9 percent of the total
investments in the EnviroTech Investment Fund. The
remaining S4.1 percent of the Fund's capitalization
comes from other participating investor-owned electric
utilities. Ameren Corporation reports that it intends to
make additional investments in the Fund over me next
several years. Sufficient information is not available to
describe each type of activity supported by EnviroTech
that results in emission reductions.
Reducing Emissions
from Transportation
The transportation sector is the largest contributing
end-use sector to total U-S. energy-related carbon diox-
ide emissions, accounting for 32 percent of emissions in
2003, Direct use of petroleum fuels in mobile source
applications accounts for 98 percent of transportation
sector carbon dioxide emissions, and most of the
remaining 2 percent results from the consumption of
natural gas. Indirect emissions resulting from the use of
purchased electricity account for about; 0.2 percent of
transportation sector emissions. Carbon dioxide emis-
sions from the transportation sector increased by 19 per-
cent between 1990 and 2003, from 1,570 million metric to
1/875 million metric tons carbon dioxide.34 The increase
was caused by increases in both the average number of
miles driven per vehicle and the total number of vehicles
on the road. The average number of miles driven by pas-
senger cars increased by 13 percent between 1990 and
2001,3S and the number of vehicles on the road increased
by 22 percent between 1990 and 2001.3& Emissions
growth was moderated somewhat by an increase in
average US. vehicle fleet fuel efficiency from 16.4 miles
per gallon to "17.0 miles per gallon between 1990 and
2002.37
For 2003, 66 transportation projects were reported on
Form ElA-1605 by 35 entities. All but 5 of the reporters
were electric generation companies. One of She
non-generators was CLE Resources, a subsidiary of an
energy services company; the others were AT&T (tele-
communications), 'line Burlington Northern and Santa
Fe Railway Co. (transportation). Blue Source, LLC
(emissions offset brokerage), and Arizona Portland
Cement. Of the 66 transportation projects reported on
Form ElA-1605 for 2003,61 have been reported in previ-
ous years. Five new projects were reported for 2003:
•The Burlington Northern and Santa Fe Railway Co.
reported on fuel efficiency improvements, including
replacing old, inefficient locomotives, using newer
roller bearing technology oft rail cars, positioning
trailers on intermodal trains to reduce drag, adjust-
ing train speeds to optimize delivery schedules and
fuel efficiency, and using friction reducers on the
wheel-to-rail interface.
•Blue Source, LLC, an emissions offset broker,
reported on the following three transportation
actions for which it owns title to the associated green-
house gas reductions:
- An empty-mile reduction project conducted by
J.B. Hunt Transport Services, Inc.3*
- An idling reduction program initiated by a major
trucking company to reduce emissions from
unnecessary fuel consumption.
- An intermodal freight transport project that com-
bines the most efficient aspects of truck and rail
modes to carry cargo over long distances. The goal
of the project is to expand the transportation of
freight by trains, which are more than three times
as efficient as trucks on a ton-mile basis.
s
34Bnergy Information Administration, Emissions of Greenhouse Gases in the United Status 200.3, DOE/F.IA-0573{2003) (Washington, DC,
December 2004), web site wwvMda.doe.gov/aiaf/1605/ggrpL
35Energy Information Administration, Annual Energy Review 2003, DO£/EiA-0384(20G2) (Washington, DC, September 2004), p. 57, web
site www.eia.doe. gov/ aer.
36U,S. Department of Transportation, Bureau of Transportation Statistics, National Transportation Statistics 2003 (Washington, DC, March
2004), Table 1-11, web site w%v^\bts.gov/pubiicaHons/natu)TALtransportstiori_statistics/2003/htmi/table_Ol_ll.ht!nl
37Energy Information Administration, Annual Energy Review 2003, DOE,'KIA-0384(2003) (Washington, IX', September 2004), p. 57, web
site www.pia.doe.gov/aer.
38Empty miles are the miles traveled by a vehicle without cargo between dropoff and pickup locations.
Energy Information Administration / Voluntary Reporting of Greenhouse Gases 2003
-------
t
•Consolidated Edison reported on the use of B20, a
mixture of 80 percent petroleum diesel fuel and 20
percent biodiesel,39 by at least 122 fleet vehicles.
Of the 66 transportation projects reported for 2003, 35
(53 percent) were affiliated with the Department of
Energy's Climate Challenge program..
Tables 12 and 13 show historical trends in the reporting
of transportation projects to the Voluntary Reporting
Program. The projects reported for 2003 fall into three
broad categories:*0
• Alternative fuel use, 31 projects (47 percent)
•Travel reduction, 26 projects (39 percent)
•Vehicle efficiency improvements, 9 projects (14
percent).
t
Table 12. Number of Projects and Emission Reductions Reported on Form EIA-1605 for Transportation
Projects by Project and Reduction Type,.Data Years 1934-2003
Year
1994
1995
1996
1397
1993
1999
2000
2001
2002
2003
Number of Projects
Vehicle
Efficiency
3
(5
7
9
9
10
9
5
5
9
Travel
Reduction
6
14
15
20
23
25
25
21
26
26
Alternative
Fuels
18
21
26
27
23
30
32
28
30
31
Total
26
40
47
55
58
62
64
53
60
66
Emission Reductions
(Metric Torts Carbon
Direct
4,203
22,660
28,813
32,283
25,085
43,499
22,611
44,996
41,966
2,459,095
Dioxide Equivalent)
Indirect
6,346
54,061
54,043
95.782
89,174
282.257
134,519
88,023
161.156
134,867
Notes: Project totals do not equal sum of components;, because some projects are counted in more than one category. Table?
excludes data from confidential reports.
Source: Energy Information Administration, Form EIA-160S.
Table 13. Emission Reductions Reported on Form EIA-1605 for Transportation Projects by Project and
Reduction Type, Data Years 1994-2003
uxide Equivalent
[ Vehicle Efficiency [
Year f
1994
1995
1996
1997
1993
1999
2000
2001
2002
2003
Direct ]
1,244
18,148
18,647
20,989
18,436
14,671
53
-1,109
15
2,387,335
indirect |
5,651
36,137
38,602
48,213
70,527
1 74,553
66,324
51,905
48,160
49,543
Travel Reduction j Alternative Fuels
Direct
1,170
2,1 79
5,427
8,753
3,110
6,077
8,548
13,059
10,920
38,951
i indirect
_
16,461
13,903
45,227
15,923
106,841
67.404
34,050
103,912
83,156
Direct
1,956
2,463
4,847
2,582
3,632
22,866
14,021
33,053
31,030
32,810
Indirect
6S5
1,485
1,546
2,352
2,746
2,148
2,306
2,068
4,085
2,168
Notes: Table excludes data from confidential reports.
Source: Energy information Administration, Form EIA-1605,
39Biodiesel is any liquid biofiiel suitable as a diesel fuel substitute or diese! fuel additive or extender. Biodiese! fuels are typically made
from oils such as soybeans, rapeseed, or sunflowers, or from animal tallow. Biodiesel can also be made from hydrocarbons derived from
agricultural products such as rice hulls.
*^The sum of projects in each category exceeds the total number of projects, because some projects are counted in more than one cate-
gory.
Energy Information Administration / Voluntary Reporting of Greenhouse Gases 2003
37
-------
The primary effect of the transportation projects
reported was to reduce emissions of carbon dioxide.
Reductions in emissions of nitrous oxide or methane
were also reported for 7 projects. For 18 of the 66 projects
reported, either reductions did not occur in 2Q03 or they
were not estimated.41
Direct reductions totaling 2.5 million metric tons carbon
dioxide equivalent were reported for 30 transportation
projects in 2003 (Table 12). This represents a significant
increase from the 41,916 metric tons carbon dioxide
equivalent in direct reductions reported for 2003. The
Burlington Northern and Santa Fe Railway Co. ('(,0 mil-
lion metric tons carbon dioxide) and Blue Source, LLC
(1.4 million metric tons carbon dioxide equivalent)
reported four new projects that were responsible for the
increase.
Indirect emission reductions in 2003 totaling 134,867
metric tons carbon dioxide equivalent were also
reported for 24 transportation projects. The sources of
the reduced emissions included "fuel cycle" emissions
associated with production., refining, transportation,
and distribution of fossil fuels; conventional vehicles
displaced by customer-owned natural gas vehicles refu-
eled by natural gas distribution companies; employee
vehicles affected by reporter-sponsored travel reduction
programs, such as carpooling; and railroad-owned loco-
motives hauling coal in lightweight aluminum rail cars
owned by electric utilities. Indirect reductions for 2003
were 16 percent lower than those reported for 2002, due
primarily to fewer reductions reported for three pro-
jects: an AT&T telecommunication project, a Public Ser-
vice Enterprise Group employee trip reduction effort,
and a TXU carpool program.
Using Alternative Fuels
Of the transportation projects reported for 2003,47 per-
cent involved alternative-fuel vehicles (AFVs). These
projects, however, accounted for only 1 percent of the
direct reductions and 2 percent of the indirect red actions
reported for transportation projects. In general, die
reported reductions for AFV projects were small, with
reductions in excess of 1,000 metric tons carbon dioxide
equivalent being reported for only one project.
AFV projects involved a variety of fuels, including natu-
ral gas, electricity, propane, B20, E85 (a blend of 85 per-
cent ethanol and 15 percent gasoline), and MS5 (a blend
of 85 percent methanol and 15 percent gasoline).
Electricity was the alternative fuel included in 11 project
reports. Southern California Edison's electric vehicles
reportedly logged 1.8 million miles in 2003., more than 10
times the 174,000 miles reported for 1996. The Los
Angeles Department of Water and Power (LADWP)
reported operating 258 electric vehicles in 2003, up from
204 in 2001 and 18 in 1996. Southern Company reported
operating a fleet of 190 electric vehicles in 2003, includ-
ing cars, trucks, neighborhood electric vehicles, and
buses; however, the current size of Southern Company's
electric fleet is less than one-half the 484 vehicles it oper-
ated in 2000. Operation of compressed natural gas
(CNG) vehicles was reported for 15 projects, and 3 utili-
ties reported operating fleets of more than 100 CNG or
dual-fuel CNG/gasoline vehicles-42 in 2003: PG&E Cor-
poration (6,010 vehicles). We Energies (654 vehicles),
and NJiSource (458 vehicles).
Eight AFV projects reported for 2003 involved fuels
other thnri natural gas and electricity. Activity in 2003
was reported for four of those projects.*3 Exelon Corpo-
ration reported continued use of E85, propane, and B20.
Cinergy reported continued use of E85 and B20 in 2003,
but it has stopped using propane in company vehicles.
Conectiv Delmarva Generation reported using a B20
fuel that included soy-based biodiesel in its fleet vehicles
in 2003.
Reducing Vehicle Travel
Travel reduction, which includes such activities as
carpooling and vanpooiing, mass transit, telecommut-
ing, and service efficiency improvements, was reported
for 26 projects for 2003—accoxinting for 2 percent of the
direct reductions and 62 percent of the indirect reduc-
tions reported for transportation projects in 2003. The
38,951 metric tons carbon dioxide equivalent, of direct
reductions reported for 2003 was more than 3 times the
10,920 metric tons reported for 2002. This increase in
direct emission reductions was largely attributable to
the new project reported by Blue Source, LLC, involving
reduction in empty miles traveled by a trucking com-
pany. In contrast, indirect emission reductions reported
for travel reduction projects for 2003 were 24 percent
(25,756 metric tons) lower than those reported for 2002,
primarily due to lower reductions being reported for
AT&T's telecommuting program.
Of the 26 projects reported in the travel reduction
category, 12 involved carpooling or vanpooling, 9
increased mass transit ridership, 5 reduced employee
t
41 in some cases, reductions for the project may have been reported for, years before 2003. In other cases, the reductions were not esti-
mated due to the lack of data or other difficulties in quantifying the effects of the project. Entities may elect to report projects without report-
ing reductions to make a public record of the /act that they have conducted an activity in fulfillment of a commitment made- under a
voluntary program such as Qitnate Challenge.
42CNG dual-fuel vehicles are capable of operating on natural gas or gasoline.
**Two other reporters continued to submit information on projects that involved consumption of propane and MS5 in previous years;
however, the projects w«re inactive in 2003.
s
t
Energy Information Administration /Voluntary Reporting of Greenhouse Cases 2QQ3
-------
•T't
1 I
vehicle use through telecommuting, 4 increased service
efficiency for freight or service vehicles, and 9 involved
other actions, such as work week compression, video-
conferencing, use of bicycles for electric or gas meter
reading, promotion of employee commuting by bicycle
or walking, and automation of electric or gas meter read-
ing in areas of low population density.44
AT&T reported the largest travel reduction project, a
telecommuting program that reportedly reduced indi-
rect emissions by 48,988 metric tons carbon dioxide
equivalent. Reductions of more than 5,000 metric tons
carbon dioxide equivalent in 2003 were also reported for
the following travel reduction projects:
•The Blue Source, LLC, empty miles reduction pro-
gram reduced direct emissions by a reported 26,649
metric tons carbon dioxide equivalent.
•LADWP reported on its employee carpooling and
vanpooling program (8,167 metric tons carbon diox-
ide equivalent indirect emission reductions).
•Southern Company reported on its carpooling and
mass transit programs (6,040 tnetric tons carbon
dioxide equivalent Indirect emission reductions).
•TXU reported efforts to reduce fleet and employee
vehicle use (6,556 metric tons carbon dioxide equiva-
lent direct emission reductions and 8,658 metric
tons carbon dioxide equivalent indirect emission
reductions).
•AT&T reported on its fleet cost reduction program
(5,715 metric tons carbon dioxide equivalent direct
emission reductions).
•CLE Resources reported its investment, through the
Edison Electric Institute's EnviroTech investment
fund, in McHugh Software, a company that devel-
oped software to improve routing for service vehi-
cles (6,582 metric tons indirect carbon dioxide
emission reductions from foreign and domestic
sources).
improving Vehicle Efficiency
Emission reductions were reported for 7 of the 9 vehicle
efficiency projects reported for 2003. Indirect reductions
were reported for 2 projects, both of which involved the
use of light-weight aluminum railroad cars to transport
coal. These projects, which were reported by electric
utilities, resulted in indirect emission reductions
because the locomotives using less fuel were owned by
the railroads. Ameren Corporation reported reducing
emissions by 2:1,576 metric tons carbon dioxide equiva-
lent, and Kansas City Power & Light Company reported
reducing emissions by 27,967 metric tons carbon dioxide
equivalent.
CLE Resources, a subsidiary of Cleco Corporation, con-
tinued to report its investment (through the EnviroTech
fund established by the Edison Electric Institute) in a
company that developed and commercialized a device
for monitoring and adjusting tire pressure on trucks to
achieve optimal fuel efficiency. CLE Resoxirces did not
report emission reductions for this project, clue to (he
unavailability of reliable data on the number of devices
sold.
^The total number of travel reduction projects is less than rhe sum of the projects in each subcategory, because some projects include
activities in more than one subeategory.
Energy information Administration / Voluntary Reporting of Greenhouse Gases 2003
39
-------
••fe
-------
4. Carbon Sequestration
Background
Carbon sequestration plays an important role in the
global carbon cycle. Green plants remove (sequester)
carbon from, the atmosphere through photosynthesis,
extracting carbon dioxide from the air, separating the
carbon atom from the oxygen atoms, returning oxygen
to the atmosphere, and using the carbon to make bio-
mass in the form of roots, stems, and foliage.
Globally, a very large amount of carbon dioxide—on the
order of 120 billion metric tons of carbon—is seques-
tered in biomass.45 At the same time, carbon is released
to the atmosphere from vegetative respiration, combus-
tion of wood as fuel, degradation of manufactured wood
products, consumption of biomass for food by animals,
and the natural decay of expired vegetation. The net
numerical difference, or flux, between carbon sequestra-
tion and release can be viewed as a measure of the rela-
tive contribution of biomass to the carbon cycle. World
flux associated with Earth's living matter is difficult to
measure, but biomass is thought to provide a net "sink"
equivalent to about 5.1 billion metric tons carbon diox-
ide per year.46
Forests can play an important role in offsetting human-
produced carbon dioxide emissions. On average, trees
are approximately 50 percent carbon by weight (oven-
dry basis, excluding water),47 The amount of carbon a
plant can sequester depends on a number of variables,
including species, health of vegetation, and age, but
can be quite large. For example, one large sugar maple
tree is capable of removing more than 450 pounds of
carbon dioxide from the atmosphere in a year. At that
rate, preserving approximately 31 trees per operating
automobile in the United States would offset all U,S.
automobile-related carbon dioxide emissions.48
Carbon sequestration on a national scale is substantial.
The U.S. Environmental Protection Agency, relying
heavily on the work of the U.S. Department of Agricul-
ture's U.S. Forest Service, estimates annual U.S. carbon
sequestration (generally defined according to the
guidelines of the Intergovernmental Panel on Climate
Change) at 691 million metric tons carbon equivalent,49
which offsets approximately 10 percent of annual U.S.
anthropogenic emissions of greenhouse gases.50
Projects Reported
For the 2003 reporting year, 51 entities reported projects
on Form EIA-1605 that involved forestry or natural
resoxirces mat sequestered carbon or reduced emissions
(Table 14). The reporters included 48 electric companies,
a private service organization providing reforestation
services to corporate clients, a petroleum company, and
a cement company. A total of 446 carbon sequestration
projects were reported for 2003, an increase of 8 percent
from 2002. Carbon sequestration projects were the third
most numerous type reported on the long form, repre-
senting 23 percent of the projects reported for 2003.
Methane reduction (470) and electricity generation (464)
projects outnumbered carbon sequestration projects.
The reported carbon sequestration projects were dis-
persed over a wide geographic area, including 33 States
and 8 foreign countries. A total of 377 domestic and 69
international forestty projects were reported; 33 of the
foreign projects represent individual equity shares in a
single forest preservation project, the Rio Bravo Carbon
Sequestration Pilot Project, in Belize.
t
^Intergovernmental Panel on Climate Change, Climate Ciiange 2001: Tiie Scientific Basis (Cambridge, UK: Cambridge University Press,
20011 p. 183.
"^intergovernmental Pane! on Climate Change, Climate Change 2001: Tte Scientific Basts (Cambridge, UK: Cambridge University Frees,
2001), p. 39.
4*R,A. Birdsey, Carbon Storage and Accumulation in United States Forest Ecosystems (Washington, DC: USDA. Forest Service, 1992), p. 12.
48Average mileage and fuel consumption for passenger cars from Rnergy Information Administration, Annual Energy Review 2003,
DOE/EiA-C384(2003) (Washington, DC, September 2004), p. 57, web site www.eia.doe.gov /aer. Carbon dioxide emissions per mile driven
,md gallon of motor fuel .from U.S. Department of Energy, Sector-Specific Issues and Re]X)rtin% Methodologies Supporting the General Guidelines
for the Voluntary Reporting of Greenhouse. Cases Under Section 1605(b) of the. Kwrgy Policy Act of 1992, DOE/PO-OQ28 (Washington, DC, October
19941, Vol. 2, p. -119.
4%.S.Ertvirorimeraal Protection Agency, J«K«fory^^
DC, April 2004), p. 206, web site hllp://yosemite,epa.gov/oar/'globalwarrniiig.nsf/corstent/l^soi!rceCenterPublirat!onsGHGEmissioiis
USEmissionsInventoty20C'4.html.
5aU,S. anthropogenic greenhouse gases emissions were 6,936 million metric Ions carbon dioxide equivalent in 2003. Energy information
Administration, Emissions of Greenhouse Gases HI the. United States 20(73, DOE/EIA-0573(2DQ3) (Washington, DC, December 2004), p. ix, web
sitewww.eia.doe.gov/oiaf/i605/ggrpt.
Energy Information Administration / Voluntary Reporting of Greenhouse Gases 2003
41
-------
Carbon sequestration reported on Form EIA-1605
remained about the same in 2003 as it was in 2002, at 7.7
million metric tons carbon dioxicie equivalent (Table 14).
Of the 446 sequestration projects reported for 2003, most
(354 or 79 percent) involved some kind of tree planting,
which included afforestation, reforestation, urban for-
estry, and woody biomass production or agroforestry
(Table 15}.51 These projects accounted for 15 percent of
the sequestration (and related direct emission reduc-
tions) reported for 2003. Although only 39 forest preser-
vation projects were reported, they accounted for 88
percent of the sequestration reported for 2003 (Table 16).
Of the total sequestration for 2003, 89 percent was
reported on behalf of foreign projects, including some
very large forest preservation initiatives.
Urban forestry projects, involving the planting of trees
in urban and suburban areas, accounted for 8 percent (34
projects) of the sequestration projects reported for 2003.
Urban forestry projects are typically much smaller than
forestry projects undertaken in rural or wilderness
areas. The average carbon dioxide sequestration
Table 14.
Number of Projects, C
for Sequestration Pro
I
I Number of
Data Year j Reporters
1994 .. .
1985 . . .
1896 , . ,
1997 , .
1998 .. .
1999 . . .
?000 . . .
2001
2002 <*' .
2003 . . .
23
44
51
56
57
53
53
51
51
51
arbon Sequestered, and Net Reductions Reported on Form EiA-1605
ects, Data Years 1994-2003
Sequestration
Number of (Metric Tons Carbon
Projects Dioxide Equivalent)
53 746,545
175 1,190,754
175 8,676,591
279 9,849,807
321 12,490,927
401 9,823,599
468 9,011,117
369 7,956,823
413 7,296,516
446 7,730,969
Net Emission
{Metric Tons Carbon
Direct \
189
378
1,291
6,160
716
3.406
1,041
1,114
1.875
1,860
Reductions
Dioxide Equivalent)
Indirect
23,127
48.730
32,215
IP-) Revised data.
Source: Energy Information Administration, Form EIA-1605.
Tabie 15, Number of Sequestration Projects Reported on Form EIA-1605 by Project Type, Data Years
1994-2003
_ __ ___ _____ ___ ____
Tree Planting
Afforestation and Reforestation .. 36 113
Urban Forestry 8 17
Woody Biomass Production
and Other Agroforestry 8 14
Unspecified — 2
Subtotal 44 131
Forest Preservation 2 22
Modified Forest Management ,.,. 12 20
Conservation Tillage 1 1
Other Projects 3 4
.....IS*^.™.:.™:.™.:..:.™.:.™™.:.:..:.:..:.:.^ .§?..IIL
(R) Revised data.
Notes: Project totais do not equal sum of components, because some projects are counted in more than one category. In last
year's report, "Unspecified" tree planting projects were inciiided in the "Other Projects" category.
Source; Ene.-gy Information Administration, Form EIA-16Q5.
31 Afforestation is the planting of new forests on lands that have not been recently forested. Keforestiott is the repiantir.g of forests on
lands that have recently been harvested or otherwise cleared of trees. Urban forestry is Ihe planting of trees individually or in small groups
in urban or suburban settings. Agroforestry is the cultivation of trees in plantations for fuel or fiber.
111
21
2
1
133
29
10
1
5
175
175
23
3
—
199
38
33
2
10
279
205
23
3
1
236
43
41
2
4
321
288
28
3
—
318
38
42
2
5
401
344
31
3
—
376
42
44
2
5
468
251
33
3
—
285
37
41
2
5
369
289
33
3
—
323
38
47
1
5
413
320
r34
2
—
354
39
48
1
5
446
f
42
Energy information Administration / Voluntary Reporting of Greenhouse Gases 2003
-------
t
reported per urban forestry project for 2003 was just 517
metric tons. In contrast, tree planting projects in rural or
wilderness areas generally are much larger, accounting
for. 16 of the '19 projects that sequestered more than
10,000 metric tons carbon dioxide each in 2003 (Figure
12), For the 445 projects for which data were reported,
average sequestration in 2003 was 1.6,456 metric tons
carbon dioxide per project.
i
Almost all (414 or 93 percent) of the reported sequestra-
tion projects were undertaken in part to fulfill commit-
ments made under the U.S. Department of Energy's
Climate Challenge-program.52 Twenty-eight (28) of the
investors in the UtiliTree Carbon Company53 each sub-
mitted reports on the 10 projects that were operational in
2003. Ail the investors reporting were also participants
in Climate Challenge. In addition, 36 sequestration
projects reported on Form EIA-1605 for 2003 were
undertaken as part of the U,S. initiative on Joint Imple-
mentation (USIJT). Established under the Climate
Change Action Plan (CCAP);54 the USIJI is a pilot pro-
gram that seeks to encourage foreign-based emission
reduction and carbon sequestration projects conducted
by 17.S. and non-U.S. partners. The USIJI program lias
been inactive since 2000. The projects reported represent
individual partner shares in two USIJI-approved for-
estry projects: the Kio Bravo Carbon Sequestration Pilot
Project (Belize) and the Noel Kempff Mercado Climate
Change Action Project (Bolivia).
Figure 12, Carbon Sequestration Projects
Reported on Form EIA-1605 by Amount
of Carbon Sequestered, Data Year 2003
Metric Tons Carbon rJHQXj^__Equiyajent
More Than 1.000,000 12
100.000 hi 1,000,000 12
10.000 to 100,000
1,000 to 10,000
100 to 1,000 |
10 to 100
0 to 10
119
140
50
150
75 100 125
f of Projects
Source: Energy Information Administration, Form EIA-1605,
620.4
1.1
237.3
1.3
322.4
1.9
449.0
. 5.3
590.6
5.8
628.0 637.9
10.5 11.2
676.1
14.4
711.7
17.6
Table .16. Carbon Sequestration Reported on Form EIA-1605 by Project Type, Data Years 1994-2003
(Thousand Metric Tons Carbon Dioxide Equivalent) '
""" „„..„...„„, Jte^^^
Tree Planting
Afforestation and Reforestation..
- Urban Forestry
Woody Bicrnass Production
and Other Agroforeslry
Unspecified , ;
Subtotal
Forest Preservation
Modified Forest Management....
Conservation Tillage
Other Projects
Total ,
726.8
0.2
3S6.6
727.0
73.0
363.8
4.3
2.8
213.9 1,964.6 1,962.3 1,962.3 503.2 392.5 425.7 428.0 425.4
7,0 « .... 0.1
627.7 2.188.1 2.263.6 2,393.6 1,077.3 1,006.4 1,056.4 1,097.6 1,135.7
615.8 6,546.5 7,545.5 10,073.4 8,823.4 7,879.6 6,804.3 6,055,9 6,469.6
366.2 93.6 148.3 167.9 164.6 74.0 51.9 98.9 81.5
4.3 3.3 8.5 8.5 8.5 11.9 4.4 4.4 4.4
3,1 4.1 44.9 . 58.9 53.1 59.1 59.8 59,7 59.8
_ ......... ..^. ... ,A 746.5 1,190.8 8,676.6 9,849.8 12,490.9 9,623.6 9,011.1 7.956.8 7,296.5 7,730.9
Revised data.
'Less than- SO metric tens. ,
Notes: Project totals do not equal sum of components, h'ecsuse some' projects are counted in more irian one category. In last
year's report, "Unspecified" tree planting projects were included in the "Other Projects* category.
Source: Energy Information Administration, Form EI/V1 605.
limate Challenge program, established in 1994, focused on commitments by electricity generators to reduce, avoid, or sequester
greenhouse gases by the year 2000. Because its focus was on the year 2000, the Climate Qiallenge program is no longer active. It has been
replaced by Power Partners9"1, which is the electric power industry's vehicle for participating in President Bush's Climate VISION initia-
tive.
53The UtiliTree Carbon Company, a consortium of 41 Norm American electric utility companies investing in forestry projects Qua
sequester carbon, was established under the Climate Challenge Program. It is administeied by the Edison Electric Institute's (EEl's) Forest-
Carbon Management Program, which has identified and sponsored 10 ongoing domestic and international forestry projects. EF.I has estab-
lished a new program, PowerTree, to coordinate electric power industry sponsorship of forestry projects through Power Partners'** for Cli-
mate VISION.
^President William J. Clinton and Vice President Albert Gore, Jr., The Climate. Change Action Plan (Washington, DC, October 1993),
Appendix (I, web site www.gcrio.org/USCCAP/tochtml,
Energy Information Administration /Voluntary Reporting of Greenhouse Gases 2(103
43
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Afforestation and Reforestation
Of the sequestration projects reported for 2003, 320 (72
percent) involved either afforestation or reforestation.
The carbon sequestration and emission reductions
reported for these projects totaled 0.7 million metric tons
carbon dioxide, representing 10 percent, of th.e total
sequestration reported for 2003. All the afforestation and
reforestation projects reported for 2003 were domestic.
American Electric Power, Inc. (AEP), a large inves-
tor-owned utility, accounted for the largest number of
afforestation and reforestation projects, submitting 60
(19 percent) of the projects in this category for 2003. The
AEP projects, all of which were afforestation projects,
sequestered a reported 102,810 metric tons carbon diox-
ide in 2003. AEP reported 4 new domestic afforestation
projects initiated in 2003, which sequestered a reported
2,121 metric tons carbon dioxide during the year.
Members of UtiHTree Carbon Company, a nonprofit
consortium of 41 North American electric utilities,
reported on 8 afforestation projects, including the West-
ern Oregon Carbon Sequestration Project and 7
bottomland hardwood restoration initiatives in Louisi-
ana, Arkansas, and Mississippi lhat are intended to con-
vert marginal agricultural land to forest: the Mississippi
River Valley Bottomland Hardwood Restoration, Upper
Ouachita Rivet Valley Bottomland Hardwood Restora-
tion, Overflow Bottomland Hardwood Forest Restora-
tion Project, St. Catherine-NFWF, Bayou Cocodrie
Bottomland Hardwood Forest Restoration, St.
Catherine-EST, and St. Francis River Carbon Offset. The
following afforestation and reforestation projects were
reported for the first time for 2003.
5
The St. Francis River Carbon Offset Project, shares of
which were reported by 28 UtiliTree Carbon Company
partners, involves the restoration of 405 acres of
bottomland hardwood forest using native tree species.
The project site is on privately owned, marginal agricul-
tural farmland in Lee County, Arkansas. Sequestration
totaling 279 metric tons carbon dioxide equivalent was
reported for 2003.
American Electric Power, Inc., reported on projects
AEP-AGSPOIL-2003 and AEP-Private Lands-2003.
AEP-AGSPOIL-2003 is an afforestation project on 1,089
acres of reclaimed mined grassland. AEP planted a total
of 885,360 seedlings in 2003, including green ash; white
ash; sycamore; pidoliy pine; loblolly pine; white oak; red
oak; bur oak; sawtooth oak; black locust; and black
alder. AEP-Private Lands-2003 involves financial assis-
tance provided by AEP to private landowners who want
to plant trees on their property in return for any associ-
ated greenhouse gas reduction benefits. These agree-
ments are in 45- or 70-year durations, depending on the
species planted and the nature of the site. The 2003
plantings involved afforestation of marginal agriculture
cropland previously used for grain, hay, or cattle pro-
duction. The species planted include white pine, white
ash, green ash, sycamore, but oak, white oak, and red
oak. Together, these projects sequestered a reported
2,088 metric tons carbon dioxide equivalent in 2003.
ESI Florida Longieaf Pine Restoration, reported by Envi-
ronmental Synergy, Inc., is located in the WithJacoochee
State Forest managed by the Florida Division of For-
estry. Native longleaf pine trees were planted in this
70-year project, which, beyond sequestering carbon, was
designed to help create large forested blocks, rejoin frag-
mented forests, and create wildlife corridors for the ben-
efit of neotropical migrator}' birds, waterfowl, and other
animals such as deer and turkey. Carbon sequestration
values were not estimated for this project.
DTE Energy/Detroit Edison reported on projects called
"Six Lakes-2002" and "Miscellaneous Tree Plantings-
2003." For Six Lakes-2002, DTE Energy/Detroit Edison
planted trees on the site of the Six Lakes-Taggert Com-
pressor Station, which is owned by Michigan Consoli-
dated Gas Company (a subsidiary of DTE Energy). The
planting in 2002 consisted of 80,000 red pine seedlings
planted on 90 acres and 20,000 white spruce .seedlings
planted on 30 acres. These plantings reportedly seques-
tered 489 metric tons carbon dioxide equivalent in 2003.
Entergy Services, Inc., reported on projects called "Little
Gypsy Plant Reforestation" and "Willow Glen Plant-
Reforestation," which involved tree plantings at Entergy
power plant sites. The former involved the planting of
20,000 nuttiill oak, cypress, willow oak, green ash and
pecan saplings and seedlings on 44 acres. The latter
included the planting of 70,577 bottomland hardwoods
on 234 acres, including the following species: water oak,
rtuttall oak, cottonwood, cherrybark oak, pecan,
sweetgum, shumard oak, cow oak, sugarberry, green
ash, and sycamore. These efforts sequestered a reported
462 metric tons carbon dioxide equivalent in 2003.
Urban Forestry
A total of 24 reporters, all of which were electric utilities,
reported 34 urban forestry projects for 2003. For the 34
projects, total sequestration of 17,565 metric tons carbon
dioxide was reported for 2003 (Table 16). Urban forestry
projects are unique, in that under some circumstances
they can reduce energy consumption as well as seques-
ter carbon. Shade trees planted near buildings reduce
summer air conditioning requirements; in addition,
trees can act as windbreaks, reducing heating needs in
the winter. Although the emission reductions associated
with energy effects of urban forestry can be several times
the sequestration benefits on a carbon dioxide equiva-
lent basis, they are difficult to estimate. As a result, no
energy-related emission reductions were submitted for
2003.'
I
I
f
44
Energy Information Administration /Voluntary Reporting of Greenhouse Gases 2003
-------
s
One new iirban forest!}' project was reported for 2003.
DTE Energy/Detroit Edison reported the planting of
3,082 trees, which were mostly white sprnce, fir, pine,
beech, oak, maple and birch. This project sequestered 5
metric tons carbon dioxide equivalent in 2003.
Forest Preservation
Forest preservation projects sequester carbon by avoid-
ing the harvesting of timber or clearing of land and, thus,
preventing the release of stored carbon. For 2003,39 for-
est preservation-projects were reported by 31 reporters;
however, the vast majority (33) of these projects were
reported separately by participating electricity genera-
tors as shares in the Rio Bravo Carbon Sequestration
Pilot Project in Belize, held independently or through
the UtiliTree Carbon Company. Also, 3 reporters pro-
vided information on their shares in the Noel Kempff
Mercado Climate Action Project in Bolivia. No new for-
est preservation projects were reported for 2003.
The two largest forest preservation projects were
reported by AES Hawaii and AES Shady Point, sxibsid-
iaries of the AES Corporation. ATiS Hawaii reported on
the Mbaracayu Conservation project in Paraguay, and
AES Shady Point reported on the OXFAM America
Amazon project in Bolivia. Together, the two projects
sequestered a reported 6.15 million metric tons carbon
dioxide in 2003, representing 95 percent of the total
sequestration reported for forest preservation projects
(6.5 million metric tons carbon dioxide equivalent).
The Mbaracayu Conservation, project is designed to off-
set carbon dioxide emissions from the AES Hawaii
plant, a 180-megawatt circulating fkiidized-bed coal-
fired cogeneration plant on the island of Oahu, Seques-
tration of carbon is accomplished through the planting
of fruit trees and cash-producing indigenous trees in the
143,000-acre Mbaracayu forest tract, which, according to
AES, would have been sold to a timber company in the
absence of the project
AES Shady Point describes the OXFAM America Ama-
zon Project as an innovative project to protect the tropi-
cal forest in the Amazon regions of Peru, Ecuador, ami
Bolivia. The project, which is being conducted in cooper-
ation with national indigenous groups, OXFAM Amer-
ica, and the World Resources Institute (WK1), is
intended to offset carbon dioxide emissions from the
AES Shady Point plant in Oklahoma. The project will
support efforts by indigenous grottps to gain control
over their lands and to develop sustainable resource
extraction plans for the forest, thus,avoiding tropical
deforestation. WRI estimates that over '10 years the
project would prevent the deforestation of 1.2~million
hectares and avoid emissions of at least 233 million met-
ric tons carbon dioxide equivalent,
American Electric Power, BP America, and PacifiCorp
reported on the Noel Kempff Mercado Climate Action
Project in Bolivia, which was accepted by the USIJI in
November 1996. The project, which involves me preser-
vation of 634,286 hectares of land on the southern and
western boundary of the Noel Kempff Mercado
National Park by incorporating it inio the park, includes
the following components: (1) carbon dioxide emission
reductions through the cessation of logging activities
arsd the protection of forest land from conversion to agri-
cultural use; (2) protection, regeneration, and preserva-
tion; and (3) leakage prevention,55 The sequestration
reported for this project for 2003 totaled 243,660 metric
totis carbon dioxide.
The Rio Bravo Carbon Sequestration Pilot Project, a for-
est preservation project in Belize, was reported by 28
utilities. Begun in 1995, the project is being undertaken
through a partnership between Wisconsin Electric,
Detroit Edison, Cinergy, PacifiCotp, and UtiliTree Car-
bon Company (which provided financial support), as
well as The Nature Conservancy and a Belizean non-
governmental organization, Programme for Belize. A
14,400-acre parcel of forest threatened by agricultural
conversion was secured, linking two forested Rio Bravo
properties. The project implemented a sustainable for-
estry management program on the entire Rio Bravo
Conservation and Management Area that aims to
increase carbon sequestration through improved forest
and timber management.
The entire Rio Bravo Carbon Sequestration Pilot Project
sequestered an estimated 20,412 metric tons carbon
dioxide in 2003, of which 19,890 metric tons (97 percent)
was reported to the Voluntary Reporting Program..5*
The reported carbon sequestration for this project was
estimated by defining a reference case that assumes a
profile of carbon releases that would have occurred if
the project had not been undertaken and the forest had
been converted to agriculture over a 5-year period
(1995-1999). The estimated carbon sequestration equals
the projected avoided carbon releases. To date, it has
been reported that: the entire project has sequestered an
estimated 4.4 million metric tons carbon dioxide. The
UtiliTree Carbon Company estimates that most (91 per-
cent) of that carbon dioxide was sequestered dxiring the
5-year preservation phase of the project. Tire smaller
annual sequestration totals reported for years after 2000
represent the accumulation of carbon in the forest that
has occurred since the 1995 to 1999 preservation phase.
preserve, which would offset, the sequestration achievements of the project.
56Ten UtiuTree participants did r.oi .submit reports to the Voluntary Reporting Program for data year 2003, including one Canadian titii-
ity that is ineligible to report.
Energy Information Administration /Voluntary Reporting of Greenhouse Oases 2003
45
-------
We Energies reported its independent sponsorship of an
expansion to the Rio Bravo Conservation and Manage-
ment Area, which added 20,630 acres to the preserve.
We Energies reported that this preservation initiative
sequestered an estimated 54/131 metric tons carbon
dioxide equivalent in 2003.
Only one domestic forest preservation project was
reported for 2003, by Ailiant Energy, which reported
sfjquestering 1,597 metric tons carbon dioxide by main-
taining forested buffer iands around its power plants in
the Wisconsin River Valiey. This project involves the
management of more than 10,000 acres along the Wis-
consin River valley. Included in the land management
plan are access restrictions for tine preservation of osprey
and eagle habitats in the forest.
Modified Forest Management
Modified forest management involves the modification
of the management regimes of existing forests to
increase their carbon capture rates. Of the 43 modified
forest management projects reported for 2003, 2.9 were
associated with two related reduced-impact logging ini-
tiatives in Malaysia. The first initiative was a pilot pro-
ject reported by NEGT Corporation.5'' Started in 1992,
this project implemented new logging techniques with
the goal of reducing logging damage by 50 percent. The
new techniques include pre-cutting of vines, directional
felling, and planned extraction of timber on
impact-reducing skid trails. On the second initiative, 28
utilities reported their shares of a mil-scale project spon-
sored by the UtiliTree Carbon Company that introduced
reduced-impact logging practices to 2,422 acres of forest
beginning in 1997. The reported sequestration for the
second initiative was 9,405 metric tons carbon dioxide
equivalent in 2003.
American Electric Power reported the only new modi-
fied forest management project for 2003. This project
was conducted in predominantly upland central hard-
wood stands ranging from 30 to 50 years in age. The
stands were selectively harvested, removing over-
mature, mature, cull, and diseased trees, as well as other
stems as necessary to improve growing relationships
and maximize growth rates. The project is a continua-
tion of annual forest management efforts reported sepa-
rately since 1991. Including the 378 metric tons carbon
dioxide equivalent for the 2003 project, these efforts
together sequestered a reported 15,128 metric tons car-
bon dioxide equivalent in 2003.
Sequestration exceeding 10,000 metric tons carbon diox-
ide equivalent in 2003 was reported for the following
three previously reported modified forest management
projects:
•Southern California Edison Co. reported sequestra-
tion of 23,587 metric tons carbon dioxide equivalent
by its Net Growth of Timber at Shaver Lake project.
•Ailiant Energy's afforestation project also had a
modified forest management component. The entire
project sequestered a reported 19,958 metric kms car-
bon dioxide equivalent in 2003; however, AHtant
Energy did not report the sequestration quantity
attributable to modified forest management alone,
•American Electric Power's Guaraquecaba Climate
Action Project, located in Brazil, sequestered a
reported 11, 272 metric tons carbon dioxide equiva-
lent in 2003.
On a smaller scale, DTE Energy/Detroit Edison con-
ducted selective harvesting operations in previously
unmanaged wood lots in southeastern Michigan and
reported increasing sequestration by 1,398 metric tons
carbon dioxide equivalent in 2003.
Forest Plantations
Forest plantations include woody biomass production
and agroforestiy. Woody biomass p reduction is the cul-
tivation of trees in intensively managed plantations to
produce fuel or fiber. Agroforestry involves mixing trees
with annual crops to provide wind shelter, stabilize soil,
sequester carbon, and produce fuel wood and fruit
crops.
One of the two woody biomass production projects
reported for 2003 was Minnesota Power's Short Rotation
Woody Crop Establishment project. Contracts to plant
hybrid poplars were established with landowners
enrolled in the Conservation Reserve Program, Follow-
ing pre-planting site preparation, first commenced in
1994, the plantingof 2,800 acres was phased in over 1995,
1996, and 1997. 'The project area was reduced to 2,550
acres in 2003 after consideration of adverse conditions
such as seasonal flooding of low spots, insect damage,
and poor growth rates. Tile project sequestered a
reported total of 15,430 metric tons carbon dioxide
equivalent in 2003.
The other plantation project reported was an AES
Thames agroforestry project in Guatemala, which
s
•"'This project was originally sponsored by the New England Power Company and reported by its parent company. New England Elec-
tric System (NEES) Company. In August 1998, USGer. New England, Inc. (USGenNE) completed the acquisition of New England Electric
System (NEES) Company's hydroelectric and fossil power generation business previously operated by New England Power. As part of the
acquisition, the rights to the emission reductions and carbon sequestration achieved by this and other projects were transferred to
USGenNE. For 2000 through 2002, the activities previously reported by USGenNE were incorporated into the report submitted by its parent,
PG&E Corporation. For 2003, this project was included in a separate report submitted by NEGT (National Energy and Gas Transmission),
formerly known as PG&E National Energy Croup, a subsidiary of PG&E Corporation.
Energy Information Administration / Voluntary Reporting of Greenhouse Gases 2003
-------
t
involves establishing a plantation of fruit, pulp, and
fuelwood trees. For 2003, AES Thames reported seques-
tering 410,000 metric tons carbon dioxide equivalent for
this project.
Conservation Tillage and
Other Sequestration Projects
Not all the carbon sequestration projects reported for
2003 involved conventional forestry. Other projects
reported involved conservation tillage,58 reuse of utility
poles, and restoration of terrestrial, wetland, and marine
habitats. Six such projects were reported for 2003.
Exelon (formerly Commonwealth Edison and PECO)
reported on its Illinois Prairie Grass Plantings project, iri
which native prairie grasses are planted on various
properties in the utility's State system. In contrast to con-
ventional turf grass, the deep root systems of native Illi-
nois prairie grasses afford environmental benefits that
include reducing soil erosion and downstream flooding
and eliminating the need for irrigation, fertilizers, pesti-
cides, and herbicides. In addition, the deeper root sys-
tems sequester more carbon dioxide. For this project.
Exelon claimed responsibility for the sequestration of
718 metric tons carbon dioxide in 2003. In another pro-
ject. Exelon reused wood utility poles that are structur-
ally sound in order to avoid the harvesting of trees to
manufacture new utility poles. The utility pole reuse
project was reported to have sequestered 649 metric tons
carbon dioxide iri 2003.
Alliant Energy reported on a conservation tillage project
in south central Wisconsin that involved the conversion
of 956 acres of former corn and soybean row cropland to
a variety of other uses, including tall grass prairie,
wetlands, conservation tillage, and oak savanna. This
project reportedly sequestered 4,390 metric tons carbon
dioxide in 2003. Alliant Energy also reported on a habi-
tat restoration project in Wisconsin, which sequestered
3,493 metric tons carbon dioxide in 2003.
Other carbon sequestration projects include the reclama-
tion of 5.500 acres of wetlands in Texas and Louisiana by
Entergy Services, Inc., and the reclamation of 6 acres of
wetlands by Conectiv Atlantic Generation. The two pro-
jects sequestered a reported 54,885 and 12 metric tons
carbon dioxide in 2003, respectively.
s
^Conservation Ullage includes practices (such as reduced till or no till) that, compared to conventional tillage methods, increase carbon
storage on cropland.
Energy information Administration /Voluntary Reporting of Greenhouse Gases 2003
47
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s
f
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I
5. Reducing Methane Emissions
I
Introduction
U,S. methane emissions totaled an estimated 26.2 mil-
lion metric tons (601.9 million metric tons carbon diox-
ide equivalent) in 2003, representing 8.7 percent of total
U.S. greenhotise gas emissions. Methane emissions in
2003 were approximately equal to 2002 levels and 4.6
million metric tons lower than 1990 levels.59
Methane emissions have been decreasing since 1990.
Emissions from waste management and energy sources
have been reduced, while emissions from the other pri-
'. \
mary methane source, agriculture, have remained
nearly constant. In the waste management area, esti-
mated emissions from landfills—the second largest
source of methane after, natural gas systems—-have
dropped from 10.5 million metric tons in 1990 to 6.3 mil-
lion metric tons in 2003 as a result of a rapid increase in
methane recovery at landfills. Overall, methane recov-
er}' at landfills, due to tax credits, regulation, and high
natural gas prices have grown from about 1.3 million
metric tons in 1990 to 6,3 million metric tons in 2003.
Emissions from energy sources have also fallen, as a
result of reductions in methane emissions from coal
mining. Methane emissions from coal mines are esti-
mated to have declined from 4.2 million metric tons in
1990 to 2.9 million metric tons in 2003. To some extent,
the decline is attributable to an increase in methane
recovery at coal mines, from 0.3 million metric tons in
1990 to about 0.8 million metric tons in 2003.60
The Voluntary Reporting Program has seen a rapid
increase in reported methane emission reductions since
1994, The number of waste management projects
reported (primarily landfill gas projects) has increased
from 17 in 1994 to'425 in 2003. For the 2003 data year,
reduction activities were reported on Form EIA-1605 for
at least 341 separate landfills, up from 321 in 2002.
-------
methane emission reductions were reported for waste
treatment and disposal projects. The waste treatment
and disposal category included two very large projects
reported by DTE Energy and the Integrated Waste Ser-
vices Association (IWSA). DTE Energy reported 0.2 mil-
lion metric tons of indirect reductions from, multiple
landfill gas-to-energy systems reported as one large pro-
ject, and IWSA reported indirect reductions of 0.4 mil-
lion metric tons from the waste-to-energy facilities of its
members.
Reducing Methane Emissions
from Waste Treatment and
Disposal
Reducing emissions from waste treatment and disposal
sites was the most frequently reported method for low-
ering methane emissions in 2003. These projects made
up 90 percent of all the methane emission reduction pro-
jects reported, with 21 more projects reported for 2003
than for 2002. The principal reported method for reduc-
ing methane emissions from waste treatment and dis-
posal was landfill gas recovery (the capture of methane
generated during the anaerobic decomposition of
wastes in a landfill). The recovered methane may be
flared, piped to an end-use customer to be tssed as a fuel,
or used to generate electricity, which can reduce the
need for generation from other, more carbon-intensive
fuels. Other methods of lowering emissions from waste
treatment and disposal include reducing the volume of
waste reaching landfills through combustion or recy-
cling/ and capturing methane generated during anaero-
bic decomposition of organic material in wastewater.
The 425 waste treatment and disposal projects reported
for 2003 accounted for 2.4 million metric tons of direct
methane emission reductions and 1.0 million metric tons
of indirect reductions (Table 19). Of the 42.5 projects
reported, 412 achieved methane emission reductions at
landfills by capturing- methane from landfill gas gener-
ated at waste disposal sites, 5 lowered emissions
through diversion of wastes that would have emitted
methane during decomposition, and 8 captured meth-
ane from wastewater treatment facilities.
Recovery of Landfill Gas
As waste decomposes in a landfill, it produces a biogas
that is approximately 50 percent carbon dioxide and 50
percent methane, As a result, landfill gas is a potentially
t
Table 17. Projects Reported on Form EiA-1605 with Methane Reductions as the Principal Outcome
fay Project Type, Data Years 1994-2003
(Number of Projects)
Project Type
Waste Management and Disposal , .... .
Landfill Gas Recovery.
Wastewater Treatment
Waste Combustion
Agriculture ,
Energy Production and Consumption ....
Coal Minina
Natural Gas Production, Transmission,
- and Distribution
Total
[ 1994 j
17
14
2
1
3
a
2
6
28
1995
23
19
2
2
3
11
3
8
37
1996
44
40
2
2
3
13
4
g
60
1997
53
48
3
2
3
15
5
1Q
71
1998
90
80
5
s
4
28
17
11
122
13391
153
139
6
8
4
28
15
13
185
2000
350
337
8
5
S
28
14
14
383
2001
391
381
4
6
3
35
16
19
429
20Q2W
404
391
7
6
3
39
18
21
446
2003
425
41?
8
5
4
41
13
28
470
(R)- revised.
Note: Project totals (Jo not equal sum of components, because some projects are counted in more than one category.
Source: Energy Information Administration, Form EIA-1605. •
Table 18. Total Methane Emission Reductions Reported on Form EIA-1605, Ail Project Types,
Data Years 1994-2003
_{M
Type of
Reduction
1994
199S
199S
1997
1998
1999 ! 2000 i 2001 2002
2003
Direct 25,079 8,460 409.176 378,494 1,379,1621=564,9582,693,2963,546,4803,481,465 3,347,511
JM^L-..:..•..:..-..:......19.?.iBil J.i?llt?Il.ll?.L.9i8....§0.^??? ?5M1 ? .....8.?.!.!?.?4.. 897,465 1,009.4001,067,643 1.000,063
(R) = revised.
Source: Energy Information Administration, Form EIA-1605.
50
Energy Information Administration / Voluntary Reporting of Greenhouse Gases 2003
-------
1
valuable source of energy, with a heat content of about
500 British thermal units (Btu) per cubic foot, or about
half that of commercially marketed natural gas. Because:
of its relatively low Btu content and the presence of sev-
eral impurities, the typical method for using landfill gas
is to burn it for electricity generation rather than upgrad-
ing it for sale to a pipeline. The electricity generated is
then used on site or sold to the grid. The process lowers
methane emissions and reduces consumption of other
fuels for electricity generation. When the electricity gen-
erated displaces oil- or coal-fired generation, carbon
dioxide emissions are reduced. More recently, higher
natural gas prices have resulted in an increasing number
of projects that involve piping landfill gas for direct use.
in medium-Btu boilers, which also displaces fossil fuels.
For the 412 landfill gas recovery projects reported for
"2003, reported direct methane emission reductions
Figure 13. Methane Emission Reduction Projects
Reported on Form EiA-1605 by Type
and Size of Reduction, Data Year 2003
Metric Tons Methane
More Thiin
100,000
10,000 to
100,000
1.000 to
10,000
Less Than
1,000
Metric Tons Methane
Mom Than 't
100,000 jo
SO 100 ISO 200
lumber of Projects
250
Natural
and Coal Mining
10,000 to
100,000
1,000 to
10,000 8
Less Than
1,000
20
10 15
Number of Projects
Source: Energy Information Administration, Form EIA-1605.
totaled 2.4 million metric tons and indirect reductions
totaled 0.6 million metric tons. Of the projects reported,
170 recovered landfill methane for energy, 183 simply
flared the gas, 49 included both recovery for energy and
flaring, and 10 reported other activities.
Waste Combustion
When waste is diverted from a landfill through waste
combustion, methane emissions that would have
resulted when the waste decomposed at a landfill are
avoided. Five waste combustion projects were reported
for 2003. The preponderance of the methane emission
reductions reported for waste combustion are indirect,
because they typically occur at a landfill where diverted
waste would have decomposed to produce methane,
rather than at the site of the waste diversion activities.
Total indirect reductions for the five projects were 0.4
million metric tons methane (Table 19). The majority of
the reductions were reported by IWSA, which reported
reductions associated with the combustion of waste at
facilities owned by its members across the United States.
IWSA's total reported redttction of methane emissions
in 2003 was 0.4 million metric tons. Other methods of
reducing methane emissions from waste include recy-
cling and source reduction (see box on page 52).
Reducing Methane Emissions from
Wastewater Treatment Plants
When wastewater is treated under anaerobic conditions,
the decomposition of its organic portion yields methane.
Like methane generated from waste at landfills, the
methane generated from wastewater treatment may be
captured and ei ther flared or used as an energy resource.
Because captured methane has value as an energy
resource, operators may use an anaerobic digester to
treat the wastewater and maximize methane generation.
Eight projects to capture methane generated from
wastewater treatment were reported for 2003, with total
reported direct reductions of 60.1 thousand metric tons
methane and indirect reductions of 10.7 thousand metric
tons methane. Direct reductions of 43.2 thousand metric
tons methane were reported for a Los Angeles County
Sanitation District project, and Blue Source reported
direct reductions of 16.9 thousand metric tons methane.
Indirect reductions were reported for two projects spon-
sored by FirstEnergy.
Reducing Emissions from
Energy Production and
Consumption
Reducing Emissions from Coal Mines
As coal is formed from organic material by natural
chemical arid physical processes, methane is also cre-
ated. The methane is stored in the pores (open spaces) of
energy Information Administration /Voluntary Reporting of Greenhouse Gases 2003
51
-------
e^
"Materials; tivimiigetru^^ manage-:;
1;nat ean: encompass a;: variety^of greenhouse:gas aridV:: : ;mens.:prdjects^included^c6al ash:rieu5e:{33)i recj'ding
ehiission:s6ufces,:and:.may ^include: any of:the:folioWr;: x-x^ahd source-red uctipn':pf soiid.waste:
. -' '.'.'.'-'.'.". . ." .'.' '.'.' •.'.",". ." * .' •.'.•.'.'.".'. .• ". .' ','.•,".•. , , '. _• '.' • '. -• •- . '.. l. .,"...•• , , ." •....' ','
" - •>•"'• P-r-l * '•• 'H» ••_ •'••-'• --_--.••*•• • _»"_• '••('•.- • ••_ • • 1 • • 4 • •
; wastewater tr(«tte^
s::^
•::::xtxroin: iandfiiis:of iErpm:ari^erp^
•'-.'•;. • Recyc Jirigpf hajogenated
Materials Management Projects Reported;prv
: F6ri« feJArieO^ftiita Years; 1994-1003^ xx:x
xlyy'hicli: rti
iv methane :ethis!5tptjsifrpm| municipal
x :: :: virgin matefiais'dispiacfed by ttiefniitenais recycled
ash : as;:a:;suljstitute:: f6i'':;P6xtlarid
'•::-,'-_ cement iii:coricrete;' wWcji.reduc^:carbpn Dioxide
:.:::: eriiissioris: from :the ihiaihu'factiife of: the: ceriien t;:;
: Reporting of^ rrtateriiils iiWriage:tnent'actiyities>>n:^orn)
: El Arf f 605 increased: mo re. Ilia n .eigh tf old. :frorri- :1994: to
'?6 projects \were :repprti;4:f6r.?()6^;4
difOT
most':(^;p.ercent)::::;:x;x:;x::;:[^;;^
prpjiects:reported;X:; ;X:/:S6urce:-Energy• Inferrnafto
r^e|iianc:ermssipnx:;X|x1^5.:{R)^|r9V!5ed^ ::•;:•;:
Reported Emission Reductions from Materials Management Projects by P
'
1 !?^'r
:i::'Number of: Projects
_™_
::Metharie:Erntssion:Avbidarice::
:••:'twill :GM:R&cpveiy::;:V':"^;
;:; Muhicipai; V^iSteiCb'mb-jstior
.::: Wa'stewaler: trea trt lerii:;: -:.:'-,::
:. x14;923,6S8 :
:-7,933,237 xx
•425
.
;RecVciing:3hd;Source:RedUctibn of;isbJ!d:Wasts.-:;:: ;: ^xO: ::x x :34:
.iOpaiiAsfrReusev .V/:':'
:;Total;
526
52
Energy information Administration / Voluntary Reporting of Greenhouse Gases 2003
-------
J
the coal itself and in cracks and fractures in the coalbed.
As coal is mined, the pressure surrounding the stored
methane decreases, allowing much of it to be released
into the operating coal mine. Because methane in con-
centrations of 5 to 15 percent is explosive, mine opera-
tors use large fans to provide a steady airflow across the
mine face and ventilate the mine shaft. Some very gassy-
mines must also employ degasification wells to remove
methane before or after mining so that it does not enter
the mine. Because methane is a valuable energy source,
most of the mines with ciegasification systems now inject
the methane into gas pipelines or use it to generate elec-
tricity or heat.
For 2003,13 projects to reduce methane emissions from
coal mines were reported, with total direct emission
reductions of 0.4 million metric tons and indirect reduc-
tions of 96 metric tons methane (Table 20). Jim Walters
Resources reported direct reductions of 0.2 million met-
ric tons methane from three degasificatkm projects, and
CDX reported direct methane reductions of 0.1 million
metric tons methane from its two projects.
Reducing Emissions from Natural Gas
Production, Transmission, and
Distribution
Methane is the principal constituent of natural gas
(about 95 percent of the mixture). Methane emissions
from natural gas production, processing, transmission,
and distribution are generally process related, with nor-
mal operations, routine maintenance, and system upsets
being the primary contributors. Emissions vary greatly
from facility to facility and are largely a function of oper-
ation and maintenance procedures and equipment con-
ditions, Thus, methane emissions can be reduced by
replacing leaky system components, improving opera-
tions and maintenance, and limiting routine venting
procedures. For 2003, 28 such projects were reported,
with total direct emission reductions of 0.5 million met-
ric tons methane. No indirect reductions were reported.
N3PSCO reported 9 projects, associated with the Natural
Gas STAR Program, that yielded 0,2 million metric tons
of methane emission reductions. Other major reporters
included NfEGT, which reported one Natural Gas STAR
i
Table 19. Methane Emission Reductions from Waste Treatment and Disposal Projects Reported on
Form EIA-1605, Data Years 1994-2003
(Thousand Metric Tons Methane)
Reduction and
Project Type [
Direct Reductions
Landfili Gas Recovery . . .
Wastewater Treatment . .
Waste Combustion .....
Indirect Reductions
Landfill Gas Recovery . . .
Wastewater Treatment . .
Waste Combustion
'Lass than 500 metric tons..
(R) - revised.
]
1934 t 1995
* 0.6
0.6
39.4 1,061,7
99.4 111.3
*
950.4
1 1996 I
128.4
128.4
1,142.9
250.5
*
892.4
1997 I
135.6
135.3
0.3
44S.6
298.3
151.3
| 19S8
484.7
451.4
33.3
*
644.7
470.9
4.7
169.1
t
966.8
921.7
40.3
4.4
815.3
575.5
19.6
220.2
I 2000 j
2,171.5
2,134.0
37.5
884.5
612.9
12.7
259.0
[!
i
2001 i
2,117.2
2,079.6
37.6
*
1,003.3
701.9
13.1
288.3
I 2002<«>
2,514.7
2,476.5
38.5
-0.8
1,003.3
623.8
13.1
366.5
| 2003
2,437.7
2,377.6
60.8
-0.7
988,4
569.1
10.7
408.6
Source: Energy Information Administration, Form EIA-1605.
Table 20. Methane Emission Reductions from Natural Gas Systems and Coa! Mining Reported on
Form EiA-1605, Data Years 1934*2003
Reduction and
Project Type
Direct Reductions ....
Coal Mining
Natural Gas Systems . .
Indirect Reductions . , .
Coal Mining
Natural Gas Systems . .
7 T
j 1994 j
13,687
13,767
5,920
—
I I I I
1995 [ 1996 I 1997 I 1998 1999 2000 ! 2001 j 2002 } 2003
7,714 279,766 242,040 893,92? 595,311 518,590 657,834 797,154 941,512
4,191 271,549 232,131 885.807 581,307 505,941 538,285 567,088 -106,782
3.522 8,217 9,909 8.121 14,004 12,648 118,609 230,066 534,731
3,543 4,039 5,439 7,603 6,565 6,785 96 96 96
278 893 2,285 1.568 528 747 96 96 96
3.265 3,146 3,154 6.035 6,036 6,038 000
Source: Energy Information Administration, Forms EIA-1605 and EIA-1605EZ.
Energy information Administration / Voluntary Reporting of Greenhouse Gases 2003
53
-------
project with methane emission reductions of 0.2 million
metric tons, and BP America, which reported 3 projects
with aggregate reductions of 0.1 million metric tons
methane.
Reducing Emissions from
Agriculture
Four projects reported for 2003 focused on reducing
emissions from agricultural activities, but only three
of them reported methane emission reductions.
FirstEnergy reported indirect methane emission reduc-
tions of 109 metric tons as the result of purchases of elec-
tricity generated from an anaerobic digester of animal
waste at Mason Dixon Farms—an increase from the 73
metric tons reported for 2002. Alliant Energy reported
two projects, at Deer Ridge Dairy and Double S Dairy,
which reduced carbon dioxide emissions by 1,237 metric
torts. The fourth agriculture project, reported by AES.,
was to improve feed supplements for cattle in India and
reduce emissions from enteric fermentation. AES did
not report an emission reduction quantity for 2003.
Federal Voluntary Programs
To Reduce Methane Emissions
The U.S. Government sponsors a number of voluntary-
programs specifically targeted to reduce methane emis-
sions. Most frequently cited by reporters to the Volun-
tary Reporting Program are the U.S. Environmental
Protection Agency's Landfill Methane Outreach Pro-
gram {LMOP), Coalbed Methane Outreach Program
(CMOP), and Natural Gas STAR Program. In addition,
reducing methane has been an effective method for
meeting the reduction targets adopted by utilities under
the U.S. Department of Energy's Climate Challenge vol-
untary program. The number of reported methane
reduction projects associated with Federal voluntary
programs lias increased 1-1-fold since 1994, with a partic-
ularly large increase in the number of projects associated
with the LMOP. Of the 425 waste treatment and disposal
projects reported to the Voluntary Reporting Program
for 2003, 365 {86 percent) were associated with the
LMOP (Table 21).
t
Table 21. Number of Reported Methane Reduction Projects Associated with Other Federal Voluntary
Programs, Data Years 1994-2003
Voluntary Program
Climate Challenge
Landfill Methane Outreach Program . . -
Coalbed Methane Outreach Program . .
Natural Gas STAR
Other ;
Total
1994
22
t
6
1
7
0
30
1995
27
8
1
S
6
42
1996
32
29
2
11
2
64
1997
36
. 32
2
6
2
65
1998
34
90
10
5
1
132
1999
39
116
11
7
3
164
2000
42
309
6
1
4
354
2001 I
34
359
9
14
«
w
4D7
2002
34
354
9
17
5
405
2803
38
365
6
23
5
420
(R) = revised.
Note: Totals may not equal sum of components, because some projects are associated with more than one voluntary program.
Source: Energy information Administration, Form EIA-1805.
54
Energy information Administration /Voluntary Reporting of Greenhouse Gases 2003
-------
t
6, HFCs, PFCs, and Sulfur Hexafluoride
U.S. Emissions of HFCs, PFCs,
and Sulfur Hexafluoride
In addition to the three principal greenhouse gases (car-
bon dioxide, methane, and nitrous oxide), three types of
engineered gases—hydrofluorocarbons (HFCs), per-
ftuorocarbons (PFCs), and sulfur hexafluoride (SF^)~
are also considered greenhouse gases under the United
Nations Framework Convention on Climate Change
(UNFCCC). HFCs are used as refrigerants, solvents, and
propell ants and in many other applications. PFCs are
emitted as a byproduct of aluminum smelting and are
used in semiconductor manufacture. The primary uses
of SF6 are in electrical transmission and distribution
equipment and m magnesium production.
U.S. emissions of HFCs, PFCs, and SF6 in 2003 were esti-
mated to be 143.4 million metric ions carbon dioxide
equivalent, down slightly from 1-13.7 million metric tons
in 2002. Collectively, they accounted for 2.1 percent of
total U.S. greenhouse gas emissions in 2003.62 Annual
emissions of these gases have increased by 62 percent
since 1,990, primarily due to increases in emissions of
HFCs, which are used as replacements for chlorofluoro-
carbons (CFCs) in automobile air conditioners (Figure
14). CFCs are being phasi?d out under the Montreal Pro-
tocol,63 because they damage the Earth's stratospheric
ozone layer, which absorbs harmful ultraviolet radiation
from the sun. Emissions of both PFCs and SF6 have
fallen since 1990.
Projects Reported
For 2003,38 entities reported on 66 project? that reduced
emissions of HFCs, PFCs, and SF6—1 more reporter and
2 more projects than were reported for 2002 (Table 22).
Emissions avoidance and recycling of halogenated sub-
stances were two of the most frcq ucntly reported project
types (24 and 18 projects reported, respectively), fol-
lowed by substitution of other chemicals (7 projects
reported) and the destruction of halogenated substances
(1 project reported). Reductions in PFC etnissiorts'were
also reported for 23 post-consumer waste-recycling
projects in which aluminum was one of the materials
collected and recycled.
The 38 entities reporting projects to reduce emissions of
HFCs, PFCs, and SF6 for 2003 included: 30 electric utili-
ties; 2 aluminum smelters (Alcan Primary Products Cor-
poration's Sebree Works and Noranda Aluminum, Inc.);
a chemical company (Allergan); 1 transportation equip-
ment company (General Motors); a company from the
electronic equipment industry (Lucent Technologies,
Inc.); a refrigerant reclamation company (Polar Refriger-
ant Technology); a holding and investment company
(CLB Resources); an SF6 recycling company (Xenon Spe-
cialty Gas); and a government organization (Burlington
County Board of Chosen Freeholders).
Of the 38 entities that reported projects in this category,
16 were past participants in the U.S. Department of
Energy's Climate Challenge Program and Rebuild
America. Other voluntary programs with which the
projects reported in this category were affiliated include
the U.S. Environmental Protection Agency's (EPA's)
Voluntary Aluminum Industrial Partnership, EPA's
Figure 14. Estimated U.S. Emissions of HFCs,
PFCs, and Sulfur Hexafluoride,
1990-2003
Miliior- Metric Tons Carbon Dioxide.Equivalent
Source: Energy Information Administration, Emissions of
Greenhouse Gases in the United States 2003. DOE/EIA-
0573(2003) (Washington, DC, December 2004).
62Enetgy Information Administration, Emissions of Grcentiouse Cases in the United States 2003, DOE/E1A-0573(2003) (Washington, DC,
December 2004), web site vww.eia.doe,gav/oiaf/1605/ggrpl.
63The Montreal Protocol on Substances that Deplete the Ozone Layer is an international agreement, signed by most of the industrialized
rations, to substantially reduce the'use of CFCs. Signed in January 1989, the original document called for a 50-percent reduction, in CFC use
by 1992 relative to 1986 levels. The subsequent London Agreement called for a complete elimination of CFC use by 2000. The Copenhagen
Agreement later accelerated that schedule, calling for a complete phaseoutby January 1,1996. '
Energy Information Administration / Voluntary Reporting of Greenhouse Gases 2003
55
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Waste Wise Program, and BPA's Sulfur Hexafluoride
Emissions Reduction Partnership for Electric Power
Systems.
Emission Reductions by Gas
Direct reductions of PFC and SF6 emissions totaling 6.2
million metric tons carbon dioxide equivalent were
reported by 21 entities for 24 projects carried out in 2003
(Tabie 23). The direct reductions included, emissions of
PFCs (3.6 million metric tons carbon dioxide equivalent)
and SF6 (2.6 million metric tons carbon dioxide equiva-
lent). Indirect emission reductions totaled 2.5 million
metric tons carbon dioxide equivalent, consisting pri-
marily of SF6 (2.2 million metric tons carbon dioxide
equivalent) and smaller amounts of PFC and HFC
emissions.
Hydrofluorocarbons
MFCs are used primarily as replacements for ozone-
depleting substances such as CFCs and hydrochioro-
fluorocarbons (HCFCs). U.S. emissions of MFCs were
estimated at "ill million metric tons carbon dioxide
equivalent in 2003, a 209-percent increase over 1990
levels.*4 HFCs are used to replace CFCs as blowing
agents, in automobile air conditioners and refrigerators,
and in other manufacturing applications, where emis-
sions result from system leaks. In the semiconductor
industry, HFCs are also used in plasma etching and
chemical vapor deposition processes. HFC-23 is a
Tabte 22. Number of Projects Reported on Form EIA-1605 for Hydrofluorocarbon, Perfluorocarbon, and
Sulfur Hexafluoride Emissions, Data Years 1994*2003
Project Type
Genera!
Reclamation: Recycling
Reclamation: Destruction
Substitution
Ercissions Avoidance
Use of improved Appliances
Other Projects/Activities
PFC Reductions from Materials Recycling . .
Total Number of Projects
I 1994 j
0
7
0
1
;3
0
1
0
13
1995 i
1
10
0
5
6
1
1
0
21
1996]
0
10
1
7
8
1
0
0
22
1997 f
1
14
1
7
13
1
0
4
33
1998 [
0
15
0
8
17
1
0
7.
42
1999 ]
0
15
1
9
16
1
0
10
46
2000
0
18
1
9
23
1
0
20
63
I 2001 I
0
16
1
6
23
0
0
IS
58
2002 1
0
18
1
6
24
0
0
21
63
2003
0
18
1
7
24
0
0
23
86
s: Project totals may not equal sum of components because some projects may be counted in more than one category.
Source: Energy information Administration, Form EIA-1605.
Table 23. Reductions of Hydrofluorocarbon, Perfluorocarbon, and Sulfur Hexafluoride Emissions Reported
on Form EIA-1605, Data Years 1994-2003
(Thousand Metric Tons Carbon Dioxide Equivalent)
Gas and Reducti
HFCs
Direct
Indirect
PFCs
Direct
indirect
SF6
Direct . ,
Indirect
Total
Direct. ......
indirect
on Type j 1994 ] 1995
* *
•
3,199.6 2,962.4
83,6 186,4
.... 7.7
, 3,283.2 3,148,8
....'.. — 7.7
1996 [ 1997
15.2 *
3,345.8 3,318.6
— 3.6
-70.0 516.7
A*
3,291.0 3,835.3
1998
-1.7
3,504.4
6.1
624.8
**•
4,127.4
6.1
' 1399
-1.7
3,425.5
5.9
595.4
**
4,019.1
5.9
2800
3,233.6
35,5
1,407.3
ft*
4.641.0
35.5
.....?HL..
3,606,8
34.3
2,475,1
**
6,082.0
34.3
2002
**
3,562.53
36.7
3,043.7
0.1
6,606.6
36.8
2003
38.7
3,550.5
237.4
2,611.9
2.184.7
6,162.4
"Less than 0 but greater than -50 metric tons.
"Greater than 0 but less than 50 metric tons.
(R) = revised. — = none reported.
Source: Energy Information Administration, Form EIA-1605.
64Energy Information Administration, Emissions of Greenhouse Gases in the United Stales 2003, DOF./E[A-G573(2Q03) (Washington. DC,
December 2004), web site www.eia.doe.gov/oiaf/1605/ggtpt.
s
56
Energy information Administration I Voluntary Reporting of Greenhouse Gases 2003
-------
s
t
byproduct of HCFC-22 manufacturing. Hie Tennessee
Valley Authority reported on a project that included
direct reductions of HFC-134a, but for which no reduc-
tion data have been available since 1998.
Perfiuorocarbons
U.S. emissions of PFCs in 2003 totaled 7,3 million metric
tons carbon dioxide equivalent.65 Tire principal source
of PFC emissions is aluminum smelting. PFCs are pro-
duced during aluminum production when the alumina
content of the electrolytic bath falls below critical levels
required by the electrolytic effect. The resulting electri-
cal upset in the reduction cell is manifested as a rapid
voltage increase. The gases formed accumulate at the
anode of the reduction cell (hence the name "anode
effect")- PFCs are also used in some semiconductor man-
ufacturing processes and, consequently, may be emitted
from fabrication plants.
For 2003, five companies (Alcan Primary Products
Corporation, Burlington County Board of Chosen Free-
holders, City Public Service, Los Angeles Department of
Water and Light, and Noranda Aluminum, Inc.)
reported reductions in direct emissions of PFCs totaling
3.6 million metric tons carbon dioxide equivalent, which
accounted for 58 percent of total reported project-level
direct reductions in emissions of PFCs, HFCs, and SF6 in
2003. Alcan and Noranda together accounted for 98 per-
cent of total reported direct reductions of PFC emissions
(3.5 million metric tons carbon dioxide equivalent) and
56 percent of total reported direct reductions of HFC,
PFC, and SF6 emissions.
During 2003, efforts by Noranda to reduce PFC emis-
sions were focused on controlling the amount of alu-
mina in solution to avoid anode effects ami monitoring
the process more closely to stop or correct them expedi-
tiously. According to Noranda's report, perfluoro-
methane emissions were reduced by 2,6 million metric
tons carbon dioxide equivalent and perfluoroethane
emissions by 0.6 million metric tons carbon dioxide
equivalent. Alcan reported direct reductions of per-
fluoromethane emissions totaling 0.3 million metric tons
carbon dioxide equivalent. Additionally, City Public
Service and Los Angeles Department of Water and
Power reported materials recycling projects (see box in
Chapter 5, page 52) that included direct reductions of
PFC emissions totaling 22,516 and 1,630 metric tons car-
bon dioxide equivalent, respectively, during 2003.
The U.S. Environmental Protection Agency sponsors the
Voluntary Aluminum Industrial Partnership, which
seeks to reduce emissions of PFCs, carbon tetrachloride,
and SF6 during primary aluminum processing. For 2003,
both Alcan and Noranda reported participation in ihe
program.
Sulfur Hexafluoride
U.S. emissions of SF6 in 2003 totaled 17.3 million metric
tons carbon dioxide equivalent.*6 SF^ is used as an insu-
lator for circuit breakers, switch gear, and other electri-
cal equipment and as a cover gas in magnesium
smelting. It is also emitted during the aluminum smelt-
ing process. It has A very high GWP—22,200 times the
warming effect of carbon dioxide per ton emitted.67
For 2003, 17 companies—including Allegheny Energy,
Inc., American Electric Power, Inc., Cinergy Corp., City
Public Service, City Utilities of Springfield, Consoli-
dated Edison of New York, Inc., Constellation Energy
Group, Inc., Duke Energy Corporation, Entergy. Ser-
vices, Inc., FirstEnergy Corporation, FPL Group, Minne-
sota. Power, National Grid USA, NiSource/NIPSCO,
Southern California Edison Co., Southern Company,
Tucson Electric Power Company, and TXU—claimed
direct reductions of SF^ emissions that totaled 2.6 mil-
lion metric tons carbon dioxide equivalent, accounting
for 42 percent of the total reported project-level direct
reductions in emissions of PFCs, MFCs, and SF6 (Table
23).
For those companies reporting direct reductions of SF6
emissions for 2003, Consolidated Edison of New York,
Inc., reported the largest single reduction (1.5 million
metric tons carbon dioxide equivalent), followed by the
Southern Company (0.6 million metric tons), TXU (0.3
million metric tons), and Southern California Edison
Company (0.1 million metric tons). These four pro-
ject-level claims of emission reductions combined co
account for 99 percent (2.6 million metric tons carbon
dioxide equivalent) of total reported project-level direct
reductions of SF6 emissions for 2003 and 42 percent of
total project-level direct emission reductions claimed for
MFCs, PFCs, and SFS combined (Table 24).
65Energy Information Administration, Emissions of Greenhouse Gases, in the United States 2003, DOE/E1A-0573(2003) (Washington, IX',
December 2004), web site www.eia.cloe.gov/oiaf/1605/ggrpt.
^Energy Information Administration, Emissions of Greenlteuse Cases in the United States 2003, DOE/EIA.-Q573(20Q3) (Washington, DC,
December 2004), web site www.eia.doe.gov/oiaj/1605/ggrpt.
^Energy Information Administration, Emissions of Greenhouse. Gases in ihe United States 2003, DOE/ETA-0573(2003) (Washington. DC,
December 2004), web site www.eia.diK.gov/oiaf/1605/ggrpt.
Energy information Administration /Voluntary Reporting of Greenhouse Gases 2003
57
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Table 24. Largest Project-Level Direct Reductions of Sulfur Haxafluoride Emissions Reported
on Form EIA-160S by Reporter, Data Year 2003
Reporter
Consolidated Edison Company of New York, Inc. .
Southern Company , ,
TXU •
Southern California Edison Co
National Grid USA
Cinergy Corp
NiSource/NSPSCO
Duke Fnergy Corooratiori. . ,
Tucson Electric Power Company , .
National Grid USA
American E'ectric Power, Inc
City Public Service
Entcirqy Services, inc.
FPL Group
Reported Tola!
Direct SF6 Emission Reductions
Reported
j Metric Tons
Metric Tons j Carbon Dioxide
of Gas j Equivalent
69.S 1,342,047
25.0 555,000
15.6 347,060
6.1 134,363
2.6 57,388
2.4 52,9-18
2.0 44,710
1.9 42,180
1.6 35,561
1.3 28,085
0,4 8,476
0.4 3,660
0,2 3,524
0.2 3,524
129.0 2,864.526
Percent of Tota! Reported
Direct Reductions of HFC, PFC,
and SF6 Emissions3
25.0
9.0
5.6
2.2
0.9
0.9
0.7
0.7
0.6 .
0.5
0.2
0.1
0.1
0.1
46.5
t
"Based on metric tons carbon dioxide equivalent.
Note: Totals may not equal sum of components due to independent rounding.
Sources: Energy Information Administrators, Form EIA-1605. Global warming potentials from Intergovernmental Panel on Climate
Change, Climate Change 2GG1: The Scientific Basis (Cambridge, UK: Cambridge University Press, 2001}, Table 6.7, pp. 388-389.
58
Energy Information Administration ! Voluntary Reporting of Greenhouse Gases 2903
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I
7. Entity-Level Reporting and Future Commitments
I
Overview
The Voluntary Reporting of Greenhouse Gases Program
permits three distinct types of emissions reporting:
•Entity-level emissions and emission reductions,
defined as the emissions and reductions of an entire
organization, usually defined as a corporation
•Project-level emissions and reductions, defined as
the emission reductions consequences of a particular
project or action ~"
•Commitments to take action.to reduce emissions in
the future.
Chapters 2 through 6 of this report cover project-level
emissions and reductions. This chapter covers entity-
level emissions, emission reductions, and commitments
to reduce emissions in the future.
Entity reporting arid project reporting are not mutually
exclusive. Most (177, or 76 percent) of the 233 non-
confidential participants in the Program for 2003
reported project-level information on emissions and/or
reductions, and 126 (54 percent) reported entity-level
information. Of all the participants in the Program, 70
(30 percent) reported both entity-level information and
project-level information. In addition, 89 entities (38per-
cent of all participants in the Program) reported formal
commitments to reduce greenhouse gas emissions in the
future or to provide financial support for activities
related to greenhouse gas reductions.
Entity-Level Reporting
Who Reported
Electric power producers accounted for 45 of the 126
entity-level reporters. They included Allegheny Energy,
Alliant Energy, Cinergy Corp., Constellation Energy,
DTE Energy/Detroit Edison, Entergy Services, Inc.,
FirstEnergy Corporation, FPL Group, PG&IJ, Pacifi-
Corp, Seattle City Light, the Southern Company, flie
Tennessee Valley Authority (TVA), and most of the larg-
est electric power companies in the United States. In
addition, 4 subsidiaries of the AES Corporation (an inde-
pendent power producer) reported on domestic power
plants with emissions offset by international forestry
projects.
The remaining 81 entity-level reporters included an alu-
minum smelter (Alcan Primary Products Corporation,
Sebree Works), 8 plants of ComtnScope (a designer and
manufacturer of cables for telecommunications applica-
tions), a semiconductor manufacturer (Lucent Technol-
ogies, Inc.), and several large manufacturers (Daimler
Chrysler, Toyota Motor North America, Inc., Ford, Gen-
eral Electric, General Motors, IBM, Johnson & Johnson,
and Rolls-Royce Corporation). Also reporting at the
entity level were the Lehigh Cement Company, 2 oil
companies (Sunoco, Inc., and BP America), a chemical
company (the Dow Chemical Company), an aircraft
manufacturer (Sikorsky Aircraft Corporation), textile
manufacturers (including 2 plants of Hanes Dye & Fin-
ishing, 4 plants of M.J. SOFFE Company, 6 plants of
National Spinning, Inc., arid the Valdese Manufacturing
Company), a trade association (Integrated Waste Ser-
vices Association), and the Miller Brewing Company,
Reported Emissions
Total 2003 entity-level direct emissions of greenhouse
gases reported to the Voluntary' Reporting Program
were 889 million metric tons carbon dioxide equivalent,
or 13 percent of total estimated U.S. emissions of green-
house gases68 (Table 25). Entity-level indirect emissions
reported to the Program were 105 million metric tons
carbon dioxide equivalent, or 2 percent of total U.S.
greenhouse gas emissions. Carbon dioxide was the most
widely reported greenhouse gas in terms of tonnage.
Reported entity-level direct carbon dioxide emissions
were S61 million metric tons, representing 97 percent of
entity-level reported direct emissions (Table 25). Carbon
dioxide also accounted for 95 percent (100 million metric
tons) of all reported indirect emissions (Table 25),. of
which 99 million metric tons resulted from purchased
power transactions (i.e., the indirect emissions associ-
ated with generation of the electricity purchased) (Table
26).
The single largest category of direct carbon dioxide
emissions reported was the 836 million metric tons car-
bon dioxide emitted by stationary combustion sources
(mostly electricity generators), which represented 97
percent of the total direct carbon dioxide emissions
6SEnergy Informalion Administration, Fjnissiens of Greenhouse Gases in the United Stales 2003, DOE./E!A-OS73{2003) (Washington, DC,
December 2004), we;b site www.eia.doe.gov/oiaf/16C5/ggrpt
Energy Information Administration / Voluntary Reporting of Greenhouse Gases 2003
59
-------
reported for 2003 (Table 26). The 5 largest reporters of
direct carbon dioxide emissions were TV A {85 million
metric tons), Cinergy Corporation (60 million metric
tons), Duke Energy Corporation (56 million metric tons),
FPL Group (55 million metric tons), and PaciHCorp (46
million metric tons) (Table 27). Companies reporting at
least 20 million metric tons of direct carbon dioxide
emissions included FirstEnergy Corporation, Allegheny
Energy, Inc., DTE Energy/Detroit Edison, BP America,
Entergy Services, Inc., The Dow Chemical Company,
Florida Power Corporation, NEGT, Dynegy, Inc., and
Constellation Energy.
Direct emissions of greenhouse gases other than carbon
dioxide included methane (24 million metric tons carbon
dioxide equivalent), hydrofluorocarbons (3 million met-
ric tons carbon dioxide equivalent), sulfur hexafluoride
(1 million metric tons carbon dioxide equivalent), and
perfluorocarbons (less than 1 million metric tons carbon
dioxide equivalent). Reported direct emissions of
nitrous oxide were less than 0.1 million metric tons car-
bon dioxide equivalent (Table 25).
Entity-level direct emissions of methane were reported
by 13 companies for 2003, including 4 companies that
t
Table 25. Total Reported Entity-Level Emissions of Greenhouse Gases Other Than Carbon Dioxide
by Type of Emissions, Data Year 2003
(Million Metric Tons Carbon Dioxide Equivalent) __ .' _——,
®S* ?55 JVpe ^ Ernis^ionsj 1990J 1931 j.1992 [ 1993j 1994]J9JWJJ99S j 1997j 1998 [ 1999J.2000j_200l}2002 [28^3
Carbon Dioxide
Direct 737.3 575.7 676.6 712.5 762.2. 791.2 798.0 842.9 937,4 946.3 964.5 853.3 861.1 861.3
Indirect 434.4 420.9 423.0 429.7 432.5 432.4 438.9 457.3 423.5 428.3 98.1 91.7 107.7 99.9
Methane
Direct 59.1 18.1 18.5 14.2 32.4 33,3 30.0 31.9 36.9 31.4 30.0 29.9 27.0 23.8
Indirect 2.1 2,1 2.1 2.1 2.Q 1.9 1.9 1.8 1.7 1.6 0.4 0.4 0.3 0.3
Nitrous Oxide
Direct * * * * * * * * * 0.1 0.1 *
Indirect 17.3 18.1 19.0 19.8 20.5 20.4 19.9 18.3 18.6 17.9 *' * *
Hydrofiuorocarbons
Direct * * * ' * * * * 0.1 0.2 0.4 0,8 2.4 2,6
Indirect * * 0.1 2.2 4.9 5.4 5.0 5.2 5.2 5.2 5.2 3.9 5.6 4.5
Perfluorocarbons
Direct 0.6 0.6 0.6 0.6 0.3 0.3 0.3 0.3 0.2 0.1 0.2 0.2 0.2 0.3
Sulfur Hexafiuoride
Direct 0.2 0.4 0.4 0.4 1.4 1.4 1.5 1.2 1.0 0.5 1.1 1.2 1.2 0.9
Total
Direct 797,2 594.8 696.1 7277 796.4 826.2 829.8 876.4 975.S 978.5 996.3 885.4 892.0 888.8
indirect :.;....*531.9jMI.1 444.2 453.8 459.8 460.1 465.7484:1 4S4.0_.«3_.^_^»^_^0 J^-^m^
'Less than 0.05 million metric tons.
Source: Energy information Administration, Form ElA-1605.
Table 26. Total Reported Entity-Level Carbon Dioxide Emissions by Type and Source, Data Year 2003
iM'".i°D M?*r'S TOI?.S ^f.^1? f?'9*i!?.5)
Type of Emission Source \ 1990 ] 1991 j 1992] 1983 I 1994[ 1995 I 1938 | 1997 | 1998 | 1999 [ 2000 j 2001 [ 2002] 2003
Direct Emissions
Stationary Combustion 731.8 570.6 667.8 703.2 752.1 770.5 777.1 822.3 915.3 924.1 942.7 830.9 838.1 835.8
Transportation 1.3 0.2. 0.2 0.2 0.8 11.8 11.7 12.0 13.3 13.5 13.3 13.2 13.1 13.8
Other Direct Sources 4.2 4.9 8.6 S.O 9.3 8.9 9.2 8.6 8.4 8.6 8.4 9.2 9.9 11.7
Total Direct 737.3 575.7 676.6 712.3 762.2 791.2 798.0 842.9 937.4 946.3 964.S 8S3.3 861.1 861.3
Indirect Emissions
Purchased Power 80.2 55.6 53.3 59.3 60.5 65.8 ?9.0 105.3 83.3 87.8 9?.9 91.5 107.1 99.3
Other Indirect Sources 374.2 365.3 369.4 370.3 372.0 366.6 360.0 352.5 345.3 340.8 0.2 0.2 0.6 0.6
Total Indirect 434.4 42Q.9 423.0 429.7 432.5 432.4 438.9 457.8 428.5 428.3 98.1 91.7 107.7 99.9
Source: Energy Information Administration, Form EiA-1605. >
t
60
Energy Information Administration /Voluntary Reporting of Greenhouse Gases 2003
-------
reported direct methane emissions in excess of 1 million
metric tons carbon dioxide equivalent: Consol Coal
Group {11 million metric tons), Jim Walter Resources,
Inc. (fi million tons), Peabocty Holding Company, Inc.
(4 million metric tons), and BP America (3 million metric
tons) (Table 28). These 4 entities together accounted
for 81 percent of all reported direct emissions of other
greenhouse gases for 2003. Direct emissions of HFCs
Table 27. Largest Reported Entity-Level Direct Carbon Dioxide Emissions by Reporter and Source,
Data Year 2003
Reporter
Tennessee Valley Authority . .
Cinergy Corp. , . , . . . ,
Duke Enerqy Corporation ....
FPL Group
PaciSCorp ...,.*
FirstEnergy Corporation
Allegheny Energy Ino , • .
DTP Energy/Detroit Fdison. . .
BP America.
Entergy Services, Inc
The Dow Chemical Companv
Florida Power Corporation •
NEGT ;
Dvneoy Inc
Constellation Energy
Total
i
i
! Emissions Source
. . . . Stationary Combustion
. . . . Stationary Combustion
, , . , Stationary Combustion
. . . . Stationary Combustion
. . . . Stationary Combustion
. , . . Stationary Combustion
. , . . Stationary Combustion
,.,, Stationary Combustion
. . . . Stationary Combustion
. . . . Stationary Combustion
.... Stationary Combustion
, . Stationary Combustion
.... Stationary Combustion
.... Stationary Combustion
.... Stationary Combustion
Reported Direct
Carbon Dioxide Emissions
(Million Metric Tons)
88.4
60,4
56.3
55.1
46.4
42.3
41,7
38.3
33.7
33.4
27.1
?2,5
21.3
20,4
19 J
604.1
Percentage of Total
Reported Direct Emissions
of All Greenhouse Gases
9.6
68
6.3
6.2
5.2
4.8
4.7
4,3
3.8
3.8
3.1
? 5
2.4
2.3
2.2
68.0
Source: Energy Information Administration, Form EIA-1605.
Table 28. Largest Reported Entity-Level Direct Emissions of Greenhouse Gases Other Than Carbon Dioxide
by Reporter and Emissions Source, Data Year 2003
Reporter
Consoi Coal Group .
Jim Waiter Resources. tr>c
Peabody Energy ,
BP America
Genera! Electric Company
Dow Chemical Company
Public Service Enterprise Group
Cinercjy Corp
Duke Energy Corporation .
Public Service Enterprise Group .
Alcan Primary Metals Group Sebree Works . .
Mitsubishi Motors North America, Inc. .......
Cinerqy Corp.
The Dow Chemical Company
Mitsubishi Motors North America, Inc
Tota!
r
Gas
Methane
Methane
Methane
Methane
HFC-13-1a
HFC-134a
Methane
Methane
Sulfur Hexafluoride
Sulfur Hexafluoride
Peril uoromethane
HFC-143a
Sulfur Hexafluoride
Methane
HFC-125
Emissions
Source
Other Direct
Other Direct
Other Direct
Other Direct
Other Direct
Other Direct
Other Direct
Other Direct
Other Direct
sOther Direct
Other Direct
Other Direct
Other Direct
Other Direct
Other Direct
Reported Direct
Emissions
(Thousand Metric
Tons Carbon
Dioxide Equivalent)
11,129.8
4,438.7
3,572.1
3,275.3
1,141.8
1,128.5
723.1
459.7
297.5
284,0
210.2
137,6
116.2
115.8
108.8
27,139.6
Percentage of
Total Reported
Direct Emissions
of Other
Greenhouse Gases
40.4
16.1
13.0
11.9
4.1
4.;i
2.6
1.7
1.1
1.0
0.8
0.5
0.4
'0.4
1 0.4
98,5
Source: Energy Information Administration, Form EIA-1605.
Energy Information Administration / Voluntary Reporting of Greenhouse Gases 2003
61
-------
were reported by 6 companies, including 2 companies
(General Electric and Dow Chemical) with emissions in
excess of 1 million metric tons carbon dioxide equiva-
lent. Direct emissions of sulfur hexafhioride were
reported by 8 companies, including 2 companies (Duke
Energy and Public Service Enterprise Group) with emis-
sions in excess of 0.2 million metric tons carbon dioxide
equivalent. Direct emissions of perfluorocarborts were
reported by 3 companies, including Alcan Primary
Metals Group-Sebree Works, which reported emissions
of 0.2 million metric tons carbon dioxide equivalent.
Reported Reductions
Entity-level direct reductions of greenhouse gas emis-
sions reported for 2003 totaled 214 million metric tons
carbon dioxide equivalent, and reported indirect reduc-
tions totaled 43 million metric tons carbon dioxide
equivalent. Carbon sequestration reductions reported at
the entity level were 7 million metric tons carbon dioxide
equivalent (Table 29).
Reported entity-level direct reductions of carbon diox-
ide emissions totaled 140 million metric tons (Table 30),
of which 131 million metric tons was reported as reduc-
tions in emissions from stationary source combustion.
Reported indirect reductions of carbon dioxide emis-
sions totaled 31 million metric tons, including 30 million
metric tons from sources other than stationary source
combustion, such as load control improvements, build-
ing shell improvements, improvement or replacement
of equipment and appliances, lighting and lighting con-
trol improvements, coal ash reuse, materials recycling
and reuse, heating, ventilation, and air conditioning
(HVAC), and improvements in motors and motor
drives,
Reported direct reductions in emissions of greenhouse
gases other than carbon dioxide for 2003 totaled 74 mil-
lion metric tons carbon dioxide equivalent, and indirect
reductions totaled 11 million metric tons (Table 29). Vir-
tually all were reductions in emissions of methane
The largest direct reductions for 2003 were reported by
Waste Management, Inc. (33 million metric tons carbon
dioxide equivalent of methane), TV A (25 million metric
tons carbon dioxide), FPL Group (22 million metric tons
carbon dioxide), Consol Coal Group (20 million metric
tons carbon dioxide equivalent of methane), Southern
Company (15 million metric tons carbon dioxide), and
Duke Energy Corporation (11 million metric tons carbon
dioxide). These 6 reported entity-level direct reductions
Table 29. Total Reported Entity-Level Reductions in Emissions of Greenhouse Gases by Gas and Source,
Data Year 2003
(Miltipn_ Metric Tons Carbon Dioxide Equivalent);
Gas and j i
Type of Reduction i 1991 | 1992
1993
I
1994 I 1995
1996
1997
T i
199B I 1399 ! 2000
2001
2002
2003
0.1
0.1
0.1
0.1
Carbon Dtoxido
Direct 25.7 43.5 46.4 52.8
indirect 12.7 10.9 9.1 5.4
Methane
Direct 5.9 8,1 15.8 21.5
indirect 1.7 ' 2.7 3.2 3.S
Nitrous Oxide
Diree; * * *
indirect
Hydrofluoroearbons
Direct
indirect
Perffuorocarbons
Direct
indirect
Suifur Hexafluoritie
Direct
Indirect.'.
Total
Direct...
Indirect
"Less than O.OS million metric tons,
— = none reported.
Note: Negative numbers indicate increases i?i emissions.
Source: Energy Information Administration, Form EIA-1605.
85.3
10.1
30.9
4.0
0.1
93.5
13.4
36.6
4.6
0.1
94.4 108.5 114.3 136.4 141.7 142.5 139.8
13.4 17.3 18.8 1S.4 20.9 26.1 31.1
41.2 45.4 51.6 SS.1 63.9 71.3 74.7
5.6 6.2 6.8 8.0 9.0 10.7 11.3
* » . _Q .j « •» »
0.1 0.1 0-1 0.1 0.1 0.1 0.1
-0.2 -0.3 -D.7 -1.2 -1.1
0.1
31.6
14.5
51.5
13.7
62.3
12.3
B4.5
9.1
0,1
0.1
116.4
14.2
Q.1
0.1
0.4
0,2
o.s
0.3
O.S
0.3
0.6
0.4
o.r
o.s
0.9
0.4
0.5
130.3
18.2
136.1 154.7 166.5 19S.O 206.1 214.5 214.2
19.1 23.fi 2S.7 2T.S 29.9 36.9 42.6
62
Energy Information Administration /Voluntary Reporting of Greenhouse Gases 2002
-------
f
accounted for 59 percent (125 million metric tons) of
total reported entity-level direct reductions (Table 31).
The largest reporter of indirect emission reductions was
the Integrated Waste Services Association (IWSA),
which reported indirect emission reductions on behalf
of its members. IWSA reported indirect emission reduc-
tions of 15 million metric tons of carbon dioxide and 9
million metric tons carbon dioxide equivalent of meth-
ane, resulting from the combustion of municipal solid
waste. Southern Company and FPL Group reported
indirect reductions of carbon dioxide emissions at 4 mil-
lion and 3 million metric tons, respectively (Table 32).
These 4 reductions together accounted for 30 million
metric tons carbon dioxide equivalent or 62 percent of
total reported positive indirect emission reductions.69
Most of the larger reported reductions (direct and indi-
rect) were computed on the basis of "modified" refer-
ence cases—i.e., the reporter indicated that emissions
were lower than they would have been without the
actions taken (Tables 31 and 32). TV A, for example, used
a generation planning model to calculate what its emis-
sions from 1990 through 2003 would have been if it had
used the set of generating units operational in 1990atthe
1990 capacity factors and heat rates. Since 1990, TV A has
greatly expanded nuclear generation. Browns Ferry
Unit 2 returned to service in 1991, Browns Ferry Unit 3
returned to service in 1995, and Watts Bar Unit 1. started
commercial operation in 1996. TVA's reported carbon
dioxide emissions from stationary combustion sources
for 2003 were 11 million metric tons above 1990 levels
but 25 million metric tons below what they would have
been if the 1990 generation mix and heat rates had been
used.
IWSA reported two sources of indirect reductions: (1) by
burning municipal solid waste to generate electricity, its
members made it possible for electric utilities to burn
less coal; and (2) if the municipal solid waste had not
been burned, it could reasonably have been expected to
be landfiiled, and some portion of the landfilled waste
would have decomposed anaerobically, producing
methane emissions. Thus, IWSA reported that burning
the waste reduced both fossil fuel burning and methane
emissions on the part of others.
A total of 31 companies reported emission reductions or
sequestration at the entity level using a "basic" reference
case. In a basic reference case, reductions are calculated
as the difference between actual emissions in the report-
ing year and emissions in a baseline year. Of these 31
companies, 15 were electric power producers: AES
Thames, LLC, Arizona Public Service Company,
Consolidated Edison of New York, Inc., DTE Energy/
Detroit Edison, Duke Energy Corporation, Florida
Power Corporation, Hawaiian Electric Company,
KeySpan Energy Corporation, Los Angeles Department
of Water and Power, National Grid USA, PG&.E Corpo-
ration, Sacramento Municipal Utility District, TV A, Tuc-
son Electric Power Company, and Waverly Light &
Power Company. The 16 other reporters using a "basic"
reference case included BMW US Holding Corp., Consol
Coal Group, The Dow Chemical Company, General
Motors Corporation, Internationa] Truck and Engine
Corporation, Lucent Technologies, Inc., Peabody
Energy, Republic Metals Group, Rolls-Royce Corpora-
tion, Sunoco, Inc., and Toyota Motor North America,
Inc.
Table 30. Total Reported Entity-Level Carbon Dioxide Emission Reductions by Type and Source,
Data Year 2003
.. ...
Type of Reduction Source] 1991 | 1992 | 1933 j 1394 | 1395 J 1996 f 1997 [ 1998 J 1999 J 2000 |
2001 I 2002 ! 2003
Direct Reductions
Stationary Combustion . .
Transportation
Other Direct Sources
Total Direct
Indirect Reductions
Purchased f-owsr
Other Indirect Sources . .
Total Indirect
Carbon Sequestered ....
25,5
*
0.2
25.7
*
12.7
12.7
0,6
44.6
*•
•1.2
43.5
-2.6
13.5
10.9
1,6
47.7
*
•1.3
46.4
-4.1
13.2
S.1
8.0
64.1
*
•1,2
62.9
-9.7
15.1
5.4
6.1
86.1
th
•0.9
85.3
-8.4
18.6
10.1
S.9
94.1
0.1
•0.6
93.5
-6,7
20.2
13.4
6.9
94.0
0.2
0.1
94.4
-6.8
20.2
13.4
7.8
107.7
0.5
0.3
108.5
-3.4
20.7
17.3
8.0
112.9
0.5
0.8
114.3
-5.1
24.0
18.8
8.1
128.3
0.7
7.4
136,4
-6.1
24.5
19.4
7.4
133.0
0,8
7.9
141,7
-4.4
25.3
20.9
7.6
134.4
0.8
7.4
142.5
-3.6
29.6
26.1
6.9
130.9
0.7
a.1
139.8
1.4
29.7
31.1
6.9
*Less than 0.05 million metric tons.
Note: Negative numbers indicate increases in emissions.
Source: Energy information Administration, Form EIA-1605.
^Negative indirect reductions in entity-level emissions (i.e., emission increases) were reported for 2003 by 25 participants iti the Volun-
tary Reporting Program.
Energy Information Administration / Voluntary Reporting of Greenhouse Gases 2003
63
-------
Future Commitments
To Reduce Emissions
The Voluntary Reporting Program also permits entities
to report commitments to reduce emissions or to take
action to reduce emissions in the future. There are three
types of future commitments in the Program: entity
commitments, financial commitments, and project com-
mitments. Entity and project commitments roughly
parallel the entity and project aspects of emissions
reporting: an entity commitment is a commitment to
reduce the emissions of an entire organization; and a
p roject commitment is a commitment to take a particular
action that v/ill have the effect of reducing the reporter's
future emissions. A financial commitment has no emis-
sions reporting counterpart: it is <» commitment to spend
a particular sum of money on emission reduction activi-
ties, without a specific promise on the emissions conse-
quences of the expenditure.
Table 31. Largest Individual Reported Entity-Level Direct Emission Reductions by Gas, Source,
and Type of Reference Case Employed, Data Year 2003
Reporter
Waste Management, Inc
Tennessee Valley Authority
FPL Group
Ccmso! Coal Group
Southern Company
Duke Energy Corporation
RrstEnetqy Corporation
Blue Source, LLC
Entergy Services. Inc
Constellation Energy
Jim Waiter Resources, Inc.
NiSourcs/NIPSCO
Florida Power Corporation
NE'GT
The Dow Chemical Company
PG&E Conooration
Municipal Electric Auth of Georgia (MEAG Power). .
Farmer Capital Corporation
Alliant Energy
KeySpan Energy Corporation
BP America
8P America
DTE Energy/Detroit Edison
General Motors Corporation
Allegheny Enerqy, !nc
Cinergy Corp
Sunoco, trie
Hawaiian Electric Company, inc
PacifiCorp
Santee Cooper
NiSource/NIPSCO
The Burlington Northern and Santa Fe Railway Co..
Total
I
t
1
1
1
|
! Gas
CH4
CO.
CO,
CM,
coz
CO?
CO,
CO2
COj
COj
CH4
CH4
CO,
CH<
C02
CO,
CO,
CH4
CO-
CO,
CO-
CM,
C02
C02
CO,
CO,
CO,
CO..
4L
CO-
CO,
C02
CO2
i
!
!
i Source
Other Direct
Stationary Combustion
Stationary Combustion
Other Direct
Stationary Combustion
Stationary Combustion
Stationary Combustion
Other Direct
Stationary Combustion
Stationary Combustion
Other Direct
Other Direct
Stationary Combustion
Other Direct
Stationary Combustion
Stationary Combustion
Stationary Combustion
Otner Direct
Stationary Combustion
Stationary Combustion
Stationary Combustion
Other Direct
Stationary Combustion
Stationary Combustion
Stationary Combustion
Stationary Combustion
Stationary Combustion
Stationary Combustion
Stationary Combustion
Stationary Combustion
Stationary Combustion
Transportation
i
1
i
i Reference
i Case
Modified
Modified
Modified
Basic
Modified
Modified
Modified
Modified
Modified
Modified
Modified
Modified
Modified
Modified
Basic
Modified
Modified
Modified
Modified
Basic
Modified
Modified
Basic
Basic
Modified
Modified
Basic
Basic
Modified
Modified
Modified
Modified
& Reported Direct 1
\ Emission Reduction j
\. (Million Metric Tons i
1 Carbon Dioxide 1
[ Equivalent) j
32.9
25.2
21.6
20.2
14.5
11.0
8.0
fi.8
6.7
6.2
5.1
4.8
4,8
3,9
3.6
2.9
2.9
2.8
2.6
2.4
2.0
2.0
1.8
1.7
1.5
1.5
1.4
1.3
1.2
1.2
1.1
1.0
207.0
Percent of
Total
Reported
Direct
Reductions
15.4
11.8
10.1
S.4
6.7
5.1
3.7
3.2
3.1
2.9
2.4
2.2
2.2
1.8
1.3
1.4
1.3
1.3
.1.2
1.1
0.9
0.9
0.3
0.8
0.7
0.7
0.7
0.6
0.6
0.6
0.5
0.5
96.6
t
Note: For 2003, negative direct entity-leva! emission reductions were reported by 27 participants in the Voluntary Reporting of Graenhosjsa Gases
Program.
Source: Energy Information Administration. Form E1A-1805.
64
Energy Information Administration /Voluntary Reporting of Greenhouse Gases 2003
-------
Entity-Level Commitments
Entity-level commitments to reduce greenhouse gas
emissions were reported by 56 participants in the Volun-
tary Reporting Program. These firms made promises to
reduce, avoid, or sequester future emissions at the cor-
porate level. As in the case of entity reporting, some
commitments were to reduce emissions below a specific
baseline, others to limit the growth, of emissions per unit
of output, and others to limit emissions by a specific
amount in comparison with a baseline emissions growth
trend. Participants reporting entity-level commitments
to reduce greenhouse gas emissions in the future
included Allegheny Energy, Inc., Alliant Energy', City of
Klamath Palls, Entergy Services, Inc., FirstEnergy Cor-
poration, FPL Group, Middlesex Generating Company,
National Grid USA, Noranda Aluminum, Inc., and TVA.
The reporters of the largest individual entity-level com-
mitments pledged to reduce emissions in the future by
84 million metric tons carbon dioxide (Table 33). TVA
(23 million metric tons carbon dioxide}, National Grid
USA (15 million metric tons carbon dioxide), FPL Group
(10 million metric tons carbon dioxide}, City of Klamath
Falls (6 million metric tons carbon dioxide), and Entergy
Services and Middlesex Generating Company (5 million
metric tons carbon dioxide, each) reported the 6 largest
entity-level reduction commitments. These 6 commit-
ments combined accounted for 74 percent (64 million
metric tons carbon dioxide) of the total reported
entity-level commitments to reduce greenhouse gases.
National Grid USA, City of Klamath Falls, and Entergy
Services, Inc., measured their reduction commitments
using basic reference cases. The 3 other reporters used
modified reference cases.
Project-Level Commitments
A total of 27 companies reported-on commitments to
undertake 1.91 individual emission reduction projects.
Some of the commitments were linked to future results
from projects already underway and forming part of the
reporters' submissions. Others were for projects not yet
begun. Data on the quantities of reductions expected
were provided by 22 reporters for 1.16 projects.
Reporters indicated that projects were expected to
reduce future emissions by 73 million metric tonscarbon
f
Table 32. Largest Individual Reported Entity-Level Indirect Emission Reductions by Gas, Source,
and Type of Reference Case Employed, Data Year 2003
Reporter
integrated Waste Services Association
Integrated Waste Services Association
Southern Company ,
FPL Group
Sacramento Municipal Utlilty District
Mys'ic Development, LLC
Public Service Enterprise Grouo
Portland General Electric Co
Genera! Motors Corooratlon
PG&E Corporation
IxFGT
Alliani Fnenjy i
Firssirnfirtjy Corporation
Berkshire Power LLC
Waste Manaoement, Inc.
Peabody Holding Company, Inc
Total
!
i
!
i
j
Gas I Source
CO,, Other Indirect
CH4 Other Indirect
C0~ Other Indirect
CO, Other Indirect
CO, Purchased Power
CO., Other Indirect
CO? Other indirect
CO- Purchased Power
CO2 Purchased Power
CO- Other indirect
CH4 Other indirect
CO? Other Indirect
CM,, Other Indirect
CO2 Other Indirect
CO- Purchased Power
CO, Purchased Power
Reference
Case
Modified
Modified
Modified
Modified
Basic
Modified
Modified
Modified
Basic
Modified
Modified
Modified
Modified
Modified
Modified
Modified
Reported
Indirect Emission
Reduction
(Million Metric
Tons Carbon
Dioxide
Equivalent)
150
8.6
3.7
3.0
24
2.0
1.6
1.3 '
0.9
0.8
0.8
0.8
0:7
0.7
0.6
0.5
43,5
Percent of
Total
Reported
indirect
Reductions
353
20.3
8.6
70
58
4.6
3.8
3-?
2.1
1.9
1.9
1.9
1.7
1.7
1.4
1.1
102.4
Note: Twenty-eight participants in the Voluntary Reporting of Greenhouse Gases Program reported negative indirect entity-leve!
emission reductions for 2002.
Source: Energy information Administration, Form EIA-1605.
Energy information Administration /Voluntary Reporting of Greenhouse Gases 2003
65
-------
dioxide equivalent. Of that amount, 61 million metric
tons would be carbon dioxide, 7 million metric tons car-
bon dioxide equivalent would be methane, and 3 million
metric torn carbon dioxide equivalent would be
perfluorocarbons. Nitrous oxide and sulfur hexa-
fluoride together would constitute about 1 million met-
ric tons carbon dioxide equivalent.
The largest individual project-level commitment, made
by TV A, was described as "an increase in low-emitting
capacity" as a result of TVA's nuclear power program. It
would reduce carbon dioxide emissions by 1.8 million
metric tons. The second and third largest individual pro-
ject-level commitments were made by Middlesex Gener-
ating Company, LLC (5 million metric tons carbon
dioxide equivalent) and FirstEnergy Corporation (4 mil-
lion metric tons carbon dioxide equivalent). These 3 pro-
ject-level commitments accounted for 44 percent of total
reported project-level commitments, or 27 million met-
ric tons carbon dioxide equivalent (Table 34).
Financial Commitments
A total of 40 financial commitments to reduce green-
house gas emissions in the future were made by 21 com-
panies, 18 of which were electric utilities. The total
amount of funds promised was $50.3 million. The single
largest reported financial commitment to reduce green-
house gas emissions was tbat of Entergy Services, Inc.,
which committed to spend $25.0 million on a "carbon
burnout plant" to make fly ash suitable for sale to
cement companies, followed by Noranda Aluminum,
Inc. ($5.5 million) and Ameren Corporation (S5.0 mil-
lion). Minnesota Power, FirstEnergy Corporation, CLE
Resources, and Kansas City Power & Light Company
each committed to spend $2.0 million, and the City of
Klamath Falls reported two Individual financial com-
mitments that totaled $2.5 million. These 8 entities
reported financial commitments that together accounted
for 92. percent of the total financial commitments
reported for 2003 {Table 35).
The largest expenditures reported for 2003 were by
Entergy Services, Inc. ($2.0 million), Ameren Corpora-
tion and Noranda Aluminum, Inc. {$0,5 million each),
Dynegy Midwest Generation, Inc. ($0.4 million),
and Bountiful City Light & Power, PacifiCorp, and
NiSource/NIPSCO ($0.2 million each). These 7 compa-
nies combined reported 34.0 million in expenditures to
reduce greenhouse gas emissions in 2003, or 98 percent
of total reported expenditures (Table 36).
Table 33, Largest Reported individual Entity-Level Commitments To Reduce Greenhouse Gases by Gas
and Type of Reference Case, Data Year 2003
Referenc
Reporter Gas Case
Tennessee Valley Authority CO, Modified
Nationa! Grid USA , CO2 Basic
FPL Group , CO- Modified
City of Klamath Falis CO2 Basic
Entergy Services, inc. CO2 Basic
Middlesex Generating Company, LLG , . . . CH , Modified
FirstEnergy Corporation CO2 Modified
Noranda Aluminum Inc CF^ Sasic
Afliant Energy CO2 Modified
Greater New Bedford Regional Refuse Mgl District . , CHA Modified
The Burlington Northern and Santa Fe Railway Co. . . CO? Modified
Allegheny Fnerqy. Inc , CO2 Basic
South Carolina Electric & Gas Company CO2 Basic
Alliant Energy CO, Modified
Public Service Company of New Mexico CO2 Basic
Alliant Fnergy CO.. Modified
Total
Reported Entity-Levei Percent of Total
Commitment (Million Reported EntiCy-Leve!
a Metric Tons Carbon Reduction
Dioxide Equivalent) Commitments
22.6 26.3
15.1 17.6
10.0 11.6
6.3 7.3
S.O S.8
4.8 5.6
2.9 3.3
2.3 3.2
2.4 2.8
2.1 2.5
2.1 2.4
1.8 2.1
1.8 2.1
1.8 2.0
t.5 1.7
1.0 1.1
83.8 S7.6
t
CO2 = carbon dioxide. CH4 = methane. CF4 = perfiuoromethane.
Hold: Reporters are not asked to indicate whether future reductions wi!i be direct, indirect, or sequestration.
Source: Energy Information Administration, Form EIA-1605.
66
Ertargy information Administration / Voluntary Reporting of Greenhouse Gases 2003
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Table 34. Largest Reported Individual Project-Level Commitments To Reduce Greenhouse Gas Emissions,
Data Year 2003
Reporter
Tennessee Valley Authority
Middlesex Generating Company, LLC
FirstEnergy Corporation
City of Kiamaih Faits-Cogen
Reported
Commitment
(Million
Metric Tons
Carbon
Dioxide
Equivalent)
_._
Percent of
Total
Reported
Project-Level
Noranda Aluminum, inc.
FirstEnergy Corporation ,...
City of Kiamaih Pails-Cogs n .
Municipal Eteciric Auth'df Georgia
{MEAG Power) /?
Alliant energy
Nsw York Power Authority
Tennessee Valley Authority
Greater New Bedford Regions! Refuse Mgt
District :..
City of Kiamath Paiis-Cogsn
Alliant Energy
PacffiCorp
Santee Cooper
Municipal Electric Auth of Georgia (MEAG
Power)
Santoa Cooper
Allegheny Energy, Inc
City of Ktemath Fafls-Cogen ,
. ...Project Description
Increase In low-emitting capacity 17.6 24.3
Landfill gas control arid energy recovery to produce electric power 4.8 6.5
Undertake supply side efficiency improvements 4.4 6.0
As part of KCP's carbon offset proposal to tFSC. $1.5 million in 3.0 ' 4.2
funding was committed to the FRT program to support
reforestation of underproducing tends in western Oregon
Reduction of RFC emissions through anode effect reduction 2,8 3.8
program in keeping with uSEPAgoal of 30-50%: 90% reduction
in PFC emissions from Lines 1 & 2 and 69% reduction from
Line 3; ail reductions from 1590 baseline emissions
Nuclear generation operation improvement • 2.5 3.5
Under the Oregon State Energy Facility Siting Council Sits 2.5 3.4
Certificate, the Klamath Cogeneration Project committed to invest
$1 million {in 1998 dollars) to extract useful energy (methane) for
electricity production from two largely untapped sources
2.5 ' 3.4
Increase nuclear unit availability
Modified forest management 2.4 3.3
NYPA customer energy services programs 2.3 3.1
Fuel switching 2.2 3.0
2.1 2.9
Landfill gas control nnrf future utilization
Cogeneration of steam to displace fossil-fired ooilars used at an 2.0 2.8
off-site industrial facility
Other energy end-use projects/activities (electric) 1.7 2.3
Other aneigy and -use projects/activities 1,3 1.8
Cross Unit 2 retrofit .1.1 1.6
Increase nuclear unit capacity 1.0 1.3
Upgrade Summer Nuctosr Station 0.9 1.3
•Utilitrae: Rio Bravo Canton Sequestration Project, Belize: 0.9 1.3
134,400 acres
Sales and installation of solar photovoltaic systems in off-grid 0.6 1.2
rural households in India and Sri Lanka
Tennessee Vaitey Authority Other energy end-use projects/activiiies
Total
Source: Energy Information Administration. Form EIA-1605.
08
60.4
1.1
S3.3
Energy information Administration. /Voluntary Reporting'of Greenhouse Gases 2003
67
-------
Table 35. Largest Reported Individual Entity-Level Financial Commitments To Reduce Greenhouse Gas
Emissions, Data Year 2003
Reporter
Ereergy Services, Inc
Noranda Aluminum, Inc
Amcren Corporation (formerly US and C1PS) .
Minnesota Power
FifstEfisrgy Corporation
Kansas Cily Power & Light Company
Ct£ Resources
Ciiy of Kiamath Faifs-Cogen
City of Kiama.li Fails-Cogen
• PacifiCorp
City of Kiamath Paits-Cogen
Dvnegy. Inc.
FifstEnerqy Corporation
Bountiful City Light & Power
Kansas City Rower & Light Company
McMinnvtlte electric System
Conectiv Atlantic Genera Bon -GAG)
NiSourcB/NIPSCO
Rrstfe'nargy Corporation
TXU
Dynegy, Ine
TXU
Constellation Energy
Ciiv of Kiamath Fails-Coqen
Total . ,
i
|
Financial i
Commitment {Voluntary Program
Industry { (Dollars) I A.SB!?M°.!1
Electric, Gas, and Sanitary Services
Primary Metals Industries
Electric, Gas, and Sanitary Snrvioss
Electric, Gas. and Sanitary Services
Electric, Gas, and Sanitary Services
Electric, Gas, and Sanitary Services
Holding and Other Investment Offices
Services, not elsewhere classified
Services, not elsewhere classified
Electric, Gas. and Sanitary Services
Services, not elsewhere classified
Eflectric, Gas. and Sanitary Services
Electric, Gas, and Sanitary Services
Electric, Gas, and Sanitary Services
Electric. Gas, and Sanitary Services
Electric, Gas, and Sanitary Services
Electric, Gas, and Sanitary Services
Electric, Gas, and Sanitary Services
Electric, Gas, and Sanitary Services
Electric, Gas, and Sanitary Services
Electric, Gas, and Sanitary Services
electric, Gas. and Sanitary Services
Electric, Gas, and Sanitary Services
Services, riot elsewhere classified
25,000,000 None
5.500,000 Voluntary Aluminum
Industrial Partnership
5,000,000 Climate Challenge
2,000.000 Climate Challenge
2,000,000 Climate Challenge
2,000,000 Climate Challenge
2.000,000 None
1.500,000 None
1000,000 None
610,000 Climate Challenge
500.000 None
450.000 Climate Challenge
400,000 Climate Challenge
.293,924 Climate Challenge
264,000 Climate Challenge
249,600 Renewable Snargy
Commercialization
200,000 Climate Challenge
200,000 Climate Challenge
200,000 Climate Challenge
105,000 Climate Challenge
105,000 Climate Challenge
105,000 Climate Challsrsga
100.000 Climate Challenge
100,000 None
4S,887j524
Percent of Total
Reported Financial
Commitments
49.7
10.9
9.9
4.0
4.0
4.0
4.0
3.0
2.0
1.2
1.0
0.9
0.8
0.6 •
0.5
0.5 . 4
0.4
0.4
0.4
0.2
0.2
0.2
0.2
0.2
99.2
Source: Energy Information Administration, Form EIA-1605.
Table 36. Reported Entity-Level Financial Expenditures To Reduce Greenhouse Gas Emissions,
Data Year 2003
Reporter
Entergy Services inc. .
Amsreo Corporation (formerly UE and CIPS)
Noranda Aluminum, Inc
Dynegv, inc. ...
Bountiful City Light & Power
PacifiCorp
NiSourcs/NlPSCO
TXU
TXU
Kansas City Power & tight Company
Xcei Energy
NiSourceWiPSCO
Cleco Corporation
Total
Industry
Electric, Gas, and Sanitary Services
Electric, Gas, and Sanitary Services
Primary Metals Industries
Electric. Gas, and Sanitary Services
Elaclric, Gas, and Sanitary Services
electric, Gas, and Sanitary Services
Electric, Gas, anc Sanitary Services
Electric, Gas, and Sanitary Services
Electric. Gas, and Sanitary Services
Electric, Gas, and Sanitary Services
Electric. Gas, anc! Sanitary Services
Electric. Gas. and Sanitary Services
Electric, Gas, and Sanitary Services
"Less than 0.05 percent.
Source: Energy Information Administration, Form ElA-1505.
2002
Financial
Expenditure
(Dollars)
2,000.000
500,000
434,665
400,000
230.495
218.067
200,000
20,000
20,000
10,000
5,000
5.000
1,600
4.074.827
Percent of
Total Reported
Voluntary Program Financial
Affiliation Expenditures
None 49.1
Ciimate Change 12.3
Voluntary Aluminum 1 1 .4
Industrial Partnership
Ciiinate Change 9,8
Ciimate Change 6.7
Ciimatf; Change 5.4
Climate Change 4.9
Climate Change 0.5
Climate Changs 0.5
Climate Changs 0.2
Climate Change 0. 1
Ciiinate Change 0.1
None *
100.0
68
Energy information Administration / Voluntary Reporting of Greenhouse Gases 2003
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8. Project-Level Reporting on Form EIA-1605EZ
The Energy Information Administration (EIA) provides
Form. EIA-1605EZ to participants in the Voluntary
Reporting of Greenhoxise Gases Program as a less com-
prehensive and less detailed alternative to Form
EIA-1605. Form EIA-1605EZ (the "short form") allows
reporters to provide a brief summary of their emission
reduction projects for a single year. The short form is
used exclusively for reporting projects undertaken
within the geographic boundaries of the United States,
its territories and trusts. Because reports submitted on
Form EIA-1605EZ do not make a distinction between
owning or controlling an emissions source and simply
initiating or participating in an emission reduction activ-
ity, there is no systematic way to distinguish between
direct and indirect emissions reported on this form.
Also, because the data reported in support of the emis-
sion reduction estimates are limited, it is difficult to per-
form anything but the most rudimentary arithmetic
checks for accuracy.
Who Reported
on Form EIA-1605EZ
A total of 34 entities submitted reports on Form EIA-
1605BZ for 2003. Of those, 17 were electric power pro-
viders., typically, relatively small electric power cooper-
atives; 8 were alternative energy providers, including
one coal mine methane developer, 2 landfill gas-to-
energy developers, and 5 firms that combusted biomass
to reduce greenhouse gas emissions; and 6 were manu-
facturing firms—one each from the textile, refining, fab-
ricated metals, and microprocessor industries, and 2
from the chemical industry. One industry association,
one individual household, and one forestry firm also
filed Form EIA-1605EZ for 2003.
What Was Reported
on Form EIA-1605EZ
A total of 219 projects were reported on Form EIA-
1605E2 for 2003 (Table 37), down from 253 projects
, reported on the short form, for 2.002. The decrease was
caused by the absence of reports for 2003 from 3 entities
representing 1-1 projects that were reported for 2002, and
by the reporting of fewer projects for 2003 than were
reported for 2002 by 4 other entities. (For example, Wis-
consin Public Power, Inc., reported 61 projects for 2002
but only 30 for 2003.) Another 10 entities reported more
projects for 2003 than they reported in 2002. Of the 219
projects reported for 2003,76 focused on improvements
m energy efficiency, 50 emphasized reductions; in emis-
sions from electricity generation, transmission, and dis-
tribution, and another 44 involved the capture and
combustion of methane. Although reporting on meth-
ane capture and combustion has grown steadily since
1994, 7 fewer such projects were reported for 2003 than
were reported for 2002. For example, U.S. Energy Biogas
Corp reported, fewer methane capture and combustion
projects for 2003 than it did for 2002.
Together, the 219 projects reported on the short form for
2003 reduced greenhouse gas emissions by 16.4 million
metric tons carbon dioxide equivalent (Table 38). Of that,
total, II .0 million met tic tons resulted from efforts in ihe
electricity generation, transmission, and distribution
sector. Another 3.5 million metric tons was attributed to
waste treatment and disposal, nearly all of which
resulted from the capture and combustion of methane at
municipal solid waste landfills (Table 39).
Federal voluntary programs played an important role in
those projects reported on Form ETA-1605EZ. Of the
projects reported, 120 (55 percent) were associated with
some Federal voluntary initiative: 57 were associated
with the U.S. Department of Energy's Climate Challenge
"program, and 41 of the 42 waste treatment and disposal
projects reported referenced the U.S. Environmental
Protection Agency's Landfill Methane Outreach Pro-
gram (Table 40).
Energy Information Administration / Voluntary Reporting of Greenhouse Gases 2003
69
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Table 37. Number of Projects Reported on Form EIA-1605EZ by Reduction Objective and Project Type,
Data Years 1994-2003
Reduction Objective and Project Type
Reducing Carbon Dioxide Emissions
Electricity Generator1 , Transmission and Distribution
Cogeneralion and Waste Heat Recovery
Energy End Use
Transportation and Offroad Vehicles
Other Projects
Reducing Methane and Nitrous Oxide Emissions .......
Waste Treatment and Disposal (Methane)
Agriculture (Methane and Nitrous Oxide)
Oil and hJatura! Gas Systems and Coal Mining (Methane) . .
Carbon Sequestration ,
HaJogenaied Substances ,.,..,
Total , ,
1994 1 1995 1 1996 i 199? [ 1998J 1 999 } 2000 1 2001 2802 i 2003
88 118 125 138 177 151 148 146 186 160
35 4-1 44 46 59 53 55 50 58 SO
0122200010
44 50 53 80 66 56 61 64 97 76
5 8 11 9 14 11 12 13 9 10
4 IS 16 21 36 31 20 19 21 24
15 21 30 32 41 45 44 4? 51 44
10 16 21 28 39 42 43 45 49 42
0000000000
5594231222
20 24 23 30 , 34 41 35 14 14 14
2111002321
125 1614 179 201 252 237 223 210 253 219
Note: Table .excludes projects submitted in confidential reports.
Source: Energy Information Administration, Form EIA-1605EZ.
Table 38. Emission Reductions Reported on Form EIA-1605EZ by Reduction Objective and Project Type,
Data Years 1994-2003
{Million Metric Tons Carbon Dioxide Equivalent)
Reduction Objective and Project Type
Reducing Carbon Dioxide Emissions
Electricity Generation, Transmission, and Distribution
degeneration and Waste Heat Recovery . . . . »
Energy End Use
Transportation and Offroad Vehicles ,
Other Projects , ,
Reducinq Methane and Nitrous Oxide Emissions
Waste Treatment and Disposal (Methane)
Agriculture (Methane and Nitrous Oxide)
Oil and Natural Gas Systems and Coal Mining (Methane) . .
Carbon Sequestration
Haloqenated Substances ,
Total
1994 ( 1995 j 1995 j 1997 1996 1999 i 2000 2G01 2002(2003
3.7 5.0 4.4 6.7 16.4 8.6 9.2 10,9 12.8 12.5
2.3 2.9 2,1 3.8 13.0 8.1 7.8 9.7 11.6 11.0
* * * * it. I...L. *
1.4 1.6 i.9 2.4 2.4 0.3 0,4 0.3 0.4 0.4
* W « qr ******
0.1 0.5 0.4 0.5 0.8 1.1 1.0 0,9 0.9 1.0
0.6 1.2 1.3 1.8 3.0 3.2 3.1 4.0 4.3 3.9
0.6 1.1 1.2 1.8 3.0 3.2 3.1 3,8 4.0 3.5
0.1 0.1 * 0.2 0.3 0.3
* * * * *01 * * * *
,,. ft -i **ni*.
™""" ™ \ft | ••" "••" V. I
4.3 6.1 5.7 8.6 19.4 12.9 12.3 14.8 17.3 16.4
'Less than 0.05 million metric tons.
— = none reported.
Note: Table excludes data submitted in confidential reports.
Source: Energy Information Administration, Form EIA-1605EZ.
t
70
Energy Information Administration / Voluntary Reporting of Greenhouse Gases 2(103
-------
t
Table 39. Carbon Dioxide and Methane Emission Reductions Reported on Form E1A-16G5EZ by Reduction
Objective and Project Type, Data Year 2003
(Million Metric Tons Carbon Dioxide Equivalent)
Reduction Objective and Project Type [ Carbon Dioxide { Methane
Reducing Carbon Dioxide Emissions, 12.4 *
Electricity Generation. Transmission, and Distribution 1p! .0 —
Cogeneraiior, and Waste Heat Recovery
Energy End Use 0.4
Transportation and Offroad Vehicles * —
Other Projects 1.0 *
Reducing Methane and Nitrous Oxide Emissions. * 3.8
Waste Treatment and Disposal (Methane) * 3.5
Agriculture (Meihane and Nitrous Oxide)
Oii and Natural Gas Systems and Coal Mining (Methane) * 0.3
Carbon Sequestration ,.. * . —
Haiogenated Substances — —
J*^^^^^.^^^-^^^J.^L^^J.^^J.±I:^J.^'^ .1?.-.?. M
"Less than 0.05 million metric Jons.
— = norm reported.
Notes: No reductions of nitrous oxide emissions were reported on Form E1A-1605EZ fof 2003. Table excludes data submitted in confidential
reports.
Source: Energy information Administration, Form EIA-1605EZ.
Table 40. Number of Projects Reported on Form EIA-1605EZ Associated with Other Federal Voluntary
Programs, Data Years 1994-2003
Voluntary Program j
Climate Challenge
Landfill Methane Outreach Program
Climate Wise Recognition Program
FNFRGY STAR Programs
Energy Efficiency and Renewable Energy
Information and Training Programs
Green Licjhts Program
Coftlbed Methane Ouiroach Pfooram
WasteWise Program
Other
Total
1994
106
....
5
1
_
-1
116
[ 1995 |
127
3
6
3
__
11
150
i 1996
117
2
5
10
6
1
_
3
144
[ 1997 j
124
2
12
, 5
4
1
_
9
157
1998
129
34
25
2
6
2
_
7
205
j 1999 j
114
10
25
1
2
3
_
1
186
2000 !
111
42
12
2
1
_
3
171
2001
97
44
1
8
1
.....
2
11
184
f 2002
75
43
1
28
27
1
4
7
191
j 2003
57
41
2
11
3
6
120
— = none reported.
Note: Tabie excludes data submitted in confidential reports.
Source; Energy Information Administration, Form EIA-1605EZ.
Energy Information Administration / Voluntary Reporting of Greenhouse Gases 2003 71
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t
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Glossary
t
Afforestation: Planting of new forests on lands that
have not been recently forested,
Anaerobic lagoon: A liquid-based manure management
system, characterized by waste residing in water lo a
depth of at least 6 feet for a period ranging between 30
and 200 days.
Associated natural gas: See associated-dissolved natu-
ral gas.
Associated-dissolved natural gas: Natural gas that
occurs in crude oil reservoirs either as free gas (associ-
ated) or as gas in solution with crude oil (dissolved gas).
Baseline period: The years 1987 through 1990 for which
entity-level emissions maybe reported.
Biofuels: Liquid fuels and blending components pro-
duced from, biomass (plant) feedstocks, used primarily
for transportation.
Biogas: A mixture of carbon dioxide and methane pro-
duced through bacterial action.
Biomass: Organic nonfossil material of biological origin
constituting a renewable energy source.
British thermal unit: The quantity of heat required to
raise the temperature of 1 pound of liquid water by 1
degree Fahrenheit at the tempera ture at which water has
its greatest density (approximately 39 degrees
Fahrenheit).
Carbon sink: A reservoir that absorbs or takes up
released carbon from another part of the carbon cycle.
The four sinks, which are regions of the Earth within
which carbon behaves in a systematic manner, are the
atmosphere, terrestrial biosphere (usually including
freshwater systems), oceans, and sediments (including
fossil fuels).
Carbon sequestration: The fixation of atmospheric car-
bon dioxide in a carbon sink through biological or physi-
cal processes.
Cblorofluorocarbon (CFC): Any of various compounds
consisting of carbon, hydrogen, chlorine, and flourine
used as refrigerants, CFCs are now thought to be harm-
ful to the earth's atmosphere.
Cogeneration: The production of electrical energy and
another form of useful energy (such as heat or steam)
through the sequential use of energy.
Commercial scale: Application of a demonstrated tech-
nology at a cost-effective scale.
Commitment: An expressed intention to undertake an
action or actions that will reduce greenhouse gas emis-
sions, increase carbon sequestration, or achieve a stated
emissions goal.
Conversion factor A number that translates units of one
measurement system into corresponding values of
another measurement system. Note: For specific conver-
sion factors, see ETA data products,
Deforestation: The net removal of trees from forested
land.
Emissions coefficient: A unique value for scaling emis-
sions to activity data in terms of a standard rate of emis-
sions per unit of activity (e.g., pounds of carbon dioxide
emissions per unit of fossil fuel consumed). .
Emissions: Anthropogenic releases of gases to the atmo-
sphere. In the context of global climate change, they con-
sist of radianvely important greenhouse gases (e.g., the
release of carbon dioxide during fuel combustion).
Emissions, direct: Emissions from sources owned
(wholly or in part) or leased by an entity.
Emissions, fugitive: Unintended leaks of gas from the
processing, transmission, and/or transportation of fos-
si! fuels.
Emissions, indirect: Emissions from sources not owned
or leased by an entity that occur, wholly or in part, as a
result of its activities.
Emission reduction: A decrease in annual greenhouse
gas emissions.
Energy conservation: Activities that reduce end-use
demand for energy by reducing the service demanded.
Entity: For the purposes of the Voluntary Reporting Pro-
gram, an individual or organization that is a legal U.S.
person (e.g., a U.S. citizen, resident alien, company,
organization, or group incorporated under or recog-
nized by U.S. law; or a Federal, State, or local govern-
ment agency).
Entity boundary: Conceptually, a line drawn to encom-
pass the emissions sources and sinks to be evaluated in
an entity-level report. An entity boundary should
Energy Information Administration / Voluntary Reporting of Greenhouse Gases 2003
-------
include all the emissions sources and sinks owned
(wholly or in part) or leased by the entity and, to the
extent possible, other emissions sources and sink?
affected by the entity's activities.
Entity-level reporting: The reporting of greenhouse gas
emissions, emission, reductions, and carbon sequestra-
tion for an entire entity. See also Project-level reporting.
Estimation method: The techniques, including key
assumptions and data sources, used by the reporter to
derive the reported emissions, emission reductions, or
sequestration.
Foreign activities: All actions outside the United States,
its territories, and trusts.
Forest preservation: Protecting existing forests from
harvest and, in some cases, conversion to another land
use as a means of mitigating increases in atmospheric
carbon.
Fossil fuel: An energy source formed in the Earth's crust
from, decayed organic material. The common, fossil fueis
are petroleum, coal, and natural gas.
Fuel cycle: The entire set of sequential processes or
stages involved in the utilization of fuel, including
extraction, transformation, transportation, and combus-
tion. Emissions generally occur at each stage of the fuel
cycle.
Fuel switching: The substitution of one type of fuel for
another. The fuel substitution may be either temporary
(as in the case of a power plant that temporarily switches
from coal to natural gas) or permanent (as in the case of a
fleet operator who replaces gasoline-powered automo-
biles with electric cars).
Fugitive emissions: See Emissions, fugitive.
Global warming potential (GVVP): An index used to
compare the relative radiative forcing of different gases
without directly calculating changes in their atmo-
spheric concentrations. GWPs are calculated as the ratio
of the radiative forcing that would result from the emis-
sion of one kilogram of a greenhouse gas to that from, the
emission of one kilogram of carbon dioxide over a fixed
period of time, such as 100 years.
Gob: A zone of rubble created when the roof of a conl
mine collapses behind the mining operations.
Greenhouse effect: The result of water vapor, carbon
dioxide, and other atmospheric gases trapping radiant
(infrared) energy, thereby keeping the Earth's surface
warmer than it would otherwise be. Greenhouse gases
within the lower levels of the atmosphere trap infrared
radiation .that would otherwise escape into space, and
subsequent re-radiation of some of the energy back to
the Earth maintains,higher surface temperatures than
would occur if the gases were absent. See Greenhouse
gases.
Greenhouse gases: Those gases, such as water vapor,
carbon dioxide, nitrous oxide, methane, hydrofluoro-
carbons (HFCs), perfluorocarbons (PFCs) and sulfur
hexafluoride, that are transparent to solar (short-wave)
radiation but opaque to long-wave (infrared) radiation,
thus preventing long-wave radiant energy from leaving
Earth's atmosphere. 'The net effect is a trapping of
absorbed radiation and a tendency to warm the planet's
surface.
Halogcnated substance: A volatile compound contain-
ing halogens, such as chlorine, fluorine, or bromine,
Horizon year. The year in which a commitment to
reduce greenhouse gas emissions or increase sequestra-
tion (reported on Schedule TV) is expected to be met.
Intergovernmental Panel on Climate Change (IPCC):
A panel established jointly in 1988 by the World Meteo-
rological Organization and the United Nations Environ-
ment Program to assess scientific: information related to
climate change and to formulate realistic response
strategies.
Life cycle: The progression of <» product through its ser-
vice life. For most products, emissions and energy-
consuming characteristics will be altered as they age.
Longwall mining: An automated, form of underground
coal mining characterized by high recovery and extrac-
tion rates, feasible only in relatively flat-lying, thick, and
uniform coalbeds. A high-powered cutting machine is
passed across the exposed face of coal, shearing away
broken coal, which is continuously hauled away by a
floor-level conveyor system. Longwall mining extracts
ail machine-minable coal between the floor and ceiling
within a contiguous block of coal, known as a panel,
leaving no support pillars within the panel area. Panel
dimensions vary over lime and with mining conditions
but currently average about 900 feet wide (coal face
width) and more than 8,000 feet long (the minable extent
of the panel, measured in direction of mining). Longwall
mining is done under movable roof supports that are
advanced as the bed is cut. The roof in the mined-out
area is allowed to fall as the mining advances.
Manure management: The method used to dispose of
the solid waste produced by livestock and poultry.
Modified forest management: The modification of the
management regimes of existing forests to increase their
carbon capture rates.
Municipal solid waste: Residential solid waste and
some nonhazardous commercial, institutional, and
industrial wastes.
74
Energy information Administration / Voluntary Reporting of Greenhouse Gases 2003
-------
i
Ozone: A molecule made up of three atoms of oxygen.
Occurs naturally in the stratosphere and provides a pro-
tective layer shielding the Earth from, harmful ultravio-
let radiation. In the troposphere, it is a chemical oxidanl,
a greenhouse gas, and'major component of photochemi-
cal smog.
Photosynthesis: The manufacture of carbohydrates and
oxygen from carbon dioxide and water in the presence
of chlorophyll, with sunlight as the energy source. Car-
bon is sequestered and oxygen and water are released in
the process.
Pilot project: A small-scale trial designed to test or dem-
onstrate the efficiency or efficacy of a project.
Project: An action undertaken to reduce greenhouse gas
emissions or sequester carbon.
Project boundary: Conceptually, a line drawn to encom-
pass the emissions sources and sinks affectecJ by a pro-
ject. A project boundary \ should include all the
significant and quantifiable effects of the project.
Project ID code: A unique code assigned by the Energy
Information Administration to a reported project for
tracking purposes. "
Project-level reporting: Reporting on emission reduc-
tions or carbon sequestration achieved as a result of a
specific action or group of actions.
Reconductoring: Replacement of existing conductors
with large-diameter conductors to reduce line losses.
Conductors (including feeders and transmission lines)
are a major source of transmission and distribution sys-
tem losses. In general, the smaller the diameter of the
condxictor, the greater its resistance to the flow of electric
current, and the greater the consequent line losses.
Reference case: The emissions levei to which current
actual emissions levels are compared when emission
reductions are calculated.
Reference case, basic: A reference case using actual his-
torical emissions or sequestration values.
Reference case, modified: A reference case using pro-
jected emissions or sequestration values, representing
the emissions level that would have occurred in the
absence of reduction or sequestration efforts.
Reforestation: Replanting of forests on lands that have
recently been harvested or otherwise cleared of trees.
Reporter: An entity (see definition above) completing
either Form EIA-1605 or Form EIA-1605EZ and submit-
ting it to the Energy Information Administration.
Room-and-pillar mining: The most common method of
underground mining in which the mine roof is sup-
ported mainly by coal pillars left at regular intervals.
Rooms are places where the coal is mined; pillars are
areas of coal left between the rooms. Room-and-pillar
mining is done either by conventional or continuous
mining.
Sequestered carbon: Carbon that is removed from the
atmosphere and retained in a carbon sink {such as a
growing tree) or in soil.
Sequestration: See Carbon sequestration.
Sink: See Carbon sink.
Third-party reporter An authorized party that submits
a report on behalf of two or more entities that
have engaged in emissions-reducing or sequestration-
increasing activities. Possible third-party reporters
include trade associations reporting on behalf of mem-
bers that have undertaken reduction projects.
Urban forestry: The planting of trees individually or in
small groups in urban or suburban settings.
Vhar metering: Phase shifters on watt-hour meters thai-
measure reactive volt ampere hours or varhours.
Watt (VV): The unit of electrical power equal to one
ampere under a pressure of one volt A watt is equal to
1/746 horsepower.
Energy Information Administration /Voluntary Reporting of Greenhouse Gases 2003
75
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