AUG - 2 2006
bFA Headquarters Library
Room 3340 EPA West Building
MC: 3404T
Washington, DC 20460
Dear Sir/Madam-
Enclosed are two copies of the Environmental Financial Advisory Board's (an
EPA Federal Advisory Committee), report titled, "Combined Operations of the Clean
Water and Drinking Water State Revolving Loan Fund (SRFs)" for your records. If you
have any questions, please call me at 202-564-5186
Internet Address (URL) • http //www epa gov
Recycled/Recyclable • Printed with Vegetable Oil Based Inks on 100% Postconsumer, Process Chlonne Free Recycled Paper
Vanessa Y. Bowie, Director
Environmental Finance Staff

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June 12, 2006
Honorable Benjamin Grumbles
Assistant Administrator for Water
U.S. Environmental Protection Agency
1200 Pennsylvania Avenue NW.
Washington, DC 20460
Dear Mr. Grumbles-
As you suggested in your letter of July 21,2005, members of the Combined
Operations Workgroup of the Environmental Financial Advisory Board (EFAB)
presented our advisory paper on joint Clean Water and Drinking Water State
Revolving Fund (SRF) operations to the State/EPA Work Group on November 2,
2005, in Chicago. Your office had forwarded the paper to the Work Group for
comment, and we appreciated the opportunity to meet with them to present the
results of the Board's work.
Following the presentation, a lively discussion ensued. The majority of the
Work Group found merit in the concept as set out in the advisory paper
Specifically, the Work Group adopted a motion that EPA " undertake an
examination of what opportunities and advantages exist across a broad array of
alternatives for combined SRF operations, including but not limited, to the
combination of both funds into one single fund "
Many States at the Work Group meeting reported that they have found
benefits and efficiencies through combining some aspects of fund operations. The
Board is gratified by the positive action of the Work Group and strongly reaffirms
its view that there are significant benefits to be achieved by moving, however
incrementally, toward joint operations of the two SRF programs. The potential for
these efficiencies is even more important given the reduced capitalization
contributions for the two programs in recent years and because budget constraints
nave become more apparent throughout the federal government.
We appreciate that questions, and some apprehension, remain about the
concept of coiT.Vinmg opeiat'ons. As we acknowledged m our-Adviso;y, we
believe that this area would benefit from a more intensive analysis that goes beyond
ihftanecdotal e\ idence provided in the EFAB report. We concur with the State/
EPA Work Group recommendation that EPA undertake an in-depth study of
potential benefits cf combining certain aspects of the operations of the two loan
.pregrants, and to the cAtent possible, attempt to quantify them. Such an analysis
should also strive to explicitly address the real or perceived barriers to combining

Providing Advice on "how To Pay" for Environmental Protection

Ideally, the analysis would be undertaken by a neutral organisation chosen
by EPA with a reputation for analytical skill and objectivity, and would proceed
with the active input of the State/EPA Workgroup Ultimately, we hope the study
would desenbe and quantify the financial implications of joint State Revolving
Fund operations in the areas of fund investment, management, leveraging,
accounting and reporting, loan generation, loan monitoring, legal review and other
aieas EPA and the States consider important.
Thank you again for your referral to the State/EPA Workgroup and for your
continued interest in this important area EFAB continues to strongly support the
concept that potential benefits and efficiencies could accrue from the expanded use
of combined operations We would be pleased to lend our expertise to support
efforts to promote combined operations in any way you think useful
A Stanley Meiburg
Executive Director
cc James Hanlon, Office of Wastewater Management
Cynthia Dougherty, Office of Drinking Water and Ground Water
Lyons Gray, Chief Financial Officer