£3519
United States
Environmental Protection
Agency
Office of Water
Program Operations (WH-547)
Washington, D.C. 20460
December. 1978
Water
SEPA
Report to Congress
Industrial Cost Recovery
Volume V — Transcripts of
Public Meetings
(Regional Public Meetings)
Repository Material
Permanent Collection
Coopers & Lybrand
1800 M Street, N.W.
Washington, D.C. 20036
US EPA
Headquarters and Chemical Libraries
EPA West Bldg Room 3J4U
Mailcode 3404T
1301 Constitution Ave NW
Washington DC 20004
202-566-0556
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'•'
INDUSTRIAL COST RECOVERY PUBLIC MEETING
Federal Building
Boston, Massachusetts
Tuesday, October 24, 1978
The public meeting was convened at 10:10 a.m.
John Gall presiding.
T^-EN i. :'.\LLZR 5. /PS'-CI/.TEJ
•-S T.-.^3 JT1SJT : *
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Pace
Opening statement of Lestsr Sutton, Watsr Program
Division Director, on behalf of William Adams,
Regional Administrator 3
Statement of John Gall, Regional UC/ICR
Specialist, en Purpose of Study and Purpose
of Meeting 6
Project Scope and Methodology
J. nikal Tcwnsloy 14
Myron Olstain 19
Statements of Congressional Speakers
Ccngresswcman Margaret Heckler 29
Ms. Mimi Feller, for Senator Chaffee 36
Discussion of Alternatives 39
Statement of Carlton M. Viveiros,
Mayor, City of Fall River, Mass. 75
Statement of Georgs T. Oarmody, Exec. Director
Fall River Industrial Development Commission 79
Statement of Patrick H. Harrington, Bristol Co.
Commissioner, en behalf of United Merchants
of Fall River 83
Statement of John E. Walker, Director of
Research & Development, Chamber of Commerce
Greater Portland, Maine 39
Statement of Makram H. Megalli, Director
Public Works, City o'f Woonsocket, R. I. 97
Statement of Hedley Patterson, Division Engineer
City of Wocnsccket, R. I. 106
Statement of David L. Phillips, Exec. Director
South Essex Sewerage District
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L £. i (Ccnt'd.)
Statement cf William Torpey, President
Greater Fall River Chamber of Coransrcrs - 11,
Statement of Philip Murray, on behalf of The
Industrial Wastewater Survey Comxn. , New Bedford 12 u
Statement of Ralph Guerriero, Co-Chairman
Fall River Textile Processors Wasts
Watar Trsatmcnt Committee 12 *
S»;af:9TT.snt cf l-artin Had ley , Chairman
Sewer Commission, Town of Templeton 12T
Statement of William Goodwin, City Engineer
City of Portland, Maine 12 r
Statement of Kenneth Bundy
Plant Engineer, Roed & Barton Co. 134
Statement of Ms. Mimi Feller for Staff
of S-snator Chaffse of Rhcdo Island 137
Statement of Duane wheeler, Vice President
Acushnet Company 142
Statement of Karl Spilhaus
Hctthern Textile Association 144
Statement of Kenneth Gillum, Mgr. of Engineering
Goodyear Tire & Rubber Company 145
General Discussion and
Questions and Answers 146
List of Attendees 156
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MR. GALL: I think this would be an appropriate
time to start the conference on Industrial Cost Recovery.
This is the fourth in a series of meetings in the
Eastern half of the United States.
The final meeting in the five Eastern Regions will
be on Thursday in Atlanta.
Our opening comments this morning, fche introduction,
will be provided by Lester Sutton, the Water Proaram's
Division .Director for EPA's Region I Office here, in Boston.
STATEMENT OF
LESTER SUTTON, WATER PROGRAM DIVISION DIRECTOR
MR. SUTTON: Good morning. It's a pleasure to
welcome you here today on behalf of Bill Adams, our Regicnal
Administrator for the Environmental Protection Agency here
in Boston.
Here in Boston we're responsible for administrating
EPA's Programs in the six New England states. I'm in charge
of the.Water Programs Division, which includes among other
programs, the Construction Grants Program for aid to
municipalities in the construction of wastewater treatment
facilities.
One of the major aspects of the 1972 Act that caused
seme major changes in our proerram was the provision for
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Industrial Cost Recovery, whereby industries are required t«
pay back ever a period of tine their share cf the Federal
grant en any construction projects.
This has caused a lot of confusion, a lot of
questions over the years. And, as a result, in the 1977 ™.
Congress reconsidered the Program and determined there sho
be a study and evaluation with a report back to them for
consideration cf possible amendments of this provision of
Act, which is the purpose of this meeting here this mornin*
It's our intention that the public be involved ir
this study to the maximum extent and that your statements
and concerns will be reflected in the final report as pre-
sented to Congress this December. In order to make certain
that everyone has a proper opportunity to be heard, we'd
like to observe the following order of procedure this
morning.
We'll start with an explanation of the purpose of
the Industrial Cost Recovery Study, which you may, hear refe
to from now on as the "ICR Study" and the purpose of this
meeting. This will be presented by John Gall, our Regional
Specialist here in Boston on User Charges and Industrial
Cost Recovery.
This will be followed by a briefing of the project
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scope and methodology by Mikal Townsley of Coopers & Lybrand,
the management consulting and accounting firm hired by EPA
to assist us in this Study.
we then expect that the Hon. Margaret Hechler,
Congresswoman representing the 10th Congressional District
here in Massachusetts, will be here to present a statement
on the subject.
Next will be a presentation by Myron Olstein of
Coopers & Lybrand of the findings, conclusions and the possible
recommendations being made by this Study and what could
possibly be the result thereof.
This will be followed by those who have prepared
statements to make and who have submitted the statement in
advance of this meeting.
Following that, anyone else who wishes to make a
statement, whether to present it in writing or to present it
orally, will be given the opportunity.
We will then open the discussions for any questions
and answers that any of you may have and in this way we hope
to ensure that everyone who has a statement to make or a
question to ask will be heard.
ICR is an important and topical issue. We want to j
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make sure that Congress is aware of all the concerns being I
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expressed at the grass roots level. Therefore, we'll stay
here as Long as necessary to conclude this discussion and tc
hear all statements.
We have a Court Reporter here with us today and
a transcript of this meeting will be appended tc the final
raport which goes to Congress. For that reason, we ask yo
to speak clearly and slcrwly and one at a tima.
I will now turn the meeting over tc John Gall, whc
will explain the purpose of the Study and the purpose of tl
meeting.
STATEMENT OF
JOHN GALL, REGIONAL SPECIALIST FOR EPA
MR. GALL: Thank you, Les. In addition to servir
as the Regional UC/ICR Specialist, the User Charge/Industri
Cost Recovery Specialist, over the past six months I've als,
been involved with * Technical Advisory Group at the
Washington level, providing input to our management consult"
in terms of direction and the scope of the Study.
And so I represent not only Region I here today,
also EPA's Washington office.
I'd like at this time to provide you with some
brief insights as to why the ICR Study is being conducted ai
why this meeting is being held in particular. As we all knr-
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ths passage cf the Federal Water Pollution Control Act in
1972, that is Public Law 92-500, established specific
financial programs which all Title II grantaes have to adopt.
More specifically, the Act required grantees to
develop and maintain two different types of rate systems.
One, which is User Charges, to cover the operating and
maintenance costs cf the wastewater treatment system on a
proportional basis; and the other one cf course, is
Industrial Cost Recovery to recover from industrial users
of the treatment plant that portion of the EPA Grant which
is allocable to their use.
While there's certainly been some controversy
ccncering the User Charge regulations and the systems in
general, the ultimate goal that program was supposed to
provide -- that is adequate O & M planning for wastewater
treatment plants — is a goal in which there is almost
universal agreement.
ICR, on the other hand, is a topic which has caused
considerable debate over the past six years. And in response
to many questions and much discussion. Congress, in December
of 1977, enacted the Clean Water Act of 1977, or Public Law
95-217. In this regard, there have been several modifications
to the 1972 Act, cne cf which was set forth in Section 75
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which specified the EPA would study the "efficiency of and
the need for" Industrial Cost Recovery.
The Study was to include, but not be limited to,
analysis of the impact of Industrial Cost Recovery on rural'
communities, on industries in economically distressed areas,
areas of high unemployment. And it further stipulated such
a report must be delivered to Congress no later than
December 31 of this year.
In May of this year, EPA contracted with Coopers
Lybrand to conduct the Study for the Agency. Coopers &
Lybrand is a large management consulting firm and one of
tha largest in the nation and has considerable expertise in
these areas.
As I indicated, the purpose of the ICR Study was t<
carry out the instructions of Congress. The basic foundatic
for the scope of the contractor's work were inserted in the
Congressional Record of December 15th of 1977 by Congressman
Roberts of California, and I'd like to read you specifically
his entry, in the Congressional Record so you will have a fai
idea of what has been the focus of the Study. The
Congressman said;
"It has long been the intent of Congress to encour
participation in publicly-owned treatment works by industry.
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Th«* conferees are most concerned ever the impact the
Industrial Cost Recovery Provision cf existinq law may have en
industry participation on these public systems. Accordingly,
the Industrial Cost Recovery Study, Section 75, has been
incorporated in the Conference Report, and EPA is encouraoed
to submit the results of the Study as soon as possible so that
Ccnoress can take action on any rsccmmenda^icns that are
forthccmina. !
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"It is expected that the Administrator will consult
with all interested groups in conducting this Study and .-that
the Study will address at least the following questions:
"First, whether the Industrial Cost Recovery
Program discriminates against particular industries or
industrial plants in different locations, and do small town
businesses pay mere than their urban counterparts?
Additionally, what is the combined impact en such industries of
the User Charge and Industrial Cost Recovery requirements?
"Second. Whether the ICR Program and resultant
User Charges cause some communities to charge much higher ;
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costs for wastewater treatment services than other communities
in the same geographical area?"
There is a parenthetical note — "(Some communities
have indicated that disparities in ICR and User Charges affect
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employment opportunities in their localities.)"
And, going on with the second question — "Whethe:
a mechanism should be provided whereby a community may lew
both its User and ICR Charges to a level that is competiti
with other communities in order to restore parity?
"Third. Whether the ICR Program drives industri<__
cut of municipal systems, the extent and the community imp*
of that action?
"Fourth. Whether industries tying into municipal
systems pay mere or less for pollution control than,- direct
dischargers?
"Fifth, Whether the ICR Program encourages conserv-
ticn, the extent and the economic or environmental impact o
that decision?
"Sixth. Whether the ICR" —
—or "How much Revenue will this Program produce fo
Local, State and Federal Governments, and to what use will r
should these revenues be put?
Additionally, "Whether the ICR Program encourages
cost effective solutions to water "pollution problems?
"Eighth. Determination of the administrative costs
of this Program, additional billing costs imposed, costs
associated with the monitoring of industrial effluent for
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the purpose cf calculating Hie ICR Charges, ancillary benefits
associated with the monitoring of industrial effluents,
procedures necessary to ta^e into account the changes in the
n umber of industries discharging into municipal plants, and the
impacts of seasonal or other changes in the characteristics
and quantity of effluents discharged by individual industries?
"Ninth. Whether small industries should be
exempted from ICR: and how should small be defined; and is
there a reasonable floor that can be established for ICR-
based upon a percentage of flow?"
C & L has been busy for the past five months
asking questions and erathering data from a cross-section
cf viewpoints. As a final action in their data collection
phase, ten meetings are being held in the ten Regional
office cities, to present a summary of the data gathered to
date, as well as a preliminary set of conclusions as to
what the data means.
We would like to gather data and statements from
those interested parties with whom we have not had the
opportunity to talk in the past, and want to present a list of
some of the alternatives to Industrial Cost Recovery which
could be recommended.
Finally, we want to answer as many of your questions
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as w«> can reasonably answer. Our primary purpose, thcunh,
is to listen tc your comments.
Before I turn the mssting over to Mike Townsley t
Coopers & Lybrand, I'd like to make two additional — or
three additional comments.
First of all, as I indicated, the report that we
arc doincr is dus tc Congress bv December 31 of this year.
The whole conduct of this Study has been characterized by
compressed deadlines and lead times, which leads to all sor
of logistics problems.
I'd like tc apologize on behalf of our Washington
office for any short notice that you may havra had in regard:
to this meeting; and, further, that although the purpose of
this meeting today was to be a sort of final point of public
comment, we will be keeping the record open so to speak for
additional written comments until the 6th November of thi
year.
We'd appreciate it, should you wish tc make
additional written comments on the General Study, that they
be directed to me, that is Jchn Gall, at the Municipal
Facilities Branch, Environmental Protection Agency, JFK
Federal Building, Boston, and the zip there is 02203.
At the same time, it would be appropriate to send
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a copy to Cccpsrs & Lybrand, to the attention of Myron
Olstein, and their address is 1800 M street, N.w. ,
Washington, and the zip on. that is 20036.
we'll probably be giving those addresses several
course during the course of the meeting today.
The last point that I want to bring out is to
provide some focus as to how the decision making process will
work.
The Agency contracted with Coopers & Lybrand and
provided them with the scope of study to follow and we expect
that their report will be available to us no later than the
end of November of this year.
Although we fully expect that that report will
contain some recommendation and conclusions and documentation
supporting the recommendations, the Agency then has the
responsibility, of course, to take the report, further review
it, and distill it into a set of racommendations for Congress.
So, in that regard, I'd like you to keep in mind
that the decision as to which recommendation will be made
to Congress lies with the Agency- The decision, of course,as
the direction the Industrial Cost Recovery will taks in the
future obviously lies with the Congress and with the President.
I
With that, I would like to turn the meeting over to j
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Mike Townsley of Coopers & Lybrand.
STATEMENT OF
J. MIKAL TOWNSLEY OF COOPERS & LY.BRAND
MR. TOWNSLEY: Good morning. I'd like tc cover s.-~
cf the background and what we did to conduct this Study.
I've been responsible for most of the data collei
in the Eastern half of the United States, including this
particular Region. VThat I'd like to do is go through what *
did and how did it and why we did it.
When EPA asked us to conduct the ICR Study, the
first thing we did was read the 1972 Legislative history ral
to User Charge and Industrial Cost Recovery, to find out
exactly what ICR does accomplish — that it was supposed tc
accomplish. Stated very briefly, there were two major
objectives contained in the Legislative history:
The first was equity, or the equalization of the
assumed economic advantage for those industries using public
sewer systems, as compared tc those industries treating the
own in their own facilities.
A second objective was capacity, or the appropriate
sizing of wastewater treatment plants with adequate but not
excessive capacity.
A third objective, but not as important as the firs
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twc, was to encourage water conservation.
This background material, toaether with the
Legislative history related to the 1977 Act, and especially
Congressman Roberts' questions and Congresswoman Heckler's
emphatic statements on ICR, served as the frame of reference
for us to plan the Study.
Our initial step, in late May of this year, was to
sit down with EPA personnel, including John Pai, John Gall,
Te(j Horn, and put together a shopping list of every data
e lament that we thought would help in answering the specific
questions and some additional questions about ICR and Usar
Charges.
We took this list of data elements and converted it
into two draft survey questionnaires — one for industry and
one for grantees.
The draft industrial questionnaires were then
reviewed and refined with industry groups such as The
National Food Processors, The National Association of
Manufacturers, and other public and industrial associations
as well.
After refining our questionnaires, we developed a
survey list.
we compiled, with EPA Regional office assistance, a
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list of approximately 100 cities which we planned to visit.
These cities ranged in size from under 1,000 to Sew York c_
We eventually visited approximately 120 cities, some of th
more than ones if strong local interest in the Study.
Our procedure was to attempt to meet first with ~
local Agency responsible for wastewater, then with local
industrial people and then with any civil or public groups
we mailed our survey questionnaires cut ahead of
time to people we were going to be raeeting with, so that tl
would knew the kinds of data that we were looking for.
We stressed at all-times that participation in th«
survey was voluntary, both with the grantees and with the
industries, in many cases, people mailed completed surveys
back to us after talking to us in person or over the telenhc
we put together a list of an additional 200 citie
for your telephone surveys, we used the sane questionnaire
We called them, talked to them, sent the questionnaires out,
and, in most cases, got the questionnaires back in the mail
We put together a list of five, which was later
expanded to six or seven industries, which we wanted to do t5
details of the study en. Although we were interested in
industries in general, we were particularly interested in
industries that met certain criteria. The criteria for
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selection included:
1. - a labor industry;
2. - a low operating margin;
3. - high water users;
4. - size of industry significant in the total
economy;
5. - seascnalitv; and i
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6. - varying degrees of pretreatment available !
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within the industrv. i
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The industries initially selected for our detailed
study were:
- meat packing;
- dairy products;
- paper and allied products;
- secondary metal products;
- canned and frozen fruits and vegetables.
We have subseauentlv exoanded the list to include:
!
- textiles and bakers, as a separate group. ;
we prepared a list of establishments in these cities j
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that we were visiting and mailed survey forms to these people, j
In most cases, they mailed it back to us. Our entire data j
collection was to be accomplished within about a six week
period, which meant we had up to ten teams on the. road
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collecting data — a lot of people aoing a lot of places.
The second step in our study was tc develoo
mechanisms for public participation in the Study. We want?*-"
qrass roots movement, sentiment, support, we wanted an ope..
Study. We put together an ICR Advisory Group of apprcximat
forty different individuals, representing industrial,
environmental, civic, local government, and Congressional
interests, and relied on them tc keep their Iccal chapters
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involved in the Study.
We held monthly meetings in Washinoton with
transcripts of tho meetings mailed to anycne requesting
them.
The third step in the project was to summarize and
analyze the data collected. We are currently completing
this task in Washington and have reached some preliminary
ccnclusicns as to what this data means.
We've prepared several computerized statistical
analyses and we're still refining and redeveloping those.
We have looked at enough data to bs able to formulate some
possible alternatives to ICR as it is presently constituted
The purpose of our meeting today is to relate to '.
what we found, and cret your reaction to it.
After these Regional meetings are held, we will
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put together a draft final report, which will bs widely
circulated. This will be seme time in mid-Novembar.
In December, we will begin to write our final report
We'll deliver it to EPA to go to Congress later in December.
As John said, this final report will contain cur recommenda-
tions. EPA may agree or disagree with those recommendations.
Congress may agree cr disagree with EPA's recommendations.
So we're net sure what Congress will and up doing.
We're changing plans hers in nidstraam. Myron
Olstain will new cover some of the findinos and conclusions.
STATEMENT OF
MYRON OLSTEIN OF COOPERS & LYBRAND
MR. OLSTEIN: Good mcrnino. I'd like tc briefly
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go over the Study findings, what we think it means, and than |
to present some nossible alternatives. i
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The data and statistics that I'll be using are !
based on our Study, and are still in the process of being
studied, validated and up-dated in our Washington office.
Some of that data has already been made available
to you. It's on a sheet entitled "ICR Study Data" dated
October 10, 1978, which you should have received earlier.
I have a very limited number of copies of some
up-datad' Study data that we worked on since then. The final
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version of the data analysis and the raw data itself will bs
appended to, and included in, our final report.
We eventually received data from some 241 grantee
the best data coming from the places that we actually visite
The data obtained through telephone surveys was not quite a
complete or precise.
In addition to that we obtained data frcrn
397 industrial facilities, most of that through the effort
trade associations. All the industrial data is at the plan
level, rather than at company level.
Let's take a look at some of the major issues rel
ing to ICR.
First, taking a look at what ICR was supposed to
accomplish and the reason it was written into the '72 Act.
The first thing we looked at was the issue of equity, or th»
assumed economic advantage, i.e., less expensive sewage
treatment costs for industries using- public owned treatment
works or POTWs as we call them, as opposed to those treatii
and discharging their own wastes.
In order to analyze that, we utilized a computer-
based model which we had already developed for industrial
clients, and modified it to reflect the impact of User
Charge and Industrial Cost Recovery. Basically, the model
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incorporates those equations which rsflect the cost of
doing business, and enable a company to evaluate the basic
alternatives — that is, a« "make or buy" decision, should wa
use a POTW or should we treat our own sewage?
What we found was that for some medium or large
industries having compatible wastes, it's cheaper in the long
run to self-treat, even without including ICR, just due to
Ussr Charges. This, we f^lt, was a very significant finding
bacauss what it msans is that, evsn without ICR cr pratreat-
ment costs, which are going to become costs very shortly,
large industries should, from an economic viewpoint, treat
the ir own s swage.
vihen we analyzied this finding, we found that this
was so due to a number of tax law changes which were not
known to the Public Works Committee as they were enacted
aver the passage of P.L. 92-500. Some of these factors
include accelerated depreciation for pollution control
equipment, investment tax credits for capital ftquipwent, and
the use of tax-free Industrial Development Bonds to finance
self-treatment facilities.
In addition to the advantage for medium and large
industries — and there also exist programs for some very
small businesses which includes Government guaranteed loans
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that are available through the SBA, So, in those circuits tan
where small businesses qualify, it would be cheaper for th«
also to pretraat.
In addition to that, although we haven't had the
opportunity to completely analyze it, the later series of
tax law changes should make it even more attractive to
industries to self-treat.
Basically, what this all boils down to is that
for many industries, it's cheaper to self-treat than to use
a POTW.
However, what we found through our survey was tha
at the present time this isn't the case, vie spoke to a
number of companies about this and right now there are a
number of reasons — you know — why that's so.
Many companies are not geographically located on
close to a river or stream and are forced to use a POTW.
Many just don't want the hassle of self-treatment,
having to get an NPDES permit, having to operate their
treatment plant, that sort of thing.
And finally, and most probably most importantly,
User Charge and Industrial Cost Recovery really hasn't been
in effect long enough for many industries to se*? its impact
The significant thing to bear in mind, though, is
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that if ICR and pretreatment costs are addad on top of User
Charges, thay could prove to be the "final straw" that
drives industry cut of POTW's, thus making it mere expensive
for these customers remaining in the POTW who continue to
use it.
In particular, EPA's application of pretreatmcnt
standards is likely to make nany industries consider sslf-
traatnGnt.
Going back to the '72 Clean Water Act, the seccnd
major issue is that of POTW capacity. ICR was supposed'to be
one of a number of strategies aimed at limiting capacity, |
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trying to keep the size of treatment plants reasonable. '
j
Based on the survey of the 241 wastewater treatment!
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agencies from which we obtained data, the average POTW uses i
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only 68 percent of its design capacity. The total ranges •
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were from a low of 4 percent to a high of 120 percent.
It would appear that ICR, as presently formulated,
has net acted to put a cap on the construction of excess
future capacity in POTW's.
The third issue, that of water conservation, is not j
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q uite as clear. Based on the industries we surveyed, water !
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consumption has dropped an average of some 29 percent, but the!
industries that we talked to about it attributed the water !
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conservation primarily to higher water rates and to User
Charges, net to ICR, because for industry right now, ICR,
as a percentage of the water bill and User Charges, is sti1"
not that significant.
Moving on to the specific questions that were- po:
to us by Congress — Congressman Roberts' questions — we
fcund through tha surveys that the economic impact of ICR
tc datr* is not very significant, in mcst locales.
Some of the reasons are the facts that ICR hasn't
really been in effect for more than a year or two in mcst
places, and mcst grantees have suspended billings while th«
current moratorium is in effect.
The exception to the relative insignificance of 1C
is in those cases where there are a large number of seasons
users and/or where thers is advanced wastewater treatment
as a requirement.
I might explain that a highly seasonal user has
the reserve capacity and basically pays ICR on the amount c
capacity they use during the peak season throughout the enti
year. So, in a slack year —• in a slack part of the year -
they might be actually paying for four times as much capaci
as they actually usa. This is felt mostly by canners, peopl
whc.are geared to a growing season, a very specific growing
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season.
And, of course, advance vastewater treatment is a
requirement in certain sta±es which, in many cases, the
states have elected to impose. In those two particular
cases, sewage treatment costs for industries have increased
by a factor of several times.
The incremental impact of ICR above User Charges is !
g sncrally not very areat with, again, the exception of these
two cases, AWT and seasonal users.
The combined impact of User Charge/Industrial.
Cost Recovery, however, can be very significant. j
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We were able tc find only a few scattered instances j
of plant closing due tc sewage ccsts, and in no case were
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those closings attributable solely tc ICR. The total jobs j
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lest in the plants that did close was less than a thousand and •
in every case, there were other factors, such as plant age
cr plant economics, which affected the plant closing.
ICR rates appear to be somewhat higher in older cities,
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particularly in the Northeast, and they tend to be higher in
small to medium sized cities and in agricultural communities.
There does not appear *-o be an impact of TCR on
industrial growth patterns tc date. We were unable to
differentiate the impact of ICR on small versus large
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businesses, because industrial plants just weren't willing *
disclose production or sales data that we would have neede
: o make that analysis. The cost to industry of sewage
treatment is much greater, some 50 percent higher, wherever
advanced wastewater treatment is a requirement, as opposed
those cases where there were purely secondary treatment
plants.
The next general area we looked at was the ccst \.
the grantees.
The incremental cost to grantees to maintain and
operate ICR, that is, the purely eliminatable cost above an
beyond what a User Charge requires is very small compared t
the costs of operating the sewage plant. The average was
seme $15,000 per grantee per year.
The average ICR revenues per grantee, one again
per year, turn out to be approximately $88,000 of which, at
the present time, only $8,800 is retained for discretionary
use by the grantee.
So the ratio of administrative costs to revenues
are almost 2-to-l.
There is some additional data that may be of
interest to you which is included in the handout, and both
Mike1 and myself would be pleased to discuss specific data
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27
with-you during the question and answer oericd, cr -?ve.n wh*5n
we take cne cf our breaks, or informally at the end of the
nesting.
Basically, to summarize cur findinos and conclusions,
ICR is not doing what it was supposed to do from either a
parity standpoint cr capacity-limiting standpoint cr a
c cnservaticn standpoint.
ICR has proven to have an extremely Iinit2d
economic impact, recognizing new that very few cities have
implemented ICR and that many of those who have have
suspended collections during the moratorium.
ICR to date has had no significant impact en
snplcyment, plant closinas, industrial growth patterns,
imncrt/export balance, cr local tax bases.
Finally, ICR is not proving cost-effectiva in
producing revenues for local or federal governments, at laast
in most cities.
Now, it is very important to realize, however, that
the Clean Water Act had a number of societal as well as
economic objectives. It was very important to Congress that
not only would it avoid having the subsidy of industry by
residential users and grantees, but they wanted to even
avcid any appearance of using public money to subsidize
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28
industries that discharged to grant funded treatment x^/orks.
While our Study has shown that many of the econo
objectives of that Act have not been met, the societal
objactives still remain and it's for that reason we develop?
a series cf alternatives to ICR for discussion, which we w_.
be getting tc later en in the meeting.
VJe'll be taking a brsaJ: very shortly and I'd like
to ask that you examine these alternatives during that brei«
It's entitled "Preliminary Ccmoilation cf Possible Study
Alternatives" and it's dated October 10th, 1978.
That document presents some 16 alternatives that
range all the way from eliminating ICR to leaving it the wa
it presently is.
As you look at them and study them, try to keep in
mind that these alternatives are not mutually exclusive.
I
Some cf thorn could be combined and done concurrently.
With that, I would like to adjourn the meeting for
— I'll turn it back over to John.
MR. GALL: We will adjourn the meeting in a shcr"
period of time in order that you may have an opportunity to
look over the list of alternatives that I hope you've ail
received copies cf. If you haven't picked up a copy of the
list of alternatives, they are at the registration desk down
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29
in the back of the room.
At this time I'd like to present Ccngrasswoman
Margaret Heckler of tha Massachusetts 10th Congressional
District.
The Ccngresswcnan has been greatly interested in
the focus of this Study, its impact and its direction, and
she would like to make seme comments to the audience this
morning.
STATEMENT OF
THE HONORABLE MARGARET HECKLER
i
l
CONGRESSWOMAN HECKLER: Thank you very much, Mr. i
i
Gall and members of the panel.
As a legislator I have a great deal of concern aboutj
j
this morning's hearings. j
The provision in the Law 92-500 which authorized •
EPA to hold hearings before imposing the ICR, Industrial
Cost Recovery, charges on industry across the country cane j
a bout as a result of a meeting that I held over a year ago j
i
with industrialists in my own city of Fall River, where we I
discussed the impact on the economy of Fall River of the i
nroposed ICR charge. i
I left that meeting with the strong and clear j
understanding that some change in the ICR was required, and my
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30
thought was that before the law was to be implemented, it we
imperative that the Federal Government, especially the
Environmental Protection Aaency, establish a means of
measuring the impact of the ICR on jobs and on the economy
particularly in the Northeast region of the country but, ot
course, elsewhere as well.
Mew, today's hearings and the year-long study cf
tha ICR ar2 tha culmination cf the proposed study that I
initiated as an Amendment to the Clean Watar Act, which was
then passed into law and mandated by the Act.
I think all of us have learned a great deal from
tha hearings and this is the third hearing that I have
attended. The imposition cf tha Cost Recovery charges had
an impact quite different from what was anticipated by the
Congress when it was passed in 1972.
The intent of the legislation was to ensure that
industry pay its fair share of the construction costs for
municipal wastewater treatment plants.
In 1972 the Congress anticipated ICR revenues to
come between $4.5 and $7 billion dollars. The ICR charge is
in addition to the User Charge for operation and maintenance
cf the treatment plants.
The perspective lock at ICR was quite different si>
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31
years acre than it is now. ICR revenues are now anticipated
to be between SI and S2 billion, with one-half of the
$.5 billion and $1 billion trans ferrinc to *-h«? Federal
Treasury.
This amounts to just 20 percent of the anticipated
revenues. And then the impact, the economic impact, although
fully not weighad yet, is major. These companies that can
afford to avoid the ICR charge will simply net participate
in the system , thereby creating a heavier burden on those whc
have no other alternative.
The question is, is the ICR charge as outlined in
i
Public Law 92-500 effective, based on today's economy? |
I feel, clearly, that the answer is no, and that I
there are several factors that have led me to this conclusion. ;
The initial SPA Study results show that tha combined |
i
User Charge and the Industrial Cost Recovery charge can be
signficiant to industry. May I point cut, for examnis, the
case of Reed & Barton Silversmiths, one of the major
industries in Taunton, Massachusetts, in my District.
It is my understanding that Reed & Barton spent
approximately three-quarters of a million dollars for treat-
ment facilities. On top of that, ths company is going to be
charged a sewer rate of $9.21 a thousand gallons, which is
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32
ths highest sewer rats reported in this Study.
The company's water use charges will climb from
$325 per aallon a year — oer million gallons a year ago -
to approximately $495 per million gallons this year, and wil
increase to an astronomical $900 per million gallons next \
In short, in three years the sewer costs will
triple. More specifically, I believe that the EPA Study has
fcund that the -Northeast is hardest hit by the ICR charge.
Older Northeastern citiss, both larg-3 and small, are bearir
the brunt of ICR.
The nationwide average of sewage treatment rate c*.
1,000 gallons of watsr is 65 c«nts. Compare that with the
figures that I have mentioned. This figure — the 65 cents
per 1,000 gallons of water — includes operation and
maintenance, bond payments, and -Recovery Cost Industrial
charges.
The rate in Taunton, Massachusetts is 80 cents per
thousand gallons, or 25 percent higher than the national
average.
The sewer rates for Fall River, Massachusetts are
c cmparably higher as well, than the national average.
The conclusion that must be reached is that the
Ncrthsast is paying more than its shar--2 in ICR costs.
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33
Finally, ICR has had an impact en industrial crcwth }
!
to dat<2, and continues to have an unknown and sc, obviously,
negative effect en future "industrial growth in Morthsastarn
cities, especially cur older cities.
The facts are difficult to ascertain. It's difficult
to msasurs and evaluate and forecast future business decisions.!
I
3u*r v/a car. predict that whan the cosr. of coinc business in a !
certain ar^a increases, the likelihood of attracting new •
industry to these same cities decreases in exact proportions. ;
t
\
ICR was in effect only one year prior to the :
moratorium which was passed into law and then in only a snail j
number of cities. From the standocint cf a credible studv, i
i
SPA seems willing to estimate industrial impact basad en past i
i
activities. However, the breadth cf evidence is net sufficient
'.\ to really be telling in terms cf the whole case.
The further complicating factor cf the ICR is the •
i
Icng-torm effect and its difficulty to assess. There is an ;
i
understandable reluctance of industry to produce statistical |
i
detailing evidence, but I have heard fron all of tha j
industrialists in my city cf Fall River and in Taunton, :
Massachusetts; and in Fall Riv»r, quite frankly, there ar^ i
i
manv industrialists who said tnis ICR cost is the cutting edcrc ;
!
between continuing to operate in the city of Fall River and :
-------
leaving — closing the plant — possibly going Scuth.
And there wa ar2, faced with these kinds of
alternatives. A safe conclusion is that the Industrial Co
Recovery issue does affect the movement of Industry. One
can assume that where the cost of doing business is higher,
as in the Northeast, there is a negative impact.
One can also conclude that the fliaht frcn
industry in the Northeast can cnly be accelerated by the
imposition of the ICR.
ICR in its present form is not workina. It is n<
providing equity for the cities of the Northeast. In
addition, I feel that it is time for the EPA to consider nc..
only the questions of the environment, but the questions o;
the economy.
I have fought and worked and voted for the
investments in the Environmental Protection Agency. I beli
in clean water and clean air. But I also believe that we rr-
have jobs and we nust make ecology compatible with the
economy.
ICR is not a factor in water conservation. User
Charges and higher water ratas are the key factors there.
I feel that this Study can cnly come to one conclusion — t
Congress was wrong in its predictions in 1972 when they
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35
•sxpectsd this great revenue to the Federal Treasury; that
Congress can new learn frcm the hearings cf this distinguished
panel and from EPA's Study, that the impact on industry i
will bo negative in that sector of the country which is
suffering the greatest flight and the greatest economic impact.
i
I knew that there are many alternatives before this I
distinguished panel, but I think the ICR cost has failed to
orcv* its utility in the terms cf i^s essential goals; it's
i
I
failed to return funds to the Treasury as anticipated; and j
of all the alternatives, as the author cf the Amendment which j
I
produced this Study, as one concerned with jobs in Massachusetts
and in the Northeast, I think that there is only one altsma- j
i
tive before the Committee and that is the abolition of the '
ICR. |
Thank you.
(Applause.) ;
MR. GALL: A very good surrjnaticn cf a lot cf I
attitudes that we've heard over the past several weeks in !
conducting the studies of these hearings in other cities. j
i
Additionally, at this point in time, there is a j
member of Senator Chaffes of Rhcds Island's staff in the j
audisnce who would cara to makfi a couple cf brief comments for
your edification.
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36
So, if I might introduce new, .Mimi Feller for
Senator Chaffee's Rhode Island staff.
STATEMENT OF
MIMI FELLER
FOR SENATOR CHAFFEE'S RHODE ISLAND STAFF
MS. FELLER: I don't think I can edify you anymc'
than .Mrs. Heck la r already has done sc I won't sv«n try,
exeunt to say that nany of the concerns that Psgay Heckler
has mentioned this morning — Senator Chaffe*? has heard the
same ones, and I've seen several people here from Rhode IsJ
in the front row and throughout the audience.
I'm Mimi Feller and I'm with his Committee Staff
for Environment in Washington and Senator Chaffee was worki
with the Clean Water Amendments back in '77 where we set the
moratorium and it was Mrs. Heckler's Amendment en the House
side and then we considered it in conferencs and decided tc
put th/2 moratorium on for 18 months so that we could do this
Study.
And what I'm really hoping to find cut this mornii
it's as clear in his mind as it is in Mrs. Heckler's that
there's got to be possibly some chancres made in the law.
tte'ro not sure what steps to take. We don't want
to hurt the structure of the Clean Water Act; and there arp
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37
several thinos wo p.cad tc watch cut fcr in that area.
But what I cans up here fcr is just to hear all cf \
your thcuahts en the various possible changes that are
mentioned in ths paper you'll be locking at.
I would also urge that if you -- you know, if ycu
don't got all ths comments covered today, if you would 1st
Senator Chaffee knew ar.d alsc Mrs. Heckler, in tvashinctcn cr '•
in their local offices, any further thoughts you have './hsn
ycu can sp^nd incrG time looking at the papers. :
I'm sure that we'll want to try to do something ,
i
legislatively and the more information we have the better icb i
we can do. So I'm pleased to see such a oood turnout, and j
ccme up and tell me if ycu have any thoughts today, cr let i
us knew in the nex*- several weeks. i
!
I
I guess this Study is acing to be sent tc the
Congress, hopefully, by around December 25th although I under- !
stand the House has rcld them that they have an extension *-o j
i
December 30th. |
So at least we'll probably be thinking of legislative;
j
ideas during the next several months. !
i
Thank you. I
MR. GALL: At this point in time we'd like tc take
a <;hort — orobablv abcut a 10-ninute — break so that you
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33
can avail yours
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39 i
loudly than the? people in the front, so that cur Court
Reporter may hear.
VOICE: Could you have them come up?
MR. GALL: I think coming up is a possibility, but
:ny opinion is that that kind of hinders the flow of ideas,
plus it would take a lot longer.
And, as you stand to r^.ake a ccrment, pleas-? identify
r
yourself and also your affiliation if you would. .
At this tine, I'll turn the hearing back over to '
Myron 01stein. i
DISCUSSION OF ALTERNATIVES ;
MR. OLSTEIN: As we go through these, I'd like to '•
remind you again that these alternatives can be ccrr±>ined, ;
they are not all-inclusive; we've had a number that have been ;
i
added as we've gone through the hearings. ',
I guess the final point to make is that we feel ,
that -- you know — our Study can't just stop with the data,
I
answers to specific questions — we have to develop some .'
alternatives. j
At this point in time we haven't chosen any one
that we prefer and we're not going to until after we study
the transcripts from all of the? public hearings, which are
still in process.
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I
I
40
Sc, you knew, ncn-2 of these reflect a specific
position that we've tak«?n yet.
I'm qoinq tc go through thf»m; I won't read ail th
advantages cr disadvatanges. I'll try tc briafly summarize
and try to qive you seme of the ideas behind each one.
And if you have a question relating to cne or if you just
want tc make a ccrLT.ent, ve'll just do it — you knew — ona
at a time.
| The first alternative, which is tc abolish TCR —
I think the previous speakers gave some of the reasons for
doing that.
It would certainly eliminate a lot of the ccmplai
that resulted in the Amendment tc the Clean Water Act- —
complaints from both grantees and industry.
As I noted, it fails tc -- thrsre still remain cpe
the societal issues that were apparently in the minds of
many of the legislators at the time they wrote the original
ICR Amendment to the Act.
Are there any initial comments to be made on that
alternative?
(No response.)
MR. OLSTEIN: Okay. If you dcn't make them now,
we still have the question and answer period coming u? this
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41
afternoon.
The second alternative tries to deal with tha
capacity issue and I think *-hat that is one cf the very real
important findings that came out of cur grantees' survey.
Excess, uneven capacity costs everybody some money because
in a treatment plant most of the costs sre fixed. If. it's
bigger than you nsed, it's ocina to cost everybody mor? than
"" ~ !
i'- should. '
And alternates, both 2 and 1, attemnt to deal with
I
I
the capacity issue in a different way than it is currently
being dealt with.
i
In Alternative Uc. 2 the arant fundina for the
j
construction cf treatment works v/ould be based at the current !
level cf usage. In other words, the cost of building a plant
i
to meet, you know, the current level of usage -- the grant
:
would be 75 percent of that cost and for anything above that
!
amount, additional feature capacity, the percentage would drop.
!
Under Alternative No. 2, ICR would be based en the |
j
current regulations. No. 2 is just an attempt to deal with
the capacity issue a little mere directly. It would
obviously cost communities -- at the beginning of a growth
phase it .would require a lot more local funds to build a
treatment plant tha si2-3 they fael they would need at some
-------
point in the future.
Any questions en Alternative 2?
(Uc response.}
In Alternative 3 it would be that same sliding
scale approach daalinq with capacity, but it would be base..
only on the ncn-industrial capacity.
Obviously, under that alternative, ICR vculd r.ct I
necessary because nc pcr^irn cf the Federal Grant Funds vc-.
be for industrial capacity.
Alternative Uo. 4 is an attempt to simplify ICR fr
the grantees that have to administer it and basically limiu
ICR just to treatment works costs only, rather than any
part of the interceptor system.
Alternative Nc. 5 is the different way of tryinc r
deal vith the equity issue that Congress had in mind back :
'72. Instead of trying to identify industry's share of thf
Federal Grant on a proportional basis, what it would attempt
to do is try to identify the incremental costs associated •*
industry being in the plant, and then ICR would be based cr
just the added increnent of industrial participation in the
treatment works.
In this way, theoretically, everyone would be in
position to benefit from economies cf scale, but there ar^
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4-3
some, administrative difficulties just in — you knew —
determining what really is the incremental costs.
Any comments on that?
(No response.)
Alternative No. 6 basically puts the — gives the
grantee the choice as to whether or net to be under ICR.
If the grantee would prefer to avoid !CR, then the grantee
could use thair own funding, alternate sources of funding for
industrial capacity, and given that option it would allow —
it would push that position down to the local level. Under
current ICR regulations you can't 'take that option.
If you accept the grant, you have to accept ICR.
Yes sir?
VOICE: Would we get —
MR. GALL: Would you identify yourself, sir?
VOICE: Makram Megalli, Director of Public Works,
Woonsocket, Rhode Island.
— Where would you get that fund to pay back that
this amount?
iMR. OLSTEIN: This is on Alternative No. 6?
MR. MEGALLI: Yes.
MR. OLSTEIN: The question is where would you gst j
the funds to pay back?
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44
MR. MEGALLI: Yes, where would you get that fund?
MR. OLSTEIN: To pay back the industrial share?
MR. MEGALLI: Ysah.
MR. OLSTEIM: Presumably, it would be either — »"
know — a state grant if you were in a state that provided
treatment plant grants or your own local sources that
finance it.
MR. MEGALLI: And if you get it from your own locc
sources, at the end it's coming from industry so that's ncl
an alternative, is it?
MR. OLSTEIN: That's true.
MR. GALL: It may or may not be an alternative.
The idea is the option — there are two options that are
provided. One would be essentially a 30-year interest-free
loan from EPA, in which case you gat all the problems of
the administration of ICR.
But the other option leaves it open to the communi
decision. It may be true that you would utilize, for examp
ad valorem taxes. In other words, the community could make
a conscious decision to fund the industrial component, in
which case the amounts the industry would see directly woul
be proportionately less than had they paid ICR.
So it- depends upon what types of financing options
are- available through other sources to industries and I don
know, Myron, if you're a tax expert as to whether IDB's cou
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45
bs sold for this purpose, in which case the industry would
have the advantage of — correct me again if I'm wrong —
depreciation*
MR. OLSTEIN: No, you couldn't use — Alternative
No. 6 — I'm 99 percent certain, couldn't be structured to give
industries a share of depreciation, but you could use an TDB
and get a lower rate of interest that way.
MR. MEGALLI: If you look at this alternative very
closely, in fact what you're saying is that that share to pay
back, cr that funds, will come from taxes ultimately and
that will come from industry and residential and all ether
classes.
So what you're saying, instead of distributing the
Industrial Cost Recovery only for industry, shift some cf
that cost also tc other users.
Is that what we're going to do?
MR. OLSTEIN: Yes, that would be one of the things
that would happen.
MR. GALL: But remember, again, it's a local option
so there would have to be a conscious decision at the local
level to, in fact, do that.
MR. MEGALLI: Fine.
MR. GALL: It's just an alternative.
-------
MR. MEGALLI: Fine, if it's just an alternative.
But what you are doing is increasing the tax rates in the
city or the locality if they chess this alternative.
MR. GALL: That's correct.
MR. MEGALLI: So whatever you do with Industrial
Cost Recovery, it sesms it is going to affect the tax
structure at a time when everybody around the country is
looking at the taxes, want to reduce taxes, now you're
telling me you are forcing us to increase taxes.
I don't think Industrial Cost Recovery is benefit
MR. GALL: Again, I'd like to call it an option.
MR. OLSTEIN: As I said at the beginning, we're
endorsing any of these.
There are, I think, alternatives — Alternative 6
might be the type of thing that a large city with very lit<
industry might want to go for, just to avoid the administrs
costs associated with ICR. That — you know -- that night
be the type of .city that would elect to go that way.
It's just an option.
MR. MEGALLI: Thank you.
MR. OLSTEIN: Alternative 7 is an attempt to simc
the administration of ICR and to reduce the inconsistencies
that exist in ICR rates, and what it would do is basically
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47
establish national ICR rates or regional ones that could bs
based on geographic bases. Presumably, there would be
different rates for different classes of industry and it
wculd be one way to assure that anyone that's affected by ICR
faces the same unit rate, assuming that it's in similar
industries.
Once again, there may be some very sizable problems
just in developing rates that might be applied that way.
The oentleman in the back?
MR. GOODWIN: William Goodwin, the City of
Portland, Maine.
I was just wondering about Alternative 7 —
whether or not this wculd be effective en cities, grantses,
who received their funds prior to the '72 Amendments, and
received secondary treatment with those funds which do not
havs ICR requirements.
In an equity sense it would seem if you were going
to 'go to a national or regional basis — thus we go back and
pick up those who do not have a future treatment plant
construction because they've already got everything they need
— they got it before the '72 amendments.
MR. OLSTEIN: I'm net a constitutional lawyer, but
I believe the answer to that question is that if you received
i
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48
84-660 funds , that included a charge that had to be made to
industry also.
The charge.is, I'm certain, much smaller that it
would be under ICR. regulations administered. If your grar*
was based on prior law, then you're not affected by anythi;^
that happens after that.
John?
MR. GALL: I'd like to make an observation on the
relationshipsbetween 84-660 and 92-500.
It may not be readily apparent to everyone in th:' -
room because all of the six New England states at that time
had matching grant funds and that, I believe, is net the
case throughout the nation. And so that the 84-660 projeci
less 5 percent H.U.D. planning bonus, I believe, would have
meant the ultimate project cost would cnly have amounted
to 50 percent, whereas under ICR or 92-500 you get a 75%
funding.
The point that I wanted to bring up'was that if 5
were in a state where there were no matching state grants
84-660 could possible be worse for industry than ICR in the
92-500, because ycu have to bear a proportionate shar«* of 1
50%, plus the cost of financing that which, over a 20-year
period, may be worse than just coiner with a straight pro rats
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49
percentaae cf the 75; so I'd like you to keep that observation
in mind if you think of some of the relationships between
84-660 money and 92-500 money.
MR. OLSTEIN: There are a number of other things
that Alternative 7 might do.
There are some grantees that, because cf the nature
cf thair grants, have to recalculate the ICR rates almost
annually as new facilities come on line. Sc there's
another — That's another area where it would simplify things.
Alternative 8 would basically establish a number
cf circuit breakers that would permit ICR exemptions based on
unusual and extraordinary local circumstances. It could be
based en economic conditions, or it could be just different
ways of establishing floors for entry into ICR.
you could make a floor based on, you know, the size
of the ICR bill that's going to be rendered; it cculd be based
on a lavel cf discharge; it could even have incentives built
into it.
Once again, there are some — It could be a very
difficult thing *o administer, but it would be another way
of providing flexibility and more local options in ICR.
Alternatives 9 and 10 are similar; He. 9, for
example, -would basically just reverse — act as a way of
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50
reversing some of the tax law advantages that aro currentl"
existing for self-treaters.
Of course, .it's a case, you know, of taking mcne
from industry with one hand and then giving it back with t
other. But it would in fact lead to somewhat mor*» equity
rather than loss.
Alternative 10, which may become a consideration
the near future, would be the tax credit for prstreatment
costs that industries ars going to have to bear in the fut
Both have, you know, would have to be worked out
but this is a tax method for dealing with that.
Any comments en 9 and 10?
(No response.)
Alternative 11 would be to return to the require-
ments of Public Law 84-660, which would in effsct abolish
-ICR, but reinstitute the former charge known as IW, Industi
Waste Cost Recovery, which was a mechanism for recovering t
local share of tha treatment works.
The amount of revenue that would be obtained und€
84-660 would tend to be quite a bit lower. In nearly every
case, I think, ICR would be much simpler to administer at t-.
local level.
Sir?
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51
MR. MEGALLI: My name is Makram Megalli, Wconsccket,
Rhode Island.
I would like to ask a question about Alternative No.
10. You say you allow tax credit for pretreatment costs.
You mean if somebody has tc pretreat now, that's not tax
credit, he cannot claim that for taxes?
MR. OLSTEIN: Well, there would be seme tax credits,
depending on the way he financed, en the way the pretreatment
works were financed.
Right now, unless you structured it properly, ycu
get a tax deduction if a business expense but not — you can--
Mike, are you familiar with the requirements?
MR. TOWNSLEY: Not that familiar; but it does take
a special facility tc qualify as a credit.
i
Ycu do get a deduction for the expenses if you !
can't qualify for a credit though, just like any other
business expense.*
MR. MEGALLIS: Oh; I see.
MR. TOWNSLEY: it's the difference between a
deduction and a credit.
MR. MEGALLIS: Okay.
MR. TOWNSLEY: A credit is against taxes.
MR. MEGALLIS: Okay. Thank you.
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52
MR. OLSTEIN: Ths other alternative under 10 migM
be to — I admit it's not very clear the way it's written —
but it might be to use monies you spent on a pretreatment
facility as an off-set to ICR charges.
So it wouldn't be a tax credit, it would be an ILr
credit, that would be associated with pretreatment costs.
MR. GALL: Do you have a question, sir?
MR. SCHMIDT: You'd also get depreciation costs,
wouldn't you?
MR. OLSTEIN: Your name?
MR. SCHMIDT: Adolph T. Schmidt, Woonsocket.
MR. OLSTEIN: You would get depreciation costs,
obviously, if you built your own facility. You always had
that.
Alternative 12 would abolish ICR and require
that local share of project costs be recovered through
proportionate User Charge, and basically, that would take the
User Charge concept and extend it to the local share of
capital.
This could be viewed as a way, you knew, of
maintaining equity by requiring proportionate repayment by
industry of the non-federal share, but it would, of course,
severely limit any rate flexibility at tha local level.
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53
In many cases it would almost entirely eliminate it.
Sir?
MR. V70ODCOCK: Christopher Woodcock, Camp Dressier &
McKee.
This alternative I think is very clear; in many
cities and towns if it results in a user charge, particularly
in towns with partial severs, extraordinary high user charges,
with a reluctance to adopt user charges a*- the level they are
now appearing. I think this would only make the situation
worse and this alternative should probably be avoided.
It would make a situation in many towns and cities
that is bad a lot worse situation.
MR. OLSTEIN: Okay. You realize that in the case
of 12, the local capital we're talking about is the Iccal
share of the grant? '
Sir?
MR. MEGALLIS: The local share — say in our case
it's 10 percent — is financed through taxes; so what you're
telling us new, it switches from taxes through user charge.
You mean what that means? That means we have to have
administrative costs to switch from one system to the other.
When we started one system the end result was the same.
We already collected that money through taxes. What are you
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54
doing; you're just collecting through another mechanism.
But through that ether mechanism, you are adding
administrative costs - and that is inflationary measures ai
We're trying to reduce inflation. We're trying to
reduce —
MR. GALL: No.
MR. MEGALLIS: — higher taxes. But what you're
telling us...switch i* to user charges, we have already
collected the taxes. Now — he's sayina now, start with
your own system — differsnt system, and collect it with the
user charge.
MR. GALL: Mr. Megallis' comment is that by
switching the local share of capital costs from the ad vale*
system onto the user charge would increase his administrati„
costs and he believes that to be inflationary.
Two things; I think that you have to realize that
this alternative is structured to attempt to address the
question of equity or parity that we believe was a prime-
focus of the 1972 Amendments. And so that in doing so ther~
are almost invariably results in a pinpointing of a certain
cost to certain users. So to the extent that that requires
additional administative costs, yes, there would be problem
But I think the way that we envisioned this
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55
alternative is that simply — your costs that you recover
through your user charge system, which, in this alternative,
is a given — that you are going to have a user charge
system anyway, so that the incremental administrative cost
we believe, is very difficult to identify.
MR. MEGALLIS: I do appreciate the problem of equity.
But, also, we are faced with another problem. That is,
you are trying to tell the local governments what to dc.
You are — you care about the equity and your federal share,
but new you're outstepping your bounds and you're coming down
to the local level and you're telling them how to operate
their city.
Don't you feel that this is imposing on local units
in telling them how to run the city?
MR. GALL: Certainly, without a doubt it is
another aspect of Big Brotherism, if you will.
(Laughter.)
MR. OLSTEIN: Are there any more comments on 12?
(No response.)
MR. OLSTEIN: Alternative No. 13 is an alternative
that would increase ICR charges and would have an interest
component on the assumption that the alternatives are
t
I
presently an interest-free loan from the government on one hand
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56
cr, you know, self-financing on the ether.
MR. MEGALLIS: Are you trying to improve the
situation or make it worse?
MR. OLSTEIN: As I said, these are alternatives.
MR. MEGALLISi I'm discussing it as an altsrnati..
Are we trying to improve or worsen the situation?
MR. OLSTEIN: It would raise —
MR. MEGALLIS: So what are we accomplishing here?
Spend more money for a Study telling us that we should
increase ICR?
MR. OLSTEIN: There are some people that do, in
fact, feel very strongly on this point.
MR. MEGALLIS: I'd like to hear their objective <
being very strong on that point.
I'd certainly be very interested.
MR. OLSTEIN: Okay.
Alternative 14 would be to extend the current ICR
moratorium, which would of course postpone things somewhat.
There may be — if I can explain this, some of the reasonir
behind this better.
There are, of course, a lot of people on the Hill
who are interested in the results of this Study. And one <
the problems that you have whenever you try to measure what'
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happening in a long-term program, the entire ICR program
from beginning to end is probably going to span more than
four years if you begin counting from 1973.
And one of the obvious problems is that trying to
measure things in 1978, you have to make a lot of projections.
we've already seen a lot of the projections that were made in
1972, when this was first proposed, and it turned cut to be
quite a bit off.
And one of the reasons behind this alternative is
that some of the decision makers may want to see much clearer
economic pictures than we're able to give them right now.
The other factor is that we have a set of pretreat-
ment standards which are going to have a very substantial
impact on ICR. There's quite a great deal of relationship
between the two, and I've had a number of industry groups tell
me that in their opinion an economic assessment of ICR really
cannot be made until after all the pretreatment standards have
been promulgated.
So, that's partly the reason behind No. 14.
Yes?
MR. PATTERSON: Hedley Patterson, City of
Wccnsocket, Rhode Island.
Just one question. Would the proposed moratorium j
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on ICR — if extended, would that mean that the amounts
due to the government during the moratorium period simply
go into escrow and at the end of this moratorium, whenever
it comes, that means there would be one large balloon paytner
to cover the number of years over which it has been held ii.
a beyance — is this correct?
MR. OLSTEIN: It's net a necessary feature cf th,-*
alternative. Many say it would be the case.
MR. PATTERSON: In the.moratorium that is presen1
on now, it is cur understanding the Industrial Cost Recove:
charges normally collectible during this period would still
be cwsd by industry at the end of it.
MR. GALL: Mr. Patterson's question is the state
cf ICR payments during the extendad moratorium period that
we are proposing here as an alternative and additionally
he's expressed his understanding of the current moratorium
and the relationship of the deferred charges that are now
being held.
First of all, in this alternative we really havei
structured any kind of — at least I don't know, I'm not
aware, that we structured any type of what you're going to
do during the moratorium, so it's really open.
Whether we would, at the end of the extended moratorii
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start with a 30-year period at that point in time, or whether
v/3 would defsr and allow repayments over some extended nericd
has not been too well thought cut.
In terms of the current moratorium, there is no
obligation on the part of our grantees to collect the monies
although they have the option should they so desire.
However, you are correct in saying the monies owed
on the moratorium sort of become a debit against the particulars
industry, tc be recovered when the moratorium runs out in
June of next year, either in a lump sum payment or over-the
remainder of the useful life of the treatment works, whichever
way the industry decides.
I believe that's an industrial decision.
.MR. BUNDY: Ksnneth Bundy, from Reed & Barton,
Taunton, Massachusetts. ' i
i
Right now, if they put a moratorium on holding the
ICR, half of this money is supposed to be, as collected,
should be invested for the dity or so on and so forth, thereby
giving money back into the operation of the plant.
|
The total package of this, if this moratorium is
held off, is going to be until this is settled, throw more onto
the average homeowner.
•MR. GALL: The observation is that on the monies
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that are currently being deferred, could . normally have beet
in some proportion, used to offset the existing operations
and maintenance of User Charges.
That, of course, is only true for the 10 percent
discretionary amount. The other 40 percent that the
municipality keeps in their own coffer cannot be used for <
It could be used for other legitimate purposes related to
ths wastewater treatment plant, so that there is a connectK
But it's not quite as direct as 50. I think the
observation is certainly true, although the impact- of it i;
going to vary from grantee to grantee and I think, in gener.
MR. BUNDY: But to defer 10 percent of the
operating cost of the - municipal plant is going to mean qud
a tax increase or decrease to the homeowners, and the home-
owners are starting to pick it up in our area, I know.
MR. GALL: Yes. I'm aware of that. Again, it we
not be 10 percent of the operating cost of the facility, it
would be 10 percent of the ICR revenues.
So that, I don't know what the numbers are
specifically, but had you, for example, a $700,000 a year
O&M bill, and $100,000 would be your ICR total collection,
out of that ICR you'd be able to use $10,000 towards O&M 01
of $700,000. I think the number could get large if there's
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vary Large or preponderance of industry making large deferred
payments. It's a good observation.
MR. OLSTEIN: I might add that if, for example,
is given consideration and the reasoning behind extending the
moratorium is, in fact, to see what the impact of pretreatment
standards is going to be and to give a better economic
picture. But it would seem to me thatjust eliminating the
payment during that period would tend to make some sense
because, in the case of prstreatment — you knew — we're
talking about extending it for two and a half years I guess;
so it would be rather a substantial amount of time. To keep
all of that money in escrow would wind up being more of a
p robiem.
Alternative 15 which is, in fact, an alternative
that's available to Congress, is just to maintain ICR in its
current form.
This would obviously not require any changes, but
it wouldn't deal with the problems that have been raised or
associated with it.
Alternative 16 is an attempt to deal a little bit
more directly, once again, with the capacity issue, and it
puts a little bit more of an onus on industry to require •
a very firm letter of commitment regarding industrial usage.
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Theoretically, this would tend to reduce the amc
of excess capacity, but it would, of course, take away
industry's flexibility in deciding which way they were goi
to go on wastewater treatment.
Mimi?
MS. FELLER: Mimi Feller for Senator Chaffee.
Are you offering that as a substitute for ICR;
in other words, if an industry is willing to commit to a
certain capacity therefore, the whole — part of the idea
of ICR is that you don't want them to say "we need
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63
seme type of clause in there for failure to deliver a certain
stipulated flow.
Whether that takes the form of ICR in terras of
payment back to the Federal Government or whether that takes
the form of a penalty which could be paid to the local
government — again, that i's not the kind of detail we've
gene through.
MS. FELLER: But if the commitment is met, then
you say no payment of ICR?
MR. GALL: That's one way of looking at it.
Only — in essence, if you could,-it's the reverse of current
ICR. In a way, you pay for that that you contracted for
but didn't use; that you contracted for and do use; no
payment.
I think there are a thousand spin-offs on that
particular option as to how you may want to approach
financing, both at the local level and in concert with EPA
in the state.
Mr. Megalli?
MR. MEGALLI: Can you explain to me what is
equity in this solution here? What's is the theory behind
it? What kind of equity have you?
MR. GALL: Well — '
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64
MR. MEGALLI: I thought the major issue was
in that — of the ICR, its cost effective. But what does
this solution offer in the terms of equity and cost
effectiveness?
MR. GALL: Well obviously, if there is no ICR
— what we call ICR by way of payment — if there is no IC1
it's fairly clear we have made a conscious decision that
that really isn't what we are looking for. The focus would
then have to be the future planning.
If you follow what I am saying —
MR. MEGALLI: No. lira afraid I don't.
MR. OLSTEIN: Let me try to answer that question.
If we can, just for the sake of argument dispense with the
specific questions that were directed to us, the nine
questions of Congressman Roberts, and just go back to 1972,
to say — you know — why did they come up with ICR in the
first place.
We identified three very major reasons that the
Committee members had in mind, there were some minor ones,
basically it boiled down to those three: Equity, capacity
and concentration.
As I think, or I hope, we pointed out, the entire
equity issue has really been, you know, compounded and
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65
confused by the actions of other committees, specifically
the Finance Committee, which has, you know, changed all of
the ground rules that were in existence in 1972 and, you
knew, you can try to do something with that but it's a lot
more complicated than it was thought to be in '72.
We took a lock at the conservation issue and found
out that there are other forces in conservation, I think the
raccrd on conservation has been in mind, at least, pretty
impressive.
So we're left with the capacity issue, and you don't
have to be a mathmatical genius to realize that if the
grantees that we surveyed serve approximately half the popula-
tion of the United States and they're running at an average of
approximately 68 percent of capacity, and you're talking
about $45 billion going in grants to them and, you know,
what is that excess capacity costing. And compare that to
the total over a 30-year period of $1 billion and $2 billion
in ICR payments — you know, capacity is a much bigger
problem than ICR is, and the question is hew do you deal with
that.
MR. MEGALLI: But don't you feel that Alternative
16 is contradicting the conservation measures? You tell me
that if you conservate, if you reduce your water consumption
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66
by somehow or another, then we're going to tax you?
MR. OLSTEIN: I don't think that's the intent of
it.
MR. MEGALLI: Yss. But isn't that in fact —
MR. OLSTEIN: You knew, that's another factor that
you have to consider when you structure that.
MR. MEGALLI: As far as the capacity, did you tah
into consideration in your Study that all ths plants are
designed for 30 years, theoretically, and probably, you knc
you surveyed the existing capacity now, which isn't the
design.
When you build a plant, you don't build it to
handle only the flow coming today then after five years you
have to build another one.
You know, so this whole alternative, it might be
built on the wrong assumptions, because you — you knew,
you observed that only half the capacity is being used.
That could be true. But within 30 years you may need that
capacity.
MR. GALL: I think that the numbers that Myron
quotes are interesting. It's very difficult to make the
logical jump from describing the entire 32 percent
under-utilized capacity to the industrial sector. Obviousl"
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67
a great portion of that which ICR never would have controlled
— domestic, commercial, institutional types of users.
But I think you're get-ting a little bit afar here
in that what we are attempting to do in this alternative is
to ensure that we don't build too much capacity for the future,
not that we don't build adequate reserve capacity for the
future, but that we're net constructing, you know, megaliths
that will sit out them and be under-utilized.
One of the very telling kinds of pieces of data
that has been turned up in this Study was that 68 percent
is the national average, and the highpoint was 120 percent.
Obviously, that plant needs to be expanded. The lowest
percent of utilization, however, was 4 percent.
Now, that is ths kind of problem — and I think
everyone would admit that that's a problem — that this
alternative is trying to address.
MR. MEGALLI: I can appreciate this problem. But
one thing also that's not addressed — that if you build a
larger capacity plant than what you need, your operating and
maintenance cost is much higher and, therefore, your User
Charge is higher, so you have the mechanism to control the
capacity. I don't think any community consciously will build
a bigger plant or larger plant than they need and jeopardize
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the chance cf their paying a higher User Charge.
You have the mechanism, you don't need ICR to
control it.
MR. GALL: well, that I think is a very logical
approach to it.
It's been my experience as a User Charge Coordinc
for Region I, however, that the emphasis on financial planr
in the initial stages for a lot of reasons probably hasn't
been as broad as it might have been. T think the major one
is that in the meantime we have a lot of plants we are
building now were designed in" 1972 and the economy was
certainly different then.
MR. MEGALLI: I did want to mention the fact, als
that all cf the design is supposed to be reviewed by ttie EPA
Agencies and instead of adopting an ICR system with your
administrative costs for the ICR system and to more technic
staff to review and assure that any new building or any new
facilities that are to be built are only for the required
capacity — that would be more beneficial than just trying
create another program over another program, and another
administrative cost over another, and inflate costs, and JUL
go around the subject — go hit the subject right on the ta:
and that's how you control it. You have the User Charge to
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69
control it. Increase ycur staff to have a more thorough
review instead of adopting another program for the ICR which
doesn't prove?, to be — you know, I don't feel that too many
p ecple are very enthused about it and it is no sense in
adopting that program.
You have ether mechanisms to control what you're
trying to achieve in Alternative 16.
MR. GALL: Okay.
MR. SUTTON: I just want to make a comment on that
point.
I wonder if the people in the back can hear the
questions here. Can you?
VOICE: No.
MR. SUTTON: Can I ask the people at the head table
then, when they are addressing the question to try to repeat
or rephrase the question.
There is a discussion going on on the utilization
of the ICR procedure to reduce or control excess capacity
as one of the purposes of whether it meets that function or
not.
And the question has been raised here as to whether
that is a good purpose for ICR. I just want to comment on
two things that the gentleman raised which I intend to agrse,
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70
from our observation that we seen.
One is the statistic that has been mentioned
several times — that the national average shows that only
68 percent of the capacity of the treatment plants is being
utilized at the present time.
Obvious-ly, as John Gall indicated, extremes such
as 4 percent cannot be tolerated, but just en a national
average of 68 percent, I think that statistic can be very
misleading and I want to emphasize that, again, a treatment
plant in general may be designed for perhaps a 20-year
period and assuming the average age of the plants we are
talking about, I'm making an assumption, is 10 years, and r
of them are not even that old Jchn tells me — but just
for the purposes of my point, obviously the plant that ws ar
talking about in the national average has about, perhaps,
10 years more to reach its design capacity.
And these are built for future growth of not just
industry but commercial and domestic and residential, you
knew, just like the increase in the birthrate or people mov
into the area.
If we assume that only 2 percent a year, which is
not a very high figure I think, in many of these areas over
10 year period you are talking, including compounding of
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71
perhaps a 25 percent increase in flow.
So if you add 25 percent to your 68 percent you're
up to perhaps 95: percent, just- throwing those rough figures out
In other words, the national figure of 68'percent
will probably be right en track with what the design practice
is. And I'd rather lock at it that way then to say that that
indicatas therrs is excess capacity.
If ths national figure showed a 98 percent
utilization I think we'd be really worried because then
we'd be rebuilding and redesigning these plants right away..
So much for that.
Now the question of ICR and to whether that's a
good mechanism to control excess capacity, the point was made
that there are better ways to do this, which is to make sure
I
that when the planning and designing are done that there is j
no excess capacity provided that whatever is provided is j
called for and is justified, and that's a function of the
municipality, the state and EPA in designing these plants and
projects.
One point that has not been mentioned that I just
want to indicate, we do have a new law now. There is a
1977 Act and our new Regulations have just recently come out
within the past few weeks. And if you refer to the cost
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72
effective guidelines — and T wish the reporter to.get thi~
repcrt — there are very specific controls and limits which
have bsen added to the whole question.
There are specific limitations on the reserve
capacity allowed for industry which was not there before.
There ars also specific guidelines on design areas and
carrying capacity that wars net included before.
So I do think these things should be referenced,
and perhaps they are a much better method of controlling
the so-called excess capacity than ICR.
We are approaching lunchtime, but we would like to
finish this phase of the questions and if there are any
additional 'questions on these particular alternatives, we
continue for at least a while.
MR. OLSTEIN: I'd like to add an additional
alternative that was offered at one of our prior meetings,
which was to retain all of the ICR collections locally and fc
take that share that would go to the Federal Government and
apply it towards things like the administration of ICR
pretreatment programs and costs associated with industrial
users, the idea there being that, you knew, the Federal
Government doesn't have a very specific need for those fund:
and we're in a period now where there are additional regula*-
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and costs associated with serving the industrial sector.
John?
MR. GALL: That will complete cur presentation for
this morning.
We have scheduled this afternoon a number of speakers
among the audience, who will be talking to us. I'd like to
go through them down the list for those of you who nay be
interested.
First of all we have Mayor viveiros cf Fall River;
followed by George Darmcdy, who's the Executive Director
of the Fall River Industrial Development Commission, I balieve;
Mr. PatrickHarrington, who represents United Merchants in
Fall River; John Walker, who's the Research Director of the
Chamber of Commerce of the Greater Portland, Maine region;
Mr. Makram Megalli, the Public Works Director for the City
of Wconsockst, Rhode Island; Mr. Hedley Patterson, Mr.
Megalli's right-hand man.
Following that we'll have David Phillips,
Executive Director of the South Essex Sewerage District;
Mr. William Torpey, of the Greater Fall River Chamber of
Commerce; Mr. Philip Murray of the New Bedford Area Chamber
of Commerce; Mr. Ralph Guerriero from the Fall River Textile
Processors Committee; Mr. Goodwin from Portland, Maine; and
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74
Martin Hadley the Chairman of the Sewerage Ccmmission from
Kami1ton, Mass.
We originally had anticipated scheduling our
first speakers at 1:00 p.m. o'lock and running then at
15-minute, intervals. I have a feeling that the speakers
probably be a little bit shorter, so if I might I'd like
to reconvene at 1:15 p.m. and start at that time.
I would like to remind you that the record — the
written record — will remain open until November 6 of thi:
year and any comments you would like to make up until that
time should be sent to me and to Myron Olstein at Coopers {
Lybrand in Washington.
Mr. Patterson?
MR. PATTERSON: One last question, is it satisfact
to leave our material here during the lunch period — will
it be safe?
MR. GALL: I intend to leave mine, how's that?
I would suggest — Mr. Patterson asked; about the safety_of
leaving material here. Have you a calculator or any kind
of thing like that, I believe I'd take it with me. I don't
think anybody is going to steal a list of 16 Alternatives 1
- if they did, I wonder who they are.
(Recess for lunch at 12:07 p.m.)
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AFTERNOON SESSION
MR. GALL: At this time I'd like to reconvene as
it were and start off with, the prepared statements of the
various people who havs scheduled the same with us.
I read earlier the list. We have approximately
9 or 10 statments, following which if anyone would care to
make a statement rather than a comment, you're welcome to
come up to the podium and do so.
For those individuals who are going to make prepared
statements, I would appreciate it if you could make a copy
of your statement available to our stenographer, court-
reporter, prior to the delivery of your speech. That will
expedite his or her burden.
I would like to ask Mayor Carlton M. vivsircs of
Fall River, Mass to come forward, and I think it would
probably be best if the statements were delivered from the
podium here.
STATEMENT OF
CARLTON M. VIVEIROS
MAYOR, CITY OF FALL RIVER, MASS.
MAYOR VIVEIROS: Good afternoon. My name is
Carltcn viveiros, I'm Mayor of the City of Fall River,
Massachusetts.
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76
May I open by thanking the Environmental Protect4'
Agency for the opportunity to comment en the Industrial
Cost Recovery issue, .which will affect the economy of the
City of Fall River and its industrial climate.
I am here today on behalf of hundreds
of people who stand to lose should an Industrial Cost
Recovery program be implemented and their employers be for<
to add a non-productive expense to the cost of doing busines
in this country.
I have reviewed the preliminary list of 16 Alten
tives prepared by Coopers & Lybrand and find only two suitah
for the large majority of industries that will be paying ti
brunt of the cost of recovery.
Those are numbers (1) Abolish the ICR; and (9),
which allows a tax credit for ICR payments.
However, I find only one acceptable to the City
of Fall River: Number One, Abolish ICR.
My reason is logical — abolishment of ICR
eliminates the burden on both city and industry while a ta>
credit to industry eliminates burden of industry, but will
require a municipality to absorb the cost of monitoring,
administering and implementing the program; and since our c
source of revenue is property tax, it would create a burden
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77
every resident in every city across this nation.
The Cost Recovery Bill for Fall River's industry
will be just over $.4 millipn, which breaks down to $134,000
per year for 30 years. The brunt of that cost would be
absorbed by 10 industries within our community; but I doubt
if it will be for the entire 30 years, because some of them
would be cut of business long before that period.
Of that $134,000 payment annually, 10 Fall River
companies would pay $110,000, ranging in assessments from
$4,000 to $26,000. Add to those figures another $250,000 :
annually for the operation and maintenance cost of the sewage
plant, and government is making a strong bid to force some
companies out of business and place some of its citizens on
welfare or Social Security.
Industrial Cost Recovery is indeed double taxation,
but without double representation.
we are most concerned with *hs effect of Industrial '
Cost Recovery upon our dye and finishing industry, which unlike
most of the industrial categories studied, has to contend with
foreign competition.
Fall River is very concerned with the drain on
cash flow which will be placed on our companies if Industrial
Cost Recovery is implemented.
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73
We are primarily concerned about the 3,200 persons
now employed in these industrial plants and the effects of
Industrial Ccst Recovery upon their livelihood.
Adverse Affects: Industrial Ccst Recovery would
tend to erode our tax base in Fall River; it would tend to
increase our unemployment lines, it would tend to increase
cur welfare rolls; boost government payments to hospitals
for medical care and numerous other social programs.
It is also true that Industrial Ccst Recovery
would provide some additional monies to our Treasury. Thai
gain, however, would be far offset by the pay-out by govern-
ment which Industry Cost Recovery would eventually create.
It, therefore, simply makes good sense to elimina
a program which will end up costing mere than you will recei
There are other factors which the EPA must con-
sider before making its final recommendation to Congress, o
of which we hope will be the competitive edge Industrial
Cost Recovery will create for foreign manufacturers over
United States manufacturers in the textile industry.
Too long has our Federal Government regarded the
textile industry as a secondary job market. Too long -nas
national policy put this industry at a disadvantage in the
world market.
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we all take pride in our dress. And we in Fall
River not only manufacture the clothes people throughout this
nation wear, but we manufacture the best quality of clothing
in this nation.
Abolishment of Industrial Cost Recovery will net
solve all the problems in the textile world, but it is a big
first step in showing the people of this nation that we care
for cur own.
In closing may I say we feel our reasoning is
sound, our arguments credible'and respectfully request that: the
Environmental Protection Agency recommend to the Congress of the
United States that the Industrial Cost Recovery section of
the Clean Watsr Act be abolished.
Thank you, gentlemen.
MR. GALL: Thank you, Mr. Mayer.
At this time I'd like to call on Gecrgs Darmody
from the Fall River Industrial Development Commission.
STATEMENT OF
GEORGE T. DARMODY,. EXECUTIVE DIRECTOR
FALL RIVER, MASS. INDUSTRIAL DEVELOPMENT COMMISSION
MR. DARMODY: Thank you very much and good afternoon.
I'm George Darmody, Executive Director of the Fall
River, Massachusetts Industrial Development Commission.
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I am here today to echo the sentiments of Mayor
Carclton viveiros and inform this Committee of the potentiaj
adverse effects implementation of Industrial Cost Recovery
would have upon the economy of the City of Fall River, Masr
May I offer my congratulations for a job well done
to Coopers & Lybrand. I have reviewed the 16 Alternatives
f«?«5l the Study group did an excellent job, but from the Cii
of Pall River's viawooint. Coopers & Lybrand could have stop
after Alternative Number One - Abolish ICR.
The Fall Rivsr Industrial Commission opposes all
aJLternatives except the abolishment of Industrial Cost Rscov
From a cost perspective, the total pyament of Cos
Recovery made by any single company should not bankrupt tha
company. However, within the textile industry that cost is
added to several other non-productive costs, which increase
tremendously the cost of doing! business in the Northeast an
does net enhance the competitive position of businss operat
in this section of the nation.
Manufacturers in Fall River and ether parts of th
Northeast have not questioned the "operating and maintenance
costs" which are also associated with the Clean Water Act.
That in itself displays a willingness to keep cur anvironms1
clean and our waters free from pollution.
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In our community, textile manufacturers have to be
concerned with other costs: The costs of energy, oil
embargoes, higher taxes and foreign competition.
The competition in the textile industry is far more
reaching than ether targetted areas studied as meats, dairies,
canners, pulp, platers and food processing.
Foreign competition in the textile industry would
make the Federal Government's payment to these industries
through the Trade Adjustment Act alone more expensive than
the revenue produced through implementation of Industrial
Cost Recovery.
Therefore, implementation of ICR would appear to
create revenue for the Environmental Protection Agency, but
an expense for the U. S. Department of Commerce.
I have neither the resources nor the manpower to
substantiate that statement with actual dollar figures.
The companies most drastically affected by Industrial
Cost Recovery in Fall River, Mass, now employ approximately
3,200 people in manufacturing jobs.
Implementation of Industrial Cost Recovery will have
an adverse impact upon Fall River, Massachusetts, whether
it be in stagnation of our die and finishing industry to the
point where those firms are unable to reach normal growth
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projections or whether that work force is reduced in
substantial numbers.
I cannot honestly cr realistically predict that
the entire industry will terminate. But I can predict tha"
phase-out operations will begin; work orders will shift to
newer sister plants in other parts of this country, and ou-
side of this country.
Using the accepted national formula that two and
a half supportive jobs are created for each manufacturing
in this nation, I can predict that a minimum of 10 percent
or 320 persons in manufacturing jobs will be out of work in
city because of Industrial Cost Recovery.
And because of that loss, 800 persons now employe
in the service sector will join the unemployed ranks, which
means 1,120 persons will have to be subsidized through one
means or another, providing those people with just enough
money to live on for three weeks alone will cost more than
the total annual bill of $134,000, which will be assessed f_
Industrial Cost Recovery within the City of Fall River,
Massachusetts.
Quite frankly, I cannot see how cities, towns or
states can afford implementation of Industrial Cost Recover
It is the concensus of many more than the majcrit"
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that implementation cf Industrial Cost Recovery will have a
severs adverse effect upon the economic climate of Fall
River, Massachusetts.
May we strongly urge the Environmental Protection
Agency to recommend abolishment of Industrial Cost Recovery
to the Congress of the United States.
Thank you very much.
MR. GALL: Thank you, Mr. Darmody.
At this time we'll have a presentation from
Patrick Harrington, who is the Bristol County Commissioner
and who represents United Merchants cf the City of Fall
River.
Mr. Harrington.
STATEMENT OF
PATRICK H. HARRINGTON
BRISTOL COUNTY COMMISSIONER, FOR UNITED MERCHANTS OF FALL RIVER
MR. HARRINGTON: Thank you, Mr. Chairman.
This is going to sound like a Fall River symposium.
However, I think the circumstances that w<» find ourselves in
are probably similar to what many other people in this room
find themselves in with respect to the ICR portion of the
Clean Water Act.
I couldn't helo but observe here that when the
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preceding speaker, Mr. Darmody, was about 12 years old I
was Chairman cf the Fall River Industrial Commission, which
shows that when you -set a shop up right it continues to n
right along, very nice and neat.
I endorse what the Mayer has said and what George
has said.
They of course have given you the broad-brush
treatment cf the situation and, just in passing, I would
like to broad-brush the situation by saying that the Ccun
Commissioners of Bristol County are seconding the City
Council's resolutions in this matter for Fall River. Of
course, it opposed the Industrial Cost Recovery program
because of the disadvantage it places the industries cf
Bristol County in.
Two larger cities, of course — the three citias
being involved Fall River, Taunton and NGW Bedford, as
well as Attleboro — four cities — i would like to say,
just by way of specifics, that I'm here .representing
United Merchants, which is the second largest manufacture.
employer in Fall River, employing something over a thousai
people.
You must remember, and I think this is one of th<
things that hasn't really been alluded to in the morning
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program, that United Merchants, like many of the other
industries in Fall River, is part of a large conglomerate
— in the case of United Merchants, an international
conglomerate.
The headquarters of that conglomerate, of course,
is not in Fall River. That conglomerate, too, has just
recently come out of a Chapter XI arrangement in bankruptcy
and the added costs of the ICR — that the ICR places upon
an industry like what we have in Fall River, largely in
the textile department, is such that those people and those
accountants reviewing the bottoms-line figures in some place
other than Fall River are quite likely to come to
decisions that have absolutely no reference to clean air
or clean water or anything else. I think we have to
remember that many of us in cities like Fall River, many
manufacturing industries are in a situation where the
accounting department far removed from the city is going
to make the decisions.
If we value our local labor force, if we value our
local industrial climate and our local industrial potential,
we have to think about that.
And so I said, in a marginal type industry where
they're operating on something like a 2 percent profit
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margin, you've cot to consider that even 70', 50, 60, 70 or
$100,000 a year on top of the taxes which may have buried
themselves all about that we've had to impose along with
many other cities throughout the Commonwealth of Massachuse
and elsewhere, that when you add this tax, and it is a ta:.,
to the other taxes, you run into a situation which may no-
be credible where the decisions are being mado.
I think that's a point that we've got tc ccnsidst.
We have to consider very carefully in a place like Fall
River.
I'm just going to mention one other thing and thei
I'll quit.
In analyzing and thinking about this whole
situation which led to the ICR, very little has been said
about the philosophy behind the Act, that is making the
industries pay for their percentage of what they put into
wastewater system or sewer system or whatever you want to
call it, and I began thinking about that.
I run a law office and I probably generate maybe
a couple of bags of paperwork, you know, through the shredt
every week and they go out on the front stoop of the builc
and the restaurant down the street — it's not down the
street anymore — used to have something like 40 bags of
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refuse and garbage and stuff cut there. It never occurred
to me to think, as a citizen, that that guy ought to be
paying, you knew, twenty times what I'm paying in terms of
taxes to support the refuse workers.
And as I began to think about that, if the ICR
theory is philosophically applicable, there are lots of
ether areas where I'm being done in and I think we ought to
take a look at them.
Even the Pest Office — new I get the usual amount
of mail, I have a small post office box, maybe I get
30 letters a day — 50 percent"of them junk mail and no"
checks for bills I've sent out — but in any event the guys
on either side of me have big bcxss and they get all sorts
of mail. In fact they have to have one of these plastic
bags to carry it back to the factory, you know, or wherever
they're going, or maybe the Chamber of Commerce or probably
the Industrial Commission with all their people looking for
new industries and the like. So I 'began to say to myself
"Well, what the hell," I know they've got all sorts of guys
running around back there sorting out that mail so it's
got to cost, you know, 10 times as much as my mail to sort
these fellows' mail — so if ICR is valid, why shouldn't we
have the guys that get more mail pay more for the postal
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office service.
Frankly, I haven't come to any conclusions on th«.»
but when we finally go back to the drawing boards with
Congress, it seems to me that in addition to the practical
things that I tried to address myself to and that I'm sure
everybody else is going to address themselves to in terms
of whore the industries stand - these are the other indust-
thsse are in the south, you knew, and all the rest of it,
the urban areas versus newer areas where they don't — the
got a brand new sewage treatment plant with plenty of
capacity and don't have to worry about it — those are all
practical applications of the problem.
But maybe what we better do is go back and let's
challenge the philosophy, because if the philosophy of the
ICR is right, then that philosophy is equally applicable t
20 or 30 other government services that we're all paying
equal amounts for and frankly, I never thought of that unti
I got involved hers with ICR.
But maybe we ought to go back and sell the Congre
on the idea that if you're going to start going that way,
unless you — if you're going to depart from the theory th,
a rising tide lifts all boats and you're going to try to
specify how much money goes into every specific function an
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make somebody pay for it, then there's all sorts of, you
know, applications of theory and maybe that might be more
effective than our tales which are going to be recorded in
the record here about what happens to individual industries.
Thank you.
(Applause.)
MR. GALL: Thank you, Mr. Harrington. Based on
your eloquence and your expertise, I refuse to believe you
have a small mail box.
(Laughter.)
At this time I would like to hear from Mr. John
Walker. Is Mr. Walker here?
Mr. Walker is the Research Director fcr the
Chamber of Commerce of the Greater Portland, Maine Region.
For all of you who think the Fall River show is
over, it's not. We have several moro speakers.
Mr. Walker.
STATEMENT OF
JOHN E. WALKER, DIRECTOR OF RESEARCH & DEVELOPMENT
CHAMBER OF COMMERCE, GREATER PORTLAND, MAINE REGION
MR. WALKER: Thank you. I think Mr. Harrington must
have known I was going to talk scms philosophy here.
My name is John E. Walker. I am the Director
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of Research and Development for the Chamber of Commerce cf
the Greater Portland Region and I'm also Staff Director
the South Portland Chamber, which is a division of cur
organization. Our offices are located at 142 Free Street
in Portland, Maine.
It is cur position that the Industrial Cost
Recovery chargss should not be instituted after the mcrat-*
period has ended, we feel that ICR charges are a discrinai
tory tax and, if enacted, would contribute to the excessi-
economic burden being placed on ICR industries because cf
user charge assessments.
The reasons for this posicn are many and derive
from philosophical differences we have with the legislati<
and from our concern for the economic difficulties many of
our industries served by treatment plants are experiencing
Regarding our philosophical concerns, we view it
as unjust to require industry to repay their share cf
capital costs if served by a Federally-supported treatment
plant. The idea fails several tests of equity.
First, as a society,.we supported this massive
investment to obtain a public good — clean rivers, lakes
and beaches through treatment of our wastes. Industry is
vital sector of our society, their tax dollars helped fund
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these plants, and they will be encumbered like all taxpayers
with annual sewer assessments for operation of these plants.
They should not be asked to pay an unfair share.
Though ICR legislation had an intent to eliminate
a competitive disadvantage to industries which could not
tie into municipal treatment plants, it is becoming clear, at
least in cur region, that this competitive disadvantage
is illusicnary. In fact, as construction costs of municipal
plants increase sharply and user charges escalate with the
whims of inflation, the economies of scale will provide
the advantage to industries which can self-treat.
The only competitive disadvantages we can identify
are those to be created by the Federal Government with the
passage of ICR charges. In two ways, ICR charges will
discriminate among industries:
First, the criteria for determining ICR-eligible
industries are crude measures resulting in nonsensical
classification.
Two-examples: we have nine banking institutions
in the Greater Portland Area. One faces ICR charges because
of its.air-condition system. Also, two firms were chosen
because they hose down machines with pure water. Yet,
commercial laundromats which send pounds of detergent into
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the sewer a day escape ICR assessments. There is an
arbitrariness in the classification system which is gross.j
unfair.
Discrimination also results from the fact that
will not be instituted for plants funded with grants
to 1972. Here the EPA is creating a competitive disadvan
fcr industries located in municipalities receiving ccnstrr
grants after 1972.
This advantage will gain new dimensions in the
next few years. With inflation so virulent and IGR charge
a direct coefficient of a plant's capital costs, like
industries will face exceptionally unequal ICR assessment:
varying according to the data of the plant's construction.
Inflation, the size cf'plants, the ICR exemption of plants
funded prior to 1972, combine to create competitive dis-
advantages to industries residing in various communities,
and disadvantage municipalities within the same geographic
region as they attempt to attract new "wet" industries to
their area.
Both types of disadvantages are evident in Maine,
where four industrial communities within 150 miles of each
other have significantly different rates or projected rate
for treating sewage and, therefore, varying ICR rates
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should be approved. The discrepancies can be shown by
quoting just their rates for water flow.
Lewiston, Maine, a municipality benefiting from the
1372 exemption and lower construction costs charge 48 cents
per 100 cubic feet.
Portland, a post-1972 facility which required a
large plant and incurred higher construction costs will
charge $1.12 per 100 cubic feet.
And Bangor, which has only primary treatment
facilities at present, has a declining block rate with:'the
larger users being charged from 27 to 33 cents per 100 cubic
feet. Yet, when Bangor1s secondary system is completed,
1980 prices will be in effect, and their rates are expected
to be the highest in the state.
As you can see, disadvantages abound.
Industrial Cost Recovery is a very poor mechanism
to correct the supposed disadvantages of industries which
self-treat their wastes for ICR and will only propagate more
disadvantages and will eliminate none;.
Our concern on this issue does not stem solely from
our philosophic considerations, but more from cur recent
experience cf assisting over 50 industries in the cities of
Portland and South Portland as they prepared to tie into a
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treatment plant.
If the EPA would carefully study -what is happen!...
in these two communities, you would notice seme problemat
results of our national decision to treat cur wastes. Bo*-v
cities, despite a combined population of Isss than 100,OOw
people, have their own Federally-funded multi-million dol
treatment plant. Beth cities have strived hard to oducatr
their major users in how to reduce their use of the sewer
system by altering industrial processes. Despite this
activity, both cities have the same problem.
The plant managers"of .the resident industries
are concerned, questioning the future of their operations
tha Greater Portland Area. The reason is that the sewer i
charges and the proposition of annual increases cf these
assessments, hit their financial planning like a hammer bl
Several firms face annual user charges exceeding $50,000.
These charges are so great and the effect on their
operations so grievous that this has become an onerous cos
of operation.
The most serious adjustment is to b® made at the
small local plants which do not readily have the capital t
invest in water conservation or pretreatment systems, or h
the profitability to simply absorb this new cost. Instead.
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they consider reducing their operating hours which would
displace labor, delaying expansion plants until they analyze
the long-term implications of sewer costs on their operation,
which delays new investment in our community: or they consi-
der locking the doers, which portends economic disruption
in our region.
It is important to point out that the theory of ICR
charges may have been conceived with the subconscious idea
of having "big business" pay its own way. Our experience
in Maine finds it is small business which is most liable
to ICR assessments.
The ICR industries most prevalent in our region are
not listed in the Fortune 500, but they are extremely
important to our economy.
They are meatpackers, fish processors, food processors
•
canneries, bottling plants, dairies, among others. All have
s pecialized processes and serve a narrowly defined geographic
market. They are economically sound but have a low profit
margin.
These industries are often locally controlled and
have operated for decades in our community. Considered good
neighbors, they have generated considerable tax revenues over !
the years. They are very labor intensive providing hundreds i
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of stable jobs for our residents.
Rather than move, they cope with lass modern plar
facilities because of their long history of successful
operation in the Greater Portland Area.
These are the industries which will face ICR
charges if you decide to institute them. It is these
industries which have experienced hardship with sewer user
charges. Married to their processes, they cannct escape t
often severe financial burden of treating their sewage.
If ICR charges are not discarded because of their
lack of philosophical integrity, I hope the EPA considers
the decision in light of the difficulties thess industries
face. In your deliberations you must realize that the sew«
user assessments alone have placed severe economic strictu*.
on certain segments of industry. Though ICR charges are
small relative to user charges, they are significant encugu
to exacerbate an already difficult situation for many
businesses, such as the small, local firms which exist in
the Greater Portland community.
We, therefore, urge you to rescind the Industrial
Cost Recovery legislation because it is potentially dis-
ruptive to certain segments of cur economy and for reasons
of equity. Thank you.
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MR. GALL: Thank you, Mr. Walker.
Our next speaker at this time is Mr. Makram
Megalli, who is the Public Works Director for the City of
Woonsccket, Rhode Island.
Mr. Megalli.
STATEMENT OF
MAKRAM H. MEGALLI
DIRECTOR OF PUBLIC WORKS, CITY OF WOONSOCKET, R.I.
MR. MEGALLI: Good afternoon. M.y name is Makram
Magalli. I'm th-2 Director of Public Works for the City
of Wconsocket, Rhode Island.
Wccnsocket is a typical New England textile
community.
The next statement by Mr. Hedley Patterson, the
Division Engineer of the Department of Public Works, will
shed more light on the characteristics and economic biography
On behalf of the City of Wocnsocket, I would like
to take this opportunity to thank the EPA and the Coopers &
Lybrand officials for arranging this session. I would liks
to thank Mr. Gall, Mr. Flax and Senator Chaffee's staff
for their visit and interest in our city during the ICR
Study, and hope that the information supplied to them was
helpful.
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His Honor Mayer Bouley has asked me to carry his
brief objective message to all of you.
The city is totally opposed to the ICR system.
implementation of this system could strip our city's
industries, jeopardize opportunities of employment, incre*
cur taxes, and curtail our effort of accomplishments.
My objective this afternoon is to comment en the
advance information pertaining to the ICR Study, and expls_
why the City of Wocnsccket is strongly objecting to the
implementation of the ICR system.
Rather than making scattered comments, I shall tx.,
to follow the order of advanced information summarizing th
results of the ICR system Study. I had prepared the
statement before examining the alternatives offered or
comments, this morning.
The tabulation and findings of the study seem to w
very thorough, yet they do not distinguish or recognize the
local conditions of different communities.
The big cities and the small cities are being
analyzed likewise in this study, yet the Federal Government
recognizes the need of different programs designed specifi
for small cities and towns to help us in our economic grow
It is our opinion that the Study if not categorize
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may. and will lead to a great many problems and hardship for
more, than are being considered in the Study.
The City has a regional wastswater treatment plant
which is designed to serve another three surrounding
communities: The Town of North Smithfield, Rhode Island;
the Town of Blackstona, and the Town of Bellingham, both
in Massachusetts. The design capacity of the plant is
16 million gallons a day average flow.
With this beif background, we offer the following
comments on the Study in relation to cur communities.
Equity: Findings of the Study "enhanced the economics
of self-treatment."
The facts are, capital funds have already been
spent, and eliminating any industry will- mean wasting that
portion of funds. It will also mean shifting of mere user
charges to other classes of users. It will present more
burden on industry for cost of self-treatment at the time
other grants are designed to help the growth of industry
in our community.
Water conservation: Findings of the Study:
"Because ICR is generally small compared to other costs, the
effect is expected to be minimal."
The cost of user charge alone in our community was
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sufficient to reduce the water consumption, as will be
testified by the next speaker, Mr. Patterson.
Jobs: Findings of the Study show ICR was a fact
in impacting few jobs.
Let me tell you, ICR will have an irreversible ii»
pact on our area and cripple our continued progress, and
will set us back by decades.
We are grateful to the mcritcriura on ICR which
enabled us to waive the implementation of ICR on its firs
year, fiscal year '77-'78, when it was due. we saw the
crush of user charge, and we would hate to see the impact c
both user charge and ICR combined.
ICR revenues: Findings of the Study:"will avera<
about $100,000 in collections, with administrative costs
generally less than $20,000 per year."
It is very interesting to take a close lock at ti
figures and what they mean.
Forty percent or $40,000 for local share for cap:
costs related to wastswater and to offset ICR administrate
costs, that's what this 40 percent will be used for. This
figure of $40,000 will remain constant if no other factor:
encountered and industry stays healthy despite the detriitw
effect of ICR.
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The administrative costs of $20,000 will not remain
constant. These costs mainly consist of salaries and wages.
It is therefore a fact that this $20,000 will progressively
grow higher and higher every year as inflation takes its
bita into it, and before we know it, it will be $40,000,
$50,000, and on.
However, from the time the two costs equalize and
for the remainder of the 30 years, communities will continue
to spend greater amounts. Ladies and gentlemen, this is
not counting the administrative cost of the Federal
Government.
We have reviewed the above phenomena prior to
findings of this Study. We used much moisconservative
figures for adminstrative costs and applied more realistic
figures for ICR revenues in our community, and the results
were the same. This study is included here for reference
and marked as Appendix A.
As the Study progresses, we find it mere interesting
and supportive of our objection to ICR charges. The
questions raised by Congressman Roberts are very thorough
and express a great concern on exploring all facets of the
controversial ICR System.
we will attempt to touch on some of the observations
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to some of those questions.
First-question: Whether ICR discriminates,
"Do small town businesses pay more..." "What the combined
impact..."
The question hits the bull's-eye.
It is by admission of the Study: "Some industri;
(especially heavy water users) nay proportionately mere..
"ICR rates appear to be higher in small treatment
plants (less than 50 million gallons per day..."
The facts of the matter ars as follows:
The major industry to be affected by ICR in
Woonsccket is the heavy water textile user.
The plant in Woonsocket is 16 million gallons oe]
day, which is much smaller than 50 million gallons ner day
distinguished by the Study. The cost ratio of ICR to usei
charge is at least 30 percent for the first year of imple-
mentation to each industrial user.
It is evident that the impact of ICR is much, muc
greater for a typical community of our size and structure,
and it could lead to impending economical disaster.
Second question: Whether a mechanism should be
provided whereby a community may lower its user charge ar
ICR charges...
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The observation was that a source of funding would
have to be identified.
It is our opinion that you have this mechanism
easily available and much less administratively expensive.
Just eliminate the provisions of ICR from P.L. 92-500. This
will offer an immediate relief of about 25 percent of the
combined User Charge and ICR charges. This will also save
the cost of administering the ICR program and the administra-
tion of a new program to offer relief from the impact of both
User Charge and ICR.
Ninth question: "Whether small industries' should
be exempted from ICR?" "How should small industries be
defined?"
EPA has already exempted users discharging less than
25,000 gallons per day from ICR, rather than the SIC
definition. The 25,000 gallon per day definition creates
some confusion because it widened the base for users falling
under ICR system such as hospitals and other non-industrial
users.
Regardless of the discrepancy in the 25,000 gallon
per day definition, it does not help our community by a
great deal.
To summarize our review, we conclude the following:
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Grant is already earmarked and spent for construct
to solve the water pollution problems and that's a goal
achieved.
Our community had hoped that such facility would
attract more industry and optimize the utilization of
different programs to lead to economic prosperity and boo:
cur continued effort of progress. If implemented, ICR WOT-'
have the opposite affect.
On its own merits, the cost ratio between
administrative costs and ICR expected revenues do .not jus^
this ICR program.
Speaking only for cur city and communities with
similarities, it is our opinion that the users served by c
plant of design capacity smaller than 32-50 million gallons
per day should be exempted completely from ICR system.
We would like, however, to make cur position verj
clear.
We are not implicating that industries served by
larger plants should not be exempted also. We are speakir
for our community only and have not examined the effects on
ether communities' economics.
We work very closely with our people, and believe
wo didn't have to go through this brief review to make our
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conclusion. T-7e could have told you a long time ago before thsi
Study that it would be a disaster.
The previous city administration in 1974, then
represented by His Honor Mayor John Cumxnings, made a
presentation before Senate Public Works Committee on Tuesday,
June 18, 1974, and he had. the same conclusions that ICR will
be detrimental to our industry and sconcmy.
The City of Wconsccket has a young and optimistic
spirit — and we trust that our Federal Government and
Administration will join us in a partnership for progress and
achievements we will be proud to present to our future
generations.
At this time I would like to add an additional
short statement. I cams here today, hoping to convince cur
Government's representatives of our views, but I found that
they are already convinced and in agreement with us.
If this is the case, who is it we have to convince?
I would like to recommend at this time, also,
Alternative Number 1. and Alternative Number 10.
I want to thank you for your attention.
Thank you.
MR. GALL: Thank you, Mr. Mega111.
At this time, we would like to hear from Hedlsy
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Patterson, of the Division of Engineers to the Public Works
Department for the City of Woonsocket.
STATEMENT OF
HEDLEY PATTERSON
DIVISION ENGINEER, CITY OF WOONSOCKET, R. I.
MR. PATTERSON: Good afternoon.
My name is Hedley Patterson. I am Division Engine
for the City of Woonsocket, Rhode Island — a community of
47,000 abutting the Massachusetts state line in the northe
corner of our state. My capacity with the City involves
me closely with all phases of the Industrial Cost Recovery
charge and with all the industries affected.
Before stating Wconsockst's objections to the ICR
charge and citing its unfavorable effects, let me, on beha^:
of my City, thank Mr. Gall and the EPA, Mr. Flax of Cooper:
Lybrand, and all of you here today for making this hearing
possible. Your courtesy is appreciated.
Woonsocket is now, as it has been for a hundred
years, an industrial community. Textiles have been its lif-
blood. The Blackstone River, which splits the city in two
furnishes an inexpensive and never-ending source of power e
process water.
Starting after World War II and continuing througl
the 1950's and 1960's, a mass exodus of this industry for
greener pastures in the South and inevitable closings and
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shutdowns reduced us to a point where we all but had to start
ever again. Wccnsocket has been able to replace only a small
part of this loss with new business. Our unemployment rate
is high, even by Rhode Island standards, we are a depressed
area, and neither need nor want another depressant.
Textiles may net be one of the industries .that you
have been specifically directed to study. It is, however,
still "our industry" more than any other; therefore and
logically, I must speak with it as a background.
Under the standard industrial classification, or
on the SIC-method of identifying-industry, Woonsocket has
approximately 75 industrial concerns of all types, a figure
unfortunately subject to change without notice. Of these,
29, or 40 percent, are textile or textile related. The
total employment of our 75 industrial concerns is 6,200 or
a bit more. Of this amount, 2,300 or about 35 percent, are
employed in textile concerns.
The real importance cf the textile industry in this
ICR matter is that the 11 largest textile firms, in terms
of water usage, will pay 85 percent of the entire ICR
charge for the city.
This percentage figure would be higher, at least
initially, if the alternate criteria of 25,000 gallons of
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10
watsr per day were used to identify who must pay ICR. UnJ~
this definition, the original list of 75 is reduced to 14,
of which 11 are -textile. Added to this short list would
be five non-SIC organizations, namely two hospitals, two
nursing homes and one subsidized housing complex. Either v
Industrial Cost Recovery effects too many people unfavora]
To say that the Industrial Cost Recovery charge 1
not been embraced by industry is definitely understatement.
Industry's basic reaction has been and continues to be,
"Why us? What did we dc to deserve this?" Thirty years
ago the Marshall Plan bailed out the shattered world, of
friend and foe alike, with millions of dollars for new p]
new equipment — a brand new start. By-and-large,
Wccnsocket's plants are old, pre-World War One/ and laid ov
to the material handling tenets of that era. Even with
new equipment their efficiency now is well below that of
modern domestic and foreign plants. Our industry would
accept that sewerage charges is something that everyone mt__
pay in order to keep the wastewater plant operating and
pre-treatment defined in our EPA approved ordinance as
necessary to keep the material treated within treatable
limits, but ths Industrial Cost Recovery is too much at de
weight for so marginal an industry as textiles to carry on
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top- of everything else. It's like kicking us when we're
down.
It does not seem right to saddle our ailing
community with this reverse subsidy. Our turn-cf-the-century
plants huddle close to the Blackstone River with the city
pressing close around them. Limiting room for expansion,
limiting opportunity for them to treat their own sewage.
Isn't it enough that we are taking industry's
waste from ths river, after so Icng a period, treating it
at their expense, and returning it to nature in a form-:
acceptable to both man and nature — if we are to believe
man? The potential damage to Woensocket for taking this
extra pound of flesh could be irreparable. Please let
me explain.
Mr. Flax came to Woonsocket twice, so that he could
see the whole picture. One happening from each meeting is
typical of the conditions that prevail.
One owner of a small, 40-employee textile plant —
still one of the 11 largest users of water and a man I've
known personally for my 14 years with city — stated that
he had had offers to leave Woonsockst and set up shop else-
where. These were lucrative offers, that he had so far
rejected.
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lir
He would, he stated publicly, now listen to future
blandishments with a mere selfish ear before allowing are.
loyalty to sway him. Further, that if he remains, he wil
think even longer before he expands within the city.
With him, if he goes, go one good taxpayer, 40
desirable jobs, and a worthwhile annual sale to the Water
Deoartment. Failure to expand would stifle the tax and jot
base and limit water sales — of which we have an ample
supply. None of these eventualities would benefit the ci-
And remember, industry has left us before, in quantity.
Let me digress ones- moment, wocnsocket is blessec
one sense. It does have more than enough water to go aroi
unlike less fortunate sections of our country. In fact, we
will have to sell one and a half million more gallons a du^
than we do now, just to get sales back where it was 15 ye;
or 20 years ago when textiles werer really big business.
At the other meeting, Mr. Flax heard the
Vice President of our largest water discharger who,
incidentally, took 90 percent of his water directly from
the Blackstone River, state publicly what he had stated
to us in private. He wouldn't leave. He didn't have to
move out. He could and would, at his own expense, instal?
equipment to recycle water and cut his discharge by
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Ill
75 percent. Few in the textile industry could do this
type of work, would not allow it.
This, when added to the lessening of water usage
by industry, in general, could push down the Industrial
Cost Recovery revenue, to a point where, over 30 years
ever-increasing administrative costs would out-total static
revenue. This also will affect tht? homeowners' sewer-
use charge adversely.
In the 1976-1977 fiscal year the indicated Industrial
Cost Recovery cost for Woonsocket was $60,000. In the
1977-1978 fiscal year the actual cost of ICR was $42,000.<
In short, industry is already doing three things:
One, taking less water; discharging as small a percentage
as possible, which trend will continue; and seeking grsener
pastures which promise considerations to help insulate them
against the realities of business life, at least for a few
gclden years.
Woonsccket's only benefit from all of this is higher
water rates, higher sewer-use charge and higher taxes, and,
on top of this, you still propose to add the Industrial
Cost Recovery.
And as if this prospect weren't bad enough, remember
that using the alternate method would involve hospital.
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iir
nursing horns and subsidized housing costs. Inflation is
enough of an upward cost thrust here without adding to it
In closing, gentlemen, I ask you to remember that
Woonsocket toe is a poor community trying, with Governmen
help, to upgrade itself. And we have made progrsss. I
invita everybody within the sound of my voice to come down
and see. I'll be glad to show you what we've accomplish:^
I'll be proud to show you around.
But we want to keep our industry healthy and add
to it, to create mere jobs to stop the outflow of our youi..
pecple. In this the Industrial Cost Recovery is working
against us. In the long run, ICR will hurt these who our
Government is trying hardest to help.
Plsase, don't drop this 30-year itch en us.
We've already started ever from scratch once in this
generation.
Thank you.
MR. GALL: Thank you, Mr. Patterson.
There are a fsw points I'd like to clear up in cas
there's any mass of confusion going on here.
First of all, Paul Flax works for Coopers & Lybra~
and has acted as a data collector in a series of cities
in this region so any references you may have heard are tc
a Coopers & Lybrand employee.
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113
The other point is that in terms of the definition
of-industry that the Agency now utilizes — most recently,
in fact on September 27th or 28th, we did publish a new
definition of industry, and if you are at all familiar with
what we had originally promulgated in April that, in essence,
has all been thrown cut the window and we have reverted back
t-c the definition of February 11, 1974 whcro industries arr»
i
i
defined according to the SIC categories A, B, D, E and I,
and at that point you can identify a 25,000 gallon per
day exemption to the user within that division.
I would sense that some people may think that sanity
i
had prevailed to a small degree at least down in the Agency.
At this time I would like to call on David Phillips.
i
Mr. Phillips is Executive Director of the South Essex j
Sewerage District here in Massachusetts. i
STATEMENT OF
DAVID L. PHILLIPS
EXECUTIVE DIRECTOR, SOUTH ESSEX SEWERAGE DISTRICT
MR. PHILLIPS: Thank you, John.
As a matter of introduction, my name is David L.
Phillips. I am the Executive Director of the South Essex
Sewerage District located approximately 15 miles north of
Boston on the North Shore and servicing approximately
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11'
260,000 people.
Our district1 and primary treatment- facilities art
capable of handling an average combined industrial and
domestic flow of 41 million gallons per day with peak load
of 96 million gallons per day, making us one of the larges
treatment agencies in the Commonwealth.
This afternoon my comments will be brief. They'll
be on one particular aspect and that particular concern tc
is the apparent discrimination that exists between the
Industrial Cost Recovery guidelines, as per the statute of
Public Law 95-217 amending Public Law 92-500, versus con-
ditions that exist under the so-called old rules or equita
cost recovery under the previous Public Law 84-660.
we have approximately 90 major industries within
the South Essex Sewerage District whose equitable cost rec
payments are that proportionate share cf capitalization wh-*
under Public Law 84-660 came out of the local 10 percent
share. Therefore, these industries will not be offered th
same kind of provisions as those that fall under the new i™
guidelines along with the 25,000 gallons per day exemption.
To illustrate my point, I submit the following:
Because the South Essex Sewerage District, back ir
the late 'Sixties and early 'Seventies acted in good faith •
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meet the requirements of both state and Federal laws regard'
ing clean-up of pollution, the industries within that district
became subject to the equitable cost recovery under Public
Law 84-660. On the other thand, there are communities
within the Commonwealth who did not move forward as quickly
and judiciously as did South Essex.
Because of that we now have a situation where cne
industry that generates 20,000 gallons per day sawerage in
the South Esssx District will be penalized a capitalization
charge, while the sama industry in a nearby community which
falls under the ICR provisions of Public Law 92-500 and now
95-217 will pay no capitalization based on that same
exemption.
Unfortunately, throughout the formation of Public
Law 95-217 from Senate Bill 1952, which was brought forth
in July of '77 and eventually combined with the House.
version, we have always been led to believe that this exemption
would cover, not only work covered under the new laws and
going back to Public Law 92-500, but would also reach back to
cover Public Law 84-660 as well. Apparently, this is not the
case.
Therefore, ray question at this hearing today is:
What answer can we give our member communities in terms of
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11
which avenue of appeal they must direct themselves to at tt
time?
As a matter cf comment this afternoon, I would i
like to point out that we have taken an active interest ant
participated in the Coopers & Lybrand study on Industrial
Cost Recovery as it pertains to 95-217. in regard to thai
via have been encouraged by the work out forward by EPA in =
effort to make this provision of the new law more easily
understood and better managed by POTW's,
In conclusion today, I ask again what method of
appeal we can advise our cities and towns to utilize at th:
point; and again reiterate cur continued interest and spii
of cooperaticn to work with you in resolving this matter.
Thank you.
MR. GALL: Thank you, Mr. Phillips.
As we go along, our presenters have been raising
several issues *~ several comments — which we would like
tc defer addressing until the end of the prepared statemen
to ensure that we can get everybody on the record.
At this time- I would like to call up Mr. William
Torpey. Mr. Torpey is the President of the Greater Fall R
Chamber of Commerce.
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STATEMENT OF
WILLIAM TORPEY
PRESIDENT, GREATER FALL RIVER CHAMBER OF COMMERCE
MR. TORPEY: My name is William J. Torpey. I
am President of the Greater FallRiver Area Chamber of
Commerce.
I first want to thank the Committee for this
opportunity to represent the nearly 1,000 members of cur
business and professional organization in presenting a very
brief but very positive position on the matter of total
elimination of the Industrial Cost Recovery portion of the
1977 Clean Water Act.
As you all must realize by new, the city of Fall
River has an outstanding history of service to this country
as a world-famous cotton manufacturing community.
The peak of this industrial achievement came
a lifetime ago at the turn of the 20th Century and has
suffered steadily a declining economy until financial and
social disaster struck during the depression era of the
•Thirties.
For the past 40 years the people of Fall River have
struggled to overcome many problems, not the least of which
included restoring its own dignity and pride, its own
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11!
self-confidence and identity. And this war against apathy
and self-condemnation has been waged with a mixture of
successes and failures by every segment of the Fall River
leadership, including the political, the Church, the indus'.
and labor, until right now, today, those efforts arc beim,
realized.
Ths determination cf Fall River citizens to work
together fcr better neighborhoods, for a better city —
has finally happened.
The new raulti-million dollar highschool, .the
government center, the bicentennial waterfront park, a flu-
of new construction by banking institutions, housing for
the elderly and commercial, industrial new-plant sites.
The birth cf a new industry called "tcurism,"
unknown 14 years ago in Fall River, has flourished and
grown with the development of the battleship "Massachusatt-
the Marine Museum, the destroyer "Joseph E. Kennedy,", the
submarine "Flying Fish," and National P-T Boat Asscciatio
These attract over 200,000 visitors each year to the city
and some $4 to $5 million in new money pumped into cur
economy. We sea the ground-breaking for a new revitalize'
central business district. Many, many more positive and
progressive things are happening in Fall River and we cannc
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affcrd a step backwards.
Fall River's people* in fact, will not sit back
and watch this happen.
Without specific details, which have already been
presented to you in testimony, and many more to ccme, the
unqualified position of the Chamber of Commerce is that
we totally reject the imposition of the ICR proposals by
the F2dsral- Government.
With a current 6.8 percent unemployment factor
in Fall River which affects seme 3,550 people, such
unfounded charges against our major employers will spell
disaster for our economy.
On August 21st of this year, representatives of SPA
and the consulting firm of Coopers & Lybrand heard the
textile industry leaders in Fall River, their Union leader- ,
i
i
ship, supporting industries, and city, state and Federal \
representatives who were led- by Ccngresswoman Margaret i
i
Heckler, who we heard hear this morning, clearly describe |
i
the effects of enforcing ICR .loss of jobs, payroll income
losses, possible plant closings. This cannot be the Federal
Government's goal.
Every possible effort to adhere-to anti-pollution
standards have and will continue to be met by these our
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12
industries, and these — they've certainly been very
expensive/ to say the least.
Gentlemen, as spokesman fcr the Falls River Area
Chamber of Commerce I urge you to consider the total
abolition of the ICR portion of the law.
As Mrs. Heckler stated so forcibly stated earlie
tcday, I sae wher« it will improve the clarity of our
waterways, but it will have a devastating effect on the
economic futute of our city.
Again, we urge you to recommend adoption of
Alternative Number 1, the abolition of ICR in any form, anc
subsequently that EPA will recommend total abolition of sx
recovery by the Congress.
Thank you very much for this opportunity.
MR. GALL: Thank you, Mr. Torpey.
We're running slightly ahead of schedule.
Is Mr. Philip Murray ready?
Mr. Murray is representing the Industrial Wastawa
Survey Committee of the New Bedford Chamber of Commerce.
STATEMENT OF
PHILIP MURRAY, representing
THE INDUSTRIAL WASTEWATER SURVEY COMM., NEW BEDFORD . C.C.
MR. MURRAY: Thank you. My name is Philip Murray,
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121
Vies President and General Manager cf Cornell-Dubilier
Electronics Corporation, New Bedford, Mass. I am represent-
ing the Industrial Wastswater Survey Committee cf the New
Bedford Area Chamber of Commerce and the City of New Bedfcrc.
The Industrial Wastewater Survey Ccmmittaa,
comprised of leaders of major industries in the New Bedford
area, workina through the New Bedford Arsa Chamber of
Ccmrrarce, have compiled statistics based on User Charge and
Industrial Cost Recovery systems, these cost projections
relating directly to the cost of doing business in the area
and projecting those costs into New Bedford's industrial
and financial future and there is an accompanying chart with
the data.
The Committee's User Charge and Industrial Cost
Recovery projections are bassd on'a wastawater survey
conducted in New Bedford and published in December 1974 by Canip
Dresser McKee, Inc., with updates mandated by the Federal
Water Pollution Act of 1972, Public Law 92-500, and the Clean
Water Act of 1977, Public Law 95-217.
In substance, these Acts mandate recovery of
municipal cost of construction, operation and maintenance
cf the sewer systems to be borne proportionately by users
according to the wastawater contribution by each user.
r
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12:
We submit that the substantial impact cf Industris
Cost Recovery on an already overburdened industrial ccmmui
further compounded by the certain eventuality cf ore-
treatment of effluent prior to discharge to publicly-owned
treatment works will mean the end cf operations for some
firms, a debilitating reluctance to locate new industry 01
expand existing operations in the Mew Bedford area and
c-onstitute a considerable incentive to relocate altogethei
by other companies.
With the preceding dismal prospects in view, the
ccst effectiveness cf ICR returns will less than account !.«.
offsetting expense in the broad spectrum of unemployment
benefits, medical costs and welfare payments.
The spectre of Federally mandated over-sized
publicly-owned treatment works dotting the landscape, havi
no broad base of support, is sobering at first glance —
catastrophic in the final analysis. Federally subsidized
wastewater treatment plants built prior to 1972 and net su
j set to ccst recovery charges are common in other parts of
the country that clearly demonstrates a cost situation burc
some to New England industries.
The prospects for industry are clearly defined in
enclosed estimate of cost impact on 31 major New Bedford
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123
industries.
We submit that if Industrial Cost Recovery charges
ar-2 not abolished, the industrial growth trends in the New
Bedford area will be adversely impacted. Our city cannot
solely rely en tourism or service business as the primary
sources of revenue.
Because of the excessive cost prCj-_.—^L~ «*. New
Bedford industries as cited in ths accompanying data and
we are positive exist in other New England cities with older
industrial plants, x*e strongly urge the elimination of~t-he
Industrial Cost Recovery charge.
The New Bedford Area Chamber of Commerce and the
City of New Bedford are constantly seeking expansion of
existing industry and location of new industries. Higher
i
operational cost factors in cur region such as energy,
transportation and taxes make this effort difficult and ths
Industrial Cost Recovery charges would be an overwhelming
burden to industry.
Thank you for your consideration.
E4R. GALL:Thank you, Mr. Murray.
At this time I would like to call on Mr. Ralph
Guerriero. Mr. Guerrierc is the Cc-Chairman of the Pall River
Textile -Processors Waste Water Treatment Committee.
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12
_STATEMENT OF
RALPH GUERRIERO, CO-CHAIRMAN
FALL RIVER TEXTILE PROCESSORS WASTE WATER TREATMENT COM
MR. GUERRIERO: Thank you, Mr. Gall and members
cf the Committee.
My name is Ralph Guerriero. I am the Co-Chairman
of the Fall River Textile Procssscrs Waste Water Trsatnen*-
Committee. Our group came together in a common cause —
survival. For we are an endangered species.
Political leaders today need more help than ever
before. Some cf them knew it and others need to be persuau-
Most of them are faced with enormously complicated problen
way beyond anything for which they were prepared by prior
experience.
Our Committee — Our group has pledged to help.
Everyone is in favor of clean water, we join' with other
citizens who see the need to preserve our natural resources
for future generations.
Our Committee was instrumental in Fall River in
creating a sewer commission which led the say for the City
Council to approve the bond issue that got the treatment
plant started with to begin with.
Textile processors will be asked to pay 57 percent
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125
of the total annual charge for ths wastewater treatment
facility. For any industry that historically works on low
margins, we will not be able to be competitive with the
South or foreign imports who already have far too great an
edge ever the finishing plants in our area. This could
be ths straw that breaks our back.
If existing industries are burdened with costs of
constructing wastsvatar treatment facilities, many will
literally gc down the drain.
The textile dyeing and finishing industry in Fall
River provides jobs namely for males, the breadwinners of
the family. In Fall River we have a very large neadlstrade
industry. Many women are employed. There are not very many
jobs for men.
We ars in favor of a user charge according to the
amount and relative harmfulness of the discharge. This is
cur incentive tc reduce pollution-recycling changes in
processes, shifting to less polluting materials, as well as
development of more efficient pollution removal technology.
We are asking that the ICR portion of the law be
eliminated, that ad valorem taxes be used to recover industry*
share of the O&M costs of the treatment plant.
If the law cannot be changed, then we will go to
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12
Washington if necessary to ask that Fall River be exempted
because the area's economy depends directly or indirectly
en the textile- finishing plants.
We will not stop here. ICR must go.
Thank you.
MR. GALL. Thank you, Mr. Guerriero.
At this time I'd like *-c call upcn Martin Hadley
cf the Town of Templetcn, Mass. Mr. Hadley is the Chairm^
of the Templaton Sewer Commission.
STATEMENT OF
MARTIN HADLEY
CHAIRMAN OF THE BOARD, SEWER COMMISSION TOWN OF TE!
MR. HADLEY: Gentlemen, my name is Martin Hadlev
Chairman cf ths Board of the Sewer Commission for th-a Town
cf Templeton.
First I'd like to thank the EPA and Coopers & Lyl
for the opportunity to speak here. We all have hoard
industry's side of the ICR situation.
I'm here to state the .Town of Templeton's pcsiti<
in this particular matter. Living in a town of 6,000 with
a very low tax base, we have to lock at the townspscples'
side in this matter also. Our industry in cur town is m
very large, we don't have a large population so while the
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127
ICR Study will no doubt provide the EPA and Congress with
necessary answers, we do not feel that it provides for
consideration of the situation existing in cur small rural
community as far as tho taxpayers are concerned.
we have a letter that we have en file, we sent to the
U.S. EPA, and I'll just read a couple of paragraphs cf it
if I might, stating our position.
In our cass the industry that we entered into
aareement with to build a water treatment plant, they being
the major polluter of the river, their effluent will amount
for 95 percent of the wastewater treatment facility capacity,
th« Town's share is, therefore, approximately 5 percent.
It was very advantageous for the mill to have
the Town join them in the construction of this facility.
A considerable amount of money was saved by the mill because
of this joint effort.
The townspeople .voted on it as a joint effort
because usage of the ICR funds made the cost reasonable to
the people. Using ICR funds, the betterment charge would
be approximately in the area of $700 per unit, without ICR
funds it would be approximately $2,700. In cur small town,
with no average yearly wages, the residents could not
possibly pay a $2,700 betterment charge or incur an increased
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tax rate.
The economic hardships of that would be—
if ICR funds would b<; withdrawn from the Town of
Templaton — would be inestimable.
we will go along probably, with Alternative 17
which would — the Town could retain part of the funds a
th-3 Federal Government wouldn't take anything from Nie bil"
Should the Federal Government deom it a necessary economic
measure to discontinue collecting the Federal shara of 1C
funds, fine — if a change is made in ICR pay-back rsgulat:
it is imperative that a grant by ICR protect the town ai..
townspeople who have entered into an agreement with indus*
such as Templetcn has done already — an agreement entered
into in good faith by all parties four years ago should n
be nullified to the great detriment of cur tcwn and
citizens.
Surely, we cannot put enough emphasis on the nefct
to protect towns or cities'in our situation; we must be
allowed to use the Town's share of the ICR payback as
planned when we entered into the agreement to do so, four
years ago.
Thank you very much..
MR. GALL: I think at this time it might: be
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129
appropriate if wo took a 10 minute break so that you'll have
an opportunity to stretch ycur lags and I'll see if we can
ventilate the room in some way so ths non-smokers won't
di2 because of the smokers and just generally to have an
opportunity to collect your thoughts.
We will be having approximately four more prepared
statements, then wo'd like to go into a question and answer
session.
So if we can reconvene at approximately 10 minutes
of three.
(A short recess was called.)
MR. GALL: I'd like tc net started once again with
cur scheduled speakers, so I'll ask you all to take ycur
seats and we'll start back up again.
At this time I'd like to call on Mr. William
Goodwin. Mr. Goodwin is in ths City Engineering Department
in the City of Portland, Mains.
STATEMENT OF
WILLIAM GOODWIN
CITY ENGINEERING DEPT., CITY OF PORTLAND, MAINE
MR. GOODWINi Thank you for the introduction. My
name is William Goodwin and I am with the City of Portland,
Maine.
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i:
The City cf Portland supports Alternative 1.
However, Fall River and other cities have done a fine jol
of representing this opinion and I fael no need to be rer
ticus. My comments aren't prepared so I won't be repetitio
The City cf Portland also realizes that Alternat
would bs supported by most of the cities. However, we dc
fael that Conaress might be a little reluctant to go with
Alternative 1, so, fcr a secondary alternative, the City
Portland supports Alternative 7 a, or another truly
equitable system.
The current systems, are not equitable. Number 7
is a national ICR and Portland feels this should apply t
all industrial users of publicly owned treatment plants,
including those funded with 84-660, 92-500 and 95-217 fun_
The current system is not equitable and I'd like
to just use the State of Maine as an example. As the nam**
Ed Muskie is probably fairly familiar to everybody that
knows anything about the 92-500 — Ed was our governor pr
to going to Congress or the Senate and, while he was in
administration cf the State, WG adopted Title 38. This i=,
the basis cf the Clean Water Act for the State of Maine.
I think he used a lot of Title 38 as a basis fcr his firs'-
writing of 92-500.
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131
In thG Stats of Maine w« have three standard
municipal statistical areas.
Greater Portland is the largest PMSA. The sewer
usage charges are $1.12 per hundred cubic f3«st of volume,
plus 5.6 cents per pound of bod surcharge, that's over
250 milligrams per meter, plus a surcharge of 2.8 cents per
pcund cf suspended solids also over a cut-off cf 300 milli-
grams per meter, plus ICR charges of $156 per million aallcns,
plus 2.1 cents per pound of bod, plus 12.4 cents per pound
cf suspended solids, or, if we choose to implement ICR
charges strictly on plant-flow capacity, that charge would
bs §222 per million gallons.
The second largest SMSA in the State of Maine is
the Lawifton/Auburn-area. The sewer usage charges in the
Lewi s ton/Aub am are a are 39 cents per hundred cubic fset for
a residential rate for the Town of Auburn. Now Auburn usss
the same treatment plant as the City cf Lewis ton however,
the City cf Lewiston's rates are 84 cents per hundred cubic
feet for all users, and Auburn also uses that rate for any
industrial or commercial rank. The surcharges in these towns
are the same. It's 1.9 cents per pound of bod over the
250 milligrams per meter, and 1.55 cents per pound of
suspended solids over the 300 milligram per raster ccncsntra-
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13
ticn. There is no ICR in Lewisten/Auburn as the nublicly-
owned wastewater treatment plant was funded under 34-660.
This publicly-owned wastewater treatment plant i
a secondary treatment plant and the cities of Lewiston an-*-
Auburn will not require any up-dating cr any additional
construction any time in the future as far as we can tell
unless a law was passed which sa^s some sort cf advanced
treatment is the ruls across the nation. And we've seen
with the '77 Amendments a kind cf reverse cf this.
The third largest area is the Bangcr/Bcoth
area. The sewer usage charges in that arsa are as follows
The first 1,200 cubic ftsct of water, 70 cents pe:
hundred cubic feet: for the next 3,600 cubic feet cf
watsr, 33 cents per cubic fact; for the next 1,450 hundred.
cubic feet it's 31 cents per hundred cubic feet; and fcr
the remaining — for anything in excess cf that it's at
a rate cf 27 cents per hundred cubic feet.
Now Bangor is only a primary treatment system an<
does possibly face up-grading tc secondary. However, the
City of Banaor has just recently applied fcr a Section
301(h) variance to the secondary treatment requirement.
If this is granted it will be some time before Banger has
tc up-grade cr provide additional sewerage treatment and,
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133
therefera, ths user Charge should be able to stay stable.
It's- true that most of these comments were en User Charges,
rather than ICR, but ICR is only an add-cn afterwards for an
industry in Portland which has a nominal bed and suspended
sclids. ICR is only about 10 percent cf ths User Charge
costs.
It does get. slightly laraer fcr the dirtier
industries, but this add-cn just does net seem equitable
and that is th
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13
share, dropped 15 percent for equitabilities, So, therefe-
lt's still 10 percent, and always has been.
MR. GALL: At this time I'd like to call on Mr.
Kenneth Bundy from Reed & Barton. Reed & Barton is locat
in Taunton, Mass.
STATEMENT
KENNETH BUNDY
PLANT ENGINEER, REED & BARTON
MR. BUNDY: My name is Ksnneth Bundy, I'm the pi
engineer for Reed & Barton Corporation in Taunton, Mass.
What I would liks to give you is one company's
view, it's history, and where we stand today on many thim
and make it known that we'rs against ICR.
Reed & Barton is an old company that is 155 years
old. It's been located in the same location for that peri
of time. It was originally started out with a metal indus
and ths street that we're on is named after it.
Reed & Barton has been through depressions and
still operated and everything else.
I've been with Reed & Barton for the last seven
years. I came there as plant engineer from Sylvania Elect.
In that seven years I've seen the plant engineering costs
the operation of the plant grow from four percent to this
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135
year we'll b<; running somewhere around 17 percent for just
ths maintenance of the building. Now what qces into making
up the maintenance of a plant is taxes, sewerage, water,
energy.
At the time I took over we had something like
63 maintenance people. I have cut this down to 51. Our
costs are still going up. '-Je have spent three quarters cf
a million dollars this year under our Consent Decree to meet
all of cur requirements for the Taunton Sewerage Department
before we could discharge into that sewer department by
December 31st of this year.
We have had guidelines all along the year of the
certain steps that we had to meet. Last year w« used
111 million gallons of water. This year we have cut back by
about 50 percent at the request of the city.
i
Now the city is claiming that we are pulling out of '
their sewer department and that we are raising their
operating costs by not putting more water in. We have spent
something like $80,000 already to take that 50 percent cut
cf the sewer department and treating it.
Our costs are continually going up. Our costs last
year for -— per million gallons cf water to tha sewer
^apartment was $325. This year, just the User Charge is
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13
$625. Our ICR is going tc be somewhere in the vicinity of
$127.66.
I say let'.s abolish the ICH because* not only nc
are we in Tauntcn in the threes of a sewer dispute, we nor
have to build a complete new water treatment plant that is
going to cost us — industry and homeowners — just as mu>
as the sower department has cost us.
The state is funding part of it, but the other pa:
is being picked up by the city.
These two itsms, between the sewer and the new
water treatment center and the ever-rising costs of labcr
and industry and energy, could drive us cut of business a
155 years.
Our — I have seen in the last seven years, a
steady decrease in cur profit margin. There's only so fai
we can go. we spent billions of dollars in the last sever
years on air pollution, OSHA; this year we're under a mande
for a quarter million dollars on noise pollution — it jus
forever and ever, keeps growing. There is no end to what
industry has to pick up.
It's my feeling that ICR would be one of the step.
only one of the steps in the right direction to help indua
survive and it has to be done. Thank you.
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MR. GALL: Thank you, Mr. Bundy.
At this time, I'd like to call on Mimi Feller
again, from Senator Chaffae of Rhcda Island's office.
If I understand it correctly, Mimi will attempt
to explain the labyrinth that is Congress and some of the
procedures and what'the Hill_is ncintj to b<3 looking at
in going through SPA's recoiranandaticns.
STATEMENT OF
MIMI FELLER
OF THE STAFF OF SENATOR CHAFFEE OF RHODE ISLAND
MS. FELLER: well, this Ls rather a dubious task
but maybe it will help all of ycu and give you seme thoughts
en seme of the measures you might want to go through to
get seme of your ideas across to the Members of Congress and
the EPA.
I think that there is rather a definite feeling in
the room that ICR needs to be abolished, but there would
be a lot more that would have to be done to get this thought
across.
First of all, it's true the Study is going to be
very important because — wall, I've seen it happen when
we've worked on legislation, I've seen at Hie last moment
a GAO Study come out on whatever subject we're working on and
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13
instantly you have a lot of staff and members, and rightful
so, running into a House or Senats conference, cr coming
and making a speech en the floor saying GAO says such and
such and this is why we should net or should take this coux
of action.
So have no doubt about it, this Study is extreme
important, it will be quoted often by members and staff no
matter what kind of action we try "to take in legislation
and that's why I'm glad to see that they are having thess
regional hearings and what the Study says will definitely
be used in aither pro or con, you know, abolishing ICR or
taking some action with regard to it.
As far as legislation gees, and whatever bills we-
might drop in the hopper, there's a lot of things that she*.
be considered.
First of all, it's hard to do legislation that he-
just a one-region impact. If we do a bill on ICR the best
thing, if all of you very much want to chance the system,
is to talk to other people in your industrial groups, in
your open groups, a conference of mayors — that kind of
thing.- They're having regional hearings throughout the
country. I understand that probably Chicago's recrional
hearing and California's regional hearings are going to be
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139
as heated and as important as this one.
They're vary concerned, as is the Northeast Region,
and probably,— and I may be wrong, but I think that these
three areas have been very heated in discussions on the ICR.
Sc that it's more difficult to come in often with
a bill that affects, you know, just one or two communities
or one region.
So I would emphasize, I certainly would hope that
we can transcripts of all the regional hearings seme time
so we can see what the rest of the people are saying also
and get some backing for whatever ideas we might want to do.
Also, as far as Congressional action, Itacw one thing
that we'll be running into. ICR is one prevision within
an over-all Clean Water Act. You've all heard about 92-500 i
and tha Clean Water Amendments, and when you say the "Clean ,
Water Act" you tend to get a lot of responses of different |
types, from different Member of the Congress. Our Senate j
|
Environment Committee has 15 members and the House Committee j
has at least 20 probably — I think a few mere than that —
all of whom have different ideas about various parts of the
Clean Water Act.
Doing a bill on ICR is going to raise the spectre
of the Clean water Act over all. Some people will be very
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14
happy about that, others will not. Seme members will be
happy because that may mean the opportunity to not only
changa the ICR provision, but Section 404 and certain cth
things.
Others are worried about that. I don't think tha-
that is a reason to not do something on ICR. I think tha
we can/ you knew, work tc maks what changes we fsel ara
necessary in the ICR, but that is something that will be
brought up. Do you want to bring up the whole Clean Wato
Amendments again, and all these other fights that we've b:
working on all these years.
As far as EPA, I'm not going tc let EPA off the
heck totally. I was asked to talk about the fact that
Congress is very varied and members hava a lot of different
feelings about other parts of the Act as well as this one.
But we've got seme 40 members at least within ju;
the Committees alone, not to mention tha whole Congress —
the ones who tried to do the Bill, but EPA and the
Administration and the President will have a very importar
say in what we do because if we do a bill one of the things
that we'll be asked about is "What is EPA — will they
testify in favor of the legislation — will they send up
an opinion, you know, totally negative to it?" "Will the
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141
President sign the Bill?"
There are just lets of ramifications in that.
So I would urge you to continue to 1st your thoughts be
known to the Administration and EPA. I think EPA's been
very open in trying to do a thorough Study hcra — in
encouraging Coopers & Lybrand to do that.
So it's a broader base than just ICR. It's a
broad-based Committee? meeting in many regions and I was
cnly asked to try to be realistic and to let you know that
you should, you know, marshall your forces from several
other areas .to get your ideas across, and I don't know —
John, what's been happening at the other regional hearings?
Have they been as definite as this one?
{Pause..}.
Not yet? (Pause.)
San Francisco is happening currently, isn't it,
the same days?
MR. TOWNSLEY: Yes.
MS. FELLER: I only mention it to give you some idea
of what we'll be working with next year in trying to take
care of this provision and see what we can do to minimize
the effect of ^he whole system on this region in particular.
MR. GALL: Thank you very much.
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14
In regard to other meetings which are going en i~
ether parts of the country, the majority of them, unfcrtu*.*
ly, have already been completed.
There will be a meeting this Thursday at the Civ'
Center in Atlanta and the three people you see up here wij.j
be attending that meeting.
In addition, there's the Sacramento meeting goin<
en today, and it was also held yesterday, if in fact there
ars two days.
And I believe that there was a meeting in SeattL
orobably on Thursday — Seattle, on 'Wednesday, and then th*
it.
The ether meetings last week — this team was in
Chicago, NSW York and Philadelphia.
At this time, I'd like to call on Ouane Wheeler,
from the Acushnet Company in Mew Bedford.
STATEMENT OF
DUANE WHEELER
VICE PRESIDENT, ADMINISTRATION - ACUSHNET COMPANY
MR. WHEELER: Thank you. Gentlemen, I appreciate
the opportunity to have a few minutes to speak today.
I am Duane Wheeler, Vice President, Administrate
of the Acushnet Company, one of the 31 major New Bedford
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143
industries that Mr. Murray, one of the prior speakers,
spcke of.
In fact, the Acushnet Company is the largest
employer in the New Bedford area. Although we operate in
and have plants in four states and the U.K. in addition to
Massachusetts, the majority of our employees — some 2,200,
ar?. in the New Bedford area.
Our company operates in two major industries —
precision molded rubber and in golf balls and golf equipment.
Beth of these industries, unfortunately, are highly
price-sensitive. Like all companies who participate in
highly priced-sensitive industries, we have to have
extensive cost containment programs and ars constantly
urging cur employees for groatsr productivity.
If we do not, we cannot, of course, offor a fair
return to cur stockholders and we cannot attract and hold
cur most valuable asset, cur employees.
I agree with the prior speaker from New Bedford
i
in that the Massachusetts area, especially the southeastern '
Massachusetts area, already operates with very high opera-
tional costs, especially in the areas of energy and taxes
and transportation; and I can honestly say that we at
Acushnet do net look forward to the Industrial Cost Recovery
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14-
charge. I join Mr. Murray and tho ether speakers hers toe
and urge you to eliminate tha proposed ICR.
Gentleman, I thank you for this opportunity and
your consideration.
MR. GALL: Thank you, Mr. Wheeler.
At this time I'd like to call on Karl Spilhaus.
Mr. Soilhaus is with the Northern Textile Association,
headquarterad hers in Boston, I believe.
STATEMENT OF
KARL SPILHAUS
NORTHERN TEXTILE ASSOCIATION
MR. SPILHAUS: Thank you,gentlemen. We had rath
short notice cf this meeting but I did want to make the
rsccrd and intend to submit some written comments.
The Northern Textile Association represents a nuir
cf small and medium sized textile manufacturers throughout
the Northaast, many of them located in older urban arsas.
Our members manufacture brcadwcvsn cotton, synthe
and woolen fabrics, as well as felt and elastic fabrics.
Water use is great in this industry, particularly in the
dying and finishing of the woolen fabrics.
Our membership is made up of both direct and
indirect dischargers cf waste water. It's been my
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145
observation, from conversations with members of cur
association whc have their own treatment plants that they do
not feel that thsy will be inequitably treated if there's
an abolition of the Industrial Cost Recovery program.
Thsy feel that thsir problems with OSHA, foreign imports
and other Government regulatory activity are much greater in
comparisen.
Another concern is that the EPA scenario for priority!
pollutant control, which they feel will negate any relative
competitive advantages on the part of either direct or
indirect dischargers.
In closing, I'd like to say that we echo the
sentiments of Mrs. Heckler and our colleagues from Fall River
in urging the complete abolition or substantial reduction cf
i the ICR program.
!
MR. OLSTEIN: Mr. Gillum, of the Goodyear Tire &
Rubber Company.
STATEMENT OF
KENNETH GILLUM
MANAGER OF ENGINEERING, GOODYEAR TIRE & RUBBER CO.
MR. GILLUM: My name is Ken Gillum. I am the
Manager for Engineering cf the Goodyear Tire &' Rubber Company
of New Bedford, Massachusetts.
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14
I'm here, also, in opposition to the waste treat""
charges, as well as the other gentlemen from the New Bedfn
area.
Goodyear of Hew Bedford is in a highly competiti—
industrial products business. It was only two years ago
that we terminated manufacturing of bicycle tires and tub
due to foreign competition and the high operating costs.
Goodyear in Nr»w Bedford is one of the largsst use:
cf water and this additional — approximately $300,000 —
increase to our operating cost is csrtainly going'to have
an effect on our future in the City of New Bedford.
MR. GALL: That concludes the people — let me
put it this way — Is there anybody else who would like t<
make a statsment, as opposed to a questicn and answer?
(No response.)
Okay. That, then will conclude statements for tl
record.
As I indicated, I would remind you that should i
care to make additional written comments you may do so up
until November 6th.
There were two issues that stick in my mind
specifically, that ware raised by some of the commenters <
I would like to try to — I will try to address one of *h
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147
and I would like tlyrcn tc address the other. That has +-o
do specifically with the appeal procedure, if you would, or
how we perceive the recommendations cf this report may
impact en prior financing under 84-660.
I don't think the Agency has a clear conception of
what it would do immediately right new and I think that part
cf the ever-all long-rango problem Hiat Congress is going to
hava to address itself tc in addressing the ICR issue, is
really the central theme of that question.
That is — How do we deal with 84-660 in the
25,000 gallon a day exemption? And I really can only defer
to their wisdom and they are going to have tc try to come
up with the best solution possible in terms of attempting
tc ameliorate the impacts of 92-500 and at the same time
mitigating any adverse effects that may be created with
any 84-660 grantees.
I'm certain one of the recommendations which we
might make could be not only to eliminate cost recovery
under 92-500, but to provide that grantees under 84-660 who
care to eliminate the equitable recovery of industrial waste
treatment costs may also do the same thing.
That would at least, across the board, eliminate
seme kind cf disparity that cculd develop by leaving in
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14
cne form the cost, recovery program but eliminating ancthar.
Myron, would you cars to address the second one?
MR. OLSTEIN: One of the earlier speakers wanted
have some mere information on the regional impacts of ICR.
As you may recall, the Act itself requires that
that was one of the analyses that we perform.
Ne have, in factr arranged cur data in such a way
that we will b-?. able to do it.
However, we have a very compressed time schedule.
Ccngrasswoman Hccklar was under the opinion we have a ful]
yaar. Our actual time to do the Study is turning cut to be
about seven months.
So it's sitting in the computer, so we can do the
state-by-state analysis. We just couldn't aet it down in
time for these hearings. It will be in the summary report
and, of'course, all the detailed data will be in the final
report.
Were there any other questions that you fait were
raised during the prepared statements that, you know, you1
like to have an answer to?
Sir? Your name and affiliation?
MR. BURNS: I'm Dick Burns, I'm with EPA in Bosto
and I was unable to attend the morning session. Perhaps th<
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149
information came out at that session, but if I may, have
you determined the size of funds that would be collected
through ICR in any way?
MR. OLSTEIN: Yes. Our estimate over the life of
the program is in the range of $1 tc $2 billion total.
MR. BURNS: How many years would that be?
MR. OLSTEIN: Forty years, I guess, would be a good
number.
MR. BURNS: And that would correspond with what
value of treatment facility, would you know?
MR. OLSTEIN: Well, that's on the assumption that
all 45 billion goes out in grants.
MR. BURNS: I see. Thank you. j
MR. GALL: Ken Bundy? j
i
MR. BUNDY: Xsn Bundy, Reed & Barton in Taunton. I
i
i
Has any thought been given tc — we were talking about the ;
over-sizing of the sewer departments that have been built j
or are being built, some of them are down to three or four j
I
percent — the cost of operating some of these over-sized j
units has to be a factor in it, this ICR too, because this
could be a very expensive thing, not only to industry but
to homeowners and everyone else?
MR. OLSTEIN: Actually, it works the other way
-------
around.
MR. GALL: Would you like to try to rephrase the
question?
Myron, why don't you —
MR. OLSTEIN: Okay, the question was asked —
Assuming that in fact treatment works that are built with
grant funds are over-sized, what impact would the higher
O&M charges, the higher charges, cost a company in the laiv
plant; what impact would that have on ICR payments?
I think the answer tc that question is that, of
course, your User Charges would be higher because, you knew
you have such high fixed costs in treatment plants. So tfc
everyone would pay more for an over-sized plant.
But — Well, the ICR charges should in fact be
lower, because since the ICR user in most cases now pays
just on a portion of actual use that he makes en the
plant, he's taking advantage of, you know, the theoretical
economics of scale.
MR. TOWNSLEY: The calculation is on design
capacity.
MR. OLSTEIN: You gave your rate on design, but i
applied to the actual volume used, so there would be a
slight benefit there. It's not really that great. I shoul
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LSI
have mentioned that Camp Dresser & McKse, I notice they're
net here — thsy are, oh — that they assisted in doing
some of the economic studies that war-? performed and there
are aconcraies of scale, but not as great as you might think
they are, because they come from larger and larger plants,
but there are some.
MR. GALL: Mr. Walker, did you have a question?
MR. WALKER: Y2s. I also was not able to —
John Walker from the Chamber of Commerce for the Greater
Portland Region.
I also did not make the-morning's part of it and
I was going to ask the consulting firm — One of the things
they asksd was whether' the ICR program would result in User
i
!
Charges causing communities to charge much higher costs j
for water treatment than other communities in the sama j
geographical area. j
The observation, I think, in incorrect. We've dccu- I
mented it in the Portland-South Portland situation, which
has caused, actually, a tremendous tension between industries
inside these communities and quite a bit of confusion on it.
MR. OLSTEIN: The way we went around trying *-e aet
and answer to that, to gst situations we could investigate,
was by going to each cne of the Regional Offices and, en the
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15
assumption that they were aware of the various grantees tU:
w«re involved in this situation, we asksd specifically
why there are cases where you have 92-500 POTW's and nine
92-500 POTW's , you know, whether it was 84-660 or someth.*-
else, but arc within the same SMSA, and maybe we overly
specified the question, but that was what we were looking
— to find out if we had thesa tremendous disparities.
And th« answer tc this question at that time was
no.
If you have information to that effect, I think
would be very heloful to us and, you know, we'd be very
happy to include that.
MR. GALL: Can T comment?
As you know — As you may or may not know, we
visited approximately 10 cities in this Region for a
"hands-on," if you would, session, an interview with.the
various municipal officials, and in addition, we mailed a
survey form, the same one you filled out at the direct mee
to about 20 more communities.
Very interesting, Portland was one of the cities
we visited, South Portland was one of the cities that get
the mailed form, so that it may be is that that particul
disparity didn't jump out in the realm of over-all data.
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153
MR. GALL: The othsr question — The only
question I hava in that regard, John, is I understand the
Portland system, that is, the rata Portland — $1.12 or
whatever it is—recovers all the costs related to the
wastewater treatment system. But I'm not sure whether tho
South Portland one does, do you?
MR. WALKER: I couldn't say exactly.
MR. GALL: That dees — could make a significant
differences. If South Portland is funding, for example,
local construction costs, debt service and capital it
shows up in your tax rate and it would not show up in the
sewer rate. So you'd see a major difference in sewer rates.
MR. WALKER: I don't know.
i
MR. OLSTEIN: The thing that we did in those cases
whsrs we had to make comparisons like that is we didn't
focus so much on the rates as we focussed on the costs, on
the assumption that if, you know, if *-he rate wasn't picking
up all the costs, at least we'd have a truer picture, based
on all actual costs of operating tho plant, and then if there
was a rata system that included ad valorem or something like
that in a substantial amount then at least we'd be able to mak
comparative cost information.
So, you know, as I said, we're still in tha process
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15
but maybe en a cost basis, we didn't* pick up a tremendous
disparity.
MR. WALKER; In answer to John's question, thay1
not picking up that — South Portland is not picking that
up.
MR. GALL: So we have an ancmcly in our Study.
Is thsrc anyone alss who has any further questio
Yss?
iMS. NESTMANN: Anna Louisa Nestmann, Member of t
League of Women Voters of Rhode Island.
I want to be sure that I know what a significant
user is. Is it ever 25,000 gallons or is it 10 percent o
ycur lighting of the plant?
MR. GALL: Tha question of hew dees EPA define
significant industrial user for purposes of Industrial
Cost Recovery and whether it is over 25,000 gallons a day
or ever 10 percent of design capacity of the facility or
any construction with relation to it has always been,
it would be an industry greater than 10 percent of the
design capacity — the various design capacities — whcthei
it be flow cr the measure of pollutant flews. Twenty-fiv«.
thousand bears no relationship to significant user.
Okay. I presume that since there's no hands up
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155
that the meeting for the afternccn can be adjourned. In
regards tc tomorrow, we will be here tomorrow morning
because tha public announcement said the 24th and the 25th.
It has been our experiences in other regions — in Chicago
on Day 2 nobody shewed up. So if you knew anybody who's
going to come tomorrow, urge them to come no later than
10:00 o'clock, because it's going to bo like college,
five minutes for an assistant orofsssor, 10 minutes for
j
a full professor.
On that, I'd like tc thank you all for coming-today,
reminding you ones again of ths November 6th deadline for
written comments and, should you have any further questions,
please give me a call at the regional office.
Thank you.
(Whereupon, at 3:40 P.M., the hearing .in the accvs-
entitled matter was adjourned.)
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Attendees
15
L. Blank
Wesley Ehrsnzeller
William J. Collins
Mimi Fsllsr
Margaret Heckler
Makram H. Meg a Hi
Suans E. Shaalsr
Kannsth Gillum
Karl Spilhaus
Philip Murray
Hadley Patterson
Carlton viveiros
George T. Darmody
John E. Walker
Martin R. Haley
Anna M. Richard
Patrick Harrington
Ralph Guerriero
David L. Phillips
William B. Goodwin
Jack Turner
Adolph T. Schmidt
Anna Nestmann
George D. Gallagher
Michael S. Karlscn
Paul D. Weisman
Robert Burks
Robert F. Dunning
Paul Walker
Richard S. Hsrsey
Paul Taurasi
John O'Brien
John J. Ostrosky
James C. Dakin
Stanley Linda
Mark Casella
Lav D. Patel
Michael Long
E. M. Lape
D. S.
Bill McAlccn
Charles E. Volkmann
Allan Mcrgsnroth
Vasanti Patel
D. Olksn
Steohsn H. Geribo
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157
Ann. R. "ir*
William T.
Alvin T. Gravely
Jchn Brady
Jack Kencvan
James Brayden
viilliam Tcrpey
Arthur Lavasqus
Edward L. Gallc
Enil W. Holland
Ronald A. Breton
Thomas E. Wesolowski
Roland J. Dasrcsiers
David Butterfield
Kenneth Bundy
Dcnald G. Wood
Cheryl A. Breen
Laura Montgomery-Tanner
Christopher Woodcock
Julian Hatch
Psarce Klazer
Paul M. Ccls^r.
^l«cf:rcnic Corp,
ol A. Hydrj
Daniel Calnen
Richard A. Chicdini
Walter Hundley
Anthcny J. Zuana
Douglas Funkhcuscr
Lionel H. Ccrrivr;au
Gulab G. Hira
Alfred Prokcp
Roland Mereiar
Stephen W. Buckley
Steffan Alstti
R. C. Frederiks5?n
Dr. Richard Bums
John Christie
Frederick A. Rubin
Arthur Corey
Ed Gillisse
Stephen E. Poole
Ben Fehan
V.aris Kolman
Wavne T. Grandi;;
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INDUSTRIAL COST RECOVERY PUBLIC MEETING
Biltmore Hotel
New York., New York
Wednesday, October 18, 1978
The public meeting was convened at 10:15 a.m.,
Kenneth Stoller presiding.
STEPHEN 8. MILLER i ASSOCIATES
:<1 ••••10 «T^C£T i. W
N-rTJ.s C r. -C014
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Page No.
Opening Statement fcr Regional Administrator
by Mr. Kenneth Stoller 3
Purpose of the ICR Study and Meeting by
Mr. Kenneth Stoller 5
Project Scope and Methodology
Mr. Michael Townsley 10
rinding & Conclusions of the Study
and Possible Alternatives
Mr. Myron Olstein 15
Statement of UC/ICR Specialist on
Purpose of Study and Public Record
Mr. John Gall 30
Questions and Answers 35
Statement of Commissioner McGough, The
Department of Environmental Protection,
City of New York 41
Statement of Congressman John M. Murphy 46
j
ICR Hearing Attendees 53 ;
-------
MR. STOLLER: Good morning. My name is Kennet..
StoHer. I'm Chief of New Jersey Construction Grants
Branch in Region 2, and I'm here representing Mr. Eckert
C. Beck, Regional Administrator of Region 2 EPA.
Mr. Beck is responsible for most of the EPA1a
activities in the States of New York, New Jersey, the
Commonwealth of Puerto Rico, and the Territory of the
Virgin Islands.
Mr. Beck did want to be here today, but because
of scheduling problems was unable to be here.
It is my pleasure to welcome you today to
participate in this meeting, which is part of EPA's Study
of Industrial Cost Recovery.
It is EPA's sincere intention that the public b«
involved in the Study and that the public's statements anf
concerns be reflected in the final report to Congress in
December of this year.
In order to make certain that everyone has the
opportunity to be heard, we must have a simple, under-
standable and orderly meeting. To assure this, we will
observe the following order of procedure:
1. An explanation of the purpose of the ICR stut
-------
and of this meeting, by myself, followed by an introductory
speech.
2. A briefing on the Project Scope and
Methodology by Mike Townsley of Coopers & Lybrand, the
management consulting and accounting firm hired by EPA to
assist in this study? a. presentation, again by Mr. Townsley,
cf the findings and conclusions of the Study, as well as
some of the possible recommendations which can be made as
a result of this study.
Prepared statements by those individuals who- have
scheduled a statement in advance.
Prepared statements by anyone else who has a
written statement to present.
And the questions and answers in an open but
orderly discussion.
It is requested that before making any statements
or asking any questions, that the individual should state
his or her full name, title and the organization he repre-
sents. In addition, we would appreciate it if you cone
up to the podium and make the statement and ask the question
in the microphone so it can be part of the record.
We intend for everyone to be heard who wishes
to speak, but I must insist that we follow the format I
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just outlined. ICR is a topical issue and we want the
Congress to be aware of the grass roots concerns related
to ICR.
We will stay as long as necessary to conclude th
discussion. We have a Court Reporter with us today, and _
transcript of the meeting -will be appended to the final
report which goes to Congress. For that reason, I must a«
you to speak clearly and slowly, and one at a time.
And without further ado, I will now explain th
purpose of the ICR Study and of the meeting.
As we all know, the passage of the Federal Water.
Pollution Control Act Amendments of 1972, also referred to
as Public Law 92-500, intended that waste water treatment"
facilities be operated as non-profit public utilities.
Section 205(b) of the 1972 Act required grantees to devel
two kinds of rate systems: First, a usage charge system
to cover the operating, maintenance and replacements costs
of the Treatment System from the users of the system on a
proportional basis related to usage, and Industrial.Cost
Recovery to recover from industry that portion of the EPA
Grant allocable to the construction of the sewage treatmei
capacity for industrial use.
While some jurisdictions disagree with EPA's
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regulations and guidelines to user charges, most grantees
agree in principle with the ideas of economic self-sufficiency
for wastewater treatment systems.
ICR, on the other hand, is a topic which has
caused considerable debate over the last six years. In
response to many questions and much discussion. Congress,
in December of 1977, enacted the Clean Water Bill of 1977,
also referred to as 95-217. This Act makes several
modifications to the Clean Water Act of 1972.
One of the requirements of the Act was set forth
in Section 75 of the '77 Act, which specified that EPA
would study the "efficiency of, and need for" ICR,
Industrial Cost Recovery.
The Study was to include, but not be limited to,
I
an analysis of the impact of ICR upon rural communities and '
j
on industries in economically distressed areas or areas of
high unemployment. The report must be delivered to Congress
by December 31, 1978.
In May of this year, EPA contracted with Coopers &
Lybrand to conduct the ICR Study for this Agency. Coopers &
Lybrand is one of the Big 8 certified public accounting
firms. The firm was selected by EPA Headquarters after
careful'evaluation.
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The purpose of the ICR Study was to carry out
the instructions of Congress. The basis for the contrac__
scope of work were the questions inserted in the
Congressional Record of December 15, 1977 by Congressman
Roberts: It has been long the intent of Congress to
encourage participation in publicly owned treatment work:
industry. The conferees are most concerned over the imp,-'
the Industrial Cost Recovery provision of the existing la*
may have- on industry participation on these public systei
Accordingly, the Industrial Cost Recovery Study
Section 75, has been incorporated in the Conference ReporT
and EPA1s encouraged to submit the results of the study
as soon as possible so that Congress can take action on
any recommendations that are forthcoming.
It is expected that the Administrator will
consult with all interested groups in conducting the Stuc
and the Study will address at least the following question
First, whether the Industrial Cost Recovery
Program (ICR) discriminates against particular industries
or industrial plants in different locations; do small town
businesses pay more than their urban counterparts; and
what is the combined impact on such industries of the use
charge and ICR requirements?
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I -
8
Second, whether the ICR Program and resultant user
charges cause some communities to charge much higher costs
for wastewater treatment than other communities in the same
geographic area — some communities have indicated that
disparities in ICR and user charges affect employment
opportunities; and whether mechanism should be provided
whereby a community may lower its user and ICR charges
to a level that is competitive with other communities in
order to restore parity?
Third, whether the ICR Program drives industries
out of municipal systems, the extent and the community
i
impact. I
Fourth, whether the industries tying into ;
:
municipal systems pay more or less for pollution
i
controls than direct dischargers. j
i
Fifth, whether the ICR Program encourages con- j
servation, the extent and the economic or environmental
impact.
Sixth, whether the ICR Program encourages
cost effective solutions to water pollution problems.
Seventh, how much revenue will this Program
produce for local, State and Federal governments, and to
what use will or should these revenues be put?
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Eighth, determination of the administrative
costs of this Program, additional billing costs imposed,
costs associated with the monitoring of industrial efflu
for the purpose of calculating the ICR charges, ancillary
benefits associated with the monitoring of industrial
effluent, procedures necessary to take account of changes
in the number of industries discharging into municipal
plants, and the impacts of seasonal or other changes in th
characteristics and quantity of the effluents discharged
the individual industries.
Ninth, whether small industries should OB exempt
from ICR; how should small be defined; is there a reasona_.
floor that can be established for ICR based upon percenta
flew?
Coopers & Lybrand has been busy for the past fi'
months asking questions and gathering data from a cross-
section of viewpoints. As a final action in their data
collection phase, ten meetings are being held in the ten
Regional Office cities, to present the summary of the data
gathered to date, as well as a preliminary set of conclusi"
as to what the data means.
we would like to gather the data and statements
these interested oarties with whom we have not had the
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10
opportunity to talk to in the past, and want to present a
list of some of the alternatives to ICR which could be
recommended.
Finally, we want to answer as many of your
questions as we can reasonably answer. Our primary purpose
is to listen to your comments.
With that, I will introduce Mike Tcwnsley of
Coopers & Lybrand, who will tell us briefly just what
it is that they have been doing for the last five months.
Before Mike goes on, I would like to request
anyone who's not signed the attendance sheet to please do
so. It's floating around somewhere in the audience.
STATEMENT OP
J. MICHAEL TOWNSLEY
MR. TOWNSLEY: Thank you. Ken.
Good morning. I'm Mike Townsley and I've been
responsible for most of the data collection and field work
in roughly the Eastern half of the United States.
When EPA first asked us to conduct the ICR study,
the first thing we did was read the '72 Legislative History
related to Use Charge and Industrial Cost Recovery, to
find out exactly what ICR was supposed to accomplish.
Stated briefly, we found two major objectives
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11
contained in the Legislative History:
First was equity, or the equalization of the
assumed economic advantage for those industries using
public systems, as opposed to those industries treating —
that treated their own facilities.
And the second objective was capacity, or the
appropriate sizing of wastewater treatment plans with
adequate but not excess future capacity*
A third objective, but not as nearly as central
as the first two, was to encourage water conservation.
This background material, together with the
Legislative History related to the 1977 Act, and especial
Congressman Roberts' questions and Congresswoman Heckler1-"
emphatic statements on ICR, served as the frame of
reference for us to plan the Study.
Our initial step in late May of this year was t-
sit down with EPA personnel, including John Pai, John Galj.
and Ted Horn, and put together a "shopping list" of every
piece of data that we could think of that would help in
answering the specific- questions already listed, as well
as addressing more general issues that were involved.
we took this list of data elements and converte
it into two draft survey questionaires — one for industry
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12
and one for grantees. These draft industrial questionaires
were reviewed with the National Food Processors Association,
The National Association of Manufacturers and other public
and industrial associations and groups.
After refining the questionaires, we developed
a survey list, we compiled, with EPA Regional Office
assistance, a list of approximately about 100 cities which
we planned to visit. These cities ranged in size from
Ravenna, Nebraska (population 561) to New York City.
we eventually visited about 120 cities, some of thea
more than ones if there was a strong local interest in the
Study.
Our standard procedure was to attempt to meet first
with the local agency responsible for wastewater, then to
m eet with industrial people, then with civic or public
groups later in the day. we mailed the survey questionaires
out ahead of time to the people we were going to meet with,
so they would have an idea of the kinds of data we were
I
looking for. I
We stressed that participation in that survey was
voluntary. In many cases, people mailed in completed-
questionaires to us, rather than meeting with us personally.
We selected an additional list of about 200 cities
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13
for our telephone surveys, we used the same questionaires
and mailed them out in advance to the people before they
we re s urveyed.
We started with a group of five industries for
detailed study. We later expanded this to six. Althougl
we were interested in industry in general, we selected
particular industries that met one or more of these
criteria — in order to be selected, an industry — we
wanted our industries to be:
First, labor intensive;
2. To have a low operating margin;
3. To be high water users;
4. To have a significant economic size, in
total, across the country; that there be some seasonality
and that there be varying degrees of pretreatment associc
The industries eventually selected include •
meat packing, dairy products, paper and allied products,
secondary metal products, canned and frozen fruits and
vegetables, and the sixth one we added is textiles.
A list of selected establishments in these
industries located in the cities which we were going to
visit was prepared, and survey forms were mailed to these
industries. Our entire data collection effort was
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14
accomplished in six to seven weeks, using up to ten
teams of consultants at a time.
The second step in our Study, and just as
important as the first, was to develop mechanisms for
public participation in th3 Study.
We wanted grass roots involvement to the extent
we could get it, and we wanted an open Study. We put
together an ICR Advisory Grcup of approximately forty
individuals, representing industrial, environmental,
civic, local government and Congressional interests, and
relied on them to keep their local members involved in
the progress of the Study. Monthly meetings were held
in Washington, and transcripts of the meetings were mailed
to anyone requesting them.
The third step in the project was to summarize
and analyze the data collected. We are right in the midst
of this right now, and we have reached some preliminary
conclusions as to what this data means. We developed
several computerized statistical analyses, and we are now
refining them.
we've looked at enough data to be able to formu-
late possible alternatives to ICR as it presently is
constituted.
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15
The purpose of our meeting today is to relate
to you what we found, and to get your reaction to it.
After these regional meetings are held we will
put together a draft final report, which will be widely
circulated. This will be sometime in mid-November.
In December we will begin to write cur final r
which will be delivered to Congress in late December. The
final report will contain our recommendations to Ccngrosu,
although we cannot, of course, guarantee that Congress
will follow our recommendations.
Before I turn it.over to Myron to review our
findings, and talk about the data we've collected, are
there any Congressional Statements to be made?
(No response.)
All right, well let me turn it over to Myron
Olstein then, who will talk briefly about what we found,
what we think it means, and what some of the passible
alternatives to ICR are.
STATEMENT OP
MYRON OLSTEIN
MR. OLSTEIN: Good morning. My name is Myron
Olstein and I'm here to tell you what we found during th«
course of the Study, what we think it means, and to presen
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16
some possible alternatives.
The data and statistics I'll be using are based
en our Study as Mike described it, and are still in the
process of being validated, up-dated and refined in our
Washington office.
So, rather than handing out raw data or computer
print-outs that would have limited understanding ~
understandability — what we've done is summarized our data
in a handout, entitled "ICR Study Data," dated October 10th.
You should have received — most of you — copies
of this earlier. I think we have a few left up here, if
you want to look at them.
I would caution you that the data is mostly
average data and requires very careful thought for using it.
We eventually got data from 241 grantees, the best data
coming from places that we actually visited, and naturally,
the data obtained through telephone surveys was not as
complete or precise.
We also obtained data from 397 industrial
facilities, most of it through the effort of trade
associations. The industrial data is all at the plant level,
rather than at the company level.
Before I go into a discussion of the findings, I
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17
noticed the gentleman sitting all the way in the back on
my left took all of the copies that we had, summarized
findings. We only have about twelve of those, and this
summarizes all on one page what I'm going to be saying.
If we could share, I think there would be enough for
everyone. As I said, it's just a summary.
Let's take a look, first, at the things that 1C!
was supposed to accomplish, the intent that Congress had
back in '72 when they passed the Clean Water Act.
The first area that we investigated was the isr
of equity, or the assumed economic advantage, i.e., less
expensive sewage cost for the industries using publicly
owned facilities, versus those using and discharging
their own wastes.
we used a computerized model which we develops*
for our industrial clients, and modified that to reflect
both User Charge and Industrial Cost Recovery. Basically,
the model incorporates equations which reflect the cost
of doing business, and enables a company to evaluate
alternatives — in essence, the "make or buy" decision —
should the company use the POTW or should it treat its
own sewage?
What we found was that for some medium or large
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13
companies having compatible wastes, it's cheaper in the lonq
run to self-treat, even without including ICR. This is
just due to Use Charges. This is a very significant
finding. What it means is that, even without ICR or pre-
treatment costs, large industry should, from an economic
standpoint, treat its own sewage.
New the reason for this is because of several tax
changes that were not known to the Public Works Committee,
they were enacted after the passage of 92-500. They
include accelerated depreciation for pollution con troll
i
equipment, investment tax credits for capital equipment, j
I
and the use c£ tax-free IDB's, Industrial Development Bonds, ;
to finance its self-treatment facilities.
There are a number of proposed tax law changes |
I
which are now pending before Congress which, if enacted,
make it even more attractive to industries to self-treat,
because of the increased investment, tax credits.
What this finding says is that for many industries
it's cheaper to selfrtreat than to use a POTW. Well, if
this is the case, why don't mors industries self-treat?
Well, there are a number of reasons: For one,
many are not located.either on or close to a river or stream
and must use a POTW. In many cases they don't want the !
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19
hassle of self-treatment, having to get a NPDES permit,
operating a sewaqe plant, etc., and finally and most
importantly, ICR hasn't been in effect long enough for
everyone to see its impact.
The significant thing to bear in mind though L
if ICR and pretreatment costs are added on top of Use
Charges, they could be the final straw that drives industi
out cf POTW's, thus making it more expensive for the
remaining customers to use a publicly owned treatment
works. In particular,. EPA1s application of pretrsatment
standards is likely to make many industries consider
se1f-treatment.
Going back to the second major issue of the '7?
Clean Water Act, the issue of POTW capacity, based on-out-
survey of 241 wastewater treatment facilities from which
we obtained data, the average POTW uses only 68% of its
design capacity, and the usage ranges from a low of-4%to
a high of 120%. It appears that ICR, as presently formu]
has not acted to put a cap on the construction of excess
future capacity.
The third issue, that of water conservation, is
as clear. Based on the industries that we surveyed,
water consumption has dropped an average of 29%, but the
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20
industries with whom we talked attributed their water
consumption to a number of factors, such as higher
water rates and to User Charges, not to ICR; the reason
being that ICR's a percentage of their water bill, and the
remainder of their sewage bill is just not that significant
at this time.
Just going en briefly through the specific
questions that were opposed by Congress in tha '77 Clean
Water Act ~
First, economic impact of ICR to date is not
very significant in most localities. The reasons are that
ICR has not been in effect for more than a year or two;
most grantees have suspended ICR billings while a
moratorium is in effect.
The exception to the insignificance or limiting
the insignificance of ICR is in those areas where there are
seasonal users and where advance wastewater treatment is
required. In those cases, total sewage cost for industries
have increased by several times.
The incremental impact of ICR above User Charges
is generally not great. Once again, with exception of those
two cases I mentioned, the seasonal users and the AWT.
The combined impact, however, of User Charges arid
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21
ICR can be very significant.
we were able to find only a few cases, scatter
cases, of plant closing dus to sewage costs, and none
were attributed solely to ICR. The total number of jobs
lost in those plants that did clos-9 was less than 1,000.
And, in every case, there were other factors such as_pla
age, which affected the plant closing decision.
ICR rates appear to be somewhat greater in oldu.
cities, particularly in the Northeast, and in small to
medium sized cities and in agricultural communities that
of course, have a preponderance of seasonal users.
There was not, that we could detect, any impac1
of ICR in industrial growth patterns, and we were not ab."
to differentiate impacts of ICR on small, as opposed to
large, businesses, because very few industrial plants we:
willing to disclose production or sales data which would
permit this kind of analysis.
The cost to industry for sewage treatment is mi
greater, per gallon, in advanced wastewater treatment pl«
as compared with strictly secondary plants, about 50%
greater.
The incremental cost to grantees, that is, the
people that operate the POTW's, to maintain and operate I<
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22
that .is the purely eliminatable cost above and beyond user
costs, is small when compared to the total costs of sewage
treatment.
ICR costs are running around $15,000 per grantee
per year. Average ICR revenues per granteee are running
approximately $88,000, of which $8,800 is retained for
discretionary use by the grantee. So that the ratio of
cost to revenue is two-to-one.
There is some more data which might be of
interest to you that's included in the handout, and we
would be pleased to discuss specific data during the
question and answer period at the end of our meeting.
To summarize our findings and conclusions very
b rief ly —
First, ICR is not doing what it was supposed to
do. very few cities have implemented it, and the ones
that have have suspended collections.
ICR, to date, has had no significant impact
on employment, plant closings, industrial growth, import/
export balance, or local tax base.
Finally, ICR is not proving cost-effective in
producing revenues for local or Federal government, at
least in most cities.
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23
Now we must realize that the Clean Water Act ha*
some societal as well as some purely economic objectives.
Among other things, Congress was attempting to avoid the
appearance of using public money to subsidize industries
that discharged to grant funded POTW's.
Now, while our studies have shown that many of
the economic objectives have not been met, the societal
objectives remain.
Accordingly, it is appropriate to consider a
series of alternatives to ICR as it now exists.
At this time I would like to ask everyone to
turn their attention to a document entitled Preliminary
Compilation of Possible Study Alternatives, dated
October 10, 1978. Michael will be distributing those.
In there, we present some sixteen alternatives,
which range from leaving ICR as it now is to outright
elimination of ICR.
As you look at these, note that the alternative
are not necessarily mutually exclusive. A number of then
could be combined.
What I'd like to do to give you a chance to rea
and study the document is to adjourn for, say, twenty
minutes — give everyone a chance to study the document,
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24
stand up and stretch your legs.
We'll reconvene at 11:00 a.m.
(Recess.)
MR. OLSTEIN: okay, if we could resume the
meeting, I would like to go through these alternatives
briefly.
I'm not going to read them, you know, I think
we can all do that. I would just like to highlight the
main points and ideas behind each one and, when we get
into the question and answer period, if you have any question^
or want any clarification, we wirll be happy to do so.
Alternative Number 1 is to abolish ICR. Now that
would, obviously, eliminate them — any of the complaints
that we have — but it still leaves us with the other
problem, the capacity — excess capacity problem.
The second one is an attempt to deal directly with
the excess capacity situation. Now what it would do — it
would base grant-funding on current usage levels; in other
words, the plant size to be current usage. It would be a
75%, and then, as the plant size goes above that, we.would j
have a sliding scale — downward sliding scale for Federal
participation in the project. Obviously, it would help
more front-end planning in getting industry more involved
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25
in the planning process.
Alternative Number 3 is very similar to 2, exc
that it would be based purely on a non-industrial usage.
Being based that way, there would be no need for ICR,
because there would be no Federal grant portion allocabl
to industry.
Alternative 4 is an attempt to simplify the
computation process associated with ICR, and it would
restrict the charging of Industrial Cost Recovery
strictly to the treatment plant.
Alternative Number 5 is one approach to dealing
with the so-called equity issue from industry's viewpoiri-
and it would be to base industry's share of repaying
Federal grant monies on an incremental cost, rather than
a proportional cost. Obviously, there would be difficul'
in coming up with the methodology and the standardized
methods for doing that.
Alternative 6 basically gives a grantee a choi<
as to whether or not he wants to have ICR at all. If th<»
grantee and, presumably, the industry within the grantee
jurisdiction, decide that they don't want to be affected
ICR, then the industrial portion of the plant would be
funded through other sources.
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26
Alternative Number 7 is another alternative that
would simplify ICR and its administration, and what it would
do would be to establish uniform ICR rates, and this would be
uniform unit rates now.
And this could be on a number of different-bases?
It could be geographical, could be by user group or
whatever, but, what it would do, it would eliminate
inconsistencies within ICR rates. And there are, obviously,
some potential problems in doing that, but it would greatly
simplify the process.
Alternative Number 3 is an attempt to bring a lot
more flexibility into the ICR process, and to provide for,
you knew, differences based on unique local situations.
And it would provide for a number of circuit
breakers which oauld be area industry groups, dollar amounts |
I
of ICR payments, could be flow volume, any number of things, j
Alternatives 9 and 10 are an attempt to equalize j
the advantage given to self-treaters by the '74 Tax Laws I
and, basically, it would permit a tax credit for ICR
payments. This would kind of be equity in reverse, and
it, would take away from one hand what's been given with
the other. It would tend to equalize the cost to industry.
Alternative 11 would, basically, be a return to
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ths requirements of Public Law 84-660, which is Industrial
Cost Recovery based en the local grant portion only, and
would tend to run, although this would vary, obviously,
from one case to another, it would tend to run lower than;
ICR and, computationally, is somewhat similar.
Alternative Number 12 would abolish ICR, but
extend the proportionality that now exists in Use Charge.
That is, to the recovery of operations and maintenance c
It would extend it to the capital costs only, and this
would be one way to ensure that, at least, all of the
charges of this industry are on a proportionate basis.
Industry would, of course, still receive whatever
advantages there are on the 75% Federal grant.
Alternative Number 13 goes in somewhat the
other direction, and it would take ICR as it now is and
add an interest component. This would, once again, folio*
the line of the Congressional debate at that time which
viewed ICR as an interest-free loan.
Alternative Number 14, not very satisfactory, is
an alternative just to extend the moratorium, and the one
possible advantage is that it has been somewhat really ii
ICR process. By postponing the date, some of the econcm.4 -
impacts might become a little bit clearer.
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29
Alternative Number 15 would maintain ICR in its
current form, everything the way it presently is.
Alternative Number 16 is another attempt to deal
with the capacity issue, and it would require letters of
commitment from industrial users at the time the proposed
POTW is signed. This would put some more testh in putting
the cap on capacity, I might add.
And Alternative Number 17, which was proposed the
day before yesterday in Chicago, is that tha ICR dollars
that presently are returned to the Federal Government be
maintained by the grantee to fund those expenses generated
by industry, pretreatment expenses, ICR administration,
that sort of thing. The argument there was that, really,
the Federal Government does not have a need for those funds.
And this wculd maintain the payments, but also, help out
the grantees.
Before we go any further, I'd like to introduce a
representative of EPA Headquarters, Mr. John Gall, who's
the User Charge Industry Cost Recovery Specialist, Region 1,
which is located in Boston; and he'll have a couple of
remarks about how we can — how you can get some of your
feelings into the public record.
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3C
STATEMENT BY
JOHN GALL
MR. GALL: Thank, you, Myron.
As Myron indicated, by base is normally in the
Regional Office in Boston. However, over the past sever
months I have been Regional Representative to the Techni
Advisory Group at the headquarters level that was involv*'
in formulating the various survey documents and providinr
general coordination and guidance to Coopers & Lybrand i
th3 Study.
It's my purpose here today to represent, if you.
would, the headquarters perspective — the Washington
perspective.
In that regard, Washington, I would like to
apologize for the short time frame «or the short lead you
may have had for the notice of this hearing. As you can
understand. Congress has mandated that we deliver this
report to them no later than the end of December of this
year, and this has resulted in a substantially compresset
time frame, in terms of conducting an orderly Study.
As a result, as we've gone along we have con-
tinually modified our schedules, dates, and/or whatever.
And it was only recently that final and firm dat
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31
were available for the public meetings. Now this is also
going to be true in terms of coordinating our efforts here
on cut in terms of receiving the draft and the final report
from Coopers & Lybrand, and distilling that into a series
of recommendations which we will then make to Congress by the
end of the year.
Should anyone feel that he has a need to comment,
either on the alternatives or on the general findings that
have been discussed this morning, EPA will be keeping the
record open until November 6th, so that anyone who wishes
to submit written comments may do so by filing them in
duplicate.
From this Region, I would request that you send
them to Ken Stoller at the Regional Office here in New
York and, at the same time, so that we can assure ourselves
that we have good coordination, a carbon copy to
Coopers & Lybrand at 1800 M Street, N.W., Washington, D.C.
To give you an idea of the schedule that we are
currently under, it's our understanding, to date, that
Coopers & Lybrand1s report will be presented to EPA in the
latter part of November of this year.
That'll be in a draft form that will include, if
I'm not mistaken, copies of the public hearings and trans-
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32
cripts from the ten Regional Offices, as well as transcrij
on hearings for the Advisory Committee which has been
meeting in Washington over the past several months.
I'd lifce to explain a little bit the compositioi
of this Advisory Group to which I'm referring. It's not
strictly an EPA/Coopers & Lybrand affair.
we have been meeting consistently with trade
associations such as American Frozen Food Institute, The
National Association of Manufacturers, The National Food
Processors Association, and several other industrial groin
In addition, there have been a wide cross-sect-.
of environmental groups represented at these meetings, s
as the Clean Water Action Project, The League of Women
Voters, The Audubon Society, Air Club, et cetera.
We've also had representation from local and
state governmental agencies. The Association of Metropol.4 •
Sewerage Work Agencies, several Regional and county-wide
municipal associations.
One thing's very important to remember in all f-1
exercise that we're going through today: That the
Coopers & Lybrand report, in essence, will be recommenda-
to the Agency, and the Agency will then take these
recommendations, along with your comments, distill them n
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33
a series of recommendations which we will then make to
Congress by the end of the year.
And so, in that regard, the final recommendation
to Congress will not, in essence, be greatly guided by the
report, but the final recommendation will be an EPA
decision.
Of course, the final tack or direction in which
the Industrial Cost Recovery Program takes is one that?s
going to be decided strictly at the legislative level.
For you people who may be interested in obtaining
copies of some of the final documents that will be
presented, I would like to -offer, if you leave us either
your business card — or we will provide a sign-out sheet
here — we will .Ke" attempting to make available a similar
report of Coopers & Lybrand's final report.
We don't believe — I have the distinct feeling
that the short time that we will have for review at the
Washington level, the draft report almost necessitates
what we would hand out to the public would be a final
summation of the final report, rather than a draft.
Thelead time of the compression is so great at
that point, if we would distribute it you would try to digest
it and then to submit comments back to us that I believe
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34
would be minimal chance that: we would coordinate all the
activities, so that we could get your comments into our
final recommendation to Washington — to the Hill, so
that we will attempt — make a summary of the final report
available.
That's really all the comments I want to make <
conduct of the study. There're two issues that we found
here, that have ccme up in, at least, one other Regional
meeting that we've had to date.
In the Eastern half of the United States, that
has been pretreatment, what we understand is that pre-
treatment certainly impacts any kind of financial decisic
that industry is going to make, as to whether to use a.
POTW or whether to discharge on its own.
I'd like to remind you that the prime focus of
the meeting today should be on Industrial Cost Recovery.
Should we stray off on a rather detailed discuss
of EPA's pretreatment requirements, I'd just caution-you
that, don't be too surprised if we try to cut you off.
With that, I'll turn this meeting back to Myron.
MR. OLSTEtN: The sequence of the remainder of 1
meeting — what I'd like to do is begin with the prepared
statements first and, if you havs a written one, if you cot
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35
give it to the stenographer it would make his job a lot
easier; go from the statements to a question and answer
session; and then, if yo.u have any other questions after-
ward, and you'd like to be informed with this, we'd try
to make ourselves available after the meeting.
Does anyone have a prepared statement? Does
anyone have a statement?
(No response.)
well, there's going to be one by Commissioner
McCartle. It's coming up. I called him from the corridor.
Okay. We do have one statement that's going to
be made, but the gentleman is on his way. If there is —
while we're waiting, are there any questions that anyone
wants to ask?
MR. FOSTER: I am Matthew Foster from Nassau
County Department of Public Works, we have POTW's that
i
are concerned with the ICR. '
My interest is in the alternative sheet, and
the question is: What is your definition of excess capacity
which you are concerned with, with the reducing the excess
capacity of the treatment plants either in the design
state or the construction stage?
MR. GALL: Anybody who may be familiar with
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36
our September 27, 1978 Construction Grant Regulations
and, in particular, the modifications to the cost effect
analysis requirements probably has a fair understanding
Agency as addressing itself to what it perceives to be a
big problem; that is, building a facility so large that
it could not reasonably be expected to be utilized withi
a — within its design period. I think that characterize;
what we talked about in terms of excess capacity.
The Regulations of the 27th or the Guidance
establishes some stringent ways to control the sizing
components or the domestic and commercial flows where it
provides us essentially with kind of an ambiguous way to
insure that the industrial capacity that's building for
the future, its size based on a rational basis, and, 1
think, what we're — we're not saying here that we don't
have any capacity for future growth.
we just want to insure that what we have is a
well documented need.
As Myron indicated, the original perception of
ICR was that it could serve to insure that financial
planners at the industrial level would look at this speci
issue and make sure that requests for capacity, if you wo
were added and quickly documented the understanding that t
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37
may suffer a financial penalty, if they were not.
As it happened, and as the ICR is broken — is
distilled down, I don't think that, really, ICR could ever
have met that goal, as it was implemented, if there still
is seme of the questions as to how we do address the problem
of unjustified or unwarranted capacity.
Doss that respond to your question?
MR. FOSTER: I understand what you're saying,
talking about future.
we arc, and I put in'quotes, "an old community
with five treatment plants which is established." We have
some plants which are overloaded which we're trying to
upgrade on the flow capacity. Actually, this really does
not affect Nassau County, as far as excess capacity goes.
Our five plants of 100 million gallons a day plus or
minus is stable.
MR. GALL: Yes. I think you can understand that
the emphasis is directed toward rapidly growing areas
where projections are made — some rather large growth
rates for twenty or forty or fifty, or whatever your period.
If one builds a facility that large, it costs a
lot of money to run it. I think you may be correct that,
depending on the specific situation, you're probably not
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impacted by the concern , at least.
MR. FOSTER: Therefore, what I'm getting at is
what is called the disadvantage that plants would be
designed to over capacity — with an over capacity would
not be a disadvantage to us, because that is no concern
for — of bigger plants. It would be demanded that we
would have, because of these future — of cities of the
future — industrial cities of the future, would we have
stand the Laws and Rules and Regulations for what's ccmi:
out from the White Tower down en the hill that says',
because of future projections, you are going to do this?
MR. GALL: I understand the concern in the
matter you are voicing.
If that's the issue that we wish to address,
then ICR, if I could — should be utilized in those
instances where that, in fact, is taking place, but-not J-
the other communities where there isn't impact of growth
or excess growth predicted.
Okay. That's — I take that as another
alternative to add to our list as Number 18. One thing —
the other thing that I would like to point out is that
the September 27th Regulation to address that issue,
as allowing,sort of unforetold capacity in the future, the
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39
by.limiting how much industrial capacity can be built into
a treatment plant without some firm commitment from industrieb
The problem is that the firm commitment that
we're looking to from industries is not predictably firm
at this point in time. It may come down more firm later
in the future, in terms of a PRM.
Any other questions?
MR. FOSTER: Can I say one other thing? On
your sheet of summary findings you said the cost to maintain
the ICR is approximately $15,000 per year for grantees;.
At today's rates of what we pay employees, that would pay
one middle management employee in our County.
I find it not realistic in the cost.
MR. OLSTEIN: The question that we asked that
produced that number is "What are the eliminatable costs,
if we just took away ICR and nothing else ? How much
money could you save," and, really, you wouldn't expect
that number to be very large.
Monitoring that has to be done associated with
ICR, also has to be done per User Charge. ICR requires
a separate billing, but it's an annual billing, usually.
And really, you should not require that much
additional cost. I think based on the incremental burden
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40
that ICR places on you, that $15,000 per grantee is a
reasonable number.
Now, obviously, since it's mostly labor, it's
number that will rise through the years. It represents
strictly an elindnatable cost.
MR. GALL: You might want to indicate that tha
something that the grantees oav* us.
MR. OLSTEIN: It'1 s also a number that came out
of the survey, we didn't come up with it — it's the
average of all grantees.
MR. CALASCIONE: .What's the definition of
grantee?
MR. OLSTEIN: A jurisdiction that has received
a waste treatment plant grant basically is responsible fc.
administering that. It could be a city, it could be an
authority, it could be a Commission.
It takes a number of different forms. It's a
local —- an arm of local government.
We now have a gentleman on his way with a state
I guess what we can do is just adjourn and, if you have
any informal questions that you want to address to us,
we'd be happy to answer them, and there will be a stateme
by ~
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41
MR. STOLLER: Two statements; one by Commissioner
McCartle and one by, I believe, Conaressman Murphy.
MR. OLSTEIN: In the meantime, I invite you —
I thank you all for attending, and for those of you who are
interested, just put down your name and address.
You111 receive a copy of the summary.
Thank you.
(Recess.)
MR. OLSTEIN: Pardon me. We'll reconvene to hear
a statement by Commissioner McGough, Deputy Commissioner
of the Department of Environmental Protection, City of
New York. I
i
STATEMENT BY |
i
COMMISSIONER McGOUGH i
I
THE DEPARTMENT OF ENVIRONMENTAL PROTECTION, CITY OF N.Y. i
MR. McGOUGH: I have a short statement that I'd
like to read on this subject, which I think is very
important to the City, and one which is going to cause a
great deal of pain and suffering if it's carried out.
The Department of Environmental Protection is
charged with the provisional role of resources and the
provision of all sewage treatment plants in New York, and
it's under our jurisdiction that an ICR charge would have
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42
to be implemented.
Our Department is now beginning to develop the
Industrial Cost Recovery Program pursuant to Section 204
of the Clean Water Act of 1977 and the regulations
promulgated by the Administrator of the Environmental
Protection Administration.
It has become increasingly clear as we go forwai
with this development that the task is formidable, and
that the program's implementation will be expensive both
to the City and the industries in the City, which will be
burdened with this additional cost. There is potentially
$1.5 billion worth of grant funds needed in the City for
new sewage treatment works and upgradings to meet Section
requirements.
We have determined that industry will have to
contribute about a million dollars per year over a thirty
year period to comply with the EPA regulations. Yet the
cost of developing an ICR System in terms of the necossit
for field sampling, laboratory analysis, computer
programming, et cetera, will cost the City $10 million o\j_
a three year period.
In accordance with the disbursement plan of
collected funds, the City will not nearly be fully
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43
reimbursed for its development and implementation expenses.
The Federal Government will realize a gross of only about
15 million dollars from New York-based industries over a
thirty year period, a comparatively small sum by Federal
Government standards. But ICR can only — can have a sub-
stantial negative impact on the effected industries in
the City, especially if we find it not legally possible to
institute collections on a total waste treatment basis.
In that event, the industries subject to ICR
payment in the Newtown Creek Plant drainage area, where
about $20 million of the total $30 million will be collected,|
will bs particularly burdened.
The development of an ICR System on a drainage
araa basis, is also beset by political problems principally
due to the apparent rssult of "taxing" the same type of
industrial plants differently on the basis of location
within the City, a politically unworkable concept.
In a commercial City like New York City, ICR is
ill-founded. Because industry contributes such a small
percentage of the total flows to our sewage treatment
plants, in practical terms, there is really no additional
cost incurred in building such works in the City due to the
presence of industrial wastes.
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44
Rationally then, an argument can be made that
no industrial Cost aecovery is justified for reimbursemei
of the capital expended in sewage treatment works
construction to serve the industry in the City.
we would suggest, therefore, that a limitation
be imposed on all publicly owned treatment works having
industrial contributions of ten percent or less from
Industrial Cost Recovery Programs.
In summary, i'n the City of New York we firmly
believe that ICR will prove burdensome to both the City ar
its industries, create unnecessary political and admini-
strative problems, will be financially meaningless to
the Federal Government, and is not justified to recover
what we believe to be illusory construction costs tc tra<.._
small percentages of industrial flow.
In conclusion, I would also like to add as we ac
forward with our development of an ICR System, we have fc
many anomalies in the Federal Regulations, and it seems 1
that some of these must be straightened out before syster-
can go forward. And, at the very least, we would ask foi
further delay in the July 1, 1979 deadline for the submis
of plans, giving EPA time to clarify some of these - some
of the regulations. Thank you very much.
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45
MR. HUELSMAN: You might comment that their
recommendation is one of — very close to one of the
alternatives, the one that speaks to busting the circuit
breaker; witness the circuit breaker, take away the industry
or discharge for that component of industry, that capacity.
There are a list of alternatives ICR
potential recommendation, if you want to look at the book.
MR. OLSTEIN: One of the difficulties that we
encountered, different grantees attempt to take a nationally
applied methodology, and when you apply it to some 10,000
different local government agencies, you're bound to run
into some very unique situations that don't limit themselves
to that type of situation. i
we still have the Congressional statement. That's j
on its way. !
I think what we'll do is probably adjourn to
quarter after one and, at that time, hopefully, either
the Congressman or his representative will arrive.
(Recess.)
MR. GALL: I'd like to thank everyone for waiting
around for us this afternoon. As you probably know,
i
Congressman Murphy intended to be here, but unfortunately i
{
was unable to attend. A member of his staff has just i
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46
dropped a statement that he had prepared to deliver at th:
public hearing. Since you've all borne with us over the
last two hours and saw fit to come back and sit down and
wait it out, I think it's only fair that I read this to yc
So this is the statement of the Hon. John M.
Murphy, on Industrial Cost Recovery Hearing, dated
October 18, 1979:
"I am pleased to have this opportunity to test:
on the future of the Industrial Cost Recovery program, a
system mandated by the Federal Water Pollution Control
Amendments of 1972, Public.Law 92-500. section 204 of tf._
Act requires that industrial users of publicly owned sewa
treatment plants repay that portion of the cost or con-
struction of these plants necessary for treatment of
industrial wastes.
These assessments are determined for individual
industrial users on the basis of the characteristics of
their use including strength, volume and flow rate.
Regulations issued by the Environmental protection Agency
require that the grantee — that is the municipality —
recover the federal cost within a period of 30 years and
refund 50% of the amount collected to the federal goverrur
The reamining 50% may be used by the grantee for the admini
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47
stration of the program. Federal grant payments are halted
if a grantee dees not develop and then administer an
approved system.
The Federal Water Pollution Control Amendments
of 1977 authorized the deferral of the Industrial Cost
Recovery program for 18 months and required E.P.A. to
submit a comprehensive study of the ICR system no later
than December 31, 1978. These public hearings are a part
of the final information gathering phase of these
inves tigations.
The ideal of Industrial Cost Recovery is laudable;
requiring industrial users to bear the financial burden of
providing their sewage treatment facilities. -However,
the realities of implementing the program have shown it to
lack a uniform, national level of standards, to be less
than cost-offective, and in many cases to engender more
problems than providing benefits.
The United States General Accounting Office
recently conducted a review of the E.P.A.*s efforts to
implement ICR systems. This review found many problems
with the system. In a letter to E.P.A. Administrator
Douglas Costle dated April 11, 1978, Mr. Henry Eschwege,
Director of the Community and Economic Development for GAO,
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48
outlined the following difficulties, and I quota from that
lattar:
1...grantses wers inconsistent in determining
which industrial users should be included or excluded fron
industrial cost recovery systems. In some cases grantee_
had gone beyond the authority of the regulations and had
improperly excluded industrial users by establishing
arbitrary cut-offs...
'Grantees also had differing interpretations o
type of waste subject to industrial cost recovery...As a
result of these practices, similar businesses and industi.-
have not been treated consistently by the various grantee
and many commercial enterprises have not been charged
industrial cost recovery.
'We also found the E.P.A. has approved industr:
cost recovery systems wherein the costs incurred by tie
grantees to develop and administer the systems exceeded
the amounts to be recovered from industrial users througt
industrial cost recovery payments.'
These findings • show serious inequities within t
program* The first two could, no doubt, be solved with s.
more specific and coherent declaration by E.P.A. of the
intent of its regulations. The third issue of cost, is a
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49
more philosophical than structural consideration and
represents my prime reason for concern with the ICR program
in its present form.
The costs required to develop, administer and
implement an ICR system far outweigh the benefits in most
situations. New York City estimates the development of an
ICR systam for its industrial users could cost upwards of
$10 million over the next three years.
At present, there are 12 operating sewage
treatment plants in New York City. None of these were
built with Public Law 92-500 funds and are therefore not
a part of the ICR program. However, two new plants are
planned, North River in Manhattan and Red Hook in Brooklyn,
as well as three plants which need upgrading or modifications,
New Town Creek, Owls Head and Coney Island.
All of the federal funds for these projects will
no doubt come from 92-500 and therefore be subject to
industrial cost recovery.
The cost of these five projects will run somewhere
in the neighborhood of $1 to $1.5 billion. The City
estimates that no more than 5% of the use of these plants
will be industrial. This means that to recover the
the federal share of approximately 75% — that is
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5C
$750 million to $1.1 billion — will cost the industrial
users approximately $56 million.
Mow $56 million is not a lot of money to the
federal government, but it represents a tremendous obsta~
to those small businesses in New York City who would have
"repay" this cost. It is important to remember that
industrial users of sewage treatment plants ara not gett"
a frae ride; they pay user charges of 25% of their water
bill as well as a surcharge if their flow is over a limi
established by the City. To require them to foot an
additional charge would in this time of economic uncertain
force many of these businesses to close. New York has
one of the highest unemployment rates in ths City — corn
To take any action which would increase unemployment or
drive industry out of the area could only be termed
suicidal.
In addition, of the money the City is required t
collect, the $56 million, it is only allowed to retain 5Q .
$28 million. It has already been estimated by the City
that to develop the program will cost approximately
$10 million. This leaves only $18 million to provide for
30 years of field investigations, computer programming,
laboratory analysis, equipment and personnel. It is
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51
obvious that in New York City's case the program is not
cost affective.
Perhaps in areas of high levels of industrial use
where bigger treatment facilities are required primarily
to handle industrial wastes, the ICR program would be both
b eneficial and cost effective. In these cases with more
users to shara the repayment burden the cost per individual
usor would be lower and therefore easier to bear.
It is always difficult to balance the economic
and environmental concerns. We can and must ra-evaluats
and re-structure the ICR program with this consideration
in mind. Thank you."
MR. GALL: That's the complete text of the
Congressman's presentation for this morning — this
afternoon.
Should anyone else, or if you have any more
questions on what we went over briefly this morning, I'd
like you to ask them now. if not, I'd like to adjourn for
the day.
(No response.)
One last thing that we haven't mentioned here
today. Should anybody feel a need to speak in a public
forum, such as this, within the next two weeks, there
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52
will be opportunities this Friday in Philadelphia at tha
Bon Franklin Hotel, the Garden Terrace Room, that will t
starting at 10:00 a.m.; and next Tuesday and next
Wednesday in Boston, Room 208 of the John McCormick Post
Office and Courthouse; that's in Post Office Square.
Additionally, on Thursday of next week there w
be a similar hearing in Atlanta at the Civic center
and also to start at 10:00 a.m.
So, I'd like to thank you all for coming here
today and bearing with us and coming through with us.
I remind you, have you any comments that you w.
to make for the record, and in writing, that they should
be delivered to EPA and Coopers & Lybrand's no later
than the 6th of November.
Thank you.
Whereupon, at 2:00 p.m. the hearing in the
above-entitled matter is adjourned.
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53
ICR HEARING ATTENDEES
1.. Edward J. Brouillard II
2. Ksnneth S to Her
3. Margaret Davis
4. John Gall
5. Michael Townsley
6. Robert wheeler
7. Joseph R. Greeley
8. James A. Hulme
9. Richard Sedlak
10. F. James Wound
11. William McCabe
12. Douglas Tozzcli
13. A. W. McKenna
14. Paul E. Peters
15. Matthew Foster
16. Robert Caddell
17. William H. wech^er
18. N. Gilbert
19. M. Hunter
20. Myron Olstain
21. G. William Calascione
Bergen County Utilities
Authority
EPA, Region II
EPA, Region II
EPAr Region II
Coopers- & Lybrand
Grumman Aerospace Ccrp.
Dvirka & Bartilucci
American Cyanamid Ccrp.
Soap & Detergent Association
Warner-Lambert Company
EPA, Region II
Parsons, Brinckerhoff, Quade &
Douglas
Wiendiel Engineers, P.C.
American Bakers Association
County of Nassau, DPW
Westchester County, Dent, of ;
Environmental Facilities :
Greeley & Hansen
i
Lobsenz-Stevens, Inc. (for CTL)
EPA, Region II
Coopers & Lybrand •
Pollio Dairy Products Corn, j
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54
22. Paul R. Paguin
23. Irwin Novick
24. Martin Rivlin
25. Joseph T. McGough
26. Douglas H. Starr
27. Ma» Wcng
Hydrcscience Incorporated
N.Y.C. EPA, Dept. cf Water
Resource
N.Y.C. EPA, Dpet. cf water
Resourct
N.Y.s. EPA, First Deputy
Commissioner cf Envir. Protec
Thomas J. Liptcn, Inc.
N.y.C. Staff of Congressman
John M. Murphy
23. William Lauer
Clinton Bogert Associates
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INDUSTRIAL COST RECOVERY PUBLIC MEETING
Benjamin Franklin Hotel
Philadelphia, Pennsylvania
Friday, October 20, 1978
The public meeting was convened at 10:06 a.m.,
Tom Maher presiding.
-------
CONTENTS.
PAGE
Introduction, Mr. Gall 3
Opening Remarks, Mr. Jones 3
Remarks of Chairman Maher 4
Remarks of Mr. Townsley 8
i
Remarks of Mr. Olstein 13 ;
i
i
General Discussion of Alternatives 22
i
Statements of: j
The Honorable Angelo J. Errichetti 43 !
i
Mr. Jack Cooper 47 ;
i
Mr. L. C. Gilde 50 |
i
Mr. Howard Lobb 56 '
Continuation of General Discussion 78
Adjournment 101
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DJG
MR. JOHN GALL: Good morning, ladies and gentlei
I think we would like to start this program off at this tin-
ny name is John Gall. And, although I normally work out <
EPA's Region I office in Boston, I have over the past six
months been associated with the development of the Coopers
Lybrand industrial cost recovery study mandated by the IS
Clean Water Act. And my purpose today here is essential!}
provide a link between EPA headquarters and the public
hearings that are being held.
At this time I would like to introduce Greene
Jones, the Water Programs Division Director for Region III,
who will be providing us with opening remarks.
MR. GREENE JONES: Thank you. I'd like to welcc
you to Region III in Philadelphia on behalf of Jack Stramm,
the regional administrator, who unfortunately is out of to
or he would have been here. But, nonetheless, I can speak
with confidence that he considers this public meeting very
important. The subject of ICR is very important, as indic_
by Congress, and also by the emphasis that EPA is putting •
this program, this reevaluation investigation into aspects
of ICR.
I truly hope that this meeting provides a forum •
-------
getting meaningful comment. It is a public meeting. A
record will be kept. And I can assure you that your comments
are valued, they're welcome, and I certainly hope that there
is a free and open exchange of your ideas to the Coopers
Lybrand and also the EPA people.
I'm not going to take a lot of time on the program
other than to reiterate I welcome you on behalf of Jack
Stramm in Region III. I'll now turn the program over to Tom
Maher/ who will get into some of the mechanics of the pro-
gram and will get on with it.
CHAIRMAN MAHER: Thank you, Greene. I'm Tom Maher,
the Region III, user charge expert. And I'm just going to
give you a little background, preliminary to the Coopers
Lybrand presentation of their national study.
|
As you all know, user charge was fairly well i
recognized as being necessary to ensure the economic viability
of a treatment system, that there be sufficient funds, and
that it be operated properly. We haven't had a great deal of
controversy on the user charge aspects.
There has been some discussion and controversy and
misinformation, anxiety, if you will, on the impact of the
industrial cost recovery system, which is why we're here this
morning. As you know, the Congress in Christmas of 1977 made
-------
some amendments to the Clean Water Acts, and they decreed
that there would be a study done of the need for and the
efficiency of ICR. 'And EPA in its wisdom I think chose
wisely in choosing Coopers & Lybrand, which is one of the
country's largest CPA firms. The reason that Coopers &
Lybrand was chosen to do this work was that they were air
immersed in this subject. They had a record of objectivi
as did a number of other firms in the field. They were,
because of this and their professional staff and their
ability to start up quickly on a project such as this sor
having already been in-house on user charge ICR work prev8'
lyr would have a greater deal of acceptance with industry,
municipality and state governments, and EPA, as well as t
Congress. So, we could get off the ground quickly with «•»
and they have been going around the country in the last—*
think they started here in August. It wasn't too long ag<
There's a rather short time frame on this—talking with
industry, state, municipalities, and trying to respond to
this congressional mandate that was outlined by Congressm.
Roberts.
I'm going to give you—and you have a copy of thi
but I'm going to paraphrase some of this that was placed j
the Congressional Record, so that you can have a better
-------
framework, let's say, for applying some of these questions
that he raised to your local situations as you know them,
either as consultants or as industry representatives; and
if something rings a bell in the comment that's here or you
have an instance or an example or an experience, why we would
like to hear from you because, as Greene has already commented
this is the major reason why we are here today. i
i
i
Congressman Roberts on Devember 15th entered into :
i
the Congressional Record nine questions, which are the basis
of this study, and I will read you his opening comments. "It
has long been the intent of Congress to encourage participa-
tion in publicly owned treatment works by industry. The
conferees are most concerned over the impact the idustrial [
i
i
cost recovery provision of existing law may have on industry t
i
participation on these public systems. Accordingly/ the .
i
industrial cost recovery study, Section 75, has been |
i
incorporated in the conference report, and EPA is encouraged 1
to submit the results of the study as soon as possible so
that Congress can take action on any recommendations that are
forthcoming."
And then he went on to say, "It is expected that
the Administrator of EPA will consult with all interested
groups in conducting this study, and that the study will
-------
address at least the following questions:"
First, is there any discrimnation against parta-
lar industries? And I notice we have a strong representac
today from the food processing group, which are heavily
represented here in Region III.
Is there any impact, small tovn versus big city?
That would be employment, economic inducement to move in,
that type thing.
Secondly, what disparaties in ICR and user charge
vis-a-vis employment opportunities are represented in thi
program?
Thirdly, does the ICR program drive industry out
municipal systems?
Fourth, does the industry pay more or less for
pollution control than direct dischargers?
! Fifth, does the ICR program encourage conservat:
of water?
Sixth, is there ICR program cost effective?
Seventh, how much revenue will this program pro-
duce for state, local, and federal, and to what uses will
be put?
Eighth, what is the administrative cost of this
program on the local grantee and EPA and the industries
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!
!
8 !
themselves who have to respond to this mandate.
And, ninth/ should small industries be exempt?
We're going to go into some of these matters. And
Coopers & Lybrand and some of our own national people, John
Gall and Myron Olstein, who is on the left of the table here
from Coopers Lybrand, and Mike Townsley, who is also from
Coopers Lybrand, have been going around the country in our
ten regional offices, holding similar meetings like this.
And they have come up with some preliminary findings/
alternatives, some proposed answers to questions, and you
!
have some of these in your hands now. So, without any further;
i
comment, I will turn this over to Mike Townsley of Coopers '
j
Lybrand to brief you further. Mike. j
MR. MIKE TOWNSLEY: Good morning. I'd like to tell J
i
you a little bit of the methodology we went through in
collecting information for this study. I have been responsible
for the data collection effort in mostly the eastern half of •
the country as well as a lot of the industry survey forms i
I
that were sent out. j
I'd like to go to the background of what we did and ;
give a little narration on why we did it. j
I
When EPA first asked us to conduct this study, our \
i
first step was to read the '72 legislative history related to j
-------
user charge and industrial cost recovery to find out exac
what ICR was supposed to accomplish.
Stated very briefly, there were two major objec
tives contained in the legislative history. The first wa
equity or the equalization of the assumed economic advantac
of those industries using a public system as opposed to tl
industries treating their own sewage.
Second was the capacity or the appropriate sizir
of waste water treatment plants with adequate but not exci
future capacity.
A third objective but not nearly as critical or
important as the first two was to .encourage water conserve.
This background material, together with the legislative
history related to the 1977 act and especially Congressmar
Robert's questions that we just went over.and Congresswoxn^.
Heckler's emphatic statements on ICR served as a frame of
reference for us to plan the study. Our initial step in M-
of this year was to get together with EPA personnel, incluu
John Gall, John Pai, Ted Horn from Chicago, and put togeth
a shopping list of every data element that we thought woulj
be essential to answer the questions that were raised.
We took this list of data elements and converted
it into two draft survey questionnaires, one for industrie-
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10
and one for grantees. We then reviewed the industrial
questionnaires xvith the Food Processing Association, the
National Association of Manufacturers, and other industrial
associations and groups who made some more refinements.
After we had completed our questionnaires, we
i
developed a survey list. We compiled with the EPA regional j
i
office help a list of about 100 cities to visit. These '.
cities ranged in size from a few hundred people to New York \
City. We eventually visited about 120 cities, some of them i
!
more than once, when we ran into strong local interest in the;
i
area. Our standard procedure was to attempt to meet with :
i
the grantee or the operator of the facilities first, then <
i
i
with any local industrial people or with any local public .
interest groups later on in the day.
We mailed our surveys out to the grantees in
advance so that they would have an idea of the types of data
we were trying to collect. We stressed that participation in
our survey was voluntary. In many cases we would leave a
blank survey with the grantee and have them send it back to
us later after we had gone over the questions with them.
We then put together a list of over 200 cities that
we were going to survey by telephone. We used the same
questionnaires, talked to them in advance, sent the
-------
questionnaires to them, and then collected the surveys fr
them later.
We selected a group of five, and later six,
industries for a detailed studyy and we were interested i
all industries, but we picked these five or six because of
certain characteristics that made ICR more important to t...
The characteristics we were looking for were labor intens
a low operating margin, high water usage, a significant s'-
of industry in the total economy of the country. We were
looking for some seasonality in the activities and vary in-
degrees of pretreatment available.
The industries that we selected to concentrate or
were the meat-packing, dairy products,, paper and allied
products, secondary metal products, canned and frozen fru:'
and vegetables. The sixth industry to be added was the
textiles.
A list of establishments in these industries in
cities we were going to visit were picked. We called them
to ask them to participate and mailed the questionnaires t
them. We did basically all of our data collection within
six-week period, starting in late July, running through Auc
and even into September. At times we had up to ten teams
consultants on the road visiting various grantees around t
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12
country.
The second step in our study was to develop a
mechanism for public participation in the study. We wanted as
much grass roots involvement as we could get. We wanted an
open study really. We put together an ICR advisory group of
approximately 40 individuals, representing industrial,
i
environmental, civic local government, and congressional
interest, and relied on them to keep their local members
i
informed of what was happening and when it was happening and \
I
where it was happening.
We held monthly meetings in Washington with j
i
transcripts of the meetings mailed to anyone who was interested
The third step in our project was to summarize and ,
analyze the data we had collected. This step is going on
right now. We're summarizing, analyzing, and trying to figure
out what it means. We have looked at enough data to be able
i
i
to formulate some possible alternatives to ICR, as it is j
presently constituted.
i
The purpose of our meeting today is to relate to youi
what we found and to get your reaction to it. After we have j
i
completed our regional meetings—and we will be holding them j
all of next week—we will put together a draft final report
which we will circulate. This will be some time in mid- '
-------
November. In December we'll begin to write our final re|
which must be delivered to National EPA and then to Congr0
later in December. Our final report will contain our
recommendations to Congress as can be modified by Nations
EPA.
Before we get into our findings and conclusions,
which will be covered by Myron, are there any congression
representatives present, staff members or anyone?
MR. CLARK: We didn't hear what you asked for.
MR. TOWNSLEY: From Congress, staff members fro
any congressman? [No response]
I guess not. All right, then/ we can proceed wii
what we have found and what we think it means with Myron
Olstein.
MR. MYRON OLSTEIN: Good morning. I'm going to '.
discussing some of the-findings in our study, what v/e thii
they mean, and then to present some possible alternatives
The data and statistics that I'll be using are be
on the results of our survey effort and are currently stiJ
being studied, validated, and updated in our Washington
office. Some of the data was summarized in the handout
entitled, "ICR Study Data" that was up at the front,table,
dated October 10th. I believe you all got a copy of that.
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14
The final version of the data analysis will be appended to
and included in our final report.
I would caution you that the data you have is
mostly average data and requires very careful thought before
us ing.
We eventually received data from 241 grantees.
That's data coming from those places where we actually
visited. We obtained some data through telephone surveys;
that was not as complete or precise.
In addition, we received data from some 397 indus- !
trial facilities, much of that through the effort of trade ;
i
associations. The industrial data is at the plant level ;
rather than at the company level. I
I
Taking a look at the things that ICR was supposed i
i
to accomplish, the idea behind the '72 Clean Water Act, let's
take a look first at the issue of equity or the assumed ;
i
economic advantage—that is, lower sewage costs for industriesj
i
using POTWs as opposed to those treating and discharging theiri
i
!
own waste. |
i
To examine that, we utilized a computer model that
we developed for our industrial clients and modified it to i
i
reflect'user charge and ICR. Basically the model incorporates
equiations which reflect the cost of doing business and
-------
enable the company to evaluate alternatives—in essence,
make or buy decision. Should the company use the POTW or
should it treat its 'own sewage?
What we found was that for medium and large
industries having compatible wastes it's cheaper in the
long run to self-treat, even without including ICR—this
due to user charges. This we feel is a very significant
finding because it means that even without ICH or pre-
treatment costs, large industries should, from a purely
economic standpoint, treat its own sewage. The reason fo
this is due to a number of tax changes that were not knowr
the Public Works Committee in 1972. These were subsequent
changes in the tax code established after 1972, and they
include such factors as accelerated depreciation for pollv
tion control equipment, investment tax credits for capital
equipment, and the use of tax-free industrial development
to finance self-treatment facilities.
There have been some tax-law changes passed very
recently which I haven't had a chance to analyze, but I b€
it should make it even more attractive to industries to se
treat because of an increase in investment tax credits.
Basically what this boils down to is that for ma
industries it's cheaoer to self-treat than to use a POTW.
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16
However, in our survey we found that there was still very
substantial use of POTWs. And if it is in fact cheaper to
do so, why don't more industries self-treat?
We had discussions with a number of decision-
makers in industry, and basically we came down to a number
of reasons. Many are not located geographically on or near
receiving rivers or streams and are just forced to use a :
POTW. In many cases they didn't want the hassle of self- !
treatment, having to get NPDES permit, operating their plant, j
i
that sort of thing. And, finally, UCICR has just not been in j
effect long enough for anyone to see and evaluate its impact, i
The significant thing to bear in mind though is
that if ICR and pretreatment costs are added on top of user
i
charges, they could prove to be the final straw driving many
i
industries out of POTWs, thus making it more expensive for !
i
the remaining POTW customers to use it. !
In particular, EPA's application of pretreatment j
j
standards is likely to make many industries consider self-
i
treatment. I
Going back again to the '72 Clean Water Act, the
second major issue or objective vas that of POTW capacity.
ICR was supposed to be a capacity limiter. Based on the ;
survey of 241 waste-water treatment facilities, from which we '
-------
obtained data. The average POTW uses only 68 percent of
design capacity. The range is from a low of four oercent
a high of 120 percent. It appears that ICR, as presently
formulated, has not acted to put a cap on the construct!©
excess future capacity of POTWs.
The third issue/ that of water conservation, is
not quite as clear. Based on the industries we surveyed,
water consumption has dropped an average of some 29 percei
The industries with whom we talked attributed their water
conservation to higher water rates and to user charges, nc
to ICR, the reason being that ICR as a percentage of the
total water and sewer bill is still not that significant at
this time.
Then moving on to the specific questions that we
posed by Congress, the ones that were voiced by Congressman
Roberts/ the economic impact of ICR to date is not very si
nificant in most localities. The reason behind this is th
ICR has not been in effect for more than a year or two in
most places; and, in addition to that, most grantees have
suspended ICR billings while the current moratorium is in
effect. The exception to the insignificance of ICR is in
those cases where there are seasonal users and/or where
advanced waste-water treatment is a requirement. In those
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11
I 18
cases total sewage costs for industries have increased by a
factor of several times.
The incremental impact of ICR above user charges
is generally not great/ once again with the exception of those
two cases I just mentioned, seasonality and AWT. The
combined impact, however, of user charge and industrial cost
recovery can be very significant.
We were able to find only a few scattered
instances of plant closings due to sewage costs, none of
which were attributable solely to ICR. The total number of
jobs lost in those plants that did close was less than a
thousand. And in every case where there was a closing, there ;
i
I
were a number of other factors that were involved, such as ;
plant age or that sort of thing.
r
ICR rates tend to be somewhat higher in older
cities, particularly in the Northeast, and also tend to be
i
somewhat higher in small to medium size cities, and of course ;
i
in agricultural communities where you have the bulk of j
seasonal users.
There does not appear to be any impact of ICR on j
industrial growth patterns to date.
We were not able to differentiate the impact of ICR
on small versus large businesses because very few industrial
-------
plants were willing to disclose production or sales data.
The cost to industry of sewage treatment is som~
what greater by some 50 percent in AWT plants as compared
secondary plants.
Getting down to the last few issues, the ones t?--
affect the grantee, the incremental cost to grantees of
maintaining and operating the ICR systems—that is, the
purely eliminatable costs of ICR above and beyond user
charge costs—is small when compared to the total cost of \
sewage operation. It averaged about $15,000 per grantee t
year.
The average ICR revenues per grantee per year arc
approximately 588,000, of which $8800, ten percent of that
amount, is retained for discretionary use by the grantee.
There is some more data which might be of interes
to you that's included in the handout, and both Mike and
myself would be pleased to discuss specific data during th
question and answer period at the end of this meeting.
To go back and summarize our findings and conclu
very briefly, ICR is not doing what it was supposed to do,
the congressional intent back in 1972, from either a parity
capacity-limiting, or water-conservation standpoint.
ICR to date has had no significant impact on
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20
employment, plant closings, industrial growth, import-export
balance, or local tax bases. i
i
ICR is not proving cost effective in producing
revenues for local or federal governments, at least in most |
cities. We must realize, however, that the Clean Water Act
had societal as well as economic objectives. Among other ;
things, Congress was attempting to avoid the appearance of
using public money to subsidize industries that discharged
i
into grant-funded POTWs. And while our studies have shown
that the economic objectives of the act have not been met,
i
the societal objectives remain.
j
Accordingly, it is appropriate to consider a series :
of alternatives to ICRs that now exist. I believe most of
.1 you picked up a document on your way in entitled "Preliminary
i
i Compilation of Possible Study Alternatives," dated October lOch
t :
•i
I That document contains some 16 alternatives, which range all
the way from leaving ICR as it presently is to the outright ;
elimination of ICR, As you go through that list in light of ;
i
our findings, I'd like to point out that the alternatives are •
not mutually exclusive. They could be combined; any number !
i
of combinations are possible. |
What I'd like to do at this time is have a ten- ,
minute adjournment, give you a chance to review that, to
-------
review the alternatives. When we come back, I'll proceed
through the alternatives, just discuss them briefly, and
from there we will move on to prepared statements and the
questions and answers. So, we will meet again at a quart
of 11:00.
[A recess was taken from 10:35 to 10:50 a.m.]
MR. OLSTEIN: Before we get started, I'd like t
introduce one other gentleman that's at the head table.
Moran is the headquarters UCICR expert. For those of you
who might have had discussions with John Pai, Tom-is goini
be replacing John in that position.
One other point I'd like to make. Sometimes whei
people go to a public hearing, as you walk out you might
think of something that you wish you had said. We can ta>"
comments,if they are sent to us in writing, all the way up
to November 6th, and they will still get into the public
record. The best way to do it is to send the comments to
Tom Maher at the EPA Regional Office. And if you could al
send a copy to me—you know, put my name on the front of i
Myron Olstein—at Coopers & Lybrand, 1800 M Street, Northw
Washington, D.C. 20036, any time up to November 6th.
QUESTION: How do you spell your name?
MR. OLSTEIN: O-L-S-T-E-I-N.
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22
QUESTION: That address again, please?
MR. OLSTEIM: 1800 M—M as in Michael—Street,
Northwest, Washington/ D.C. 20036
QUESTION: 20036?
MR. OLSTEIN: Right.
I'd like to, if possible, just deviate slightly
from what we have done previously. In the past I'd run
through the alternatives, and then we would go to the pre-
pared statements. And by the time we got to the questions and
answers, I guess everyone had forgotten these alternative i
I
approaches to ICR. !
i
Maybe what we can do is go through these alterna- I
tives one at a time and take any questions that you have
relative to each one, or conur.ent that you might v/ant to make ;
on a specific alternative, and that way be able to go
through these in a little bit more detail. :
i
The first alternative would be to just abolish ICR. j
i
Obviously that would eliminate all of the complaints that ;
i
t
prompted this study in the first place—the double taxation, .
i
inconsistency, the lack of cost effectiveness of ICR. But it :
still wouldn't deal with the societal reasoning that Congress •
had when it implemented ICR in the first place. Also it
would be just an additional control taken away from the
-------
capacity problem. It would be one more thing taken av/ay
would limit capacity.
Sir. Could I ask you to stand up? We are takin-
a record of the proceedings. If you could give your name
and affiliation first.
M?.. KANE: My name is John Kane. I'm with Chest
Engineers. I'm here to request the pamphlets. I dor.'t
believe the advantage or the disadvantage of saying that
control design parameters is true. There are other factor
in the review process on design and facility planning tha
have far more impact. That is just an untrue statement.
The ICR revenues returned to the Federal Govern-
ment—I wonder how much $25 million a year means to the
Federal Government or even as a percentage of this prograr
$25 million on the total federal budget doesn't sound like-
I got that $25 million from your statement that the goverr_
is going to receive from point five to one billion back.
presume that is over 30 years.
MR. OLSTEIN: Right. Our estimate was approxima.
$1 billion over the 30-year period.
MR. KANE: This observation of question seven sa"
point five to one. Using the midpoint of that of $750 mil*
divided by 30 years, gives $25 million a year. "That's the
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24
only comment.
MR. OLSTEIN: John Gall. |
i
MR. GALL: I'd like to try to address the problem .
i
that you brought up about capacity. I think it's obvious •
' I
that we recoanize that ICR cannot control all of the future :
I.
capacity. Quite clearly the issues of growth in any one area,'
both at the institutional, the commercial, and the domestic
level is probably really the dog as opposed to the tail. Yet
the most recent cost-effective guidelines that were published |
by the agency attempt to address the problems of sizing those •
factors or those components of the design flow of any particu-
i
lar facility.
I think what Coopers & Lybrand has said this .
morning—or I know what Coopers & Lybrand has said is tried to
reiterate what was perceived as the intent of IC5 way back in
1972, that it would act as a limiting factor for the indus-
trial sector in that we would not have industrial component
built without due regard for the financial impact both on the ;
municipality and on the specific plant via the mechanism of
ICR. So, I think your point is well taken in that ICR i
couldn't control all growth. But I think you have to recog-
nize that the intention was in the beginning that it would
have some impetus to make industrial planners cognizant of
-------
the problems that could come forward in the future.
MRS. HATHAWAY: The only trouble with that argur-
is that industries' ICR is not really developed until late
in the step three process, long after the plans are cast
concrete in fact. So, an industry usually isn't involved
They can be, of course, but usually are not involved until
quite lare.
I have another—
MR. GALL: Could I respond to that?
MRS. HATHAWAY: Sure.
MR. GALL: That's a very salient observation.
again I think Coopers & Lybrand have said it was the intent
' of Congress that ICR would act as a cap on future growth.
think one of the problems was, if you looked at the way ft
agency implemented ICR, there was no possible way that it
could have acted in that manner. However, again the new
' current cost-effective guidelines do attempt to address th
«
issue by letters of commitment at the step one stage. Hope
fully we can get the industrial sector in earlier in our
planning process.
Second one.
MRS. HATHAWAY: You mentioned that if ICR were
i| abolished that certain other societal objectives of the
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25
Congress would not be met. Could you go into that a little >
more? •
i
MR. OLSTEIN: There's a very strong feeling in !
i
Congress—there was in '72 and there still is—that if you
i
establish a grant program that would benefit industry, unless j
i
it's done totally across the board, there has to be a mechan-
ise, to the extent that it's possible to do so, to eliminate
those specific benefits. That's what I refer to as a societal
objective. And I think v/e're not dealing with anything we
can quantify here. But that's what Congress wants to do. And
if we just outright abolish ICR, those legislators on the
Hill that feel that way are going to feel that we have taken •
something away from them.
Let me add one thing. When we came up with the
list of advantages and disadvantages, we tried to identify
the things that are going to be argued on either side for
each point. We're not supporting them or we're not even
attesting to the validity of some of them. But I think these
are the types of arguments that you would be hearing relative
to each one.
And, if I could make an observation, there's still—
there is. a lot of reluctance on the Hill, I think — that is a
purely personal opinion—to abolish the ICR. If we could
-------
prove beyond any doubt that it's not doing anything that
wanted it to do—there is still a sentiment for having
something, whatever it is.
MRS. HATHAWAY: It does occur to me that there
ways to quantify some of the societal benefits or to get
the equity issue, which I think that was the word that was
used, in the '72 act. Direct dischargers have to pay for
the capital costs associated with their treatment of both
what we could call compatible and incompatible wastes. Anc
industrial dischargers discharging to a municipality—75
percent of their portion of the capital cost is an intere
free loan. It seems to me that there would be some way of
getting at the amounts that are represented in those
different treatments of those capital costs.
MR. OLSTEIN: I think--! forget what city it was
but in the air program, for example, they are attempting _^
do something like that, an individual computation of air
quality. I forget which specific regulations it is. But *•
annual costs of delaying the installation of certain air
1 equipment—they actually go through a very detailed comput
tion like that. I think with the'large number of individu"
plants that we have and the fact that each one of those thi
would be a unique computation, it might get—it's an inter
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23
approach. It might ge- very burdensome going through that
calculation each tine.
Is there another question relative to the first j
one? [No response] j
The second alternative is a very specific approach ,
to dealing with the capacity issue. And basically it would
base grant funding on a sliding seals beginning a- 75 percen-
based on current capacity, and that percentage would then
decline, would drop for amounts above current capacity. The
way this particular alternative is put together, ICR would
remain pretty much the way it is under current regulations.
And the arguments that would be forv/arded for it would be
this would be a way of encouraging more planning on the front
end to reduce the amoum: of uneeded excess capacity, and vould
also serve to encourage industry participation at that srage.
Obviously for large, rapidly growing areas it's nor
going to be very cost effective. It's going to put a strain
on the local share that has to be raised. And it's obviously
going to result in a very large local share for the building
of treatment works larger than are currently required.
Let's also take a look at three in the sane thing
because three is just a variant of that which would base the
sliding scale on current domestic usage. Obviously in
-------
alternative number two you would still have ICR. In alte
tive number three, because a grant is based only on non-
industrial usage, ICR could be eliminated. Arguments are
pretty much the same on both sides for either one of them
Any comments on those two altetnatives? [No
response]
Mumber four is an attempt to simplify the ICR
computation and limit it strictly to treatment works. FOJ
number of grantees it would really simplify the administrai
burden, and of course it would reduce ICR revenues.
Sir.
Mr. XANE: Is there any quantification of that
reduction? With that simplification on a large system tha
has been growing where you have an interceptor system and
i maybe you have a link out here that has a grant, plus a lot
i that doesn't, and you go to systemwide ICR versus project
project, you've got a tremendous detail problem. But if y
eliminate the interceptors and go to treatment works only—
in large systems you're going to have more than one treatm_
works probably, a central plant and maybe some satellite t
plant—that' s going to be difficult enough without having
various and sundry remote linkaaes of interceptor sewers
involved.
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30
MR. OLSTEIN: I'm sorry. The data that came back
to us wasn't broken out that way. So, we couldn't come up
with an estimate.
Alternative number five is an attempt to deal
somewhat more head-on with the equity issue, and that would
change the basis from a purely proportional basis to an I
i
incremental cost basis, the idea being to permit industry
i
to receive the benefits of economies of scale as well as the .
t
existing non-industrial users. And while this is not an j
unusual approach in some regulated utilities, the problem j
might be that with the state of the art of accounting and
economic analysis in this area, it might be somewhat difficult!
to apply.
i
Jack.
MR. COOPER: I'm Jack Cooper from the National
Food Processors Association. I think this alternative sort
of makes sense if you can't get rid of ICR itself in that the
community has certain costs whether there is any industry there
or not. Why not let the community go ahead and plan and build
its own secondary system and let the industry just pay for the
add-on that's necessary for its treatment? !
i
MR. OLSTEIN: Alternative six basically sets up a
choice for the grantee as to determining whether or not the
-------
industrial portion of the treatment works would be grant
eligible, and this lets a grantee make the choice as to
whether or not he is going to have to bother with ICR.
Theoretically this would also act as a capacity limiter o
improved front-end planning in industrial participation in
the planning of the works. It, however, will not elimina_
the complaints of double taxation and the geographic cis-
paraties that will continue to exist where ICR is elected -
Alternative number seven is an attempt to simpl^.
the administration and the development of ICR rates and t
administration of ICR by grantees by establishing uniform
rates. These uniform rates could either be by user class •
a regional basis, whatever. But basically it would make
unit rates of ICR consistent throughout the nation for a
given type of industrial customer. This of course would
satisfy those people that have this strong societal
objective. It would eliminate inconsistencies in rates,
it may turn out to be a very difficult thing to develop, t«
come up with the basic rates.
Alternative number eight, the circuitbreaker
approach, is one that would try to recognize some very unic
situations that occur locally, and basically it would be c
floor for entrance into the industrial group, the group tt
-------
I 32
would get affected by ICR; that could vary, depending on
local circumstances, discharge levels, dollar level of ICR
payments. I think we heard this morning about some ICR
bills of eight cents. Obviously this would be a mechanism
where you could implement a circuitbreaker that would say,
you know, "We've got to be billing out at least a hundred
or two hundred dollars to even make this worthwhile." This
would bring more flexibility into the system, but it may not
eliminate the inconsistency, once again the variance for the
same industry in different locations.
Nine and ten, which are somewhat similar, basically
act to reverse what the Public Works Committee tried to do;
and what it does is in effect net out what happens by—on the [
!
one hand, you'd have an ICR payment, but then all the money j
would be given back in the form of a tax credit. This would ;
j
of course resolve all the complaints of double taxation in the!
case of the ICR tax credit. But it may impose some additional
administration problems.
However, when you get down to the bottom line,
what you're doing is basically eliminating ICR. Maybe some
objections related to that.
Ten extends tax credits to pretreatment costs and
may tend to drive industry more toward pretreatment.
-------
Alternative eleven will be a return to the requ
ments of 84-660, which called for industrial recovery of
local share of capital costs, a somewhat simpler thing to
develop and administer; and it would of course leave all
the money with the grantee rather than having any sharing
the federal government.
Sir.
MR. KANE: You state that it is a disadvantage
that it would encourage development of excess capacity, anc
I fail to see how that can happen.
MR. OLSTEIN: Howard.
MR. LOBB: Howard Lobb from Black & Veatch,
Consulting Engineers. I notice that in- several of our al-
tives we have noted as a disadvantage the reduction in
revenue to the federal government. Our analysis of the
revenue that will be received from the federal government
under the current ICR system is zero. So, I don't know h<
we can reduce the revenue.
In other words, if you do have an industrial cus..
for example, and he paid $1,000 for an ICR charge, this w<
be a direct deduct off of his net income. The type of
industry that is going to be charged ICR is going to be ir.
the 50 percent tax bracket; so, there will be a reduction
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34
$500 in the federal income tax they will receive. While
they will get back $500, the municipality will retain $500>
and the government will get back $500. So, the two things
are offsetting, and the net effect of ICR on the federal
treasury, as far as we can see, is zero, from the point of
revenue, plus they have all the operating expenses associated
with the program going on.
MR. OLSTEIN: That assumes of course everyone is at
the 50 percent level; but it is a good point. I think wherever
you see the phrase "reduce revenue to the federal govern-
ment," you might also want to think about that societal
objective too. That's kind of part of it. But it is a good
point.
Sir. j
j
MR. HEALY: Tom Healy from the Philadelphia Water j
i
Department. When you make your presentation to Congress, j
i
the federal EPA, on a formal basis, will you go to a definite I
!
dollar reduction to the federal government, assuming all ;
branches of tax deduction from 10 to 15 up to 50 percent?
MR. OLSTEIN: The exact process that is going to
take place will be—Coopers & Lybrand will prepare a final
report that includes recommendations and associated calcula-
tions that goes to EPA. EPA then has to go through their own
internal review cycle, and the actual presentation to Congress
-------
will be by EPA. I would assume that if EPA makes a very
specific recommendation to Congress, that they would come"-
the cost, the net differences in revenues to the federal
government, as well as at the individual grantee level.
I would assume they'd do that.
I think we have enough data to make estimates; sc
it could be done.
Alternative twelve would abolish ICR, would ext
the proportionality requirement that currently applies onlj
OMN&R, to the local share of project costs. This"would b
way of at least ensuring that there is not some kind of si
sidization that takes place at the local level with the
capital costs. On the negative side, it takes away that i
more flexibility in rate design, and there may be some
problem with bond covenants. In some cases it may actually
increase the cost to the large industrial users.
And alternative thirteen would add an interest
component to the current ICR requirements. One of the
complaints that has been made about ICR is that basically
it's an interest-free loan to industry. This of course we
take away that particular objection. But the alternatives
that include a much more rapid writeoff than a 30-year
straight line and the investment tax credits that are
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36
currently available would start looking that much better.
Fourteen would just extend the ICR moratorium,
postponing the date. And. in a way some people have said it's
awfully early in the ICR program to have made—to have come
up with firm numbers with regard to the impact of the program.
I think the earliest ICR system that was designed was in '73,
but most have not been implemented for much more than one or
two years. So, it has been rather early in the program.
Alternative fifteen is to maintain ICR in its
present form. Obviously it doesn't require any changes, but
it doesn't take away any of the problems either that resulted
in the study.
Alternative sixteen is just a way to get at the
capacity issue by requiring a letter of commitments from
industrial users at the time the POTW is sized. It would
theoretically encourage more precise planning. But it puts
industry to making an awfully long-term commitment.
Sir.
MR. GALLAGHER: My name is Bob Gallagher. I'm from
the Delaware Valley Regional Planning Commission. On that
last point how do you account for industry that isn't there
now? You know, if the community has so many acres zoned
industrial and they size their plant based on that industrial
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acreage. Who pays for that?
MR. OLSTEIN: The—correct me if I am wrong—the
208 process is supposed to estimate when that industrial
capacity will go on stream. If it's appropriate to size
some future requirement, until you get up to that point t*!
cost has to be borne by everyone.
MR. GALLAGHER: Yes, but I guess what my guesti
is, What is the difference between an industry that is th
and paying and an industry that isn't there and isn't goim
to pay or won't pay till they come on line? And once the
capacity is there, you could shift that from domestic user:
industrial users, and there's no mechanism of checks and
balances for that.
MR. GALL: I think one of the—if you're at all
familiar again with the September 27th or 28th new cost
effective guidelines—one of the clear directions that we'
taking is the attempt to establish current needs, that is,
based on what is there now, and future foreseeable needs in
terms of actual types of commitments to come into an area,
and then to allow, if you would, a marginal amount, ten
percent, twenty-five percent, I forget what the numbers are
for future anticipated industrial growth. I think it's fa
clear from that guideline that the agency in the future is
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38
taking a very negative attitude towards putting out capacity
for land that simply is zoned for industrial use yet has no
firm commitment to be developed in a relatively short period
of time. And that I think goes back right to the problem of
excess capacity. I think that is the classic definition of
excess capacity from the agency's viewpoint because if you
have no again reasonable commitment to develop that amount of
area within a short time frame, the result, one/ is to
extend certain capital dollars to construct a facility and,
moreover, we find cost for operation and maintenance starts
to grow proportionately larger, resulting in the existing
users paying a larger share to finance future development
which, in some cases in my own region, has resulted in people
not tying into the sewer system because the unit rates then
escalate to the point that people will try every possible way
to stay off of a system.
MR. GALLAGHER: Part of the problem with that is
that if the grants were made to local units of government, it
would be one thing. But they're made to sewer authorities
for the most part, and they are in the business of sewage
treatment, and larger is usually bigger, and bigger is better
as far as they're concerned. So, you need to keep that
purpose in mind.
-------
MR. GALL: Yes, I understand what you're sayine
and I think you understand that the agency's position has
started to become "smaller is better," and that is a con-
tinuing debate which I don't think we're going to answer
here.
MR. OLSTEIN: There is one other alternative tha
was suggested at the Chicago meeting, and basically alter
number seventeen would keep ICR the way it is, but it wou
keep all of the money at the local level—no SO percent re-
to the federal government. The advantages are it obvious
makes the revenue to administrative cost a much more reast
able looking number. It provides more dollars at the local
level for the additional administrative burden associated
with the industrial customers with things like pretreatmen
standards coming up, that sort of thing. And it would be a
substantial help at the local level.
As far as the disadvantages, many of the disadva
tages claimed for ICR exist, the disparities, the geograph-
ical differences, because you are calculating the charge t..
same way.
Sir.
MR. KDLESZE: Tom Kulesze, Philadelphia Watei
Department. In the analysis of revenue received from the ]
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40
city municipality, did you consider the fact that the revenue
of 30 years each year would stay approximately the same, yet
the collection and administrative costs would escalate pretty
much with inflation? So that even though it may be cost
effective now, in a couple years it may not be.
MR. OLSTEIN: I don't believe you can consider the
numbers that came out of our study to be particularly cost
effective. The so-called eliminatable costs for administra-
tion are higher than the revenues they get to keep. So, that1
one point.
You are right. Many of the costs are labor-based
costs.; They will increase over time. However, many of the
ICR collections will also increase because I believe most of
the grantees that I saw anticipated more industry coming in.
MR. GALL: Not only that but more segments coming
on line.
MR. OLSTEIN: That's right. You have to remember
we were taking one point in time at really a relatively early
point in this entire grant program. The ICR revenues that are
coming in today are based on plants that were completed off
grant money that began flowing really when—in '74? So, we're
really taking a look at a very, very early point in this
program. As the newer facilities that are currently being
-------
constructed go on line, those ICR revenues are going to c
up. So, there is no doubt that the total ICR revenue
number is going to increase much faster than the administ.
tive cost for that reason.
Sir.
MR. COX: My name is Cox, C-O-X. I'm with the
Pengerdel Corporation. I missed a couple of key wor
as you turned to the gentleman on the left, when you were
saying, "Most of the grantees that we talked to anticipate*
and from there on I lost it. Could you repeat that phras
MR. OLSTEIN? The total revenue recovery requir~
ment, if you will, associated with ICR, in most of the grai
that we surveyed is still increasing at a relatively rapii
rate because we've—you know, this is 1978. We're still
very early point in the completion of these plants going or
line. And that's when you calculate the ICR revenue
requirement, if you will, so that that's still croing to c"
very rapidly.
Once again, when you look at any of these numbej
on the data sheet, it's a very early point in a program tl
is this large to try to come up with really good hard numbf
And that's one thing I would really caution you about wher
you look at that data.
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42
Someone in the back? Sir.
MR. CLARKE: Duane Clarke, Rohm &~Haas. Does it
increase because of more grants?
MR. OLSTEIN: Theoretically, as industry moves in,
the larger the industrial usage of the plant, that will
increase revenues also. But you've got a case where both the
unit rates are going to go up and the total number of gallons
to which those rates will be applied are going to go up. So,
both are going to be taking place.
MR. O'BRIEN: John O'Brien from Matlack. Did
Coopers S Lybrand say—maybe I missed something—did it find
that ICR actually did discourage building excess capacity?
Or weren't you able to determine that?
MR. OLSTEIN: What we found was what we felt was
a very high level of excess future capacity. We tried to put
it in perspective. I guess the—I know we only received
surveys from 241 grantees. Those grantees happen to serve
approximately half of the population. And so you're only
using 68 percent of the capacity that exists in the plants
that are serving half the population.
MR. O'BRIEN: So, that's one advantage or disadvan-
tage that the intent of Congress didn't actually serve.
MR. OLSTEIN: As I said, there were a number of
things in the minds of the legislators. This was just one of
-------
them. And when we put it to the test, if in fact it did
any role at all in limiting capacity/ you would expect to
see a number much higher than 68 percent out there.
Obviously there are a lot of other factors caua
excess capacity. If ICR was supposed to be doing part of
that job, it wasn't.
At this point, I will turn the meeting back to
Maher for any prepared statements.
CHAIRMAN MAHER: I did have a request that ther_
would be a representative from Mayor Errichetti's-office.
Do we have anybody there?
Yes. Would you come up and read into the mic he:
so we can be sure to get that.
STATEMENT OP THE HONORABLE ANGELO J. ERRICHETTI
REPRESENTATIVE: I' am here this morning to preset
a statement from Angelo J. Errichetti, the Mayor of the
City of Camden, New Jersey:
Good morning. I appreciate the opportunity to
speak to you today on the findings and preliminary conclus
of EPA's study of Industrial Cost Recovery.
Industrial Cost Recovery and User Charges are of
great concern to the City of Camden. In fact, over the pa
several years I wrote to Congress pointing out the problem
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44
and inequities faced by our community because of the rigid
EPA regulations pertaining to ICR and user charges, and that
unless we obtain some relief these could adversely impact
upon our employment opportunities and the City's overall
redevelopment efforts.
I was disappointed that Congress did not obtain
sufficient information to resolve this problem in the 1977
amendments. However, I was pleased that Congressman Roberts,
in addressing this issue, raised very pertinent questions
which, I understand, you are addressing. It is apparent,
based on the proposed facilities to be installed by Camden
County, that oresent regulations for ICR and developing user
charges will create total sewage costs that are not on a
parity with other local communities with whom we compete.
We urge you to indicate to Congress that communities
such as Camden, which are economically depressed and have
high unemployment, are being penalized when they are forced
to require ICR and are not given freedom to develop user
charges commensurate with their best interest in attracting
employment. It seems incongruous that the Federal Government
on the one hand provides programs and incentives for industriajl
development through grants to our Nation's cities but on the
other hand regulates user charges which do not allow us to be
-------
competitive with other communities.
I request that you bring to the attention of
Congress the plight 'of communities such as Camden so that
Congress can enact the necessary legislative mechanisms t
least eliminate ICR for communities like Camden and to p—
alternate mechanisms of developing user charges.
I believe that a program such as EPA's ICR and
charge programs should be subject to President Carter's
Executive Order 12074 of August 16, 1978 calling for Urban
Impact Analyses of major Federal actions. A program whic
would put older urban areas in a competitively disadvanta--
position to suburban and newer developing areas would be
inconsistent with the President's urban policy.
The City would welcome the opportunity to discui
this matter with you in greater detail.
CHAIRMAN MAHER: Thank you.
Do we have any other response or comments to whs
we have heard here this morning, either of a cursory nature
or a considered nature? Yes, Gardrterv.
MR. COX: Did the Coopers Lybrand study include
any quantification of the cost of the public hearing
mechanism outlined in the August 7th Federal Register, whi
I presume would be an add-on to the administrative costs c
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46
of the grantee?
MR. GALL: I think that probably the specific answei
is no, unfortunately. What Coopers & Lybrand attempted to do
was to establish at the local level historical costs. We had
not at that point in time talked about projecting future costs
such as would be related to public hearings on UCICR. So
that what they presented in terms of this average $15,000
per year related solely to those costs which grantees had
indicated to us were historical or were their projections
for the administration of ICR systems. Since most of the
field work was done prior to August, although some was done
after, I believe that we would not have seen any impact of
the nature that you're looking for.
CHAIRMAN MAKER: I've looked at the list of
attendees here, and we do have a fairly heavy representation
from food and some of the local industry here. And I would
like to ask at this time if any of those representatives
would like to come forward and just give us some off-the-
i
|
cuff comments or some specific examples of impacts upon their j
industries that are either located here or elsewhere.
I have had calls mvself from time to time about plant
!
impact in various areas, in particular Campbell Soup. I don't;
know where this plant was located. I don't think it was even
-------
in our region. But I would elicit your cooperation, if 1
care to, to give us some specifics of the impact of this
program or whatever.
Yes.
MR. COOPER: My name is Jack Cooper. I'm with
National Food Processors Association. That may be a new
name to many of you. We're really the National Canners
Association, we just changed our name recently, and that
be more familiar to you.
I'm Jack Cooper. I'm the Director of Environme
Affairs. The National Food Processors Association repre-
sents mostly the canned food industry. Our members pack
about 85 oercent o* the nation's canned food. I do have
statement that I would like to make on behalf of the indu:
and then Lou Gilde from Campbell's Soup Company will
present some specific ICR and user charge problems for hit,
company, if that's all right.
CHAIRMAN MAHER: Sure.
STATEMENT OF MR. JACK COOPER
MR. COOPER: Over the last few years many food
processors have seen alarming increases in cost for treatar-
of .processing waste water by publicly owned treatment work.*
as a result of the imposition of industrial cost recovery
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48
user charge programs in comparison to competing firms which
build and operate their own waste-water treatment facilities.
Increases on the order of'tenfold have been common where
POTWs have implemented 1CR and user charge requirements.
These costs greatly exceed costs experienced by competitors
which treat their own waste waters or which discharge into
POTWs not funded with the PL 92-500 grant money. I am sure
that many comnanies have already or will provide you with
case histories, and Lou Gilde will also.
The initial data from an intensive study of food
processing waste-water treatment costs by Coopers & Lybrand
have shown that the cost per gallon for POTW treatment of
food industry waste waters are two to four times those for
self-treatment by land or other method.
One of the handouts in the back of the room is
based on an intensive survey we did of our membership, we
got something well over 200 individual plant responses from
our members. We didn't analyze, but we made them available
to Coopers & Lybrand, and they did. And there are three
sheets there that show these costs going from two to fourfold.!
We believe that ICH is not achieving the congres-
sional intent of preventing industrial users of POTWs from
receiving a subsidy because no such subsidy actually exists.
-------
As the C&Ii data show, industrial users of POTWs are payin
more for treatment than their competitors not in such
systems. It was congressional intent that dischargers of
conventional pollutants such as those discharged by food
processing plants should be encouraged to utilize POTWs
wherever possible. Unfortunately the combined ICR and use.
charges are having the ooposite effect. Where combined I<
and UC charges are excessive a plant may stay in operation
but it may reduce its production at that site or certainly
would not expand its production at that location.- In ord«
to restore competition between plants in urband and rural
location and to encourage the obvious benefits of food
industry use of POTW svstems, the present ICR system shouJ
be abolished because, number one, the program has not
encouraged food industry participation in POTWs and/ two, t
food industry has as much right as a private citizen to ex
a return on its tax dollars in the form of assistance in
waste-water treatment capital costs.
If total abolition of ICR does not occur or if t
law continues to specify the manner in which waste-water
treatment costs are shared between industries and munici-
palities, a more flexible system should be provided which
would allow industry to pay as a minimum the incremental I
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50
and user charges incurred by their presence in the system.
This incremental cost is the difference between the cost of
a joint industry-municipal system and the expected cost of
a system constructed to treat municipal waste water if that
industry does not participate.
At this point I would like to introduce -Mr. Lou
Gilde, Director of Environmental Programs at Campbell Soup
Company. After Mr. Glide's presentation, we would be pleased
to answer any questions.
STATEMENT OF MR. L. C. GILDE
MR. GILDE: As indicated, I am Lou Gilde of
Campbell Soup Company, and I have a table here which I vould
like to give you and discuss briefly, [handing1.
If you don't mind, I'll turn around and face you
since you're the only ones that have the table.
Basically what we are trying to show with this
table is the disparities that occur within a company on the
cost of treating sewage. We show, as the first example, a
community—not a local but rather Sacramento, California.
The only reason I'm showing that community rather than f
Camden is that Camden really hasn't developed its program
far enough to come out with actual cost figures. From the
information we've received from the Camden County Municipal
-------
Utilities Authority, their costs appear to be or may be i
range of $800 to $1,000 per million gallons. But at this
point in time it's too early to know, whereas our experient
in Sacramento where the plant is under construction and
be in operation by 1980 or '81 at the latest, they've air
spelled out the total cost, and that is $725 per million
gallons. In that particular program, if we eliminate ICR
the cost to industry there would be reduced to $480 per
million gallons. And we give a third figure there, that i.
we allow the community flexibility in developing user cha
so that the industry is only charged the added incrementa
cost of treating sewage over that which would occur if it
were just treating the domestic sewage, the sewage charge
would reduce still further to $425 per million gallons.
We've made a list of other plants we have througi
the country. Another plant in California where the sewag<
charge is only $182 per million gallons. Two plants in
Nebraska, one in Illinois, one in Arkansas, and one in
Maryland. As you see, the average of those six plants is
only $273 per million gallons versus the new program unde
Public Law 92-500 of $725. Now, these other communities
have secondary facilities installed, operating under prio-
grant programs. And of course their costs reflect having
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52
been built much earlier. These are not the only plants that
we have. We have deliberately left out plants wherein
communities that achieved secondary treatment via less costly
programs such as anaerobic, aerobic ponds. We have several
installations where communities do that in the Midwest, and
the costs are down, in the range of $150 per million gallons.
The other thing that is not on this table is the
fact that of all our plants, approximately 40 percent we
treat our waste ourselves. And our sewage costs where we
treat our waste ourselves range from $55 to $250 per million
gallons. It's interesting to note that the lowest cost ones
are the ones that have the highest degree of treatment. And
these are primarily land treatment systems. So that there is
this—this provides an example of the disparity that is
being generated by the present program and the fact that if
we eliminate ICR and do provide greater flexibility on user
charge, we can bring the cost more in line with what is
prevailing in other communities.
I would like to comment briefly that one point
raised this morning was that there doesn't seem to be much
controversy on user charges. I think, as we go down the road
here and communities start learning where they are coming out
in comparison to other communities, there is going to be a
-------
heck of a lot of controversy on user charge. And just as
important as ICR is, it should be important, as was mentio-
in Mayor Errichetti's letter, to address the need for
flexibility in user charge. Thank you.
CHAIRMAN MAKER: These dollar costs you have he*--
I believe are computee as your total million gallon cost E-
operation and debt—
MR. GILDE: Right.
CHAIRMAN MAKER: —of whatever cause and not
necessarily the capital cost per million gallons of
capacity at the plant.
MR. GILDE: No, they have nothing to do—they arc
what we are charged.
CHAIRMAN MAKER: Point off three and you would I
cents per thousand gallons.
MR. GILDE: That is right.
MR. GALL: I don't want to make any point relat:
to the presentation other than to let you all know that th«
Campbell Soup experience I believe is part of the Coopers
Lybrand data that was presented to us by the National Poo<
Processors; and, to that end, we would like to thank them
greatly for their heop in the study.
CHAIRMAN MAKER: Thank you. I didn't mean when
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54
said there is no controversy on user charge that there wasn't
any impact economically and that there weren't vastly
differing charge structures in other areas. I think Mike or
Myron indicated that in some cases ICR is not the bugaboo.
It's the user charge that impacts a local community. And
that is quite true. You're quite correct. It depends on the
level of capital input in that system and how big an expan-
sion they are going under or how bier an upgrade they're under-
taking .
We have some representatives here I think from
P. & H. Schaefer" and Schmidts, Hershey Poods. Do any of you
other gentlemen care to make any informal comments or even
have any questions about what you've heard here today or can
cite any experiences of your companies or your plants in this
region or elsewhere?
I
MR. EAV-FRANKIE:V-Only ar .comment)' Bill -La Frankie, j
with Pet, Incorporated out of Allentown.
The Allentown people just went through a survey.
I'd leave a copy. I only have one copy. Maybe you have seen
it, done by MeteaIf and Eddy.
CHAIRMAN MAKER: Yes. It has just been submitted
for approval.
MR. EA' FRANKIE:- Our- situation-personally 'is the-^same
-------
as these gentlemen are talking about. It has to do with
user charge more than ICR. In our case, as in the case of
some other food companies in the area, it has to do with 1.*
strength charges also. That's the only comment.
CHAIRMAN MAKER: Yes. Many times the user chare
surcharge is of greater impact, I believe, than the ICR,
depending on the amount of exposure to the industry and tl
amount of capital being put in.
Would any of our consultants groups care to make
observations,, particularly those from outside the region?
Howard, you represent almost the whole country. What kind
flack are you gettincr?
MR. LOBB: From our standpoint, we've been in th
waste-water rate business for some 60 years, and we feel t
in general the user charge and industrial cost recovery pro-
have not improved our business from the standpoint that ma
of the things that were proposed in the user charge in the
user charge regulations are things that have been done by t:
industry for years. So, the user charge came along and it
really didn't add anything. We are finding that the indus
cost recovery charge is an additional burden to industry; fre
the standpoint of a rate consultant, it represents a chargi
which the municipality must put on one group of customers
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56
which it incurs no cost. So, from a true consultant stand-
point, we cannot see the need for or the reason for the
industrial cost recovery charge. For years there has been
the concept that rates should be based upon the cost of
providing service. The repayment of a grant in no way is a
cost to the municipality and is in no way a cost that involves
any of your service.
So, while we feel that the user charge system has
merit, we believe that customers should pay their proportionate
share of the treatment costs, we do not see any merit in the
ICR program.
I do have a statement at some point in time that I
am to present for the City and County of Baltimore.
i
CHAIRMAN MAKER: Why don't you make that now, |
Howard? i
i
STATEMENT OP MR. HOWARD LOBB j
j
MR. LOBB: Howard Lobb with Black & Veatch Consulting
I
Engineers. I have been asked by the City and County of
Baltimore, Maryland to make the following' statement.
We wish to express our full support of the basic
principles set out in the following resolution of the
Association of Metropolitan Sewerage Agencies. And I might
add off the record—tComment made off the record.]
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The Association of Metropolitan Sewerage Agenci<
resolution is as follows:
The Association of Metropolitan Sewerage Agencies
supports the elimination of ICR provisions from the Feder.
Water Pollution Control Act, Public Law 92-500, and the
Clean Water Act of 1977, Public Law 95-217. Until the ICR
requirements of the law are eliminated, the Association oi
Metropolitan Sewerage Agenies urges EPA to develop regulat
for the program that are consistent with the spirit and int
of Congress's recent amendments to Public Law 92-500.
we have listed three points of rationale. The f
point is that there is no practical benefit to be gained fr
making the program more complex, or from expanding the
definition of ICR-eligible discharges to include sewerage
customers that are not normally considered "industrial."
Two: Major Changes in the present regulations—
outside of those mandated by Congress—could be invalidate
by the findings of the ICR study and subsequent acts of
Congress and would, in the meantime, only delay fulfillmen.
of the final requirements as treatment agencies struggle w
yet another series of regulatory revisions.
Three: ICR requirements will work against the gi_.
objective of revitalizing America's central cities, since •
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58
ICR program makes joining or staying in municipal systems
more expensive than would otherwise be true. As all indus-
tries are federal taxpayers, it is unfair to require them—
and only them—to reimburse the federal government for 201
grant monies spent on their behalf if other users are not
asked to do the same.
That is the conclusion of the Association of
Metropolitan Sewerage Agencies' resolution. In addition, it
is the opinion of City and County of Baltimore that, one/
from the standpoint of the waste-water utility, the Industrial
Cost Recovery Program is not cost effective administratively;
two, the industrial customer is already meeting its share of
waste-water treatment costs through user charges, plus facing
the additional burden of pro-treatment requirements. The
additional costs of ICR can only be a further detriment to
industries in our area.
That's the conclusion of the statement.
CHAIRMAN MAKER: Thank you.
We do solicit your comments and statements, and
then I believe we want to also have an informal question and
answer period. We would like to encourage you to just ask
questions of any member on the panel about the policy issues
that are represented here in ICR. And I think maybe we could
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even broaden it out to some of the maybe confusion that me
still exist in the current regulations on user charge or ]
So, if anyone has any questions--John.
MR. KANE: Tom, I would just like to clarify one
point. I want to make sure that you don't understand that
the statement of the gentleman from Black & Veatch represen
the entire consulting industry. I find the user charges c
of the most onerous provisions of 92-500 and that it usurp
the local prerogatives on rate making. They interjected in
that law a word that was foreign to rate making prior to t_.
time, and that was the proportionality and the prohibition
against recognizing the economies of scale. I do not
subscribe to that statement.
CHAIRMAN MAHERs I didn't mean to indicate that
Howard was representing the entire consulting fraternity.
just meant that he was from Kansas City, which is almost ii.
the center of the country. [Laughter!
MR. LOBB: Those comments were from our own exper-
ence.
CHAIRMAN MAHER: I keep bumping into him no matt*
where I go.
Go ahead, John.
MR. GALL: I'd like to give you some kind of
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60
perspective of where we're going from here in terms of what
EPA is going to do with the report from hereon out and how
you could plug in in the future, so to speak, to have addi-
tional kinds of input to our study.
As Myron had indicated, comments will be received
for the record from now until November 6th, directed to Tom
or to Coopers & Lybrand in Washington.
To recap again what Mike Townsley said, some time
late in November C&L will be presenting their report to us
for our—to do whatever we will. At that point in time the
agency will be reviewing the report, considering the recom-
mendations of the consultant, the comments that we have
received through the ten regional meetings; and we'll be
preparing a final report that will be delivered to Congress
no later than December 31st of this year.
We expect to make available a summary document of
our final report to Congress in order that you may be aware
as to how your participation today impacted ourf final decision
And to that end, I'm going to put up at the registration table
just a list. And if you would either leave your business
card or sign it with your name, address, and zip code, et
cetera, we will attempt to see that you get a copy of the
summary document.
-------
There are indications again in the September
regulations that there would be a Federal Register notific*
tion of the same type. I think this would give you a much
more direct access to the final report.
We don't intend to make at this time at least a
wide distribution of the C&L final report. Basically the
problem there is that it is going to contain all of the
public hearings, all of their computer data, all of this,
all of that, and all of the other thing. It probably is
going to be about that thick [indicating]. But I think th
the summary would give a fair synopsis of the issues that
were involved, the decisions that were made, and the
rationales therefor.
In that regard, I think it is important for me t
say that the final recommendation that we make to Congress
a result of this study will be the agency's recommendation
We are charged to deliver the recommendation to Congress.
It's of course the Congress's job to make the future modifi
tion and to alter the program in whichever manner they see
fit.
So, I would just urge you once again, anything th.
you wish to convey to us by November 6th, get on the list.
And if you still wish to convey further things after the ei
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62
of the year, I think the appropriate forum is of course up on
the Hill.
MR. WEIDMAN: Jay Weidman from Be&z Laboratories.
When you were discussing the various alternatives, you men-
tioned frequently the societal effects or considerations of
Congress. I would like to ask Tom if he could give us an
indication of how many public interest groups are represented
here today in comparison to industrial representation or
consultants. You have the list.
CHAIRMAN MAHER: Yes, it's in the back of the room;
I've looked at it. We do not have any Sierra Club or public
groups that I know of. They're mostly a smattering of
authorities. We have one from Hampton Roads, and I believe
we have a preponderant representation from private industry
here at this meeting.
MR. WEIDMAN: Thank you. The second question, for
EPA: Many times since the 1972 amendments have been passed
it seems that the cart has been put before the horse. There
have been indications from the Effluent Guidelines Division
in studying the 129 toxics that when they put out the
regulations for direct use charges, they are also going to put
out resource performance standards and regulations for pre-
treatment for those toxics. They have indicated that the
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regulations for pretreatment will be as stringent as for
direct discharges. If you are intending to send a final
report in to Congress—that is, EPA—prior to seeing thesr
guidelines, which will not begin to appear until after youi
report has gone in, there is a definite possibility that
21 industry categories will choose to get out of the publ.
owned treatment works because they are going to have to pr€
treat to the same extent as they would have to in any evei
if they discharged directly. My comment here is that
possibly you might request a delay in your report until yc
see the potential effects of those difficult guidelines.
MR. GALL: I think that's clearly one option whi
we had laid out, and I think the point is well taken. I un
tunately cannot speak to the timing of the promulgation of
pretreatment standard, and I don't know how far into the
future we would be delaying all of our decision-making
processes by following that course. But it's something
clearly we have to address as we're making our final repor
I believe we had two questions over on this side.
MRS. HATHAWAY: I just was wondering—I may have
missed—when did the agency expect to make its recommendat
to Congress?
MR. GALL: By legislation by December 31st of th._
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64
year.
For anybody who has any questions about what type
of involvement the Sierra Club and others may have had, I'd
just like to briefly run down the various members of an
advisory group- that has been functioning at the Washington
level since Late in the spring of this year. That group was
put together in order to ensure that we had a fair and repre- j
sentative cross-section of people who may be interested, and
it included such organizations as the Isaac Walton League, the
Sierra Club, the Urban Environmental Conference, Friends of
the Earth, approximately 12 environmental organizations, a
number of industrial trade associations such as the National
Food Processors, the National Broilers Council, the American
Frozen Food Institute. There were involved in this a number
of governmental organizations such as AMSA, the National
Association of Counties, and in addition representation was
provided by the Water Pollution Control Federation and several
others, American Public Works amongst them. And sort of as an
aside comment, I don't think it should surprise anybody that
the people who have to pay are the people who show up at this
hearing.
MR. KANE: The summary document that you are going tc
make available, is that going to be EPA's summary or Coopers
-------
Lybrand?
MR. GALL: EPA's.
MR. COX: What is the general view that comes
across to you about urban matters from the point of view <
those organizations who are primarily interested in wildez
and wild rivers?
MR. GALL: It would be very difficult to charac-
terize their kind of involvement at the Washington level
other than to say that several of the organizations have
indicated that they understood the potential urban- problem
that could result. And that's maybe an unfair characteriz
on my part in that I haven't been to all of those meetings/
and I certainly wouldn't want to speak for them.
MR. COX: With the understanding of those urban
problems that could result, was there an expression of
genuine concern?
MR. GALL: I'd really have to look back in the
record. I'm fairly sure there's an expression of concern.
And, without a doubt, I'm sure that it is genuine.
CHAIRMAN MAKER: John, maybe to clarify this isst
I have had some comment from various sectors to the effect,
if I can paraphrase it, that there's a diversity of interes.
between the industry group in the urban section and the rur
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66
wild rivers, and that the concern was that the impact to
industry economics is being somewhat determined by people who
have no concern, if you will. I don't know whether that's a
fair way to put it or not. But this is a Region III concern
and has been. Did I twist that up pretty badly?
MR. COX: I'm still in the dark. I'd like to know,
if I may, one or two suggestions or proposals, regardless
of their merit, that may have come up in the earlier hearings
from that sector that we are discussing. Points of view,
if you like. I haven't heard any point of view yet.
MR. OLSTEIN: I have been in all the public hearings
that have been attended by these groups—the Isaac Walton
League, the Clean Water Action Project/ that sort of thing.
I'm doing a little bit of interpreting, but I don't think any
of those groups are wedded to ICR. And I know Jack has been
at a number of those hearings. He can comment on it too. I
don't think that they're really tied to it.
One comment that was made by the Clean Water Action
Project, there was a lot of concern expressed about the inter-
action of the provisions of Section 204, the rate-setting
provisions with the process of sizing the plant, regional
planning, that kind of thing, and I remember that they were
very concerned that we take a look at that process. But we
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never got around to looking at any specific urban problem:
We never got quite to that point. And I think that would >•
something that would' happen at the next public hearing in
Washington.
So, they have not shown to me that they have bee"
wedded to ICR or particularly hostile to industry. Does -~
answer your question at all, Jack? Do you have -something
you'd like to add?
MR. COOPER: I would not try to speak for the
environmental organizations. (Laughter]
MR. OLSTEIN: I don't know. My feeling was thai
didn't feel that they have been particularly rigid. Maybe
I'm interpreting the fact they didn't come out to our lasl
public hearing as an indication that maybe they weren't
concerned with—
MR. COOPER: I'm Jack Cooper. I will say this.
From the very first advisory group meeting they were all
there. All the environmenttal groups were sitting around.
They were all interested. They were all doing something.
As the meetings continued—at the last meeting there were
environmental groups present at all. They were all just th
affected industrial groups. Whatever that says, you can d
your own conclusions.
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68
MR. GOELZER: I'm Bill Goelzer. I'm with the Land and
Sewage Authority in Vineland, New Jersey. During the first
part of the meeting, you said that the cost to administer the
ICR programs was about $15,000 per year average and the
income was $8,800. How many authorities or POTWs were in
that sample to compile the average?
MR. GALL: There were 241 grantees in the total
sample. As to how many of those actually had ICR systems
where they estimated the cost—I would like to say one thing.
It was $15,000 a year in eliminatable cost. It was $88,000
a year roughly, ICR revenues, of which $8,800 was discre-
tionary. So, the comparison was made between the discretion-
ary amounts and the cost of administration.
MR. GOELZER: How large a sample was that out of that
241, just approximately?
MR. TOWNSLEY: It would have been, I'd say, a good
majority of the 241.
MR. GOELZER: And what average size were they, say, in
gallons being processed? Were they large, small?
MR. TOWNSLEY: Around 50 million gallons a day
design capacity was the average that we came up with.
MR. GALL: If you have the handout, the ICR study
data, across the top I think the first line is average size.
-------
It ranges from 50 to about 80.
MR. GOELZER: How do the costs vary/ say, for a
small authority, like a 10-mi11ion-galIon-a-day authority.
Is it the same ratio or is it higher?
MR. TOWNSLEY: We are still analyzing that in
different size categories, and this is part of the analysi_
that is going on.
MR. GOELZER: Something else too. We've been as1-
to develop an ICR program by July 1, 1979. Yet all this i»
still being discussed. The ICR program apparently is very
much unsettled. What's the reason for us being here requi-
to develop a program by that date, by July 1, 1979? We've
been told that if we don't, we can't receive any more Step
grant money.
CHAIRMAN MAKER: The Congress initially did not g
the right to approve user charge ICR in Step 3. EPA did t
as a necessity. And they're just withdrawing that regulat
privilege that EPA took. And the reason they're doing it,
believe, John, is that this should be done in the planning
steps—public information about cost/ which is user charge
ICR. And they want to get back into Step 1, Step 2; is tha
not correct?
MR. GALL: I can agree with that. The other pro]
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70
is that the moratorium, by legislative fiat, ends at that
date; and so that in order that a grantee would be in compli-
ance with the law as of that date, you have to have something.
I think that is the more direct response. I think Tom's
characterization is very qood.
MR. GOELZER: Our concern is that it may cost us
four or five thousand dollars in consulting fees to develop
an ICR program which may not even be valid by July 1, 1979 if
the regulations change.
MR. GALL: Yes, that's clearly a problem, and it's
germane not just to ICR but the entire program. Anybody who
has been with it for any period of time...
MR. GOELZER: Do you see any possible change in the
EPA requirements for the ICR program being developed by that
date?
CHAIRMAN MAHER: I think you have had indication
here, have you not, that there is not much sentiment in the
Congress to completely abolish, I believe? is that an unfair
statement?
MR. TOWNSLEY: It's a personal opinion.
MR. GALL: It's a personal opinion.
CHAIRMAN MAHER: Personal opinion.
MR. GALL: But, no, the answer to your question is
-------
no, I don't think you'll see much change and strictly bec<
of the legislative mandate that should be prepared to
reinstitute ICR at that date. That's something that we can-
change.
MR. HEALY: Tom Healy, Philadelphia Water Depart
ment. If you were to get a hundred percent negative reactii
at the public hearings to ICR, how far does that go in
influencing Congress as to these public hearings expressin
the will of the people? You said they maybe had their mind;
made up already. What good is a public hearing then?
MR. GALL: I think it's very important from the
of view that—again this is a personal observation—were thd
whole thing done cloak-and-dagger type of thing and strict.
with the advisory group and nobody else had the opportunity
comment on it and were the only way that you knew about it +
to talk to your congressman, I think that that just contim
a process that we—that is, the agency and probably the
government in general—are trying to get away from. And the
public hearing is going to be as good as you make it. We t
to get you here. We try to provide you with information an
hopefully get some good feedback. But I think the onus is o
the public to make it a viable forum.
As to what effect overall your comments are going
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72
have, I think a lot of it is going to ride on the merit of the
comment as well as, were I a politician, the numbers.
MR. LOBB: Can I express something that is concern-
ing me as just an individual, not representing anybody? In
our business over the years there has been the plan that we
could treat waste waters from all sources where you had
compatible waste more economically by a single system. We
spent the last 30 years regionalizing waste-water treatment,
eliminating small plants and pulling everything together. And
I now see a trend coming up which bothers me. In our business
we represented very few industries in the past. We're
primarily a municipal rate consultant. In the last four years
now we*re representing over 100 industries across the country.
And they are very serious about the waste-water charges. They
are very serious about coming up with alternatives to staying
on the public system.
The net result of this, which bothers me, is we're
going back to the old system we had before that didn't workj
small treatment plants would be spread all over a municipality.
We will have built into our municipal system capacity, which
is going to take years to utilize. In certain areas it has
already occurred where we are seeing less than 50 percent of j
i
our capacity being utilized. And by the time any normal growth)
-------
can pick up this capacity, your eouipment is going to be
outdated and decayed to a point that it won't work. So, t"
thing that's bothering me is that the very trend that we ha-
tried to promote in the past of an orderly treatment proce
where everybody would receive the benefit from a municipal
system, I think we are starting to reverse that trend. So,
I think anything that EPA takes into consideration, I can1
help but think that pretreatment rules and regs are a
further leaving of the municipal system.
I think it's a bad situation, and I think it's j
going to create greater problems than we have now. And an
thing that we can do to retain the industrial customer
within the municipal system and reduce the number of indi-
vidual plants with all the inefficiencies and all the potei
tials of spills and uosets, we would be much better off to
promote use of our municipal facilities, and it has been do.
the last 30 years. That's my own personal comment.
MR.-GALL: Is there anybody else who wishes to m?1
a comment or observation or ask a question? The gentleman .
the back.
MR. CLARKE: Duane Clarke, Rohm & Haas Company.
I'm finding it difficult to understand why the
ICR makes such a great difference between the cost of sewac
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74 I
treatment by privately owned plants and municipal plants.
Given the economies of scale and tax-free land, one would
think that there wouldn't.be an opportunity to compete. Has
Coopers Lybrand study given any indication by this is?
MR. OLSTEIN: You asked a couple of questions.
Basically if you're an industry that discharges—we haven't
nailed the exact number down yet—but if you're in a medium
1
to large range and the two alternatives that you have are ;
either to go entirely towards self-treatment and take as many-p
if you're large enough to be able to take all of the tax
advantages available to you on the one hand and if, on the
other hand, your other alternative is to go into POTW, there
are so many tax incentives, there are so many strategies,
i
financing strategies, that you can use, that you can have a j
i
positive present value in self-treatment, and you are never •
going to have that in a POTW because you're always paying.
The amount, the percentage, of that strictly ICR is i
i
really very small. I mean, basically it boils down to getting)
|
very inexpensive money, if you can go on an IDE, repaying
only interest until you have that final repayment of interest
of principal, getting a tax credit right off the bat, rapid
writeoff. You have all of that right over here. And, on the
other hand, what you've got is a straight-line 30-year
-------
repayment that may be interest-free; but in terms of what
is worth to you today, there is just no comparison between
two. So, if you can take advantage of everything that's
available, unless you're really small/ you're a lot better
doing that.
There are two other factors that enter into that.
One of them is that in every case where there has been a
grant—I believe it is either every case or the overwhelmii
majority of them—you have an upgrading in treatment level.
In other words, if their previous plant was primary, if th«
getting a grant now, it's to build a secondary or an advan<
secondary plant. So that in a plant type of situation you
are always going toward a more expensive treatment level, :
that additional money doesn't buy you more economical
operation. It's more expensive to run a more advanced plant
The other thing is that as you get into these moi
advanced plants, the economies of scale really aren't there
You're talking about—you know, the curve is almost flat.
It's very close to being flat when you get into these more
advanced plants.
So, there just aren't as many benefits on a POTW
side to offset—
CHAIRMAN MAHER: Question back there.
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76
MR. GILDE: Lou Glide. Our experience is more in
a different direction. Yes, there are some tax advantages.
But where we've been able to define the problem, it comes down
to the fact that in food waste, in particular, it can be
quite strong—three, four, five times as strong as domestic
waste. You treat that by itself and you get a certain unit
charge, cost. Now, you mix it with a dilute waste, and based
on the regulations that presently exist, almost all the
benefits of the larger size accrue to the people with the
least waste. So that if you reverse the concept here and
said, "Okay, domestic people and the rest of the community
try to concentrate their waste"—which is one of the things
that the food industry has tried to do, is to reuse water so
that you end up with a concentrated waste, then your systems
would be much smaller and less costly.
So, our experience is that this tremendous increase •
in cost is coming because we're not gaining the benefit of
the combined system.
The other thing is that when we build our own treat-j
ment system, it's concise and just for it. We don't have a
park around the treatment system and many other things that
I guess, from society's standpoint, are required for a
municipal plant.
-------
I'd like to, while I'm up here, address one
point, if I could. One of the other things I've been
involved in in the past 20 years is locating plants. And
experience over the years is that when you are trying to
a town to locate in, you frequently come to a community th-
says, "Well, we've got a ten-million-gallon-a-day plant, an
we're only using six to seven million gallons. Your wast«
only a million gallons. We'll just charge you the added r-
to treat that added million gallons." That is a base that
exists in many parts of the country and in many communitic
and that type of thing is still going on today where the
community does not have to rely on federal grants.
So, you're going to have this dichotomy kind of
continuing down the road. Now, what concerns me is if you
lock people into the present program—which program, accord
to Congress, is only limited to this point in time, the nex
five years or so—and you don't continue in the future mon
from the federal government to take care of future projects
then five or ten years from now, when we've done away with
federal grant program, you now have some communities that •
be building up reserves. Won't they be in the position to <
the same thing that has been done in the past with those
reserve funds?
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78
CHAIRMAN MAKER: Lou, I'm just going to interject
an administrative note here. We do not wish to filibuster
you people through lunch. We came here to avail ourselves
all day today and even Monday, if necessary. I would like to
ask at this point if there's a feeling that we should break
for lunch and if there's sufficient interest, we will come
back and have an open discussion. I think there is a great
deal of benefit in this type of thing because I think in these
types of meetings we don't get down to gut issues. We get a
little more informal as we go along. And yet we don't want
to keep you this afternoon, if you have things to do or
places to go.
What is your pleasure? Is there a consensus that
there is any benefit? would you like to break for lunch or
just continue on? [Pause]
I shouldn't ask that question. That's like asking
whether the grass should be green.
MR. CLARKE: I move we continue.
[The motion was seconded.]
CHAIRMAN MAKER: All right, let's break for lunch,
and we came prepared—[audience reactions]—oh, oh, continue,
all right. All right. And see if we can't wrap it up. Okay,
fine. Let's have some more questions and comments in response
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to the discussion so far. Yes, Gardner.
MR. COX: Mr. Gilde has pointed out certain
disparities in patterns, town for town, city for city. A-
the prime amateur in this room, I am upset by reading
Roth's' articles out of Buffalo where apparently there we
pretty tough situations, with sewer rates going up ten tint-
25 times, in one case 57 times for a barrel company. Are
there many cities that you surveyed where similar disparat
or great multiples in their rates occurred? And is there .-
common reason for this or group of common reasons?
MR. OLSTEIN: Let me answer that. "First of all,
just to get back to Lou'a statement, I think you should
recognize that Campbell's Soup in Sacramento is in a situat:
where they are hit twice. It's a highly seasonal user.
They're in a situation where you have advanced waste-water
treatment. So, they got hit at least twice just by locatinc
out in Sacramento.
You mentioned Buffalo. I should point out that
although there had been some very sizable sewage rate
increases in Buffalo, they haven't gotten their first dolla
of 92-500 funds yet.
MR. COX: These were numbers predicted by the
sewer authority itself for 19 plants. And the multiples of
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30
the year '79 versus the year '78 were pretty frightening.
MR. OLSTEIN: The reason I said that is because
I think it is very important to find out what it is that is
causing the problem. In the case of Buffalo, Buffalo was
trying to go from down here to up here at one time. And they
are going to have—because they are receiving a very small
amount of 92-500 money—they're going to be going to sort o£
a user charere system. And those are the reasons why there
are going to be such enormous increases. But they've got an
over $200 million building program going on, of which only
$14 million is going to be 92-500 funds. The rest of their
funds are all 64 or 660.
So, ICR is so small, a part of that you couldn't
even see it. And they don't have any ICR requirement right
now. What you do have—I'll go back to the findings I went
through. Where you have a situation where a municipality is
trying to go from a very old antiquated, strictly primary
type of system to a secondary, advanced secondary, or
tertiary, it's just going to cost a lot of money. And what
happens, what you'll find in a lot of cases, is they're going
from just incredibly low rates to rates that are a lot higher i
)
than what they used to be but aren't that much higher than you
find in other places. What the effect on the rates is going |
-------
to be depends on the size of your rate base, where you're
coming from, the level of treatment of the new plant that
you're installing; and in the process of doing that, you ge
some increases. I've seen increases of ten times. That i
not an unusual increase. But you're looking at an awful 1
of things hapoening all at once, of which ICR us just one
part and, in many cases, a very small part. You've cot a
tremendous amount of uparading that's going on. You have
prior rates that had ad valorem or that kind of thing in
there. And when you do everything all at once, some peopl
some industries particularly, are going to see enormous
increases. But there are a lot of things happening when yo
get—
CHAIRMAN MAKER: That's the case, Gardner; we ha
one in Region III where they went from primary treatment wh
the costs were shielded in real estate taxes; in effect, ti.
were paying no sewer bill, and they went to AWT. And that
an infinite increase.
MR. COX: It's also almost a social revolution fc.
the guys who were working in that industry, like the wet
industries in Milwaukee.
CHAIRMAN MAKER: But Myron is bringing the point .
that it's a function of where you're at, where you're goinc
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82
and how fast you're doing it. Many things influence these
matters, not the federal program, although albeit we are
requiring them to reduce their pollution.
MR. COX: The federal program is saying upgrade
by whatever method, right?
CHAIRMAN MAHER: That's right. But we're now
talking about something other than ICR.
MRS. HATHAWAY: But it truly is upgrade and propor-
tional user charge. There's where the stickler is. I mean,
if they're in Milwaukee, they're going from an ad valorem
system with companies which were in the older sections of
town, contributing vast quantities of pollutants; and now they
are being charged, rather than on a real estate basis, they're
|
being charged on a proportion to use basis. It's the upgrading,
:
plus the new system of charging.
CHAIRMAN MAHER: The full disclosure of true costs j
I
really. They were paying it before in many cases, but now
they are pulling it out, and they are not reducing the former
charge structure. They will leave the real estate tax alone.
Lou.
MR. GILDE: I was just going to point up the same
as over here. It is the federal program, the way they
demanded and developed user charges, which is only impacting
-------
on certain communities and in certain areas. It's not a
hundred percent across the board. So, instead of achievirv
the parity that Congress was after, we are really achieving
a great disparity.
CHAIRMAN MAKER: Yes, but at the same time we'r<
achieving parity and equity in the level of treatment
provided for the nation's waters. And if some were neglit
in prior-year capital investment, I don't think it's fair
charge the government with that. A town that was dumping i
into the stream with no treatment at all is now being askt_
to come up to the level of municipal operation and treatmc
of towns that have been doing this for 20 and 50 years. An
this creates a vast increase many times in the cost of thi_
fellow's operation.
MR. JOHNSON: My name is Johnson, from the State
Maryland. One comment that I think pertains to the oresen-
system. Numerous of our communities have used this break
for sewage, water, whatever, as an inducement factor for
industry. Now, some of them apparently have—I can name
one, I think the Town of Hurlock over on the Eastern Shore
It has a kind of fairly substantial industry, a wet indust-
which is a pretty marginal operation for the operator. Now
they are faced with laying on ICR, which they are afraid i
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84
going to drive the industry out of town, and there's no
escape*clause in this, is there? If so, what is the impact
or what can we do for the Town of Hurlock when that industry
employs half their people beats me because they're going to
dump ICR on them.
MR. OLSTEIN: I think the combination of the laws
and regulations are pretty specific as to how you build up |
your ICR charge, how you're supposed to build them. In the j
i
realm of EPA interpreting and establishing regulations for
federal law, there isn't anything you can do through the
sewer charge mechanism. If it's all that important, I guess
the town could provide a direct grant of some sort. But
you can't do it through the sewer charge mechanism.
MR. JOHNSON: Really I think this is one of the j
!
things that the ICR, as I see it, is off. I don't know whether
i
they can go to a svstem basis for collecting. I don't even !
!
know if that's permissible, the way the regs now read. <
Baltimore City has got myriads of tributary lines and industry
sitting out on one end. You can get a grant of rehab, the
interceptor that that industry uses; you've got to kind of
pro rate its costs or that rehab grant and so on down. It's
an administrative nightmare unless you can go systemwide at j
!
the minimum. !
-------
MR. GALLAGHER: I don't have a solution. I jus-
see all these problems occurring. And to add on to what 1
said and what other people have said, if I was an industry
sitting in Philadelphia or Camden right now looking at 92-
and seeing all the things that are going to be required ol
including industrial cost recovery, I would go ahead and tc
a close look at that plant and see whether I wanted to sts..
in Philadelphia. Most of the urban centers in the United
States are water quality limited. So, we're looking at
higher degrees of treatment than we are out in the more ru.
areas. So, it might be more conducive to me to look to me
especially when I am looking at old equipment that's alreaH
in this plant I'm going to have to upgrade and consider th_
whole system.
As the 208 agency, we did this in trying to plan
for the year 2000, and our policy was the revitalization o
the urban core, and we can't do that without the industrie
remaining in the city. 1 think that all these programs fi'-
together are working to chase them out of the areas where
already have other existing infrastructures. I think that
has to be considered. You just cannot 'look at cost and th«
cost of treatment. You have to look at some of those other
social implications.
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86
MRS. HATHAWAY: I am interested in your personal
assessment of Congress, and I've heard other people,
knowledgeable people, making the same assessment. I wonder
what the issue is that they are particularly interested in.
And if it is equity issue between direct dischargers and
those who are discharging to municipal treatment works, I
think you have already—about 10 or 15 minutes ago—talked
about the fact that you feel that the direct dischargers are
in fact in a better position, in a better economic position,
because of all the tax advantages and financial options that
are available to them.
The ICR was intended partly to not allow a municipal
discharger an unfair opportunity, as I understand it. And
you feel that it in fact is not an unfair opportunity because
the direct dischargers have all these other opportunities.
I think that ought to be made clear, if that is the pivotal
issue, the sort of psychological issue in Congress.
MR. OLSTEIN: I think what we did—whenever you
write a law, you have certain things that you want to do.
Some of them are very quantitative, some are very qualitative.
And inevitably whenever a law goes into effect, it has some
unintended consequences, and that's exactly what we did. We
said, "Let's take a look at the quantifiable objectives that
-------
you had when you passed the law and find out if maybe
something didn't happen so that you weren't able to achiev-
•
what you wanted. And, to a certain extent, I think we ha\_
done that. We have shown that the so-called parity issue
not totally correct. If that was in fact their only objec-1-
in writing the law, then it just wasn't doing that. We hav
proven that that's incorrect in every case because there e
lot of cases where you're better off staying in a POTW. t
if I had to make that decision, I would in a lot of cases.
The problem—
MRS. HATHAWAY: If you were to make that decisic
what?
MR. OLSTEIN: If I had to make that decision—if
I were in a company that had to make that decision, there
a lot of benefits of being in a POTW also. You are not
locked into something, a piece of equipment that is going
be there for 30 years. But Congress was trying to do some
symbolic in ICR. And the things that made them want to do
this symbolic thing I think still exist. And that's why I
hoping that somehow or other we come up with some kind of
accommodation that satisfies everyone. We probably won't b
able to. But that's why I have a personal feeling that we
have to find something else. I'd hate to think—there are
so many of the original objectives of ICR that aren't being
-------
88
met that I don't think it's appropriate to leave it exactly
the way it is. But I don't think it's going to be considered
to be totally appropriate to just eliminate it either. So,
that's why we have this emphasis on alternatives and try to
get reactions to the various alternatives.
MR. COX: I'd like to add something to the remarks
of the DVRPC gentleman, going over into the field of air, which
is not in your field of interest. But if you add up his
remarks about possibly going to direct discharge in a more
remote area, add to that the impact of the Clean Air Act
amendments of '77, about which alone some analysts whom I
respect have described as foreseeing the ruralization of
American industry, then the two combined would seem to double
impact and thrust in the direction of the dispersion at least
of American industry to parts that are like in Stanton or
something like that in this state and other places that are
relatively thinly populated. That's just a feeling.
MR. OLSTEIN: In the case of water, I don't think
that's totally correct because as you go more and more into
the more rural areas, if you were going to move an industry
there, then I think what you're doing is you're going to be
getting closer to a self-treatment situation without any of
the benefits. I mean, I wouldn't want to go, if I were
-------
located in Philadelphia, for example, and I thought ray
sewage rates were too high--so, I was going to pick a town
of* say, a hundred people to move to—-I know for sure that
tying into' a POTW in a town of a hundred people is going t
be more expensive, a lot more expensive than self-treatraen
In the case of water, it doesn't work that way.
probably does in air. But the smaller cities had higher
rates.
MR. GALLAGHER: I don't know if that's the point
we're trying to make though. Obviously if you moved that
to a. rural area, it would be cheaper for you to buy the lai
and hook into a public treatment plant. But the point is
that we're sizing plants now in this city to take a certaii.
amount of industry, and that industry is going to be forcec
out of the city.
MR. OLSTEIN: Believe me, that's a very real
concern, and that really is a problem.
MR. GALLAGHER: There are cheaper labor markets
around too that are economically depressed. And with the tc
incentives you mentioned earlier for industries in building
new places/ it destroys what we are trying to do, of keepin
the- infrastructure we already have in the city in existing
school systems, the highways. We're just going to lose all
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90
that, and we're going to -just have this leap-frogging effect
of just keep extending the suburbs. So, there are other costs
to society that aren't being measured here.
MR. OLSTEIN: When you begin to see the way these
different laws interact, it really is incredibly different
to try to head off every one of these unintended effects of
every act.
MR. KANE: I thought that Camden's statement was
very much to the point. And I'm just wondering how many
other statements of a similar ilk you've had from other
communities or from other hearings.
MR. OLSTEIN: Let's see, we've had statements—
New York City I think had a very similar statement. Rockford
also added what I thought were some very pertinent remarks
about the administrative problems associated with it. I
guess we're getting about one or two statements from munici-
palities, the area.
MR. JOHNSON: I don't know for certain, but if I
had written that law, I would assume this provision is to
prevent a free ride. It hasn't been mentioned yet—maybe it
was before I was in—is part of your analysis to show that
any benefits derived in return of the deletion of ICR? How
does it stack up against revenues versus from the industries
-------
that get this free ride? You're dealing with money that's
really just being funneled through a federal agency and
dropped back down onto the source. A lot of people feel
maybe we should get- the hell out of the business complete!.,
because there's a pretty high overhead charge on it, takin
it out of my pocket on April 15th and then giving it back *•
me in the treatment plant ten years from now. I just wond_
if there is any governmental information available that
would show that the source of the revenue from industry,
balanced against the benefits that are going to derive, frou.
This would be one way to show Congress that in fact they a
not doing anything but giving industry part of their own tr
back.
MR. OLSTEIN: Your question is if we eliminate Ii
MR. JOHNSON: Your analysis is going to apparent."
show some effect. You've shown the administrative overhead
that goes into collecting ICR. What I'm saying is you're
spending a certain amount of money which indirectly or
directly you believe will benefit industry. Your revenues
came from industry and the civilian population. Can you
show in fact industry is not getting an undue share out of
corporate taxes versus personal taxes?
MR. OLSTEIN: We can identify how much money woul
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92
be saved in administrative expenses if we didn't have ICR.
We can identify what percentage of the total grant funds are
going toward ICR. And I guess all you'd have to do is take
a look at where your tax dollars come from—
MR. JOHNSON: Federal revenue.
MR. OLSTEIN: Yes—to make that comparison.
MR. JOHNSON: It won't eliminate the imbalance
between the private treater who does it with his own
capital, but it will in fact show that probably the majority
of your industry is in publicly owned treatment works
anyhow.
MR. OLSTEIN: I think the point you're getting at
is if—let's use some numbers/ for example. Let's say out
of the $45 billion in grant dollars, one billion of it
represents ICR. I'm pretty sure that industry's share of
total tax payments is in excess of that two percent. So that
if you were to follow that line of reasoning, you could say,
"Well, gee, ICR is nowhere near how much of that money came
from industry in the first place."
MR. JOHNSON: You could take that into the—many
are helping support industries...
MR. OLSTEIN: Yes, you could do that. The problem
of the variations from one place to another though are still
-------
there and would still be a problem.
CHAIRMAN MAKER: The initial discussion in the
Congress on these matters had to do with the long-held
principle that Congress does not appropriate federal tax
monies for private purposes. I realize that runs counter
to your economic argument. But in many economic programs
there are several things that are well-established in the
Congress. One is: Do not create dependency. Don't give
out federal tax dollars for operating cost. Let's build
something that is of tangible value. The other is it shoul
be for public purposes. They went even further in this on
and said that these monies were restricted for public
purposes. Now, why they did that, I don't know. But that1
some of the philosophical basis for the program.
You're right, there are private industry dollars
that tax fund. But they made a special point of pointing o\
that these monies were to be reserved for the public problc
if you will, not the private. And I think one of the reasc
was that they wanted the money to go as far as possible in
the public treatment plant treating the residential custome
This was some of their thinking.
MR. WEIDMAN: Correct me if I'm wrong. I'm Jay
Weidman again from Betz. But my understanding of Public La
-------
94
92-500 was that the environmental protection agency in
administering that law was to encourage use of publicly owned
treatment works and also regional treatment works and so forth
It seems to me from the discussions that your own contractors
have made and the comments here today that the ICR is going
in the direct opposite of one of the basic goals of the
original law.
CHAIRMAN MAHER: I think in philosophy it might be,
but I think in impact it's not differential; it's very
minimal. I don't think it's a big factor.
MR. GALL: I'd like to make one comment on that.
Specifically one thing that Myron said was that the changes
that have altered that balance have taken place since the
passage of 92-500. In other words, it's the finance
committee coming in to do its bit for pollution control, and
that's something that nobody could have foreseen in 1972.
Frankly I am not expert to speak on what the tax situation
was in 1972 and as to whether or not ICR was a parity
program at that point in time.
MR. OLSTEIN: Just a brief comment. You're right.
The overall objective of the '72 act was to promote region-
alism. And if you read the legislative debate, every
reference that was made to ICR in terms of the parity issue
-------
was a negative reference? it was Bella Abzug who really ti
it up better than anyone else. She very clearly made the
point that on one hand, via ICR, there was this interest-fr-
loan, admittedly straight-line, 30-year period. But the
alternative was always going to be something that was goir
to have an interest attached to it. So, it was couched in
very negative terms. It was that ICR was not going to dri
people out. So that the parity issue was always presented
that manner. The overall objective of the act, not just th
section, was indeed to enhance regionalism. So, you're
right.
MR. WEIDMAN: Again I would just like to reemphas
the fact that if there is any way possible that the Enviro
mental Protection Agency could find some means of delaying
final decision on this matter until they can heal the impac
on industry—those 21 industry categories, many of which a
using publicly owned treatment works. If you take the Wes
Coast as an example, practically every refinery in the Los
Angeles basin discharges into the Los Angeles County Sanit_
tion District. If in fact they're going to have to pretre
to the same extent to remove those chemicals which they hav
in their waste, then why would they want to continue to us_
the publicly owned treatment works, pay the user charges.
-------
96
also pay the ICR? So, I think this is a matter-really at
the administration level of EPA that some consideration
should be given to, at least getting together with the Effluent
Guidelines Divsion to find out what they are doing, whatever
contract was shown to date, what are your plans, and how does
Ihis impact upon the possibility of people getting out of these
i
very large publicly owned treatment works and then what j
happens to the cost to the domestic users? ;
i
MR. CLARKE: I just wanted to point out that Congress
had the knowledge of what had had happened between 1972 and
1977, and yet they apparently didn't take advantage of it. i
CHAIRMAN MAHER: When you talk about Congress, you
have a very diverse group, both from the House to the Senate.
They don't always see eye to eye, and then within each group
f
i
you have very diverse forces at play. And then you have the
power structure of the committee structure. If that man is in;
i
favor of a certain piece of legislation and he happens to be j
on one side or the other, that influences the legislation.
I'm not telling you anything, and it doesn't make a heck of a
lot of sense, sometimes. It does to him and his constitu-
ency.
Yes. I
i
MR. GOELZER: Bill Goelzer again from the Landis j
-------
Sewerage Authority. Has Coopers & Lybrand made any estim;
on the effect on domestic rates, residential rates, when ;
if industry does pull out? That's especially important in
authority like ours where one-third of our flow is from
industry and two-thirds from residential. If industry
pulls out and the plant is already built/ that cost has to
borne by people, by individuals through domestic rates.
CHAIRMAN MAHER: I think we're thinking about
thinking of contractual commitments in-over ten percent,
aren't we? We can't fund capacity over ten percent even r
I don't think, without a contractual commitment in Region
MR. GOELZER: Most of our industries are still le
than the 25,000 gallons a day. Even a commitment I don't
think would tie them to a 50-year period.
MR. OLSTEIN: The answer to your question is that
the rates will go up. As a matter of fact, as part of thi_
study, we were able to develop curves that had been valida
the data had been collected.
Rates will go up. Exactly how much they go up
depends on the size of your plant, level of treatment, tha
kind of thing. In the more advanced plants, the coefficien
runs about .88. So, the economies of scale working against
you aren't quite as bad you might think it is. But rates '
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98
always go up because your fixed costs don't change. If you
have a very specific question, you could give us a call, and
we might be able to give you an estimate based on what we
found out.
MR. GOELZER: The point I'm concerned about is
that I don't think it has been really looked at to see what
the effect will be on domestic rates, on the individual
voters, if industry is forced to qo through economics into
self-treatment.
MR. OLSTEIN: We're going to work up that number on
a national level. We're going to find out nationwide what
the increase is to the non-industrial sector as a result of
movements out of POTWs by industry.
MR. KANE: Are you going to do that on a curve
because on a smaller plant/ with major industry pulling out,
it's going to be a much larger impact than on a larger one? i
MR. OLSTEIN: The question that we're going to be
addressing is the total economic impact type of question. So,
we're going to be spreading it over the entire United States.
CHAIRMAN MAHER: Yes, Gardner.
MR. COX: I might attempt, to express a view that
maybe is familiar to other people in the room, that in going
for a national average you conceal local grief, and you do not
then inform through the analytical process a community like
-------
Vineland as to what may be down the pike for them. Maybe
is not in your assignment to do these things, but you can «
a questing by the people in this room to know what the fu«
holds for them.
CHAIRMAN MAKER: In the nature of a study like *fc
there are work papers which are based upon, I believe,
individual cases. And if there's any indication that thi;
is a problem, we're going to have plenty of interest by tl
General Accounting Office or other auditing types, and they
will go into the specifics and the local—it won't get los
is what I'm trying to say. It will in the final conclusit
in the impact. But I believe if anybody is sufficiently
interested in it, they will get down to the cases. This i
my experience in this type of situation. And I believe tt
enitre record is going to be available, is it not?
MR. OLSTEINs Yes.
MR. GOELZER: Is Congress going to be made aware
though of the impact on a small community? Do you plan to
put that right in the report?
CHAIRMAN MAKER: They are usually asking the saw
kinds of questions you're asking. They're well aware that
grand national averages hide a lot of individual grief. C
rect me if I'm wrong. Most of these committee members are
-------
100
veryr very sharp, and they will put pressure on those very
points, and they will bring that information forward in their
determinations to see what it means. One of the alternatives
I think was a selective type of operation, based on grief.
MR. GALL: The other point to bring out is that the
impact on rural communities is specifically one of the
questions that Congressman Roberts raises. There's going to
be a lot of trouble if we don't try to address that ade-
quately .
CHAIRMAN MAHER: John Gall wants to be certain that
you are reminded to leave your name or business card on that
table back there if you want the draft of comments.
Any other unanswered or unreceived comments or
questions?
MR. GOELZER: Is it possible to have a list of the
names of all the people who attended sent?
CHAIRMAN MAHER: With the summary?
MR. GOELZER: Right, say, with the summary, yes.
"CHAIRMAN MAKER: That does get to be a problem
sometimes. Who is sending the summary, John, us, EPA, or
Coopers?
MR. GALL: It'll be EPA.
CHAIRMAN MAHER: We've got Xerox machines. I'm
-------
trying to think what we're going to do with that list bac!
there. Is the list of attendees part of the public record'
MR. GALL: Yes.
MR. OLSTEIN: There will be no problem.
CHAIRMAN MAHER: I don't think there is any
problem. We need to know who you are.
MR. TOWNSLEY: With a full mailing address too.
CHAIRMAN MAHER: If there are no other comments,
questions, or statements or anything, why I think we can be
adjourned. And we appreciate your coming very much. I th
this has been a very helpful session for both our contract
and EPA. So, thank you very much.
[The hearing concluded at 1:08 o'clock p.m.]
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ICR PUBLIC MEETING - PHILADELPHIA
BENJAMIN FRANKLIN HOTEL
OCTOBER 20, 1978
ATTENDEES
David Gaines
Miller Reporting Service
H.P. Green
Wyeth Laboratories
Paul Hess
Hershey Foods Corporation
Hershey, PA 17033
Howard J. Lobb
Black & Veaths Consulting Engineers
Kansas City, MO
H.J. Amici
Penna Power & Light Co
John E. O'Brien
Matlack, Inc.
Thomas L. Goodwin
W. Va. Dept of Natural Resources
V.J. Gordon, Jr.
Roy F. Weston, Inc.
J.G. Weidman
Betz Lahs
Trevose, PA
Thomas Kulesze
Phi la. Water Dept.
Fred Grant
EPA - Region III
R.P. Schiwall
A.W. Martin Assoc.
George A. Golia
Betz-Converse-Murdoch
William Moore
Rohm & Haas & Co.
Guy M. Aydlett
Hampton Roads Sanitation District
Jack Cooper
National Food Processors Association
Washington, D.C.
L.C. Gilde
Campbell Soup Company
Camden NJ
J.B. Asilania
New Castle County
Delaware
John V. Dougherty
Gannett, Fleming, Corddry & Carpenter, Im
Harrisburg, PA
John T. Kane
The Chester Engineers
Jim Canterbury
W. Va. Dept of Natural Resources
D.S. Patterson
Prior Coated Metals
D.G. Clarke
Rohm & Haas Co.
Paul J. Sieracki
Phi la. Water Dept.
Bruce Kraeuter
Water Resources Agency for
New Castle County
M.D. Hopkins
PA State or United States
Breuersa
Joseph W. LaCerra
C. Schmidts & Son
Philadelphia
Tom Healy
Phila Water
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ICR PUBLIC MEETING - PHILADELPHIA
BENJAMIN FRANKLIN HOTEL
OCTOBER 20, 1978
ATTENDEES
Bob Reed
EPA - Finance
Paul R. Gandolfo
EPA - Audit
Joseph Salwen
Crown Paper Board
J. Robert Gallagher
D.V.R.P.C.
Phi la, PA
William C. Goelzer
Landis Sewerage Authority
Vineland, NJ
Arthur S. Vanek
F.& M. Schaefer Brewing Co.
Allentown, PA
V.R. Hathaway
Jaca Corp
Ft. Washington
Richard Snide
Lehigh Valley Dairy
Allentown, PA
Blake C. Marks
Butz, Hudders & Tallman
Allentown, PA
Tom Maher
EPA - UC/ICR -
Region III
Mike Towns ley
Coopers & Lybrand
Thomas J. Moran
EPA - HQ
Bill Hoffman
EPA - Finance
John H. Williams
Western Electric
Allentown, PA
William A. LaFrankie
Pet Incorporated
All entown PA
Robert A. Schway
Landis Sewerage Authority
Vineland.NJ
Gardner Cox
Perferdel Corp
Env. Improvement Committee
Phila, PA
C.D. Yon
State of Maryland
Don Wchtz (sp. ??)
City of Allentown
Michael D. Verra
City of Camden
New Jersey
Charles Bodo
Coopers & Lybrand
Myron 01 stein
Coopers & Lybrand
Greene Jones
EPA - Region III
-------
ICR PUBLIC MEETDTG "— C3
BENJAMIN FRANKLIN HOTEL
OCTOBER 20, 1978 ^-ii*
NAME
D-c.
v i. c G,
,-MV N f\
^ OP
-------
ICR PUBLIC MEETING
BENJAMIN FRANKLIN HOTEL
OCTOBER 20, 1978 - 10:00 am - 4:30 pm
NAME
&•
'£•'
>'
J
V /?. P SCH/WALL
REPRESENTING
**
-------
£S<
^ta-
ICR PUBLIC MEETING
BENJAMIN FRANKLIN HOTEL
20, 1978 - 10:00 am - 4:30 pn
'.• Sbty
,£L£*f fasu^-Q
-------
ICR PUBLIC MEETING - PHILADELPHIA
BENJAMIN FRANKLIN HOTEL
OCTOBER 20, 1978
REQUESTS FOR SUMMARY OF REPORT
J. Robert Gallagher
D.V.R.P.C.
1819 JFK 81vd
Philadelphia, PA
C.D. Johnson
Md DH&MH, EHA
201 West Preston St.
Baltimore, MD
Bob Schwarz
The Landis Sewerage Authority
City Hall, 7th & Wood St.
Vineland, NJ 08360
Blake C. Maries
Butz, Hudders & Tall man
740 Hamilton Mall
Allentown, PA 18101
John T. Kane
Chester Engineers
845 Fourth Ave.
Coraopolis, PA 15108
Jim Canterbury
W. Va. Dept of Natural Resources
1201 Greenbrier St
Charleston, W. Va 25305
Thomas L. Goodwin
W. Va. Dept of Natural Resources
1201 Greenbrier St.
Charleston, W. Va. 25305
George A. Golia
Contract/Cost Specialist
Betz, Converse, Murdoch, Inc.
Plymouth Meeting Mall
Plymouth Meeting, PA 19462
Guy M. Aydlett
Chief, Industrial Wastes Division
Hampton Roads Sanitation District
P.O. Box 5000
Virginia Beach, VA 23455
J.B. Asthana
4836 Hogan Dr.
Willimington DE
19808
Joseph LaCerra
C. Schmidt & Son
127 Edward Street
Philadelphia, PA 19123
Duane G. Clarke, Ph.D.
Technical Associate Environmental
Rohm & Haas Company
Box 584
Bristol, PA 19007
Jack L. Cooper
Director, Environmental Affairs
National Food Processors Association
1133 Twentieth Street, N.W.
Washington, D.C. 20036
John V. Dougherty, P.E.
Pollution Control Division
Gannett Fleming Corddry & Carpente»
P.O. Box 1963
Harrisburg, PA 17105
L.C. Gilde, Director
Environmental Engineering
Campbell Soup Company
Camden, New Jersey 08101
William C. Goelzer
Plant Engineer
Landis Sewerage Authority
34 Porreca Drive
Millville, NJ 08332
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ICR PUBLIC MEETING - PHILADELPHIA
BENJAMIN FRANKLIN HOTEL
OCTOBER 20, 1978
REQUESTS FOR SUMMARY OF REPORT
H.P. Green
Attorney
Wyeth Laboratories
Box 8299
Philadelphia, PA 19101
Virginia R. Hathaway
Research Associate
Jaca Corporation
550 Pinetown Road
Fort Washington, PA 19034
Paul W. Hess, Ph.D.
Corporate Manager,
Environmental Affairs
Hershey Foods Corporation
Hershey, PA 17033
Thomas J. Kulesza, Chief
Industrial Wastes Unit
"Philadelphia Water Department
1140 Municipal Services Bldg
15th & JFK Blvd.
Philadelphia, PA 19107
William A. LaFrankie
Plant Manager
Frozen Foods Division
Pet Incorporated
2132 Downyflake Lane
Allentown, PA 18103
Howard J. Lobb
Black & Veatch Consulting Engineers
1500 Meadow Lake Parkway
Kansas City,MO 64114
William P. Moore
Environmental Control Engineer
Rohm and Haas Delaware Valley, Inc.
Philadelphia Plant
5000 Richmond St.
Philidelphia, PA 19137
John E. O'Brien
Manager of Environmental Services
Matlack
26 South Lansdowne Ave
Lansdowne, PA 19050
Joseph R. Salwen
Crown Paper Board Co., Inc.
Delaware Avenue and Tasker Street
Philadelphia, PA 19148
A.S. Vanek, P.E.
Safety & Environmental Control Engineer
The F.& M. Schaefer Brewing Co.
Lehigh Valley Brewery
P.O. Box 2568,
Allentown, PA 18001
Michael D. Vena
Chief Engineer - Water Utility
Department of Public Works
City of Camden
City Hall
Camden, NJ 08101
J. G. Weidman
Vice President Environmental Controls
Somerton Road
Trevose, PA 19047
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-1 " •? ' 1
INDUSTRIAL COST RECOVERY PUBLIC MEETING
Civic Center
Room 201
Atlanta, Georgia
Thursday, October 26, 1978
The public meeting was convened at 10:10 a.m.,
Kirk Lucius presiding.
-.3 • • -5 .•>•£" '.
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2
Opening Remarks by Mr. Lucius, Chairman 7
Presentation by Mr. Hurlebaus 9
Presentation by Coopers & Lybrand
Mr. Townsley 14
Mr. Olstein 19
Presentation by Mr. Gall 26
Recess 28
Remarks of attendees 29
Statements of attendees 49
Questions and answers 71
Closing Remarks by Mr. Lucius 77
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ATTENDEES:
Chuck Anderson, Cost Accountant, 764 VTest Ridqe Ct.
Marietta, 30064
J. R. Arnold, 'Jr., Vice President, Robert & Co.
Associates, 96 Poplar Street NW, Atlanta 30303
Bert Baum, Management Consultant, 2951 Church Stree4-
East Point
Michael J. Boyer, Director, S.E.Pegion, The Chester
Engineers, 5 Dunwoody Park, Suite 118, Atlanta 30338
Thomas W. Burke, Engineer, Greeley & Hansen, 33
Ponce de Leon Avenue NE, Atlanta 30308
Michael E. Burton, Management Consultant, Arthur Yoi
& Co., 2100 Gas Light Tower, Atlanta
Henry J. Byrd, Accountant, 601 City Hall, Atlanta
William J. Camp, Director, Engineer Services Poultry
Group, PO Box 2210, Atlanta 30301
Claude A. Castagner, Grant/Contract Administrator,
10 E. Park Square, Marietta, 30061
Leland B. Cook, Vice President, Cook Coggin Engineers
Inc., PO Box 1526, Tupelo, MS, 38801
Richard J. Curran,Jr., Regional Economist, Staff
Attorney, 501 Union Street, Mashville, TN 37219
K. C. Duke, Sanitary Engineer, Fulton County Public
Works, 165 Central, Atlanta 30303
-------
'.•Jilliam M. Floyd, Supervising Engineer, 1772 County
Farm Road, Marietta
Richard E. Friberg, Miami Dade Water and Sewer
Authority, PO Box 330316, .Miami 33133
Fred L. Gaddis, Mayor, City of Forest Mississippi,
39074
James L. Garrett, City Engineer and Director Public
'•/orks, PO Box 1430, Meridian, MS 39301
Carl Glanzman, Senior Environmental Engineer, Georgia
Pacific Corporation, Atlanta
Robert Hadden, 3139 Sherwood Drive, Douglasville,
30135
Hugh Haralson, Jr., President, Forest Packing Co.,
Drawer D, Forest, MS
Alan Hartenstein, 6754 Lenczyk Drive, Jacksonville,
FL 32211
John C. Hawkins, Engineer, Wilbur Smith & Associates
Bankers Trust Tower, Columbia, SC 29201
Fred C. Hawkins, Sanitary Engineer, Hensley-Schmidt
Inc. , 2840 Professional Parkway, Atlanta 30339
Frances Hearn, Grants Assistant, 1300 Plaza Drive,
Lawrenceville, 30245
John S. Hunter, Jr. , Eudaet Administrator, Cobb
County, PO Box 649, Marietta
-------
Ray Ihlenburg, P.E., GRW Consulting Engineers, 1725
Ashley Circle, Bowling Green, XY, 42101
Russell M. Jones, Federal Grant Project Analyst,
Alabama Water Improvement Commission, State Office Buildin-,
Montgomery, AL 36130
John A. Kamsky, Manager, Coopers & Lybrand, 1200
Equitable Building, Atlanta 30303
John B. Kincaid, Director, Wastewater Control Syste
Knoxville TN 37901
George King, Miami Dade Water & Sewer Authoirty,
3575 S. LeJeune Road, Miami
C. M. Krebs, Controller, Krebs & Associates, Inc.,
PO Box 20158, Birmingham, AL 35244
Thomas C. Leslie, Environmental Engineer, Atlanta
Regional Commission, 230 Peachtree Street NW, Atlanta 3030"
James Maugham, James Hayes, 136 Jackson, Lawrencevil
Arthur H. McCollum, Associate, 2840 Professional
Parkway, Atlanta 30339
C. M. McKeown, Director, Environmental Engineering,
3503 Summit Drive, Aiken, SC 29801
Michael P. Murphy, Engineer, William Bishop Enginee
Inc., PO Box 3407, Tallahassee, FL 32303
James Osbey, Research Chemist, PO Box 368, Greenvil
SC
-------
Frank J. Pepe, Engineer, Davis & Floyd Engineers,
PO Box 7506, Charleston Heights. SC 29405
Rudy Powell, Engineer, Davis & Floyd Engineers, Inc.
PO Drawer 428, Greenwood SC 29646
Mel Rozier, Sr. Management Analyst, Dekalb County,
Courthouse Square, Decatur, 30030
Stephen R. Sedgwick, Vice President, PO Box 8117,
Jacksonvi1le, FL
John W. Smith, 602 City Hall, 125 North Main Street,
Memphis, TN
James M. Tarpy, Grants Administrator, Department of
Water & Sewerage Services- Stahlman Building, 211 Union Street,
Nashville, TN 37201
Carl Taylor, Secretary-Treasurer, Louisville and
Jefferson County tletropolitan Sewer District, 400 South
6th Street, Louisville, KY
William F. Thompson, Assistant Manager, Clearwater
Finishing Plant, Clearwater, SC 29822
David Van Landingham, Director, Gwinnett County Water
.Pollution Control Department, 1300 Plaza Drive, Lawrenceville
Brian C. Warsham, Manager, Environmental Department,
John J. Harte Associates, 3290 Cumberland Club Drive,
Atlanta 30339
Neal A. We1Ions, Lab. Supervisor, Clayton County Water
Authority, Morrow 30260
-------
PROCEEDINGS
MR. LUCIUS: Good morning. It is after 10 o'clo
V7e will go- ahead and start the meeting. My name is Kirk
Lucius. I am Deputy-Director of the Water Division in Atl
It is my pleasure to welcome you today to partic
pate in this meeting, which is part of EPA's study of indust
al cost recovery.
At this time I would like to intorduce the other
bers of the panel. On ray left is John Hurlebaus, Chief, Gre
Administration Section, Program Support Branch, Water Divis..
To his left is John Gall, Region 1, EPA. He is
on the Headquarters Task Force for Industrial Cost Recovery-
To my far right is J. Mikal Townsley of Coopers and Lybrand,
and to his left Myron Olstein of Coopers and Lybrand, the
consulting firm that has conducted the study nationally for
EPA.
It is our sincere intention that the public be
involved in this study, and I want to assure all of you tha^-
the statements and concerns expressed here today will be
reflected in the final report that is submitted to Congress
in December.
In order to make certain that everyone has the
opportunity to be heard, we will observe the following form«
for the meeting.
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8
1. An explanation of the ICR study and of this
meeting by John Hurlebaus, our regional specialist for user
charge and industrial cost recovery;
2. A briefing on the project scope and methodology
by Mike Townsley of Coopers & Lybrand, the management consulting
and accounting firm hired by EPA To assist us in the study;
3. A presentation by Myron Olstein of the
findings and conclusions of the study, as well as some of the
possible recommendations which could be made as a result of
the study.
4. We will have a statement by John Gall, member
of the Headquarters Task Force.
5. We will hear the prepared statements by those
individuals who bare scheduled a statement in advance, and
I believe at this time we only have five of those.
6. We will hear statements by anyone else who
wishes to speak, and, lastly, the panel will have a question
and answer period.
We intend for everyone to be heard today who wishes
to speak, but we ask your cooperation in following the format
and holding any questions you might have until the question
and answer period.
We want Congress to be aware of the grass roots
concerns related to ICR, and we intend to stay here as long
-------
as necessary to conclude the discussion.
We have a court reporter with us today, and a
transcript of the meeting will be appended to the final
which goes to Congress.
without further ado I will turn the meeting ove
to John Hurlebaus who will explain the purpose of the stur1-
and the meeting.
MR. HURLEBAUS: Good morning. ."ty name is John
Kurlebaus. It is my responsibility to coordinate review
and approval of user charge and industrial cost recovery
systems for EPA grantees in Region 4. I would like to te]
you briefly why the ICR study is being conducted, and why
we are having this meeting.
As we all know, the passage of the Federal Water
Pollution Control Act Amendments of 1972, which most peopl
call Public Law 92-500, intended that wastewater treatment
facilities be operated as non-profit public utilities.
Section 204 (b) of the 1972 Act required grantees to develo
and maintain two kinds of rate systems: The first was the
user charge, which is usually abbreviated UC. That is to
cover the operating,'maintenance and replacement costs of
treatment system from the users of the system, on a proporti<
basis related to usage, and we also have the industrial coi,
recovery, abbreviated ICR, to recover from the industrial
-------
10
users of sewer systems the portion of the EPA grant allocable
tothe construction of sewage treatment caoacity for industrial
users.
While some jurisdictions disagree with EPA's regula-
tions and guidelines related to user charges, most grantees
agree in principle with the idea of economic self-sufficiency
for wastewater treatment systems. Industrial cost recovery,
on the other hand, is a topic which has caused considerable
debate over the last six years. In response to many questions
and much discussion, Congress in December of 1977, enacted
the Clean Water Act of 1977, Public Law 95-217.
This Act made several modifications to the 1972
Act. One of the requirements of the Act was set forth in
Section 75, which specified that EPA would study the
"efficiency of, and need for," ICR. The study was to include,
but not be limited to, an analysis of the impact of ICR upon
rural communities, and on industries in economically distressed
areas or areas of high unemployment. The report must be de-
livered to Congress by December 31, 1978.
In May of this year, EPA contracted with Coopers fi
Lybrand to conduct the ICR study for the Agency. Coopers &
Lybrand, a management consulting and accounting firm, is
one of the largest -of the "Big 8" certified public account-
ing firms. The firm was selected for several reasons; Some
-------
11
of the key reasons were: Coopers & Lybrand had the necessa:
expertise and familiarity with user charge and industrial
cost recovery requirements, since they have done quite a f~
then; they had sufficient expereinced personnel to perform
study within the very short time period available; and the
firm was respected by the industrial community and by loca"
governments, both sectors which had had previous exposure t<
CPA firms,as objective and disinterested auditors, as well
as management consultants.
The purpose of the ICR study was to carry out the
instructions of Congress. The basis for the contractor's
scope of work were the questions inserted in the Congress!
Record of December 15, 1977 by Congressman Roberts:— and I
quote — "It has long been the intent of Congress to encoi
participation in publicly owned treatment works by industr
The conferees are most concerned over the impact the indus-
trial cost recovery provision of existing law may have on L.
dustry participation on these public systems. Accordingly
industrial cost recovery study, section 75, has been incor-
porated in the conference report, and EPA is encouraged to
submit the results of the study as soon as possible so that
Congress can take action on any recommendations that are
forthcoming."
It is expected that the Administrator will consul
-------
12
with all interested groups in conducting this study and that
the study will address at least the following questions:
First, whether the industrial cost recovery program
discriminates against particular industries or industrial
plants in different locations, and do small town businesses
pay more than their urban counterparts? What is the combined
impact on such industries of the user charge and ICR require-
ments?
Second, whether the ICR program and resultant user
charges cause some communities to charge much higher costs
for wastewater treatment than other communities in the same
geographical area? (Some communities have indicated that
disparities in ICR and user charges affect employment oppor-
tunities.) Whether a mechanism should be provided whereby
a community may lower its user and ICR charges to a level
that is competitive with other communities in order to restore
parity?
Third, whether the ICR program drives industries
out of municipal systems, the extent and the community impact?
Fourth, whether industries tying into municipal
systems pay more or less for pollution control than direct
dischargers?
Fifth,- whether the ICr program encourages conservation
-------
13
the extent and the economic or environmental impact?
Sixth, whether the ICR program encourages cost
effective solutions to water pollution problems?
Seventh, how much revenue will this program produ<
for local, state and federal governments, and to what use
will or should these revenuse be put?
Eighth, determination of the administrative costs
of this program, additional billing costs imposed, costs
associated with the monitoring of industrial effluent for
purpose of calculating the ICR charges, ancillary benefits
associated with the monitoring of industrial effluent, pro
cedures necessary to take account of changes in the number
of industries discharging into municipal plants, and the
impacts of seasonal or other changes in the characteristic
and quantity of effluents discharged by individual industr
Ninth, whether small industries should be exempte--
from ICR? How should small be defined? Is there a reason-
floor that can be established for ICR based upon percentag
flow?
Coopers & Lybrand has been busy for the past fiv_
months asking questions and gathering data from a cross se
of viewpoints. As a final action in their data collection
phase, ten meetings are being held in the ten EPA regional.
-------
14
office cities, to present a summary of the data gathered
to date, as well as a preliminary set of conclusions as to
what the data means.
We would like to' gather data and statements from
those interested parties with whom we have not had the oppor-
tunity to talk in the past, and want to present a list of some
of the alternatives to ICR which could be recommended.
Finally, we want to answer as many of your questions
as we can reasonably answer. Our primary purpose, though,
is to listen to your comments.
With that I will call on Mike Townsley of Coopers.
& Lybrand, who will tell us briefly just what it is that they
have been doing for the past five months.
MR. TOWNSLEY: Good morning. I am Mike Townsley
of Coopers & Lybrand, and I have been responsible for most of
the data collection and field work in the Eastern half of the
country. We have somebody doing roughly the same thing in
the Western half, and they are in the regional cities of the
West this week.
What I would like to do is cover briefly how we
went about planning and collecting the data we are using.
When EPA asked us to conduct the ICR study, the first thing
we did was to read the 1972 legislative history related to
user charge and industrial cost recovery, to find out exactly
-------
15
what ICR was supposed to accomplish. Stated briefly, thei
two major ideas contained inthe legislative history: equit
or the equalizing of the assumed economic advantage, namely
less expensive sewage costs, for those induatrj.es using pt
sewer systems, as opposed to those industries traating the
own sewage, and capacity, or the appropriate sizing of wast
water treatment plants with adequate but not excess future
capacity.
A third idea, but not as central to ICR as the fi
two, was to encourage water conservation.
This background material, together with the legi
tive history related to the 1977 Act, and especially Congre:
man Roberts' questions, which we have already discussed, at..
Congresswoman Heckler's emphatic statements on ICR, served
the frame of reference for us to plan the study.
The initial step in late May of this year was to
sit down with EPA personnel, including John Pai, John Gall.
and Ted Horn, and put together a "shopping list" of every
; piece of data that we thought would be useful in answering
' the specific questions already asked about ICR, and some re
to user charges, as well as addressing more general issues
that were involved.
We took this list of data elements, and converted
into two draft survey questionnaires: one for industry ana
-------
16
one for grantees. The draft industrial questionnaires were
reviewed with the National Food Processors Association,
and the National Association of Manufacturers and other public
and industrial associations and groups, and revised somewhat.
After refining the questionnaires we developed a
list of people to survey. We compiled, with EPA regional office
assistance, a list of approximately 100 cities which we planned
to visit. These cities ranged in size from under 1,000 to
New York City. We eventually visited approximately 120 cities,
some qf them twice, if there was strong local interest in the
study.
Our standard procedure was to attempt to meet first
with the local agency responsible for wastewater, then with
industrial people, then with civic or public groups late in the
day. We mailed questionnaires out ahead of time to people
we were going to meet with, so they knew the kinds of data
we were looking for. We stressed that participation in the
survey was voluntary. In many cases people mailed in completed
questionnaires rather than meeting with us personally because
it sometimes took a lot of effort, and they mailed the ques-
tionnaires back to us. In all cases we stressed the participa-
tion in our survey was voluntary.
. A list of 200 additional cities was put together
for telephone surveys. The same questionnaires were used.
-------
17
We sent the questionnaires to them, discussed with them
the phone, and in most cases got the questionnaires back b
mail.
A group of five, later expanded to six, Industrie
was selected for detailedstudy. Although we were interest
in industry generally, we were particularly interested in
industries which met one or more of these criteria:
1. labor intensive
2. low operating margin
3. high water use
4. size of industry
5. seasonality
6. extent of pretreatment .
The industries eventually selected for detailed s
were: meat packing, dairy products, paper and allied prodi
secondary metal products, canned and frozen fruit and vege-
tables, and textiles.
A list of selected establishments in those indust
located in the cities which we were going to visit was prepi
and survey forms mailed to those establishments. The entiz
data collection effort was to be accomplished in six weeks,
using ten teams of Coopers & Lybrand consultants. This mear
at times we had up to ten different teams on the road in
almost every state, visiting industry and cities.
-------
18
The second step in the study, and just as important
as the first, was to develop mechanisms for public participa-
tion in the study. We wanted grass roots involvement, and
wanted an open study. We put together an ICR advisory group
; of approximately 40 individuals, representing industrial,
environmental, civic, local government, and congressional
'= interests, and relied on them to keep their local chapters
:- involved in the study advised of what was happening with the
~ project. Monthly meetings were held in Washington, and
^ transcripts of the meetings mailed to anyone wanting them.
* , The third step in the project was to summarize and
j analyze this data collected. This is going on right now.
a
| While we have reached some preliminary conclusions as to what
n '
the data means, we will be analyzing the data more and be
S finding out more in the next week or two.
—/
o
£ We have looked at enough data to be able to formulate:
=3 !
s: \ some possible alternatives to ICR as it is presently constituted.
i iThe purpose of our meeting today is to relate to you what we founc
31
•z. ; and to get your reaction to it, and today we will finish up
£ i the Eastern half. I think Seattle is ending today.
.! Then in December we will begin to write our final,
I report, which will be delivered to Congress in late December.
i
.j the final report will contain recommendations to Congress.
i We cannot, of course, guarantee that Congress will act on our
5
-------
<
5
J1
'_'
19
recommendations.
I will now turn the meeting over to Myron Olsteiu
who will relate to you what we found, what we think it mea
and what possible alternatives could be suggested.
MR. OLSTEIN: Good morning. I would like to briej
. discuss the study findings, the analysis of the findings,
then to present some possible alternatives.
The data and statistics I will be using are based
on our study, and are currently being studied, evaluated ar
1 updated in our Washington office. Some of the data that we
i obtained was summarized in a handout entitled ICR Study .
i
Data, dated October 10, 1978, which you should have receive
, prior to the meeting.
The final version of the data analysis as well as
all of the supporting data will of course be appended to an
included in our final report. In the meantime I would like
i
to caution you that any data that you see or that I will be
! using in my discussion is average data and requires some ve.
'i
• careful thought before we use it.
; We eventually got data from 241 grantees. The bes-
i
' data came from places where we actual ly visited. The data
'' obtained thorugh telephone surveys was not as complete or
!precise. We also obtained data from 397 industrial faciliti*
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20
most of it through the effort of trade associations. The
industrial data is at plant level, rather than company level.
Let's take .a look first at the things ICR was supposed
to accomplish. Looking at the major issues before looking at
: specific data, the first thing we want to address is the issue
of equity, or the assumed economic advantage, namely, less
expensive sewage costs, for industries using POTWs, versus
those treating and discharging their own wastes.
We used a computerized model which we had developed
: for industrial clients, and modified it to reflect user
charges and ICR situations. Basically, the model incorporates
' equations which reflect the cost of doing business, and
enable a company to evaluate alternatives — in essence, a
; "make or buy" decision: Should the company use a POTW,
^ ' or should it treat its own sewage?
< | What we found was that, for some medium or large
j
5 ' industries having compatible wastes, it is cheaper in the
s j long run to self-treat, even without including ICR, just
ca i
g 1 user charges. This to us is a very significant finding.
•J- . i What it means is that, even without ICR or p re treatment
costs, large industry should from a purely conomic viewpoint
treat its own sewage. This is based on several tax changes
i that were not really known to the public Works Committee,
i
j since they were enacted after the passage of P.L. 92-500.
-------
21
These included: accelerated depreciation (over
five-year period) for pollution control equipment; investm
tax credit for capital equipment, and the use of tax-free
industrial development bonds to finance self-treatment fac^j
ties.
The tax law changes just recently enacted by
Congress make it even more attractive to industries to selz-
treat, because of the increased investment tax credits.
What this finding says is that for many industrii
it is cheaper to self-treat than to use a POTW. If this is
the case, why don't more industries self-treat? By talking
a number of industries we found out there are a number of
reasons:
They are not geographically located on a river 01
stream and must use a POTW, or they just don't want the has
of self-treatment — NPDES permit, sewage plant operations,
etc., or, possibly most important, user charge, industrial
cost recovery has not been in effect long enough to see its
impact.
,< The significant thing to bear in mind though is
that if ICR and pretreatment costs are added on top of user
, charges, they could be the final straw that drives industry
;; out of POTWs, thus making it more expensive for smaining
j
ij POTW customers to use a POTW. In particular, EPA's applica
of pretreatment standards is likely to make a number of
-------
22
industries consider self- treatment.
Going back to the 1972 Water Act, the second major
issue is that of POTW capacity. Based on the survey of 241
wastewater treatment facilities from which we obtained data,
•j
-j . the average POTW uses only 68 per cent of its design capacity.
* :
. The usage ranges from a low of 4 per cent to a high of 120
^
I 'per cent.
" It appears that ICR, as presently formulated, has
.: not acted to put a cap on the consturction of excess future
| i capacity in POTWs.
i
s i The third issue, that of water conservation, is
! I -
jj ;' not quite as clear. Based ion the industries we surveyed,
/> •
a
\ water consumption has dropped an average of 29 per cent, but
ft
*
i the industries with whom we talked attributed that primarily
'.0
< , to the higher water rates and to user charges, not to ICR,
'•
i
' because ICR, as a percentage of water bill and user charges,
I
' is not that significant at this time.
Going to the specific questions' posed by Congressman
z } -Roberts , the questions that resulted in this study mandated in
i i
'£ j the 1977 Act, the economic impact of ICR to date is not
vi
i
| significant in most locales because ICr has not been in effect
i
i
; for more than a year or two and most grantees have suspended
I ICR billings while the moratorium is in effect.
I
'! The incremental impact of ICR above user charges
i
jj is aenerally not great with the exception of the two cases
-------
23
of seasonal users and or mass wastewater treatment. The
combined impact of UC/ICR can be very significant.
We can find only a few scattered instances of pla:
closings due to sewage costs, and none attributable solely
'?. ICR. The total jobs lost in the plants that did close was
P
: less than 1,000. In every case, and we investigated every
'i one of them, there were other factors such as plant age wh_.
•i
affected the plant closing also.
; The impact of ICR appears to be greatest in olde^
* ; cities, particularly in the northeast, and particularly in
3 : small to medium sized cities, and in agricultural communit
" \
_ i
I \ where we tend to find more seasonal users. There does not
n
\
I i appear to be any impact of ICR on the industrial growth
rt
. patterns to date. We were not able to differentiate the
< . impact of ICR on small versus large businesses, because ver~
% : few industrial plants were willing to disclose production
^
K ; or sales data that we would need to make that analysis.
| 1 The cost to industry of sewage treatment is much
z
UJ
X
LJ
greater, by about 50 per cent per gallon in ANT plants as
compared with secondary plants.
The final area we looked at is the incremental co
i
i
| to grantees. The incremental cost to grantees to maintain
; and operate ICR, that is, the eliminatable cost above and
beyond UC aosts, is small, when compared to the total costs
of sewage, averaging about $15,000 per grantee per year.
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24
Average ICR revenues per grantee per year are approximately
$38,000, of which $8,800 is retained for discretionary use
by the grantee. I think it is worth pointing out both of
these numbers should increase. Total ICR revenues will go
-; up in time as more grant facilities come onstream and as more
t industry uses it, and of course since that $15,000 repre-
sents primarily labor costs, that also will increase over
time.
: There is more data which might be of interest to you
T- that is included in the handout. Both Mike and I would be pleased
discuss specific data during the question and answer period
3 I
•" I
: , at the end of our meeting.
• i
= i To summarize our findings and conclusions very
c briefly: ICR is not doing what it was supposed to do back
£ in '72. ICR has had relatively limited economic impact
=• because very few cities have to date implemented ICR, and
'A '
cal tax bases. Finally, ICR is not proving
:
'. cost-effective, in producing revenues for local or federal
; government, at least in most cities.
j What I have just discussed are the quantifiable
!j
ji things, associated with ICR, but we have to remember however
-------
03
25
that the Clean Water Act had a number of societal objective.
as well as the purely economic ones which we analyzed.
Among other things, Congress was attempting to a"'
the appearance of Busing public money to subsidize Industrie.
that discharged to grant funded POTWs. While our studies
have shown that many of the economic objectives have not be
met, the societal objectives remain. Accordingly, it is
appropriate to consider a series of alternatives to ICR as
it now exists.
At this time I would like to point out that we made
available a document entitled Preliminary Compilation of
Possible Study Alternatives dated October 10, 1978. That
document contains some 16 alternatives ranging all the way
from leaving ICR as it now is to outright elimination of
ICR. These alternatives are not mutually exclusive. Many
of them can be combined concurrently. In a little while
I will be going through each of those alternatives. What
we would like to do is receive questions and comments on
each one individually.
Before we get to that I would like to turn the met
ing over very briefly to John Gall for some comments. John
is the UC/ICR specialist in Region 1 who during the tour of
the Eastern cities has been acting as a representative of El
Headquarters.
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26
MR. GALL: Thank you, Myron. As Myron indicated,
my normal base of operations is in Boston, but for about the
past seven months I have been associated with this study
as part of the technical advisory group which Mike Townsley
: mentioned earlier/ so I am here to represent the Washington
"- office of EPA, if you will.
I- In that regard I bring Washington's apologies to
anyone who may feel they suffered a severely short lead time
i in notice on this meeting. As you can well understand, we
': are suffering under a legislative mandate to deliver this study
i
, . to Congress by December 31, and frankly by the time we got
" !
i ! cranked up early this year, all of our schedules and
Jt .
I j deadlines had been compressed further and further as we go
2 i
: along, so unfortunately I think the short lead time is a
•_•:
| necessary evil in the conduct of this particular study.
$ i We are however going to leave the record open for
* :
* j written comments, either on what you hear today or any other
'jj '
| | things that may come to your mind in the next few weeks, and
° any comments which are received prior to November 6 will be
UJ
gj made part of the final report of Coopers & Lybrand and
l~ v
V) '
: eventually be distributed to Congress.
i
, If you do plan to make comments, I think it would be
•j beneficial if you sent copies first — the original, if you
would — to John here at the Region 4 office and at the same
-------
27
time send a carbon copy to Myron Olstein at Coopers &
in Washington. I will give you their address, and I am
sure it will be mentioned several other times today. It :'-
Coopers & Lybrand, 1&00 M Street, Washington, D.C., and
the zip code is 20036.
As I indicated we are going to be delivering thi
report to Congress by the end of this year under themandate
of Section 75 of the Clean Water Act of 1977. To give you
brief idea of what is going to take place after this meeti
which is the last of the five Eastern meetings, and how the
1 Coopers report will dovetail with what is going to take pi
in the future, we expect that sometime in the latter part i
November their report will be available to us in a draft
. final form.
During the early part of the month of December il
: will go through a review at EPA Washington level, and in the
latter part of the month of December it will be distributee
i to Congress.
i
One point I want to make specifically is that Coon
i & Lybrand will make recommendations to the Agency. It is o_
course then our job, if you will, to take their recommendat
to review them in terms of both the national policy as EPA
I perceives it, and to prepare a set of recommendations to
I
Congress.
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28
Obviously there is a chance for changes and modifi-
cations in that step. Lastly of course ours will only be
recommendations to Congress, and the final decision is obviously
going to be one at the Congressional level.
But I would like you to keep in mind as we go
through the meeting today it is not, if youwill, a consensus
form of government here today but more to obtain your input
in specific instances if we can so we can build a strong
case one way or the other.
^ It probably would be a good idea at this time if
_•>
; we took about a 15 minute break for those of you who wish to
3 !
A |
: • stretch your legs. During that 15 minutes you can use the
ji I
; i
a time to review our list of alternatives so when we come back
; Myron can lead a discussion as to pros and cons, and then
;d y°u might talk to us.
<
c (Recess)
« • MR. LUCIUS: I think we are ready to start the
^ meeting again. Next we are going to get into the alternatives,
i !
a] j and Mr. Olstein will be reviewing those with you now.
z ;j .
| i MR. OLSTEIN: What I would like to do, before I
lu
" , get into them, I would like to say that I personally and
1 Coopers and Lybrand and EPA don't endorse a specific alterna-
i
! tive. The idea here is to elicit comments and questions
:j from you.
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29
' T
V
Wat
-v Plu
a.
UJ
In Boston one fellow was very angry about Alteri
13. Ke said, Well, you told us how bad it x>ras, and now
you are suggesting we make it even bigger. There are some
people who believe that ICR is not large enough which is
why it is there, but don't blame us; tell us if you don't
like it.
I will be going over these one at a time, and I .
prefer if at all possible to have questions and comments o
each one as we consider them. If you do have a question o1-
comment, when you get up to speak/ please give your name ai»
affiliation so that the court reporter may identify in the
transcript who the question came from.
I will just very briefly go over the advantages an
disadvantages. I am sure we can all read from the detail h
Alternative No. 1 would be just abolish ICR outright. Obvi
ously that would eliminate all of the complaints that were m
regarding cost effectiveness and the inconsistency in ICR.
The problem is it doesn't deal with the so-called societal
objectives that ICR is supposed to achieve.
Are there any comments or questions on that alteri
MR. VAN LANDINGHAM: Gwinnett County Water Pollut
Control Department.
I certainly didn't want this one to go by without
some comment. My comment is on the disadvantages, and cer-
tainly the disadvantages that are shown in this paper are
certainly weak as far as disadvantages to the abolishment of
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<
31
UJ
UJ
in
30
ICR. I certainly say as far as the No. 1 disadvantage,
certainly EPA doesn't have the control over the design plan,
I have been very fooled and I don't know what they do have,
but I think certainly that the controls are there as far as
design parameters, and I can't for the life of me see how
the facility could construct or design or plan for larger
than what is necessary now. Of course, to eliminate ICR
revenue returns to the Federal Government, I can't see any-
thing wrong with that either.
MR. ROZIER: I agree with what he says.
VOICE: Do you want to establish a procedure on
these things?
MR. OLSTEIN: Yes. What we have been doing is
commenting on each one individually, and we are still going
to have a question and answer period afterwards, if you want
to make any summary comments, you will be able to do that then
also.
MR. ROZIER: My name is Mel Rozier, DeKalb County.
I agree with Mr. Van Landingham from Gwinnett County, Georgia,
concerning this elimination of ICR revenue return from the
Federal Government. I agree there is nothing wrong with that.
In fact,- the returning of the revenues from the Federal
Government makes this program a loan program instead of a
i
( grant program.
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31
Also, it is very inefficient to return money to _.
Federal Government in this manner. It is a very poor bure
cracy. I am sure there are other disadvantages we can com*
up with in addition to these. Hopefully it will be covere-
our statement.
I
MR. GADDIS: My name is Fred Gaddis. I am the
j
i
i Mayor of Forest, Mississippi. Being from Mississippi, I a...
not supposed to have much sense to start with. I had the
(inaudible)
rare opportunity to attend _ University, Universit"
of South Carolina, University of Georgia and finally Columbi
i
i
i University in New York, but I feel like my experience is
! better than education.
'
: I have been the mayor of my city since 1962. I
was involved with the implementation of this monstrosity tl
we were forced to build by EPA. I want to speak for and or
' behalf of the abolition of the industrial cost recovery phas
:
* I would like my remarks to cover general comments with refe
Zi
z i ence to the entire program.
2 I
a ,j I am from a small town, of 4,085 people, by officia
•2 !
| ;i population of 1970. We are gifted to have four major watei
5
using industries, namely poultry plants, in our city. They
employ 2120 people directly and indirectly which is a large
contributor toward the economy of our small area.
,: Industrial cost recovery to these plants .at certa
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32
times would be a terrific hardship for them,in times when
their price structure fluctuates up and downas radically as
it does. To me the whole thing of industrial cost recovery
;. doesn't add up so far as overall or national economic impact
•j is concerned.
If a plant is fortunate enough with the present
5 governmental regulations of EPA, Pure Food and Drug, USDA,
local municipalities, if they are fortunate enough to make
J a profit at that point, then they are going to pay a large
s ' share of their profits into the Internal Revenue Service.
i
* I If we should eliminate completely the entire industrial
" i
\ ; cost recovery part of the program, I still believe that the
a !
I Federal Government would receive as much money in net income
.1
,i as they would to leave industrial cost recovery in the program.
< No. 2, "Our small municipality does not have a
p
jg ; large number of people who are qualified to implement and
!
x i formulate and to collect the proposed industrial cost recovery
i monies due to the complexity of the formulas that are in-
ao
z i volved in the calculation. ;
J5 • j I have in my hand here a copy of the industrial cost
recovery formulas as used to calculate four different indus-
, tries in our city. Each of these formulas is completely
: different. It looks like to me a fire control formula used
i
,i to calculate the> fire of a battle ship trying to intercept a
:
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33
projecting missile coming from some foreign battleship to
interpret this.
We hired an engineer to work out this kind of a
^ system, but we can't maintain an engineer on our staff
s . to actually get involved in the cost of the collection of
?* !
1 I these things. I for one want to go on record as saying th<
i
~ ' I realize that part of industrial cost recovery is designed
stay at the local level, to replace worn out parts at some
I point in time during the time that your sewerage system
^ , goes out of order.
.! To answer the question regarding this phase of 1C
5 ; you know a local municipality must charge a customer under
| j a user charge an amount sufficient to take care of the cost
- I of operation of this monstrosity that we have in our city.
£ •! We budgeted in the beginning about $5,000 per month for the
% \ operation of our sewer plant to cover the cost of electricty
* based on the best known facts that we had at our command.
5 i
S : Last month our electric bill was $9,886, you migh
say double. So what did we have to do? We had to raise our
• rates from 30 cents 59 43 cents to 60 cents, and we are goi]
Ul
=
Q.
LU
1— '
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34
with, first of all, an expenditure of from $200,000 to
$400,000 apiece to buy their pretreatment plants.
Now, then, they have to buy their monstrosity. Now
they have to operate that sone-of-a-gun because you and I
3- pass regulations saying that their BOD can't be but so much
.1
2 and their oxygen can't be but so much, and, Lord knows what
%
your regulations is going to be tomorrow, unless you change
r the philosophy.
- I would like to see,first of all,EPA eliminated
= . from the whole governmental system Second from that I would
~. ;
< i
I like to see industrial cost recovery eliminated from the- law
I that I know you are charged to enforce. I would like to see
I ; te economy of a small town like we live in to have a fair
3 j
= | opportunity to exist.
i
•n ' My justification is this. There are 28 cities in
~ our state that are currently only in the planning stage of
jj •
< ; these monstrosities. I know because I saw a list at the state
a •:
2 ' level. Our state participation on a loan basis to a munici-
2 j pality to qualify for your 75 per cent grant.
ffl !
5 :| Those industries that are located in those towns
£ i
-hi v
w ,! can
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35
competitors next door do not, assuming that they make a pr
or make a loss at that point. It is unfair competition.
I have not heard your alternate make one comment
with reference to that phase of your interpretation. I w&
that in the record, and I would like very much to have an
opportunity at a later date to forward my comments for
' official publication.
I have already taken up the matter, asking them
for a stay of execution in my state for an additional periot
of time, and we are already handling it from our legislate
' standpoint, but I would like your report to show that the
[
' mayor of a small city had the opportunity to make his thougt
'
! known.
; I have some individual remarks that might apply
to all the rest of your comments there, but I think I summai
' mine when I say I think the best thing to do is to complete
i
;
' eliminate industrial cost recovery because it will still
' produce for the Federal Government an amount equal to the
'
total amount that you will receive from industrial cost
a
Z 'I
d •' recovery should the industry involved be fortunate '- enough
o_
'•" ! to make a profit. If they can't make a profit, I would like
-them to be forgiven this amount so that we can employ that
2,120 a little bit longer, and thereby maintah the economy
: of our community a little bit longer. (Applause^
i
MR. ROZIERt- Do you want to accept statements late
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36
s
MR. OLSTEIN: So long as we are meeting, anything
that is said will go into the transcript and will of course
be part of the record. We will accept in addition to that
anything we get up to the 6th of November, in writing.
MR. ROZIER: I have a statement. Should I read it
now or later?
( MR. OLSTEIN: The objective here was to have a
i
discussion relative to the alternatives. Following this
!
\ we have prepared statements ~ we have a number that have been
; requested — and following the prepared statements then we
* j will go into the question and answer period. •
| ! MR. KINCAID: John Kincaid for the City of
"a !
a |
I | knoxville, Tennessee.
5 :
I would like to simply state that Knoxville supports
'.n '
•—i
< , Alternative No. 1 unqualifiedly. (Applause)
w i
c ' •
01 | MR. OLSTEIN: Are there any other comments on
z I Alternative 1?
'-j- ;
—~ i
I i Alternatives 2 and 3 are somewhat similar. Both
a •!
•z '< are directed at dealing with the capacity issue , and would base
i' i
•± [ the percentage of the grant funds on current capacity,
~7t
• current utilization.
; No. 2, the grant funding would be set up at current
< useage levels and would be 75 per cent of those levels, and
;] for anything larger than that would be on a sliding scale,
j
i
I
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37
and would go down, the idea being that would increase the
incentive to minimize excess future capacity.
In the case of Alternative 2, since it would be
2 : based on current generation of industrial as well as com-
T
-i ; mercial - and residential, ICR would be maintained accordin
7 j to current regulations.
T '
I , In Alternative 3 the same sliding scale formula
a ! would be applied but only to domestic and commercial wast
water, and under Alternative 3 there would be no need for
ICR as the Federal grant portion would not be allocable to
industry.
Are there any comments on either of those?
MR. ROZIER: Mel Rozier, Dekalb County, Georgia.
; •!
J If this means ICR would be maintained, I can
LJ
5 , state throughout these alternatives we are against ICR, so
if you need comments every time stating that we are oppose.
I will do that; but I am officially opposed to ICR, and if
you don't hear any comments from me it is because we are
against ICR in any form.
MR. OLSTEIN: Alternative 4 is merely an attempt
;l
; simplify ICR somewhat by limiting it to the treatment workr
, only.
j Alternative No. 5 is an attempt to deal with the
I) so-called equity issue in another way and basically it wou.1-
-------
38
establish the ICR repayment rather than on a proportional
basis as is currently the case it would be on an incremental
cost basis, the idea here being that in that way industry
would be able to receive the benefits of the economies of
scale on an incremental basis.
The obvious problem is that although incremental
costing is not unfamiliar to electric utilities, it would be
relatively new to wastewater utilities.
Alternative No. 6 tries to provide a little more
flexibility to the individual grantee, and puts the choice
up to him as to whether or not he wants to accept federal
funds for that portion of the treatment plant that he is
going to use. That leaves it squarely up to the local level
as to whether or not they are going to have ICR.
Alternative No. 7 is another attempt to simplify
the problem we heard about earlier, the many computations
* ,! associated with ICR, and what it will do is establish a
£2 .i
^ J uniform ICR rate that would be applied. It could be on a
15 ! national,regional basis or whatever, but basically it would
.1
<
5
•a
a
U
O
VJ
Ml
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39
Alternative No. 8 is another attempt to reflect
local conditions a little bit better and would provide fc~
a number of circuit breakers for ICR exemptions based on a
f number of ciresistances, local economic conditions, dolla
31 '
« ! amount of ICR payments, any other extraordinary circumsta
"i ,'
§ Obviously this would bring a little more flexibi
I
7, I down to the local level, but it does pose a number of ad-
O I
3 '
-i ,
u ,i ministrative problems, and once again the charges of inco
= i
5 j sistency in ICR rates and payments are certainly not going
to be eliminated.
j Alternatives 9 and 10 are both tax methods.
Alternative 9 would basically try to return things to the \
the situation was in 1972 and to reverse the tax advantag*
if youwill, self-treaters currently have. It has been
pointed out tax credit merely gives back with one hand whal
10
I
u
$ i take away with the other, but that would be one way of eq\
* izing the situatiop between POTW users and self-treaters.
X
Alternative No. 10 would extend the tax credit tc
the pretreatment costs that are going to be required for
those industries that are affected by the pretreatment regv
r '
! tions.
i
; Are there any comments on 9 or 10?
i
Alternative No. 11 would be to return to the
1
1 requirements in Public Law 84-660 which basically applied
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_,
T
<
C
40
a capital recovery charge to a more limited range of indus-
try, SIC Division D, as opposed to the five conditions now
covered under ICR, and it is strictly a local capital
recovery charge with all the money staying at the local
level.
MR. ROZIER: It seems to me that No. 11 is in-
correctly stated. You say return to Public Law 84-660
; would abolish ICR, but in accordance with what you just
; said, it would not abolish ICR.
j MR. OLSTEIN: It would go back to what I believe
! was called IWCR. The difference between the two, ICR is a
i
! repayment of the federal grant potion. That section of 84-660
j was repayment of the local capital portion. It has been
i
.' my observation that most cities already have that now.
i
MR. ROZIER: I do not know whether that is true
or not, that most cities and counties have that now.
=3 i MR. OLSTEIN: As part of the rate structure.
j | MR. ROZIER: Right. Maybe in the rate structure,
i !
•a but we would be opposed to going back to 84-660; and how it
•z. \
~ 'is treated we think should be left up to the local government,
" ! how to collect from industry and all of our customers.
MR. OLSTEIN: Alternative 12 would be to abolish
ICR. It requires simply that the local share of project
! costs be recovered on a proportionate basis, and that would
-------
*T
iN
o
-I
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42
Alternative 14 would extend or postpone the date
for makinga final decision on ICR. I might add there is a
little more rationale behind it than is apparent here. The
-: point has been made by a number of industry associations that
S if we are going to do an economic analysis of ICR as well
- as all of the charges industry faces, it can't be made until
I after all of the pretreatment regulations are out, which would
- i be most likely three years from now.
-. '. Another thing is the fact that it has proven to be
EE '
< ! very early in the ICR program to make accurate economic
i
i i i
s ! assessments, the impact of that program, so that an extension
* i '
I :
: ; would provide some more time to learn what the impacts really
! -i
* • are.
= i
" . Alternative 15 would be to maintain ICR in its
'~ i current form. Obviously it wouldn't require any changes from
%w> i i
$ i what we have now but it woudl deal with any of the problems
< j '
* ! resulting from the study.
Alternative 16 deals with the capacity issue
and would require firmer commitment from industry at the :
i
time the POTW is sized.
i
: Finally, an additional alternative was offered at
one of our prior meetings. It would be to keep all of the
i
dollars collected under ICR and applied to those things
.j
! that are industrial in nature, like administration of the
-------
o
z
55
<
j>
a
U
Si
en
LU
u
s
43
pretreatment program, monitoring and that sort of thing.
Sir.
MR. McCOLLUM: I may be confused on Item 16 but
we were required to revise our 201 facility plan to meet
this requirement at the present time. I see now as an
10 !
•>j «
§ 1 alternative we have it here.
MR. HURLEBAUS: The thing that required the lett
as
of commitment,Aa contract from industrial users of POTW
whe? the agreement is signed*
MR. McCOLLUM: That is true. We have reserve
capacity contracts in the ccfuntyfor approximately 6 mill*
somewhere around there, 5 million gallons., and we origina:
sized the interceptors in the plant to serve these indust
and because we didn't have a definite legal long-term fon
legalized thing, we were required to revise the whole 201
plan,downsize our plant, downsize our interceptors, and n<
I see it is presented here as an alternative. This kind <
surprised me.
MR. HURLEBAUS: I will have to check further, bu
it seems to me they required a letter of commitment possil
from all industrial users. Previously the letter of commii
ment to reserve the capacity was only from those Industrie:
that wanted firmly reserved capacity. The others merely i
an indication of whether they intended to use the wastewatc
-------
3
-J
<
44
treatment facility or not.
MR. McCOLLUM: I believe Gwinnett County has signed
contracts and in Gwinnett County's case these people were
paying reserve capacity charge, and this was disallowed.
I don't know if you are paying money to reserve capacity,
that sounds like a pretty firm commitment to me.
MR. HURLEBAUS: I will have to .look into the par-
t
I ticulars of this thing. I don't really remember the 201
i
requiring these industries or having Gwinnett County require
i
i the industry to do that. I thought it was still in their
I option? if the industry wanted firmly reserved capacity, it
•» i
3 ! would sign a letter of commitment, otherwise it would simply
* i
» i]
I ! sign a letter of intent. But let me get with the project
- j officer and look into the thing.
i
- i MR. McCOLLUM: Thank you.
G i
S ; MR. GALL: I would like to try to address the same
3 i
=a I issue a little bit if I might. The Agency's new regulations
£ j
zj j on cost effectiveness of course were published in late
2 I
03 ' September, and they do speak to letters of commitment from
I !
Z ' industrial users during the facilities planning stage.
- i
-n !
This alternative though I see as something differ-
'. ent from that, in that you could, for example, under this
i alternative eliminate ICR completely but just insure you have
i
,j adequate front end planning from the industrial community
-------
u
o
in
ca
45
so that you don't oversize a treatment plant. The altern.
tive points to the problem of building the capacity that y
are never going to use in the future, and that is the idea
of it. Then it can ,be melded 'with Option l,if you wou
to try to address the problems some people see, that is,
building reserve capacity that you are never going to use.
So I think you have to think of all the alternai
in that light. They can be mixed, combined, Tax credit
is a kind of abolishment to some people. So I think you hi
to take them all into account.
MR. OLSTEIN: If there are no more comments on
these? Sir.
2 I MR. BORD: Harold E. Ford, Southeastern Poultry
Association.
What legal recourse would EPA have to collect
for ICR if an industry refused to pay the assessment? Wov
your recourse be at the municipality level or directly up<
UJ
-J the industry involved?
2
MR. GALL: I am far afield since I am an engine*
and not a lawyer, but you are correct I think that our
prime focus would be at the grantee because our grant is
in fact a contract with the grantee.
However, there are recent revisions in the Clear
Water Act that would allow us to provide technical assistai
-------
46
to grantees when they are having problems on their own.
I am not really familiar under the circumstances that that
can operate , but it would seem logical to me, which means
: we probably can't do it, that at that point EPA could step
7- in as a legal consultant to the community in attempting to
\ . straighten out the problems the community has with the in-
i
! dustry.
?, i
• This is something that clearly needs to be discussed
i
« \ with regional counsel of EPA. What you have here today is
2 i
\ | just the opinion of an engineer.
3 i
; MR. OLSTEIN: I think what would probably happen
2 i
Jt i
-a ; is EPA would take civil action with the grantee, and then
^ \
=. it is up to the grantee to turn around and decide what it does
z i
3 , at that point, whether it takes action against the industry.
I think that would be the route.
<
;/i
The gentleman in the back
* ' MR. FLOYD: Bill Floyd.
uj
2 My first introduction to the ICR was in a meeting
I
i
31 1 in Richmond, Virginia where we had people coming down from
z !
j '
I Washington from EPA to explain that they didn't understand
-i.
' n ,
the regulations. Since that time I have worked on several
! other proposals with different consultants that I have been
I employed by.
j
At the present time I question whether items 2
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i
u
2
u
o
V)
47
through 16 can be fairly administered throughout the
different EPA regions, prorated to the different industries
depending on locations, depending on EPA personnel, or
whether you will in fact apply the same dollar value to
different industries in one specific area.
If you have an industry in Atlanta versus an
industry in Knoxville, will the EPA people, and will the <
sultants working in those two counties, be able to charge
like industries a fair and proportionate amount based on \
= i types of wastewater treatment?
< i
- Knoxville has a pure oxygen plant, DeKalb County
has a pure oxygen plant, will we in fact charge the same
industrial cost recovery to, say, poultry industries or ii
dustries such as that?
MR. OLSTEIN: I think what you are speaking to i.
Alternative 7. Thatwould be one attempt to achieve some
uniformity in rates. Unless we have some sort of uniform
rate system, you are going to have variations all over the
s
ffi , place because ICR depends on the size of the grant, how ma
z I
= i| of your facilities are grant funded. There are so many
variables.
I would be surprised if the rate were the same i
any two cities just by the nature of it as it is today.
-------
48
MR. FLOYD: Then basically in using these you would
be applying still another variable that would have to be con-
sidered every time you approach the industry coming into
~ your community. That again would also be based on how that
T
-T '
particular EPA's regional personnel interpreted the regulations
' | at the time they read them and provided you with the documen-
T i
3 ' tation.
=• MR. OLSTEIN: Are you talking about any specific
z i
~3 ' alternative?
= i
| I MR. FLOYD: Just the alternatives 2 through 4.
% ' Every time you build in a different variable and then you
i
t /: go to the consultant who has to work out the variable,
a i
I | this interpretation is then based on what the EPA's interpre-
j tation of that variable is.
< i If you are dealing with EPA in Virginia or if you
u '
£ { are dealing with EPA in Georgia, or if you are dealing with
X
'Al
ID
.1
EPA in Tennessee, then you could get a totally different
picture at the same sewage treatment plant.
MR. OLSTEIN: I think it is fair to say there is
; indeed some variability from one region to another, but that
i
i
! was one of the ideas of setting up the regions also, to
; decentralize that operation.
i
1 You are right, whenever you have something being
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conference on public finance in April, 1977.
I would like to present this on behalf of Mr.
Russell and read this cover letter to Mr. John White. Mr.
^ Russell wanted to be here, today but due to the short notice
-: of the meeting it was one of the main deterrents of his
'- being unable to attend.
>
2 This cover letter is dated October 26, 1978 to Mr.
-i
r : John White, Regional Administrator, Environmental Protection
| ' Agency, Atlanta, Georgia; Subject: DeKalb County's Statement
5 ! Opposing Industrail Cost Recovery - Public Hearing of
* i
5 j October 26, 1978.
i
- ! "Dear Mr. White:
^ i
| ! "Attached is DeKalb County's official statement
~ i opposing any form of Industrial Cost Recovery. This statement
7)
^ ; was compiled in 1977 and our position has not changed.
C
| j "The ICR concept in any form or extent results in
< I
* [ an additional and unwarranted tax on industry which will be
H i
= ! passed on to the consumers and taxpayers of DeKalb County
and throughout the nation. This type of tax is highly in-
flationary and will become a model of Federal government
bureaucracy and inefficiency.
"In these times of great concern by our taxpayers
about the need for cutting taxes, I think the members of
Congress and EPA should be aware of the consequences of such
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programs as ICR.
"Not only is ICR an inflationay tax, but it wou1-
create inequities in sewerage rates between adjoining coun-
ties. This would interfere with the competitiveness of p
location and would also influence the movement of existing
plants. This unwarranted interference with the affairs of
local government is intolerable.
"We also oppose ICR because it makes the EPA
construction grant program a loan program, requiring the
payback of so-called grant funds back to the Federal Trea:
This is highly inefficient and I do not think this should
the intent of the EPAconstruction grant program. If it is
.called a grant program, then that is what it should be.
"Your cooperation in this matter will be greatly
appreciated."
o MR. LUCIUS: Thank you, Mel. Next I would like
to call on Mr. Leland Cook.
MR. COOK: I am Lee Cook, Cook Coggin Enginners,
Consultants for the City of Meridian, Mississippi. I wou]
like to read a statement prepared by the Mayor of Meridiar
"The City of Meridian, after six years of diliger
effort under Public Law 92-500, is on the brink of launchi..
its construction program of wastewater treatment facilitie
We are deeply concerned with the implications that the proc
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Industrial Cost Recoery System will bring to our city of about
50,000 people.
"We wish to take this opportunity to express our
objection to the ICR System for the following reasons:
"1. Administration of the ICR System will be a
tremendous burden, and vexing to say the laast. In our small
town (but the second largest in Mississippi), we have about
400 commercial and industrial users who would probably
become entrapped in the system. We can visualize a separate
division of our water and sewer department just to administer
the program.
i
3 '
" j "2. At what flow value would a user be exempt
X
3 i from the ICR System? There are certain fixed administrative
x '
a I costs, such as sampling, analyzing, billing, collecting and <
r* '
I
£ j record keeping which are independent of the flow quantity
i— !
5 ! of the user. In our opinion, administrative costs would exceed
V) I
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^ ' the present ten per cent of the total charges which munici-
* •
H i palities would be allwoed to retain.
ffi "3. Due to the strict effluent limitations placed
z
'- • upon our community, the ICR charges would be higher here than
^ ' in some of our neighboring communities where lesser (secondary)
discharges are permitted. This differential in charges would
1 place our community in an unfair position in trying to attract
:! new industry, or keep the industry which we have for that
i
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matter.
"4. We also believe that such a system will ten<
drive industry out of municipal systems, even to rural ar
at a location where the industry, as a separate discharge
could utilize secondary treatment.
"We respectfully request that you seriously con
sider these arguments in forming youropinion."
MR. LUCIUS: Next I would like to call on Mr.
Carl Landsman representing the Georgia Pacific Corporatio..
MR. LANDSMAN: I would like to welcome you folk
down to Atlanta, Georgia, the state in which Georgia Paci*
is chartered as a corporation and where we had our initiax
" j beginnings.
? ,j You might notice also that as a corporate head-
i
" ;! quarters function some of our central engineering folks
<
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as
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have come back here to take care of the state in proper
fashion.
He have been subject to, as the nation's largest
integrated forest products corporation, a number of the
ICR schemes at several of our more than 200 facilities aci
the country. I think generally we would have to conclude
that Coopers & Lybrand's initial findings are roughly cor-
rect, that is, that we have in industrial cost recovery a
system which is not particularly well entrenched yet, that
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is, we have the opportunity to get rid of this monster be-
fore it grows, or we have a system which has not as yet
forced individual production entities out of business but
£ yet it has also not yet had a chance to put out its ten-
•:. tacles into the entirety of the country.
J I would have to however disagree with I think
-r
2 three points that are fundamental to the conduct of this
'=. | study. The first point is that — and I realize it was at
5 !
; . the direction of both the Environmental Brotection Agency
| I and Congress — you look for Armageddon or absolute cata-
s j strophic circumstances.
;. j
I i I think as rational persons involved in theeconomy
I \
| : of major corporations we and Coopers and Lybrand should early
.1
•» i
' have realizedthat there are no real catastrophic situations
< i set up by the introduction of yet another incremental cost.
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£ '' It is however the subtle interworkings of various
r
K i incremental costs added to various production facilities
_l i
1 i that causes long term changes in the nature of our economy,
!
z :! and I regret to say that from both the presentations that we
~ . have seen and from the initial information made public about
the study, there has been precious little time and effort
I expended to find the subtle changes in the nature of produc-
i tion. *'* **•**
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The third thing is I have to object very strong
to what is purported and touted around EPA to be an objec
study wherein one of the tasks in that study, to find out
whether a system is necessary, is workable, and what its
impacts are, is to generate another set of alternatives f
either disposing of the beast or amputating arms and legs,
I don't think it is particularly proper to cond
an objective study and simultaneously generate the type o
alternatives-that we have been confronted with today. Tha-
is the reason that I did not discuss any of the alternati..
during that particular portion of the show.
I would like to say that there was a third probii
s ,
| I that relates in particular to a small segment of the pulp
** i
; and paper industry, and I am sure the Coopers and Lybrand
UJ '<
*~ and EPA people are, there are two types of paper making fa-
cilities. There is the integrated facility which has its
own pumping, perhaps its own wood preparation and carries
out either the production of an intermediate or finished
paper product, and then there is the converting facility, .
you will, which takes the paper at some step in the produ<
and finishes it.
We see various systems where a paper coating layi
is produced in one mill and the rest of it is produced in
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another. We see the corrugated box industry and so forth.
The nature of the converting fiicilities is that there are very
low employer people in a particular plant, they are a small
j plant, and generally they'are kept at an arm's length from the
—,
•7
-• corporation, that is, the company will not jump in and bail
~, ' out a foundering small productive entity but will usually
«
2 : seek to dispose of it with another company that can perhaps
<5 i
~ i make better use of it.
z '.
3 ' Here we are getting back to the subtle changes. We
' are a very large corporation, and we have become large by
acquiring smaller corporations and smaller entities as-well
-
i '< as by developing internally our own production facilities.
a !
I j It would be foolish for me to say that we feel by adding the
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i incremental costs of industrial cost recovery to a small
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< i production facility's total cost picture you are hurting us.
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a i
i However, the company also realizes that competition
03 l
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u« !
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J2 ! having to go back and pick up mutilated pieces of a small
• production entity when various governmental regulations
j piled on such incremental costs that it becomes no longer
i
profitable to operate it.
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I don't think you will see many of these conver-
ing facilities shutting down in the near future because o
ICR, and it was a shame you had to waste your time looking
i for them.
The next thing I would like to say is that induj
! trial'cost recovery does not exist in a vacuum all by itseJ
i
• It is part of a strategy that was- developed in 1971-72 in
Congress. On paper it looked like it made sense. In the
meantime we have added, as you have stated, changes in the
laws where even to amortize our investments in a different
way we are able to obtain tax credits that weren't previou
; available, and for some of our facilities it becomes desir-
able to go ahead and treat on our own.
It would be sort of ironic, I think, that by
requiring all 201 grantees that they develop an ICR progra-
and recover these funds, then industry finds, Heck, it's
just cheaper and makes more economic sense to move out of
the system, leaving large parts of a federally financed
s treatment
scheme of waste .across the country underutilized or abandon
z A
It doesnt make any sense to me, and I hope it do<
make any sense to you.
The second thing is that just recently, in Septembe_
i of this year, EPA came .out with a final pretreatment regul.
tion. The nature of these pretreatment regulations are th«
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if you have any toxic or hazardous material or any
material that passes through untreated through the municipal
treatment works, you as an industry are going to have to
provide what is called the best available technology for the
.- elimination of that pollutant.
^
i It quite often happens that industrial wastewaters
- are not treatable for a specific component but rather you have
2
', to draw out a number of components from that waste treatment
"• i
I i simultaneously with the effective treatment or pretreatment
| i fr that particular waste.
~* I
I I think what you are going to find in the pulp
* i
I \ and paper industry in particular is that if any toxic,hazardous
x i
— i
1 I or pass-through materials are found in our waste streams
S I
: ! going to the municipal treatment works, we are going to be
•£ required to put in full biological treatment and filtration
8 i of the effluent to remove this biological solvent.
8 I
* . At that point there is no difference between that
- \ particular effluent from the pretreatment works and what we
1 i
a i are allowed to discharge directly to the nation's waters in
i
1
\
' the effluent guidelines. I can think of a number of our
paper mills, most ly smaller mills in terms of total pro-
duction today, which are hooked up to municipal treatment
.1 works: one in particular at Plattsburgh, New York, where
we in combination with Diamond International and Imperial
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Wallcovers and the State University of New York, have basic
almost purchased and put in place for the city through th
> development bonds a very effective secondary waste treatm<
| facility.
I We are very much concerned that after having anu
j tized a fair portion of that investment already and movin<
; very closely to the date when it is fully paid off, EPA
through its pretreatment program will force us out of that
facility, abandoning a 50 million gallon a day hydraulic
I capacity, 16 million gallon a day normal average dry water
flow capacity plant for use by a medium sized Strategic
Air Command bomber base, a town of just a few thousand
people, and a few summertime resorts on Lake Champlain. It
f >
j doesn't make any sense at all.
<« !
Ul
< We are at that particular facility now expanding
: our pulping, and we are ii the process of offering to the Cit
: of Plattsburgh that we would pay outright for the capacity
increase to the plant if we can just keep EPA's tentacles
]
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away,
LO
Industrial cost recovery for us at that plant wou*
•i
; mean that if any portion of that facility were to be expand
we as the* provider of 50 per cent of the flow, and well ove-
50 per cent of the BOD, and approximately 30 per cent of th-
total solids that go through that plant, would be paying
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basically for almost all of that expansion.
It makes no sense for us in that particular situa-
tion to go ahead and go through EPA's grant program. If
industrial cost recovery and pre treatment programs were
relaxed or abandoned, it might make some sense to make use
of this and to provide New York State's highest county of
unemployment additional employment opportunities.
I would like to also cite two examples from the
State or Oregon which our department has recently transferred
which also have to do with industrial cost recovery folly.
The first is the unified sewerage agency of Washington County,
an area that is rapidly growing around the Portland metro-
politan area.
The scheme there is to provide advanced waste
treatment, very expenseive, and a long system of regional
5
interceptor sewers to accommodate a fairly large future but
very small present population.
Industrial cost recovery would require of us, when
the moratorium is lifted, of all industries in that area,
very substantial payments for interceptor sewer system which
really doesn't serve but one industrial facility, that being
Techtronics, the maker of oscilloscopes, and the only service
they would receive is the sanitry wastes from their employees'
shower facilities.
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The second prime example from the State of Oregor
of industrial cost recovery folly is down in Salem, Orego
It is a relatively small state capital, but has a number <
i
: canneries, in fact it is the hub of canning in all of that
i
i valley. An infiltration inflow study conducted as part o
I the 201 analysis plan for the recent upgrading of that fa<
£ i found that it was not cost effective to eliminate sources
| infiltration of inflow because the rains come in the winti
) and the canneries come in the summer/ and the net average
I
hydraulic load to the plant is constant.
However, industrial cost recovery scheme that w«
s .1 proposed for this plant had industry paying for that majoi
2 •'
- ! portion of the excess capacity of the plant which is used
** I
- i
tn S by stormwater from leaky city sewers.
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We have heard a mayor from a small town in Mississippi
expressing how companies in his area are discriminated against
because of this program in relationship to the cost,in relation-
ship to the competitors in other towns. We have heard the
, same theme from a larger town of Knoxville, and then we have
heard a discussion from DeKalb County which is wall to
i
i
i wall with municipalities, and I have heard only one thread
j of thought here, and that is the program design had in mind to
i
! be great things to a lot of people, but apparently it hasn't :
! workedthat way. ;
There is certainly nothing wrong with admitting
jj >i the program is not solving the problem; it has created more
•" i i
3
I | problems than it has solved, and to abolish it certainly
I
: should not be an embarrassment to anyone, or certainly no
jj ! :
< :| government agency.
3 I
£ ! If it is not working and not doing its job, let's
z
i eliminate it and get on to some more constructive programs.
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•MR. LUCIUS: Next, Mr. Dave Van Landingham from
Gwinnett County.
i
MR. VAN LANDINGHAM: David Van Landingham, Direct
j of the Gwinnett County Water Pollution Control Department.
The policy position in Gwinnett County on indusi
cost recovery: Gwinnett County, Georgia, supports the abc1
§ I ment of the Federal Industrial Cost Recovery System since
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we feel in our situation it is practically impossible to
equitably charge each industrial user as defined in the C]~
Water Act of 1977. At the present time there is only one
facility funded federally under P.L. 92-500 (Beaver Ruin
AWTF -and its associated interceptors) in Gwinnett County.
Within the Beaver Ruin Basin there are now only
two users that qualify for industrial cost recovery. The
total ICR obligation from these two users amounts to apprc
mately $3,000 a year. Under P.L. 92-500 Gwinnett County's
only legal obligation is to charge these two users which
happen to be located in the Beaver Ruin Basin, and forget
about the other industrial users that discharge into other
county facilities.
'! This would be very simple for us to administer,
j but would it be equitable? We feel that it is inequitable
to.penalize the two affected users simply because they are
located in a certain area of the county. Also by charginc
just the industries located in the Beaver Ruin Basin, we
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give industries an incentive to congregate in an area that
is not affected by ICR. We feel that this is a potentially
serious problem.
Federal regulations governing ICR systems permit
a grantee to calculate unit ICR costs on a countywide
basis in lieu of unit ICR costs for each basin within the
; grantee's service area. Thus, the law permits the grantee :
i to. charge all industrial users in the county the same ICR
! :
rate regardless, whether the industry discharges waste into
• a federa-ly financed facility or not. This eliminates the
problem of industries congregating in certain areas of the
county, but is it equitable? ;
a ! Since the Beaver Ruin project is at present time i
I I
s ! the only P.L. 92-500 federally financed project in the county,1
S3 ! the unit ICR costs calculated for that basin will be used if !
< •!
a countywide ICR system is implemented. Gwinnett County is
only required by law to return 50 per cent of the ICR payment .
; from industries located in federally funded basins. No
percentage of the revenue collected from industries outside
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, the Beaver Ruin Basin is required to be returned to the U.S.
u I
'•* -I Treasury.
!
Therefore, Gwinnett County could receive large
i
! revenues from the counljwide ICR system from industrial users
i
,: which in most instances do not benefit from federal monies.
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We feel that this is likely to cause serious legal problei
preventing the implementation of a countywide ICR system *-
this context.
The situation in Gwinnett County is complicated
further by the fact that the wastewater generated in Nortl'
Fork-Peachtree Creek Basin is transported through DeKalb
County in a federally funded interceptor, but is eventual!
treated at the R.M. Clayton facility in the City of Atlani
0 DeKalb County plans to implement a countywide ICR system ir
which the Unit ICR costs for each basin of the county wil!
the same. For this reason, even though the wastewater is
treated in the City of Atlanta, which at the present time c
not have any P.L. 92-500 funded facilities, DeKalb intend!
to bill Gwinnett County for transport as well as treatmenl
in '•
of this wastewater.
<
0 ' This, in our opinion,is not equitable. Since
« | DeKalb only transports the flow from Gwinnett, we feel we
uj
should only be accessed an ICR bill based on flow alone.
However, this wou-ld cause problems in the implementation
of the countywide ICR system, each industrial user is cha;
based upon the strength and quantity of their waste dischaz
without regard to their location within the county. There
fore, those industrial users in DeKalb that discharge intc
the R.M. Clayton Interceptor will pay an ICR payment based
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on the capital cost of both the treatment and -transport
of wastewater. To those industries, it is evident that
charging Gwinnett County only for flow is inequitable.
It appears that*an ICR system free of inequities is
virtually impossible. For this reason, we reiterate our
, plea for the abolishment of the Industrial Cost Recovery
i
! System.
.j One note I would like to add, certainly I don't want
£ i to give the idea Gwinnett is for anything but the abolishment
3 '!
5 i
3 of ICR, but under the alternatives presented, certainly if
3
i Alternative 14, the extension of the ICR moratorium,is not
S i
ft ;
: i upheld, Alternative 7, to establish a uniform ICR rate on,
= :
* i
i I and we recommend a SMSA basis which would give a uniformity
£ I of the rate through all counties and states.
i
i | MR. LUCIUS: Thank you, Dave. Are there any others,
2 i
•-J '
S ; in the audience who would like to make a statement at this
< \
* ! time?
^* "
c :
^ \ MR. TARPY: James Tarpy, from the Metropolitan
2 i
<= 'I Government of Nashville and Davidson County, Tennessee.
5 !
r I have with me today two prepared statements
j
•f>
both of which support the abolishment of the industrial
: cost recovery provisions of the law. I would like to submit
them into the record and not go through reading them.
At the same time I would like to ask a question.
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In considering the recommendations to Congress if Alterna
No. 14 is considered to extend the ICR moratorium, will s
recommendation be made to the Congress as to how themoney
j
I ; will be collected during this moratorium period? If it i
o ;
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^ | extended, will they be suspended ? Will the recommendati
•j
a j
7 - be a suspension of this collection of these monies, or at t
t "<
s , same time if the proposal does go to Congress there will
! 'I
= i be some modification of the industrial cost recovery pro-
vision of the law, will this also be retroactive on the
:
money obligated to be collected under this proposal?
MR. OLSTEIH: I think all of the details under
Alternative 14, if that is the one that gets recommended,
depend a lot on the reasoning behind it. That would be
what I would expect to be the case. If you feel that the
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application of pretreatment standards, for example, is one
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of the reasons why they would like to wait to get a bettei
picture, you are talking about a pretty long period of tim<
it would seem to make sense to me that the longer the morr-
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that is the reason.
John, do you want to comment?
MR. GALL: I think if you look at the alterna-
z tives — I don't know whether it is 15 that is to leave ICR
4
-•> in its present form — in fact if the moratorium is extended
I the way I see it, it almost has to come with a suspension
| ; of payments, because the alternative would be to restart
-' i
= j payments June 30 of next year which is in fact what the
current form of ICR is. We are playing a little bit of se-
| mantles there. You would have to say that you would have to
suspend payments in some form.
I MR. TARPY: Will there be a formal recommendation
^ i
a '
I i by this committee to the Congress?
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MR. GALL: Oh, certainly, there has to be. As
I said, Coopers & Lybrand will make recommendations to EPA,
3
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all the other statements that have been made here today ii
this respect.
I think it would be a detriment to us keeping tl
industry we have and to attracting new industry. We are
just now at a point where we are beginning to attract indus
some fairly large industrial plants, and we don't want th
stumbling block to be in our way of further industrial
growth.
5 MR. LUCIUS: Are there any other statements to 1..
H- I
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= j made at this time? Mr. Cook.
I |
i MR. COOK: Think what is going to happen after t*
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first of the year. Doesn't the moratorium end as of the
first of the year?
MR. LUCIUS: June 30.
MR*." COOK: Presumably Congress will act on this
thing before then.
MR, LUCIUS: w® certainly hope so.
MR. COOK: What if it doesn't? What is going to
happen?
i MR. OLSTEIN: When,EPA submits the report, whicl
is due the last day of December, what you have is two
; committees that have jurisdiction. You have one on the
• House side and one on the Senate side, and they really a]
ii not in a position where they are forced to take action.
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This is one of the things that both the House and the
Senate want to take a look at with respect to any additional
Clean Water Act amendments, but while some members want to
get out a new set of amendments next year, there are others
: that would rather not, so you have the tug and pull of those
•! things.
!
'! I wouldn't be surprised if nothing happens, if no
legislative action is taken by the 30th of June. I guess
you would just revert back to where you were before the
moratorium was put in place.
John.
MR. GALL: On Tuesday in Boston we had a repre-
| sentative from the Senate of Rhode Island who happens to be
i
I on the Senate Committee on the Environment. There are two
i
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|JJ things that she said that I would like to transmit to you
X
u
today that I think are particulary important.
One has to do with what Myron said, that both on
the Senate and House side there are varying factions that
have fairly large committees, they have different concepts
what
of/^the Clean Water Act is all about, where it should go,
where it shouldn't go, and some people would be only too happy
to have reason to open it up for further amendments next
year, not only on section 204 (b) but also on 404 or the
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MR. GALL: No. The way the legislation was set
up it is not a forgiven, unfortunately. Debts acrrue
during the moratorium period. They could be paid. The
jpayment schedule of the deferred debt could be either in a
lump sum or over the remaining useful life of the treatment
works, the remaining 28 and a half years at the industry's
| option.
! Do you have any other questions?
| MR. KINCAID: In considering the possibility of a
i
j moratorium and talking about the pretreatment program as a
i
! possible time frame with which that moratorium would con-
i
tinue, are you looking for something in the pretreatment progrm
•] ! that would support continuance of ICR, or are you looking
= i
- ! for that missing nail to put in the lid of the coffin on
5 •!
2 .! ICR?
< '!
§ 1 MR. GALL: I think clearly it is the latter and
'•n !
-i
3 ; and I think that our reason for-standing back would be pre-
, treatment would be an additional and very much larger burden.
That could certainly color any decision made relative to
i
, ICR.
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MR. KINCAID: I would agree totally and would h<
that that could be anticipated on the front end, and I
would urge that we press £>r a decision if at all possible.
The municipalities a're continuing to have to develop thes<
industrial cost recovery schemes even during the moratori
and we would like to bring it to an end if possible.
Is there any general support for ICR?
MR. GALL: Let me relate to what we found in th
meetings. This is the fifth eastern city. I would say
< the sentiment here today typifies the sentiment we found —
3
!
all of the other cities. If I remember correctly there w
only one community that spoke out directly in favor of in-
dustrial cost recovery. That particular community stands
to giin a lot of money through the program, and they have
great need for it.
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0 At the other levels of involvement in the study
which include the National Association of Manufacturers a
several kinds of governmental and environmental groups,
I think clearly you can understand that the trade associat:
9
£ j are not particularly enamored of the program.
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I I think the other organizations kind of have a '
i
j off attitude, waiting to see what the results of the
study are, what are the relative impacts. So I think
they are fencesitters at this point in time. They do see
some potential philosophical advantages, but my personal
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74
reading from what I have seen, reacting to it, is that
they still have not committed themselves.
Does that answer your question?
MR. KINCAID: Yes. One final one, is there any
beginning indication of what EPA's position will be ?
MR. GALL: No, I really think it is premature to
try to say that particularly because the people that have
3
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3 .! part of the decision making process, but I don't work in
< Washingtonr nor does the other fellow who works in Region 5,
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$ J but it will be a Washington level decision. There are ..
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\ try to go on record as to the inclination on the part of the
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5 ; agency.
§ | MR. KINCAID: Thank you.
| MB. LUCIUS: Are there any other questions or
^ 'j statements to be made at this time? Do the members of the
_ \ panel have any other comments?
5 : :
i MR. OLSTEIN: John looked at me at the end of his
comments. The thing I would like to just point out, because
i
at a meeting thatgoes the way this one has gone, you tend
. to get an almost one-sided view'of sentiment, I would like
i
1 to point out that there are a not insubstantial number of
people who feel very strong about the use of federal funds ;
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preconceptions but when you get up on the Hill you have a L
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75
in a way they might be construed to be a subsidy toward
industry, and my feeling throughout the program is that we
have to develop very strong data and evidence to deal with
It is a philosophical thing, so you have really
got to pile the numbers up to be able to counter it. I
think that is one of the things that is going to be looioin-
there after EPA's review. There are a lot of groups that *.
this way, and want to have something. I have to admit tha
EPA has been very good about not pressing us or directing
us in one way or another. I think they have done a very
even-handed job.
When they go through their internal decision mak"
process, which will be done in December, it should be a veir
even-handed balanced development, of the position based on
the data. So I don't think EPA has gone into this with an
of philosophical viewpoints you have to deal with, a lot
of tradition that has to be dealt with, and that is why th
has been usch an emphasis on public hearings, on the data.
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£ j The stack of data we are going to be delivering is going
to be about that high (indicating). That is the way it is
i
| going to have to go to get any kind of change.
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76
MR. DUKE: I am H. C. Duke from Fulton County.
We are building a new $10 million sewer system
without any federal help. Dont you think that is going to
dry up some of our existing industrial areas?
MR. HURLEBAUS: As I understand it you are building
, this entirely without federal assistance. In that case there
i
,
would be no industrial cost recovery because industrial cost
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; recovery is only on the federal share, and if there is zero
i
I federal participation ....
MR. DUKE: Don't you think that an industry having
» • to pay this ICR is going to move to a place (inaudible)., and
1 \
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A •
I , MR. HURLEBAUS: It possibly could. It would
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: depend upon the importance of wastewater treatment to that
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% I statement in that case.
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77
Also, for those of you who made a statement toda
if you have a copy of yourstatement, and you haven't done
so already, please give a copy of that to the reporter be£«
2 ' you leave.
On behalf of EPA, 02 would like to thank all of
you for coming today. Let me assure you we will include yc
I comments in the final report.
The meeting is adjourned.
(At 12:35 p.m., the meeting was adjourned.)
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ARD FLLTON MAYOR
METROPOLITAN GOVERNMENT OF NASHVILLE AND DAVIDSON COUNTY
A
October 25, 1978
MEMBER OF COUNCIL
2OS COURTHOUSE
NASHVILLE. TENNESSEE 372O1
Mr. John C. White,
Regional Administrator
U. S. Environmental Protection Agency
345 Courtland Street, N. E.
Atlanta, Georg.ia, 30308
Re: EPA Preliminary Industrial Cost Recovery
Study Regional Meeting
Dear Mr. White,
As a Municipal Official, past Chairman and present member
of the Budget and Finance Committee of the Metropolitan Council,
and Chairman of The National Association of Counties, National
League of Cities, and International City Management Association
Advisory Task Force for the wastewater treatment project funded
by the Federal U. S. Environmental Protection Agency, I submit
the following statement for the record.
1. The Industrial Cost Recovery provision of The Clean water
Act of 1977 should be abolished. This requirement is
inflationary by placing on the consumer the increased costs
associated with industry paying this additional charge.
Metro's existing industries have previously paid for their
share of the cost of the treatment facilities during their
years of continued uses.
2. The I.C.R. Program places a continuing implementation cost
on Local Governments. The user charge system does recover
this cost for administrating, operating, and accounting for
the Industrial Cost Recovery Program, but this charge is
being placed on all customers under our existing rate
structure.
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Page Two
Mr. John C. White
October 25, 1978
It is immaterial where the monies come from to fund the
construction grant program. What does make sense is to give a la
portion of the Federal tax dollars back as benefit to the citizens
of this country. The Industries of America are tax payers and sto
not be penalized nor should .the citizen be penalized by higher
consumer prices resulting from Section 204 of the Clean Water Act.
This I.C.R. Program is perpetuating a continuous cycle from which
the only benefit to be derived is a sharper reduction in the powe:
of the American people.
Very truly yours,
/ • A >/ *•/
/V.^/^^C -r/-
Richard G. Adams, D.D.S.
Member of Metropolitan Coi
RGA/bsc
cc: Honorable Richard H. Fulton, Metropolitan Mayor
Vice Mayor David Scobey
K. R. Harrington, Director, Dept. of Water & Sewerage Services
Robert Horton, Administrative Asst. to Mayor
Mr. Ken Schoen, Director of Finance
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RICHARD FULTON, MAYOR
OFFICE OF THE MAYOR
METROPOLITAN COURTHOUSE
NASHVILLE,TENNESSEE 37201
METROPOLITAN GOVERNMENT Of NASHVILLE AND DAVIDSON COUNTY
October 25, 1978
Mr. John C. White,
Regional Administrator
U. S. Environmental Protection Agency
345 Courtland Street, N. E.
Atlanta, Georgia, 30308
Re: EPA Preliminary Industrial Cost Recovery
Study Regional Meeting
Dear Mr. White,
The Metropolitan Government of Nashville and Davidson County,
Tennessee supports the elimination of ICR provisions from the
Federal Water Pollution Control Act (PL 92-500) and the Clean
Water Act of 1977 (PL 95-217). Until such time as the ICR re-
quirements of the law are eliminated, we urge EPA to develop
regulations for implementing the program that are consistent
with the spirit and intent of Congress1 recent amendments to
PL 92-500.
The Clean Water Act of 1977 revised ICR provisions in PL 92-500
to exempt small dischargers from ICR payment and to allow cal-
culation of ICR charges on a system-wide, rather than a project-
by-project basis. In the law, Congress also ordered the Agency
to undertake a study of the feasibility of ICR systems and the
economic impact of ICR charges. We urge EPA to use these oppor-
tunities to revise existing ICR regulations so the program require-
ments that treatment agencies must comply with are simpler, clearer,
and more likely to foster the smooth administration of the programs
developed.
No practical benefits will be gained from making the program
more complex, or from expanding the definition of ICR-eligible
dischargers to include sewerage customers that are not normally
considered "industrial." Major changes in the present regulations,
outside of those mandated by Congress, could be invalidated by the
findings of the ICR study and subsequent actions of Congress and
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Page Two
Mr. John C, White
October 25, 1978
would, in the meantime, only delay fulfillment of final require-
ments as treatment agencies struggle with yet another series of
regulatory revisions. Moreover, ICR requirements will work against
the general objective of revitalizing America's center cities,
since the ICR program makes joining or staying in municipal
systems more expensive than would otherwise be true. As all
industries are federal taxpayers, it is unfair to require them -
and only them - to reimburse the federal government for constructioi
grant money spent on their behalf if other users are not asked to
do the same.
The Metropolitan Government asks the E.P.A. and its con-
sultants, Cooper and Lybrand to consider these comments in making
the final recommendation to Congress.
Very truly
Richaftd H. Fulton,
Metropolitan Mayor
RHF/bsc
Encl.
cc: Mr. K. R. Harrington, Director-Dept. of Water & Sewerage
Mr. D. Elmo Lunn, Director-Tenn. Division of Water Quality Cont
Mr. John Kane, Chester Engineers, Coraopolis, Pa.
Mr. Sam Waddell, Project Manager, U. S. Environmental Protect:
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•.n
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STATEMENT OF METROPOLITAN GOVERNMENT OF
NASHVILLE AND DAVIDSON COUNTY
(see page 66)
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