Environmental Finance Advisory Board Backhaul Alaska Consultation February 12, 2020 Overview On February 12, 2020, the Environmental Finance Advisory Board (EFAB) will engage in a consultation with EPA on financing options for the Backhaul Alaska program. Prior to this consultation, the EFAB prepared an advisory report in 2019 on revenue options for a waste service backhaul program in rural Alaska, called Backhaul Alaska. At the request of EPA Region 10, the EFAB has agreed to engage in further discussions on financing and governance options for the Backhaul Alaska program. A consultation is a form of advisory activity that provides oral advice and feedback from the EFAB members at a public meeting. Product The product of the Backhaul Alaska consultation will be a summary of the consultation discussions. During the consultation, EPA seeks recommendations for the Backhaul Alaska program in each of the following areas: (1) Structure, (2) Organization and Administration, and (3) Finance and Sustainability. Session Framework During the Backhaul Alaska consultation session, EFAB members will be presented with a scenario and then the board will be broken into small groups to discuss tailored questions for each topic area. Scenario: The Backhaul Alaska program will be fully functional in March of 2021 (one year from now). It is estimated that operations will cost approximately $1,000,000 per year to backhaul materials initially. At full capacity, the program will cost about $3,600,000 per year. There will be an estimated $500,000 available for startup costs which will be funded through government grants. For the purpose of this scenario, assume there will be an estimated $500,000 available for startup costs, funded through government grants. Also assume that the first two years need to be funded via grants. Past that, the ongoing funds will be a combination of (1) Government Funding (federal, state, tribal, or local grants or appropriations), (2) Other funding, such as income from other Backhaul Alaska services (including EPR support1), donations, and/or foundation grants, and (3) Program fees, collected from villages for backhauling services. For purposes of this exercise, assume the below source funding ratio: 40% government 50% other funding and 10% program fees 1 The Solid Waste Alaska Taskforce is pursuing a statewide Extended Producer Responsibility (EPR) initiative that will legislate electronic manufacturer support of e-waste recycling. If successful, funding supplementation could be significant. Page 1 of 3 ------- Unless EFAB recommends differently, the organization will be set up as a non-profit with a Board of Directors with advisory committees for each stakeholder group. Administration would be centralized with possible contracting/sub-awarding of all or some program functions. Task: EFAB members are tasked with helping Backhaul Alaska partners design an organization that maximizes the usefulness of each of the funding sources, is run efficiently within known legal constraints, and leverages the opportunities inherent in having a multi-stakeholder funded organization. Process: EFAB members will be divided into three groups to each discuss one of the consultation's three focus areas, using a set of structured questions. Each EFAB member will be assigned to a section to work on for the first 30 minutes. After the first 30 minutes, each group will report out then EFAB members will rotate to another group. One EFAB member will stay to be the "history". There will be a total of three rotations so that all members have an opportunity to consider questions in all three topic areas. Group report outs will answer the following questions: 1. What did you discuss? 2. What questions did you not get to? 3. What should the next rotation focus on first? During the third and final group report out rotation, Groups will provide: 1. Summary of what was discussed by the group with recommended next steps 2. Recommendations for further information gathering. 3. Key take-aways especially related to opportunities or obstacles. Group 1: Structure A. Should Backhaul Alaska be organized as a not-for-profit or quasi-governmental authority (in the latter case, with responsibilities delegated to it by the state)? B. How do the structure and governance of Backhaul Alaska expand or limit alternative models for long-term sustainability? C. What not-for-profit (or hybrid) models might be appropriate for Backhaul Alaska and what tradeoffs are involved? D. What are the advantages/disadvantages of different corporate forms in funding Backhaul Alaska? E.G. quasi-governmental, special districts, for profit, etc. E. Should Backhaul Alaska be structured within or affiliated with an existing governmental or nongovernmental organization in order to share capacities and improve effectiveness? F. What other key issues should be addressed in this area? Group 2: Organization and Administration A. What technical and administrative capacities should Backhaul Alaska maintain internally, and what functions might be contracted out? B. How would an oversight board for Backhaul Alaska be organized to ensure stakeholder representation as well as organizational accountability? C. What external linkages will be critical for Backhaul Alaska and how can they be cultivated and maintained overtime? Page 2 of 3 ------- D. How would Backhaul Alaska communicate and interact with its stakeholders and constituents? E. How should Backhaul Alaska prioritize its work and what challenges and risks are likely to arise? F. How should Backhaul Alaska monitor and evaluate program performance? G. What other key issues should be addressed in this area? Group 3: Finance and Sustainability A. How should capital expenses be funded by Backhaul Alaska, particularly startup expenses? B. How should operational expenses be funded by Backhaul Alaska? C. What combination of existing and innovative tax instruments, grants (governmental and nongovernment), and fees should be used to support and sustain Backhaul Alaska, initially and over time? D. How should fee assessments in support of Backhaul Alaska be structured given locational and resource disparities among villages? E. Should Backhaul Alaska build an invested endowment fund in support of operations? F. Can financial incentives for industry (positive or negative) be built into the Backhaul Alaska program? G. Can Backhaul Alaska transition from governmental support to be financially independent and sustainable, and if so, how? H. What other key issues should be addressed in this area? Desired Outcome EFAB will provide financial and organizational advice to help ensure that the Backhaul Alaska organization is both fiscally sound and resilient to financial and other challenges. Page 3 of 3 ------- Backhaul Alaska Preliminary Cost Projections for Environmental Finance Advisory Board February 2020 Meeting Comparison of Program Costs Recycling, shipping Administration Indirect Number of villages Per person backhaul costs $ 51,107 $ 557,869 $ 101,868 $ 336,775 17 162 218 $ 66 Note: Program operations include state and regional coordination, training, outreach. Village investment includes supplies, labor, O&M Dollar Investment per Village Component 2020 2030 Administration $ 52,217 $ 17,345 Recycling and Shipping $ 3,006 $ 3,444 Investment $ 10,691 $ 10,332 Note: At full program, the median village size is larger and more difficult logistics (costlier) villages are added, so the recycle and shipping costs are higher ------- |