U.S. ENVIRONMENTAL PROTECTION AGENCY
ENVIRONMENTAL FINANCIAL ADVISORY BOARD
May 13 -14, 2014
Held at the
Potomac Yard Conferencing Facility
Arlington, Virginia
EPA-190-S-14-003
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Environmental Finance Advisory Board (EFAB)
May 13 - 14, 2014
Contents
May 13, 2014
Introductions and Opening Remarks 3
The Council on Environmental Quality's Engagement in Water Infrastructure 5
Report Out: Transit-Oriented Development Final Report 9
Report Out: Leveraging Technology and Finance 10
May 14, 2014
Environmental Finance Center Network Update 12
Report Out: Improving Compliance at Small Water Systems in Puerto Rico/
Pacific Island Territories 13
Report Out: Financial Capability Analysis Guidance 13
Report Out: Funding/Financing Legacy O&M Costs at Green Infrastructure, Brownfields
and Superfund Sites 15
Report Out: Financing Small Community/Rural Brownfields Sites Remediation 16
General Discussion and Next Steps 17
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Environmental Finance Advisory Board (EFAB)
May 13 - 14, 2014
Tuesday, May 13, 2014
Introductions and Opening Remarks
Mike Shapiro, EFAB Designated Federal Official (DFO)
Karen Massey, EFAB Meeting Chair
Maryann Froehlich, Acting Chief Financial Officer
With shrinking budgets for infrastructure and tighter pockets across federal agencies, the appetite
for finding creative ways to improve programs while leveraging resources has grown in the policy
realm. In light of today's challenges, members of the Environmental Financial Advisory Board
(EFAB) convened for their spring meeting May 13-14, 2014, to welcome new members, discuss
pending and ongoing projects, and identify innovative, cost-effective ways to protect the
environment.
EFAB Chair Karen Massey opened the meeting at 1:30 p.m. Mike Shapiro, EFAB's Designated
Federal Official, followed up with additional comments, noting that the new members have jumped
right into their work-group assignments with energy and excitement. Mr. Shapiro concluded by
inviting all participants to give brief introductions.
Maryann Froehlich, the Acting Chief Financial Officer for the Environmental Protection Agency
(EPA), highlighted the critical work of the board in her welcoming remarks. Board members have
thought creatively about environmental finance and about how to pay for environmental protection.
As federal, state and tribal resources become increasingly constrained, helping communities find
ways to pay for environmental protection will be key.
The recently finalized FY 2014-2018 EPA Strategic Plan gives all EFAB members a blueprint of
the direction the agency will take during the next few years. The plan, which has a strong focus on
communities, outlines priority areas for agency work within EPA Administrator Gina McCarthy's
theme:
• Making a visible difference in communities across the country;
• Addressing climate change and improving air quality;
• Taking action on toxics and chemical safety;
• Protecting waters;
• Launching a new era of state, tribal, and local partnerships;
• Embracing EPA as a high-performing organization; and
• Working toward a sustainable future.
Cross-agency strategies in the Strategic Plan focus on:
• Working toward a sustainable future;
• Working to make a visible difference in communities;
• Launching a new era of state, tribal, local, and international partnerships; and
• Embracing EPA as a high-performing organization.
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Environmental Finance Advisory Board (EFAB)
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Ms. Froehlich said that EFAB's work should focus through this lens. EPA's strategies also line up
with EFAB's current project list.
The FY 2014 enacted budget is at $8.2 billion, which is $300 million above what the agency
received at the FY 2013 enacted level, a sequestration year. The budget provides $2.4 billion for the
combined state revolving fund (SRF) for clean water and drinking water, which is about $119
million above the FY 2013 enacted. $1 billion out of the budget will go toward categorical grants.
The budget also provides $65 million for Tribal grants. Ms. Froehlich noted that the increase for
Tribal general assistance grants has been going up steadily.
The budget also includes $415 million for geographic programs, a $28 million increase from the
enacted FY 2013 budget. That amount includes $300 million for the great lakes and $70 million for
the Chesapeake Bay.
Congress must now act on the President's FY 2015 budget request for $7.89 billion. The agency
hopes to have a real bill by October 1, instead of a continuing resolution or an omnibus bill.
Seeking to reduce the threat from climate change, EPA's request for climate change and air quality
was more than $1 billion. It designates almost $200 million specifically for climate change work.
The budget also requested $673 million to support chemical safety for all Americans, especially
children. The request for revolving loan funds was at $1.775 billion for the combined clean water
and drinking water state revolving funds. It is a bit down from the current enacted level, said Ms.
Froehlich. The FY 2015 budget proposal also requested $1.33 billion to continue approaches for
cleanup under RCRA Superfund, leaking underground storage tanks and brownfields. This will
ensure land returns to beneficial use.
The request for tribal general assistance grants of $96 million is an increase from the $65 million in
the FY 2014 enacted budget. Unfortunately the Environmental Finance Center grants have been
decreasing over time. That doesn't reflect on the importance of the work; instead, it is simply a
result of the circumstances and choices EPA has to make.
Questions and Answers
PhilJohnson asked if the strategic plan gives consideration to the impact of climate change in
relationship to coastal cities. Given Hurricane Sandy and a recent storm that drowned low-income
communities in Pensacola, Florida, and Mobile, Alabama, the reinvestment issues that coastal cities
face are enormous. Private sector involvement will play a critical role in getting coastal cities
prepared for climate change.
Ms. Froehlich said the EPA is working on how communities adapt to the changing climate. There's
growing interest in finding out how wastewater treatment facilities and other utilities can withstand
major weather events.
Mr. Shapiro added that the Office of Water has developed some tools that utilities can use to assess
their vulnerability and identify actions they can take to increase resilience.
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Environmental Finance Advisory Board (EFAB)
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Going forward, EPA seeks to incorporate resilience considerations into the general guidance
provided for SRF programs. The federal government also continues to look for ways to coordinate
all agencies, such as the Department of Transportation and Department of Energy, as well as state
and local governments to provide tools and assistance in a smart way.
Eustace Uku asked about strategies for establishing consensus about climate change even though
doubters remain in key leadership positions. Despite the naysayers, EPA makes its decisions on the
basis of science, said Ms. Froehlich, and the agency will continue to look at mitigation and
adaptation as part of its efforts to slow the extent of climate change.
In response to a question from Heather Himmelberger, Mr. Shapiro said the SRFs faced cuts due to
the hard choices the agency has to make between a dollar for infrastructure or a dollar to pay the
salaries of EPA inspectors. The revolving funds have been essential to making progress in drinking
water and clean water but those funds have to fit within other needs.
Returning to the topic of climate change, Suzanne Kim asked what percentage of the $1 billon
targeted in 2015 toward climate change will go toward actually mitigating climate change versus
mitigating against the effects of climate change. Ms. Froehlich said the $1 billion is for climate
change and air quality, so about $200 million will go for climate change. Ms. Froehlich further said
that, while numbers were not available during the meeting, the mitigation at this point is related to
rule makings that are going on for reducing greenhouse gasses in power plants.
Action Items
• Mr. Shapiro noted that EFAB will pursue another project with the Office of Air and
Radiation after the spring meeting.
• Ms. Massey introduced another mini-project: developing a summary of a green infrastructure
report submitted to the Office of Wastewater Management following the December meeting.
Former DFO Vanessa Bowie will send EFAB members the link to the report via e-mail.
Interested members can schedule a conference call to boil the report down to a one- to
two-page summary of actionable items.
• As part of this effort, members could consider reviewing a number of past projects to
identify other green infrastructure opportunities and writing a paragraph or two of practical
advice based on the reports.
The Council on Environmental Quality's Engagement in Water Infrastructure Financing
David Wilkinson, Senior Policy Advisor for Social Finance and Innovation, White House Council
on Environmental Quality
Chitra Kumar, Deputy Associate Director for Water, White House Council on Environmental
Quality
The idea of innovative finance around water infrastructure has been of great interest lately, said
Chitra Kumar, Deputy Associate Director for Water in the White House Council on Environmental
Quality.
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Environmental Finance Advisory Board (EFAB)
May 13 - 14, 2014
CEQ and a number of other components of the White House, including the National Economic
Council and the Council on Economic Affairs, seek to identify policy levers to provide more
opportunities for private finance in water infrastructure. These efforts follow in the footsteps of
opportunities leaders have taken in the transportation realm and other infrastructure investments.
CEQ continues to talk to experts such as EFAB board members to identify such opportunities.
CEQ staff also have been involved with the administration's transportation reauthorization package,
for example, in an effort to connect to a large pot of infrastructure funds that can benefit
environmental purposes. Ms. Kumar highlighted a few areas where CEQ succeeded in getting some
environmental language, specifically with a stormwater and/or climate resilience focus, into the
administration's proposal:
• Formula funding programs: CEQ included some language that requires states and
metropolitan planning organizations (MPOs) to complete a transportation resilience
assessment as a part of their mandated planning process. CEQ also got some language about
considering stormwater planning through those planning processes and added green
stormwater infrastructure as an approved use of funding in a number of places, including
environmental restoration funding, eligibility under the surface transportation program and
permitting green stormwater infrastructure to replace more traditional transportation-related
stormwater infrastructure.
Green stormwater planning can also be an eligible activity with safety improvements.
Getting the Department of Transportation to identify green stormwater solutions as a way to
increase safety is meaningful because it puts the issue of water on that Department's radar.
Such language clarifies the intent in the formula funding programs.
• Competitive grants: The proposal continues the TIGER grants and includes a Race to the
Top type of program called FAST, Fixing and Accelerating Surface Transportation. Both
programs include stormwater and green infrastructure/environmental considerations as a
ranking criteria. Further, the TIGER Notice of Funding Availability that went out and just
closed recently provided $600 million. That NOFA included some ranking criteria around
resilience and stormwater funding for their planning grants. That is 2014 money that is
totally independent of the new authorization. This is an example of a pot of money others
can use for environmental purposes.
Various components of the White House also have focused on how to do a better a job of valuing
ecosystem services or environmental benefits of water and other environmental goods such that it
can influence financial decisions. This builds off of a 2011 report on the importance of ecosystem
service valuation from the President's Council of Advisors on Science and Technology.
Focus on ecosystem services also builds on Principles and Requirements for water investments and
work under the Sandy Rebuilding Task Force strategies. The Sandy work group is looking at green
infrastructure valuation broadly (not just stormwater but large landscape scale/natural infrastructure)
to advance the ball in the area of valuation techniques to provide more tools for local communities,
government decision makers and practitioners.
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Environmental Finance Advisory Board (EFAB)
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David Wilkinson further discussed this topic, noting that current accounting practice doesn't
adequately value natural infrastructure as an economic asset on the books of utilities or other
government entities.
Seattle, for example, spent a modest sum at the turn of the century to buy acres of land, which today
is worth vastly more dollars. But on its books, Seattle must still value that land at the original level
due to accounting board rules. Valuing an asset at a low level creates difficulty in trying to justify
bonding to maintain the land.
Mr. Wilkinson also highlighted these concepts:
• A January EFAB report recommending expanding SRF guarantee authority resources by
using excess credit capacity — excess guarantees or recycled fund asset turnover resources
that may be on books or flow/average cash balances. These can supplement current uses of
SRFs to advance green stormwater infrastructure and other innovations such as those
addressing water scarcity.
Mr. Wilkinson recommended turning the 30-page report into a two-pager and taking it from
a concept to an implementation strategy by identifying which states have the authority,
technical capacity, balance sheet, and interest to do this and estimating the kind of scale
required to pilot something like this.
• Pay for Success Strategies: Similar to pay for performance, this strategy pays for outcomes,
encouraging governments to attempt innovative ideas that might otherwise seem risky.
These strategies typically involve private finance or philanthropy. Pay for Success includes
many possible applications in the context of green stormwater infrastructure. Pay for
Success in the transportation bill will help fund water installations. This strategy also is
called for in the Sandy CDBG guidance, which all states can use. New York, as part of a
$650 million pot, is applying Pay for Success strategies for nitrogen remediation and other
stormwater solutions.
Other ideas included:
• Private activity bonds;
• Long-term financing to match financing with asset expected asset lifecycles through
"century bonds;"
• Using SRFs as takeout financing, a strategy Onondaga County, New York, is using;
• Stormwater credit trading, a promising new tactic being deployed in Washington, DC; and
• Commercial PACE strategies that allow water solutions on private property to be financed in
connection with a tax assessment, which can encourage owners today to implement solutions
knowing that even if they don't own the property forever - the cost will be connected to the
property rather than the specific entity that makes the solution at the time, for solutions that
may pay off over years, which is relevant for water-conservation strategies.
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Environmental Finance Advisory Board (EFAB)
May 13 - 14, 2014
EFAB board members suggest the White House should pay attention to these issues:
• City officials in small cities and towns may not have the training and know-how to leverage
Pay for Success and other innovative strategies. Mr. Johnson recommended setting vehicles
in place to promote conversations between the private sector financing entities and public
officials. Mr. Wilkinson said specific efforts are under way to help in this area, including the
recent West Coast Infrastructure Exchange, which lines up deal flow for infrastructure
transactions and financiers who seeks to fund those transactions. The exchange also wants to
help small or medium-size cities collaborate.
• Ms. Himmelberger noted that the pay for performance idea may work well at the beginning,
but maintenance and upgrades must continue. In the long term, problems can occur when
cities own the stormwater infrastructure but another entity manages it.
• Ms. Himmelberger also pointed out that jobs in water typically don't face outsourcing to
other countries. The next goal is to figure out how to value water enough to turn that work
into high-paying jobs in small communities.
• Vernice Travis-Miller asked about elevating the concern about communities that still don't
have indoor plumbing. As cities and agencies discuss fixing and repairing infrastructure,
some communities have never received infrastructure, typically as a result of historic
segregation. Further, new development often gets infrastructure faster than existing,
low-income Tribal or communities of color.
Questions and Answers
Thomas Liu asked about a federal program Water Infrastructure Finance and Innovation Act
(WIFIA) that would provide low-cost funding or guarantees for qualified water-financing projects.
Where does the White House stand with this program?
Ms. Kumar said the Administration is on the record as not supporting WIFIA for a couple of
reasons, including that prior versions of the program have been incompatible with the SRFs.
Further, the administration had a proposal for a national infrastructure bank. Mr. Liu noted the
dollars for the national infrastructure bank are limited, and water projects can't compete against
projects for transportation, bridges and schools. Ms. Kumar responded to that as new information
and said others argue that water infrastructure could be more cost-effective if it were in tandem with
other infrastructure improvements, so having an infrastructure bank could facilitate cross-sector
collaboration.
Comments about valuing ecosystems raises significant concerns about valuing assets at something
other than original cost for purposes of securing debt, said Rick Giardina. Ms. Kumar recommended
developing a group that looks at these issues and determines the right solution because the issue
deserves some attention.
Marie De La Parra wondered about the possibility of working with or commenting on a White
House pilot program regarding greenhouse gas reductions. In addition, the focus on climate change
issues seems to offer no guidance on how cities can really work more collaboratively. Many of the
cities in California don't have strategic plans, and one isn't in place statewide. Mr. Wilkinson said
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Environmental Finance Advisory Board (EFAB)
May 13 - 14, 2014
the West Coast Infrastructure Exchange, a partnership between the governments of Oregon,
Washington, British Columbia and California, primarily focuses on infrastructure.
Lisa Daniel reminded the panelists and members of the tried-and-true successful programs, such as
state revolving funds. Policy decisions should focus on how to loosen the constraints on SRFs.
Further, bureaucracy often keeps innovative ideas from becoming reality. Cities must learn to shift
their focus from cost to value and from compliance and outputs to success and outcomes. Protecting
what's in place is important, said Mr. Wilkinson. However, new solutions are necessary when
ongoing programs face threats from policymakers.
Report Out: Transit-Oriented Development Final Report
Philip Johnson, EFAB Work Group Chair
After a couple years of work, the transit-oriented work group has brought this process to closure in a
good way, said Mr. Johnson. The work included numerous conference calls, collaborative meetings
and a great deal of effort.
Group members initially planned to work with the Office of Policy and Sustainable Communities in
looking at the notion of transited-oriented development in terms of the charge presented to the group
around four different communities: Salt Lake City, Denver, Chicago and Atlanta. These four
communities had done a significant amount of work and planning but couldn't finance the
infrastructure for transit-oriented development.
Atlanta, for example, faced a major task of trying to expand MART A, which runs north and south
of Atlanta, to running east and west, and the use of an existing old rail line circling the city. The
agency brought in a consultant and looked at a variety of ways to come up with a toolbox and other
strategies to finance the development.
The work group sought to uncover the impediments and the barriers that stood in the way of these
communities. After some discussion, members brought together a group of experts, developers and
transit officials from around the country into a daylong workshop. During this event, work-group
members attempted to learn whether communities had conducted adequate planning or created a
development strategy for multi-station systems.
Work group members also sought to answer such questions as these:
• What were assets? Amenities typically part of a sustainable community, such as land, bike
paths, walking paths and green spaces weren't necessarily assets in terms of infrastructure;
• How can private sector financing get involved? A second roundtable discussion brought
together a number of private sector financing entities such as the Unilabor Life Insurance
Company as well as EPA staff; and
• What are the missing components? Members decided the four areas needed the involvement
of the private sector.
The final report presented to EFAB concludes that private sector involvement and public-private
partnerships (P3s) were the missing link in the consultant's report prepared for the Office of Policy.
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Work-group members provided a succinct and precisely written summary to bring the work to
closure. Although the group ran into issues and delays due to sequestration, members believe the
time devoted to the project was well-spent and successful.
Ms. Bowie submitted a form for concurrence so that the report can go to the agency.
EFAB staff member TimMcProuty committed to sending all board members a summary of the
workshop and the roundtable as well as the prior P3 report done by EFAB referenced in the
work-group's report.
Report Out: Leveraging Technology and Finance
Chiara Trabucchi and Bill Cobb, EFAB Work Group Co-Chairs
This project seeks to take a look at the interaction of technology and finance in environmental
issues. The Office of Research and Development has the primary interest in this topic. Research and
Development sent the group a market-stimulation challenge around the development of a nutrient
sensor. Nutrients in surface water pose a significant contamination problem, but current technology
is pricey. The challenge: How do you make something more affordable for a broad-scale
application? ORD would like something that costs less than $5,000 that is completed in less than
three years.
Mr. Cobb and Co-chair Chiara Trabucchi have discussed the project but the work group has not had
a chance to convene. Ms. Bowie added that an initial conference call took place with OCFO, which
has done some limited technology work in the past year. The Office of Water submitted a
framework on technology that its staff members are developing. The EFAB work group must meet
and determine what the charge is actually going to be.
During the EFAB board discussion, Tracy Mehan said this type of discrete project should offer a
prize to stimulate interest. Ms. Himmelberger suggested the traditional academic model of bringing
competitive organizations together to collaborate on a solution. Mr. Cobb said that this is a
wide-open discussion on a project in its infancy. Interested board members are welcome to get
involved in further conversations.
Questions to Consider
• Is there a way to bring money to bear to create a solution?
• Is there enough interest among the board to create a working group to be able to work with
this issue?
• What is EFAB's role in this particular issue?
• How does it fit within the board's mission statement?
Action Item
• Ms. Trabucchi hopes to pitch the project to the Office of Air and other areas to gauge further
interest.
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May 13 - 14, 2014
Mr. Shapiro adjourned the day's session at 4:30 PM. The EFAB meeting continued on Wednesday,
May 14th.
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May 13 - 14, 2014
Wednesday, May 14, 2014
Environmental Finance Center Network Update
Lauren Heberle, Director, EFC at the University of Louisville
Ms. Heberle began the second day of the EFAB meeting with a discussion of the Environmental
Finance Center Network projects as well as future ideas and challenges. Following her brief
remarks, Ms. Heberle asked Ms. Himmelberger, the longest-standing director of the EFC, to set the
stage for the conversation.
EFCs began in 1992 at the University of New Mexico. EPA created the sites to fill in the gap
between the regulators and regulated communities, providing assistance in coming up with
innovative ways to address local challenges. Today the 10 centers work at all levels, including EPA
headquarters, EPA regions, the states, both regulatory and funding agencies, and local governments.
The centers cover the entire environmental arena: water, stormwater, wastewater, brownfields, solid
waste, smart growth, climate change and more.
Ms. Heberle added that the network is unique because it is university-based, which provides access
to students, faculty members and other technical-assistance resources. EFCs can also reach out to
each other for follow up or additional grants/technical assistance.
Joanne Throwe highlighted the activities of the Environmental Finance Center at the University of
Maryland, which covers EPA's mid-Atlantic region. The EFC addresses Chesapeake Bay activities,
covering stormwater, agriculture and land preservation. The Maryland EFC has a staff of 12 with
support from 12 graduate students. EFC staff have also incorporated classroom activities into some
projects to allow students to work on some community efforts. The EFC continues to welcome new
opportunities.
Angela Buzzard, directs the Region 7 EFC, now in its fifth year of operation. This region covers
Kansas, Missouri, Nebraska and Iowa. Ms. Buzzard noted some other nontraditional EFC projects
within the Network, including:
• An oil company recently hired an EFC to look at compliance with drinking water systems on
their oil platforms in the Gulf of Mexico;
• Another EFC is assisting the Idaho Department of Environmental Quality in looking at
rulemaking for surface water quality standards in Region 10;
• On the wastewater side, analyzing a variety of community population factors, to determine
community affordability related to additional infrastructure investments. Staff have started in
Nebraska and are now looking in Missouri. As the Midwest sees population decline in rural
communities, what is the ability to pay in looking forward to implementing new regulations
and new infrastructure to maintain that?;
• Stormwater and green infrastructure, following up on a GI summit in New York. Another
summit will occur in Ohio; and
• Providing services to the Idaho Office of Energy, identifying drivers for statewide
acceptance of some recently enacted energy efficiency codes.
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Ms. Heberle also recognized Chris Dodson and Melissa Young, representing Syracuse University.
Syracuse and the University of Maryland have just launched Sustainable Finance International in
partnership with the California contingent EFC.
Due to budget cuts across EPA, EFCs have struggled to maintain their core functions. EPA should
consider its funding of the EFCs as an investment, said Ms. Himmelberger. Every dollar EPA
invests pays off at least three or four times and allows EFCs to provide the innovation that benefits
communities. Without EPA funding, the EFCs will end up much more project-based and less
collaborative. The network will remain strong without funding but may look somewhat different in
the future.
Questions and Answers
• Regarding funding in the future, Mr. Johnson commented on the role the corporate world
can play in support of environmental issues. The EFCs should begin to collaborate and speak
a language with corporate America to replace some of the funding. Corporate America, for
example, needs water as well for manufacturing facilities and other projects. Further,
manufacturing companies may bring jobs, but communities should aggressively ask for
assistance with economic development, water issues or other concerns.
Because EFCs are university centers that seek to remain neutral, they tread carefully with
corporate support, said Ms. Heberle. EFCs, however, do provide leadership training for state
and local governments to empower officials to advocate for their communities when
economic development comes to an area.
Report Out: Improving Compliance at Small Water Systems in Puerto Rico/Pacific Island
Territories
Blanco. Surgeon, EFAB Work Group Chair
The charge of this group is to provide assistance to small systems in Puerto Rico. In their
discussions, group members discovered that the small systems aren't part of the Puerto Rico
Aqueduct and Sewer Authority (PRASA). PRASA manages most of the population when it comes
to people. But other small, private systems exist. The group needs more information on whether the
small systems are private for-profit or private nonprofit.
The project goal is to help the small systems achieve compliance. The systems face issues with
billing and collecting revenues. There is no culture of paying for water. Further, a lot of the
infrastructure consists of just a pipe in the ground from a spring. The area encompasses about 250
systems for over 100,000 people.
The work group has discussed such strategies as creating a management umbrella entity that will
manage all the systems, a regional collaboration that will create a culture of billing and collections
as well as customer service. PRASA could possibly be that entity rather than creating a new
organization. The big question: What is in it for PRASA? Group members continue to brainstorm
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possible incentives. The work group must also determine whether the small systems will respond to
PRASA. The work group has scheduled a conference call on May 21.
Action Items
Members plan to:
• Continue discussions on the structure of the management entity;
• Get more information from the agency that gave the charge. Members would like to see a
map of where the systems are located. PRASA or the management entity could start with a
cluster of systems and build incrementally. Members also want to know about rates,
enforcement actions and ownership of the project;
• Determine the needs as well as the incentives for the non PRASA water systems;
• Find the right leadership in PRASA that is willing to take on this effort;
• Develop a financial plan for how much this effort will cost; and
• Connect with EPA contacts in the region and headquarters who may be familiar with
previous compliance efforts in Puerto Rico. Those contacts can participate in future
conference calls.
Members hope to achieve at least one of these outcomes in time for the fall EFAB meeting and have
a draft of the others.
Questions and Answers
Mr. Giardina said the charge also includes Pacific regions, which lack resources, technology and
expertise. The solution for that region might be vastly different. Ms. Himmelberger said EPA is
happy with a focus on Puerto Rico for now.
Mr. Giardina also asked about taking PRASA's pulse to determine its level of interest. Ms.
Surgeon said the work group would continue to build a structure, develop some bullet-point
incentives and then go in and talk to PRASA. And at the appropriate time, the group can reach out
to Mr. Weiss's senior-level contacts within PRASA and with other PRASA leadership, EPA and
state folks to work with.
Report Out: Financial Capability Analysis Guidance
Tom Liu, EFAB Work Group Chair
The Office of Wastewater Management asked this group for a follow up to a 1997 report on
Combined Sewer Overflows: Guidance for Financial Capability Assessment (FCA) and Schedule
Development. The report talked about the procedure, looking at the impact on residential rate payers
and also the financial capability of the permittee in evaluating indicators in terms of affordability.
Other reports have come out since then, but the office has put in additional information that EPA
should consider. That information is in a draft memo that came out March 4. Work group members
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agree that other factors should weigh into the decision in terms of implementing clean water
requirements.
EPA has asked work-group members to look at three specific questions regarding the March 4
report:
• Discuss the usefulness of each type of additional information that they have identified as
well as potential challenges and concerns with the information.
• Offer recommendations regarding other metrics that may be considered for inclusion as part
of the draft framework.
• Provide recommendations on how this additional information can be used in terms of a
two-part assessment.
Work-group members have spent some time talking to EPA staff about the background of the
assessment framework and clarifying the charge. Members want to get a better understanding of
what more the office is looking for. The group also had lengthy discussions on the original 1997
analysis and EFAB's view on the issue and affordability, especially in economically challenged
communities.
Other topics of discussion include:
• Metrics that rating agencies have used to evaluate the financial strength of a system and
assess affordability issues;
• Recent developments within the industry; and
• Changes in accounting rules that may affect balance sheets and put additional strain on
systems.
Action Items
• An e-mail with potential meeting dates will go out so work group members can reconvene.
• The group will develop a skeleton outline of the topics group members want to discuss. A
report could be ready before the next EFAB meeting if that works for EPA. The report could
go out electronically to get all EFAB members' approval. Ms. Massey encouraged the group
to move the process along without delay.
Questions and Answers
Ms. Tobias posed these questions:
• Are there standardized metrics that are already collected by the rating agencies or in the
context of the municipal bond practice that might be helpful? Mr. Liu said rating agencies do
have more current views. Work group members have access to that information and can add
it into the report;
• Does EPA have a standardized collection format? The March 4 draft report as well as the
1997 document did identify certain metrics. Some of the metrics, for example, were oriented
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toward a system that received general obligation funding, not necessarily revenue backed
funding. Work group members agree they can add more to that - not providing a formula
for EPA but providing additional insights; and
• EPA has raised concerns about the valuation of certain assets. Is there a need to consult with
the appraisal community on that issue? Mr. Liu said he was unsure if that was part of the
group's charge but the group can include that.
Regarding metrics that other ratings agencies produce, Ms. Cregger said they all have rich
repositories of different metrics along which they evaluate systems that are available for free to any
issuer who has a rating with any one of the three rating agencies.
Report Out: Funding/Financing Legacy O&M Costs at Green Infrastructure, Brownfields,
and Superfund Sites
Donna Ducharme, EFAB Work Group Chair
This has been a project in search of a client, said Ms. Ducharme. Although the brownfields office
wasn't interested, other potential clients are on the horizon. A number of regions have expressed
interest in this issue as well. Mr. McProuty has noticed increasing attention to the solid waste issue
regarding what happens beyond 30 years in terms of operations and maintenance.
EPA's Superfund side might be interested because it has a much more long-term involvement with
sites than the brownfields folks. Ms. Travis-Miller mentioned that staff members from the
Superfund Reuse Initiative are always open to more partnerships to get the word out. The Office of
Sustainable Communities also is providing technical assistance around green infrastructure from the
Sustainable Communities Building Blocks technical assistance efforts. Finding a client will help the
work group develop the scope of the project.
In addition to ideas about endowments and trusts, other strategies for funding O&M have emerged
from around the country, including:
• watershed improvement districts;
• financing mechanisms tied to property taxes;
• stormwater assessment districts;
• ecosystem services payments streams; and
• tax credits.
Further, some nonprofits see this issue as an economic development tool in low-income
communities. And as part of new social ventures, businesses would train and employ low-income
residents and use streams of job-training money and other things to help create a favorable cost
structure while achieving other social benefits.
Action Items
• Identify the work group members.
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May 13 - 14, 2014
• Nail down the client and scope the project. Ms. Bowie will contact the Superfund office, the
regions and others mentioned to give Ms. Ducharme a chance to pitch this project.
• Characterize the issues that work group members want to address. Should work group
members focus solely on green infrastructure and use brownfields and superfund as
examples to learn from?
• Determine the magnitude of the costs. What kinds of costs go with which approaches, and
what are the related issues? For instance, how does one value ecosystem services?
• Collect some best practice or emerging case studies that group members can use as an
example.
• Ms. Bowie will e-mail information to the entire EFAB board regarding the work group's
client and scope of project.
Questions and Answers
Ms. Tobias said EFAB has a strong opportunity to develop a work group on green infrastructure,
and in the past work groups have been able to do more than one report. Green infrastructure is an
emerging area that has generated tremendous interest in the agency, the EFCs and the
administration. Further, the identification of some best practices would be an excellent deliverable.
Ms. Throws added that green infrastructure is an important issue for the Region 3 EFC.
Ms. Massey noted the Syracuse EFC could offer assistance as well. Further, ORD may be working
with a few communities and pilot projects in Region 5 on green infrastructure issues.
Ms. De LaParra said the city of Alameda has a Superfund site that was formerly the Alameda
Naval Base. The city has designated the site for total green infrastructure.
Report Out: Financing Small Community/Rural Brownfields Site Remediation
Karen Massey, EFAB Work Group Chair
This group seeks to answer these questions: How can revolving loan funds be more productive for
small communities, and what are the knowledge gaps that keep small communities from moving a
deal forward?
Brownfields revolving loan funds are small awards for cleaning up priority redevelopment parcels
for future use. These projects typically involve a partnership between a city and a redevelopment
authority. Although work group members initially had different ideas for this project, brownfields
staff and others believe communities struggle with financing issues — finding ways to structure
loans. Political issues, conflicting priorities and an inability to collaborate at a local or regional level
also can cause a deal to fail. Leaders of small communities can benefit from training in how to
manage these processes.
Work group members must also consider these issues:
• What are the best practices of state programs that successfully reach out to small
communities? What lessons have they learned?
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May 13 - 14, 2014
• What technical and other types of assistance are available?
• What are the different ways of putting a deal together in a rural or small community? What
funding sources are available?
• How can the office get more statewide RLFs to focus on rural communities?
• What could a deal look like for a small community?
• How can the office connect and package the RLF with other funding sources? An RLF
award is usually no more than $1 million at a time.
Action Items
• Identify all work group members. Ms. Tobias, Ms. De La Parr a, Ms. Ducharme and Mr.
Cobb expressed interest in joining the group.
• Go back and work with the brownfields staff to define the project scope clearly.
• Send the work group charge out to the entire board for approval.
Questions and Answers
Ms. Trovers-Miller noted that local officials and developers often leave taxpayers and community
residents out of reuse planning. Including that input creates a more complex, dynamic plan that
addresses the need for supermarkets, laundromats and other commercial resources.
Ms. De La Parra added that the historic components of successful communities include water
access, food, housing and education. Today the process seems to involve putting in a manufacturing
plant to attract workers or building a housing development and then trying to attract jobs. The goal
should be creating sustainable communities.
General Discussion and Next Steps
Ms. Daniel proposed establishing the definition of a green bond. A few clients have endeavored to
deem their bonds as green bonds but with really no protocol, which can lead to a lack of
consistency, continuity or standards.
Ms. Tobias asked whether EFAB could complete the work rapidly enough before the market moves
past what the members might develop. Most reports require a year or more. A lot of data seems to
exist, said Ms. Daniel, but the group would have to decide how to harness it. Ms. Kim asked about
verifiers. Who would be the body that verifies the definition of a green bond: the government or an
independent body?
Mr. Weiss recommended looking at the certification processes that multilaterals such as the World
Bank have used. Ms. Cregger said a year isn't necessarily too long because green bonds are a
nascent market.
Mr. Liu's firm, Bank of America/Merrill Lynch, has come up with a common definition of green
bonds by consolidating requirements from a variety of industry groups, including nonprofits and
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Environmental Finance Advisory Board (EFAB) 19
May 13 - 14, 2014
accounting firms that have green standards. Mr. Liu said he could share that information with
EFAB.
Mr. Kim said the European market for green bonds is more mature than the U.S. market, and all of
the certified green bond issuances have occurred outside of the United States. The World Bank did
the first green bond issue in 2008 and has laid out a number of criteria to follow. Further, a lot of
European entities have issued debt, and they have established a protocol that they follow, which
includes independent second-party opinion providers.
EFAB could speak to the Office of Policy or the Office of Research and Development to determine
EPA's interest and role in a certification process. Developing a full-blown standard for green bonds
might be difficult for a group like EFAB to do given the number of outside stakeholders that would
want to engage in the process, said Mr. Shapiro. Members could instead advise the agency on
merits, parameters and kinds of models worth considering.
Mr. Shapiro also mentioned that EFAB members might be able to tour or conduct part of the next
EFAB meeting at DC Water. The fall meeting should occur in October.
Action Items
• Ms. Bowie will schedule a new members' orientation conference call for Ms. Travis-Miller
and Mr. MacAdam. Ms. Himmelberger will participate in a separate call on special
government employees (SGE).
• Following the meeting, EFAB staff leads will initiate work group conference calls. Staff will
also send information to the Environmental Finance Centers to see who wants to serve as an
expert witness for the groups.
• Staff will pursue a conference call with Betsy Shaw in the Office of Air and Radiation to
determine if there is an air project that Suzanne Kim will lead.
• The Transit-Oriented Development report will go to the Office of Policy with a request for a
response from the program office.
Mr. Shapiro adjourned the meeting at 2:20 PM
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