U.S. Environmental Protection Agency
Environmental Financial Advisory Board
May 14-15, 2015
Held at the
District of Columbia Water and Sewer Authority
Washington, DC
E PA-190-S-15-004
The minutes that follow reflect a summary of remarks and conversations during the course of
the meeting. The Board is not responsible for any potential inaccuracies that may appear in
the minutes. Moreover, the Board advises that additional information sources be consulted in
cases where any concern may exist about statistics or any other information contained within
the minutes.
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Contents
May 14, 2015
Introduction and Opening Remarks 4
Update on the Water Infrastructure and Resiliency Finance Center and Project
Charges to the Board 5
Meeting 21st Century Water Challenges—Including Financing 9
Summary of Day 1 11
May 15, 2015
Opening Remarks 12
Environmental Finance Center Network Update 12
Work Group Report Out: Financing Green Infrastructure Operations and Maintenance 16
Office of Water Charges—Work Group Setup, Assignments, Next Steps 17
Charges 18
Charge 1. How can the Center best support communities to develop dedicated sources of
revenue for stormwater and green infrastructure programs? 18
Charge 2. How can the Center best support communities interested in exploring a
public-private partnership for their water infrastructure project? 20
Charge 3. How can the Center best support financing of predevelopment activities
for water infrastructure projects in communities? 22
Charge 4. What role can the Center play to address affordability challenges in the
water sector? 23
Charge 5. What role can the Center play to address and/or support financial capacity
development for small drinking water and wastewater systems? 24
Summary 25
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Project Charge: The Cost of Deferred Maintenance 25
Public Comment 28
General Discussion and Next Steps 29
Adjournment 29
Action Items... ...29
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Thursday, May 14, 2015
Introduction and Opening Remarks
Mike Shapiro, EFAB Designated Federal Official
Karen Massey, EFAB Chairwoman
David Bloom, Acting Chief Financial Officer, EPA
Mike Shapiro opened the meeting at 1:30 pm, thanking Mark Kim for making the Blue Plains
Advanced Wastewater Treatment Plant available for the tour and the meeting. He then turned the
introductions over to Karen Massey, whose appointment as chair has been extended for two
more years. Ms. Massey thanked David Bloom for the support of his office, thanked the
members for their participation, and welcomed new members Aurel Arndt, Hope Cupit (who
could not attend), Jeff Hughes, Courtney Knight, Joanne Throwe, and Jeff Walker. Members Bill
Cobb and Phil Johnson could not attend; Donna Ducharme will particicpate via telephone for her
report out, and Leanne Tobias will attend on Friday only. Members Eustace Uku, Vernice
Miller-Travis, and Helen Cregger can no longer continue as members because of increased work
obligations. Ms. Massey asked that members begin to think about suggesting new members for
EFAB and then asked all members and other participants to introduce themselves.
Mark Kim introduced George Hawkins, CEO and General Manager of the District of Columbia
Water and Sewer Authority. Mr. Hawkins explained the construction and function of the plant,
emphasizing its progress over the last five years. The scale of expenditure during that time has
been dramatic, and the sheer scale of the financial obligations that DC Water faces has
necessitated a doubling of residential water rates in the last five years; it is expected that these
rates will double again in the next 10 years. More than 350 people signed in at the public
meeting Wednesday night (May 13). The Water and Sewer Authority heard heart-rending stories
from hard-pressed consumers for whom the water rate increase deprives them of other
necessities. Affordability is an important issue. In fact, 15 percent of the population spends more
than 5 percent of household income on water. In response, the Water and Sewer Authority is
working on creative steps to generate its own revenue. There are more than 60,000 water plants
in the United States, most of which are small operations that produce the largest supply of
organic nutrients in the country. Before leaving the meeting, Mr. Hawkins invited questions.
There were none.
Mr. Shapiro explained the agenda for the next day and a half, including logistics for the meeting
and group dinner in the evening. He welcomed David Bloom, who will continue as Acting Chief
Financial Officer of the EPA (the Agency).
David Bloom, in turn, thanked Ms. Massey, Mr. Shapiro, and Mr. Kim and welcomed everyone,
emphasizing that the Environmental Financial Advisory Board (the Board) helps the Agency
succeed. He gave an update on the EPA's budget: Congress passed an appropriations bill in
December for fiscal year 2015, with about half of the budget in grants. The challenge is that the
operating budget is squeezed, however, there is a lot of good work across the Agency for how to
spend non-payroll dollars. The Office of the Chief Financial Officer (OCFO) finances the
Environmental Finance Centers (EFCs) and this year more money was allocated to them. The
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President's budget for FY 2016 was submitted to Congress in February. The budget prioritizes
resources for the following: community technical assistance (which furthers the work of the
EFCs), climate change, and preparedness, all with strong emphasis on communities. However,
FY2016 looks like it will be challenging, with decreased funding for most things and increased
fixed costs. The EPA workforce is at the 15,000 level, versus 18,000 a few years ago, and the
Agency is looking at different ways of doing business. EPA's E-Enterprise program is one such
program, a business model to help us be more successful in carrying out our work. One E-
Enterprise project is to launch a web portal by the beginning of the fiscal year. The Agency will
continue to monitor congressional action. With the establishment of the new Water Infrastructure
Resiliency Finance Center within EPA's Office of Water, the work of the Center for
Environmental Finance has been recognized as being more in line with the Office of Water's
mission, so it will be moved to that office from OCFO.
Questions
Suzanne Kim asked when the Water Infrastructure Finance and Innovation Act (WIFIA) will take
off. Mr. Bloom reported that the infrastructure is in place in the FY 2016 budget. Dr. Andrew
Sawyers added that no appropriation has yet been made; the request is only for infrastructure.
Update on the Water Infrastructure and Resiliency Finance Center
and Project Charges to the Board
Andrew Sawyers, Director, Office of Wastewater Management, EPA
Dr. Sawyers thanked new members for volunteering and ongoing members for their work. He
explained that both the Water Infrastructure and Resiliency Finance Center and the Water
Infrastructure Finance and Innovation Act (WIFIA) are housed in the Office of Water, which is
deploying resources to get both started. Both are on course.
On January 16, 2015 Vice President Biden announced the formation of the Water Infrastructure
and Resiliency Finance Center to help communities across the country improve their wastewater,
drinking water, and stormwater systems, particularly through innovative financing and by
building resilience into climate change activities. The Office of Water hired two staff members,
and Jim Gebhardt will serve as Senior Advisor to the Deputy Administrator. The Center has
begun with the goal of convening 10 regional financial forums, beginning this summer or early
fall. These forums will address the gap between appropriate financing mechanisms for
communities by broadening community knowledge about options available to them, bringing in
both private and public funders. The Center hopes to help one or two communities address those
issues and figure out how to move ahead.
Another big theme of the Center is establishing partnerships, public-private, public-public,
public-non-profit and private-private, etc. It is looking at development in light of defining
funding mechanisms using the P3-P4 concept to work out contract issues and has begun
discussions with the Environmental Finance Centers (EFC), who will do the work. These issues
could be defined within this calendar year. The third theme is stormwater financing. Only 1,400
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communities have stormwater mechanisms, so the Center wants to determine what is happening
nationally and inform communities of external support mechanisms. The Center's concern is
how to help small communities that face financial obligations understand what to expect.
Communities rarely talk about financial implications and obligations, and the Center wants to
inform communities about what is available to them and how best to support this initiative.
Lastly, the Center will add requests to the EPA budget request. Dr. Sawyers opened discussion
on the five charges that EFAB will work on this year:
Charge 1. Addressing the charges will require multi-sector pursuits, involving other areas
beyond water management. Charge 1 requires that EPA have a standing work group to help the
Agency.
To Joanne Throwe's question about whether the focus of the charge was more at Phase 1 or
Phase 2, Dr. Sawyers reported that of some 8,000 communities, about 1,000, mostly cities, are in
Phase 1, and the rest, smaller communities, in Phase 2.
Helen Akparanta noted that the state of Maryland has repealed its mandatory stormwater fee.
Communities have responded around the predevelopment of projects. The Agency wants to help
the Center help communities prepare for construction.
Charge 2 focuses on helping communities explore partnership opportunities and helping centers
develop dedicated sources of revenue through public-private partnerships for flooding, water
quality, and so forth. Ideas are needed on what EPA's role should be, and Dr. Sawyers wants
EFAB to look at barriers to dedicated sources of revenue and how to overcome them.
Lisa Daniel wants to focus on public-private partnerships. A work group should look at risks,
including traditional risks that governments are not required to assume and are not prepared to
assume. These include risks to those who have equity in the project.
Charge 3 involves supporting the financing of predevelopment activities for water infrastructure.
The State Revolving Fund (SRF) is a good place to start, but it can't solve broad financial needs.
A big question is how to address broader needs, including what tools are accessible to
communities.
Suzanne Kim said that the EFAB needs to know how the lines are drawn. However, Dr. Sawyers
does not see a line but rather a complementary relationship: the SRF supports communities
across the country.
Ms. Kim asked about the intention of the SRF. Dr. Sawyers's intention is to look at WIFIA and
amendments to the Clean Water Act to broaden eligibility, noting that both WIFIA and SRF can
finance many of the same projects. The distinction, he suggested, is that WIFIA can finance
larger projects, but SRF can also fund large projects. He sees this as a complementary program,
another available tool. However, a single project could be financed by more than one
mechanism.
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Mathilde McLean suggested that the SRF could not continue to issue tax-exempt debt for a
project that is partially financed through WIFIA. Dr. Sawyers said SRF can issue it, but tax-
exempt proceeds are not used for that.
Responding to Jeff Walker, Dr. Sawyers said that he doesn't see the SRF use for predevelopment
as a problem, although many would like to have a ready-made project to finance. This is more
appropriate in cases where communities don't have the capacity to get projects ready.
Ms. Kim noted that investors are reluctant to go directly to green-field projects; they want to fund
only huge projects. Dr. Sawyers added that another aspect is having many small communities
that do not have the capacity to develop the projects.
Tom Liu noted that this is more of a problem for smaller communities; larger communities have
access to financial advisors and other resources.
Ms. Throwe was not sure where the public projects that have been planned would fit.
Mr. Walker said that much depends on who the advisors are. Some assumptions are problematic.
Some communities have gone ahead with a project and wound up in the middle of something
they cannot afford. Also, some advisors intend to benefit from projects that are done in a certain
way.
Charge 4 concerns affordability. The Agency has a strong interest in projects being done
economically. This is a troublesome area for communities, and EFAB's thoughts on achieving
affordability would be welcomed.
Tying in with the issue of affordability is Charge 5, support for small systems, many of which
are struggling. The Board needs to consider how to work with these entities, wrestling with
various aspects of the financial side. Its expertise should be brought to small- and medium-sized
groups across the country.
Discussion
Blanca Surgeon noted that many issues involve economies of scale for small communities. It
will be necessary to look at facilitating projects because small communities (many of which have
populations of fewer than 3,000) simply do not have the economies of scale to build financial
resources. It would be a good idea to reach out to these communities and encourage them to talk
with the neighbors in a region about these things. When it comes to regionalization, facilitation
and mediation are called for in addition to financial assistance. And mediation has to get beyond
"What'sin it for me?"
Dr. Sawyers reported that he has had lots of conversations, and people are thinking differently
about how best to address water and wastewater in small communities. In fact, he said that we
are at a tipping point. He is looking for answers that can be implemented and have been "ground-
truthed," that is, executable actions.
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Ed Crooks said that in considering the Board's responses, we need to know the context,
including how big the systems are. Is the Center intended to be a repository of information, or is
it expected to go out to the communities?
Ms. McLean asked, how deep should EFAB go into these issues? How much advice should we
give? Dr. Sawyers responded that the repository concept would have a central role for shared
information and as a convener of meetings and webinars. But recommendations should be
deployed in targeted communities. So, it is both.
Mike Shapiro added that other groups have also been established to help with providing
additional material that EFAB members can use.
Dr. Sawyers added that EFAB's function will be mostly funding and financial. Mr. Crooks noted
that the U.S. Department of Transportation operates similarly as a repository and a provider of
technical assistance.
Heather Himmelberger asked attendees to think about the potential role of the Agency. It throws
a lot of requirements at operators of water systems, and it is hard for them to know how it all fits
together. EFAB could help synergize that information as integrated pieces of a seamless,
integrated whole. Because small communities have trouble figuring out the big picture, we could
help them figure out how to use the Agency and who the requirements are meant for—how to
put all the pieces together.
Dr. Sawyers thought this was a good point.
Ms. Himmelberger explained that the New Mexico Environment Department recently developed
a portal like the one EPA is talking about, offering an opportunity to collaborate.
Aurel Arndt observed that the charges appear to be based on what already exists. Many of the
60,000 water systems are small and do not have capacity. If we could regionalize service in an
area, we could address small systems, affordability, and preplanning because we would have a
larger base from which to work. If we were to invest money in restructuring and reconfiguration
of responsibility, we could alleviate and mitigate some of the problems.
Dr. Sawyers said this was not encouraged because decisions have to be made at the community
level. EFAB's job is to provide information so that EPA can make informed decisions. He sees
significant interest in water reuse, which is likely to be an intersection in some targeted areas.
Ms. Surgeon said that we need investment in grant funding because it is a strong motivator for
small systems to regionalize and build capacity.
But, said Dr. Sawyers, the Center offers no grants. Ms. Surgeon replied that nevertheless, the
nation needs to think about these issues. We may not have the money to give, but we spend the
same amount of money in different ways helping small systems build capacity that they cannot
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achieve mostly because of size and because they depend on rotating volunteers to do the
management and operations.
Dr. Sawyers encouraged EFAB members to look at the charges and decide how they want to
approach them.
Meeting 21st Century Water Challenges—Including Financing
Dr. A. Stanley Meiburg, Acting Deputy Administrator, EPA
James Gebhardt, Senior Advisor to the Deputy Administrator, EPA
Dr. Stanley Meiburg, who was EFAB's Designated Federal Official from 2001 to 2010, noted
that this board is unique among federal advisory committees in that it actually performs work
itself and is not limited to just reviewing other people's work. Consequently, its access to
expertise and experience sets high expectations for the EFAB.
Dr. Meiburg congratulated new members as heirs and legatees to a great tradition at a time when
the Agency faces many challenges. The EFAB lives at the intersection of how to enhance
opportunities and meet challenges. He thanked all the members for serving.
This is a golden age, he said, because we have exciting challenges and support, particularly in
regard to water. Mr. Meiburg has had two goals: (a) starting a new Senior Executive Service
Candidate Development Program (SES CDP), which will occur before he leaves in 2017, and (b)
rectifying the disappointing Agency cutback on support of the Environmental Finance Centers
(EFCs). Moreover, there is much interest in the Executive Office of the President. Dr. Meiburg
wants to improve existing initiatives and find new funding sources. He reported that Jim
Gebhardt has joined the EPA as a senior advisor and brings to it knowledge of how bond markets
and the government can work together. The EFAB is not just about water, Dr. Meiburg noted,
but has other interests in line with the Agency's mission of protecting human health and the
environment. Additionally, the future protection of the environment will require more financial
information than what the Agency has now.
Discussion
Mathilde McLean requested opinions of the desired size, scope, and depth of EFAB deliberations
in light of the new financing mechanisms. Dr. Meiburg said these mechanisms would help
stretch available funds: Loan leveraging capacity goes from 1:1 to 4:1. Some of the difficulty is
cultural; for example, some systems are run by people with solid financial expertise, whereas
those who run others need expertise on how to make the money they have work harder. People
"on the ground" (i.e., the EFCs) can do that, whereas going to the Agency is more formidable.
Dr. Meiburg is convinced that people want to invest in infrastructure. Meanwhile, there are
billions of dollars in pension funds that could be leveraged, and water infrastructure does that
with good returns. The question becomes, how to find ways to attract that capital to meet
infrastructure needs? The EFCs are objective, neutral, competent people and are the greatest
asset that the Agency provides. It is not enough to issue requirements; we must help people to
meet those requirements.
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Dr. Sawyers said that partnerships are a way to make existing resources work harder, along with
other activities such as leveraging. Mr. Meiburg added the importance of financial assurance.
Federal and state governments look at distressed properties. Without financial assurance,
taxpayers are left holding the bag. Financial assurance plays an important role in preventing
catastrophe. For example, with cleanup, it may not be possible to clean up an entire site, but we
could prevent a disaster.
Blanco. Surgeon observed that the District of Columbia's water system is one of the largest in the
country; they do have expert personnel and advanced technology. However, small systems have
the same problems but don't have the resources in people, technology, or finances to deal with
them. The smaller systems are a class in themselves. Targeting assistance to the mid-sized
systems will also help small ones that are looking for a stronger regional partner. It's analogous
to sustaining the middle class.
Dr. Meiburg agreed with this description of the kinds of problems encountered by various
systems. We must work together as systems for financial opportunities because the smaller
systems might not get as favorable terms by themselves. We also need to look at technical
support systems because a well-meaning person may try to sell a system to a town that is too
small to sustain it. We need a more holistic view to match needs with long-term capability,
including operating and maintenance costs over time.
Wayne Seaton asked for comments regarding the EFC's role in the potential between pension
funds and infrastructure projects. Dr. Meiburg said that the Agency has not considered this issue.
Mr. Gebhardt thought that the State Revolving Funds (SRFs) would be more appropriate
resources for water issues, followed by financing within the state. That also addresses how to
maximize the value of resources on the table, which is also important. The SRFs are actually
infrastructure endowment funds, so they could help drive more resources into the system and
deliver more from those resources. SRFs need to be part of this conversation, even though they
may take financing away from certain areas. The cost of funds is a critical driver. Even with a
People, Prosperity, and the Planet (P3) program in place, we have to deal with the return on
investment, which may not work in a community context. Everything must be looked at, and part
of that is evaluating how the SRF framework lines up with needs. We must demonstrate that the
SRF is working at the highest level, rather than just asking for more money.
Karen Massey pointed out that it is not just a matter of saying that the SRF is performing at its
highest level, but also putting that in the context of a particular state. Mr. Gebhardt agreed that
every state is different, bringing different resources and different political realities. Dr. Meiburg
agreed: It also depends on the people involved and how much they know.
Ann Grodnik-Nagel noted that some charges look familiar and wondered whether this might be
an opportunity for the EFCs to work on a particular project. Dr. Meiburg said that it is up to the
Board to decide on particular projects. Dr. Sawyers said that the idea is to find one or two
projects and use the EFAB's resources to determine how to do the project internally. But it is up
to the Board to decide what and how many charges to work on. Dr. Meiburg praised the Board
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members for their commitment to the particular charges, which is an important element of their
success.
Tom Liu noted that only 28 states have SRF leverage, leaving 22 without, and those 22 are the
states that need help.
Suzanne Kim: Whether it's leveraging grants, financing public-private P3 projects, or defining
an investment horizon, we need to create a product, not a fund, for investors, which could be like
Fannie Mae. Dr. Sawyers thought of it as a mechanism to create a pool of projects that would
generate a specific return. Part of the Board's role is to pull together options, not to require
communities to do a particular thing; it is to inform communities so they can make their own
decisions. Creating a pool of investible projects is not what the EFC is set up to do; it is to help
communities make decisions. Dr. Meiburg mentioned that P3 means different things to different
people. EPA has the ability to influence, and its listing of where one state is relative to other
states will increase the likelihood of change. It's a way to encourage change.
Ms. McLean observed that bankers know their local communities, whereas the EPA is national in
scope. Thus, perhaps the answer is aggregating the local information so that it can be accessed by
non-local private equity investors. Funders need access to this kind of information. Dr. Sawyers
replied that this is something that the Agency is working on. It is convening financial forums to
bring communities together with potential funders and others. It's a good concept, and there are
different ways to provide a convener role.
Heather Himmelberger stated, we need to broaden our thinking. We focused on water
infrastructure with P3, but there are other ways, and a wider environmental scope will help get
funding. Companies will invest if they see the benefits to themselves. We need to keep it broader
than water. Dr. Meiburg agreed, saying that there is much interest in water, but we shouldn't
limit it to water—after all, it's the Environmental Financial Center. Beyond that, he wonders:
Does he have clients? Does leadership care? But this is beyond the scope of EFAB.
Summary of Day 1
Mike Shapiro and Karen Massey
Mr. Shapiro: The ideas presented today by Dr. Sawyers for the Office of Water offer a point of
departure for tomorrow. EPA has to be open to these kinds of suggestions. We may have the
financial but not the social knowledge of how to effect these things.
Ms. Massey agreed. She encouraged board members to consider the board's value and its
potential future products. There might be an opportunity to introduce other types of products, for
example, portals, to communities.
Mr. Shapiro thanked everyone and adjourned the day's discussions at 4:30 PM.
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Friday, May 15, 2015
Opening Remarks
Mike Shapiro and Karen Massey
Ms. Massey opened the meeting at 9:03 AM and discussed the agenda for the day. Donna
Ducharme would join the meeting by phone for her workgroup report out. Mr. Shapiro would
like to leave this meeting with a clear sense of how the Board wants to organize and address the
five Office of Water charges.
Environmental Finance Center Network Update
Angela Buzard, President, EFCN
The Environmental Finance Center Network (EFCN) is a university-based organization that
creates innovative solutions to difficult, how-to-pay issues of environmental protection and
improvement. The EFCN works with the public and private sectors to promote sustainable
environmental solutions while bolstering efforts to manage costs. It is focused on collaborative,
innovative, neutral, multidisciplinary expertise to help smallest to largest systems—local, state,
regional, and national systems. It provides financial expertise, a range of other expertise,
technical transfer, a national presence enabling partners to participate in national projects, and a
partnership for regulation of the regulators. Lastly, it leverages funds. The 2014 EPA core grant
provided an investment leverage ratio of $1 to $3.18. EFCN's great strength is its being
university based.
Ms. Buzard introduced representatives of the EFCNs, including Martha Shells, Carol Norton,
Ben Clark, and Khris Dodson. EFCN Directors for each region are the following: Jack Kartez,
Region 1, University of Southern Maine EFC; Melissa Young and Khris Dodson (Co-Acting),
Region 2, Syracuse University EFC; Joanne Throwe, Region 3, University of Maryland EFC;
Lauren Heberle, University of Louisville EFC and Jeff Hughes, University of North Carolina
EFC, both in Region 4; Benjamin Clark, Region 5, Cleveland State University EFC; Heather
Himmelberger, University of New Mexico EFC, Region 6; Angela Buzard, Region 7, Wichita
State EFC; and Sarah Diefendorf, Region 9, Dominican University of California EFC.
EFCN Projects
1. University of Southern Maine: The EFC has created Web-based tools that helps
communities understand the future economic impacts of climate change, and is assisting
New England communities with climate adaptation planning, including providing useful
information to smaller communities that have limited resources and time to devote to
sifting through the growing array of on-line tools. Other projects include solid waste
management, including composting in schools; EFCN collaborations, for example, with
the U.S. Department of Housing and Urban Development (HUD), and the Smart
Management for Small Water Systems Program. We also provide assistance to
communities within and beyond our region on an as-needed basis on a range of finance-
related topics.
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2. Syracuse University: The EFC conducted workshops titled "Smart Management for Small
Water Systems"; the region is working together on this one national project. It is halfway
through Round 2, having convened at least one workshop in each state. The workshops
include technical assistance, which involves in-depth training of at least 20 hours, one on
one. Seven dashboards have been completed, and seven more will be done. Dashboards
show rates versus revenue and expenditures. Round 2 ends this year. Round 3 has been
awarded and will end in 2016. Communities are selected through regulatory agencies and
via mailed and e-mailed flyers. The Australian Water Association (AWA) was involved
this year. There has been a shift in deliverables, with many more webinars being done
this year.
Heather Himmelberger and Glenn Barnes are focusing on solid waste management,
encouraging early training to develop professional capacity, training on resources for
community-based organizations in Puerto Rico. Stormwater resilience planning is
occurring in rural New York State, where the workforce pipeline concept has been
developed: 30 interns from universities across the state are creating and developing
programs. This is ultimately creating the next wave of solid waste professionals.
3. University of Maryland: The EFC is tapping into the University of Maryland for online
training in stormwater management, particularly as it relates to the Chesapeake Bay. It is
creating and developing tiers—beginner, midlevel, and advanced. Its expertise will be
free across the United States. It has also begun a municipal program for sustainability. In
Maryland, the system is county based (beginning with Prince George's County) and will
be scaled up accordingly. The program directors want to be sure sustainability goes to
every activity, including those related to climate change, whether or not the county is
coastal. They are prioritizing projects in light of where a community has problems, as
well as where engineers have problems. They are now starting to link communities to
similar sister cities, for example Newport, Rhode Island, to Annapolis, Maryland.
4. University of Louisville (UofL): The UofL EFC is particularly proud of our leveraged
work under the HUD Sustainable Communities Capacity Building Grant. The UofL EFC
served as lead capacity builder for the EFCN under a second-round of funding from U.S.
HUD Capacity Building for the Sustainable Communities Initiative (SCI). We are
wrapping this up this month. Working closely with EFCN members at USM, UMD, and
UNM we provided technical assistance to grantee communities across the country to
support the creation of a national learning network among SCI planning grantees; built
the capacity of grantees to meet their work plan objectives; increased coordination
between grantee projects; increased grantee integration of EPA priorities related to water
infrastructure, green infrastructure, consent decrees, and brownfields redevelopment into
their projects; and finally assisted grantee consortium members with the inclusion of
equity, environmental justice, water infrastructure, climate and hazard mitigation, food
systems and sustainable financing as tools of economic development and community
planning.
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This work was accomplished through the production of a variety of publications,
webinars, in-person training events, and one-on-one assistance.
At the Local Level:
Louisville Central Rail Corridor Plan: The center partnered with Louisville Metro
Government in their successful application for an EPA Area-wide Brownfields Planning
grant. We assisted government officials and their planning consultant with community
engagement around the development of the plan and implementation strategies that
emerged from the planning process. We facilitated community workshops to help gather
stakeholder input and provide information about brownfields in the study area. The
project is important because the area includes, along with many brownfields large and
small, an environmentally compromised urban stream, an active rail corridor, and a future
stormwater retention basin that is part of a consent decree in a dense residential
neighborhood. The city's approach is unique in that it is making an effort, through
community engagement, to address the corridor by dovetailing all the public agencies'
and advocacy organizations' efforts so that the private sector will see the benefits of
investing in the redevelopment of brownfields along the corridor. One example of the
value of our participation was that we brought our sewer district into a meeting to hear
about community based green infrastructure efforts and concerns about the new retention
basin which resulted in the sewer district developing their own new community
engagement strategy because they realized that it will bring financial benefits in the form
of new partnerships with resources and less opposition.
New Partnerships: Under the final year of our current EFC grant agreement, we are
partnering with PolicyLink and NADO (National Association of Development
Organizations) to produce two webinars this fall that will focus on Equity in Water
Infrastructure Planning and Hazard Mitigation/Community Resiliency for metropolitan
planning organizations in the Southeast.
New Tool Development: Through Fall of 2015, EPA Region 4 is partnering with us to
develop an Organics Recovery Toolkit for Colleges and Universities. This advisory
document will provide colleges and universities technical guidance on policies, technical
and economic feasibility, and implementation issues relevant to developing a sustainable
management protocol for organics.
The Center is launching a five year research project with Virginia Tech funded under the
EPA Brownfields K6 program to develop a community benefits calculator tool kit for
brownfields redevelopment that will challenge traditional market analyses by including a
broader set of indicators of community benefits and hyper local data. We expect this
project to have broad implications for those measuring community benefits of other
environmental infrastructure investments beyond brownfields redevelopment."
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5. Cleveland State University: This EFC offers technical support for the Small Business
Liability Relief and Brownfields Revitalization Act through the Brownfields Technology
Support Center and the Great Lakes Environmental Finance Center.
6. University of New Mexico: The EFC, have begun a Water Research Foundation project
on rate resiliency and other projects that include, smart management for small water
systems, a tribal drinking water program, asset management for senior centers, sanitary
surveys on oil platforms in the Gulf, and a water efficiency/water loss project for
Oklahoma and New Mexico. The EFC works with other EFCs, HUD, and others. Ms.
Himmelberger reported that her regions contact all 50 states at the beginning of each
round to explain what the Southwest EFC has to offer. The states' needs, including what
systems they want the EFC to focus on, vary from state to state.
7. Wichita State University: The EFC is dealing with the issue of rural community
population decline and the communities' consequent diminishing ability to pay.
Evaluation is the biggest issue. The Rate Check-up Tool (resembling TurboTax) will
yield quality information on rate structures; the beta version will be available next month.
It also has a collaborative project with the University of New Mexico developing
manuals, videos, and training programs as well as technical and financial programs to
manage water systems.
8. Dominican University of California: The EFC is dealing with solid waste management,
has drafted a marketing/business plan for the Tijuana Compost Center, will host the
Sustainable Materials Management Symposium in December in Tijuana (in cooperation
with EPA), and is supporting the Las Vegas Food Waste Workshop in September.
Discussion
Tracy Mehan: Although the discussion is interesting and stimulating, we are hearing about inputs
but not outcomes. It may be useful to have an outcomes meeting. How do you determine whether
programs started are successful and how successful? That may not be possible to do. What
measures do you use? Ms. Buzard: Many have to report on their projects, so we are collecting a
lot of that information. Ms. Throwe: They have the information and can report on it. Ms.
Himmelberger: Her EFC gave a workshop for tribes on maintaining the chlorination levels of
the water supply. Now they never have to call and wait a few weeks for someone else to come
and fix the levels; they can deal with it themselves. Monitoring is an important element to ensure
that they are headed in the right direction.
In response to AurelArndt, Ms. Buzard said that her EFC professionals have a joint network and
could access information from the individual centers, but they don't aggregate all the outcome
data.
Marie de la Parra asked whether there is an electronic mailing list at the University of Maryland
that allows subscribers to know when programs start. Ms. Throwe explained that her EFC is
developing the program now, and everyone will be informed when it is ready, maybe by
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December. Ms. de la Parr a wondered whether there was a contact for grants to rural
communities in California that would provide grant information. Ms. Throwe answered, not a
grant per se, but free help for managerial or financial issues. She or Mr. Dodson can be contacted
for details. They will talk to the community that wants assistance. A form can also be filled-out
online and sent to the EFCN at efcnetwork.org, which has a drop-down tab for technical
assistance).
Lisa Daniel asked about plans for an umbrella center for the 10 regions, a "mother-ship center."
(Raffael Stein later said the accepted acronym for this center is WIRFC). Ms. Buzard said that the
Agency is interested, particularly in technical assistance in collaboration with the regional
groups, but there are not yet any tangibles about what the collaboration would look like. Mike
Shapiro offered that these centers are now part of the broader context of the Office of Water: It's
a work in progress, but displays more and more integration between planning and integration.
Ms. Himmelberger said that her EFCs always look for the gaps in an effort so as not to duplicate
work. They want to help additional planning for the WIFRC once they are more established, to
make ensure that everyone is going in the same direction and not duplicating effort. It was noted
the existing grants expires soon, and they are waiting to see who will be awarded the grant
beginning in FY 2016.
Karen Massey added that EFCs touch so many media areas that EPA wants to collaborate and
get new input on other projects.
Work Group Report Out: Financing Green Infrastructure Operations
and Maintenance
Leanne Tobias and Donna Ducharme (via telephone), Co-chairs
Leanne Tobias distributed an outline of the guide for local governments on financing green
infrastructure operations and maintenance and asked members to e-mail any gaps they see to Tim
McProuty, Donna Ducharme, and herself. Content of the outline includes stormwater utility fees,
federal grants, innovations such as use of property-assessed green infrastructure funding, historic
insurance, use of endowments, and collaboration with social ventures. A first draft of the report
has been completed, and it is hoped that the second draft will be done by the end of June. The
second draft will be reviewed by the workgroup's expert witnesses. The final draft will be
distributed before the next EFAB meeting and finalized during that meeting.
Discussion
Ed Crooks asked about opportunities for cost reduction. Ms. Tobias's work group has not
addressed that, but will evaluate whether this topic might be included.
Tracy Mehan wondered about the desired length of the document. The objective should be that
the report is read, so it shouldn't be too long. Ms. Tobias thought that 70 pages of typescript is
not a bad length as long as the final product permits topics to be accessed digestibly on an as
needed basis. The work group wants the guide to be useable to local governments. Can they get
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support from EPA or one of the EFCs, so, when finished, it can be published and not remain a
typescript?
Ms. Ducharme added that they talked about moving some material to the appendices.
Jeff Walker: Adding to the length is the case studies, but they are a valuable part.
Mr. Shapiro: Is there a decision sequence? Ms. Tobias: Yes, a matrix and a decision tree have
been proposed.
Wayne Seaton and Richard Weiss: Whether constructed for public versus voluntary, private
participation is similar for green infrastructure.
Tom Liu offered to look at a draft. Ms. Tobias will send it to him and other interested Board
members.
Suzanne Kim: The user's options are the most important part; all the rest is substantiating
information. A key focus should be on the matrix and decision tree.
Office of Water Charges—Work Group Setup, Assignments, Next
Steps
Full Board
Karen Massey invited discussion of EPA's five charges and the Board's approach. Raffael Stein
(Director, Office of Water, Municipal Support Division), who was in the audience, joined the
members to answer questions.
Discussion
Ed Crooks: What do you need? An umbrella group or a rapid-response team? Mr. Stein: The
Office of Water needs to have the products reviewed. The focus is on projects, but the office is
also looking for EFAB to provide external advice to the Center for its direction. Some quick-
turnaround reevaluation of a product may be needed, along with longer turnaround on strategic
advice. At some point, the Center will want to move into other areas, but it needs to figure out
what areas.
Ms. Massey: What about subgroups versus the group as a whole? Mike Shapiro: Anything
formed in a work group has to go through the EFAB before it becomes official advice. Only the
Board as a group can speak formally to the Agency. We have to figure out the mechanisms to
convey advice when it is needed quickly. Vanessa Bowie explained that this is a Tier-1
committee, so a working group has to be able to quickly communicate to the whole Board so the
Board can make a recommendation: E-mail will help.
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Joanne Throws: It doesn't have to be one particular person. Ms. Bowie: Expert witnesses have
been appointed, and advice could come from an EFC.
In answer to James Mac Adam, Ms. Bowie said that even when rapid turnaround is needed, EFAB
still needs communication from every Board member to approve or disapprove (and why) to
comply with Federal Advisory Committee Act (FACA) rules. TimMcProuty: There's official
advice to the Agency versus consultation with the Agency. For formal advice or a
recommendation, the whole Board is needed, but the Agency can interact with the work group on
what it is working on and thinking; it is just not an official recommendation.
Mr. Shapiro: For the strategic end, it would be valuable to have a group that is following the
progress of the Center on a regular basis so its members know the context and history to build
on.
Leanne Tobias: Need all work products created by EFAB be written up? Mr. Shapiro: FACA
regulation applies when a group of individuals is collectively advising the Agency. If they are
hearing the individual views of the experts, then it is possible to solicit oral advice.
Tom Liu: Some work has already been done on the five charges; we first need to understand
what has been done, so we don't duplicate it. Ms. Massey agreed that this may be the first step.
Mr. Shapiro: One needs to ask where the gaps are. Mathilde McLean: The way members of the
EFAB participates in the review of the National Infrastructure Bank that was undertaken by the
Government Accountability Office (GAO) could be a useful format.
Heather Himmelberger: We should structure this with standing committees for a framework.
That way, when an action item comes to the Board, it is known to whom to send it. Each request
may need a different set of members. EFAB should give contact points to EPA. It might be only
one or two who field the requests, and a different subset of people would respond to different
requests. Vanessa Bowie added that members are meant to rotate on and off the Board, and Helen
Akparanta noted that people's availability will continually change.
Mr. Crooks: How actionable can the Center be? Another constraint is that we do not want to
repeat what has been done, but we want to produce something that is useful.
Rick Giardina: The process is already in place. Ms. Massey could evaluate requests and put out
the call for people to respond to the request. We have looked at the five charges in a variety of
ways, and we don't want to be constrained by artificial boundaries. We may recommend that
another body be formed to deal with one aspect or another.
Charges
Charge 1. How can the Center best support communities to develop dedicated
sources of revenue for stormwater and green infrastructure programs?
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Tracy Mehan: The actual charge is more than an exposition to funding for stormwater and green
infrastructure; it sounds like politics. There has been a request for clarification of intent. Raffael
Stein admitted that this is challenging. The best way to solve it would be to focus on enabling
these projects so they can go forward. There is the concept of a clearinghouse for the many good
studies. And, we want major operating principles not to be duplicative. Mr. Stein is considering
posting these studies on the website. The Board should help communities identify where they
can find resources to address their particular issue. It is a sensitive issue to create these. This
could be seen as a charge to EFAB to advance the ball. Mr. Mehan thought they might be
interested in social science studies.
Lisa Daniel: City councils always ask how to pay for things. If we delineate options from raising
taxes to reducing expenditures, it would be helpful. Furthermore, we are not asked for the
answer, only the alternatives.
Heather Himmelberger thought there could be nonpolitical barriers and noted that counties have
varying degrees of power.
Mr. Mehan thought AWWA would be a better group to do that.
Mathilde McLean saw that among the many other barriers is the need to have the capability of
billing.
Mr. Stein encouraged the Board to be more general—the members are giving advice to EPA; not
lobbying for a particular cause. Also, the Center will not be a huge entity; it will be doing a lot of
work through partners. Independent analysis of the EFCs yields a lot of advice to communities.
Jeff Hughes observed that EFAB members represent a great diversity of professional and
geographic perspectives, so one approach would be that we could answer the charges from our
own perspectives. It could be presented this way before we offer national guidelines. That kind
of expertise could be valuable. What we bring is our own experience and we should focus on our
diversity.
JamesMacAdam thought that the barriers would probably be mostly political.
Joanne Throwe thought that the charge could be addressed without becoming political. There are
so many barriers, for example, the legal ramifications. Every state could take the region as a
whole.
Ms. McLean asked how the Agency has overcome the hurdles of setting up stormwater and green
systems.
Richard Weiss asked what tools would be available if a community wants to establish a revenue
stream. He agreed that there are barriers, and the political side is very important. But a lot of
work has already been done and is ongoing, for example, Jonathan Cuppett's project; the Water
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Environment Federation's recent workshop on stormwater management and utilities. Moreover,
the Board offers resources on politics, billing systems, and other topics.
Marie de la Parra asked whether the Center would support workforce development. Will there
be programs to help communities acquire affordable financial capital, financial tools, and labor?
Can the Center support elements to make communities sustainable over the long term, instead of
projects with short-term goals that, once completed, no longer produce revenue? Creating a local
viable, cutting-edge labor force is needed. Mr. Stein said that the new Center will consider soil,
water, and energy efficiency. As for a workforce, the focus has been on operators. True, the
workforce is graying as the infrastructure is crumbling, but what Ms. de la Parra talked about is
more about economic development and thus outside the scope of the Center and the Agency.
Karen Massey suggested collaborating with other FACA committees to address this, perhaps the
one on environmental justice. Ms. de la Parra said that the Department of Labor is looking for
such programs and wants to partner with organizations to do them. It wants such programs to be
developed and implemented anywhere in the country. Ms. Himmelberger suggested bringing
Sarah Diefendorf into this discussion because she develops green businesses.
Mr. Mehan thought modifiers should be added to barriers. It would be more focused if we added,
"The Center requires that EFAB identify legal, technical, and logistical barriers." Mr. Stein had
no objection but reminded everyone that the main theme of the requirement for the Board is to
advise EPA on what actions it can take. The Agency seeks advice on what it should be doing.
Ms. Himmelberger gave the example of the Earth-Water Protection Project: Its case studies in
various states found that people in the Agency were unaware of these situations. The barriers
may seem obvious, but they are not. Some funding mechanisms may not work at all in some
states, or work less well. She sees Charge 1 as a synthesis and education exercise of what's out
there, for example, the legal system in the West is different from that in the East. The contextual
task is to understand what can and cannot be done.
Ms. Ducharme thought the Charge 3 element—lack of understanding of engaging the
community—should be a component of Charge 1: People can't figure out financing if they don't
know what they're financing.
Charge 2. How can the Center best support communities interested in exploring
a public-private partnership for their water infrastructure project?
Ed Crooks thought that the People, Prosperity, and the Planet (P3) program should probably be
done by others. We could survey existing reports to identify the relevant ones, and we could
survey successful and failed attempts that might complement those studies.
Mathilde McLean: The Center was set up to address how communities can finance projects.
Maybe an option is to create a document that would help whomever the EPA hires get up to
speed.
Raffael Stein said that EPA is not peddling P3. EPA's position is that for some communities, a
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P3 may make sense; EPA just wants to position communities so they can access it. Communities
are not well positioned to understand some of these complex structures, and there is no good
source of objective information available. He suggested expanding into case studies and maybe
putting out a community guide for which sources will be critical. This is a big funding challenge.
Suzanne Kim: In California, we are trying to make communities aware, but the private sector
will not come in unaided. The White House tried to get special recommendations on barriers, and
that could be a different take on this charge. The question is how we facilitate that. Mr. Stein did
not disagree. The White House has narrowed in on challenges. But, some options are very
expensive. The focus in Charge 3 is predevelopment costs and how to address them. The bigger
challenge is communities that are not receptive. Karen Massey: This shows a lack of informed
decision making. Ms. McLean: So much money has to be spent before one can get to the focus.
Aurel Arndt: There are a lot of other elements to these P3 situations, other things besides a
traditional P3 that would work. Likewise we have more than public-versus-private financial
factors. We must also consider nonfmancial factors. Focusing exclusively on P3 factors will not
fully address the issue. It is much broader than stormwater; it affects all elements of water
infrastructure.
Jeff Walker explained that one review has not ended. At least once a month a group goes through
Texas and asks about P3, and they all say it is working. He does not see EFAB's job as pushing
P3, but more as delineating options. A good way would be to develop a decision tree of options.
Tom Liu: We are using the term P3 loosely. First we should look at P3 and then look at the
funders, varying needs, and varying rates of return. The problem here is lack of communication.
P3 could be the most expensive option, depending on the investor option chosen. It gets to the
affordability issue and highlights some of the challenges. A limited number of deals have been
done in the United States, but we can highlight benefits and challenges of the successes. It is
impossible to structure one that would apply to all communities. Helen Akparanta: Although the
United States has not done a lot of P3 projects, Europe has, and we could use those studies.
Lisa Daniel: There is a lot of material already out there. What's missing is from the public water
utility management side: What should the manager be thinking about? What are the risks? How
does the community attract investors? What does the manager need to know to come up to
speed? We need to know key words. It would be helpful to make this charge a leadership piece
about what those questions are. The Treasury recently released a paper on P3 that says that there
is a need for someone at the table who is invested in all factors.
Ms. McLean: A 2008 report from the Board discusses all these issues and should be the starting
point. TimMcProuty: George Raftelis' firm use to represent communities on P3 case studies.
Ms. Massey: We can look at those and bring them up to date and look for gaps.
Richard Weiss: There is a wide range of P3 projects; many address risk transfer and the varying
cost of capital depending on the type of risk. Is the charge here to focus on the system?
Mr. Arndt: Many initiatives have been undertaken on a project basis for reasons that have
nothing to do with the water system. Often the initiative is run out of a city finance office, and
that office will continue to drive these transactions. Another aspect is how to look out for the
interests of those who are served by the water system.
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Charge 3. How can the Center best support financing of predevelopment
activities for water infrastructure projects in communities?
Karen Massey: Planning and predevelopment activities complement the financial capacity of
water utilities. Financial capacity should be part and parcel of predevelopment activities.
Ann Grodnik-Nagel: Does the impact of this oppose the new budget rule? There are strict rules
about who can give financial advice to communities. Ms. Massey: This issue relates to the
investment banking community. Blanca Surgeon: Why isn't finance an issue? First comes
money for planning, next is for design, and then comes the project construction. The whole
process may take up to five years but, without the pre-development activities there is no
construction.
Heather Himmelberger: Charge 3 doesn't just have to be about small communities.
Predevelopment may hinder long-term sustainability, and, if so, we need to ask whether any
project is this the right project at the right time for the right reason. We need to keep a broader
view for long-term sustainability.
Mark Kim wanted clarification of what predevelopment means. Ms. Massey observed that these
issues must be considered from a more holistic approach. Mathilde McLean wondered whether
communities could use a line of credit or some other mechanism. Mr. Kim said that if we know
what the project is, we can recommend a mechanism and best practices. Ed Crooks thought the
task should be not figuring out how to finance the project, but how to access different
mechanisms to acquire the money to do the project. Jeff Walker observed that once the money is
in hand, the method to accomplish the project must be determined. Jennifer Wasinger suggested
that the board should offer education about how other states do business.
Ms. Himmelberger: The community could be left with something it can't manage, so an
important component is pointing out what the community should be thinking about, for example,
best practices. Mr. Kim: The question is how to do predevelopment well and then how to pay for
it. Ms. Himmelberger saw the important issue as best practice and its impact on finance. Ms.
Massey noted that work has already been done, so we must determine how to tap into that.
Marie de la Parra: Many communities don't take into consideration that project money leaves
after the project is done. They need to consider the community's economic health after the
project is done. Or, as Rick Giardina phrased it, what is the community left with when the
project is done? We could define and raise red flags for the community, but they're technical
issues.
Ms. Himmelberger: The community needs to ask questions about the long-term ramifications of
all options. Better thinking about predevelopment will have effects for the long term.
Richard Weiss: Maybe our product is a list of questions that the community should ask itself, not
technical advice.
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Ms. de laParra: We must first ask what they want, especially in underpopulated communities.
Aurel Arndt agreed with Mr. Weiss. Willingness to pay is the real issue. For example, regulated
utilities require discussion of payment in the predevelopment phase. The Board has no
representative from a regulated utility.
Ms. McLean asked about the merit of case studies. Ms. Daniel: There are as yet no specific rules
about case studies. Ms. Massey: The Agency is our client. What does it want?
Charge 4. What role can the Center play to address affordability challenges in
the water sector?
Tracy Mehan: Charge 4 covers important issues, but it should also cover wastewater as well as
water. Affordability deals with social equity and environmental justice but becomes an excuse
for communities not to raise rates. Raffael Stein: Household affordability is a real concern.
There is general recognition among utilities that this has become more and more an issue.
Mr. Mehan noted that Michael Curley has a good section on this in his book.
Mathilde McLean: Both the District of Columbia and New York have surveyed other cities to
find out what they are doing with regard to affordability, so we could pull that information
together.
Aurel Arndt: This is the most important issue, particularly with older systems. It is important in
being able to sustain capital investments in the future. And median household income is a poor
indicator.
Ms. McLean: Jeff Hughes has a chapter on affordability. Mr. Mehan: This issue involves policy
and politics, for example, residents receive solicitations from gas and electric utilities to donate
to winter heat funds, but they never receive such pleas from water utilities.
Ms. McLean: With such programs, including the federal Home Energy Assistance Program, you
also have to establish income eligibility criteria for recipients and verify each recipients' income.
New York City has leveraged these income-verified lists that are used to distribute hating
assistance and local property tax exemptions to provide financial assistance for water charges;
this means that the water utility does not have to duplicate the income verification work and
create its own eligibility lists.
Richard Weiss: Ways to address affordability vary by state. For example, California prohibits
subsidization.
Heather Himmelberger reported that her region set up an affordability program, but the subsidy
was so small that people didn't bother to fill out the form.
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Jeff Hughes favored adding to all charges that the Board will help review documents and filter
them. For example, the Water Research Federation published three or four ground-breaking
reports.
Karen Massey observed that this definitely helps the Center do what it does.
Mr. Stein: The real focus is to give us direction on how we can make a difference. What would
make sense? Highlighting successful communities so the charge can be expanded?
Ms. Massey: The focus is identifying opportunities. This role is a little different from the one that
we have played in the past. Identifying options is good, but it may also be good to know why
something works or does not in one place or another.
Mr. Stein, in response to Mr. Mehan, said that it depends on the resources of the 2016 budget;
this might be done through literature review.
Charge 5. What role can the Center play to address and/or support financial
capacity development for small drinking water and wastewater systems?
Blanca Surgeon: One problem of assisting many individual small systems with capacity
development is that in-depth training is down to 20 hours per system. In this training, one person
can make more of a difference than a five-member board. Coordination of work among all
technical assistance providers is very important. The EPA has a grant that funds all assistance
providers and divides the work among all of us but none of us are providing comprehensive,
technical assistance that results in capacity building. It is important to coordinate to get the best
outcome for the system.
Heather Himmelberger: EFCs have already identified funding sources. My region has created a
map of the United States, which can be pulled up on a computer that shows water funding in
each community. We tried to coordinate with states to get a very comprehensive list of identified
sources, which is updated every year. We could add predevelopment and other funding sources
to this map. In fact, we are already making phone calls to the states for this year's update. The
role can be made more valuable by directing communities to the appropriate resource. Now the
burden is on the community to find out which agency offers what funding. Arkansas has done a
good job of coordinating this, but other states have not, and EPA could help them. Karen
Massey: That is what OW is looking for. The charge seeks other opportunities that EPA could
look at.
Ms. Himmelberger thought the burden should be on EPA rather than the volunteer board of a
small community. Tim McProuty suggested talking to former Board member Steve Grossman.
Ms. Himmelberger added that he has surveyed the situation and posted his results on his website.
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Summary
Karen Massey asked Board members to put their name on the top of a piece of paper and indicate
which of the charges they are interested in working on, giving order of preference and whether
they are interested in leading the work group. She will propose work groups, circulate the list to
the entire Board by e-mail, and assign a staff member to each work group. Each work group will
refine the charges.
Tom Liu noted that there are opportunities for overlap among the five charges. He asked whether
they should be preparing one report or five. However it is done, it needs to be coordinated among
the leaders so as to not duplicate another group's work. Ms. Massey assured him that they will
get each work group leader in communication with EPA to be sure everyone is thinking the same
way. She reiterated that EPA has not asked the Board to solve anything, but to guide them on
what needs to be solved. The Board should offer a menu of actions, observations, and perhaps
new charges. The Agency wants to know what to focus on and how to focus on it. It wants to
discuss these matters with everyone before defining a time line.
Project Charge: The Cost of Deferred Maintenance
Heather Himmelberger
In the folder distributed to Board members is a draft, written by Ms. Himmelberger and Howard
Rubin, Office of Water of two project charges titled "The Hidden Cost of Deferred Maintenance
and Subsidy and Borrower Incentives: Balancing Affordability ad Environmental Justice with
Asset Management and Sustainability." The charge stresses that funds granted are for capital
expenses only and not for maintenance. But no funding has been allotted to deferred
maintenance. This means that infrastructure will have to be replaced earlier, so we need to factor
that cost into the dynamic. How can we encourage communities to fund maintenance, especially
if they won't be able to take advantage of as much asset management as possible if they don't
consider the deferred maintenance as an issue? The second issue—subsidy and borrower
incentives—addresses how affordability and environmental justice factor into long-term
sustainability. How can communities balance those against asset management and sustainability?
Are EFAB members interested in taking on these issues?
Discussion
Leanne Tobias: The first (deferred maintenance) is very important, and it can be quantified. It
would be a useful tool for the Agency and I support it as a research topic.
Mark Kim agreed that it is hugely important, but it could be approached from a best practices
perspective. Ms. Himmelberger was thinking more of the impact on the SRF program. For
example, sometimes new work cannot be funded because the community has to take on deferred
maintenance. Is deferred maintenance eroding the capacity of the funds to do more? How big an
issue is it?
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Mr. Kim: Every dollar of deferred maintenance cuts into new capital expenditures.
Jennifer Wasinger suggested looking at states that consider maintenance and providing
suggestions on how to make SRFs more successful.
Ms. Himmelberger thought it might be an opportunity to affect behavior. Maybe EPA would
want to add something. Ms. Wasinger: It is a good first step for the SRFs. Maybe the Board
could recommend how to make it a more useable, workable plan, especially for smaller
communities. Ms. Himmelberger: The worse-off the community is, it receives more money when
it has an emergency, so it doesn't raise its rates but waits to become an emergency.
Suzanne Kim asked how this could be quantified, but Ms. Himmelberger did not know.
Ms. Wasinger announced that the Oklahoma Water Resource Board has just developed its
system.
Jeff Walker countered that if the community does maintenance, it may delay capital
improvements. What's the end-point? Ms. Himmelberger: We have to have the data to
substantiate the assumption and work from there.
Blanca Surgeon: With the Fiscal Responsibility Plan/Asset Management Plan required by
funders, many states are getting the plans; systems are completing them but there's no
accountability beyond completing the plan. There should be a requirement for at least
establishing a short-term asset reserve fund. Then there is the issue of systems having reserve
funds in the bank but they don't use them because they're looking for public funds. Education
and training needs to happen. USDA requires communities to have reserve funds. So systems are
saving for maintenance or repairs but we need to say, "this is how you go about reinvesting that
money into your own system." Ms. Himmelberger agreed that it is not an engineering problem; it
is asset management, which should be decided upon by the community. Ms. Wasinger suggested
putting together a template in a way that empowers the community and guides the discussion.
Lisa Daniel: Planning seems to be an area that needs attention. SRF is a way to get at this. Once
we find the information, what do we expect to happen?
Rick Giardina suggested giving city planners tools and information so they can raise rates. This
is about communicating the need, but quantifying the problem may be one of the tools needed to
create convincing communications. In the long term, deferred maintenance costs more for the
rate payers.
Ms. Tobias: Once the problem has been quantified, how do you incentivize a community to
make and implement an asset management plan? Ms. Himmelberger said that we can do that
now. A bipartisan Government Accounting Office (GAO) team was tasked to investigate asset
management for water and wastewater utilities. That team is now working on this issue.
Tracy Mehan knows that it is a problem. If the Board documents the size of the problem, we may
give states the information they need to mandate asset management. We should compile case
studies.
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Lisa Daniel: SRFs compete so much. Ms. Himmelberger: But this is not an SRF-only issue. Ms.
Daniel: The problem is poor planning on the part of the borrower.
Ms. Himmelberger: A federal mandate could be helpful. KarenMassey: Asset management is
not a silver bullet, and I would be reluctant to recommend that communities raise rates and that
they have a comprehensive asset management program. Rather, it boils down more to the
funding issue. Is data-driven analysis a practical assessment? What is the value to EPA unless it
comes with a recommendation? We need to know what our end product should be.
Mathilde McLean: Asset management would be a huge burden for small communities.
Mark Kim: Asset management can tell you what you need to do, but it does not give the money
to do it. It would be useful to highlight the consequences of deferred maintenance.
Ms. Himmelberger: We have to know that there is $200 million of deferred maintenance before
people will raise rates to pay for it. You don't get on a path at all until you know the facts. A
national conversation would be helpful.
Tom Liu: We should not make any more demands on the SRF programs. Local implications are
that communities can show theoretical calculations and the impact on jobs, and so forth. The
political factor involved is that they have to approve the increased rates, so they defer it to the
next administration. What are we trying to achieve? A target goal that's different from what is
already been done? Ms. Himmelberger quoted the charge: "fund efficient operations" rather than
"fund capital". We need to break the barrier between operation and maintenance (O & M) and
capital.
Helen Akparanta cited an example of the State of Maryland using Bay restoration funds to pay
for operations and maintenance at wastewater treatment plants that upgraded to enhanced
nutrient removal treatment levels. Ten percent of the monies collected in the fund (after certain
expenses) has been set aside for operations and maintenance. It works well. It does not pay for
all operations and maintenance, but it helps. Mr. Kim: The important difference between capital
dollars and O & M funds is that a lot of capital dollars are funded from debt. The broader point is
whether the Agency should make grants for operation. It is a different way to get to the same
end. The Board could look at that. Deferred maintenance is not accounted for. Mike Shapiro:
That would require statutory change, but if members feel strongly enough about an issue, it is
good to get that on record.
Leanne Tobias: In energy efficiency space, often the metric is life-cycle cost analysis. Is this
used in water infrastructure? Ms. Himmelberger said that it is. It is the total cost of one
alternative versus another.
Ms. Massey: We need to find out the question set from the Agency, that is, what the client wants.
Ms. Himmelberger: We could focus on the first issue and fold in the second under the umbrella
charge. Ms. Massey concluded that it's a two-part question.
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Ms. Tobias: We need a client, unless Howard Rubin is no longer interested. Mr. Shapiro: We
just need a formal blessing.
Ms. Massey talked to the Agency about both, particularly Number One, and is working through
the process. Mr. Shapiro said that they can fund planning through the acid water initiative. But,
Ms. Tobias cautioned that GAO and the client may have some interest in how this is done.
Ms. Himmelberger: If not prohibited, we should find out what GAO is doing and have a
conversation with it. Vanessa Bowie can get a copy of GAO's charge; the report is due
December 31.
Ms. Akparanta, Ms. Wasinger, and Ms. Himmelberger will work on this draft proposal and flesh
it out.
Public Comment
Mike Shapiro and Karen Massey
Co-Bank
Sarah Tyree is vice-president of government affairs for Co-Bank, which is collaborating in a new
public-private partnership known as the U.S. Rural Infrastructure Opportunity Fund. Its mission
is to support rural (Third World American) infrastructure, a mission it shares with the U.S.
Department of Agriculture (USDA). It lends to small, rural wastewater systems and is funded by
USDA and Capitol Peak Asset Management. It has a pool of infrastructure loans in the funds,
and other people can invest in it. This will be announced in July. Ms. Tyree distributed her
contact information and invited questions.
Discussion
Suzanne Kim asked about the size of the fund. Ms. Tyree said that it is $1 million-$5 million for
10 or 20 years. Some water systems have a lot of unobligated obligations. Co-Bank created this
new program two years ago to offer unsecured financing for less than $150,000, which enables it
to get the funds obligated. Funds are offered at market rate, but Co-Bank is a cooperative bank,
that is, the customers own it, and they have no outside owners. Therefore, when the bank does
well, the customers benefit.
In response to Leanne Tobias's question, Ms. Tyree said that the bank loans are not restricted to
capital costs, planning, or O & M.
Tom Liu asked whether the bank lends to municipal projects only. Ms. Tyree said that the bank is
a privately owned cooperative and is not funding just essential water projects. Therefore it is
competing against other banks, but at a higher rate, and the USDA partnership.
Responding to Jennifer Wasinger, Ms. Tyree said that a client can come directly to Co-Bank
without going through a federal agency. It gives funds to communities of populations of 20,000.
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To Jeff Walker, Ms. Tyree said that she is working with a bank in Denver.
Water Research Foundation
Jonathan Cuppett reported that the Water Research Foundation is planning and managing
finance-related research, including research for the drinking water industry. Therefore it is
working on most of the issues discussed here. He offered his group as a resource. It has already
studied many of these topics. The Water and Environmental Research Foundation is a sister
organization, and there are talks for merging.
General Discussion and Next Steps
Mike Shapiro and Karen Massey
Vanessa Bowie will work with Ms. Massey, Mr. Shapiro, and Andrew Sawyers to circulate
possible dates for the next meeting. Dr. Sawyers would like to have a meeting in March in
Washington, DC, and one in San Francisco in the first or second week of August, as was
customary. Ms. Massey may follow up with some conference calls before the next face-to-face
meeting.
Adjournment
Ms. Massey andMr. Shapiro thanked everyone and adjourned the meeting at 2:20 PM.
Action Items
1. Board members will send Karen Massey suggestions of potential new members.
2. Andrew Sawyers will create a standing work group to support Charge 1—"support
communities to develop dedicated sources of revenue for stormwater and green
infrastructure programs."
3. Leanne Tobias will send Tom Liu and other interested Board members a draft of the
report from the work group Financing Green Infrastructure Operations and Maintenance
for their review and comments.
4. The Charge 1 work group will add to the charge: "The Center requires that EFAB
identify legal, technical, and logistical barriers."
5. Karen Massey will propose work groups and their leaders on the basis of the interests that
Board members noted. She will circulate the list to the entire Board by e-mail and assign
a staff member to each work group. Each work group will refine its charges.
6. Vanessa Bowie will get a copy of GAO' s charge for studying the cost of deferred
maintenance and will circulate it.
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