U.S. Environmental Protection Agency
Environmental Financial Advisory Board
Meeting Summary
August 21-22, 2018
Meeting held at:
EPA Region 5
75 W Jackson Ave., Chicago, IL
EPA-850-S18-002
The minutes reflect a summary of remarks and conversation during 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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Meeting Purpose
The EPA's Environmental Financial Advisory Board ("EFAB") held a public meeting on August 21-22,
2018. The EFAB is an Environmental Protection Agency ("EPA" or "the Agency") advisory committee
chartered under the Federal Advisory Committee Act to provide advice and recommendations to the
EPA on creative approaches to funding environmental programs, projects, and activities. The purpose of
this meeting is to hear from informed speakers on environmental finance issues, proposed legislation,
and EPA priorities.
Attendees
EFAB Members
-	Aurel Arndt, Lehigh County Authority
-	Lori Beary, Iowa Finance Authority
-	Janice Beecher, Michigan State University
-	Theodore Chapman, S&P Global Ratings
-	Rudolph Chow, City of Baltimore, Department of Public Works
-	Edwin Crooks, Transurban
-	Hope Cupit, Southeast Rural Community Assistance Partnership (RCAP)
-	Lisa Daniel, Public Financial Management
-	Yvette Downs, Sewage & Water Board of New Orleans
-	Ted Henifin, Hampton Roads Sanitation District
-	Heather Himmelberger, Southwest Environmental Finance Center, University of New Mexico
-	Craig Holland, The Nature Conservancy
-	Jeff Hughes, Environmental Finance Center, University of North Carolina at Chapel Hill
-	Daniel Kaplan, King County, Washington Department of Natural Resources and Parks
-	Suzanne Kim, SPI Partners
-	Pamela Lemoine, Black & Veatch Management Consulting, LLC
-	James McGoff, Indiana Finance Authority
-	Chris Meister, Illinois Finance Authority
-	Marie Roberts De La Parra, BMB Construction Properties
-	Eric Rothstein, Galardi Rothstein Group
-	Linda Sullivan, American Water
-	Joanne Throwe, Maryland Department of Natural Resources
-	Angie Virnoche, FCS Group
-	Jeff Walker, Texas Water Development Board
-	Richard Weiss, Morgan Stanley
-	William Stannard, RAFTELIS
-	David Zimmer, New Jersey Infrastructure Bank
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EFAB Members unable to attend the meeting:
-	Brent Anderson, RESIGHT
-	James "Tony" Parrott, Metropolitan Sewer District of Louisville
-	Carl Thompson, Infiltrator Water Technologies, LLC
-	Jennifer Wasinger, Freese and Nichols, Inc.
Additional Attendees
-	Gerry Baker, EPA Region 5
-	Glenn Barnes, Environmental Finance Center, University of North Carolina at Chapel Hill
-	Lisa Bonnett, Illinois Finance Authority
-	Mary Ann Boyle, Metropolitan Water Reclamation District of Greater Chicago
-	Sonia Brubaker, EPA
-	Dr. Elliott Campbell, Maryland Department of Natural Resources
-	Heather Cannon, Environmental Finance Center, Rural Community Assistance Corporation
-	Sarah Cardona, Metropolitan Planning Council
-	Gabriella Carvalho, EPA Region 10
-	Edward Chu, EPA Region 7 Deputy Administrator, EFAB Designated Federal Officer
-	Tim Colling, Great Lakes Environmental Finance Center, Michigan Technological University
-	Jennifer Cotting, Environmental Finance Center, University of Maryland
-	John Covington, EPA
-	Alecia Crichlow, EPA
-	Khris Dodson, Environmental Finance Center, Syracuse University
-	Josh Ellis, Metropolitan Planning Council
-	Brad Fletcher, Illinois Finance Authority
-	Leo Gueriguian, EPA
-	Ray Kljajic
-	Thomas Liu, Bank of America Merrill Lynch
-	Justin Keller, Metropolitan Planning Council
-	Ramsey Mahmoud, Environmental Finance Center, California State University at Sacramento
-	Timothy McProuty, EPA
-	John Murray, Metropolitan Water Reclamation District of Greater Chicago
-	Ryan Occhsler, Illinois Finance Authority
-	John Padalino, Environmental Finance Center, National Rural Water Association
-	Michelle Pugh, Environmental Finance Center, Wichita State University
-	Dr. Andrew Sawyers, EPA
-	Martha Sheils, New England Environmental Finance Center, University of Southern Maine
-	Scott Sigman, Illinois Soybean Association
-	Adam Slade, Metropolitan Planning Council
-	Cathy Stepp, EPA Region 5 Administrator
-	Cameron Wilson, Illinois Finance Authority
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Day 1 - August 21, 2018
Introductions & Opening Remarks
Dr. Andrew Sawyers
Ed Chu
Joanne Throwe
The meeting began at 8:46 am with Ed Chu welcoming all attendees. Before beginning discussion of the
meeting's agenda, Mr. Chu thanked Dr. Andrew Sawyers for his service to the Board.
Dr. Sawyers-thanked all in attendance, especially the Environmental Protection Agency (EPA) team
who organized the meeting. He extended his appreciation to Chris Meister for providing a good
welcome to Chicago and the Environmental Financial Advisory Board (EFAB). He noted that this was not
a farewell to the Board in full. Dr. Sawyers shared that the Board has provided many reports that have
made a difference at the agency, on both financial ideas and programs. He noted the importance of the
EFAB going forward, as it is a critical time for the agency in terms of broad infrastructure; the
administration has a broad infrastructure strategy that takes into consideration issues around life cycles,
leveraging, and ensuring federal resources are used wisely. He advised the Board that many of the
projects they are currently pursuing play a role in how the larger infrastructure strategy gets rolled out
nationally. The Board continues to be an important advisor to the agency, and as conversations with the
Administrator's office continue, the administration has expressed support for and understands the
importance of the Board, both financially and programmatically. Dr. Sawyers recollected that when he
was the acting Designated Federal Official (DFO), he wanted to pass the job to someone who did not
work at the EPA Headquarters office, but a senior official from one of the other offices. He welcomed Ed
Chu and reminded him of his role in supporting the Board, procuring additional support throughout the
agency, and getting additional resources from the Administrator. He also introduced and welcomed
Joanne Throwe as the new Chairperson.
Dr. Sawyers provided biographical information on Mr. Chu and noted his time as the Deputy Regional
Administrator in Region 7. He has the distinction of being the most senior EPA official who has worked in
the most regions. He has done an incredible job over his career in his leadership in energy, water, and
during his time in Region 5 as Acting Administrator. He has a wealth of knowledge, has supported the
Board extensively over the past few years, and will continue to support the Board through leadership
and stewardship, with the hope that the Board will continue to support the agency. Dr. Sawyers again
welcomed Mr. Chu and thanked him for accepting this role. He noted his anticipation to hear the
important conversations the group would have over the next two days.
Mr. Chu - thanked the Board for their public service. He acknowledged that they all have full time jobs,
yet they show up to workgroup meetings, providing a public service to the country, the EPA, and all who
try to protect the environment. He shared that he previously wanted this role ten years prior, but was
told he was not ready, so he waited. Dr. Sawyers made the role one Mr. Chu really wanted and noted his
excitement in working with the Board. Mr. Chu continued that Ms. Throwe and he hope the Board will
continue to spend the extra time they've all committed to continue the good work they've been doing.
He noted that the EFAB is one of the longest established advisory boards at the EPA, with a proud and
long tradition of great public service.
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Ms. Throwe - greeted the group and reminisced that when she was approached to become chair, she
was extremely interested, knowing Mr. Chu would be leading it. She remarked that the group would
have a lot of fun together, with a wealth of diversity to the issues, including the multimedia aspect of
the EFAB that she believes will come into play. She also thanked Dr. Sawyers for his work on the Board,
as well as Alecia Crichlow, Sonia Brubaker, John Covington, and Timothy McProuty for their roles in
organizing the meeting. She noted that the Alaska Backhaul workgroup owed Mr. McProuty a debt of
gratitude for bringing very thick copies of their report with him to the meeting. Ms. Throwe also
recognized Tom Liu, who has significant expertise and experience with the EFAB, and who agreed to
serve as an expert consultant to the Board. She encouraged new members to reach out to him. She
noted her excitement to meet new members and conduct their orientation and thanked existing
members for their hard work. Finally, Ms. Throwe introduced Cathy Stepp and asked the room to
introduce themselves.
Ms. Throwe noted her appreciation that Ms. Stepp could join. She explained that Ms. Stepp oversees
environmental protection efforts in the Great Lakes states as well as 35 federally recognized tribal
governments. She manages the Great Lakes National Program, at which she leads restoration and
protection of one of the largest freshwater systems in the world. Prior to her work at Region 5, Ms.
Stepp served as the Principal Deputy Regional Administrator for Region 7 and the Secretary of
Wisconsin's Department of Natural Resources (DNR), the third largest state agency, where she was
responsible for state enforcement and protection of wildlife, fisheries, state parks, trails, forests, and
environmental permitting. Ms. Stepp also served as a Wisconsin state senator from 2003-2007,
representing nearly 160,000 constituents. Ms. Throwe again welcomed Ms. Stepp.
Welcome to Chicago/What's Going on in Region 5
Cathy Stepp
Ms. Stepp - thanked the group and welcomed them to Chicago. She explained that while she had
prepared talking points, she thought it would be more productive to conduct a question and answer
session and offered an opportunity for the Board to provide her with any important information about
the EFAB or messages to deliver to the Administrator. Ms. Stepp noted that one of the most important
things about environmental regulation is transparency and public involvement, which is why she is
excited about the EFAB. The Board is a group of busy people who can take time away from jobs and
families on behalf of the country to help the EPA move in the right direction on these important
conversations and decisions. She expressed her appreciation for their tireless efforts in this regard, as
the topics covered are ones the EPA needs guidance on and there is no better place to learn what's
working or not than from those who see where the dollars actually hit the streets. She asked the group
how the EPA can do that better and produce results that are measurable so that the successes can be
conveyed to Congress and the President.
Ms. Stepp noted that in Region 5 there is never a dull moment. During her time in Region 7 there were
fewer challenges, with much of that credit going to Mr. Chu's efforts, as he is someone who never says
no to a challenge, always sees things through, and gives significant thought to all issues. When Ms.
Stepp moved to Chicago, she was able to bring her expertise from Wisconsin to the region, particularly
on issues pertaining to the Great Lakes such as drinking water and water quality challenges, including
algal blooms. She noted that there is never a boring day in the region with its plethora of legacy
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challenges, which is why they need gifted, brilliant and passionate people around from the public to
guide the direction the EPA needs to go. Ms. Stepp continued that the EPA is science driven, but that it
also needs to understand how the decisions it makes impact the public it serves. She asked how they
can better explain to the public not only the risks of an incident, but also the benefits of the work they
do. Government is good at bragging about how much money it provides, but the average person may
ask why that matters, as those numbers are dizzying. Ms. Stepp noted that the EPA needs to do a better
job of selling the benefits so that the average person understands. As an example, she noted that when
discussing algal blooms, the EPA typically uses acronyms that people do not understand. However, they
do understand when they cannot go swimming or fishing due to blooms, or when the drinking water
they count on is unsafe to drink. She identified that active, two-way conversations and the involvement
of people like those on the Board are a way to change that. She thanked the EFAB again and paused to
allow questions and discussion.
Discussion and Questions
Aurel Arndt - asked Ms. Stepp where the Great Lakes Program is headed in the next few years.
Ms. Stepp - responded that one of the items she is paying particular attention to is the outcomes of
investments they have made. She wants to ensure that when they fund projects, there are measurable
deliverables, so they can demonstrate, document, and celebrate successes to present the program's
importance to policy makers in Washington, DC. She again noted the concept of selling benefits and
highlighting successes where their investments enhance quality of life. She noted her belief that there
will be more support in the future if they are able to accomplish this.
Eric Rothstein - asked if Ms. Stepp could offer her perspective on Michigan's adoption of the new Lead
and Copper Rule, and how that might affect things beyond Michigan. He also asked about the status of
remediation.
Ms. Stepp - answered that they are continuing to build the relationship between the state and Flint,
Michigan. She noted that it is a bit challenging at times, but that they continue since the ultimate goal is
safe drinking water. She added that lead line replacement is going well. With regards to the Lead and
Copper Rule, Ms. Stepp noted that the EPA is reviewing the rule. She added that the one positive
outcome from this issue was that people and policy makers started paying attention to drinking water
quality and failing infrastructure across the country. There is increased attention being given to the rule
from the Acting Administrator as well. Ms. Stepp continued that Region 5 has provided opinions
regarding the current rule and its challenges, especially given that there is increased science and
technology available for better lead and copper regulation.
Ms. Throwe - noted that the EFAB would be having a discussion the following day about new charges
and areas to take on. She asked Ms. Stepp whether she could think of any direction or guidance Region
5 had yet to work on that the EFAB could explore.
Ms. Stepp - responded that she would think about it. She added that she counts on the board members
to inform the EPA on the issues they see. She noted emerging challenges, such as Per- and
Polyfluoroalkyl Substances (PFAS) and Perfluorooctanoic Acid (PFOA), as a significant challenge, and
added that while there is research being conducted in academia, the EPA also needs help with what the
real risk is, as it is hard to communicate to the public without that knowledge.
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Dr. Sawyers - expressed his curiosity as to what Ms. Stepp is considering when looking at quantifying
benefits, not just in the Great Lakes, but also in the State Revolving Funds (SRFs). He explained that
there were a number of great SRF managers in the room and asked if there were any financial
challenges Ms. Stepp saw in Region 5 that she would like the EFAB to consider.
Ms. Stepp - replied that when she was at Wisconsin DNR, her team would advise her on their projects
using SRF funds, but that she did not dive into the mechanics of the process. She noted her interest in
learning more about that process and questioned if it is as easy as it needs to be to quickly move funds
to action, whether there are process challenges, and if there are other creative ways to leverage
additional funding from the private sector. She added that examples of innovative ideas could be shared
with Headquarters. Ms. Stepp explained that she is a former home builder and once owned a company
that sold approximately 40 homes per year. One of her greatest lessons learned from that experience
was that there are sellers who show you a home and ramble off housing jargon, and there are sellers
who do not focus on the home's features, but instead on how they will benefit the prospective buyer.
She reiterated that if there is a way to enhance and better explain the benefits that they're investing in,
they will be more successful. She provided examples such as depicting children in a tube pulled by a
boat, a father and daughter duck hunting in a marsh, and healthy children smiling, all of which convey
importance through emotion. She noted that the approach is somewhat like an advertising campaign, so
that the EPA is in the news for positive reasons.
Mr. Meister - thanked Ms. Stepp and the agency for maintaining funding for the SRF program and noted
that when projects pay less for their capital improvement funding, it translates to paying less in taxes
and rates. He asked if Ms. Stepp had other suggestions for what some in attendance - particularly those
from the SRFs across the country - could do to continue to deliver the message that it is a successful
program.
Ms. Stepp - suggested that opportunities to speak to the public can be used to provide examples of
some of the great initiatives the federal government is pursuing and why they matter. She suggested
using terminology such as "SRFs" to increase awareness, as well as going out and interacting with the
public to sell the benefits and provide examples of good stories that typically do not get as much
publicity. She noted that this was a successful strategy during her time at Wisconsin DNR. She added the
need to make it popular to love the EPA and the work it does and implored the group to help in that
mission.
Ted Chapman - noted that many states deregulate and asked Ms. Stepp's opinion on whether that is
positive, negative, or indifferent.
Ms. Stepp - shared her caution in giving opinions on relationships between states and municipalities.
She noted that her experience in Wisconsin was that relationships differed depending on the town or
city in question. Municipalities have different strengths and deficiencies, which may require increased
oversight where needed. She added that some depend on individual states and how they believe they
can best serve their constituents. She noted the need to remember that whether coming from the local
or state level, the same people are affected.
Jeff Walker - emphasized the need to promote SRFs more but added that he feels the messaging coming
from Washington, DC is that public-private partnerships (P3s) and the Water Infrastructure Finance and
Innovation Act (WIFIA) are the solutions. No one seems to know about the SRF program. He provided an
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example that while it may be easy to demonstrate some benefits, that may not be the case in a small
community in west Texas (not located near a regional provider) that has naturally occurring
radionuclides (RADs) in the water. The community is being told it must spend $30 million to address it,
or approximately $20,000 per household, and residents ask what the benefit is. He noted the similarity
to lead, where some argue there is no safe level, and asked how to show the benefits.
Ms. Stepp - responded that Administrator Pruitt had not felt there was sufficient information on WIFIA,
and thus there was a push to increase awareness across the country. She noted that she was
encouraged that Mr. Walker heard so much about it. She acknowledged that small community issues are
difficult and solutions for issues like RADs may be unsustainable. Having conversations to raise
awareness amongst the public then puts pressure on lawmakers to address federal level infrastructure
improvements across the country. She added that people want to know what they are investing in, and
there is a need to talk about water as an investment, not a cost. Ms. Stepp finished by thanking the
Board for the work it has done, as well as for what it will continue to do.
Presentation to the Board
John Murray, Acting Executive Director, Metropolitan Water Reclamation District of Greater Chicago
Mary Ann Boyle, Treasurer, Metropolitan Water Reclamation District of Greater Chicago
Josh Ellis, Vice President, Metropolitan Planning Council
Mr. Chu - announced that prior to the next speakers, he wanted to touch base on some of the themes
Ms. Stepp mentioned. He explained that one of the reasons Dr. Sawyers mentioned the multimedia
program was Mr. Chu's expertise and interest in the regional differences across the country. Mr. Chu
continued that a key priority area for the meeting is to look at new projects and charges for the EFAB,
and that while the Board currently focuses a great deal on water infrastructure projects, he would like
those in attendance to think of the broader interests of the EPA, beyond water. He noted the Alaska
Backhaul project as an example and asked the Board to suggest projects that align with their interests
and expertise so that the EFAB and EPA's interests are brought together and balanced.
Mr. Chu then introduced the next presenters, John Murray, Mary Ann Boyle, and Josh Ellis.
Mr. Ellis - began by explaining that the Riverwalk in downtown Chicago has been successful with tourists
given the river's clean water and noted that efforts are funded in part by purchase of beer and wine
from the restaurants along the stretch. He said that had anyone in attendance been on the Riverwalk
yesterday, they would have been very wet given the intense storms. He described a situation in which
tens of thousands of people in the region likely observed the storms and wondered if their basements
would flood and provided two examples of crew teams who row on the Chicago River and may have
wondered what would be floating in the water next to them during practice. He further described the
runners along Lake Michigan who may wonder if the water fountain is safe to drink given a couple of
fountains they'd heard about that tested positive for lead. Similarly, he described the families
purchasing bottled water because a neighbor's house tested positive for lead. Mr. Ellis added that the
average municipal size is 10,000 people, and the communities range in affluence. He explained that the
poorest have the higher water rates because of the uniform socioeconomic situation and lack of affluent
customers to offset rates.
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Mr. Ellis noted that many communities have little capacity and mayors with no water experience, so
while tools such as the SRF, WIFIA, and P3s are available, those in office do not know what they are or
how to access them which makes it challenging to solve and get ahead of issues in the region. However,
Mr. Ellis recognized Metro Water, who is doing a significant amount of work on the topic. He noted that
while some communities are doing water work, others are not simply because they cannot, given
competing priorities such as keeping schools open or paying pensions. He noted his interest in
regionalization and added that he is increasingly convinced that some of the problems will require
consolidation to solve. Along this point, he explained that while 200 separate utilities use Lake Michigan,
others are on groundwater. He noted his interest in learning more about nutrients, stormwater, and
other topics during the meeting.
Mr. Murray - provided an overview of the Metropolitan Water Reclamation District of Greater Chicago
where he's been employed for 16 years. He explained their mission is to both protect Lake Michigan, the
source of their drinking water, and to manage stormwater. Cook County is 885 square miles,
encompassing Chicago and 120 additional municipalities, which leads to many complexities. They have
combined and separate sewer areas, and seven plants that treat 1.4 billion gallons of wastewater per
day. They spend approximately $40 million on electricity and gas and are looking into ways to reduce
that use through equipment and options to buy or generate their own. Mr. Murray continued that some
of their plants are 70-80 years old, and that regulations have changed since they were built,
necessitating rehabilitation efforts and addition of new processes to keep them running. He also noted
their focus on resource recovery, including their historic use of biogas at the plants to heat boilers.
Recently they restored a turbine that had been out of service for roughly 20 years, and now generates
approximately 3 megawatts per day. He added that they are considering additional ways to use biogas
as well. Mr. Murray continued that they operate the world's largest Ostara facility to recover
phosphorus using Crystal Green, which doesn't dissolve in water. Thus, it can be taken from pre- and
post-digester feeds and spread on agricultural fields where it is absorbed in the soil and does not end up
in runoff. The plant has been operational for about one year, and while it does recover some of the
chemical costs, it is not a revenue generator; it is, however, great for the environment. Two other large
plants are under a permit requiring phosphorus limits of 1 mg/L, and they are exploring options to fulfill
that.
Mr. Murray noted that they have also been charged with stormwater management since 2004 and have
been building regional detention basins ranging in size. When the program began, they created
watershed plans for each of the seven watersheds, working with municipalities and watershed planning
councils to collect data and update the floodplain maps. The projects are large, and while building them
on Metro's property is simple, it becomes more challenging to build them elsewhere, necessitating work
with local stakeholders and procurement of property. Mr. Murray noted that approximately 40 projects
came out of that, some of which are still ongoing. They also looked at localized flooding, green
infrastructure, and smaller projects to address issues that overbank flooding would not. This phase was
wildly successful. Mr. Murray explained that a large number of projects were proposed, and many
communities expressed their difficulties with flooding. Mr. Murray responded that a solution would be
buyouts of homes and opening of the space. After an initially negative response, they received
legislative authority to buy out homes and have created open spaces, which has been successful. He also
noted their work with green infrastructure, first incorporating it through sewer permit ordinances, then
consent agreements that require a certain amount. Mr. Murray provided an example of one of the
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partnerships between water reclamation, city water management, and the Chicago public schools. The
water groups installed the infiltration infrastructure and the Chicago public schools payed for
playgrounds, in what resulted in an award-winning partnership, of which Mr. Murray indicated he was
very proud.
Mr. Murray continued by explaining the development of a Watershed Management Department that
applied to communities outside of Chicago and required them to capture one inch of runoff by volume.
This could be achieved through permeable pavement, rain gardens, swales, and more. This plan alone
has increased storage capacity by almost 40 million gallons. He also outlined the regional tunnel and
reservoir system, conceived in the late 1960's to early 1970's to manage stormwater. The reservoirs can
hold almost 8 billion gallons. Since the project went online, Mr. Murray noted that there had only been a
couple of overflows in the region, where in previous years there had typically been dozens. He added
that the overflows that did occur served as learning moments that allowed them to make structural
changes. They have not had one in about a year.
Ms. Boyle - explained her role as treasurer and provided background on the group's financial stability,
with a AAA rating by Fitch and a AA+ rating by S&P. She thanked the Illinois EPA for their loan program,
which she cited as an important source of funding for their programs. She explained that many projects
qualify as water quality projects, and they recently had one approved as a stormwater loan. She
provided additional background on their funding, explaining that they use ad valorem real estate taxes
as their primary funding source. They do not set rates for residential customers, although they do set
rates for commercial and industrial users as a cost recapture program. Ms. Boyle noted that this has
worked well for them. Because of their AAA rating, they have access to capital markets, and have
recently tried the SRF, which they found to be a spectacular program for many of their projects. They
budget to spend approximately $200 million per year in capital costs and have a 30-year financial plan to
achieve that. Because they are under a tax cap and are limited in how much they can increase levies
each year, low-interest loans work best. The engineering team helps Ms. Boyle develop a capital funding
forecast, and they provide a 5-year capital program that is updated quarterly. This ensures a long time-
horizon and allows for controlled scheduling of projects.
Ms. Boyle noted that their first plant will soon be 100 years old, so rehab has become their focus, as well
as phosphorus and nutrient removal and technological needs. Metro has 59 loans outstanding, totaling
close to $1 billion. The largest project's financing was $250 million, with an interest rate of 1.75% for the
first loan and 1.76% for the second loan which are historic lows in interest rates compared to capital
markets. Ms. Boyle added that they did issue their first refund in 2014. She noted that the engineers talk
directly to investors, explaining projects, how they are evaluated, and the different metrics used. They
also sold bonds in 2014 and 2016 for new capital financings. Ms. Boyle continued that looking to the
future, the WIFIA may be another subsidized financing arena for them, although they are not yet sure
how exactly it will fit into their program given the successes they have achieved with the SRF. However,
Ms. Boyle did conjecture that the WIFIA would likely be of interest when they approach longer useful
life programs, since the SRF only has 20-year loan amortization. She noted that they listen to webinars
and find them very helpful. Ms. Boyle added that while they have not looked at P3s, they may be of
interest for resource recovery. She finished by saying they are always listening for new opportunities
and continuing to focus on having capital funds available. She thanked the partners in the room and
noted that the loan programs have greatly benefited taxpayers.
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Discussion and Questions
Heather Himmelberger - commented that in regionalization, oftentimes large utilities have smaller ones
within their boundaries, or just outside. She asked if they do anything actively to encourage
regionalization, how they feel about it, whether they try to get systems to join up, and generally how
that process works.
Mr. Murray - responded that they do not actively pursue making the agency bigger, as it started with
the city of Chicago and has grown over the years.
Mr. Ellis - added that from the water supply side, they have seen regionalization occur when utilities
were in the process of determining whether to remain on groundwater or switch to Lake Michigan. In
the western edge of the area, there are many suburban communities facing limitations on groundwater,
and there are clusters of communities looking at the Fox River or Lake Michigan. He noted that he is
helping them consider their options and weighing potential benefits and detriments. He noted that he
imagines these issues will trigger some regionalization efforts. Mr. Ellis noted his interest in the low-
capacity staff areas connected by drinking water pipes in the Lake Michigan resource area, and whether
it makes sense for them to regionalize service and operations to address current rate structures and
achieve better loan ratings. He added that he is encouraging that as a pathway.
Jeff Hughes - noted his fascination with the ad valorem tax approach and explained that he works with
challenges of allocating costs, especially in locations such as Baltimore, Atlanta, and Philadelphia where
there are significant stormwater fees. He asked how they found the experience of using ad valorem
taxes, and given their successes in raising money would they recommend them?
Ms. Boyle - responded that they are very protective of their ad valorem taxes. She noted that there is
some leveling out for economically disadvantaged communities, but it has been a long history that has
been successful compared to a rate assessment. She continued that because of the strong statute in
Illinois, collection is guaranteed; if a homeowner does not pay then the mortgage pays, or they lose the
property. This has provided a consistent collection of 97% per year. When asked what their rate is, Ms.
Boyle responded that it is 40 cents.
Richard Weiss - referenced a show he watched explaining the history of the Chicago River, including its
reversal, and asked about that.
Mr. Ellis - responded that the Chicago and Kennedy Rivers were reversed, and canals connecting the
Mississippi River system to the Great Lakes were built. This created a pathway for invasive species, most
notably carp, but also mussels, small fish, viruses, bacteria, weeds, and more. He noted that just this
past week, three new invasive species were discovered. This issue has prompted some to think about
separating the two systems, whether by physical or chemical means. He noted that given the city's
reliance on the waterways for shipping and transportation needs, there is no current pursuit of re-
reversal.
Lisa Daniel - commented that a number of her clients are dealing with infrastructure around resilience
planning and noted that the EFAB has taken this issue on as a charge: where to invest to prevent costs
later. She asked whether they have thought about capital plans as an investment in preventing costs and
loss later.
Mr. Murray - responded that yes, they have.
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Mr. Chu - thanked the presenters and provided brief housekeeping information. The Board then
separated into the workgroup breakout sessions.
EFAB Report Out: Chesapeake Bay Metrics
Suzanne Kim
Craig Holland
Mr. Chu - welcomed the group back after a lunch break and introduced the Chesapeake Bay Metrics
workgroup.
Suzanne Kim - began the presentation by relaying that the report was almost final and needed
members' comments. She indicated that they would send the written manual and a Microsoft Excel
spreadsheet around for comment. She explained that their aim was to provide a perspective on private
equity capital versus debt capital, and they created a model to demonstrate how the fund manager is
aligned with the project. She added that without achieving a return or certain type of hurdle, investors
would not pay.
Craig Holland- continued that the original charge was to determine how to leverage additional private
capital financing into Chesapeake Bay water quality projects, but as they worked with the Bay Program
they decided to split the charge into a few components. He added that this charge is somewhat of a
financing 101 type of charge, in which they are attempting to clearly explain the perspective of the
private equity investor and how he or she might view the project, it's potential stakeholders, and how it
would be transacted. He continued that it was not meant to be an exhaustive review of procurement or
financing structures but rather a basic understanding of the private equity investor perspective.
Ms. Kim - reviewed that the key stakeholders fall into the following groups: equity providers, debt
capital lenders, project developers, market regulators, and municipalities that must meet regulatory
requirements (i.e. credit purchasers). She noted that their model depicts where and how equity and
debt investors earn returns. She then reviewed the model and explained that black values are outputs
and blue values are inputs. The model includes five fake projects with various inputs, which are
described in the accompanying document, all of which roll up into a fund cash flow. The final output is
the amount the investor would return, based on cash flows, and what the fund manager would get, as a
means of showing how key stakeholders receive their capital.
Mr. Holland - added that they did not conceive of the model as a decision-making tool, but instead one
to show the variables that a private equity investor would consider when determining whether to invest.
He acknowledged that should the Bay Program input real numbers they could use the model to pitch
new programs or projects, but again reiterated that they did not envision it as a decision modeling tool.
The model and its accompanying explanation of basic financial concepts and stakeholder perspectives
was the first charge. Mr. Holland continued that the second charge is how this private equity structure
may use public dollars such as the SRFs and under what circumstances those funds could be used. He
also identified a potential third charge that would entail expansion of revenue sources that could secure
financing.
Ms. Kim - reiterated that for this charge, the model attempts to capture benefits as credits purchased
by the municipality and includes capital costs and recurring O&M costs beyond the timeframe when the
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model is generating purchasable credits. In summation, the model attempts to capture all the costs in a
project, and by doing so, establish who the stakeholders are. She noted that they had hoped to have the
draft finalized by the meeting but would welcome comments so that it can be finished soon. She also
added that they are soliciting additional help on the committee, especially from those with experience
in private structures, bringing private borrowers into the structure, and borrowing SRF financing. She
also asked if any board members know of case studies they could review to support their efforts.
Discussion and Questions
Martha Shells - noted that Vermont is changing its state legislation to allow private investors to borrow
from the SRF to ensure sustainable systems They are offering funds just below market rate, but above
what a public entity can borrow at. She indicated that she could put the committee in touch with
someone in Vermont.
Ms. Throwe - asked whether there were any board members who could provide guidance on the
charge.
Yvette Downs - asked to clarify that this portion of the charge is complete, and that it is seeking
approval.
The committee responded that was correct, and that guidance would be needed on part two of the
charge.
Mr. Holland - added that if others with experience in P3s and/or raising public money into private
structures for alternative delivery would be able to join and assist, they could use their help. He noted
that because of the issue's complexity and its plethora of interrelated issues (regulation, local policy,
securing revenue, procurement, various financing structures, legal issues, etc.), they had primarily
focused on how to procure private financing for water quality projects.
Mr. Throwe - noted that the work is necessary and important, and commented her interest in a charge
from a regional office's program where the state governors are playing an active role. She noted the
opportunity to provide recommendations and move forward.
Ms. Daniel - asked whether the workgroup was thinking about private equity and SRFs in the context of
social or environmental impact, or whether those were separate.
Mr. Holland - responded that it is a structure they could look at, but that to date they had been only
considering more traditional private equity.
Ms. Kim - added that if a project is targeted at a 5% return, it likely would not attract a private equity
investor but that if it had a low-cost leveraging mechanism it could be boosted and potentially become
more attractive.
DavidZimmer - noted that when his group in New Jersey is involved, they fund an entire project except
the small percentage that is not covered under the SRF. He noted that after thinking about the issue, he
only sees redevelopment projects as ones where SRF and private equity models could merge to split
risks. He added that typically he does not want to take on that risk but would rather fund his piece of the
project 100% with less than 2% interest.
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Mr. Holland - responded that Mr. Zimmer's point made sense and added that because the Bay Program
deals with nonpoint source pollution, some of the financing needed would not qualify for the SRF.
However, if there were a way to subdivide the financing and generate water quality credits, for which
there is a demand, that could be an idea the Bay Program may like to explore further.
Mr. Zimmer - commented that his perception is that the SRF works on a larger redevelopment project
with a municipality, of which stormwater is an aspect. However, since SRFs cannot fund stormwater
projects, he suggested that a municipality would take on the risk and loan funds for the redevelopment
program. The municipality would approve of the project and rates, so they would borrow funds, lend
them, then be compensated for the construction risk. The redeveloper would agree to provide benefits
for a period of time under contract and would receive inexpensive funds in exchange. Finally, a private
equity investor would finance the remainder of the project. Mr. Zimmer indicated that this was his sense
of how the SRFs could be leveraged with P3s.
James McGoff- noted that he could think of only one example from the SRF program, which is in
preliminary discussions now. The example concerns a large pump manufacturer in discussion with a
small start-up private equity investor interested in the $5-$10 million range and willing to look at the
shorter term. The pump manufacturer would supply its own funding to the project, and private equity
would be deployed at the start, with expectations of approximately 3% return over five to seven years.
The project would have SRF debt on the back side. He noted that in his experience, the only way to bring
in private equity is to look at the short term. He suggested that in the prior example, he would have the
manufacturer pay for the pumps and the SRF would fund the pump lines with its money on the back side
of the yield curve.
Mr. Hughes - noted that this idea came up during the P3 workgroup's discussions, and that they
searched for a blended SRF equity deal. He reported that based on that research, they only identified
ones where it was broken into several components. He expressed his opinion that because the SRFs are
so project-specific, they do not want to add a percentage of money to a larger project. He cited Carlsbad
as an example where the project was split, with the SRF taking on a piece.
Mr. Holland - noted that he had engaged in conversations in the Bay with SRFs who may be interested
in acting as credit aggregators, where they purchase water quality credits from privately developed
projects, regardless of how they were financed. They would be aggregated at the SRF and then sold at a
rate negotiated between the SRF and the purchaser - likely MS4 communities with permit obligations
which can be met with credit purchases over a longer duration. He noted this model could also prove
interesting.
Daniel Kaplan - asked who sets the price for the credits, and whether it would be a negotiation between
the credit supplier and purchaser.
Mr. Holland - replied yes, but that much of this is preliminary. He noted the Bay Program's desire to try
innovative strategies and added that everything is on the table because the total maximum daily load
(TMDL) is increasing and also because of compliance obligations. He noted that the role of the EFAB is to
help the Bay Program understand whether some structures being suggested are unrealistic, or whether
some are durable solutions.
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Ms. Throwe - asked the committee for a date for the Board to provide feedback, and after a short
discussion settled on September 10, 2018. She noted that the next step would be to send a form around
to the Board where members can concur and sign off with comments.
EFAB Report Out: Pre-Disaster Resiliency Investment and Finance
Ted Chapman
Jennifer Wasinger (unable to attend)
Mr. Chapman - noted that while the charge was quite expansive, the group had identified three primary
areas of opportunity for pre-disaster resiliency and financing:
•	Missions: this entails an attempt to discuss policy overlap and silos since there is a bit of this
topic in many other areas. The committee asked how they could make specific
recommendations for utilities and identified the issue of competing interests of missions for
groups such as the Federal Emergency Management Agency (FEMA), the US Department of
Agriculture (USDA), and others, where different departments and agencies have the same
purpose. He added that this may provide an opportunity for better alignment.
•	Messaging: he noted that outside of the EPA there is a need for better promotion, such as the
notion that best management practices (BMPs) exist, which can be applied and replicated. He
added that messaging can be lost on local leadership.
•	Money: a large reason for pushback is the lack of a comprehensive capital plan. Given the
competing interests at the local level, oftentimes there may not be a backup plan, but instead
the hope that an emergency does not occur, and if it does, federal safety nets are in place. He
added that these safety nets may disincentivize longer term planning. He likened this notion to
an insurance policy, and the decision between paying to avoid an emergency, or hoping one
does not occur.
Mr. Chapman remarked that the current document is approximately 45 pages long, in which it attempts
to highlight the three key areas of opportunity and make recommendations. As an example, he noted
the competing interests at the federal level, such as FEMA and SRF eligibilities, and whether they could
become more open-ended to include stormwater; and if stormwater were included, whether flood
control could be as well. He also noted the lack of data or mechanisms for determining the specific
effects of an emergency on a community, such as loss of tax base, loss of community, and others. Mr.
Chapman continued that based on his work at a credit rating agency, he has seen that many
communities consider business-as-usual options, but that he would rather consider those items relative
to credit, such as demographic shifts, collateral damage, contingencies that could occur, etc. He noted
that while investors certainly consider the rate of return, there is a growing interest in doing the "right"
thing, whether in respect to the environment, society, or governance. He noted that while Wall Street
does play a role, there is significant opportunity at the local level, where messaging is critical. He added
that Mr. Kaplan had discovered examples of cities that have looked at expanding beyond their silos to
look at the larger resiliency picture.
Mr. Chapman also noted the example of a system that may have put an asset into service in 1978, and
thus goes into the financial books at that value. However, the system may not know what the cost to
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replace the asset in 2022 will be, and thus that capital cost may not be in the budget. He added that
money and messaging have significant correlation, and that asset management and lifecycle costs will
appear as recommendations in the final report.
Mr. Chapman noted that there are many case studies, which he views as positive. He remarked that
oftentimes local communities do not want to be the first to try a new approach, but that there are
examples across the country where these strategies have worked well. He noted that while the group's
focus has been on flooding, there are other perils across the country that may also come into play but
that were deemed outside of the charge.
Discussion and Questions
Mr. Throwe - asked for an estimated time of completion.
Mr. Chapman - responded that he believed it would be done around September 30, 2018.
Mr. Chu - noted that a 45-page document may be daunting, and that a shortened version would be
appreciated.
Mr. Chapman - agreed and noted that the committee wanted to ensure the document served not only
the EPA, but local communities as well to demonstrate best practices and examples of occasions where
they have been successfully implemented. When asked what he viewed as the primary takeaways, Mr.
Chapman responded that messaging was a significant area of opportunity. He noted that local
decisionmakers may not know what is available to them. He also noted their focus on missions, and the
need for some clarity surrounding who should do what, any incentives, a potential hazard mitigation
program, and the notion that better resilience ahead of time may lead to greater eligibility of bailout
later.
Mr. Zimmer - asked whether the EPA's stance changed in internal discussions and with the FEMA
following Hurricanes Harvey and Maria, particularly regarding how new capital grants should be
handled. He added that his experience following Hurricane Sandy was that there were some differences
in opinion regarding SRF lending as capital grants and therefore duplication of benefits.
Dr. Sawyers - responded that there had been subsequent conversations on that issue and noted that
the FEMA has strict requirements regarding eligibility. He believes a workgroup was established to
discuss what portion may be available for SRF loans. When asked if there was a report, Dr. Sawyers
answered that he would see if one was available.
Mr. Holland - noted that the US Housing and Urban Development Agency (HUD) ran a successful
national resilience competition in 2015, with the intent of having local governments create and
institutionalize plans and frameworks for resilience thinking. He questioned whether anyone has
reviewed the plans that had been implemented in the wake of that competition, and whether those
cities' financial standing improved, or if there were impacts on decision making. He noted that he was
not asking the committee to conduct this research, but noted that the data is thin and this may be an
area to find new information.
Mr. Chapman - responded that in his experience, those participating cities tended to be larger, with
more human and financial resources and higher credit ratings. He added that Boston Water and Sewer
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Commission had taken those plans and incorporated them, but that the city was highly rated and had a
strong financial capacity prior.
Mr. Holland - followed up that he had been one of the subject matter experts and had worked with
poor communities and had found the competition to be highly effective. He added that highlighting the
operational aspect is critical so that recommendations can be operationalized.
Ms. Throwe - commented that resiliency could potentially dovetail with the regionalization charge. She
noted that the resilience bonds and collaborations with the Rockefeller Foundation, Goldman Sachs, and
others was fascinating, and continued that these are items the EFAB could consider as potential
recommendations.
Lori Beary- added that she may be able to provide a contact, and Mr. Zimmer followed up that Shalmi
Valhalla was hired by the Rockefeller Foundation and that her group may have metrics.
EFAB Report Out: Water System Regionalization
Eric Rothstein
Linda Sullivan
Linda Sullivan - began by announcing that the group's executive summary is almost complete, although
work remains on identifying longer-term solutions and innovative ideas. The group's next step is to hold
an in-person workgroup meeting to brainstorm additional ideas. She continued that while the issue is
broad, the committee is attempting to narrow the charge to look at implementable items. She noted
that there is significant fragmentation of the water market in the United States, with additional issues
surrounding water quality and infrastructure, with regionalization as a potential solution. The group
reviewed the issue from a structural perspective and identified several structural options for regional
solutions including public authorities, municipal systems, privately owned systems, P3s, and public
cooperatives. They reviewed evaluation criteria advantages as well as barriers to regionalization, many
of which depend on the system, location, local political issues, and more.
Mr. Rothstein - noted the complexity of the subject matter and its implications for existential issues, like
how to structure utility governance and equitable finance infrastructure investments, which have made
defining the charge itself difficult. He also noted the differences in potential solutions depend on
whether a system is small and rural versus suburban or urban. What works in one place will not
necessarily work elsewhere. He explained that the charge expressed an interest in incentives regarding a
change in governance in utilities and the difficulties in honoring local control and decision making, while
at the same time recognizing that local decisions can disadvantage customers and populations that
cannot defend themselves. Providing populations with access and ability to afford water and
wastewater services has been a difficult issue, with some general ideas but few silver bullets. He noted
that the executive summary discusses various regionalization structures and potential options that
might be successful in advancing their adoption. He provided examples such as having SRF programs
provide some level of funding, preferential rates, or grants for regionalization studies. Mr. Rothstein
added that a challenge in the committee's future work will be to explore the mechanics of how
regionalization could work. He listed Alabama and Kentucky as two progressive states in regionalization
with interesting examples of successful steps they've taken, which may be applicable as models
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elsewhere. He noted the difficulty in trying to prescribe governmental options when considering a very
diverse set of states, with highly different ways of thinking and managing programs.
Ms. Sullivan - indicated that much of the group's discussions have gone beyond financing solutions and
looked at how regionalization might level the playing field of what is required to effectively operate a
water system and contribute to making it affordable in low-income areas. She reiterated Mr. Rothstein's
point that there is not a one-size-fits-all solution, and that the committee is looking at this charge as
having different options that a community could consider.
Mr. Rothstein - noted the immutable fact that the large number of systems is inefficient and, in order to
have increased water affordability, regionalization of systems must occur. Yet, this consolidation also
means a reduced number of utility directors, CFOs, and others associated with the systems. He also
noted the dilemma of the many communities or subpopulations within larger communities that are not
in the position to afford financing their infrastructure. He remarked that the fundamental decision is
whether to subsidize these improvements to some degree, or to essentially determine that water and
wastewater services are not a social good and that those who can afford to pay associated costs have
access, and those who cannot do not.
Discussion and Questions
Ms. Throwe - asked about the timing of the proposed in-person workgroup meeting and wanted to
ensure the group was continuing to move forward.
Ms. Sullivan - responded that the idea for the in-person meeting came up that day during the
workgroup breakout session, and they are just beginning to work on its logistics.
Ms. Throwe - replied that a few years ago a transit-oriented development charge had a workshop with
interesting results. She noted her interest in the idea.
Ms. Himmelberger - noted that California had passed human rights legislation that included some
mandatory regionalization. It detailed that if a small utility is failing and not meeting public health
requirements, it can be forced to consolidate with a larger utility. She noted that the most significant
problems stem more from the larger utilities than the smaller ones. The small utilities are glad to be
taken over but convincing the bigger utility of the benefits is harder. The state is attempting to
incentivize the consolidations through SRF funding deals for certain projects that the larger utilities want
to undertake. She noted that several case studies are on California's consolidation website and added
her surprise that the smaller utilities in California were eager for the consolidations, as she had the
opposite experience in New Mexico. She reiterated that California has some good information and case
studies if the committee has yet to review those.
Ms. Downs - thanked the committee for its hard work. She noted the difficulty of politics entering into
these decisions and provided the example of Cincinnati, where a 50-year agreement to share resources
had almost come to fruition, until differences in politics caused the plan to fall through. She also noted
her interest in seeing additional discussion of resource and cost sharing, as those can be viable
alternatives to relinquishing autonomy. She added that she would be interested in the in-person
meeting, as her experiences with regionalization have been mixed. She noted a valuable addition could
be a lessons-learned section from the times regionalization did not succeed.
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Ms. Throwe - suggested that as the committee moves forward with the meeting planning, they utilize
the Environmental Finance Centers (EFCs).
Khris Dodson - noted that New York is engaging in some work at the county level looking at
opportunities to share prior to regionalization. Another EFC member reiterated her interest in the EFC's
involvement in the in-person meeting.
Mr. Chu - added that he hoped the committee would include the Wichita EFC and other midwestern
perspectives, as regional differences are acute, especially with regards to rural communities.
Adam Slade - introduced himself and informed the Board that his organization had published a report
titled Drinking Water 1-2-3, which has some discussion of regionalization and service sharing.
Mr. Meister - asked whether the committee had further details on Alabama and Kentucky's successes in
regionalization.
Mr. Covington - informed the group that several years ago Kentucky had well over 1,000 utilities, but
today has a total of approximately 400 community and noncommunity water systems. He noted that the
state does not have utilities serving less than 500 people, which are common elsewhere. He provided an
example of a county in eastern Kentucky that is mountainous and poor, which went from over 100
utilities to three. He noted another example of a western county that consolidated 13 utilities to three,
two of which are managed by the same entity. He continued that these changes did not occur overnight,
but began to occur in earnest in 2000, when planning areas were established around the state. Mr.
Covington added that Kentucky rarely adds new systems, but instead first looks to regionalization and
while it may not ultimately be the option chosen, it is always on the table. He informed the Board that
Kentucky has one of the highest populations served by potable water in the country, currently at about
95%, which is second only to California. He added that in Alabama, regionalization is based off health-
based violations and if a community has a violation, they either must fix it themselves or merge with
another utility that can. Alabama does not have the number of health-based violations that other states
have, in part thanks to this policy.
Janice Beecher - added that a large contributor to its success in Alabama was someone in leadership
who championed it. She also cited the 1996 Safe Drinking Water Act (SDWA) Amendments' Capacity
Development requirements as providing benefit.
Mr. Covington - added to Ms. Beecher's point that a key for Kentucky's regionalization successes was
that the governor considered potable water for the whole state a major policy initiative and worked for
bipartisan legislation providing resources for planning and funding. The state used severance and packet
settlement money to fund infrastructure, and until the 2008 financial crisis the issue received significant
funding. Mr. Covington then reiterated the importance of strong leadership.
Ms. Himmelberger - suggested that keeping the focus on public interest is key, and that the issue is not
about the utilities but about serving safe water. She noted an example in Arkansas that seemed to be a
clear-cut scenario for regionalization, where a small utility had violations, a deteriorating well, no
operators, and all volunteer-provided support. A neighboring utility was willing to take them on but
asked that when the pipeline was installed to connect the systems, people along the pipeline also be
added. That stipulation caused the deal to fall apart. Ms. Himmelberger suggested that it would be
beneficial if at times a regulatory entity could enter and determine that the regionalization must occur,
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as state dollars would otherwise be wasted. She noted that Pennsylvania has some language in its
legislation that if consolidation saves money and a utility refuses, they must procure funding elsewhere.
Mr. Rothstein - reiterated the difficulty in working with some perverse interests and commented that
many board members benefit from larger numbers of systems, as this means more clients and issues to
solve. He noted that the industry may need to contradict the conventional ratemaking guidance and
pursue options such as funding for affordability programs and class subsidies to effect better long-term
outcomes.
Ms. Beecher - responded to Ms. Himmelberger's comment and noted that what she described was a
classic economic regulatory question, where there is a monopoly, so economic regulation substitutes for
a competitive market, and complements local markets. She noted that these types of regulations are in
place but that they are not applied well to the water sector. She added that she is writing a brief paper
on economic regulation in Michigan for the same reasons and while it may not be a panacea, it also does
not require the invention of something new; instead it just requires applying an existing strategy to this
specific issue.
Mr. Chu - thanked the committee and noted the complexity of the project. He asked what the
committee's plan was for creating a more manageably-sized deliverable.
Mr. Rothstein - responded that the in-person workgroup meeting would help the committee to define
some substance and that their work ahead would focus on the kinds of financial incentives to identify
and the best approaches to include. He noted that while they could talk about government structures,
they felt that in staying true to the EFAB they should focus on financial tools that could be a part of a
toolbox and applied in various contexts. He imagined that the charge would require a few more months,
but that they would know more following the workgroup meeting.
Wrap-Up/Adjourn - Day 1
Ed Chu
Joanne Throwe
Ms. Throwe - expressed her excitement to see relatively new board members taking on leadership for
some of the charges, and that some of the longest-serving members are using their expertise in new
charges. She asked members to provide additional support to the Chesapeake Bay charge and
encouraged especially those not currently engaged in charges to get engaged. She noted her excitement
and anticipation for further presentations and discussions the following day.
Mr. Chu - seconded Ms. Throwe's sentiments and asked the Board to consider improvements to the
charges and deliveries overnight ahead of a discussion on the topic the next day. He then provided some
information for the group dinner and new member orientation and closed the day's meetings.
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Day 2 - August 22, 2018
Opening Remarks - Day 2
Ed Chu
Joanne Throwe
The meeting began at 8:45 am.
Ed Chu - welcomed everyone back and remarked that the dinner the previous night had been a fabulous
opportunity to talk and mingle. He thanked Ms. Crichlow for arranging it.
Ms. Throwe - asked that attendees attempt to stay until the end of the meeting and promised to try to
stick to schedule. She also acknowledged new members David Zimmer, Bill Stannard, and Ted Henifin.
She noted that another new member, Carl Thompson, was unable to attend the meeting. She then
introduced the Alaska project, which she had previously worked on. She noted it's challenges and
unique nature relative to other charges the Board had taken on.
EFAB Report Out: Alaska Solid Waste Backhaul
Hope Cupit
Heather Himmelberger
Ms. Himmelberger - greeted the Board and introduced Gabriel/a Carvalho from EPA Region 10. She
noted that in her long tenure on the Board, this is the most complex charge she has seen. She explained
that the charge concerns remote, miniscule villages in Alaska ranging from tens of people to a couple
hundred. The villages are very remote with limited access; some can only be accessed via air or boat.
She continued that many of these villages operate with bartering as the primary form of economy,
presenting challenges for funding options. She explained that some federal agencies and the military
had constructed projects and in the process had generated and left legacy waste in the communities.
While in the contiguous United States the waste would typically enter a landfill, that is infeasible in
Alaska. She added that the proximity of the waste to the communities raises concern for leaching of
contaminants into waterways, especially as some of the waste is hazardous. The questions posed to the
committee were how to remove the waste from the villages, as leaving it there is also infeasible. Not
only is the content of the waste challenging but the locations of the villages pose problems as well. The
materials must be sorted and packaged properly, after which they must be shipped out, yet because
many of these villages are cashless societies there is a question of how to pay the villagers who do this
work. She noted that at every turn it appears there's a barrier. Ms. Himmelberger also added that there
is a pilot program in 15 villages to train residents on how to package the waste. She explained that in the
first few months of the charge the group spent time learning about and wrapping their heads around
the issue. Over the next few months, they spent considerable time developing the current report.
Hope Cupit- thanked the group for their efforts on a highly complex project. She noted that she had
rearranged her schedule to attend the meeting today given the importance of the issue at hand. She
explained that the group broke the paper into three components:
• A look at fee-based options, and what could be done at the village level.
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•	Financing and funding options, including other revenue streams that might help remove the
waste.
•	An exploration of innovative opportunities to fund and run the Backhaul program.
She continued that when they first received the charge, they were informed that the Indian General
Assistance Program (IGAP) funds would be eliminated; however, they later received information that
they could in fact be used for backhauling. She noted that this was not a solution but a component of a
funding toolbox that could help. Ms. Cupit continued that there are three steps to review how to
enforce a fee-based program. The first is understanding that it is a challenge that requires local solutions
specific to the tribes. The second is communicating to a collective voice, where all are in agreement and
there is a citizen advisory group for each tribe. The third is consideration of the best metric used in
choosing a fee. The group identified options such as a charge per person, a charge based on household
income, and a charge per unit of waste or unit of consumption. The group also reviewed a tax rate
based on property size. Ms. Cupit noted that in her research she saw many stations where the waste is
burnt, which requires significant gas and energy and results in negative air quality effects. She also
questioned whether illegal dumping would ensue if a fee were charged.
The group also considered the rate collection process and options such as a sliding scale per village and
richer villages subsidizing poorer ones. Ms. Cupit pointed the Board's attention to page 23 of the draft
report and asked for additional input on how to move money from the village level, to the hub level, to
the haulers in an efficient way. She noted that this section of the report contains a business template
with a long spreadsheet put together by Brent Anderson, Ms. Carvalho, and Dr. Lynn Zender. It looks at
recycling as an option for removing the waste and creating jobs and opportunities, all in a way that is
self-funding. She also pointed out a report from the Institute of Scrap Recycling Industries that evaluates
the scrap industry and its job creation in Alaska, generating an overall economic impact of over $195
million. Recycling has generated approximately 778 jobs with $79,300 as an average wage. She
continued that the committee had researched the creation of a co-op for each village.
Ms. Cupit directed the group's attention to the model on page 51 and explained its intentions were to
demonstrate the financial implications of the program, its fundraising needs, and its use as a tool for
revising projections as they become available. The plan looked at nine regions and each region's costs
over the next ten years for personnel, supplies, shipping, trucking, and more. The model considers
household costs and assumes that the Backhaul Program's costs are accurate and up to date, no capital
is included, there is no inflation, and that there is a linear cost structure for each region. She noted that
the model does not include operating or capital costs and does not account for inflation. She noted that
the model should allow each village to input values to determine what to charge and whether it will be
profitable.
Ms. Himmelberger - added that if anyone on the Board had expertise with business models, they would
appreciate feedback. She continued that the group also considered the military as an alternative funding
source. She questioned whether the military could conduct an exercise where they pack and haul out
the waste but determined that while that innovative use of the military has happened prior, it does not
represent a long-term, sustainable solution. She noted that the state of Alaska is under some financial
strain and thus cannot support a large portion of the project financially. However, the state could still
play a key role and pointed to the GSA, which shows the guaranteed prices from a vendor for a given
item. She questioned whether the state could provide something similar: a list of pre-negotiated
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transport costs, so that each village would not have to negotiate on its own and could quickly determine
costs.
Ms. Himmelberger added that the committee has attempted to find similar situations elsewhere but
noted the difficulty in finding them. Greenland has similar issues with backhauling waste from remote
villages; however, those villages are located on the coast and can be accessed by boat, while some in
Alaska cannot. There are some Canadian examples that the committee is reviewing. She explained that
phase one of the project was completing this report and phase two will be determining how to collect
the fees at the village level, who should collect them, and where they should go. For example, would it
make more sense to collect the money in the village and keep it within that community, or should it be
moved to a regional group level that then pays the costs. She noted that given the Board's background,
the question of how to move the money would be well-suited to its expertise, and she solicited help in
determining the most cost-effective and fair mechanisms. Ms. Himmelberger also noted that beyond
financing, the committee was considering which government structures and entities could be the most
useful and commented that the regionalization working group may have some parallels. The federal
government does not want to run the program or participate as the major purveyor of funds, so she
questioned what its supporting role could be. She added that in the workgroup breakout session the day
prior, the group discussed the potential need to educate the communities about the waste and
considered whether a foundation, the USDA, or the EPA could provide funding for the educational
pieces, separate from the backhauling component. She noted that the committee still has work to do
and welcomed any board members to join.
Ms. Carvalho - noted that she approved of the summary and was incredibly pleased with the
committee's work thus far.
Discussion and Questions
Mr. Chu - added that prior to discussion, he wanted to note that the EFAB is an advisory board to the
EPA and the Administrator. This means that at the charge's culmination, they need to provide a
recommendation letter with actions for the EPA to take. He acknowledged the challenges of this project
but asked the Board to think about what actions can ultimately be recommended to the EPA and the
Administrator at the culmination of each charge.
Mr. Holland - offered two points. The first was asking whether the group had reviewed the Alaska
Permanent Fund, which contains the oil and gas royalties and which every Alaskan citizen is eligible for.
He believed it totaled a couple thousand dollars per year. As a permanent revenue source with an
administrative board, there may be a mechanism for using a portion of these funds. His second question
was whether the group had researched Alaskan state law for establishing special purpose districts. He
noted that there is likely an example that already exists in the United States of one for trash collection.
Special purpose districts grant taxing authority to the district for a special purpose, which may provide
an alternative source of funding. Mr. Holland also noted that he receives inquiries from graduate
students working on capstone projects every year, and that a business plan for this charge would be a
potential benefit for both a student and the committee. He noted Columbia and Duke as two programs
that connect students with clients to engage in this type of work.
Mr. Chapman - asked whether the backhauling would be eligible for Superfund money.
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Mr. Chu - noted his support for all of Mr. Holland's ideas, and asked once again how to take the group's
work and identify actionable items for the EPA. He noted that questions about using Superfund money
are the types of questions he would ask and answered Mr. Chapman that Superfund money would not
be applicable here, but that the EPA programs concerning Brownfields could potentially be leveraged.
He reminded the group to consider how the EPA could act on each idea that arises.
Ms. Carvalho - added that the state has a solid waste program that has permitting authority, so it does
inspection. The approach has been to work with the communities to get land permitted, but that has
been a challenge for the state. Alaska is not at the point where it could take enforcement actions. She
added that she often hears that contractors are in the communities but that their waste is not being
handled properly. She noted that this could be an opportunity for the state to engage and make the
project successful.
Mr. Chu - commented on the good discussion and added that a question arose on whether the Board
should comment on the EPA's oversight of Alaska's Solid Waste Program. He noted that the challenges
in Alaska are significant and that both the state and the EPA are attempting to work within the context
of geography, social systems, and politics. He returned the conversation to what items may be
actionable for the EPA.
Ms. Himmelberger - responded that the mechanism by which the EPA has been funding the program -
through IGAP - is unsustainable and proposed that determining a business model or fee-based structure
could be a direct role for the EPA.
Ms. Downs - asked whether Ms. Himmelberger meant that this recommendation to the EPA could
potentially consist of advising them to transmit the report to the state or community.
Mr. Chu - responded that was not necessarily the case but that for the Board to be effective, the
recommendation must be actionable. He noted that he would prefer not to see a year's worth of hard
work result in an action of suggesting the Administrator pass along the report to the state. He raised the
topic of other funding sources that may be available and suggested that those may provide an
opportunity for clear, actionable items.
Ms. Cupit - asked whether the document would be public once it was sent to the Administrator, and Mr.
Chu responded that was correct.
Ms. Downs - thanked the group for their work and asked what the average income in the villages is, as a
means of understanding how different rates per household would affect percentage of average income.
Ms. Throwe - responded that incomes are typically subsistence wages.
Ms. Kim - commented that Alaska is carbon rich and questioned whether tribes have access to
substantial amounts of land. She continued that if they do, they might create a carbon offset program,
and noted that her previous employer worked on a similar, successful project in southern Alaska. It was
also noted that tribes possess land through regional and village corporations but that they do not
actually own the land and that an offset approach would be interesting.
Marie Roberts De La Parra - commented that the US Department of Transportation (DOT) possesses
funding for infrastructure and revitalization needs.
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Ms. Beecher - asked that additional consideration be given to externalities. She noted that the
committee might review the existing literature and consider ways to allocate costs to the originators of
the problem. She added that there is a cultural story at play as well, in the notion that where there are
significant areas of open space, anything goes, but this mentality does not consider the connection
tribes have with the land.
Ms. Himmelberger - responded that an item the committee would like to review are how the Federal
Acquisition Regulations are applied across the country, and whether it is in a fair and uniform manner.
She noted that if they are not, this may be an actionable item for the EPA to address.
Mr. Arndt - noted that the committee could research the petroleum industry to understand how they
address waste backhaul when operating in the region.
Ms. Throwe - noted her interest in hearing more from the group as they continue their work. She
thanked Ms. Carvalho for her dedication, as well as Dr. Zender. She asked whether the group would be
completing the report in October.
Ms. Himmelberger - responded that the plan is for this portion to be complete by October but that a
second piece of the charge may unfold, in which the committee would gather additional information
and better recommendations, which would be completed by the next board meeting.
Ms. Throwe - commented that she noticed a trend of increasing numbers of second phases amongst the
projects. She cautioned against this, as the Board would be having a discussion of potential new charges
later in the day.
Mr. Chu - added that the Board should remember the opportunity costs of time spent on charges and
noted that new charges cannot be pursued if old ones are still ongoing. He also noted the jobs and
commitments that board members face in their personal lives.
Ms. Kim - noted that she had observed the charges becoming broader in her time on the Board, which
has resulted in committees breaking them into smaller pieces.
EFAB Report Out: P3/Alternative Project Delivery
Lisa Daniel
Richard Weiss
Ms. Daniel - began by noting that the workgroup had not received a specific charge to produce any
documents until the most recent term, when the group worked with Mr. Hughes to produce seven to
nine case studies of water P3 partnerships. She explained that the committee's current charge is to help
support products concerning alternative delivery.
Mr. Weiss - thanked the workgroup for their input. He explained that their charge is the development of
tools that could be employed for predevelopment activities in evaluating feasibility, ranging from
design-build to privatization, public-public, or public-private partnerships. He continued that the group is
focused on two tools, one of which is a learning module being developed by the EPA that the committee
is assisting Leo Gueriguian in reviewing, and another is a decision framework matrix for predevelopment
decision-making that is being developed by the workgroup. The matrix is a standalone document that is
currently nine steps, although he added that it will likely contain 10-12 steps once complete. It reviews
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who and what is involved and the financial, legal, engineering, and political considerations. Mr. Weiss
noted that most importantly, the matrix identifies motives, objectives, and barriers to pursuing
alternative delivery. He added that the matrix is approximately 80% complete and will contain additional
information on identifying decision makers. He noted that the matrix's applicability would vary based on
the type and size of a community. He reiterated that the matrix would be complementary to the
learning module, as the intent is for the two to be used together. The committee expects the matrix to
be complete by October 2018.
Mr. Gueriguian - added the workgroup has gone in a wonderful direction on the matrix. The learning
module and matrix would provide decisionmakers with information on choosing a path forward.
Ms. Daniel - added that the committee refined the title to "Decisionmakers Guiding Principles for
Project Delivery Options." She again thanked all the committee members.
Discussion and Questions
Edwin Crooks - added that the workgroup attempted to avoid recreating existing resources and noted
that the learning module provides extensive information. He explained that they attempted to create a
tool to help decisionmakers who are considering alternative mechanisms, but do not know how to
begin. The goal of the document is to walk a decisionmaker through the early stages where all options
are open. He noted that the document does not advocate one option over another, but instead provides
information on what considerations must be taken into account when thinking about alternative
delivery.
Ms. Beecher - asked whether the document is aimed at providing information for the process,
evaluation, or projects, and noted that those are three different areas that the committee could provide
guiding principles for. She asked for clarification on whether the group is offering principles for those
who are undertaking evaluation.
Ms. Daniel - responded that the intent of the document is to set up the framework for evaluating and
thinking through options.
Mr. Holland - noted that predevelopment has a specific meaning for the P3 spaces and commented that
the document looks to be focused on program predevelopment. He suggested clarifying that the
document concerns programmatic predevelopment, as opposed to project predevelopment. He added
that many municipalities have recognized that predevelopment is not financeable for project
developers, and that there are ways to engage in project predevelopment where bidding contractors
have sufficient information to price their services.
Mr. Kaplan - said when he has discussed it with project managers ranging in experience, they have done
the projects and acknowledged the benefits of guaranteed maximum price contracts. However, because
design-bid-build is so prevalent in state law and projects must undergo review by the state board, there
are barriers. He noted these as practical problems with how project managers perceive P3s.
Mr. Meister - responded that the workgroup's document is attempting to address that issue and
provide information on all the considerations that must be evaluated at the beginning. He added that
the committee's idea is for this 8-15 page document to provide high level concepts so that a project
manager can understand the initial questions that must be answered.
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Mr. Chapman - added that in Virginia there is a similar process and he thinks this will be a beneficial
document for those who are just learning about what to consider. He added that they go through a
similar process internally that allows decision making on a project-by-project basis.
Mr. Chu - thanked the workgroup for its work and announced a brief break. He noted there was a
member of the public who wished to make a public comment later in the day's agenda.
Environmental Finance Center Updates
Khris Dodson
Mr. Chu - reconvened the meeting and remarked that when he was working in Region 4 there were two
Environmental Finance Centers (EFCs), but once he arrived in Region 10 there were none, and he
worked with Region 10 staff to establish one in the region. He introduced Mr. Dodson and noted they
were working hard at the agency to find funding for the EFCs.
Mr. Dodson - began by directing the Board's attention to a draft brochure in their folders, which
provides a basic overview of the EFCs. It provides information on what the EFCs offer such as technical
assistance, training, and facilitation. He explained that the EFCs' work is management and finance, and
that through facilitation, they conduct some cost benefit analyses for projects such as regionalization.
He noted that there is one EFC per region and two in Region 9, and that while many focus on the regions
they are in, they also work at a national scale. Mr. Dodson noted that different EFCs have different areas
of expertise, resulting in a set of complementary skills. He explained that in addition to the draft
brochure, each EFC has an additional one page insert that can be added to further explain its unique
strengths and projects.
Mr. Dodson then presented some ideas the EFCs hope to pursue in the future and asked the Board for
any feedback. One project area was rural resiliency, given rural populations are growing older and
decreasing in wealth and size. He commented that it may not be drought or floods that hurt them
financially, but the erosion of their communities and infrastructure. Mr. Dodson provided an example of
the south shore of Lake Ontario, which had significant flooding last summer. Tourism and agriculture are
the primary economic drivers, so the EFC is conducting economic assessments to determine how
resiliency can be maintained. He also noted affordability as an area of interest, including microfinance
models, Go Fund Me pages for water utilities, and more. Stormwater utility development, climate
resiliency, and work with small systems are additional areas of continued interest. He noted that he had
spoken with the Water System Regionalization co-chairs and offered EFC support in their workgroup.
Mr. Dodson also reminded the Board that the EPA's funding provides a small amount of the EFCs' overall
budgets - approximately $60,000 this year - and reiterated the EFCs' commitment to supporting the
Agency and the EFAB.
Discussion and Questions
Mr. Walker - asked for a clarification on the EFCs' role with the EFAB, and what the relationship
between the two is.
Mr. Chu - responded that the agency has supported the EFCs for many years, and that the EPA Regions
as well as Headquarters find enormous value in their efforts. He added that there may not be a formal
connection between the EFCs and the EFAB per se and opened the discussion for others to contribute.
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Ms. Throwe - added that the EFCs could be utilized as expert witnesses as their work on local levels
could provide reality to the Board's charges. She noted the symbiotic relationship between the two
groups and emphasized its potential for adding value to projects.
Dr. Sawyers - added that he would go so far as to say there is a formal relationship between the EFCs
and the EFAB. He noted that he has continued to advocate for additional funds for the EFCs and
explained that because the EFCs have staff and graduate students available to provide support, they
make up a significant footprint to the Board. He also commented on the overlapping project work, such
as the work UNC's EFC did on P3 projects, as well as Ms. Himmelberger's work in support of not only the
EFAB but the EPA as well. He concluded by reiterating his view of the EFCs as a formal extension of the
Board.
Mr. Hughes - asked whether the EFCs are a resource for the Board to engage for research. He noted
that he has had a difficult time grappling with the fact that the EFAB is an advisory board, not a research
organization, and that it is supposed to be advising based on the research it sees.
Dr. Sawyers - responded that during his 12 years on the Board it was a working board, with members
writing full board reports. He added that he would discuss how to facilitate work going forward with Mr.
Chu, Ms. Throwe, and leadership at the EPA.
Ms. Himmelberger - added that while the $60,000 the EFCs receive from the EPA is a small portion of
their budgets, that money differs from other funding they receive. She described this money as their
innovation funding, which allows them to pursue new and difficult ideas. She provided the example of
asset management at small systems, and how the EPA funding was the means by which she was able to
pursue that topic. She noted that decreased funding from the EPA stifles innovation, especially given the
networks of students she has access to. She noted that they can work with the EFAB to take an
innovative idea and continue it, especially with regards to on-the-ground implementation.
Ms. Throwe - encouraged the Board to utilize the EFCs and thanked them for all of their work.
EPA Water Infrastructure and Resiliency Finance Center Activities
Sonia Brubaker
Ms. Brubaker - introduced herself as the acting director of the Water Infrastructure Resiliency and
Finance Center and expressed her excitement to work with the Board in this capacity. She noted that
she would provide some information and updates on the work being undertaken at the Center and
added that the Board had provided a broad range of recommendations that they are now implementing.
Ms. Brubaker continued that over the past year they developed a Water Finance Clearinghouse, which is
a web-based portal and one-stop-shop for all funding sources and resources for water finance. She
added that the Clearinghouse has received approximately 40,000 hits since being launched last year. She
explained features of the Clearinghouse, such as the capability for states to look at their own
information and update it to reflect current annual funding allocations and better describe the work
they are doing. She noted that there are over 130 state contributors keeping the information up to date
and expressed her excitement at the number of visits the site has received. She continued that the next
phase of the Clearinghouse is to develop a learning portal to provide access to modules on water finance
topics. Ms. Brubaker explained that they determined there was a need for additional information and
guidance on how to continue once funding sources have been identified, such as how a system can
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finance a water loss project or how a homeowner can finance replacement of their septic system. Ms.
Brubaker explained that they are developing learning modules to present this information, which are
self-taught and will be accessed through the Clearinghouse. She noted that some board members are
already familiar with the P3 module that will be published in the future but explained that the first
modules nearing completion pertained to SRF, WIFIA, and septic systems. She conveyed her hope that
these first three would be available next month, and that an additional module would be published in
each subsequent month, covering topics such as agriculture, stormwater, water loss, and resiliency. She
noted that the modules look modern, are easy to use, and are targeted at local decisionmakers. Ms.
Brubaker noted that they are also working with the Southwest EFC to conduct research on different
methodologies for measuring affordability for essential services. Ms. Brubaker expressed that she is
looking forward to continuing to implement the Board's recommendations.
Discussion and Questions
Mr. Kaplan - informed the Board that King County closed on its first WIFIA loan in April. He noted that
the commitment was $134 million for a 5-year construction project at a fixed rate, which provides
certainty to financial planning and allows for rates to be more affordable. He added that King County
would be participating in a Government Finance Officers Association (GFOA) seminar to talk about their
experience, and thanked the EPA for their support throughout the process. He expressed his sentiment
that if Congress continues to support the program, utilities will be interested in participating.
Ms. Brubaker - responded that they are working on the WIFIA module now and will be adding case
studies such as Mr. Kaplan's once it comes out.
Public Comment
Ms. Throwe - announced that although the agenda listed the Board's discussion of additional topics at
this point, the public comment session would occur first as they were waiting on audio-visual support.
Mr. Scott Sigman - introduced himself as the transportation export infrastructure lead for the Illinois
Soybean Association and thanked the members of the Board for their time. He recounted to the Board
that his organization conducted an economic impact evaluation a few years ago on what it would take to
improve the locks and dams on the Illinois and Mississippi Rivers for the purposes of soybean transport.
During this evaluation, they realized that it was not solely the locks and dams, but the pools and levies
that would require improvements as well. The infrastructure faced a backlog of deferred maintenance
that the US Army Corp of Engineers (USACE) did not have the money to fully fix, so it was not fully
addressed. He continued that in 2015 they returned to USACE and asked if they had gotten ahead of the
challenge of improving the locks and dams. After an evaluation, they found that the cost had increased
to $599 million for the same improvements. Mr. Sigman explained that they again returned and asked if
the issue had been addressed as the waterways serve a critical role for a multitude of benefits, such as
municipal industrial water, cooling, irrigation, commerce, and recreation. The answer they received in
February 2018 suggested that deferred maintenance would now cost approximately $778 million. He
noted that had this been addressed much earlier, it could have been cost effectively resolved.
Mr. Sigman explained that his group is an organization of farmers who are increasingly interested in
water and noted it as a necessity that must be defended at all costs. He informed the Board that Illinois
is the country's largest soybean producer with 60% of the crop exported. This includes export of the
water used to grow the soybeans. Given the growing global population and significant number of areas
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that cannot produce their own food, his organization is planning to help address that challenge. He
explained that his point in coming to the EFAB was that there is a need for cross fertilization and
dialogue amongst many related groups around the country. He noted that it takes a bit of a stretch to
reach beyond comfort zones and go beyond agriculture, but he expressed his hope that he could help
inform the EFAB and could also learn from the EPA to the benefit of others. He continued that whether
engaged in the maritime administration, commerce, or supply chain, increasingly these groups are
intertwined and silos need to be broken down. He reiterated Mr. Chu's point that there are synergies
where value can be gained.
Discussion and Questions
Mr. Arndt - noted that he was not well-versed in the interagency aspects of water but pointed out that
one of the pieces of WIFIA legislation is sustainable funding for the USACE, and that the USACE has not
yet stood up their portion of WIFIA. He expressed his curiosity as to whether that is an avenue that Mr.
Sigman's organization has looked at.
Mr. Sigman - noted that they are keeping tabs on the USACE and Congress' ability to fund it. He
explained that side of the WIFIA is learning from the EPA's side of WIFIA, and that the USACE could use
some improvement. He added that they try to collaborate with the USACE in order to help lift them as
it's everyone's federal government. He noted that they are constantly learning, educating, and looking
for opportunities to increase cost savings on projects based on the time value of money. He added that
if they can secure rates that are more favorable to the projects, the ultimate benefit is to the
community.
Ms. Cupit - asked if Mr. Sigman could clarify what he meant by exporting water.
Mr. Sigman - responded that water is embedded in the soybean, and as a resource that other states do
not have, when they ship the soybeans to other states and countries for animal feed, vegetable protein,
oil, and more, they are also shipping the embedded water.
Board Discussion: Additional Topics
Ms. Throwe - announced that Mr. Chapman had an opportunity he would like to present.
Mr. Chapman - thanked Mr. Chu and Ms. Throwe for adding him to the agenda. He explained that his
idea was a bit different, but similar to WIFIA and the Transportation Infrastructure Finance and
Innovation Act (TIFIA), which has worked. He continued that from the Wall Street perspective, roughly
the 4,000 biggest water systems have rating relationships. They have access to low cost of capital. In the
next tier are large and medium systems that might access the SRF, and finally there are the 5,000-7,000
smallest systems that may access the USDA. However, their access is less certain given that they are
small and rural with naturally aging infrastructure and population. He continued that regardless of what
comes out of Washington, DC, it will likely be the case that states and local governments will fund most
of the cost of this infrastructure. Mr. Chapman provided P3s as an example of projects that the private
sector is interested in and if there were a specifically structured vehicle that could be replicated easily,
perhaps that could work. He noted that as a broad observation, P3s in the Middle East, Australia, and
Europe have been utilized for decades. However, in the utility sector projects such as Rialto, Bayonne,
and Poseidon have been one-offs with one-on-one confidential negotiations that are not easily
replicated.
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Mr. Chapman proposed master limited partnerships (MLPs) as a potential opportunity. He noted that as
someone with public finance expertise, he does not deal with these himself but has observed that there
are about 90 currently in play with a market capacity of $400 billion ready to participate but that do not
know how. One of the generic benefits of MLPs is that there are tax benefits; they are similar to a
corporation but are only taxed once. The IRS tax code says, "any mineral or resource/' but there is a
restriction that says water is not included. It has been in place for 20-25 years, but an act of Congress
would be necessary to revise it. Mr. Chapman indicated that if this is the direction that things appear to
be moving, why not consider this $400 billion in capital as a potential source? Currently, the majority of
MLPs are in midstream energy, such as oil and gas exploration, and there is a strong, direct correlation
between MLPs and the price of oil. When looking at where the spending is coming from, there is a
backlog of capital expenditure that is not being addressed. Some may be attributed to the 2017 tax
reform, some because interest rates are going up and some because of the notion that DC may produce
an infrastructure package. Mr. Chapman noted that it would be similar to the TIFIA and WIFIA, where
regionalization and attracting investors would take scale. He provided an example of a Pennsylvania
bridges project, where there were 558 structurally deficient bridges across the state. Private capital
funded upfront costs and allowed the state to address all the bridges at once, providing scale and better
pricing. He commented that if there is an opportunity for 558 bridges and a couple billion dollars rather
than smaller microloans, it will attract more private equity and capital as well as better pricing.
Mr. Chu - noted that he hoped they could revisit the substance of Mr. Chapman's talk in the future. He
added that it was a good launching point to discuss the Board's future planning process and how to
engage its members to come up with projects and charges for the next year. He reminded the group
that this is a public service they provide and that the work they choose to take on has important value to
himself, the agency, and hopefully to the board members as well. He explained the process by which
new projects are typically selected. In the fall he and Ms. Throwe go to the regions and the program
media office and seek ideas for challenges they face that involve financing. Then the Board reviews the
projects and determine which ones to take on. Mr. Chu provided the criteria that has historically been
used when selecting projects and asked the EFAB members to comment on whether they would like to
continue to use it moving forward. He also asked for feedback on the project work the EFAB currently
engages in and whether there may be different options to pursue. He noted two recommendations from
earlier in the day that the EFAB could discuss, the first being that the EPA should continue to support the
WIFIA program and the second being a recommendation to the advisory board about the role of the
EFCs. He added that these would differ from yearlong projects and sought feedback from the Board.
Mr. Chu also solicited opinions on how the work is completed. He noted his desire to determine how to
most efficiently use time to produce deliverables that have an impact. He noted that when a
recommendation goes to the EPA, the best chance of receiving an answer is if the recommendation was
actionable. He then opened discussion up to the group to ascertain the Board's sentiments as he and
Ms. Throwe begin the planning process for the upcoming year.
Ms. Throwe - added that a few years ago she discussed lead financing as it was timely, although it was
not something that the EPA had approached the EFAB about. She encouraged the Board to voice what
they are seeing in order to match those observations with what the EPA needs.
Ms. Kim - asked whether other offices are aware of the EFAB and its capabilities and commented that
oftentimes the charges are written as reports, where the EFAB revisits existing information and creates
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summaries. She suggested that the Board clarify its role as an entity that does not just write reports but
can provide real-time advice.
Mr. Chu - commended Ms. Kim on an excellent point. He added that the EFAB could better clarify client
expectations at the outset. He also responded that yes, other offices in the agency are aware of the
EFAB, and that in recent years it has been water-related. He added that while the Alaska Backhaul
project may seem off base, it should not, as the agency needs help on a wide array of topics.
Dr. Sawyers - commented that the notion of recommendations being actionable and implementable is
critical. He encouraged the Board to present ideas and noted that in his time on the EFAB they made
recommendations that they knew the agency would disagree with but wanted to provide that opinion to
the Administrator. He reminded the group that the EFAB is an independent board and that part of Mr.
Chu's job is to corral the agency and ensure they are aware of the EFAB.
Mr. Meister - suggested that the EFAB clarify the process that was used to create the letter to the
Administrator on the P3 project in 2017 to encourage EFAB members to work together within a
framework and process to generate written communication back to Mr. Chu, Dr. Sawyers, and the
Administrator in real-time. He noted his interest in what Mr. Chapman presented as it contains specific
relevance and would represent an actionable item by the EPA and Congress to respond to some of the
infrastructure financing challenges posed by the 2017 federal tax legislation. He thanked Mr. Chapman
for the succinct and informative suggestion. In response to Mr. Chu's two suggested recommendations
from earlier in the day, Mr. Meister responded that there were varied experiences with the WIFIA, and
that the EFAB could be a forum to raise issues and clarify concerns in real-time so that they can be
addressed. He added that the role of the EFCs is another example of a question that can be clarified
quickly in the present.
Ms. Himmelberger - commented on the project timelines and noted that while Mr. Chu may reach out
to the EPA for projects in September 2018, the committees do not start work on them until February
2019 but they are expected to have completed them by September 2019 in time for the next round of
charges. She remarked that this does not allow sufficient time and expressed concern that the projects
are being rushed. She noted that on complicated projects such as the Alaska Backhaul charge, it may
take months to fully understand the issue before any work can be done. She suggested counting the
year to work on the projects as the time the committees are spending on them, not the time from which
they are first discussed with the EPA. She also added that the in-person EFAB meetings provide valuable
time for collaboration on the charges and suggested extending the current 1.5 day meetings to 1.75 or 2
days long to provide more time for this.
Mr. Chu - responded that he and Ms. Throwe are compiling this feedback and would like specifics on
how they could engage in the charges differently. He commented that on other advisory boards, charges
are first discussed with experts before the Board decides how to proceed, rather than receiving them in
written form.
Mr. Holland - commented that as a co-chair on one of the charges, he felt there was not a great deal of
transparency regarding how charges are evaluated against the criteria and not much evidence of back
and forth with the EPA to ask some of the hard questions about the charges to receive specific answers.
He added that this process is essential to get charges defined. He also commented on the lack of
transparency in how workgroups or chairs are selected and suggested that there should have been a
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conversation rather than just an email informing him that he was a chair. He suggested that there be a
conversation and some ability for the co-chairs to have some back and forth on how the criteria is
applied to the charges prior to their official selection.
Mr. Rothstein - commented that the charges appear to be getting increasingly complicated, require
more time, and reflect a greater recognition of integrated holistic needs rather than being confined to
small project types. He suggested there may be potential benefit in taking some of the effort and
looking at how the EFAB works collaboratively with organizations such as those dealing with agriculture
for issues such as nutrient loading and phosphorus management.
Mr. Weiss - commented that it is necessary to define the scope of the charge when considering the
timeline.
Ms. Sullivan - commented that she would encourage more discussion on emerging issues and increased
flexibility to discuss issues that are relevant today. She noted that these ideas might spur a charge but
that having discussions as an issue occurs is important.
Mr. Chu - responded that Mr. Rothstein's comments highlight the need to make room on the agenda for
these other important issues, such as the soybean issue, that have a clear nexus on the nutrient side. He
noted the many interesting and critical issues that the EPA needs advice on, and the need to determine
how to make room on the agenda for them.
Ms. Roberts De La Parra - commented that she appreciated all of the input from others, as it closely
resembles what she herself has been thinking.
Ms. Cupit - noted that because she was a co-chair, she was unable to contribute to the Water System
Regionalization project. She suggested looking at the structure to ensure that the EFAB is doing justice
to the organization or group that solicited their help for a project, as she does not want to send
something back that is not useful. She also noted that she has spent Saturdays, vacations, and holidays
working on these projects and that when others approach her and ask about joining the EFAB, she tells
them to be ready to work.
Ms. Kim - expressed her sentiment that many of the recommendations are general and that there may
be a feeling of trepidation in making criticisms.
Mr. Chu - explained to the Board that recommendations and letters do not move forward unless there
is consensus. The group must decide if the characterization of a recommendation is one they agree with,
and while some may disagree with a given characterization, others may find it perfectly suitable.
Dr. Sawyers - acknowledged Ms. Kim's comment and the sentiment that the reports are subtler than
she may prefer and added to Mr. Chu's point that it is important to consider how a recommendation is
written in order to solicit a response. He noted that there is not an issue with a recommendation that
informs the EPA it is not going down the right path, but the way in which it is written matters.
Ms. Throwe - asked the Board to help ensure she understands the messages from their work, what the
recommendations are, and what the desired response is. She encouraged the Board to work with her to
make meaningful recommendations.
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Ms. Daniel - noted that it is difficult to build consensus with a large group, and that there must be
sufficient time for debate and healthy friction. She suggested finding time for that in these meetings.
She also noted that provocative ideas are harder to debate and build consensus around but that the
Board has an opportunity to do that.
Mr. Kaplan - questioned whether the EPA has provided advice regarding legislation on the WIFIA and
SRF to Congress and whether there may be a potential for a recommendation there.
Mr. Chu - clarified that board members are prohibited from lobbying and that the EPA does not lobby
either. Thus, the EFAB should not recommend that they take a position on legislative issues.
Dr. Sawyers - The EPA provides technical assistance but does not lobby. Congress will take the
information and make a decision.
Mr. Chu - noted that the purpose of the EFAB is to provide an experienced and diverse point of view
and added that the recommendations provided are ones that the full group agrees with. While this may
dilute views, it is positive for an advisory group.
Ms. Himmelberger - noted that the Water System Regionalization and Pre-disaster Resiliency
workgroups had calls every week for the duration of the summer, and while she could not attend all of
them she noted that the Board often gets a broad charge, goes too far back and lays everything they
know about it out, and then moves forward. She noted that it would help if the EFAB did not need to do
that background work first, but instead had charges that are more specific and focused on a single
aspect. Then, if the group wants to focus on a different one, it can be pursued the following year. She
added that this would help reduce the amount of time involved, as it is currently too demanding. She
reiterated the earlier point that it disadvantages the EFAB when individual members cannot participate
in multiple groups because they are so busy in one.
Mr. Dodson - responded to a question from Ms. Throwe asking for the EFC perspective, and he
commented that an interesting charge idea may be one that looks at China's recent decision to close the
door on recycling products and the resulting situation where local communities are spending 400% more
to recycle because there is not currently a domestic market. He added that this may change since the
market will likely establish, but a look at how to finance recycling could be pertinent. He also noted that
there was a previous report on green infrastructure that the EFCs dug into and provided significant
support on. He continued that building the EFCs into the project support can help with some of the time
input that the board members are spending. He added that he was not suggesting taking effort away
from the EPA staff, but that the EFCs could provide support with some of the meetings and calls.
Mr. Holland - added that once his group got into the process of the charge, the EFC engaged and helped
with clarification of the process of making the charge relevant. He suggested that the EFCs continue to
help define the charges as many tend to come up from research the EFCs are doing, and they have
tremendous insight on items such as the vetting and scoring processes.
Mr. Chu - announced that the EFAB would not be following the traditional planning process and would
take the comments back to review them. He asked those who did not speak up to please send their
comments on all the questions he previously raised, and new ideas as well. He suggested that those who
serve on other committees look at their practices to identify any that the EFAB can learn from.
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Ms. Throwe - outlined the schedule moving forward. She said that they would begin working on the
transmittal letter from the Chesapeake Bay workgroup. She indicated that she would attempt to listen in
on calls and provide any feedback she can. Ms. Throwe noted that the next meeting would be in
February or March 2019 in Washington, DC and that they would discuss new charges.
Ms. Brubaker - added that they could create a google form for feedback as well as criteria and charges,
so the Board could expect something coming out on that.
Ms. Himmelberger - noted that that dates tend to shift, and while she blocks off the original date
provided, six weeks out it changes, and she can no longer attend. She asked that if dates could be set to
the greatest extent possible, it would be helpful.
Mr. Chu - noted the difficulty in confirming dates and asked for the Board's patience. He noted that the
staff has done an outstanding job so far.
Ms. Kim - noted that there have been discussions about the need for capital from other sources, but
that she and Mr. Holland are the only two who represent private equity and private investor capital. She
suggested increasing representation from that industry on the Board.
Mr. Chu - ended the meeting at 12:02pm, thanked the Board, and wished everyone safe travels.
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