ENVIRONMENTAL FINANCIAL ADVISORY BOARD
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Karen Massey, CM#
Helen Akparanta
Brent And®rsort
Aurel Arndt
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Janice Beecher
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Mwin C'ooks
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Lisa Daniel
Marie D« La Parra
Yvett* Downs
Donna DucIunw*
Rick ©iardlna
Heather tl§Mnwlt»er§#f
Jeffrey Huqhe*
David tcan#
Suzanne Kim
Courtrt«y Kniqht
Thomas Liu
James McGolf
Chris Waiitej
G Tracy Mrh*«v Hi
Wayne Seat on
Blanca vogeon
Joanne Throw*
Jeffrey Walker
Jennifer Was1»g«r
Richard Weiss
Michael Shapiro
Desifiiaid
federaf'WPeiat
June 14, 2017
Honorable Scott Pruitt
Administrator
U.S. Environmental Protection Agency
Washington, DC 20460
Dear Mr, Pruitt:
On behalf of the Environmental Financial Advisory Board (EFAB), congratulations
on your appointment by President Trump and your confirmation by the United States
Senate as the 14th Administrator of the United States Environmental Protection
Agency (EPA). Our purpose in writing to you is to bring to your attention in-
valuable mission of EFAB as expressed in the body of the Board's Charter (enclosed
for your reference), and to highlight the critical role that EPA financing programs
have in helping state and local governments address their water infrastructure
funding challenges. We also want to directly express our commitment to supporting
your leadership efforts in this area and to highlight some opportunities for federal
action that can improve prospects for delivering effective and resilient infrastructure
to our local government partners.
Financial Advice and Counsel for Infrastructure Investment
The EFAB is chartered under the Federal Advisory Committee Act, 5 U.S.C. App, 2
and operates under applicable EPA policies. In accordance with the Board's Charter,
it is our duty to provide policy uUvkv and recommendations to the EPA
Administrator through the Office of Water with regard, but not limited, to the
following:
• "Reducing the cost of financing sustainable environmental facilities,
discouraging polluting behavior, and encouraging stewardship of national
resources" (Charter, Section 3.a);
• "Creating incentives to increase private investment in the provision of
environmental services and removing or reducing constraints on private
involvement imposed by current regulations" (Charier, Section 3.b):
• "Developing new and innovative financing approaches and supporting and
encouraging the use of cost-effective existing approaches" (Charter, Section
3.c);
• "Assessing government strategies for implementing public-private
partnerships, including privatization and operations and maintenance issues,
and other alternative financing mechanisms" (Charter, Section 3 e); and
• "Increasing the total investment in environmental protection and stewardship
of public and private environmental resources to help ease the environmental
financing challenge facing our nation" (Charter, Section 3,fa.).
Innovative and Cost Effective Environmental Protection
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The Board is currently comprised of 30 volunteer members, including experienced senior finance
professionals from a cross section of private businesses (15 members), state and local
government (8 members), major universities (3 members), and the non-profit sector, including
the nation's leading water industry trade association (4 members).
Our last biannual meeting was held on February 21-22,2017, coinciding with your first day as
Administrator. As a recent and relevant example of the Board's contributions, the Public Private
Partnership Working Group provided input throughout the development of a March 15,2017
report and companion perspective on public-private partnerships in the water and wastewater
sector entitled. "The Financial Impact of Alternative Water Project Delivery Models."1
National Need for Water and Wastewater Infrastructure Investment
The depth and breadth of the EFAB members' subject matter expertise, particularly in
infrastructure finance and private-sector options, make the Board a unique resource to you as
Administrator as you face our nation's daunting needs in the water and wastewater infrastructure
sector:
* Approximately $1 trillion will be needed over the next twenty years for the repair,
replacement, and expansion of drinking water systems.2;
* An additional $30 billion would be required to replace every lead service line in the
nation3;
* An estimated $271 billion in needs have been documented by the states as necessary to
meet current and future demands for wastewater treatment infrastructure over a twenty-
year period4, (because of difficulties in documenting long-term needs, nearly all of these
needs fall within the five-year period, 2012-2017)
Investing in water and wastewater infrastructure is essential for public health and safety and also
good for our nation's economy, including job creation and retention. The U.S. Bureau of
Economic Analysis ("BEA") in the Department of Commerce estimates that for every dollar
invested in public water infrastructure; $2.63 is generated in the private sector5. For every job
added to the water workforce, as many as 3.68 jobs are added to the national economy6. Finally,
the essentiality of water infrastructure also strengthens the sector's credit profile; historically the
default rate for water utilities is only O.C4%7.
Leveraging State Revolving Funds by Accessing the Capital Markets
1 Prepared by the EPA Water infrastructure and Resiliency Finance Center in partnership with the West Coast
Infrastructure Exchange and through the University of North Carolina Environmental Finance Center.
http://www.eFc.sog.uric.edu/project/atteroative-water-project-clelivery-modeIs
2 John J. Donohue, American Water Works Association (*AWWA"), March 16, 2017, Congressional Testimony, p. 2.
3 Donohue, AWWA, p. 2
4 EPA Clean Watersheds Needs Survey 2012 Report to Congress
5 Donohue, AWWA, testimony, p.2
6 BEA; Donohue AWWA, p.2
7 Donohue, AWWA, p.2
1
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We recognize the President's commitment to funding water and wastewater infrastructure; his
proposed 2018 budget includes $2.3 billion for EPA s State Revolving Funds (SRFs), a $4
million increase over the 2017 annualized continuing resolution (CR) level8, The budget clearly
reflects the administration's/your understanding that the Agency's SRF programs successfully
and effectively contribute to state and local investment in drinking water and wastewater
infrastructure.
As you also know, federal grants and state contributions provide equity to largely self-sufficient
state-run SRF programs that provide low cost funding to public and private utilities throughout
the country. The states and EPA have worked together effectively to expand the capacity of
these low-cost financing programs and save taxpayer funds by finding ways to effectively deploy
private capital The programs are viewed very favorably by the credit rating agencies. The EPA
estimates that by working with the private capital markets, the SRF programs have expanded
low-cost assistance capacity by more than $134 billion since their inception. The EFAB
members believe that leveraging public support with private capital, when properly structured
and overseen, can be an economical method to finance essential water and wastewater
infrastructure and to deliver safe water to all Americans, with a high return on investment.
Water Infrastructure Finance and Innovation Act ("WIFIA ")
Recognition that America's water and wastewater infrastructure challenge requires new
approaches led to the creation of a five-year pilot program, the Water Infrastructure Finance and
Innovation (WIFIA) program. The WIFIA program is based on the successful U.S. Department
of Transportation loan program of similar name, the Transportation Infrastructure Finance and
Innovation Act program. In response to this mandate, EPA launched the new WIFIA program to
leverage federal support and increase private investment in significant water and wastewater
infrastructure projects. With 43 letters of interest from sponsors of potential projects received to
date, the EFAB members anticipate that this pilot will demonstrate that WIFIA is an effective
tool for water infrastructure financing.
Utilizing the 2017 funding, the WIFIA program estimates that the credit subsidy could
potentially support $1.5 billion in direct federal loans. The President's 2018 budget would fund
the WIFIA program at a level that would allow for an additional $1.0 billion in credit assistance
in a time of significant government-wide austerity.9 The Board stands ready to inform and assist
you on matters related to WIFIA as you deem needed and/or appropriate.
Tax-Exempt Bonds for Financing Water and Wastewater Infrastructure
As Congress moves to focus on federal tax reform, we recognize the proven power and potential
of federally tax-exempt bonds to support private-sector investment in water and wastewater
infrastructure, as currently allowed by the federal tax code and state law. During calendar year
2016, tax-exempt bonds financed or refinanced more than $44 billion in water and wastewater
infrastructure projects across the United States10.
8 EPA 2018 Budget Document, p. 41
9 EPA 2018 Budget Document, p. 41
10 Securities Data Corporation
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As federal tax reform proceeds, we want to highlight some of the issues that you may encounter
that would beneficially impact water and wastewater infrastructure financing in addition to the
preservation of the municipal bond tax exemption generally:
• Potential elimination of the private activity bond "volume cap" for water and wastewater
infrastructure projects, or the provision of an additional volume cap that could be
authorized and administered by EPA (similar to USDOT's volume cap);
• Potential elimination of arbitrage rebate restrictions associated with water and
wastewater-related tax-exempt bonds to increase funding capacity for utility and SRF
issuers; and
• Potential expansion of safe harbor flexibility for private operators of publicly owned
water or wastewater facilities beyond the recently released Revenue Procedure 2017-13
management contract rules.
The Public Private Partnerships Workgroup along with the entire Board will be focusing on these
issues as well as other potential statutory or policy proposals that may affect water and
wastewater financing opportunities. The Board's objective will be to develop a series of findings
and recommendations for your consideration based on our review of the issues and proposals.
Conclusion
The EFAB supports a range of approaches to investment in America's water and wastewater
infrastructure - investment that is vital to protect human health and the environment and grow
our nation's economy. These approaches include leveraging public and private capital through
innovative financing, debt instruments, and tax policies. We appreciate the Administration's
focus on infrastructure and believe that the EPA should continue to play a valuable role with
respect to investment in the water sector.
Finally, we stand ready to provide our expertise as you work through these critical issues and to
provide you with any information you might need to further initiatives that promote sound
investment in our nation's water and wastewater infrastructure.
Sincerely,
Karen L. Massey, Chair
Environmental Financial Advisory Board
Enclosure
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UNITED STATES ENVIRONMENTAL PROTECTION AGENCY CHARTER
ENVIRONMENTAL FINANCIAL ADVISORY BOARD
1. Committee's Official Designation (Title):
Environmental Financial Advisory Board
2. Authority:
This charter renews the Environmental Financial Advisory Board (EFAB) in accordance with
the provisions of the Federal Advisory Committee Act (FACA), 5 U.S.C. App. 2 and relevant
Agency policies. The EFAB is in the public interest and supports EPA in performing its duties
and responsibilities.
3. Objectives and Scope of Activities;
There are many critical environmental financing issues facing our nation. Environmental
legislation places significant additional resource requirements on all levels of government,
increasing their infrastructure and administrative costs. At the same time, limited budgets and
economic challenges have constrained traditional sources of capital. Growing needs and
expectations for environmental protection, as well as increasing demands in all municipal
service areas, make it difficult for state and local governments to find the resources to meet their
needs. The resulting strain on the public sector challenges the quality and delivery of
environmental services.
The major objectives are to provide policy advice and recommendations on:
a. Reducing the cost of financing sustainable environmental facilities, discouraging
polluting behavior, and encouraging stewardship of natural resources;
b. Creating incentives to increase private investment in the provision of environmental
services and removing or reducing constraints on private involvement imposed by
current regulations;
c. Developing new and innovative environmental financing approaches and supporting
and encouraging the use of cost-effective existing approaches;
d. Identifying approaches specifically targeted to small community financing;
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e. Assessing government strategies for implementing public-private partnerships,
including privatization and operations and maintenance issues, and other alternative
financing mechanisms;
f. Improving governmental principles of accounting and disclosure standards to help
improve sustainability of environmental programs;
g. Increasing the capacity of state and local governments to carry out their respective
environmental programs under current Federal tax laws;
h. Increasing the total investment in environmental protection and stewardship of public
and private environmental resources to help ease the environmental financing challenge
facing our nation; and
i. Removing barriers and increasing opportunities for the U.S. financial services and
environmental goods and services industries in other nations.
4. Description of Committee's Duties;
The duties of the EFAB are solely to provide advice to EPA.
5. OfTicial(s) to Whom the Committee Reports:
The EFAB will submit advice and recommendations and report to the EPA Administrator,
through the Office of Water.
6. Agency Responsible for Providing the Necessary Support;
EPA will be responsible for financial and administrative support. Within EPA, this support will
be provided by the Office of Water.
7. Estimated Annual Operating Costs and Work Years:
The estimated annual operating cost of the EFAB is $400,000 which includes 4 work years of
support.
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8. Designated Federal Officer:
A full-time or permanent part-time employee of EPA will be appointed as the DFO. The DFO or
a designee will be present at all meetings of the advisory committee and subcommittees. Each
meeting wii! be conducted in accordance with an agenda approved in advance by the DFO, The
DFO is authorized to adjourn any meeting when he or she determines it is in the public interest to
do so, and will chair meetings when directed to do so by the official to whom the committee
reports.
9, Estimated Number and Frequency of Meetings:
EFAB expects to meet approximately two (2) times a year. Meetings may occur approximately
once every six (6) months or as needed and approved by the Designated Federal Officer (DFO).
EPA may pay travel and per diem expenses when determined necessary and appropriate.
As required by FACA, the EFAB will hold open meetings unless the Administrator determines
that a meeting or a portion of a meeting may be closed to the public in accordance with 5 U.S.C.
552b(c). Interested persons may attend meetings, appear before the committee as time permits,
and file comments with the EFAB.
10. Duration and Termination:
EFAB will be examined annually and will exist until the EPA determines the committee is no
longer needed. This charter wi'l be in effect for two years from the date it is filed with Congress.
After the initial two-year period, the charter may be renewed as authorized in accordance with
Section 14 of FACA.
11. Member Composition:
The EFAB will be composed of approximately thirty five (35) members who will serve as
Representative members of non-federal interests, Regular Government Employees (RGBs), or
Special Government Employees (SGEs). Representative members are selected to represent the
points of view held by specific organizations, associations, or classes of individuals. In selecting
members. EPA will consider candidates from all levels of government, the finance, banking, and
legal communities; business and industry; and local, national and non-governmental
organizations.
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12. Subgroups:
EPA, or the EFAB with F.PA's approval, may form subcommittees or workgroups for any
purpose consistent with this charter. Such subcommittees or workgroups may not work
independently of the chartered committee and must report their recommendations and advice to
the chartered EFAB for full deliberation and discussion. Subcommittees or workgroups have no
authority to make decisions on behalf of the chartered committee nor can they report directly to
the Agency.
13. Recordkeeping:
The records of the committee, formally and informally established subcommittees, or other
subgroups of the committee, will be handled in accordance with NARA General Records
Schedule 6.2 and EPA Records Schedule 181 or other approved agency records disposition
schedule. Subject to the Freedom of Information Act, 5 U.S.C. 552, these records will be
available for public inspection and copying, in accordance with the Federal Advisory Committee
Act.
March 3. 2016
Agency Approval Date
March 3.2016
GSA Consultation Date
March 7.2016
Date Filed with Congress
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