United States         Offico of            August 1989
               Environmental Protection     Water
               Agency            (WH 556)
xvEPA        Rnancing Strong State
               Water Programs In  New
               Proceedings Of A
               National Workshop
               March 20-21, 1989
               Denver, Colorado

               Co-Sponsored by:
               Association of State and Interstate
               Water Pollution Control Administrators

               Association of State
               Drinking Water Administrators

               Council of Infrastructure
               Financing Authorities

               Council of State Governments

               Government Finance
               Research Center

               National Conference of
               State Legislatures
               Proceedings Prepared by
               the National Academy
               of Public Administration
                                                Printed on Recycled Paper

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Academy as an institution.


    The National  Academy  of Public Administration agreed  to  prepare this
summary of the proceedings of the  workshop on  "Financing Strong State Water
Programs in New Ways" sponsored by the Office of Water, U.S. Environmental
Protection Agency.  The workshop took  place  in Denver,  Colorado on March 20
and 21, 1989.

    It was co-sponsored by the :

    Association  of  State  and   Interstate  Water  Pollution  Control

    Association of State Drinking  Water Administrators

    Council of Infrastructure Financing Authorities

    Council of State Governments

    Government Finance Research Center

    National Conference of State Legislatures

    New requirements imposed  by amendments  to the Safe Drinking Water Act
and the Clean Water Act coupled with  a prospective reduction of  50 percent
in federal funds available to states  to support  their ongoing water quality
management  programs  made  it  imperative  to  review financing  options
available to states.

    The National  Academy  of  Public Administration was  pleased to assist in
this important effort.

Proceedings Table of Contents
Page Title
i Glossary
1 Introduction
3 Summary of Recommendations for State and U.S. EPA
Actions to Support Supplemental Funding Programs
9 State Keynote Address
The Honorable Roy R. Romer
Governor of Colorado
13 U.S. EPA Keynote Address
Rebecca W. Hanmer
Acting Assistant Administrator
Office of Water
U.S. Environmental Protection Agency
17 The Challenge of Financing Environmental Protection
Charles L. Grizzle
Assistant Administrator for Administration
U.S. Environmental Protection Agency
21 State Needs: New Money; New Solutions; New
27 Designing and Adopting Fee Systems to Cover the
Costs of State Services
35 Designing and Adopting Special Taxes
41 Designing and Adopting a System of Dedicated Fines
and Penalties

Page Title
45 Management Funds - Once the Money is Available,
Pooling and Managing It for Revenue Growth
53 Working with State Legislatures
59 Reducing the State Programmatic Burden
67 Collaborating with Other Agendes and Third Parties
to Accomplish Water Program Goals
67 Session I
73 Session 2
79 A. Official Conference Attendance List
89 B. Colorado Cash Fund Sources
91 C. New Jersey Pollutant Discharge Elimination
93 D. Idaho Water Pollution Control Account
95 E. AWWA Recommended Funding Sources for
Main Drinking Water Functions
97 F. Vermont Environmental Infrastructure Financing
103 C. Rural Community Assistance Programs
109 H. New York Technical Assistance Programs

Proceedings Glossary
ASDWA Association of State Drinking Water Administrators
ASIWPCA Association of State and Interstate Water Pollution
Control Administrators
AWWA American Water Works Association
CDBG Community Development Block Grant Program
CEM Office of Cooperative Environmental Management
(U.S. EPA)
CES Cooperative Extension Service (USDA)
DEC Department of Environmental Conservation (Vermont
and New York)
DOJ U.S. Department of Justice
EPA U.S. Environmental Protection Agency
FMHA Farmers’ Home Administration (USDA)
GAO Government Accounting Office
HHS U.S. Department of Health and Human Services
HUD U.S. Department of Housing and Urban Development
ICC Iffinois Commerce Commission
MTAS Municipal Technical Advisory Service (Tennessee)
NARUC National Association of Regulatory Utility
NEHA National Environmental Health Association
NJPDES New Jersey Pollutant Discharge Elimination System
NOAA National Oceanic and Atmospheric Administration
NRWA National Rural Water Association
NSF National Sanitation Foundation
0MB Office of Management and Budget
PUG Public Utility Commission
RCAP Rural Community Assistance Corporation Program
SCS Soil Conservation Service (USDA)
SOWA Safe Drinking Water Act
SRF State Revolving Loan Fund
USDA U.S. Department of Agriculture
USGS U.S. Geological Survey
UST Underground Storage Tank
WPCA Water Pollution Control Account (Idaho)

Proceedings Introduction
The workshop was a product of the U.S. Environmental Protection
Agency’s (U.S. EPA’s) Office of Water State Funding Study. Rebecca
Hanmer, the Acting Assistant Administrator for Water, initiated the
study in May 1988 as a result of her concern that States were facing
growing financial problems in carrying out their water programs.
States are crucial implementing arms of Federal policy as well as
their own State agendas, and new resources must be found to sup-
port State-based water management programs and new program
The study is quantifying the need for increased funding to support
State water programs, identifying possible solutions such as alterna-
tive financing mechanisms and increased general revenues, and
investigating ways to reduce the amount of resources needed in
implementing the laws and regulations.
States face an increasing financial shortfall in funding their water
management programs. The shortfall is caused by two events - new
legislative requirements and diminishing Federal funding for estab-
lished Clean Water Act programs.
New requirements of the amendments to the Safe Drinking Water
Act (SDWA) in 1986 and the Clean Water Act in 1987 will demand
new State resources that by 1994 could double the current State oper-
ating budgets.
In drinking water programs, States must promulgate 83 new and
revised drinking water regulations over the next five years and 25
additional regulations every three years thereafter. States must also
increase monitoring activities as well as establish more stringent
enforcement programs, and regulate some 20,000 drinking water
systems previously unregulated. In surface water programs, States
must increase toxic and nonpoint source control, and add sludge
management and stormwater control.
At the same time, 50 percent of the Federal funds historically avail-
able to States to support their ongoing water quality management
programs will be greatly reduced by the end of fiscal year 1990 and
terminated altogether by the end of fiscal year 1994. These funds are
available through set-asides to the Federal construction grants pro-
gram, which will end and be replaced by State revolving loan funds.

Although necessary, increasing Federal and State funding of water
management programs from general revenues is proving to be
difficult, given the Federal deficit, tax reform changes, and the anti-
tax climate in the nation. As a nation, we need to decide our policy
on Federal support of State water programs, increasing State sup-
port, and adopting supplemental financing mechanisms that will
add new sources of revenue to those that traditionally fund water
This workshop sought to:
(1) make known the severe problem facing States in managing their
water programs;
(2) share the “how to” information from States that are already
successfully implementing alternative financing mechanisms;
(3) help forge new partnerships among the water administrators,
legislators, and the financial community to stimulate new financing
opportunities; and
(4) obtain recommendations from workshop participants on actions
States and U.S. EPA can take to support implementation of alterna-
tive financing mechanisms.
The workshop was sponsored by U.S. EPA’s Office of Water, with
cosponsorship by six other concerned organizations:
the Association of State and Interstate Water Pollution Control
• the Association of State Drinking Water Administrators
• the Council of Infrastructure Financing Authorities
• the Council of State Governments
• the Government Finance Research Center
• the National Conference of State Legislatures
The National Academy of Public Administration prepared these
proceedings of the two-day meeting, based on an edited transcript of
the workshop and review of the proceedings by speakers and panel-
ists from the sessions.
Participants at the workshop included representatives from over 30
States, State and Federal legislators and staff, the financial industry,
and private interest groups. Appendix A contains a complete listing.

Summary Recommendations for State and U.S. EPA
Actions to Support Supplemental Funding
General Considerations U Water in the United States is cheap and underpriced; until we
realize the true value of water, our economic problems will only
become more severe.
• There is no single revenue solution to the State funding gap, rather
a number of partial solutions need to be undertaken.
• We need to have better accountability to show what water pro-
grams are producing and we should not be afraid to say what we
cannot produce because of lack of resources.
U Supplemental financing mechanisms should be pursued, but
improved efficiencies, better financial management, and cost
saving organizational or programmatic changes should receive
equal attention.
U Leveraging techniques should constantly be sought in the expen-
diture of funds.
• Utilities should establish reasonable reserve rates within the price
of water to reflect depreciation of their existing facilities.
• We need to try to protect our existing funding sources, recogniz-
ing that others may want to use our methods, especially our sur-
pluses, if any.
U.S. EPA Actions U Develop a State/U.S. EPA consensus on how to move forward in
Recommended partnership.
U Promote better communications between States and U.S. EPA.
U Re-examine the issue of Federal funding criteria, and the need for
a Federal policy to determine how much support for State pro-
grams should be provided at the Federal level.
• Give explicit support to the Federal obligation to help pay an equi-
table share of program operating costs.
U Take the lead in defining what is affordable for environmental
3 programs.

• Set up a permanent water program financing task force.
Fee Systems U States are using fees to support their core program. Fees can not,
however, fill the entire funding void; there is an upper limit.
U We need a balanced approach to funding with a major role for
fees; do not fragmentize funding sources.
U We need to be flexible, recognizing we will have a period of inno-
vation and experimentation.
• There are administrative complexities which must be recognized.
• We could benefit from more technical transfer among the States.
U.S. EPA Action U Develop a clearinghouse for collecting, analyzing, and sharing
Recommended information on traditional and innovative ways of financing State
water programs.
Fines and Penalties U The primary purpose of fines should continue to be to ensure
compliance, with the hope that fines eventually will not be neces-
• In the meantime, fines should be viewed as an opportunity to have
the polluter pay back into the system.
• This requires preparation of a system that can receive and use the
fine revenues. The impetus and commitment to make the penalty
work will affect the development of such a system.
U.S. EPA Action U Play a strong clearinghouse role in sharing information on sizes of
Recommended penalties for various violations, and uses of proceeds from penal-
Funding Allocations U We need to look at the allocation of Federal monies to States and
perhaps tie these more strongly into needs and performance.
Funds U If possible, revenues from fees and taxes should be combined into
a single dedicated fund, not mixed with general revenues.
Management U State and Federal governments need to be leaner and meaner, and
think smarter.

• We need to survey State water program needs on a regular basis.
• We should encourage all possible efficiencies in program admini-
• In the drinking water program, we need to encourage regionaliza-
tion, consolidation, and circuit riders.
U There should be greater use of pollution prevention, water conser-
vation and water demand management.
U We should encourage greater use of pretreatment to reduce the
amount of waste generated.
• We should develop industrial incentives for cost reduction.
• We should take some risks to “think smart” even if it is not busi-
ness as usual. We could even be radical; for example, experiment
with procurement.
U.S. EPA Actions U Review the various Federal laws and regulations to give States
Recommended more flexibility within the needed accountability.
• Involve States and other interested parties in defining require-
ments and promulgating regulations.
• Remove legal impediments to public-private partnerships at the
Federal level, and promote such partnerships at the State level.
U Work to keep reporting requirements and programs simple to hold
down costs so that U.S. EPA money can support public health pro-
tection and not be used merely to report back to U.S. EPA.
Priorities • Resources are short enough that we will have to compromise.
Therefore, it is important to focus on water quality objectives and
make decisions on what is most important to accomplish.
U We need clearer separation of the “musts” from the “mays and
U.S. EPA Actions U Recogi ize, because of their differences, the importance of flexibil-
Recommended ity to the States in setting priorities and program objectives.
U Allocate resources according to priorities.

Public Support U We need to convince the public of the benefits of our water pro-
grams, not just the need for additional people to run the programs;
funding for administrative costs will follow with increased pro-
gram funding.
U We should encourage greater individual responsibility, commu-
nity participation, and education of the legislatures and the public.
U We must better present the benefits of water programs to gain
public support.
U.S. EPA Action U Do a better job of stimulating public and congressional awareness
Recommended of the need for water programs and resources to support them.
State Legislatures U Find and work with key State legislators as advocates for the pro-
grams and needed resources.
• Remember that if fees are set too high, without collaborative work
with those who will pay them, legislative constituencies may
EPA Actions U Give strong assistance to State agencies in translating requirements
Recommended and communicating the new needs to the State legislatures.
• Recognize that departments of health are often the lead agency for
water programs and are at a disadvantage competing with larger,
more visible agencies.
* Make dearer to State legislators that the Clean Water Act is going
to raise administrative operating costs, since it may not be appar-
ent that these are not infrastructure costs.
Taxes U A new tax will require extensive consensus-building which must
include private business and utilities.
• In obtaining a new tax, it is important to keep the effort simple and
U.S. EPA Action U Develop model State legislation that deals with new taxes.

Technical Assistance I Technical assistance organizations can accomplish goals and work
in places that States cannot.
I Technical assistance can reduce overall State and community costs.
I At least one technical assistance agency, such as the Municipal
Technical Advisory Service in Tennessee or a Rural Community
Assistance Corporation, should be supported with additional
funding, if necessary, in each State.
• Relationships need to be strengthened between technical assistance
organizations and the States.
• Coordination can be improved between agencies.
I Success stories should be publicized.
U.S. EPA Actions U Make more of a hands-on outreach effort to ensure coordination by
Recommended getting interested parties together and helping the States identify
who needs assistance.
I Form a team to help solve technical problems rather than put new
money into programs.
Third Parties I States could extend their resources by making better use of public
health professionals who are available.
• States could make better use of third parties such as the National
Sanitation Foundation for things such as service and laboratory
U.S. EPA Action U Work with other agencies, local governments and third parties as
Recommended well as States.

Excerpts from State Keynote Address
Speaker The Honorable Roy R. Romer
Governor of Colorado
Ever since the Clean Water Act and the Safe Drinking Water Act were
passed in the 1970s, Congress has incrementally added to the areas
that State water quality programs are required to address. Controlling
conventional water pollution and point sources has been successful;
now we must implement programs to control toxics and nonpoint
Initially these new responsibilities were supported by set-asides from
the Federal construction grants program. In 1987, Congress enacted a
plan to replace the construction grants program with State revolving
loan funds dedicated to constructing and expanding wastewater
treatment plants.
By 1995, U.S. EPA estimates that half of the federal funding formerly
available to States for water quality will be gone. And what is left will
not fully address the needs for which it is provided. This conference
will be focusing on supplemental financing which we can use to fill
the funding gap that will exist.
In Colorado, more than 50 percent of the funds supporting the Health
Department’s water quality programs come from the Federal govern-
ment. Our commonly discussed options are new Federal or State ap-
propriations, increased permit fees, tap fees, and pollution taxes or
effluent fees.
New Federal and State appropriations are likely to be few and selec-
tive, given the Federal deficit and the prevailing political attitude
concerning taxes in Colorado and many other States. While we can
and should expect Congress to continue to refine and initiate water
quality legislation, the States must continue to insist that the Federal
government share the costs of the legislation.
The nation’s governors have asked Congress not to create new State
obligations without sufficient funding assistance to share the cost of
those obligations. In no area is that request more important than in
the area of water quality.
In Colorado, talk of new appropriations from the State’s general fund
gets about as good a reception as talk of wilderness water rights gets
from western water developers.

Permit fees now provide about 22 percent of the revenues for the State
program which is only slightly less than the 26 percent provided from
the State’s general fund. But permit fees cannot be raised indefinitely,
and we are thoughtful about how much more burden can be put upon
the dischargers.
Tap fees are appealing to some because they spread the costs across
the broadest possible base, the consumers, who are also the beneficiar-
ies of water quality programs. However, I have reservations. It could
be argued that pollution is morally wrong, and that the pollutants
rather than the consumers should pay.
As an economist I must raise the flag of economic efficiency and talk
about pollution taxes, or effluent fees. These can force polluters to
recognize the cost of pollution as part of the cost of production. If tax
rates are properly set, they can insure that those who encourage pollu-
tion through buying the products which result pay for the conse-
quences of that pollution. However, as a politician I recognize that the
resulting burden falls largely upon large municipalities and large
industries, who will take a long, hard look at pollution taxes and the
What this all means is that none of these solutions are without ad van-
tages and disadvantages. Together, political leaders and water pollu-
tion control experts will have to make some tough choices about these
traditional options for filling the water quality financing gap. Any
choice we make will require that we invest in a healthy amount of
public education about the importance of environmental quality in
general and water quality in particular.
There is another way of addressing the funding gap. Let me challenge
you to look beyond the revenue side and think more creatively about
the ways we manage our water quality programs and the costs of
those programs. These ways ought to be explored thoroughly before
State water quality programs seek supplemental revenues.
1. Consider new ways of organizing and managing to gain greater
efficiency. We have an obligation as public servants to take every
dollar spent on water quality and stretch it as far as possible.
• Recognize that managing financial resources requires close
collaboration with other agencies and with the legislature.
• Look closely at program organization and ask tough questions.
Are there other ways of achieving water quality goals than the
status quo? Rethink how we can do our jobs more efficiently.
R Since personnel for enforcement are limited, one idea we will

be exploring is an outreach program for dischargers to train
and certify operators to do their own comprehensive inspec-
2. Actively promote water conservation which would increase the
supply and leave less water to be treated, thus reducing treatment
costs. Some possibilities would be requiring low-flow fixtures for
consumers; and for agriculture, a big user in Colorado, setting up
financial incentives to conserve, perhaps by selling the water
savings to other users.
3. Encourage pretreatment programs. These are not only important
for compliance, but can greatly reduce burdens on wastewater
treatment plants and encourage waste reduction in the private
sector. Industrial discharges to plants create some serious prob-
lems including health hazards to the public and workers; interfer-
ence with proper operation of treatment plants; increased expense
of toxic pollutant disposal; damage to pipes and equipment; and
the potential for explosion caused by highly volatile wastes. Re-
ducing these problems through pretreatment saves municipal
money. Shifting the costs to dischargers may also provide addi-
tional incentives to implement cost-saving waste reduction tech-
4. Promote individual responsibility and community participation.
Increasing education on pollution prevention and cleanup prac-
tices can make us all part of the solution and could include such
activities as proper disposal of used engine oil, alternatives to
sanding and salting techniques for de-icing, and proper land use
Let me wrap this up by summarizing what I think all this means.
First, there is not likely to be a single solution to the water quality
funding gap. There are only a number of partial solutions which,
when combined in creative ways, may allow States to preserve a
strong water quality program.
Second, we cannot look only at supplemental financing mechanisms
to bridge the funding gap. Improved efficiency, better financial man-
agement, and cost-saving organizational or programmatic changes
should receive at least as much attention from water quality manag-
Third, States may find that the best they can do is to preserve a strong
core program of planning, standard setting, permitting, monitoring,
and enforcement. Increased reliance on private sector and locally
generated solutions will become increasingly important in the years

Fourth, we must all remember that the primary goal of our efforts is to
protect and enhance the quality of the water supplies upon which all
life depends. There are at least as many ways to achieve that goal as
there are creative minds devoted to the task. At all levels of govern-
ment, and in the private sector, we need to appreciate that and pre-
serve the flexibility to experiment with new approaches to meet the
great challenges which lie ahead.

Excerpts from U.S. EPA Keynote Address
Speaker Rebecca W. Hannier
Acting Assistant Administrator for Water
U. S. Environmental Protection Agency
State water programs are heading very rapidly into a brick wall—
greatly expanded legislative mandates to be met despite a funding
shortfall which will hamper meeting even our current mandates. As
we contemplate how to deal with this crisis, we need to ask ourselves
a whole series of brand new questions.
We need to think in a new and broader context than simply program
funding levels. We need to be asking other questions, such as: How do
we manage and run the water pollution control and drinking water
programs more efficiently? How do we find ways to strengthen the
involvement of local citizens and local governments in what we are
doing? How do we engage citizens in an intelligent discussion on how
those things should be paid for? How do we engage the private sector
more effectively in terms of monItoring, permit conditions, and com-
The State funding gap is large. In spite of all our great ideas on doing
business differently, it will still be necessary, and, in fact, crucial, to
find additional monies to fund strong State water programs ade-
Why do we care so much about administration costs of State water
programs? We are constantly reminded that while the States are
spending millions of dollars, this pales in comparison to the billions of
dollars invested in infrastructure at the local and private levels. How-
ever, without strong State programs, the billions of dollars we’re
spending on infrastructure at the public and private levels may not be
spent in a way that ensures healthy, clean water Statewide and, ulti-
mately, nationwide. In fact, some of those billions of dollars might not
be spent at all without the State’s regulatory role.
But with all the money that has been invested, we have made very few
of the inherent problems go away. In most areas, we have put huge
systems of concrete, pumps, and electrical systems between us and a
potential pollution deluge that is always there. Those systems have to
be maintained all the time.
Strong State programs are crucial. Not only do States perform a regu-
latory role, but they set water quality standards and goals, and they

ensure that priority problems are addressed first, that downstream
jurisdictions don’t suffer from decisions made by upstream jurisdic-
tions, that small communities which can’t afford to manage their infra-
structure are assisted, and that we meet and maintain the bottom line
of clean water and healthy drinking water.
We believe that the States and their partner local governments are in
the best position in this country to deal with the site-specific water
problems as efficiently and as cheaply as possible. They have the site-
specific knowledge, connections, and familiarity to get results most
effectively and efficiently.
In addition, States must meet multiple environmental requirements in
other area besides water. They are therefore in a good position to
evaluate all the individual environmental problems and requirements
affecting their given areas, and to develop coordinated, prioritized,
effective solutions that take into account the resources available at the
State level.
Also, much of the remaining water quality problems come from a vast
universe of small, diverse, and complex pollution sources. These
nonpoint sources are most effectively dealt with by State and local
authorities because the solutions involve thousands of individual local
decisions and local behavioral changes. The same principles apply in
the welihead protection program in terms of protecting our ground
water. We are not dealing with an easily regulated small universe of
very large sources. Rather, we are dealing with millions of small
problems that can only be assisted by people who are near those
problems, their causes, and their solutions.
The comprehensive new amendments to the Safe Drinking Water Act
in 1986 and the Clean Water Act in 1987 present us with major new
challenges, and give the States a tremendous new agenda to imple-
ment. These amendments also clearly recognize the primacy of the
States for responsibility for most of the remaining work to be done in
water pollution control. If the States cannot give these new programs a
solid start, it means that either U.S. EPA or the States will have to
spend considerably more money down the line for enforcement and
remediation, or suffer a return to the water quality conditions of the
1940s and ‘50s, which we thought we had grown well beyond. And it
will be more expensive and difficult this time around because of the
tremendous increase in our population and our economic activity
since we began this trek 20 or 30 years ago.
For all these reasons, I regard supporting and building State capacities
as one of the main goals of the Office of Water and, indeed, of the U.S.
Environmental Protection Agency. We sent this message to Lee Tho-
mas, who authorized us to begin this study, and to Bill Reilly, our new
Administrator, and we are going to be saying it even more forcefully
in our 1991 planning sessions.

Financing is most of the name of the game, and it is also something
that can never be taken for granted. These issues need to be shared
constantly with the public. So, despite the fact that not all these ideas
are new, they are new to a whole generation of leaders and people
who will be expected to pay the cost. That is why we initiated and are
publicizing our State Funding Study in every forum we can—in the
news media, in mailings, in work with interest groups, and in brief-
ings to congressional staff.
We are serious. This is an urgent issue. We do not have much time,
but we do have a lot of ideas. Now is the time to take those ideas and
put them into an effective form that we can use to communicate at the
national level.
We have gathered information on alternative financing solutions and
presented this information in appropriate forums. Of course, many
States are well ahead of us at the Federal level in designing and imple-
menting innovative solutions. We are lrying to help the States, pursu-
ing common ends with not only them and with interest groups, but
with other U.S. EPA program offices, such as the Office of Air and
Radiation, which faces very similar problems, and with the financial
We have a task force of Federal and State members who have been
providing us with advice on how best to support the State efforts, and
they will be meeting again after this workshop. We hope this work-
shop will help publicize the State funding problem. We would like to
provide a forum for States with successful alternative financing pro-
grams to tell others how they did it. We would like to stimulate new
partnerships between the various parties that need to be involved in
this issue. And we would like to obtain recommendations from you,
the participants, for actions the Office of Water could take to help the
States solve the funding problem.
The final element in the next couple of months will be to examine
what the Federal role needs to be in supporting State environmental
programs. There has been Federal funding for State water pollution
control programs at least since the 1956 Federal Water Pollution Con-
trol Act. At the time those Federal funding mechanisms were set up,
there was a recognition on the part of the Congress that people were
entitled to a certain minimum level of water quality and safe drinking
water regardless of whether they lived in a poor or rich State. As a
result, Congress set up an income redistribution mechanism by pro-
viding State grants from the Federal tax base.
In addition, States carry out national mandated water pollution con-
trol or safe drinking water activities that go beyond what their own
citizens would ask for, demand, and be willing to finance. Supporting

this State role is an integral part of achieving the national goal for
dean water. And the Federal taxpayer through the Federal tax system
should, in fact, pay to support this goal.
The final report from the State funding study effort will contain an
implementation plan to help address the funding crisis. We have
called our initial effort a funding “study,” but we have always in-
tended it to result in an action plan to support State programs.
I would like to mention some of the ideas we have received already
about follow-up actions and the federal role. Some have suggested
that U.S. EPA might act as a dearinghouse for information on innova-
tive State financing mechanisms over time, to carry on the work we
have been doing into future years, and that we might maintain a
network of financial experts that the State and local governments
could go to for assistance. We need to continue our public awareness
campaign. We might partially fund personnel exchanges between
State and U.S. EPA staff in the area of creative financing. We might
work to remove unnecessary legal impediments to beneficial public
and private partnerships and encourage States to do the same. We
might consider increasing the private sector role in some areas of our
regulatory activity by providing a certification for self-monitoring of
certain activities. We might provide more technical assistance on
financial mechanisms and other technical subjects. And we also
should periodically examine our underlying regulations to see if we
can develop less burdensome ways to reach our water quality goals in
working with State and local governments. We are very eager to hear
your recommendations at this workshop.
In closing, I would like to note that we at U.S. EPA are well aware that
we are not leading the parade in finding solutions to these financial
problems. All we can do is help foster the parade that is already on its
way. State water programs have been fashioning creative funding
programs for some time.
I’m very much looking forward to hearing from you the actions you
want us to take and the leadership and support you want from us.
Every time Congress has made major amendments to our clean water
and drinking water laws, U.S. EPA, the States, and local governments
have entered a new phase of our partnership in program manage-
ment, in funding, and in ways to work together. Now, more than ever,
we need a coalition. There is no way that we alone, at any level of
government, are going to be able to ensure our citizens of dean drink-
ing water, dean surface water, and diverse and healthy ecological
systems. Clean water is necessary for all of us and it costs money. We
are seeking new partnerships. We have new ideas. And we, at the
Federal and State levels, are actively looking for ways to make our
bureaucracy operate more efficiently and effectively. We are open to
new ways of doing business and we are all in this together.

Excerpts from The Challenge of Financing
Environmental Protection
Speaker Charles L. Grizzle
Assistant Administ rat orfor Administration and Resources Management
U. S. Environmental Protection Agency
The current environmental challenge is the result of two concurrent
Needs and expectations for environmental protection are growing.
Legislation reauthorized or proposed by Congress has placed major
resource requirements on States and communities, much of it to
meet new water quality requirements such as toxic wastes, non-
point pollution, sludge, degradation of wetlands, estuaries, coastal
waters, and ground water.
Federal budget constraints, changes in tax laws, and increasing
demands in all service areas limit traditional funding sources. The
resulting shortfall jeopardizes past, present, and future environ-
mental improvements.
We now estimate that the funding gap just to maintain existing
environmental standards will reach $20 billion annually by the year
2000. This does not include new regulations or new problems such
as ocean pollution, stratospheric ozone depletion, and the inability of
high-density urban areas to meet U.S. EPA air quality standards for
ozone. This shortfall affects all levels of government and, due to the
Federal deficit, we can no longer rely on the Federal government to
meet as great a share of environmental protection costs. For example,
the amount Congress appropriated to U.S. EPA to implement the
Clean Water Act falls significantly below what was authorized.
You have heard about State problems. At the local level, to maintain
todays level of service, environmental expenditures are expected to
nearly double by the turn of the century. Communities will spend
over $48 billion annually, about 65 percent of the national cost, while
Federal support will drop from 12 percent to less than six percent by
the year 2000, mostly due to phasing out of the Construction Grants
Program as mandated by Congress.
The problems at each level of government are interrelated. The
inability of the Federal government to provide the necessary re-
17 sources places burdens on the States, and the difficulties that local

governments have in financing their infrastructure needs also place
additional requirements on State administrative structures.
As our environmental problems evolve and mature, it is dear that
State and local governments are being called upon to take on more
implementation responsibilities while U.S. EPA moves to a support
role. Historically, shifts in Federal/State relationships are not so
unusual. Roles have changed before in some of the more traditional
government services such as housing, health care, and highways. But
this is the first time environmental programs have been on the table.
And despite the wisdom gained from experience, the process has not
become any easier.
The message that the State must assume more responsibility is some-
times interpreted to mean that the feds are imposing significant new
requirements without providing the means to implement them. I can
well understand this perception. We at the Federal level must work
with the states and municipalities to ensure that a broad range of
alternative and effective financing strategies are available.
The growing costs of environmental protection require a re- examina-
tion of how the nation finances and pays for such investments. The
gap between current and future needs and spending dearly calls for
bold and innovative approaches at all levels of government — Fed-
eral, State, and local. We are at a critical point in the history of the
environmental movement, and we need to go beyond the traditional
With all this in mind, U.S. EPA has developed several initiatives —
traditional and non-traditional — to encourage whatever institu-
tional and policy changes are required to meet the challenges of the
future. These initiatives seek to promote greater cooperation and co-
ordination between U.S. EPA and the environmental community, i.e.,
State and local governments, private industry, the financial commu-
nity, associations, and academia. They also encourage the use of
innovative techniques, procedures, and technologies to manage and
meet environmental expectations.
U.S. EPA is encouraging States to adopt:
• Fees on State environmental services.
• Taxes on products that contribute to pollution.
• Fines on polluters.
• Trust and revolving funds for administrative and infrastructure

At the Federal level, U.S. EPA is promoting:
• The Superfund to finance cleanup of hazardous waste sites
through a tax on oil and chemical manufacturers.
• The State Revolving Fund for seed money for construction of
wastewater treatment facilities. This may be extended to other
• Feeson-
- pesticides registration;
- toxic pre-manufacture notices;
- ocean dumping; and
- radon certification.
In addition, U.S. EPA is seeking to enlist market place forces and in-
genuity and the resources of the private sector by actively promoting
public-private partnerships. These would not only attract private
capital, but also help change the adversarial relationships between
the regulating and regulated communities. Nineteen States have
legislation which promotes these partnerships and other States are
encouraged to adopt such legislation.
Other U.S. EPA initiatives include:
• A new unit within my office to serve as a national focal point for
innovative financing and public-private partnerships. It is cross-
media in scope, and will coordinate U.S. EPA efforts and develop
national strategies to encourage Federal, State and local use of
public-private partnerships and innovative financing.
• A new U.S. EPA Office of Cooperative Environmental Manage-
ment (CEM) to improve environmental results by creating a coop-
erative climate in problem solving, shared knowledge, and tech-
nology transfer through technical assistance, training and infor-
mation dissemination.
• A National Financial Advisory Board to serve the CEM’s National
Advisory Board on Environmental Technology Transfer. The
board would provide a nationally recognized body of experts that
would advise U.S. EPA, States and local governments on finan-
cial, tax and legal matters. The board will be composed of elected
State/local officials, financial experts, bankers and industry

U A new Pollution Prevention Office to serve as a focal point for
prevention activities.
U A national outreach effort induding:
- a new small community ombudsman;
- a State/local roundtable;
- the State/U.S. EPA committee; and
- conferences such as this one.
U.S. EPA is also aware that environmental legislation and its subse-
quent implementation have tremendous impact on the finances of
federal, State, and local governments, the private sector and the
general population. Accordingly, the agency will review its ap-
proaches to legislative and regulatory development to assure that
the laws are fair, effective, flexible and, of course, affordable.

Panel State Needs: New Money; New Solutions;
New Partnerships
Introduction As U.S. EPA and the States move into a new phase of water program
management, it appears that an increasing share of the funding bur-
den will fall on the States. Several factors contribute to this. New
requirements under the Clean Water Act and the SDWA place addi-
tional responsibilities on the States. At the same time, 50 percent of
the Federal funds that States used to support their water quality base
programs in 1988 will disappear by 1995 due to the termination of
U.S. EPA’s construction grants programs and the set-asides from
them. The Federal deficit makes new Federal funds from other
sources difficult to obtain, and the 1986 Tax Reform Act changed the
attractiveness of some infrastructure financing mechanisms. To fill the
financial gap, we need new money, new solutions, and new partner-
ships to support State efforts in protecting water resources.
New money is necessary, because State needs for water programs are
expanding, while Federal funds are diminishing. States need funds
from new sources, as well as increased general revenues (the tradi-
tional form of environmental program financing) to support these
New solutions are critical to respond to a State’s expanding and
increasingly complex program because of the inflexible and some-
what uncertain future of general revenue funding due to budget
deficits. Supplemental financing mechanisms not only provide new
revenue sources, they can also creatively link the type of financing
approach taken to the specific environmental programs it supports.
New partnerships are important because States do not operate their
programs in a vacuum: U.S. EPA and municipalities play obvious
supporting or direct operational roles with State water programs. The
private sector can also have much to contribute, not only as a regu-
lated interest, but as a creative partner in solving environmental
Moderator Mr. Michael Quigley
Office of Municipal Pollution Control
U. S. Environmental Protection Agency

Key Points by Panelists Ms. Linda Eichmiller
Deputy Director
Association of State and Interstate Water Pollution Control
Administrators (ASIWPCA)
An AS1WPCA survey of 50 State administrators (43 responded)
I Present water programs are underfunded by 24 percent ($76 mil-
• Fifty percent of existing funds come from State general revenues,
21 percent from Section 106, 14 percent from Clean Water Act set-
asides, and 15 percent from alternative financing and miscellane-
ous funds.
I The funding gap will increase from $116 million in 1988 to $439
million in 1992.
These estimates will increase as we learn more about how we will
implement the requirements. For example, State estimates to imple-
ment pretreatment were very high, and that was not a 1987 amend-
ment requirement, but an existing requirement whose resource de-
mands are now becoming clear. Inflation is eroding the base such that,
in real dollars, funding for water programs is not much ahead of 1972.
In looking at what a Federal fair share would be, at 25 percent, which
is conservative, it would more than double the 1990 Section 106 State
grant program above FY 89 levels. To implement the Clean Water Act,
not only will more resources be necessary, but the national program
must be made more efficient and effective through streamlining re-
Mr. Frederick Marrocco
Chief, Division of Water Supplies
Department of Environmental Resources
Past President, Association of State Drinking Water Administrators
An ASDWA survey responded to by 34 States and one territory cover-
ing 71 percent of all community water systems showed:
• $96 million being spent currently on State public water supply
programs (two-thirds State and one-third Federal);
• $32 million shortfall to implement current drinking water program

S $131 million in new requirements annually by 1992; and
S $200 million in initial one-time costs between 1987 and 1992.
• The rules that have the biggest resource implications for States are
disinfection, volatile organics, radionudides, surface water treat-
ment and lead.
Because of the funding shortages which will exist, U.S. EPA is going to
have to be flexible in negotiating what can not be done with the States
and aggressive in going back to Congress with the results.
Fourteen States surveyed employed some form of user fees, and eight
others are contemplating it. Fees included:
S Annual fees paid by public water suppliers based on population
served or water production volume.
S Laboratory fees.
S Operation permit/licensing fees.
S Plan review fees.
Eight States indicated fees were totally dedicated to drinking water;
four indicated less than half were dedicated; two indicated that all fees
go into the State’s general fund.
Greater recognition and visibility is needed for drinking water pro-
grams and cooperative work with the constituencies of the National
Governors’ Association and the National Conference of State Legisla-
tures on the importance of a safe thinking water program.
U.S. EPA should be more flexible to allow States to deal with their
unique needs. We should not be afraid to say what we cannot accom-
plish due to lack of resources. Defensiveness will not get new money.
Mr. Thomas Looby
Assistant Director for Health and Environmental Protection
Department of Health
In Colorado, about 17 percent of the funds for the Office of Health and
Environmental Protection are devoted to water quality control. Forty-
two percent is financed by the State and 58 percent by the Federal
government. A listing of Colorado Cash Fund Sources is contained in
Appendix B.

By 1991, about $1 million now provided by the Federal government
must be made up by the State to maintain current services. The shift is
too big for such a short time period. States cannot pay for all the new
programs alone. Cutbacks in State services will be necessary. One of
the most troubling is cutbacks in monitoring. The Federal government
needs to provide more funds, at least during the transition period.
Colorado is convening a task force this summer to examine methods
of alternative financing.
Colorado is already using fees extensively. Additional fees are being
considered induding a toilet paper tax. In the early 1980s, the State
adopted a “pay as you go” policy for environmental programs, and
now they are beginning to feel a backlash against fees, which are
regarded as hidden taxes. We may have gone too far with the “pol-
luter pays” principle, and need to get back to the “beneficiary pays”
Sixty percent of the 60,000 community water systems (36,000) have
less than 500 people in them. This suggests that consolidation could
improve efficiency. We need more comprehensive solutions to reach
our environmental goals.
U.S. EPA should help States set priorities among requirements and
should allow flexibility in meeting water programs goals. We need to
engage major municipal institutions in solving our problem, and also
put greater emphasis on assistance to small systems. We need to col-
lectively start to set priorities in water quality programs and make
judgments to how to best allocate available resources.
As a society, we need to have more comprehensive financial solutions
for environmental capital improvements for the next 30 to 50 years, as
well as dealing with the programmatic requirements. U.S. EPA and
the States need to take a stronger leadership role in identifying major
financial issues and solutions, and engage financial institutions in the
dialogue. We need broadened partnerships as well, with local govern-
ments and the private sector.
Mr. Charles Sutfin
Water Division Director
U. S. Environmental Protection Agency, Region V
To adequately fund State water programs, we must know what the
needs are and explain them in terms that speak directly to health and
environmental quality for citizens. We must also address Federal and
State responsibilities, which are a partnership; neither has the re-
sources or expertise to carry out its roles independently. U.S. EPA’s

position must be one of leadership; support will never come where
leadership is lacking.
Inadequate funding never stopped Congress or U.S. EPA headquar-
ters from demanding more from Regions or States. But Regional U.S.
EPA officials must recognize the resource limitations of State pro-
grams and explain to headquarters how to produce the best results.
A six-part strategy would help us solve the resource problems.
• Instituting an institutionalized consistent approach to estimating
environmental and public health needs which should be reviewed
every two or three years.
• Formulating a strategy to obtain the needed resources. The strat-
egy should include:
- maintaining the base program;
- avoiding compartmentalized funding needs, which restrict our
flexibility; and
- showing willingness to start new programs, even though fund-
ing may be insufficient. This would help demonstrate the needs
and engender local support.
• Agreeing on an appropriate Federal-State mix of support resources
and the level of Federal control expected and desired.
U Allocating Federal funding for States using formulas which recog-
nize need and State performance and are updated to be compatible
with the periodic needs survey.
U Agreeing on meaningful measures of environmental results, not
just “bean counting” activities.
U Being willing to be held accountable, including frank discussion of
what we cannot accomplish because of insufficient resources.
Ms. Rebecca Hanmer
Acting Assistant Administrator for Water
U. S. Environmental Protection Agency
The Office of Water will continue to have as a major priority the sup-
port of strong State water programs. U.S. EPA wants to improve the
effectiveness of State partidpation in the rule-making process. The
existing rules should be re-examined every four or five years as tech-
nology and institutions change, and new ideas come to us.

We need to:
• Separate “must” requirements from “shoulds” and “mays” in
policies, guidance and recommendations.
• Develop better ways to advise Congress and State legislatures on
the costs of their proposed programs, not just when new laws are
passed, but in periodic updates of costs.
• Continually reexamine the proper balance between general reve-
flues and user fees.
• More effectively involve citizens as well as dischargers in such
activities as ambient monitoring.
• Mobilize others such as the U.S. Department of Agriculture’s many
local employees. The National Estuary Program is a model for
involving all parties in water programs.
• Set up an overt system at U.S. EPA to continually ask provocative
questions that could lead to new ways of doing business.
• Publicize the water quality gains and the benefits from new invest-
• Be flexible in issuing regulations. Some State regulations are more
stringent than the Federal model, thereby restricting public-private
Participants were asked what criteria the Federal government should
use to fund State water programs. Suggestions ranged from 50 percent
to 40 percent (the current percentage for drinking water programs) to
allowing a range of options and alternatives rather than a fixed per-

Panel Designing and Adopting Fee Systems to
Cover the Costs of State Services
Introduction Fees — a charge for a specific activity or service — establish a direct
link between the demand for services and the cost of providing them.
The validity of the fee often rests on the relationship between the fee
itself (who pays and how much) and the service rendered in return
for the fee.
An important issue involves the amount of the service cost that the
fee covers. If the full cost is not covered, then the program which is
ostensibly fee-based for revenue is not self-reliant and will require
subsidies from elsewhere. Yet an inordinate amount of time and
energy may be required to gain support of a fee high enough to cover
the full cost of the service. In either case, it is important to include all
relevant program elements in estimating program costs to ensure all
needs are funded.
Many State water programs conduct activities that can be supported
by a fee for service. These fees are levied on private parties (citizens or
businesses), or on municipalities. Businesses and municipalities often
pass the costs on to other parties. Other fees may represent the cost to
society of an action taken by a municipality or private entity or indi-
Another issue relates to the efficiency of operating a variety of fees
and fee structures, each one adjusted to the specifics of an individual
State service. It can be administratively burdensome and potentially
frustrating to the regulator as well as the regulated or serviced com-
munity to initiate, collect, or pay many small fees. Thought should be
given to an integrated fee schedule or one larger fee, rather than
several small fees.
Moderator Ms. Linda Eichmiller
Deputy Director
Association of State and Interstate Water Pollution Control
Administrators (AS1WPCA)
Key Points by Panelists Ms. Eichmiller, as moderator, polled the States represented in the
audience and announced the results. Seventeen had alternative fund-
ing mechanisms, fourteen had fees, and four were considering

Mr. Arnold Schiffman
Assistant Director
Ground Water Quality Management
Division of Water Resources
Department of Environmental Protection
New Jersey
The fee system which supports the New Jersey pollutant discharge
elimination system (NJPDES) is one of the most complex in the coun-
try. The fees are:
• Established by regulation, not the legislature;
• Deposited in the general fund and must be annually appropriated
back to the program. However, they are earmarked only for the
• Collected through, permits which can be revoked for non-payment.
(The penalty is $50,000 per day.)
• Based on the estimated cost of the program, not the service cost of
individual permits. The State keeps track of program costs to
establish a budget but not to justify an individual permit fee.
Shortly after the fee system was established, the courts overturned the
New Jersey fee system because it purported to, but in actuality did
not, indude environmental risk, e.g., a pound of sand discharged
would cost as much as a pound of dioxin. This court ruling for the
first time clearly established the polluter pays principle - that those
who do the most to create injurious conditions should bear a greater
share of regulatory costs. The court went on to say that if the chal-
lenged regulation actually scaled the fee structure proportionate to the
degree of harm threatened by the permittee’s discharge, the court
would have no problem sustaining the validity of the regulation. The
fees are now proportional to the degree of risk threatened by the
discharge, and this has been upheld by the New Jersey Supreme
Court. The fees are assessed on the public and private sectors, except-
ing only schools and religious organizations. The fee schedules cover
fringe and indirect costs, whereas general revenue funds do not di-
rectly indude these costs in the agency budget.
New Jersey has about 2,000 permittees and fees are relatively large.
The average annual fee is about $8,000; however, permit fees over
$250,000 have been assessed.
By contrast, when the Underwater Storage Tank (liST) Program was
established, a large universe of permittees was available (25,000).
Therefore a small fee, $100, was set. At $100, 25,000 registration fees
brings in $2,500,000 annually.
28 See Appendix C for details.

Mr. Barker Hamil
Chief, Bureau of Safe Drinking Water
Division of Water Resources
Department of Environmental Protection
New Jersey
While the polluter pay principle works for surface water, it does not
work as well for drinking water. New Jersey drinking water programs
are funded from four different sources, which makes for a balanced
funding program totalling about $4.5 million:
• General appropriations, which indude a relatively fixed amount
that they have been able to hold onto, part of which go directly to
the State laboratory to do analytical work.
• A relatively fixed EPA grant which has had only very small in-
creases since the 1970s.
$ A water tax, one penny per 1,000 gallons, collected by the Treas-
ury, which provides the bulk of their program funding.
• Fees increased over the last year and a half. They include:
- annual operating fees based on the size of the system, ranging
from $120 to $3,280;
- construction permit fees ranging from $100 to $1,200 per per-
mit; and
- physical connection permits, about $200 each, which raise only
a small amount of money and do not appear to be too helpful.
New Jersey also is looking at a system whereby local agencies collect
and use fees without State involvement. This would lessen the burden
on the State and provide incentives for local agencies to handle their
portions of the program.
A tax provides a broad base and adds minimal collection costs. While
taxes are difficult to raise, much of the populace is not greatly op-
posed to a tax base to support these programs. Fees are easier to
change. In requesting additional fees it is very useful to add additional
services at the same time. New Jersey’s combination of support has
provided a fairly good funding source.

Mr. Stuart F. Bruny, P.E.
Chief, Division of Public Drinking Water
Ohio Environmental Protection Agency
Our annual drinking water budget is about 2.95 million dollars with
about 33% of 1 million dollars coming from our Federal grant and the
remainder through State general revenue funds.
Ohio EPA has had a program of fee generation since 1980. All fees are
returned to the general revenue fund. Civil penalty assessments gen-
erated through agency enforcement actions are also returned to the
State’s general revenue fund, although some hazardous waste fines
are returned to an Ohio EPA rotary account to be used for emergency
There is no direct correlation between the amount of fees deposited in
the State’s general revenue fund and the amount of money returned to
the agency’s operating budget. In other words, if a particular fee
program generates $300,000 per year, it doesn’t mean we get that
$300,000 back to Ohio EPA. Other than perhaps the solid waste pro-
gram, none of the agency’s programs are self supporting through the
fees they generate.
Specific fees charged in the drinking water program include:
1. Plan review;
2. Lab certification; and
3. Operator certification.
Ohio has required public water systems to perform their own drinking
water analysis for the last several years.
During 1988, our fees generated a total of $361,000 dollars. This repre-
sented about 1/6 of our total drinking water budget. Considering the
3 programs individually, the plan review and operator certification
programs were nearly self sustaining, but there was a major shortfall
in the lab certification program.
Now, let’s look at our recent proposal for generating additional funds
through a supplemental financing mechanism. In the drinking water
program, we sat down and tried to determine how much additional
staff we would need in the next two years to maintain our existing
programs and to continue implementation of the SDWA Amendments
of 1986. Since many of the drinking water regulations are not yet final,
there was a lot of guessing in figuring out how many additional
people we might need. Our estimate represented a 26% increase in
staff over the next 2 years.

Our Office of Budget and Management (OBM) told us there would be
no tax increases. We then examined various alternatives to general
supplemental funding, including:
1. Increased Federal funding,
2. Increased fee generation, which included:
a. raising the fees for services we currently charge
b. establishing new fees for existing services such as sanitary
surveys or new site inspections
c. or a combination of these 2 options;
3. Establishing a water user’s fee which included several options,
a. a user fee based on the amount of water used by customers of
community water systems.
b. a flat fee plus user’s fee
c. a flat fee per service connection at community water systems.
4. A straight increase in general revenue funds even though our OBM
said this wasn’t likely to happen; and
5. A cut in existing programs.
Analyzing these five alternatives, we didn’t see much hope for in-
creased Federal funding, or State general revenue funding. We also
felt it very inappropriate to cut existing programs, as we are not con-
ducting any unnecessary or unneeded activities.
The alternatives of raising our existing fees and charging new fees for
current services was discounted because some of the fees turned out
to be exorbitantly high in order to support the proposed expansion of
our program. There are also obvious administrative problems in
charging different fees for each service provided.
We therefore focused our attention on the water user’s fee alternative
(Alternative 3). Our proposal included a proposed fee of 1.5/1000
gallons charged to users of community water systems; this would
affect 1600 water systems in Ohio. Of those 1600 systems, about 900
are unmetered systems; for these we proposed a flat fee of 75/quarter
for each active service connection; resulting in a 3.00/year charge. To
the average metered homeowner using 300 gpd, the 15/1000 gallons
would mean a fee of $1.64 per year.
As you can see, the unmetered customer would pay a higher rate. We
did this to encourage installation of water meters at these 900 systems.

Our goal was to improve water conservation through the installation
of meters as unmetered customers typically use much more water.
Our proposal also included a $1000.00 per year cap on large water
users, meaning that any one using more than 180,000 gpd would
benefit from the cap. We did this hoping that the large water users
would not band together to fight this proposal. The fee does not apply
to water sold by one community water system to another for resale to
We proposed that the water systems collect the fees as part of their
normal billing process and then make quarterly returns to the State. In
an effort to have our water systems support the proposal, we allowed
the water system to keep one-half of what they collected. The water
system’s share could be used to cover the cost of collection of the fees
and disbursement to the State, and in some cases, provide funds to
help pay for increased monitoring requirements under the SDWA. We
estimate the proposed fee would generate $6 million per year, of
which 3 million would go to the State and 3 million to the water sys-
This proposal is currently being debated in our legislature. The House
Finance Subcommittee has recommended that the fee be deleted from
the budget process and perhaps be considered in separate legislation.
Ms. Lydia Taylor
Management Services Division
Oregon Department of Environmental Quality
• Oregon’s environmental quality budget is funded:
- 25 percent from State general revenues;
- 30 percent from Federal revenues; and
- 45 percent from other fee sources.
I The fee portion is being moved up to 64 percent this year.
• To obtain greater flexibility and larger amounts of money, Oregon
has been adding fees which depend on products or on volumes of
solid or hazardous waste. Examples include:
- $1 per tire, 85 percent of which goes for recycling programs and
waste tire cleanup;

- $20 a ton on hazardous waste disposal; and
- $2 a ton on solid waste disposal.
• Fees are not expected to cover 100 percent of the costs; most pro-
grams have two or three funding sources, which gives advantages
in cash flow management because Federal grants and fees don’t
always arrive on the first of the month.
U To control administrative costs of collecting fees, Oregon intends
to add additional fees on groups who are already registered with
the State for other reasons.
U Fees are written so the revenues can be used flexibly in a variety of
environmental programs.
U Revenue from fees has increased from $6 million to $41 million
since 1979. Oregon now has 29 fees. This has been accomplished
through a program of:
- getting interested parties to agree there is a problem to be
solved (not that “we need more money” for current programs);
- forming a representative advisory group of all interested par-
ties with a strong voluntary chairperson;
- providing the group with ample information and analysis and
listening to their advice and recommendations; and
- keeping the group advised throughout the implementation
This process provides an excellent political base for recommendations
for the legislature.
• Establishing equity in fees tends toward complexity in the number
of categories, and does not take into account the ability to pay.
• If fees are dedicated to fund specific activities, as they are in Ore-
gon, complex budgeting and recordkeeping can result.
• Fees can also lead to over-dependency, which can work against
you in recessions, or in a perceived danger of yielding to the pres-
sures of those regulated (who also can lobby against your fees).
N Fees also do not solve the problem of how to fund nonpoint source
programs. Funding such programs will take new relationships,
e.g., with agriculture.

All the panelists agreed that there could be pressures to provide cost
accounting to justify fee amounts. This could be a burden which
would be very expensive and is best resisted by emphasizing that fees
were supporting a program for the State, not individual services for
each fee payer.
Other Points Included: I Do not introduce a fee system at budget time - it will be seen as a
hidden tax.
I Greater equity leads to greater complexity, though it is hard to
determine equity, i.e., who is what percent of the problem.
• If a fee generates a great deal of revenue, have a cap beyond which
it flows to the general fund. This can avoid backlash against the fee
or toward the program.
• Try to dedicate fees to the program - it lessens support if the reve-
nue goes to the general fund.
• Programs supported only by fees often have cash flow problems.

Panel Designing and Adopting Special Taxes
Introduction Taxes to fund water programs are typically used when program
funding needs are large and when the benefits of an activity are
widespread. Unlike fees, there may be less of a direct relationship
between the tax and the use of the funds.
Taxes are generally charged from either sales, income, or property
bases and can be universally levied or targeted to those who have an
impact on or gain a benefit from the service. Consideration of equity -
who should pay - is an important element in the nature and applica-
tion of a tax to support water programs. General taxes may be more
appropriate to support general water program costs. Specific taxes
can be most useful to fund activities where benefits are clearly tied to
the individual or entity paying the tax.
Taxes dedicated to environmental programs and, in particular, to
water programs are less common than dedicated fees. State legisla-
tures have tended not to dedicate tax revenues from a particular
source to a single program, although some environmental examples
do exist.
Moderator Mr. Steve Brown
Center for Environment and Natural Resources
Council of State Governments
Mr. Brown noted the public has expressed support for environmental
programs, even if this has meant more taxes.
Key Points by Panelists Ms. Mary Ann Dickinson
Acting Director of Planning
Connecticut Department of Environmental Protection
Connecticut attempted to expand its conveyance tax on land transfers
as a way of funding open space purchases and affordable housing.
The process is instructive for those considering taxes to fund water
I Disappearing open space in Connecticut is perceived to be of crisis
proportions - one half to one percent of the State’s total land area
each year. There has not been a major State land acquisition effort
since the 1950s.

U Interest groups got together and the Governor agreed to support a
$100 million bond issue over a five year period for State acquisition
of land.
U To support local land acquisition they decided to use a conveyance
tax of half a percent on all land transactions, paid by the buyer,
based on experience in Nantucket. Nantucket in 1983 put a two
percent tax on all land transfers, paid by the buyer. Charitable
donations, gifts of property, and the first $100,000 for a first time
home buyer were exempt. The tax was intended to be simple and
effective and to raise about $80,000 a week.
U The tax revenues would keep pace with development, and there-
fore are inflation proof, and would harness the vigor of the market
for the goal of open space preservation.
U The Connecticut tax was supported by a lobbying effort of 1,500
organizations, induding 97 land trusts and paid professional
U In the end, it failed for several reasons. First, it was enabling legis-
lation rather than a mandatory tax, so a community had to choose
to adopt it. Second, it tried to do too much and was too complex. In
this case, the tax revenues would have been used for two purposes:
affordable housing and open space purchase, with some additional
discretionary use of part of the revenues. There were complexities
of required open space and housing plans, and also required
actions once funds reached a certain level in the community. Eq-
uity considerations also appeared - a town with expensive real
estate would have much greater revenues than a small, less
wealthy town. A summary report, after the proposal failed, listed
seven main objections:
- it gave the towns power to levy a new tax;
- it set up a dedicated fund, which the legislature did not like;
- it tapped a potential State revenue source, which could go to
reducing the deficit;
- it had the potential to drive up land and housing costs, which
concerned the real estate industry;
- - it did too much or too little for open space or affordable
housing, depending on your perspective;
- - it combined housing and open space.

I Suggestions for future attempts to adopt a new tax indude:
- dearly identify the funding need;
- design a program that is easy to understand and therefore
- make it a bipartisan effort and get the governor’s support, if
possible; and
- build a prairie fire of support and create unusual alliances.
The water funding situation in Connecticut is grim. The money re-
quired is for more than that proposed for open space. The Federal
government should not forget that water is often a regional resource
of multi-State concern, and should not shirk the Federal responsibility
to help support water pollution and drinking water programs.
• Connecticut is also considering a three cent tax on each roll of toilet
paper and any other products which go down the drain including
laundry detergent, chemical drain unpiuggers, etc.
• Connecticut is also considering a public trust lands leasing pro-
gram, with a minimum $1,250 fee for new activities (such as a
dock) in public trust lands.
Mr. Alan Stanford
Senior Water Quality Analyst
Bureau of Water Quality
• In 1969, with great foresight given today’s financial crisis, the
Idaho legislature created the tax-based water pollution control
account (WPCA) to be used to correct point and nonpoint sources
of pollution. It was originally created to match Federal grants and
to assist communities throughout the State to install waste water
facilities while maintaining reasonable fees. The account was
originally funded from a $1.5 million bond issue in 1970. Since
then, it has received 100 percent of the tobacco tax, 6.7 percent of
the cigarette tax, 80 percent of the inheritance tax, and $4.8 million
annually of the sales tax. Legislation was introduced in 1988 to
give the account three percent of the sales tax as well. The Idaho
economy is good; the fund may provide quite a lot of money.
U In 1980, the WPCA had such a surplus that the legislature decided
to create a separate State grant program for wastewater facilities,
and 75 percent grants for agriculture pollution control projects in
37 conjunction with soil conservation districts.

I The account has been so successful that it has been used for a
number of related and unrelated purposes over the years. This is
another example of a supposedly dedicated fund “robbed” by
other interests when revenues accumulate. Administrative costs
for the grants program have been induded. Six percent of the
account revenues also support special water quality studies. Two
years ago, the legislature decided to fund not only the water qual-
ity but the hazardous waste bureau budget as well. Account
money has also funded prison riot cleanup, forest fires, medicaid
shortages, etc.
I Management of the fund has changed over the years, and the SRF
matches will also affect the WPCA.
• Idaho cities have realized the WPCA is an important financial
resource, and the legislature now continuously demands explana-
tion about why the account should stay intact and be used solely
for its original purposes.
• A summary of the growth in revenues and expenditures for the
Idaho Water Pollution Control Account is included in Appendix D.
Mr. Jon G. DeBoer
Technical and Professional Department
American Water Works Association
• From the point of view of the consumer and the industry, the
difference in impact between a tax and a fee is not important,
though if you call it a fee it should relate to the cost of a service.
• The water industry is not concerned with whether taxes are gen-
eral fund or special use taxes.
I If you take the ASDWA needs figures and apportion needs across
the country, the amount per household would not be great, com-
pared to the costs of operating water systems nationwide.
• The industry believes that taxes or fees collected from it should be
used for water programs and not raided for other purposes.
I From the point of view of the water industry, revenues from gen-
eral fund taxes might best be used for broad-based functions such
as enforcement, regulatory development, data management, pro-
gram management and public education.

- Special use taxes could support survey and inspections, train-
ing and assistance, enforcement correction and plan review.
- Fees might most equitably support specific programs such as
laboratory services, permitting, plan review, certification, and
• The water industry recognizes the problems of ability to pay,
particularly in small systems.
• On the other hand, large utilities do not feel they should be as-
sessed the full cost impact on a per user basis.
• Utilities and States should be involved in developing U.S. EPA
regulations. Utilities want to see fee or tax systems that are simple
to implement and flexible to allow a utility to operate its program
in the most effective way. The water industry recognizes the State
financing problem and is ready and willing to accept new taxes,
but would like to be involved in designing them, and in designing
the U.S. EPA regulations that States must implement.
• Utilities are also interested in seeing State agencies maintain pri-
macy and be funded so as to operate effectively and efficiently.
I A list of recommended funding sources associated with functions
to be supported is induded in Appendix E.
Other Points Included: I National polls continue to indicate that the general public supports
environmental programs, even if that means they will personally
be taxed to support a cleaner environment.
• The Council of State Governments analyzed all State budgets for
fiscal year 1986 and aggregated funding into 17 environmental
categories. States spend more on water than on any other program.

Panel Designing and Adopting a System of
Dedicated Fines and Penalties
Introduction Fines and penalties are imposed primarily for violations of laws,
regulations, or permit stipulations. Fines and penalties may be im-
posed for civil or criminal offenses and may be levied administra-
tively or judicially. Whereas fees and taxes may be collected in every-
day activities, fines and penalties do not typically provide a steady
stream of revenues for program operations. If they are dedicated to
support operating programs, which would include enforcement costs,
conflicts of interest could ensue. However, if they are dedicated to a
separate program that benefits State water quality, this problem could
be avoided.
Fines and penalties may — through a large, one-time fine or penalty
or through accumulation over time — provide the initial capital that
can form the basis for a fund that can be used to implement specific
water programs which benefit the State. A plan that can be imple-
mented in the event of such a windfall could ensure that a large fine
would specifically benefit designated water programs.
Fines and penalties create positive incentives by encouraging im-
proved compliance within the regulated community. Over the long
run, the goal would be to eliminate fines and penalties through coop-
erative programs to address water quality problems proactively
rather than retroactively.
Moderator PaulShinn
Government Finance Research Center
I Fines and penalties differ from other funding sources in three
major ways:
- they are paid only on an exception basis — when things go
- they are one- time payments; and
- in the long-term they should disappear as violations disappear.

• In the short run it is appropriate that fines and penalties be used
for the environment. However, three elements are essential to de-
veloping them as a funding source:
- there have to be laws, rules, and regulations which clearly
establish what constitutes a violation;
- there has to be enforcement; and
- there has to be a process to bring violators to judgment, which
can be administrative or judicial.
I Fines and penalties can go into:
- the general fund;
- the general fund on a reservation basis for specific programs; or
- a restricted fund managed by a State or third party.
I Advantages of fines and penalties are:
- “polluter pays” is appropriate and equitable because everyone
can choose to comply with the law and avoid the fine;
- fines are flexible and can be tied to ability to pay and the seri-
ousness of the offense;
- they have public approval; and
- they create the proper incentive.
• Disadvantages include:
- much effort and expense in the enforcement process; and
- sporadic revenue which is therefore unreliable for operating
• In operating the system:
- keep the fines reasonable — we want compliance, not bank-
- be prepared to prove that they are reasonable;
- try to find a prime mover who will help to push a program to
use fines through all the obstacles;

- identify the beneficiary of the fine, which may make it more
acceptable to the judge and the violator;
- identify who should manage the revenue, perhaps a third
party; and
- identify what the money will be used for and in doing so, avoid
even the appearance of conflict of interest.
• According to a GAO report Water Pollution, Stronger Enforcement
Needed to Improve Compliance at Federal Facilities, these facilities are
twice as likely to be in noncompliance as municipal facilities.
Mr. William Nuzzo
Chief, Office of Water Program Coordination
U.S. Environmental Protection Agency, Region I
The Massachusetts Bay Credit Project/Massachusetts Bay Trust Fund
was created as part of a settlement in which the Commonwealth of
Massachusetts agreed to pay $2 million to establish a new trust fund
and a $425,000 fine to the Federal Treasury for the discharge of pollut-
ants into Boston Harbor over a long period of time. The Massachusetts
Bay Credit project is an example of a dedicated fine or settlement
being used to directly support environmental cleanup efforts; the
Massachusetts Bay Trust fund is an example of a management mecha-
nism needed to direct the use of the penalty funds.
The Trust Fund would be used to coordinate and fund projects dedi-
cated to restore and protect Boston Harbor. Remedial projects include
the restoration of impacted beaches and salt marshes. In addition, the
Trust Fund provided seed money to develop a Massachusetts Bay
Estuary Project that would eventually lead to nomination for the
National Estuary Program.
U.S. EPA ‘s penalty policy under the Clean Water Act does allow for
flexibility in using penalty revenues for beneficial mitigation projects,
rather than just payments to the U.S. Treasury. Mitigation projects
must be in addition to all regulatory environmental compliance obli-
gations and provide benefits of full compliance, and should closely
address the environmental effects of the defendant’s violation.
Before the settlement could be reached, there were protracted negotia-
tors within U.S. EPA, and between U.S. EPA and the U.S. Department
of Justice (DOD over the proposed use of the fine. DOJ was looking for
implementation of concrete remedial action, and did not favor “stud-
ies” unless they would dearly lead to implementation.

I There are some guidelines for using penalty funds to establish
environmental credit projects and environmental trust funds:
- the projects should be dearly related to effects of the violator;
- the projects should provide benefits beyond benefits of full
- the activity must be in addition to all regulatory compliance
obligations; and,
- the project should have dearly defined milestones and comple-
tion dates.
I One good use of fines is for studies which would not otherwise be
conducted, or support for activities in high priority resource areas
such as Vermont’s Lake Champlain.
Other Points Included: During discussion it was noted that in Nevada some polluters would
prefer to provide equipment, conduct studies, or provide erosion
control work rather than have on the record payment of a big cash
penalty. This could help the local environment in lieu of fine revenues,
which the law requires be placed in the general fund. The usefulness
of third party involvement was stressed. This was the case in the
kepone incident on Virginia’s James River. In lieu of partial fines, the
company gave money to a third party to establish the Virginia Envi-
ronmental Endowment.
I Other points which arose during the question period included:
- Settlements should insure that corrective action is taken on the
problem; a fine is not enough.
- Fines should be high enough to ensure that people install
pollution correction equipment rather than merely pay a low
- Part of the enforcement procedure should include additional
fines for not correcting the problem within an agreed upon
- The fine should never be less than the cost of proper behavior.

Panel Management Funds: Once the Money is
Available, Pooling and Managing It for
Revenue Growth
Introduction Fund management is as important as raising revenues. Financial
management mechanisms aggregate sources of funds, link them with
their intended uses, and can be used to increase the value of resources
between the time they are collected and disbursed.
The traditional, most commonly used financial management mecha-
nism is the budget process through which general revenues are col-
lected and funds are appropriated to government programs on a
regular basis. The issues of continuity and flexibility in the receipt and
use of general revenue funds under current economic conditions call
for independent financial management mechanisms such as trust
funds, environmental endowments, and enterprise funds. All of these
are designed to channel specific sources of revenue to particular
Management funds require careful tailoring to an individual State
situation. Among the elements to address are the time period over
which funds may be drawn down, the connection and trade-off be-
tween management funds and general revenues, and the impact of
surcharges on existing funds.
Moderator Mr. George Ames
Executive Director
Council of Infrastructure Financing Authorities
Key Points by Panelists Ms. Carol Jolly
Assistant Director
Water and Shorelands
Department of Ecology
This workshop is an ideal way for U.S. EPA to help States move into
the future. Washington State has a wide variety of fees, several new
taxes, and a proposal now before the legislature to use fines and
penalties. Revenues are used in all environmental programs. The
State still relies on State and Federal general funds to support much of
the base program. It would be a mistake to rely too far on specialized

• Washington has about 15 fees for its environmental programs
- a vehicle emissions fee that funds inspection and maintenance;
- a wood stove fee, based on the sales of wood stoves, which
funds educational programs about the air hazard of wood
burning; and
- a grass seed fee used to study alternatives to burning grass
The fee programs specify they should cover the cost of the service.
• The Centennial Clean Water Fund was created in 1986. It is based
on an eight cent tax on cigarette and tobacco products supple-
mented by:
- an additional sales tax on pollution control equipment for
projects funded from the account; and
- a general fund complement to provide a revenue floor.
Essentially, all the revenue (about $45 million/yr.) is passed through
to local governments.
I In addition, Washington has:
- a laboratory certification program, passed in 1987, with fees to
make it self-supporting;
- a wastewater operator certification program, passed in 1987
and containing a fee structure to make it self-supporting by
1991; and
- a wastewater permit fee program for all State and Federal
permit holders, passed in 1988, with fees ranging from $100 to
$100,000 per permit per year. This will raise about $3.6 million
a year.
Fees will not cover all program costs. There is a conscious effort to
maintain a balance in the agency budget, which is currently 40 percent
State general funds, 20 percent Federal funds and 40 percent alterna-
tive funding mechanisms.
I All alternative funds are in dedicated accounts to be used for the
specific purpose for which they were created. Funds revenues are
specifically excluded from supporting the enforcement part of the

water program. All funds must be appropriated before they are
available. However, for management purposes, the treasurer’s
office handles them as a pool.
U Funds are invested in government securities and low risk invest-
ments, 60 percent with maturity dates of less than a year.
• The Treasury Office is role is to maximize investment return and
monitor cash flow.
• Eighty percent of investment return is prorated to dedicated ac-
counts based on their percentage of the total pool where it is
treated as direct revenue; 20 percent goes to the general fund. The
Centennial Fund generates $4 million a year in interest but cannot
invest in corporate debt. Operating accounts are expected to zero
out at the end of each biennium; others do not have to.
I Disadvantages:
- substantial administrative complexity — the State had to totally
revamp its accounting system due to complex hazardous waste
cleanup fees;
- there is a danger of perception that general fund support is not
needed anymore, this must be avoided at all costs; and
- danger of client overload, particularly as several fees begin to
hit the same clients.
U In establishing a fund, it is important to focus on flexibility and
creativity. Washington legislature is now looking at bills to charge
those responsible for spills or illegal discharges for pollution dam-
age. The monies would go to a special account to restore the envi-
ronment to its previous condition, or to pay for damages. If State
staff has to clean up damage, they could be funded by these special
monies instead of drawing on base programs. This financing
mechanism has the advantage of serving as a disincentive to unde-
sirable behavior.
Mr. William Brierley
Director of Public Facilities
Department of Environmental Conservation
• In 1987, Vermont introduced legislation to create three revolving
funds — pollution control, water control and solid waste. Only
pollution control is funded at this time.

• All funds would be operated jointly by the Department of Environ-
ment Conservation and the Vermont Municipal Bond Bank, which
would be the financial manager.
• The Bank would make loans, collect repayments, chase delinquent
accounts, and invest unused balances. Vermont Bond Bank can
invest unused balances in the same manner as the State treasurer
can invest State balances.
U Loans were to be for 20 years, equal annual payments, interest
rates set by the treasurer between zero and 80 percent of State’s
interest rate.
• Vermont felt it could finish all necessary sewage plant and com-
bined sewer overflow projects by 1994, the date of the last Federal
grant appropriation. But the State anticipates growing needs for
water supply revenues, and faces major new mandates in solid and
hazardous waste as well as water quality management. This led
the State to assess its overall needs over 10 years and the resulting
shortfall. This turned out to be $208 million. (Details are in Appen-
dix F.)
• $56.7 million of that total is expected from the following dedicated
revenue sources:
- gas tax of one cent per gallon generating $3 million a year;
- hazardous waste generation of 7 cents per gallon or 9 cents per
- petroleum tank assessment of $200 per tank;
- solid waste tipping fee $2.40 per cubic yard, or $6.00 per ton;
- annual appropriation from the transportation fund to handle
hazardous waste.
• The agency brought together the Bond Bank, the Vermont League
of Cities and Towns, and other parties to discuss how to deal with
the needs. The group considered creation of a Vermont Environ-
mental Assistance Financing Fund, a free standing authority of five
people (Secretary of Vermont DEC, State Treasurer, two bankers,
one municipal representative).
I Each year the agency would request all capital appropriations
from the fund. The authority would determine what they could
fund and request the balance from the legislature, which would

appropriate funds back to the authority. The authority would
determine how much of the funds would be loans, and how much
used for other purposes, and define the terms of the financial
• This would equalize financial stress among recipients. For in-
stance, the authority might say no project could generate an annual
costs in excess of one percent of the median family income, and
tailor the grant or loan to achieve that.
• The governor decided to ask for a year’s study on the proposal.
Political constraints:
- the treasurer doesn’t like dedicated funds;
- the legislature has mixed feelings about dedicated funds, and
doesn’t like authorities; and
- the Bond Bank feels it must be kept simple.
• However the decision goes, Public Facilities would like to expand
its financing programs to include land acquisition and wellhead
Mr. Steven Binder
First Vice President
Prudential-Bache Capital Funding
I Water (and pollution) cultures vary from State to State and this
influences the funding mechanisms that can be used.
• We have made an error in this country for at least 75 years in how
we view the financing of water, and the financing and cost of
• Water has been badly underpriced historically both in what is
charged the consumer and in the calculation for true depreciation
and replacement of facilities. Compare a $55 monthly television
cable hook-up with a $12 monthly water fee, or a 60 cent municipal
discharge limit with the cost of a pizza. Yet imagine the public
outcry if the $12 monthly water bill were raised to $18. The public
has come to believe that drinking water is safe and cheap and
subsidized, so the real value of water has been obliterated. The
primary cause of today’s problem is old, wrong ways of financing.

• We need to recognize that we have government expenditures for
activities that are revenue-producing. We have underfunded,
underpriced, and abused a precious commodity. Until we can have
a grass roots educational system as to what this commodity is
really worth, all of the political discussion on alternative finandng
will be obscured.
• We are merely rearranging the deck chairs on the Titanic; we
cannot manage our way out of this crisis. We need a massive
educational campaign on the value of water. The argument must
be framed in a different manner. The main argument is “what is
clean water worth.” There is an economic value to water which is
not that difficult to calculate.
• Funds management is as important as raising the revenue. The
more complex the program, the greater is the potential for disaster.
Many government agencies do not have the expertise for fund
• Funds management:
- requires that all fund sources be identified;
- must integrate funding sources and State needs on a time-
certain basis;
- may have to be managed privately;
- will have to recognize that it is necessary to subsidize small
- may best be run on a segregated trust account basis. Do not
allow it to be commingled with the general revenues of the
- will not be favorably viewed by investment bankers because
they will view them as able to be manipulated by State legisla-
tures; and
- could generate a large surplus in 15 or 20 years if funds are
properly managed and local residents realize they will have to
pay their fair share.
• Putting projects through the U.S. EPA process can add around 30
percent to the costs (primarily because of the Davis-Bacon Act).
I The Tax Reform Act literally takes the power of good fund man-
agement and arbitrage out of the hands of local government and
was disastrous for the water financing partnership. SRFs that are
leveraged offer the best long term “bang for the buck.”

U The bottom line is we are not going to manage our way out of this
crisis. The general public is going to have to support clean water
and pay.
Regarding infrastructure:
U Depreciation has been unfunded. Governments typically run on an
income, rather than on a balance sheet basis, do not take into ac-
count the physical depredation of plants and equipment. Because
of this, we will face a huge infrastructure cost over the next 30
years, to build new facilities to replace those built between the De-
pression and the Korean war.
Other Points Included: Mr. Ames summed up panel recommendations for U.S. EPA to help
U Basic principles suggested for U.S. EPA include:
- be flexible;
- preserve local choice for the States on setting priorities;
- promote simplicity in designing and managing alternate fund-
ing mechanisms; and
- recognize that the Federal government has an obligation to help
fund State costs to achieve national objectives. This should be a
central covenant of a Federal-State partnership. Then we can
debate the percentage of funding for each.
• Two basic roles U.S. EPA could fill are:
- becoming a clearinghouse and focal point to collect, analyze,
and share information on financing of State water programs;
- sustaining a base line of funding and technical assistance.

Panel Working with State Legislatures
Introduction The establishment of new funding mechanisms in the States requires
close coordination with State legislatures. New programs compete
with existing ones for funding, expertise, and legislative commitment,
three commodities much in demand by other sectors.
Effective working relationships with State legislatures depend on
constructive involvement of all affected interests and comprehensive
identification of the problems and solutions in funding State water
Moderator Mr. Larry Morandi
Program Director for Natural Resources
National Conference of State Legislatures
Announced that the panel would look at:
• Substantive policy issues; for example, current and expected
sources of revenue and strategies to obtain them.
• Political issues - whether the budget is a Governor’s or a legisla-
tive budget, and the relationships of the legislative policy commit-
tees to the fiscal committees. When you work with administrative
costs, you may be working with the fiscal committees only, which
changes your budget strategies. You may have a more receptive
audience for your needs with program committees than for fiscal
Key Points by Panelists The Honorable Fred W. Finlinson, Senator
Chairman, Utah Natural Resources Council
Caflister, Duncan, and Nebeker
• Basically we are proposing to move from “soft” to “hard” money,
i.e. from Federal dollars to State tax dollars.
• Looking at drinking and wastewater infrastructure costs, Utah
foresaw a $4 billion need through the year 2000. In 1983, Utah
used a number of leveraging techniques to create a fund to meet
these needs. These techniques included insurance, repurchasing
plans, remarketing, tenders, hooks, interest buy downs, letters of
credit and grants. They refined the fund in 1985, 1987, and 1988 to
include increased leveraging. All leveraging was an attempt to
53 guard and use their most precious resource - - public funds.

• To originally implement the fund, Utah put together a coalition of
irrigators, safe drinking water people, transporters, waste treat-
ment people and city officials. This is important because legisla-
tures can work well with agreed-upon bills and goals, but not with
mixed signals.
• Basically, administrative costs should not be funded from bond
issues, and Utah’s 1983 legislation prohibited this, but some moth-
fication to this position may be required . The Senator’s 1989 bill
would have allowed some of the bond proceeds to fund adminis-
trative costs of the projects — however the bill did not pass. This is
a risky area. The State needs to face up to the fact that it needs
ongoing revenue to administer programs, not just set-asides from
the capital dollar.
From a legislator’s point of view, several points emerge:
I Do not have your bill come up first.
• Avoid one-page bills; everyone will read them.
• Encourage legislators to become advocates, not remain as judges of
competing interests. If the legislator is a judge, not an advocate of
your bill, you have a problem.
• Keep the legislature advised and informed so they are able to be an
advocate. Potential advocates can be identified through the com-
mittee structure.
Mr. Marion Fannaly
Water Pollution Control Division
Department of Environmental Quality
• Louisiana started with a $900,000 fee program in 1981 which has
grown to $7 million (63 percent of requirements) today.
• The State’s fee program growth was largely forced by reduced
general revenues from oil. When oil prices dropped, the State
economy did too. In 1988, the State faced a deficit of around $900
• When this happened the State’s dedicated funds, of which the
environment trust fund was one, were used to meet the general
shortfall and the dedicated funds were abolished. The funds were
dedicated by account, but not in a separate bank account.

U Water program fees went up 50 percent in 1985,30 percent in 1987,
and 75 percent in 1988.
U Other programs saw the water program able to fund itself in spite
of the deficit, seized the idea, and started addlitional fees. Many of
the facilities regulated by water programs pay other fees to other
programs. It is becoming a significant economic burden. As a
result, the system has been subject to legal and political attacks.
• There is an argument on whether the fees are really taxes. In Lou-
isiana, the fee has to be related to service and cannot exceed the
cost of service. However, detailed cost accounting has not been
provided to permittees; the State argues that the fee is for mainte-
nance of the entire program. If the State collected more revenue
than the cost of the program, and that excess money could be
traced as going back to the general fund for some other purpose, it
would be the “kiss of death” for the fee. You can win the legal
battle and still lose the political one.
• The fee limit that public will bear may have been reached.
• The State agency can set the fee based on assigning a dollar value
to assessed points such as toxicity and major or minor status, and
can change the fee fairly easily. However, it is subject to legislative
Ms. Pauline Bouchard
Assistant Director
Division of Environmental Health
Department of Health
• Minnesota has been fairly generous to environmental programs,
but mostly those unrelated to drinking water. So the State is con-
sidering a legislative proposal to create a fee to fund the entire safe
drinking water program.
• Historically, State funding has been low. The current Federal share
of the program exceeds 50 percent, but the Safe Drinking Water
Act amendments have focused the demand for additional funds.
U The State decided to continue to pay for public water supply
laboratory work rather than chase after the utilities not complying
with monitoring regulations.
• Opinion polls showed that the public was willing to pay more for
safe water.

• Minnesota formed a broad-based advisory task force, including a
hand-picked environmentally interested State legislator. That
effort alone has been worth many times over the amount of staff
work put into it. It was a 15-member task force representing many
communities including the League of Women Voters, environ-
mental, water well contractors, and large and small water utilities.
The charge was specific — they were presented with a program
outline which required $2.9 million over the next five years, asked
to evaluate the program and recommend how it should be funded.
• The task force recommended that financing should be through a
tax, because the program benefitted all citizens, and therefore
revenues should come from the general fund. However, the gover-
nor had a position that new services should pay for themselves by
fees where possible, so the staff proposed a service connection fee
of $3.20 per year for community water supply hook-ups.
• They took the proposal to the legislature in an off budget year. The
policy committee approved the scope of the program. The finance
committee approved the program in concept, as well as dollars to
get started, but said to return in a year with a report on alternative
funding mechanisms, that the program must be largely self-sup-
porting. So the Task Force began again. In the meantime, there was
a tremendous groundswell of interest in a broader water initiative,
fueled partly by pesticides contamination of some water supplies.
• The agency’s bill has now been incorporated in a much larger
comprehensive bill on environmental interests — it is a quarter of a
page in a 120-page bill totalling $24 million. There are House and
Senate versions.
• The original legislator has left, and the agency feels it is very im-
portant to maintain close contact with the legislators. The agency
tries to call legislators once a week to see what constituents are
saying. The Governor’s staff does not usually like this but blessed
the procedure in this case. The agency has offered to prepare
additional briefing papers, and feels it has the best working rela-
tionship with the legislature in 10 or 15 years.
• Industrial revolts against fees can be forestalled by a cooperative
discussion about the funding needs of the program and the
amount of industry support needed.
• A State might consider going directly to the voters with an initia-
tive to raise funds, but it is hard to sell the need for more adminis-
trative costs - public initiatives work better for project costs.

Other Points Included: A panel discussion on the budget process followed:
U In Utah, the Governor prepares the budget, but so does the legisla-
ture’s analyst, and perhaps also a State agency, and the final
budget results from working with all proposals. There is also a
split between policy issues and budget issues and standing and
appropriations committees. In Louisiana, the Governor dominates
the budget process. In Minnesota, the legislature tends to pass the
Governor’s budget, but the process of drafting the Governor’s
budget is long and inclusive.

Panel Reducing the State Programmatic Burden
Introduction Supplemental financing mechanisms can help close the funding gap
in State water programs. Another approach toward closing the gap
involves changes in State institutional arrangements. Three options
for States to consider are: technical assistance to forestall future en-
forcement or clean-up costs; legal and regulatory arrangements to
promote use of supplemental financing by other sectors in the State;
and third party (local and private sector) participation.
Technical assistance and advice by States to their local jurisdictions,
particularly their small communities, can help communities plan for
and implement drinking water and water pollution control activities
cheaply and efficiently. Investment of State monies up front for tech-
nical assistance can also save money by negating the need for costly
clean up or enforcement programs.
State legal or regulatory arrangements can enable third party arrange-
ments and save costs for others who implement water quality and
drinking water activities in the State. Such arrangements include
streamlined regulatory or permitting processes, allowing the use of
alternative or innovative technologies, allowing turnkey projects
where appropriate, encouraging economies of scale in planning and
operations, where feasible, and exploring the potential of regionaliza-
tion for some small systems.
Local and private sector participation can increase if States make such
changes to laws and regulations to allow others to use innovative
financing mechanisms. For instance, States may revise bidding proce-
dures or enact privatization laws to allow municipalities to use pub-
lic-private partnerships more effectively.
Moderator Mr. Wade Miller
Executive Director
Association of State Drinking Water Administrators
Five elements can reduce the State administrative burden:
• Engage in preventive activities such as the use of technical assis-
tance, to avoid more costly activities, such as formal enforcement
at a later date.
• Leverage resources at every opportunity, for instance, using serv-
ices of the National Rural Water Association or the Rural Commu-
nity Assistance Projects to reduce State case loads.

* Examine existing State legal or regulatory arrangements for pos-
sible modification to achieve efficiency or cost savings, for in-
stance, using a third party such as the National Sanitation Founda-
tion to evaluate drinking water additives, which is a very resource-
intensive operation, or streamlining engineering plan review or
permitting processes, or exploring the potential for regionalization
or consolidation of small systems to reduce noncompliance.
• Encourage privatization where appropriate, for instance, a State
public utility commission could allow a larger entity to purchase a
small investor-owned utility.
U Explore wholesale changes to the way in which we do business.
For example, during World War II, Britain found it had inadequate
water supplies to fight fires. So after the war it passed the Water
Act which reorganized all existing water management activities
(approximately 1,600 separate water, sewage, and river basin
management bodies) into ten hydrologically based water region
authorities with authority over all water activities in their bounda-
Highlights of the dilemma of small water systems:
U There is a major small systems problem; 51,400 of the 58,500 com-
munity water systems serve less than 3,300 people; 124,000 non-
community water systems receive little attention. 20,000 noncom-
munity water systems are being reclassified as nontransient, which
means they will have to comply with many more regulations.
• Many small community systems are “nonviable operating units”,
that is, they probably cannot raise water rates high enough to
cover the full cost of service without making water totally unaf-
fordable. Most do not have a full or even a part-time operator.
There are no economies of scale possible, little financial or techni-
cal management, and often no accountability. When a State goes to
take regulatory action, it may not be able to find the responsible
• There will always be systems too remote to be merged and too
poor to repay a loan or hire an engineer. Since they are needed and
cannot be dosed, technical assistance is the only viable answer. But
whatever the States do, it’s never enough. That’s why NRWA and
Rural Community Assistance Programs (RCAPs) are so important
— they will go where State and private parties cannot.

• Full-cost pricing ought to be a requirement of all systems including
establishment of a reserve fund to cover replacement costs. We
have an opportunity under Section 14.16 of the SDWA, the excep-
tion provisions, to mandate full cost pricing as one of the mini-
mum requirements for receiving an exemption.
We must do everything we can to encourage private sector involve-
ment. In the past 12 months Mr. Miller has been approached by U.S.
and foreign banks and companies interested in buying water systems.
Key Points by Panelists Mr. C. L. Overman
Executive Director
Municipal Technical Advisory Service (MTAS)
University of Tennessee
• Technical assistance is part of the broad spectrum of actions
needed to support water programs, and a way to maximize dollars
invested at the local level.
U MTAS, a creature of the legislature, the University of Tennessee,
and the Tennessee Municipal League, has been providing services
to Tennessee communities for about 40 years. The returns have
been very good, a ratio of at least 10 to 1.
• In 1984, the Tennessee Department of Health and Environment
asked MTAS for help in providing technical assistance to 250
publicly-owned wastewater treatment plants. Over three years of
the program they have invested $700,000 for the department in
technical assistance and seen $22 million in savings. This is a re-
turn of 30 to I on their investment. MTAS provided:
- technical assistance;
- management development for systems managers;
- financial analysis assistance;
- grants and loan assistance; and
- project coordination and go-between services between the
State, the engineers, and the local officials.
U The project staff consists of two civil engineers and a finance per-

The department uses MTAS rather than its employees for technical
assistance so as not to confuse the regulating and technical assis-
tance functions.
• The full MTAS staff has 31 professional people including nine
former city managers and 14 support staff. They are financed by:
- $1 million from the university budget;
- $1 million from 3/4ths of 1 percent of the cities’ share of the
State sales tax; and
- about $500,000 from contracts.
MTAS does not teach or do research. It provides hands-on manage-
ment and technical assistance to 336 Tennessee municipalities. MTAS
- management assistance
- ordinance codification
- public works consulting
- budgeting and accounting
- information and data processing
• MTAS conducts about 1,200 major projects each year, and 5,000
smaller ones.
• MTAS’ basic goal is to develop self-sufficiency and internal man-
agement capabilities for Tennessee cities, to help solve short term
crisis and aid long-term planning.
U.S. EPA and the States can help by: 1) promoting similar programs;
2) helping to fund at least one technical assistance organization in each
State; and 3) helping local governments to understand that infrastruc-
ture is a local government responsibility, and they must have the
proper tools to manage it.
Ms. Elizabeth Ytell
Director, Water/Wastewater Division
Rural Community Assistance Corporation
(A summary of the Rural Community Assistance Corporation pro-
grams with specific examples of technical assistance is contained in
Appendix G.)

• RCAPs are field-based regional training and technical assistance
organizations that grew out of the Department of Health and
Human Services (HHS) that originally funded them to give on-site
water and wastewater assistance to rural communities.
• RCAPs are based in six regional offices, each of which has about
$800,000 in resources. They leverage about $136 million with that
investment. For example, last year the Midwest Assistance RCAP
worked with 120 communities and leveraged $6.5 million on local
• Mapleton, Oregon hired an engineer to draft plans for a wastewa-
ter treatment plant and got a million dollar proposal. The RCAP
engineer designed one for $500,000.
• Deer, Arkansas saved $135,000 on a well project.
• Funding is now received from HHS, the Farmer’s Home Admini-
stration, foundations, the Public Welfare Foundation, and U.S.
EPA and the RCAP program has expanded to include solid waste
and groundwater issues.
• In the western (10 State) RCAP (Ms. Ytell’s) more than half the
funds are contracted out to 22 different organizations such as the
Environmental Training Center, the Northeastern Council of Gov-
ernments in Colorado, community colleges, and community action
agencies. Groups vary from State to State depending on the local
politics and situation.
• Typical activities indude:
- information dissemination including newsletters, educational
materials, video training materials, and one page fact sheets;
- outreach programs in which they try to get interested parties
- training conferences and workshops on such topics as financial
management, budgeting, planning, rate setting, or hiring an
- financing, induding helping apply for grants and loans, sug-
gestions on leveraging and working with multiple funding
- third party assistance for small systems, much of which re-
quires building trust over a period of time; and
- leveraging funding sources.

RCAI’s often end up working with cases no one else will deal with.
The community must want the project.
• Suggestions for U.S. EPA and the States include:
- improving interagency coordination at the State level;
- documenting success;
- encouraging proactive rather than reactive (firefighting) techni-
cal assistance — prevention vs. crisis management; and
- supporting RCAP links with States.
Mr. Fred Esmond
Assistant Director
Division of Construction Management
Department of Environmental Conservation (DEC)
New York
New York State has a self-help support system, developed by the
Renseleerville Institute, which works in partnership with the New
York Department of State, DEC. and small communities. The Ford
Foundation also provided some seed money for low interest project
The basic requirement is local initiative — recognition and ownership
of the problem. The Self Help Program provides guidance and advice
with a goal of at least 30 percent cost savings. Usually the savings are
more like 50 to 60 percent. Often the way to get money for these proj-
ects is to need less of it, and that is the route Self Help tries to take.
The community builds the project. The effort is not a program with
special funding — it is a tool, a way to work with communities. It
counts on individuals to make it go. Overwhelming problems become
overwhelming opportunities.
Mr. Esmond presented a case study involving Seward, New York, a
community of 44 homes.
Seward had a problem involving a storm drain running along the
State highway which backed up, leaving sewage in ditches, surround-
ing wetlands, backyards, and basements. Land values were destroyed
and mortgages unobtainable.
• An engineer hired by the community projected a cost of $530,000
to correct the situation, which would cost $1,200 per homeowner.

• The current estimate after the Self Help Program is $165,000. They
reduced the costs by:
- developing a set of worksheets (Appendix H) which outline all
of the tasks which have to be performed.
- reviewing each step to see if there is someone in the community
or available in a State office who can do the job at no cost or a
nominal cost. For example, the County Health Department did
a no cost sanitary survey. The required archeological survey
was done by a local professor and his student for $300. Every-
body restores their own lawn.
• One of the major payoffs is the goodwill which developed out of
the projects between the community and the government.
At present, New York’s Division of Construction Management is
limited by resources to about 14 projects at a time. The demand ap-
pears to exceed that.
Illinois is interested in the program, and the New York Self Help
Program is working on a pilot case with Elkart, Illinois.
Other Points Included: Audience discussion pursued how small communities can stay on an
independent course once helped over their crisis. One recommenda-
tion would be for SRFs to require financial capability and manage-
ment responsibility plans and guarantees at the front end. On the
question of whether technical assistance generated conflict with the
private sector, panelists agreed the problems such assistance usually
addressed would not provide good business for the private sector, or
they’d have to do it free anyway.

Panel Collaborating with Other Agencies and Third
Parties to Accomplish Water Program Goals
Introduction State agendes that operate drinking water and water quality manage-
ment programs can work with other agencies as well as with regu-
lated interests and the private sector to accomplish their environ-
mental goals. Resources of other agencies and organizations with
shared goals can augment those available to the State agency.
Joining resources can produce more “bang for the buck” to accom-
plish mutual goals and programs. “Third party” arrangements can
result where the other agency or organization performs a task that the
State would otherwise have to do.
Moderator Mr. Paul Shinn
Government Finance Research Center
Key Points by Panelists Ms. Judy Kelly
Assistant Regional Manager
Gulf/South Atlantic Region
Coastal Programs Division
Office of Ocean and Coastal Resource Management
National Oceanic and Atmospheric Administration (NOAA)
NOAA programs can assist States with water program information
needs, and in particular with programs in coastal areas. More and
more, NOAA is recognizing the connection between upstream water
quality impacts and NOAA responsibilities.
• NOAA has two major databases which NOAA, U.S. EPA and
States jointly use in U.S. EPA’s National Estuary and Near Coastal
Water Programs.
• The National Estuarine Inventory contains preliminary informa-
tion on land use, wetlands, classified shellfish waters, and toxic
pollutant discharges in over 120 estuaries.
• The National Coastal Pollution Discharge Inventory indudes
discharge estimates for all point, non-point and riverain resources
67 and pollutants in the United States.

• Using this data, NOAA has developed a preliminary estuarine
classification system based on pollution susceptibility. U.S. EPA
has used this scheme to help prioritize estuaries nominated for the
National Estuary Program.
• The wastewater treatment component contains over 3,000 facilities;
data is contained in a report Publicly Owned Treatment Works in
the Coastal Areas of the United States.
• A major innovative effort is underway both to make this data
accessible to State officials on a MacIntosh computer, and to incor-
porate State data into the data base. They are looking for States to
participate in a pilot project for data use.
• NOAA wants to develop closer working relationships among State
coastal management programs and water quality management
programs. NOAA also has water quality research and manage-
ment efforts funded through sea grant programs, research oppor-
tunities and habitat studies and data available through the Na-
tional Marine Fisheries Service.
• Congress has called for a renewed and systematic review of the
links between the coastal zone and water quality programs with
State-by-State recommendations.
• Most coastal States have coastal zone management programs,
sharing an annual congressional appropriation of $34 million.
U Examples of CZM funded program activities which addressed
water quality issues include:
- The State of Washington developed a prototype of a coastal
watershed program aimed at correcting bacterial pollution in
six major coastal watersheds;
- South Carolina updated Section 208 plans to improve stormwa-
ter management and develop stormwater guidelines;
- Florida spent well over a million dollars to develop watershed
management plans; and
- On the Federal level, U.S. EPA and NOAA signed a memoran-
dum of understanding to implement the National Estuary
Program, and the Coastal Zone Management Act will be reau-
thorized in 1990.
U NOAA is looking for innovative programs that address coastal
water quality issues. State coastal management funds may be
available for such projects. Water quality managers are encouraged
to renew CZM contacts and seek out opportunities to work coop-
68 eratively on these important issues.

Dr. Jim Loftis
Associate Professor
Department of Agriculture and Chemical Engineering
Colorado State University
U To produce a nonpoint source assessment report and management
plan, a multi-agency task force with subcommittees on agriculture,
silviculture, mining, urban and construction mn-off, and hydro-
logic modification was formed under the auspices of the Colorado
Department of Health. This was stimulated by Section 319 of the
Clean Water Act.
U The task force produced an assessment report concentrating on
surface water conditions; streams which have problems, where
they are, and the extent of the problems. There is not much
ground-water data for Colorado.
• The management plan consists of best management practices for
dealing with the problems and a hope that agencies and individu-
als will adopt them voluntarily. Some construction grant money
has been directed to local organizations for pilot or demonstration
I One such project by the Northern Colorado Conservation District
is managing nitrates in the South Platte River Basin.
• The Cooperative Extension Service (CES) and the Soil Conserva-
tion Service (SCS) signed a Memorandum of Understanding on the
national level, which is filtering down to the State level. SCS will
incorporate water quality into conservation plans. CES and SCS
staff meet regularly and both include water quality in work with
farmers. Work on pesticides and nitrates is particularly important.
The Cooperative Extension is also working with the Department of
Health, Water Quality Control Division, on safe drinking water clinics,
and with several agencies about starting a ground-water data base.
Mr. Laurence Bowman
Chief, Program Development Branch
Water and Waste Disposal Division
Farmers Home Administration (FmHA)
Department of Agriculture
• FmHA started its water loan program in the 17 western States in
1937. They have made $9.7 billion in loans and $3.1 billion in
grants for water and waste disposal facilities.

• Presently, FmHA can make grants and loans, mostly for water and
sewer systems as a lender of last resort, to public bodies and non-
profit associations in towns under 10,000; they like to concentrate
on those less than 5,500.
• They prefer to improve, enlarge or modify water and sewage
facilities as compared to building new ones, and give priority to
low-income and truly rural communities.
• Current interest is market rate (7.5%), poverty (5%) for those meet-
ing the guidelines, and an intermediate rate (6.25%). Loans are
granted for a maximum of 40 years, or the life of the facility, or in
conformance with State law whichever is less. Security is required.
• Grants are also available to reduce user rates to a reasonable level.
Grants can only be made to communities if the median household
income is less than the State non-metropolitan median household
income. Grants can be as high as 75 or 55 percent depending on the
income and need of the community.
• In the loan program, FmHA experience is to structure the loans so
there is reasonable security and chance for the borrowers to repay.
The repayment rate has been good for communities. An effort is
made not to be too divergent in the objectives of the loans.
• A circuit rider program is available in all 48 continental States
under contract with the National Rural Water Association. FmHA
will put about $2.9 million into it this fiscal year. Circuit riders
provide day-to-day operational, management, financial assistance
and advice to rural water systems.
• Starting last year, one to two percent of FmHA’s funds have been
available for technical assistance and training.
Mr. Charles Kreiman
Director of Program Operations
Community Planning and Development
Denver Regional Office
Department of Housing and Urban Development
• Community Development Block Grants (CDBG) funds go directly
to cities (70 percent) — generally to those over 50,000; 30 percent of
the funds go to States, which then make grants to local govern-
ments under State-specific priority systems. Over $2 billion was
available in fiscal year 1989. The money is available for building
any public facility except buildings for the general conduct of gov-
ernment. The money has generally been used for housing and also
for water projects.

• Virtually all of South Dakota’s funds between 1982 and 1986 were
spent to improve water facilities in rural parts of the State.
• Funds spent must meet the national objectives of the Act, the most
important being that a majority of users be low and moderate
income users. Beyond this, the funding process can be quite broad.
States often give priority to water projects based on health issues,
coastal zone projects, or ground-water policy.
• Communities must make local environmental analyses of the
projects to see if a full scale environmental impact analysis under
the National Environmental Policy Act is required. They also must
comply with other Federal laws such as the Davis-Bacon Act.
Ms. Janice A. Beecher
Research Specialist
National Regulatory Research Institute
Ohio State University
• While Public Utility Commissions (PUCs) don’t have money to
give, they do have information and expertise that will help in the
financial crisis.
• Forty-five State PUCs regulate the rates of 4,500 private water
utilities. Nearly 10,000 water utilities fall under PUC jurisdiction.
• Revenue is under $15,000 for half of the regulated water utilities,
and under $100,000 for 75 percent. Forty-three percent of PUC rate
cases are water utility cases. Therefore, PUCs share the concern
over small water utilities.
• The basic principle that “regulation should be in the public inter-
est” leads to a careful balancing act between investors and rate-
payers. PUCs have experience in rate setting and in the legal chal-
lenges which can occur, e.g., one legal case challenged an assess-
ment on railroads for the cost of regulation because they felt it was
a tax, not a fee, and because it was discriminatory in not being
applied evenly to different corporate entities.
• There are a number of opportunities for cooperation between
PUCs and State water agencies, e.g., in California the PUC and the
Department of Health Services agreed to:
- monitor regulatory water systems;
- identify contaminants and determine system improvements,
including alternatives;

- select improvement projects after reasonable alternatives have
been defined and cost analyses performed; and
- establish mutually agreed upon priorities for improvements.
• Duties defined for each organization include:
Department of Health Services:
- Evaluate public water systems to identify health deficiencies;
- Identify alternative, cost-effective corrective actions;
- Review and approve plans and specifications for water quality
- Inspect water quality improvement projects during and after
- Share project expense reports with the PUC; and
- Participate in appropriate commission public meetings and
Public Utility Commission:
- Determine the type of rate relief needed to finance water qual-
ity improvement projects;
- Arrange for and publicize public meetings and hearings; and
- Provide an analysis of the financial impacts of water systems
• There are ten benefits for State water agencies in coordinating with
their PUCs:
- Optimizing mutual expertise;
- Avoiding duplicate effort;
- Ensuring equity and developing informed policy decisions,
e.g., fairness among municipal and private interests;
- Sharing regulatory clout, and providing checks and balances;
- Preventing small utilities from falling through the regulatory

- Avoiding conflicting signals;
- Avoiding confrontation between the PUC and State water
- Supporting each other politically, e.g., in State budget proc-
- Providing less fragmented, and more efficient and effective
water program management; and
- Ensuring better quality water at rates that meet public interest
Two suggestions for U.S. EPA, which came out of the audience partici-
pation, were that U.S. EPA should:
• Work with other agencies and utilities to reconcile the need and
affordabililty issues of the SDWA by using existing formulas such
as those of HUD’s CDBG program, or the FmHA to establish new
• Become more involved in the nitty-gritty of State problems to
insure States better apply U.S. EPA directives and to help put
coalitions together.
Moderator Mr. Michael Cook
Office of Drinking Water
Environmental Protection Agency
Key Points by Panelists Mr. Nelson E. Fabian
Executive Director
National Environmental Health Association (NEHA)
The consensus of local environmental professionals on the ideal State-
local relationship is:
U State activities should include:
- regulation development;
- technical assistance and consulting;
- maintenance of an expertise base that the local professional
73 could access;

- education and training;
- management of the general permit process;
- maintenance of an information clearinghouse;
- compilation of centralized data management; and
- general program oversight.
• Local activities should include:
- most enforcement monitoring (local political concerns might
make this difficult, so there should be a provision to refer sticky
situations to the State level);
- inspection up through revocation;
- sampling;
- local consulting;
- public education;
- compilation of data for local and State use; and
- generally those functions which require interaction with the
public in the field.
• Local officials contend they know the problems and should be con-
sulted first. They believe State and Federal staff have slower re-
sponse rates and higher costs and generally know less about local
If this division of responsibilities were maintained, water programs
would be more effective and efficient and less costly.
However, this arrangement is not possible in many States. For ex-
ample, Colorado statutes specifically describe the activities for which
permit fees may be used — in effect, State program administration.
The State can not subcontract to local communities for the kind of
assistance they are capable of giving. State legislatures seem to be
ambivalent to changing this - they may fear losing control if such
powers were granted to the locals.
County and local health professionals are willing and interested in
helping; the tremendous resources they offer are in place. States seem
interested in using them. We need State legislative changes to allow

this to happen. Clearing away State legislative requirements which
require action at the State level would allow more efficient use of
resources at the local level, giving more effective service for the same
amount of money.
Dr. Nina McClelland
President and Chief Executive Officer
National Sanitation Foundation (NSF)
NSF, a private consultant, has been in business for 45 years, operating
programs in every U.S. State and 26 foreign countries. NSF certifies
products and services conform to NSF and other recognized stan-
dards. Work is done on a fee for service basis.
• Public dollars will not be enough to fill the financial gap. Private
sector funding must be added. Third party services are a way to do
U Third party providers are private, independent organizations
called upon to bridge the communications and confidence gap that
exists between a regulatory agency and those regulated, or be-
tween a manufacturer and a user of a product.
U Sometimes third party providers develop standards and some-
times they test, evaluate, and certify products for conformance
with standards and accredit laboratories. In many cases, States
actually certify laboratories based on NSF recommendations.
U Usually they work on a fee-for-service basis and authorize a regis-
tered mark that authenticates the service.
U Success of third parties depends on their competence, credibility,
confidence of others in their processes, confidentiality, communi-
cations, and ability to build consensus.
• Specifically for water, NSF provides:
- standards and certification for point of use and point of entry
drinking water treatment units. Standards include carbon
filters, ion exchange, water softeners, reverse osmosis, and
soon, ultraviolet disinfection, distillation, and drinking water
vending machines. (23 companies and 250 products with 35
applications pending).
- certification of bottled water for compliance with U.S. EPA and
U.S. EPA regulations (30 bottlers and 210 annual plant inspec-

- drinking water program compliance e.g. in Michigan accredit
140 microbiology and eight chemistry laboratories. These
accreditations provide a cost effective way for States and EPA
to have laboratories evaluated, either in a single State or against
several State standards.
- standards and listings for on-site wastewater treatment devices,
recyde and reuse systems, and items such as package wastewa-
ter treatment plants.
U NFS also undertakes a variety of research and development proj-
ects under contract such as characterizing residuals in waste
sludges from drinking water facilities or determining the feasibility
of point of entry treatment to reduce radon.
U The goals are to optimize and measure performance, measure
costs. and develop procedures for monitoring maintenance and
waste disposal.
U Use of these private sector services offers a good alternative to the
burdens of greatly increased regulation requirements.
Mr. Paul Foran
Vice Chairman, Water Committee
National Association of Regulatory Utility Commissions (NARUC)
U In providing resources for drinking water programs, the role of
PUCs is somewhat limited.
U Extends only to private and investor-owned utilities.
U They usually do not have money to offer drinking water programs.
U Nonetheless, PUCs can be helpful to State and to U.S. EPA.
U PUCs’ primary responsibility is to regulate rates and conditions of
service for all investor-owned gas, electric, water, and sewer utili-
ties, with a statutory obligation to see that services is safe and
reliable. The PUC Act mandates that PUCs ensure water is potable.
U In practice, PUCs rely on the expertise of others, such as U.S. EPA
and the States, to develop health and safety standards.
U However, expertise in rate-making, financial, and economic mat-
ters can make them valuable in the program by:
- determining affordability of various treatment methods and
how that relates to grant exceptions and variances;

- combining their expertise in local companies and financial and
rate-making with State and Federal officials’ knowledge in
these areas to provide optimal decision-making;
- determining the effect on the customer rates of large plant
additions to comply with the SDWA amendments;
- discouraging the formation of small, marginally underfunded
water systems; and
- insisting on adequate capitalization of water systems.
U For at least the last 15 years the illinois Commerce Commission
(ICC) has had a dual policy with small water systems. First, they
have tried to discourage them or steer them to other means of
providing water. They have even denied certificates on lack of
financial viability. This has reduced the number of regulated small
water companies from approximately 150 to under 80. Second, if a
small system is the only alternative, the ICC helps them with
technical assistance, recordkeeping, streamlined rate case filings,
and time and rate relief.
U Public utilities provide effective hearing processes and other proce-
dures which provide for conflict resolution and balancing different
interests and abilities to pay. Such mechanisms will be essential if
SDWA funding will come from a variety of Federal, State, local,
and private sources.
In answer to a question, Mr. Foran said he was not aware of any States
or PUCs that have formal standards for financial viability. Though
these would be useful, they would probably have to go through for-
mal rulemaking and be expensive. The more informal case by case
way used allows more flexibility though the success has not been
NARUC has come up with general guidelines on how to judge water
rate increases. But every time you come up with a standard you come
up with an exception. NARUC tries to write standards that are flexible
but empirical. Perhaps they can look at median national income in
comparison with county income statistics, or unemployment rates to
establish affordability in an area.
Mr. Donald L. Coffin
Program Officer, Central Region
United States Geological Survey (USGS)
Department of the Interior
The Geological Survey’s role is to understand the water resources of
the nation and collect data to describe the resource. USGS conducts
77 three broad programs in the area of water:

• A Federal program with its own budget appropriated by Congress
- research and development on cause-effect relationships in
water such as analysis of toxic substances;
- data collection, e.g. on the water quality in the nation’s rivers;
and baseline monitoring in areas not greatly affected by man’s
activity, the benchmark program;
- examination of agricultural chemical runoff; and
- the National Water Quality Assessment.
• Other programs funded by other Federal agencies such as a review
of waste disposal practices at Air Force bases.
• The water effects of Federal/State cooperative program which is
funded 50-50 between USGS and the State or local agency con-
cerned. The program is negotiated between the USGS district chief
and the State or local agency. Current projects include:
- ground-water vulnerability in Colorado and Utah;
- data on estuaries in Texas;
- water resources of eastern South Dakota;
- water quality and quantity in the Black Hills;
- quality of reservoirs for drinking water in Kansas and Texas;
- effect of mining activities in western Montana.
• There is also a nationwide water-use program based on county
aerial appraisals to inventory who is using what water. We will do
county aerial appraisals as well.
• There is always a trade-off between costs and need in the USGS’
methodology on pollution detection techniques. However, the
water quality laboratory which is usually used operates under U.S.
EPA -approved methods.
• Federal money cannot be used to match other Federal money, e.g.
U.S. EPA 106 grant funds with those of USGS.

Appendix A
Official Conference Attendance List
Financing Strong State Water Programs In New Ways
March 20-21, 1989
Denver, Colorado
Mr. Stephen Ailbee
Director, Planning and Analysis Division
U.S. Environmental Protection Agency
401 M Street, SW
Room 1209, East Tower
Washington, DC 20460
Mr. James Allison
Vice-President, CoBank
P.O. Box 5110
Denver, CO 80217
(303) 740-4035
Mr. Marc Alston
Chief, PWS Program Section
U.S. EPA Region VIII
999 18th Street (8WM-DW)
Denver, CO 80202
(303) 293-1424
Mr. George Ames
Executive Director
Council of Infrastructure Financing Authorities
P.O. Box 39187
Washington, DC 20016
Ms. Laurel M. Andrews
Apogee Research, Inc.
1425 Fourth Avenue, Suite 705
Seattle, WA 98101
(206) 447-9938
Mr. Michael Annarummo
Deputy Director for Regulations
RI Dept. of Environmental Management
(Environmental Quality Study Commission)
291 Promenade Street
Providence, RI 02908
(401) 277-2808
Ms. Constance P. Ashcraft
Environmental Program Planner
Environmental Protection
18 Reilly Road
Frankfort, KY 40601
(502) 564-3410
Mr. James Bailey
Director, Arkansas Environmental Academy
SAU Tech
Camden, AR 71701
(501) 574-4550
Ms. Kelly Beard
Environmental Engineer
U.S. EPA Region VII
726 Minnesota Avenue
Kansas City, KS 66101
(913) 236-2813
Ms. janice A. Beecher
Research Specialist
National Regulatory Research Institute
Ohio State University
1080 Carmack Road
Columbus, OH 43210
(614) 292-9404
Mr. Jerry Biberstine
Section Chief, Drinldng Water Section
Colorado Department of Health
4210 East 11th Avenue
Denver, CO 80220
(303) 320-8333

Mr. Steven D. Binder
First Vice President
Public Finance Department
Prudential-Bache Capital Funding
100 Gold Street
New York, NY 10292
(212) 776-3963
Ms. Pauline Bouchard
Assistant Director
Division of Environmental Health
Minnesota Department of Health
717 Delaware Avenue, SE
Minneapolis, MN 55440
(612) 623-5331
Mr. Laurence Bowman
Chief, Program Development Branch
Water and Waste Disposal Division
USDA, Farmers’ Home Administration
14th and Independence Avenue, SW
Washington, DC 20250
(202) 382-9637
Mr. Donald J. Brady
Chief of Regional Operations Programs
Support Branch
U.S. Environmental Protection Agency
401 M Street, SW
Washington, DC 20460
(202) 382-5392
Mr. William C. Brierley
Director of Public Facilities
Dept. of Environmental Conservation
103 South Main Street - Building 9 South
Waterbury, VT 05676
(802) 244-8744
Mr. Walter Brodtman
Chief, Operations Branch
U.S. Environmental P-”
401 M Street, SW
Washington, DC 20460
(202) 382-5843
flFW ULflI Agency
Mr. Brad Brogren
District Engineer, Division of Water Supply
Michigan Department of Public Health
3423 North Logan
P.O. Box 30195
Lansing, M l 48909
(517) 335-8311
Mr. Steven Brown
Director, Center for the Environment
and Natural Resources
Council of State Governments
Iron Works Pike
P.O. Box 11910
Lexington, KY 50578
(606) 231-1866
Mr. Stuart Bruny
Chief, Division of Di-inking Water
Ohio Environmental Protection Agency
1800 Water Mark Drive
Columbus, OH 43266-0149
(614) 644-2752
Ms. Janet Cain
Assistant Division Director
Minnesota Pollution Control Agency
520 Lafayette Road
St. Paul, MN 55126
(612) 296-7354
Mr. Raymond Cantor
Associate Counsel
Office of Legislative Services
Statehouse Annex
Trenton, NJ 08625
(609) 292-7676
Ms. Ann D. Carey
Project Manager
ICF Incorporated
9300 Lee Highway
Fairfax, VA 22031-1207
(703) 934-3229
Mr. Stuart P. Castle
Chief, Ground Water Bureau
Health and Environment Department
1190 St. Francis Drive, Rm. S2063
Santa Fe, NM 87503
Mr. Conny Chandler
Financial Analyst
Water Management Division
U.S. EPA, Region W
345 Courtland Street NE
Atlanta, GA 30365
(404) 347-3633

Mr. John Chase
Project Administrator
Colorado Department of Health
Water Quality Control Division
Field Support Section, Grants Unit
4210 East 11th Avenue
Denver, CO 80220
(303) 331-4569
Mr. Rick Claggett
Chief, Water Quality Management Section
U.S. EPA Region VIII
999 18th Street, Suite 500
Denver, CC) 80202
(303) 293-1573
Mr. Donald L. Coffin
Program Officer, Central Region
U.S. Geological Survey
P.O. Box 25046
Mail Stop 406
Denver Federal Center
Lakewood, CO 80225
(303) 236-5929
Mr. Michael Cook
Office of Drinking Water
U.S. Environmental Protection Agency
401 M Street, SW
Washington, DC 20460
(202) 382-5543
Mr. Jon DeBoer
Technical and Professional Department
American Water Works Association
6666 West Quincy Avenue
Denver, CO 80235
(303) 794-7711
Ms. Mary Ann Dickinson
Acting Director of Planning
Department of Environmental Protection
165 Capitol Avenue
Hartford, CF 06106
(203) 566-2711
Mr. Max Dodson
Director, Water Management Division
U.S. EPA Region VIII
999 18th Street
Denver, CO 80202-2405
Ms. Debra Downs
Public Works Specialist
Colorado Division of Local Governments
1313 Sherman Street, Room 520
Denver, CO 80203
(303) 866-2156
Mr. John Eckstein
Calkins, Kramer, Grimshaw & Honing
Special District Association of Colorado
1700 Lincoln, Suite 3700
Denver, CO 80202
(303) 839-3804
Mr. Brian Ehrle
Project Administrator
Colorado Department of Health
Water Quality Control Division
Field Support Section, Grants Unit
4210 East 11th Avenue
Denver, CO 80220
(303) 331-4537
Ms. Linda Eichmiller
Deputy Director
Association of State and Interstate
Water Pollution Control Administrators
444 South Capitol Street, NW
Washington, DC 20001
(202) 624-7782
Mr. Steve Eldredge
Michigan Dept. of Natural Resources
Surface Water Quality Division
P.O. Box 30028
Lansing, MI 48909
(517) 335-4177
Mr. Fred Esmond
Assistant Director
Division of Construction Management
NY Dept. of Environmental Conservation
50 Wolf Road
Albany, NY 12233-3750
(518) 457-6674
Mr. Dave Evans
Program Analyst
U.S. Environmental Protection Agency
401 M Street, SW
Washington, DC 20460
(202) 382-4221

Mr. Nelson E. Fabian
Executive Director
National Environmental Health Association
720 South Colorado Blvd.
South Tower, Suite 970
Denver, CO 80222
(303) 756-9090
Mr. Marion T. Fannaly
Water Pollution Control Division
Department of Environmental Quality
P.O. Box 44091
Baton Rouge, LA 70804-4091
(504) 342363
Mr. Ted Fasting
Acting Chief, Planning & Evaluation Section
Pennsylvania Dept. of Environmental Resources
3rd & Locust Streets
Harrisburg, PA 17120
(717) 787-3481
Mr. Edward C. Feddemen
Professional Staff
Committee on Public Works and Transportation
U.S. House of Representatives
Annex 2, Room 588
Washington, DC 20515
Mr. John S. Files
Division Director 11
Bureau of Pollution Control
Mississippi Dept. of Natural Resources
P.O. Box 10385
Jackson, MS 39289-0385
(601) 961-5171
Mr. Lonnie Finkel
Program Analyst
Office of Water
U.S. Environmental Protection Agency
401 M Street, SW
Washington, DC 20460
(202) 475-6790
The Honorable Fred W. Finlinson, Senator
Chairman, Utah Natural Resources Council
Callister, Duncan, and Nebeker
Suite 800, Kennecott Building
Salt Lake City, UT 84133
(801) 530-7353
Ms. Mary B. Fleming
Environmental Quality Program Analyst II
Dept of Environmental Quality
Water Pollution Control Division
P.O. Box 44091
Baton Rouge, LA 70804-4091
(504) 342-6363
Ms. Jane Fontenot
Chief, Issuance Section
Permits Branch, Water Management Division
U.S. EPA Region VI
1445 Ross Avenue
Dallas, TX 75202
(214) 655-7190
Mr. Paul Foran
Commissioner, Illinois Commerce Commission
Vice Chairman, NARUC Water Committee
100 West Randolph Street
Suite 9-100
Chicago, IL 60601
(312) 917-4790
(217) 442-4386
Ms. Peggy Galligan
Project Administrator
Colorado Department of Health
Water Quality Control Division
Field Support Section, Grants Unit
4210 East 11th Avenue
Denver, CO 80220
(303) 248-7151
Ms. Ciaire Gesalman
Roy F. Weston, Inc.
955 L’Enf ant Plaza, SW
Washington, DC 20024
(202) 646-6800
Mr. Rick Giardina
707 17th Street, Suite 3800
Denver, CO 80202
(303) 297-9500
Mr. Seth Goldstein
Fiscal Officer, Water Quality Control Division
Colorado Department of Health
4210 East 11th Avenue
Denver, CO 80220
(303) 320-8333

Mr. Tom Goodwin
Natural Resource Administrator
Dept. of Natural Resources
Division of Water
617 Broad Street
Charleston, WV 25301
(304) 348-0641
Mr. Charles L. Grizzle
Assistant Administrator for Administration
and Resources Management
U.S. Environmental Protection Agency
401 M Street, SW
Washington, DC 20460
(202) 382-4600
Mr. Barker Hamill
Chief, Bureau of Safe Drinking Water
Division of Water Resources
NJ Dept. of Environmental Protection
401 East State Street, CN029
Trenton, NJ 08625
(609) 292-5550
Ms. Karen Hamilton
Life Scientist
U.S. EPA Region VIII
999 18th Street, Suite 500
Denver, CO 80202
(303) 293-1576
Ms. Rebecca W. Hanmer
Acting Assistant Administrator
Office of Water
U.S. Environmental Protection Agency
401 M Street, SW
Washington, DC 20460
(202) 382-5700
Mr. Robert Hardaker
Director of State and Educational Programs Staff
Environmental Management Division
499 South Capitol Street SW
Washington, DC 20460
(202) 475-9741
Ms. Karen Harder
Environmental Scientist
U.S. EPA Region VIII
999 18th Street
Denver, CO 80202-2405
(303) 293-1702
Mr. Ray Hartung
General Manager
Lower Platte North Natural Resources Department
P.O. Box 258
David City, NE 68632
(402) 367-3103
Mr. Stephen Hogye
Office of Municipal Pollution Control
U.S. Environmental Protection Agency
401 M Street, SW
Washington, DC 20460
(202) 382-7284
Mr. David Holm
Director, Water Quality Control Division
Colorado Department of Health
4210 East 11th Avenue
Denver, CO 80220
(303) 320-8333
Mr. Emile Honle
Business Development Manager
Bechtel Environmental, Inc.
P.O. Box 3965
San Francisco, CA 94119
(415) 768-1265
Mr. Charles Jarik, Esq.
Chapman & Cupler
111 West Monroe Street
Chicago, IL 60603
(312) 845-3795
Ms. Carol Jolly
Assistant Director, Water and Shorelands
Department of Ecology
Mail Stop PV-11
ARH Room 180
Olympia, WA 98504-8711
(206) 438-7494
Ms. Judy Kelly
Associate Regional Manager
Gulf/South Atlantic Region
Coastal Programs Division
Office of Ocean and Coastal Resource Management
National Oceanic and Atmospheric Administration
1825 Connecticut Avenue
Washington, DC 20035
(202) 673-5138

R. Jerrad King
Environmental Management Corporation
689 Craig Street
St. Louis, MO 63141
(314) 432-8070
Mr. Ray Kijajic
Vice President
Drexel Burnham Lambert, Inc.
I South Wacker Drive, Suite 1500
Chicago, IL 60606
(312) 977-1290
Mr. Charles Kreiman
Director of Program Operations
Community Planning and Development
Denver Regional Office
Dept. of Housing and Urban Development
1405 Curtis Avenue
Denver, CO 80202
(303) 564-4666
Mr. Ron Kreizenbeck
Deputy l)irector, Water Division
U.S. EPA Region X
1200 Sixth Avenue
Seattle, WA
(206) 442-1086
Ms. Trudie Lay
Small Systems Program Manager
American Water Works Association
6666 Quincy
Denver, CO 80202
(303) 794-7711
Mr. William Leonard
Rural Utilities Management Specialist
Midwest Assistance Program
P.O. Box 1456
White Fish, MT 59937
(406) 862-3600
Ms. Dana Letourneau
Director, Policy Management Support Staff
Office of Marine and Estuanne Protection
U.S. Environmental Protection Agency
401 M Street, SW
Washington, DC 20460
(202) 475-8580
Ms. Michelle LeVette
Shorthand Reporter
Attorneys Service Center
2135 South Cherry, Suite 222
Denver, CO 80222
(303) 691-2278
Dr. Jim Loftis
Associate Professor
Dept. of Agriculture and Chemical Engineering
Colorado State University
Room 100 Clover
Fort Collins, CO 80523
(303) 491-5252
Mr. Thomas Looby
Assistant Director for Health and
Environmental Protection
Colorado Department of Health
4210 East 11th Avenue
Denver, CO 80220
(303) 331-4510
Ms. Nancy Lopez
Chief, Office of Water Data Coordination
U.S. Geological Survey
417 National Center
Reston, VA 22092
(703) 648-5014
Mr. Tom Lucas
Sr. Environmental Specialist
Dept. of Environmental Quality
811 SW 6th Avenue
Portland, OR 97204
Mr. Emerson Markham
National Academy of Public Administration
1120 C Street, NW, Suite 540
Washington, DC 20005
(202) 347-3190
Mr. Frederick Marrocco
Chief, Division of Water Supplies
Department of Environmental Resources
P.O. Box 2357
Harrisburg, PA 17120
(717) 787-9035
Mr. Charles Massie
RLF Program Coordinator
Virginia Revolving Loan Fund
Virginia Resources Authority
P.O. Box 1417
Richmond, VA 23211
(804) 644-3100

Ms. Catherine Mastropieri
Chief, Grants Management Section
U.S. EPA Region III
841 Chestnut Street
Philadelphia, PA 19107
(215) 597-6166
Dr. Nina McClelland
President and CEO
National Sanitation Foundation
P.O. Box 1468
Ann Arbor, Ml 48106
(313) 769-8010
Mr. Robb McCracken
Administrative Officer
Community Technical Assistance Program
Department of Commerce
Cogswell Building, Room C-211
Helena, MT 59620
(406) 444-4479
Mr. Wendell D. McCurry
Water Quality Officer
Nevada Division of Environmental Protection
201 South Fall Street
Carson City, NV 89710
(702) 885-4670
Mr. Robert K. McDonald
Section Manager
OEPA Grants Administration Program
Ohio Environmental Protection Agency
1800 WaterMark Drive
Columbus, OH 43215
(614) 644-2832
Richard McVay
Director of Special Programs
Texas Water Commision
Office of Policy And Research
P.O. Box 13087
Austin, D( 78711-3087
(512) 463-8103
Mr. C.R. Miertschin
Director, Construction Grants Division
Texas Water Development Board
P.O. Box 13231
Capitol Station
Austin, TX 78711
(512) 463-7853
Mr. Wade Miller
Executive Director
Association of State Drinking Water Administrators
1911 North Fort Meyer Drive
Arlington, VA 22209
(703) 524-2428
Ms. Elizabeth Miner
Manager, State Funding Study
Office of Water
U.S. Environmental Protection Agency
401 M Street, SW
Washington, DC 20460
(202) 382-5818
Mr. Steve Minick
Head Receivable & Fee Unit
Texas Water Commission
P.O. Box 13087
Austin, TX 7871 1-3087
(512) 463-8041
Mr. Larry Morandi
Program Director for Natural Resources
National Council of State Legislatures
1050 17th Street, Suite 2700
Denver, CO 80265
(303) 623-7800
Ms. Jocelyn Mortensen
Bear Sterns, Inc.
245 Park Avenue
New York, NY 10167
(212) 272-2171
Mr. Robert L. Munari
Manager, Field Services Section
Arizona Dept. of Environmental Quality
2655 East Magnolia
Phoenix, AZ 85034
(602) 392-4002
Ms. Chris Noah-Nichols
Chief, Municipal Facilities Branch
U.S. EPA Region X
1200 Sixth Avenue, WD-133
Seattle, WA 98101
Mr. William Nuzzo
Chief, Office of Water Program Coordination
Water Management Division
U.S. EPA Region I
JFK Federal Building
Boston, MA 02203
(617) 565-3480

Mr. David Osterman
Branch Chief
Public-Private Partnership Office
U.S. Environmental Protection Agency
401 M Street SW
Room G013 NEM
Washington, DC 20460
(202) 475-8227
Mr. C. L. Overman
Executive Director
Municipal Technical Advisory Service
University of Tennessee
891 20th Street
Knoxville, TN 37996-4400
(615) 974-5301
Ms. Sue Patnude
Circuit Writer Program Management
Dept. of Community Development (State Dept.)
9th and Columbia Building
Olympia, WA 98504
(206) 753-2621
Ms. Martha Prothro
Director, Office of Water Regulations and Standards
U.S. Environmental Protection Agency
401 M Street, SW
Washington, DC 20460
(202) 382-5400
Mr. Michael Quigley
Office of Municipal Pollution Control
U.S. Environmental Protection Agency
401 MStreet,SW
Washington, DC 20460
(202) 382-5850
Mr. Mohammad Razzazian
Environmental Engineer
999 18th Street
Denver, CO 80202-2405
(303) 293-1556
Ms. Marlene Regeiski
Office of Municipal Pollution Control
U.S. Environmental Protection Agency
401 M Street, SW
Washington, DC 20460
Dr. Bill Roach
Oklahoma Environmental Training Center
Rose State College
6420 SE 15th Street
Midwest City, OK 73110
(405) 733-7364
Mr. Bill Rogers
Financial Assistant
Water Management Division
U.S. EPA Region N
345 Courtland Street NE
Atlanta, GA 30365
(404) 347-3633
The Honorable Roy R. Romer
Governor of Colorado
136 State Capitol
Denver, CO 80202
(303) 866-2471
Mr. Barry Royals
Chief EE Administrator
Bureau of Pollution Control
Mississippi Dept. of Natural Resources
P.O. Box 10385
Jackson, MS 39289-0385
(601) 961-5171
Mr. Kenneth Rubin
Apogee Research, Inc.
4350 East West Highway
Suite 600
Bethesda, MD 20814
(301) 652-8444
Mr. Steven M. Sandier
Small Communities Outreach Coordinator
Water Management Division
U.S. EPA, Region IV
345 Courtland Street
Atlanta, GA 30365
(404) 347-4491
Ms. Stephanie Sanzone
Office of Marine and Estuarine Protection
U.S. Environmental Protection Agency
401 M Street, SW (WH-556F)
Washington, DC 20460
(202) 475-7137

Mr. Joe Sarcone
Environmental Scientist
U.S. EPA Region Vifi
999 18th Street
Denver, CO 80202-2405
(303) 293-1424
Mr. Bernie Sarnoski
Chief of Program Control Section
Construction Branch
U.S. EPA Region III
841 Chestnut Street
Philadephia, PA 19107
(215) 597-9794
Mr. Arnold Schiffman
Assistant Director
Ground Water Quality Management
Division of Water Resources
NJ Dept. of Environmental Protection
401 East State Street, CN029
Trenton, NI 08625
Mr. John T. Schira
Chief Engineer
Ohio Water Development Authority
50 West Broad Street, Suite 1425
Columbus, OH 43215
(614) 466-5822
Mr. Franklin Schutz
Outreach Director
EPA Small Flows Clearinghouse
258 Stewart Street
Morgantown, WV 26506
(304) 293-4191
Mr. Peter E. Shanaghan
Mobilization Manager
U.S. Environmental Protection Agency
401 MStreetSW
Washington, DC 20460
(202) 382-5813
Ms. Evelyn Shields
Policy Analyst on Public Finance
National Governors’ Association
444 North Capitol Street
Suite 250
Washington, DC 20001
(202) 624-5384
Mr. Paul Shinn
Government Finance Research Center
1750 K Street, NW
Suite 200
Washington, DC 20460
(202) 429-2755
Mr. Gayle J. Smith
Director, Bureau of Drinking Water
Utah Dept of Health
Salt l.ake City, UT 84116
Mr. Robert Sonnek
Managing Director
Piper, Jaf fray and Hopwood, Inc.
222 South 9th Street
Minneapolis, MN 55402
(612) 342-6656
Mr. Michael K. Sposit
Rural Utility Management Specialist
P.O. Box 688
Green River, WY 82395
(307) 875-4200
Mr. Alan Stanford
Senior Water Quality Analyst
Dept. of Health and Welfare
Idaho Bureau of Water Quality
State House Mail
Boise, ID 83720
(208) 334-5859
Ms. Carol Stanzak
Office of Water
U.S. Environmental Protection Agency
401 M Street, SW
Washington, DC 20460
(202) 382-5822
Mr. Charles Sutfin
Director, Water Management Division
U.S. EPA Region V
230 South Dearborn Street
Chicago, IL 60604
(312) 353-2147
Ms. Jane Swallow
Rhode Island Department of Health
75 Davis Street
Providence, RI 02908
(401) 277-6867

Ms. Lydia Taylor
Management Services Division
Department of Environmental Quality
811 SW 6th Avenue
Portland, OR 97204
(503) 229-6485
Ms. Gina Terry
Washington Department of Ecology
Mail Stop PV-11
Olympia, WA 98504
(206) 438-7084
Ms. Christine Tirpack
Professional Staff
Committee on Public Works and Transportation
U.S. House of Representatives
Annex 2, Room 588
Washington, DC 20515
(202) 225-5504
Mr. Charles 1. Unseld
Planning Specialist
Colorado Division of Local Governments
1313 Sherman Street, Room 520
Denver, CO 80203
(303) 866-2156
Mr. Wally Venrick
Head, Public Water Supply Branch
State of North Carolina
P.O. Box 2091
Raleigh, NC 27602
(919) 733-2321
Mr. Paul Walker
Director, Water Management Division
U.S. EPA Region V I I
726 Minnesota Avenue
Kansas City, KS 66101
(913) 236-2812
Ms. Donna Wessel
Project Administrator
Colorado Department of Health
Water Quality Control Division
Field Support Section, Grants Unit
4210 East 11th Avenue
Denver, CO 80220
Ms. Linda B. Wilbur
Chief of Regional Operations Program
Support Branch
U.S. Environmental Protection Agency
401 M Street, SW
Washington, DC 20460
Ms. L.ori Williams
State Programs Coordinator
Office of Wetlands Protection
U.S. Environmental Protection Agency
401 M Street, SW
Washington, DC 20460
(202) 382-5084
Mr. Hal Wise
Nonpoint Source Branch
U.S. Environmental Protection Agency
401 M Street
Washington, DC 20460
(202) 382-7109
Mr. Kenneth Wiswall
Project Director
Roy F. Weston, Inc.
955 L’Enfant Plaza, SW
Washington, DC 20024
(202) 646-6800
Mr. James R. Yancey
Water Specialist
Missouri Department of Natural Resources
P.O. Box 176
Jefferson City, MO 65102
(314) 751-1602
Mr. Bryan Yim
Chief Construction & Technology Section
U.S. EPA Region X
1200 Sixth Avenue, WD-133
Seattle, WA 98101
(206) 442-8575
Ms. Elizabeth Ytell
Director, Water! Wastewater Division
Rural Community Assistance Corporation
2125 19th Street, Suite 203
Sacramento, CA 95818
(916) 447-2854

Appendix B Colorado Cash Fund Sources
Stationary sources Permit $96/hour
Annual Inspection $60/emission point
Asbestos $55-825
Mobile sources Vehicle Registration $1.50/registration
Solid Waste Landfill Application $50/hour/$5,000 Cap.
Hazardous Waste Permits and Closure Plans
Superfund Solid Waste User Fee $.15-.25/cubic yard
Radiation Control Radiation Services- $67/hour
X-Ray Inspections
Water Quality Discharge Permit $220-$11,000/year
Annual Fee
Consumer Protection Food Service $50/year*
Inspections $30-to locals
Dairy Products $10/licenses
Drug & Medical $25/year
Dairy Plant $10/application
Mattress & Bedding $5-$25/license
Kennels & Pet Shops $50/year*
*$30to locals
Psittacine Bird $15/year
89 Breeder License $15/year

NJPDES Pollutant Discharge Elimination
System Program 1982 - 1988
Total Program Cost and NJPDES Fees
Appendix C
(Page 1)
FY87 FY88
Fiscal Years STATE FUNDS
I ’
Cl )
FY84 FY85 FY86

Appendix C
(Page 2)
I —
1983 1984 1985 1986 1987*

1987 1988
Appendix D
(Page 1)
1981 1982 1983 1984 1985 1986

Appendix D
(Page 2)
1980 1981 1982 1983 1984 1985 1986 1987 1988

Appendix E AWWA Recommended Funding Sources for
Main Drinking Water Functions
General Fund Taxes Enforcement
Regulatory Development
Data Management
Program Management
Public Education
Special Use Taxes Survey and Inspection
Training and Assistance
Enforcement Correction
Plan Review
Fees Laboratory
Plan Review

Appendix F Vermont:
Environmental Infrastructure Financing
Page 1
Pollution Control Aquatic Nuisance Control
Water Supply Underground Storage Tanks
Solid Waste Hazardous Waste
Dam Maintenance
B. Total Estimated Need $481 Million
C. Current Rate of Progess Too Slow
D. Federal Financial Support Declining
E. Anticipated State Capital Appropriations
Don’t Allow Program Acceleration
F. Annual State Capital Bonding Limited to
90 Percent of Bonds Retired That Year

Appendix F Vermont Estimated Environmental Financial
Assistance Need
Page 2 _______________________________________________
Engineering Interest Free Loans! 10 VSA 1593
Cony. to Grant
Treatment Facilities 35% Grants or 100% 10 VSA 1625 $ 36.0 Million
Loans 24 VSA 4754
CSO Projects 50% Loans/25% Grants 10 VSA 1624 $120.0 Million
24 VSA 4754
Job Zone Projects 50% Loans /50% Grants 10 VSA 1625
Engineering Interest Free Loans! 10 VSA 1593
Cony, to Grants
Treatment/Trans. 35% Grants or 100% 10 VSA 1624 $120.0 Million
Loans 24 VSA 4754
Regional Planning/Eng. 100% Grants 10 VSA 6603b $ 12.0 Million
Minor Munic. Facilities 40% Grants or 100% 10 VSA 6603c $ 10.0 Million
Grants 10 VSA 6603f
24 VSA 4754
Major Munic. Facilities 100% Loans 10 VSA 6603c $80.0 Million
Closures 100% Grants 10 VSA 6618 $ 38.0 Million
Recycle/Waste Reduction 100% State effort 10 VSA 6618 $ 10.0 Million
Municipal Assistance 25% Grants 10 VSA 922 $ 0.2 Million
State Projects 50% State Effort 10 VSA 922 $ 2.8 Million
CWA 314
Cleanup Projects 100% State after $IOK 10 VSA 1941 $ 30.0 Million
Replacement Loans 100% Loans 10 VSA 1944 $ 1.0 Million
Emergency Spill Cleanup 100% State effort 10 VSA 1941
Emergency Spill Cleanup 100% State effort 10 VSA 1283
Superfund Match 50% non-Fed. Match CERCLA $20.0 Million
Dept. Owned/Flood 100% State effort Agreements w/ $ 1.0 Million
Control Corps. of Eng.
TOTAL $481.0 Million

Appendix F Vermont:
Dedicated Revenue Estimate
Page 3
Source of Revenue Millions
Gas Tax 1 cent/gallon $3.0/year
Hazardous Waste Generation $0.4/year
Tax 7 cents/gallon or 9 cents/lb.
Petroleum Tank Assessment $0.4/year
Solid Waste Tipping Fee $1.5/year
$2.40/cy or $6.00/ton
Transportation Funds $0.37/year
Yearly Total $ 5.67
10 Year Total $56.7 mu

Appendix F
(Page 4)
Aquatic Nuisance Control ($3 Million)
Underground Storage Tanks ($31 Million)
Hazardous Waste Superfurtd ($20 Million)
Dam Maintenance ($1 Million)
$150 Million
Solid/Hazardous Wastes
$120 Million
$156 Million
Municipal Water Supply
Municipal Pollution Control
400 —
300 —
200 —
100 —
Source: Department of Environmental Conservation (12/88)

Appendix F
(Page 5)
Local & Private Funds
Federal Programs
> Vermont Statute Commits to $265 Million
State Funds
Tipping Fee Gen & Transportation Funds
Gas Tax UST Tax Haz Waste Generator Tax
$165 Million
$51 Million
400 —
300 —
200 —
100 —
$208.3 Million
Source: Department of Environmental Conservation (12/88)

1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995
Appendix i:
(Page 6)
• PC, WS, SW Only
• $13M Surplus
• Projected
Source: Department of Environmental Conservation (12/88)

Appendix G Rural Community Assistance Programs -
Progress in FY 88-89
Page 1 _____________________________________________
Southeast Rural Community
Assistance Program 201 communities $36.307 million
Rural Community Assistance
Corporation 112 communities $8.2 million
New England Rural Community
Assistance Corporation 72 communities $ 2.786 million
Midwest Assistance Program 120 communities $ 6.634 million
Great Lakes Rural Network 100 communities $78.0 million
Community Resource Group 99 communities $4.0 million

Appendix G Rural Community Assistance Programs
Resources and Assistance for Small Systems
Page 2 ________________________________________________
Fairfield, Vermont New England RCAP worked with the community on negotiating an
agreement with the Vermont Department of Environmental Conser-
vation to perform the preliminary engineering study for their new
system. Saving the community between $15,000 and $20,000.
Geiger, Alabama Community Resources Group (RCAP agency) obtained an agreement
from the ChemWaste Corporation to dig the trenches and construct
the mounds for Geiger’s on-site wastewater system. Firm agreed to
donate $40,000 in labor and equipment toward the completion of this
Deer, Arkansas Community Resources Group worked with the community on obtain-
ing the services of a local geology professor to perform resistivity tests
at no charge. The community was able to drill a well at a depth of 200
feet instead of 2,500 feet. The estimated cost for drilling a well at 200
feet was $15,000 versus $150,000 for drilling at 2,500 feet. Saving the
community $135,000.
Mapleton, Oregon A 1975 engineering estimate projected the cost for Mapleton’s sewer
project at $1.0 million. The community had to forego the project
because they could not afford it. Western RCAP engineer provided
the community with a second preliminary engineering estimate for a
treatment system with a proposed cost $450,000 - $500,000. The
WRCAP’s field agency assisted the community in obtaining the fi-
nancing for the project with Community Development Block Grant
funds and their local share. They will break ground in March, 1989.
The cost of Mapleton’s wastewater system is $500,000 less than the
original estimate.

Appendix G Rural Community Assistance Corporation
Cost Savings - At the Local Level
Page 3
Cindy Mann
Community Housing Improvement Program, Western RCAP
Chico, California
Water and wastewater problems in small, unincorporated areas often
go unattended due to resource constraints at the local levels of gov-
ernment. Residents who volunteer their time lack the expertise to
initiate and maintain ongoing efforts to solve water quality problems.
Using technical assistance funds are a cost-effective option that states
can use to address public health problems in small, rural communi-
Gerber - Surfacing effluent threatened the health of residents in the low-in-
A Case Study come community of Gerber in Tehama County, California (population
970). The problem is being addressed through the provision of techni-
cal assistance funds for ongoing project development services. The
Western Rural Community Assistance program field agency, Commu-
nity Housing Improvement Program (CHIP) is working with the
Background Gerber-Las Flores Community Services District and Tehama County
to: apply for state funding to conduct a pollution study; prepare a
facilities plan; develop an environmental impact report, and the plans
and specifications for a conventional gravity sewage collection sys-
tem, treatment plant, and land application system. CHIP prepared all
funding applications, acted as a liaison to obtain loan/grant funds,
ensured compliance with state and federal regultions, hired engineers
and legal counsel as needed, established and maintained record keep-
ing systems for audits, and provided all other assistance critical to the
successful implementation of project activities.
In this instance, Gerber is benefitting from these services at little or no
cost to the low-income residents. The median income in Gerber is
$11,500. Over the life of a project like Gerber, this translates to a
substantial savings to the residents in monthly user fees. This also
results in lower costs of the project and makes additional funding
available for others.
As part of the Western RCAP network, CHIP is able to provide man-
agement and technical assistance at a substantially lower cost than
for-profit firms. Rural Community Assistance Corporation (RCAC)
provided funds and assistance through the Western RCAP to CHIP
for this project. From 1985 through 1988, CHIP has received $21,600

in funding to provide technical assistance in Gerber. CHIP services
cost $20 per hour, plus travel. In comparison, the fee a consulting firm
would charge the community may range from $45 per hour to $75 per
At the billed rate of $20 per hour, the 1,078 total hours of CHIP’s
services resulted in a savings of nearly $59,291. The following figures
explain how this savings is computed.
1985 $ 7,459 State Facilities and Technical Assistance Funds
1985 3,000 RCAC’s Western RCAP Funds
1986 6,600 California Rural Development Assistance Program
1986 2,000 RCAC’s Western RCAP Funds
1987 2,500 RCAC’s Western RCAP Funds
TOTAL $21,559
$21,599 divided by $20/hr = 1,080 hours CHIP Services
1,078 hrs X $75/hr = $80,850 private consulting fee minus $21,559
(CHIP’s fee) equals a
TOTAL SAVINGS to date of $59,291.
CHIP anticipates that there will be an additional $40,000 saved in the
construction phase for a total project savings of $99,291.

Appendix G Rural Community Assistance
Program Agencies
Page 4 _______________________________
Community Resource Group
2705 Chapman Road
Springdale, Arkansas 72764
(501) 756-2900
John Squires, Executive Director and RCAP Director
Great Lakes Rural Network
A WSOS Community Action Commission Program
109 South Front Street
Box 568
Freemont, Ohio 43420
(419) 334-8911
Oroville Burch, RCAP Director
Don Stricker, WSOS Chief Executive Director
Midwest Assistance Program
318 East Main
Box 81
New Prague, Minnesota 56071
(612) 758-4334
Ken Bruzelius, Executive Director
Northeast Rural Community Assistance Program
A Rural Housing Improvement Program
Box 370
Winchendon, Massachusetts 01475
(508) 297-1376
Earnie Baresh, RHI Executive Director
John McCarthy, RCAP Director
Rural Community Assistance Corporation
2125 19th Street, Suite 203
Sacramento, California 95818
(916) 447-2854
William French, Executive Director
Elizabeth Ytell, RCAP Director
Southeast Rural Community Assistance Program
A Virginia Water Project Program
Box 2868
Roanoke, Virginia 24001
(703) 345-6781
Wilma Warren, Executive Director
107 Jackson Hall, RCAP Director

Appendix H New York Technical Assistance Program
Page 1
Self-Help Partnership
The Renssealerville Institute
NYS Department of State
NYS Department of Health
NYS Department of Environmental Conservation
The Ford Foundation

Appendix H New York Technical Assistance Program
Page 2
• Target - Small communities (<1000)
• Requirements - Local initiative and determination
• Method - Guidance to locals (technical/managerial)
• Goal - Cost savings (at least 30%)
• Result - Makes projects possible
• Benefits - Community pride
- Enhanced state/local relationship

Appendix H Innovation in Government
Page 3
- In the Bureaucracy
- Locally

Appendix H NYS Self-Help Support System
Chronology of Implmentation
Page 4 _____________________________________
Spring 1984
Workshop introduces concept
Fall 1984
2-day workshop to develop implementation strategy
Late Fall 1984
Commissioners commit to concept
Winter 1985
Pilot projects selected
Spring 1985
Pilot project in work plan
Workshops for field staff
Fall 1985
Prop. to Ford Foundation
2nd round workshops for field staff
Spring 1986
Ford loan to TRI
2-day workshop with program directors
Self-Help in work plan (1 person yr.)
Summer 1986
Presentation to EPA
Fall 1986
Loan Review Committee formed
Summer 1987
Construction starts on Pilot Project
Fall 1987
Regional workshops
Program staff doubled from I to 2
Spring 1988
Program staff increased to 10

Appendix H Self-Help Support Section
Page 5
Central Office: (7 filled before budget freeze)
Section Chief
3 Engineers
Environmental Specialist
Senior Account Clerk
Keyboard Specialist
Regional Staff:
1 each in Regions 5,6 & 8

Appendix H Hamlet of Seward, New York
Cost Savings Techniques: Planning
Page 6
Sanitary Survey County Health -0-
Soils Testing County Backhoe 4-
SCS Geologist
Treatment DEC/Sewer -0-
Alternatives Committee
District Tax Maps -0-
Surveying Resident -0-
Environmental Local Official -0-
Assessment W/DEC
Archaeology Local $300
Sewer District Residents Petition; $500
Formation Attorney Review

Appendix H Hamlet of Seward, New York
Cost Savings Techniques: Design
Page 7
Engineering Report Engineer -4 pages $2,500
Design and Plans Engineer $4,500
Materials List Residents Prepared -0-
User Charge System and Local Official -0-
Sewer Use Ordinance w/DEC
Easements Residents $ 100
Treatment Site Land Donated -0-

Appendix H Hamlet of Seward, New York
Cost Savings Techniques: Construction
Page 8
Access Road Highway Crew $ 500
Pipe Bedding Town Highway $ 250
Sand Crew Hauled
Sand and Bid; Handled by $ 6,000b
Gravel County Truck
Construction Comparison Shop $32,084b
Materials Bid
Construction Town Gradeall $12,800
Equipment Purchased Backhoe
Bulldozer Donated
by Local Official
Construction Town Crew, a
Engineer Trains
Highway DOT Assistance a
Lawn Residents -0-
Recordingkeeping Local Official -0-
a Final Cost Unknown - Project Under Construction
b Cost to Date - Final Cost Unknown

Appendix H Financing the Seward Project
Page 9
PROJECT COST: $165,000
Short Term Financing:
State Grant - $60,000
Self-Help Loan - 100,000,3 yrs. @ 0.5%
BAN’s - 5,000, 3 yrs. @ 5.0%
Long Term Financing:
Balance - Bonds @ 8% for 20 yrs.
SRF @ 5.33% for 20 yrs.

Appendix H Seward Project Costs
Page 10
1985 Construdion Grants Estimate: $530,000
1987/88 Self-Help Project:
Planning $ 800
Design 7,000
Construction 157,000
TOTAL $165,000

Appendix H Loan Repayments
Page 11
U Begins prior to beneficial use
U Yearslthru3:
$9,150 = $208/yr/user
U Estimated balance to bonds: $79,620
U Years 4 thru 24:
Bonds (8%) $9,555 = $217/yr/user
SRF (5.33%) $7,429 = $169/yr/user
I 19

Appendix H Total User Charges
0 & M cost estimate:
$1,433 = $33/yr/home
Year 1 (capital only)
Years 2 & 3
Years 4 thru 24
$250/yr/user (bonds)
$202/yr/user (SRF)
Traditional financing:
(no grants or loans)

Appendix H
Page 13
“I never thought I could trust or respect a DEC representa-
tive, but after the Self-Help experience, I’m grateful to that
person. I didn’t get a dime of money, but I did get assis-
tance encouraging me to work harder for my community.”
Carl Barbic
Town of Seward