U.S. Environmental Protection Agency Environmental Financial Advisory Board Consideration of the Stormwater Infrastructure Funding Task Force Report Pre]Meeting Comments from EFAB Members Developed in preparation for the February 11]12, 2020 meeting of the EFAB.


U.S. Environmental Protection Agency
Environmental Financial Advisory Board

Consideration of the Stormwater Infrastructure Funding Task Force Report
Pre-Meeting Comments from EFAB Members

Developed in preparation for the February 11-12, 2020 meeting of the EFAB.

Table of Contents (as of 2/6/2020)

Comments from Brent Anderson:	2

Comments from Janice Beecher:	3

Comments from Edwin Crooks:	5

Comments from Dan Kaplan:	7

Comments from Suzanne Kim:	8

Comments from Richard Weiss:	14

Comments from David Zimmer:	16

-------
Comments from Brent Anderson:

Executive Summary: I would add a brief paragraph describing what stormwater is. It will frame
the rest of the Executive Summary, and for those that never read beyond the Executive
Summary, context for the problem and recommendation

Page 10: Key Terms. I would clearly state that the issue is one of water quality, not to be
confused with water quantity.

Page 14, Section 3.1.1: The word "utilities" is used throughout the document. This approach
works in metropolitan areas, but much less so in unincorporated areas.

Regarding the Recommendation on technical assistance: I think the technical assistance should
also include cooperative basin wide projects. The focus on federal and municipal funds likely
results in a more ad hoc solution because projects have to follow the funding. Technical
assistance that addresses problem in a coordinated basin context would likely reduce costs. It
could result in additional (though more complex) funding opportunities.

Page 15, Section 3.1.2: This is a great recommendation, and to the extent we address Federal or
any other state funding, we should always make it.

Page 16, regarding SRF as an integral tool: Conditioning access to SRF support on intra-basin
solutions could be used to get different participants to work toward an economical common
solution.

2

-------
Comments from Janice Beecher:

•	The report is ambitious, well-organized, and dense with information; case studies
add value (although I did not review them carefully).

•	It would benefit greatly from close editing by people with technical expertise in
specific areas; for example, I took a swing at a paragraph on "private investment"
(see below)

•	The evaluation criteria (Sec. 6.2.2.1, page 67) were not entirely clear to me in
terms of interpretation, and in some instances, I disagree with the "score."

•	It is very important to avoid conjecture and assertions that may not be evidence-
based; add a citation, a caveat, or delete.

•	Be careful not to conflate sources of funding, means of financing, and
organizational entity (government, utility).

Page 48: the private sector does not provide "financial assistance." Neither do finance
companies. You do not "apply for private investment". Regarding the statement on private
sources of capital being more expensive but more accessible than public sources: is this evidence
based?

4 Private Investments: Private investment can take the form of loans and/or other financial
assistance originating from sources other than commercial banks and/or finance companies.
debt or equity instruments. Sources of private capital investment can include_o, but are not
limited to, insurance companies, pension funds, venture capital funds, individual venture
capitalistsor private equity (fund or individuals), corporation partners and general capital
investors.and publicly traded companies. Investor-owned utilities utilize both the private
equity and shareholder models. Private investorsmont ftmds-finance billions of dollars' worth
of_ now business start-ups in the United States each year. The potential uses of private
investment for supporting environmentally related businesses and/or activities are only
limitodis based on perceptions of by the degree of profit associated with thomprofitabilitv.
which for investor-owned utilities is usually subject to state economic regulation due to their
monopoly status. In fact, the creation of a privately owned utility may trigger state
jurisdiction. The cost of public or private capital is based on anticipated returns relative to
risk. : if it can be shown that an idea or activity will make money, then private investment can
be found to support it. Applying for private investment is typically much faster than for
government loan programs.Private sources of capital are more expensive but, in some cases,
may be less limited and more accessible than public sources. Private investors usually have
no sot eligibility criteria and may have no prodotorminod limits on the total amount of loan
capital available. Private investment generally demands ors tend to demand a significantly
higher rates of return than public sources on their money, though, than other sources of
capital. Private investment can also be part of a public-private partnership or hybrid model.
Note that a private investment can develop into a public private partnership of an
operational component is added to the mix.

Page 50: add citation

3

-------
5.2.3.I	Public-Private Partnerships

Public-private partnerships (P3s) are receiving incroasinggaining attention in the United States
and internationally as an innovative way of financing a wide range of different environmental
protection initiatives. PThc point of P3g is that partnering with private enterprise can expand
access to resources and capital and offer better potential economies of scale. There are many
types of P3s: design^build, design^/build^operate^/maintain, pay-for-performance
(interchangeable with pav-for-success) contracting, community-based P3s, etc. They may include
private financing or a combination of public and private financing. According to [cite],
c€ommunity-based P3s have a

Page 69: Table 2

Table 1. Financial Capacity Impact of Recurring/Intermittent Funding Sources—O&M Operations.
Do these eval criteria really track here? low, hi, volatile?

Household

Affordability

Impact

HigbModerate:

property taxes
aro generally
doomod as

rogroG

ModerateH4gk:

property taxoG aro
gonorally doomod
ao rogroooivo

Moderateiow: User
fees are s&U
Gomowhat
regressive but may
beuGually much
smaller in actual
dollars compared to
water and sewer
charges	

Moderatetow: if tied
to a "user pay" levy,
would mostly likely be
borne by those
directly benefitting
from the
infrastructure

Moderate: not as

regressive as a pure
tax but still
correlated to
property valuation
without explicit
income recognition

Household Affordability Impact: oversimplification - property taxes are not necessarily
considered regressive, and are certainly less regressive than user fees.

4

-------
Comments from Edwin Crooks:

In general, I think this is an excellent document - thorough, thoughtful and well-written. A couple
points we might want to address include:

Section 3.1.3: I'm struggling a little with the first recommendation about building a national
database. No doubt it would be good to have the info available, but it sounds like a very heavy lift
and I question whether it would be very impactful to addressing the core challenges of
stormwater financing. If the EFAB wants to keep this recommendation I think we need to beef up
the argument for how it would make things better and give a good rationale for EPA to invest
time and money in doing it.

Section 5.2: This section title should be changed to "Stormwater Funding and Financing". It might
seem like semantics, but there is a big difference between funding and financing and we blur the
lines here. The core problem of this entire charge is summarized in the first sentence of the
"Revenue" discussion - the need for ongoing stable and meaningful funds. To the extent that
funding flows can be increased and made more predictable, financing becomes cheaper and
more readily available and lots of problems can be solved. But I think we need to highlight the
differences in funding and financing in this section and discuss the linkage between the two.

Section 5.2.1.1.2: The subject of tax increment financing is mentioned later in section 5.2.3.5 but
I think we ought to tee it up here as a subset of the universe of special taxing districts. This can be
an important tool and I feel it is somewhat buried in its current location.

Section 5.2.2.1.1: The call out box about green bonds caught my eye for two reasons. First, it says
these are tax exempt instruments. While they usually are tax exempt, there is no reason that a
taxable bond couldn't be green as well. Then further down it says that these bonds are of interest
to "younger investors", which I would dispute. Also, this appears to be a quote but there is no
attribution to a source.

Section 5.2.3.1: In the first sentence we talk about P3 only as a financing mechanism, but we
should describe it as a holistic approach to project delivery, including financing. In the second
sentence we should add some mention of the potential for P3's to deliver more creative and
efficient technical solutions to stormwater projects.

Also in this section there is no mention of another financing source used in P3 deals, which is
private investor equity. I suggest we add a blurb somewhere here that says something like
"Financing for P3s also typically includes private investor equity as another source of capital.
Investor equity is very flexible, typically patient capital that instills a level of rigor in the private
operator's management of the stormwater asset. This is relatively expensive financing, however,
and typically requires that the public project sponsor cede some level of control to private
investors."

Section 5.2.3.5: The second bullet on tax increment financing needs to be corrected to say:
"...increase surrounding property values and the incremental tax on the increased property value
is dedicated to funding the new infrastructure. In addition, owners of those properties may also
agree to a new tax levy..."

-------
Section 6.0: It seems to me that this section is missing one very important observation about how
the funding sources affect affordability. When municipalities are faced with insufficient funding
they will often default to a "pay as you go" approach, meaning they will only build the
improvements they can afford at that time. This means that larger projects have to be split up
into multiple pieces that are procured and constructed separately over many years. This is
inherently more expensive than building larger projects because it requires the municipality to
conduct multiple procurements, each with its own transaction costs, oversight requirements, etc.
Meanwhile the municipality is left with the added risk of coordinating and integrating what may
become a patchwork quilt of improvement projects. In addition, the community and
environmental benefits of completing the entire project are delayed.

If the municipality's funding sources were more robust and predictable, bond financing could
become an option that would enable larger, more impactful projects to move forward. These
projects and their benefits could be completed earlier and with less transaction cost and residual
risk for the owner. And as funding sources become more and more robust and more
creditworthy, the cost of borrowing should decline.

These points are applicable to several subsections of chapter 6.0 but should probably be
addressed more explicitly somewhere in the chapter.

6

-------
Comments from Dan Kaplan:

The second paragraph in 1.2 of the Executive Summary gives disproportionate emphasis on
innovative funding strategies relative to what is presented in the report. The body of the report
is clear that the preponderance of new funding sources will be local. This Executive Summary
section should discuss how local communities need technical support for the creation of
stormwater utilities and revenue systems, including assistance in accessing innovative
approaches. This would provide a better tie-in to the first recommendation.

The draft report is inconsistent on the role of other federal funding programs. Section 2.4
delineates funding needs not included in the report, including agricultural pollution, but the final
recommendations calls for a set aside for federal farm subsidies. I agree with this
recommendation, but it should be supported within the report with a section on pollution caused
by agricultural runoff.

The recommendation and supporting narrative (page 18) on the national data base to enumerate
state barriers for the creation of stormwater utilities and fees should be moved to the education
and technical assistance section and out of funding assistance. And can it be stronger? "States
are encouraged to eliminate barriers to the creation of stormwater utilities and user fees to
support them." And for funding assistance, "Federal assistance programs should prioritize
funding to those communities with dedicated stormwater utilities."

Section 5.0, page 29 includes green infrastructure as a factor that has increased the average cost
of stormwater programs. This bullet should be deleted, as green infrastructure is a response to
challenges enumerated below that bullet and not a cause per se. I would include an additional
bullet: "New investments for complying with CSO consent decrees and MS4 permits."

Lost in the discussion and tables on funding sources is any mention of wastewater fees, which are
used by many utilities to support stormwater operations. Rather than clutter the table, a
paragraph on cross-subsidization and equity could address this.

Page references for the case studies on page 80 would be helpful.

-------
Comments from Suzanne Kim:

There is a tremendous and laudatory amount of work accomplished in a very short period of
time. My comments are focused on the Executive Summary as this will be the primary vehicle to
communicate the contents of the report.

1) The Executive Summary needs to be absolutely tight. I have attached my suggested edits
to the Executive Summary (I didn't include comments #4 & #5).

2) Funding = free money, like grants. Financing is money you have to pay back...like loans
and equity capital. You need to distinguish between the two. Funding DOES NOT =
Financing. This section must distinguish between the two and communicate this
distinction.

3) Also Funding/Financing is different from Revenue... Revenue is what utilities need to
access debt capital. Revenue is leveraged to access financing. IT IS NOT
FINANCING. There is confusion throughout the executive summary conflating the two
concepts. Revenue is not funding nor financing

4) At the last EFAB meeting, there was considerable discussion on whether there is enough
capital out there in the current programs to support the capital needs and or whether
the problem is accessibility (how it is marketed and who can access it). In the Executive
Summary, we need to establish whether we want to push for additional capital, better
access, or both? Let's be clear.

5) In the executive summary the author asserted that there has been no comprehensive
national survey done to determine the magnitude of the funding and financing shortfall—
-if so, that survey/analysis/study absolutely needs to be in the recommendations. How
can one justify that the federal government appropriate additional $s ("billions" is
vague—is it tens of billions? Hundreds of billions?) if it the quantity is unknown? If there
truly has been no study, someone has to do one. Therefore, it should be in the
recommendations.

-------
1.0 Executive Summary: Stormwater Funding: A National Problem That
Requires Action

In the United States. sEffoctivo stormwater management is as-as integral critical to American
quality of life as effective wastewater management and delivery of safe drinking water to
achieving high water quality, thereby improving the basic quality of life for all Americans. To be
as effective in the delivery of quality and effective drinking water and wastewater services.

Hence, stormwater management will need comparable and equitable access to stable, reliable,
and efficient funding and financing programs-

needs to bo deemed as a true utility service on par with drinking water and wastewater utility
services—and it needs equitable and reliable funding, just like drinking water and wastewater
utilities.

; water and wastewater management services in the USt are
¦largely delivered through the utility structuremodel and 7-have generally matured te
reliable and effective community services to the communities, and. Critically, these
services -have extensive with dedicated access, noting that access is not uniform, to sources of
funding (such as grants) and financing (such as low-cost loans). CumulativelyTo date. Clean Water
State Revolving Fund programs have provided $133 billion in financial assistance, mainly in the
form of low-cost financing, to a wide range of eligible borrowers. The utility itructuremodel, tbat
is conducive tocharacterized by effective and efficient management governance structures and
dedicated reliable revenue streamsfunding, which has generally worked well tn-forthe drinking
water and wastewater sectors_and_rshould be applied toadopted for the stormwater sector,
which is the next frontier sector the nation should tackle in its efforts to improve for this nation's
water quality feats.

A critical component of the utility model is predictable and sufficient revenue streams. But even

a utility structure requires predictable and adequate revenues and sound governance, If these
two elements arc in place, effective operational capability will follow, Unfortunately, however,
approximatelyef^ 1,600 of the 7,550 permitted stormwater entities in the United States have
dedicated revenue sources. Typical stormwater revenue sources include, such as stormwater
user fees (also known as stormwater utilities where fees are based, for example, largely on
impervious area), taxes, ?f-an( established drainage districts that collect dedicated funding for
stormwater management. In addition to stable revenue streams, the utility model requires
effective governance structures guided by transparent and effective policies and procedures.
And, with stable revenue streams and effective management, a utility is better equipped to
access funding and financing programs.

A significant complication with stormwater services is that

But even a utility structure requires predictable and adequate revenues and sound governance.
If these two elements are in place, effective operational capability will felslewr

-Stormwater knows nodoes not respect conventional jurisdictional boundaries and requires
cooperation among crosses various local, municipal, county, state, county and municipal
bordorsand federal entities. Therefore, meaningful cross jurisdictional partnerships underlie
effective stormwater management. In addition, ffhere afe-have been no comprehensive

9

-------
assessments conducted at the national level to determine the magnitude of the funding and
financing capital needed to construct, operate, and . and adoquatolv maintain and oporato
stormwater infrastructure across the country nationally. Recently, there have been some Recent
regional . limited surveys that have attempted to estimate the funding and financing shortfall in
the stormwater services sector. These limited studies concluded that the annual shortfall is
somewhere in the neighborhood of billions. [Kim: "billions" is not adequate—please cite
something]

challenge, local funding efforts arc not enough. Because of the cross jurisdictional nature of
stormwater management and because the amount of and access to capital via current funding
and financing programs are inadequate to construct, operate, and maintain effective stormwater
management across the country, the Task Force recommends that the federal government
invests in stormwater infrastructure, similar to how the federal government established There
is a nood for fodoral invostmont in stormwator infrastructure, similar to tho lovol of invostmont
that-federal funding and financing programs have-providod in the past to begin buildingthat
have built our interstate highway system, upgrade our wastewater infrastructure, w-and
deliver d safe drinking water to our homes. Tho fodoral financing and funding framework that
has worked so woll to support tho drinking water and wastewater sectors should bo adapted to
fund solutions to the stormwater challenge. _This type of federal financing and funding will
support communities with stormwater permits that serve more than 80 percent of the U.S.
population. Therefore, stormwater funding is a national problem that requires action.

1.1 Stormwater Infrastructure Funding & Financing Task Force Report and
&_Charge

This report was developed n response to Section 4101 of the 2018 America's Water
Infrastructure Act (AWIA), which diroctoc the Environmental Protection Agency (EPA) te
establish d a Stormwater Infrastructure Funding & Financin Task Force "Task Force") "to
conduct a study on, and develop recommendations to improve the availability of public and
private sources of funding for the construction, rehabilitation, and operation and maintenance of
stormwater infrastructure" to meet the requirements of the Clean Water Act.

Specifically, the iPA charged the Task Force	with the following tasks:

4 Identify existing federal, state and local public and private sources of funding and financing
for stormwater infrastructure (addressed in Section 5.0)

4 Assess how the source of funding and financing, including the costs associated with

infrastructure finance affects affordability including costs associated with infrastructure

4 Assess whether these sources of funding and financing are sufficient to support capital
expenditures and long-term operational and maintenance costs required to meet the
stormwater infrastructure needs of municipalities (addressed in Section 4.0).

The charge has culminated in the attached report.

gomont and infrastructure fundi
nding lovols. Without question, 1
thoro is a pressing nood to contir

41y

3r funding sources that do oxist aro typically insufficient for currently
s. Givon tho magnitude and cross jurisdictional nature of tho stormwator

in Section 6.0) andr

10

-------
1.2 Local Stormwater Funding & Financing Efforts

Finding funding sources has bocomo a necessary activity for local governments and utilities that
are charged with managing stormwater programs. Several professional organizations have
developed publications and hold workshops on how to develop and implement dedicated
funding mechanisms. Their advocacy efforts have also elevated the discussion on the need for
funding and the importance of affordability.

Perhaps more importantly. Recently, ceonversations among local governments and utilities
charged with managing stormwater programs in recent years have shifted from "how to develop
stormwater utilities" to the need fordesigning and utilizing innovative funding and financing
strategies

Undoubtedly, sourcing funding and financing capital is necessary function for local governments
and utilities involved with stormwater management. Several professional organizations have
developed publications and held workshops on how to develop and implement dedicated
revenue streams. This has led to industry-wide discussions on the need for funding and financing
and has elevated related topics such as the importance of affordability. In addition, these
industry organizations have educated members on innovated funding and financing strategies
that includesuch a: public-private partnerships, incentives for private property owners to
implement stormwater controls, green bonds, and trading schemes. Innovative funding and
mechanismsfinancing programs, coupled with reliable traditional mechanisms (e.g., stormwater
utilities, fees-in-lieu-of, drainage/taxing districts) have provide I some local programs with
valuable additional alternatives to fund finance their stormwater needs.

1.3	Federal Stormwater Funding and Financing Support

As previously stated, local funding efforts alone are not enough. Stormwater infrastructure
requires funding and it has been neglected, or inadequately funded, for far too long. The Task
Force advocates for There is a need for federal investment in stormwater infrastructure, similar
to the level of investment that federal funding programs have provided in the past to, among
other thing , login buildingbuild our interstate highway system, upgrade our wastewater
infrastructure, and deliver safe drinking water to our homes.

The federal government can also help byalso efficiently allocate +f>g-funding and financing for
stormwater programs from existing related programs to ensure that infrastructure is properly
maintained and that future infrastructure planning, design and capital expenditures are
conducted using industry best practices.

Municipalities and local utilities need federal and state help in Jofining identifying long-term
reliable funding sources. Funding must be available in all states and be sufficient to support both
capital expenditures and long-term operation and maintenance costs.

1.4	Recommendotions

Task Force recommendations are	practical to implement, actionable

at the federal level and understandable to the public.	uggestions ange from

increasing accessibility to and education of existing funding and financing programs.te Mse
enhancing existing funding and financing mochanismsprograms, increase accessibility to those

11

-------
funding mechanisms, and creating identify additional funding and financing
opportunitiessources. and enhance public education. The-Specific Task Force's recommendations
are rouped into the following categoriesas follows:

4 Stormwater funding education and technical assistance. Educating the public and elected
officials on the need for stormwater funding managemen' is critical to the successful
implementation of and community support for funding and financing solutions. In addition,
many communities need technical assistance relatec to evaluat log and securemi funding
and financing nechanismssources.

Recommendation: Educate elected representatives, professional administrative leaders
and the general public on the need for sustainable local stormwater funding and
organizational capacity through, for example, the creation of stormwater utilities or the
expansion of existing utilities into the stormwater sector.

Recommendation: Provide technical assistance and funding to help communities create
sustainable funding sources. This could include assistance with funding need assessments,
organization analysis, grant applications, and/or establishing a stormwater utility fee.

4 Simplification and/or modification of existing federal grant and loan programs and

affordability support. Federal grants, loans (e.g., from State Revolving Funds) and support to
enhance affordability are needed to maintain sustainable local funding sources.

Recommendation: Provide for a common application for different federal grants across
all federal agencies.

Recommendation: The State Revolving Fund (SRF) is an integral tool among the many
infrastructure financing options available to communities. Whether stormwater receives
consideration of its own through a new SRF program, or receives less restrictive eligibility
considerations and larger appropriations within the existing Clean Water SRFs (CWSRF) or
eligible Drinking Water SRF (DWSRF) projects, it is the view of the Task Force that
stormwater would benefit from an additive - not zero-sum - recurring financial
commitment from EPA. This could be achieved by the implementation of one or more of
the following, each of which is outlined below:

o Create a new SRF program exclusive to stormwater programs and projects.

o Expand the existing Water Infrastructure Finance and Innovation Act (WIFIA)
program or fund the Army Corps of Engineers' Water Infrastructure Program also
established in 2014.

o Create a specific stormwater set-aside in the existing CWSRF framework and increase
awareness/ guidance on the CWSRF for stormwater projects, including the Green
Project Reserve program.

Recommendation: Use federal funding or technical assistance to help utility customers
who are financially struggling to pay their water, sewer, and stormwater utility bills
(similar to Low Income Home Energy Assistance Program (LIHEAP)).

4 Dedicated federal stormwater funding assistance. Given the magnitude of the stormwater

12

-------
needs described in this report, there is a need for federal investment similar to the
investments in the National Interstate Highway system and historical wastewater treatment
plant upgrades.

Recommendation: Build comprehensive national database that enumerates state
barriers to implementation of new dedicated stormwater revenue sources such as user
fees or other revenue sources, and/or any state restrictions on existing fees and charges.

Recommendation: Increase annual funding allocation for and modify the 319(h) grant
program to allow and encourage local capacity building, utility fee study and
implementation, asset management, and remove restrictions on use of grant funds for
MS4 permit compliance.

Recommendation: Develop a new construction grant program specifically for stormwater
projects, similar to the federal Municipal Construction Grants Program that funded the
construction of wastewater treatment plants.

Recommendation: Given the link between agricultural pollution and mandated
stormwater pollutant reduction targets for impaired streams, a Farm Bill Federal subsidy
dedicated to stormwater programs would also be valuable. Require 10 percent of US
federal farm subsidies (all programs) be re-directed toward stormwater/nonpoint impacts
in same watershed where recipient farm is located.

13

-------
Comments from Richard Weiss:

In general, I thought that the report was very thorough and informative. The charge questions to
the workgroup were adequately addressed. It was clear and logical with recommendations
supported by the body of the draft report. Following are some comments on various sections of
the report for the workgroup's consideration.

Page 4 - Section 1.4 recommendation for a new construction grants program for stormwater
projects similar to the federal Municipal Construction Grants Program for wastewater projects
could be viewed as an inefficient way to get funding to communities. However, page 19 mentions
the use of the SRFs as well as other modifications which would make the proposal more efficient
than the original Municipal Construction Grants Program. Suggest modifying the
recommendation to make it clear that this recommendation is not a repeat of the prior program.

The Section 1.4 recommendation to carve out 10% of US federal farm subsidies to be redirected
toward stormwater/non-point impacts in the same watershed was unclear to me. See my
comments on page 20.

Page 5 - First paragraph second line insert "management" after "capital program".

Page 17 - For III, an additional Disadvantage of the specific stormwater set-aside in the existing
CWSRF framework is the potential for reduced funds available for non-stormwater projects if the
CWSRF grant funds are not increased to accommodate this.

For IV, what is meant by "equal weighting"? Funding for the three infrastructure needs may not
be equal. Perhaps revise to say "Create a "One Water" SRF that includes drinking water, clean
water and stormwater."

Page 19 - To the extent that there is a Stormwater Construction Grants Program, it would be
efficient for the federal government to provide capitalization grants to the SRFs. To affordability,
there could be meaningful principal foregiveness on each loan originated by the SRFs (particularly
for disadvantaged communities). This approach would eliminate the need for a local match as
was the case on the wastewater Municipal Construction Grants Program.

Page 20 - For the requirement that 10% of U.S. federal farm subsidies be redirected toward
stormwater/nonpoint impacts in the same watershed - how was this percentage determined?
What would be the impact on farmers of this carve out in various commodities market
environments? How would this impact project development to the extent that farm subsidies
vary from year to year? Who would determine the projects, oversee the expenditure of these
funds, and the completion of these stormwater/non-point projects?

Page 36 - In the chart for the Coordination with other Municipal Departments and State
Agencies, one could also include the concept of merging stormwater functions into an existing
water and/or wastewater utility to get greater coordination as well as operating and capital
spending efficiencies. Stormwater could still be a separate enterprise of the utility. The concept is
addressed later in Section 6.1.2.

-------
Page 41 - "WKIT referenced in the second full paragraph. Suggest defining it in the first full
paragraph after "Western Kentucky University". In the second paragraph, there is reference to
$2.2 billion in utility fees with 20% coming from Chattanooga. If these are annual fees, that would
imply $400 million for the City. Text here should be checked.

15

-------
Comments from David Zimmer:

Overall, great paper. I have some minor additions I hope will add value. My general thought is
that the paper might consider shedding a bit more light on the need to educate and help local
officials with quantifying how much effective storm water management policies and their
corresponding projects will save their constituents - in macro-economic terms to offset the rate
costs from the SW utility's projects (e.g. savings from mitigating the occurrence and costs of
flooded basement and car repairs, business interruption costs, commuter down time from
flooded streets or blocked roadways).

If the narrative includes language in dollars and cents - especially if the projects become net
positive for the community, it becomes an easier sell to get behind. I noticed some comments in
this regard, but they seemed to be minor mentions.

Page 3: Recommendations

Should consider including the cost of inaction (i.e. relative cost of choosing to do nothing):

Recommendation: Educate elected representatives, professional administrative leaders
and the general public on the benefits of and need for sustainable local stormwater
funding and organizational capacity through, for example, the creation of stormwater
utilities or the expansion of existing utilities into the stormwater sector.

Regarding the recommendation about a new SRF program ("Create a new SRF program exclusive
to stormwater programs and projects"): I know there were 2 SRFs involved in the writing of this
fine paper. I would take issue with the part of this recommendation for the possibility of a 3rd
separate SRF Program. There is enough infrastructure in the CWSRF to handle this already...
additional segregated funds maybe, but not a new SRF program with its own division w/in EPA.

Page 14, Section 3.1.1 Stormwater funding education and technical assistance

In addition to Water Quality benefit, need to include related concept that SW Mgmt also
promotes economic improvement from the mitigation of the destructive forces of floods,
standing water, etc. Also, nice segue into next parag.

Recommendation: Educate elected officials, professional administrative leaders and the
public on the need for sustainable local stormwater funding and organizational capacity
through, for example, the creation of stormwater utilities or the expansion of existing
utilities into the stormwater sector. Sustainable funding for stormwater infrastructure
builds long-term financial capacity, improves operational performance—and over time
produces results for citizens and residents. For over two hundred years, this has been the
experience with drinking water and wastewater utilities in this country. The educational
goals for these three audiences will demonstrate that stormwater management
investment directly benefits the health, safety and economic opportunity for citizens and
residents through the overall improvement of water quality and resiliency of the
community.

-------
Page 16:

I. Create a new SRF program exclusive to stormwater programs and projects.

o Advantages

¦ Replicates programs that have been proven successful for decades.

¦ Would eliminate 'competition' with wastewater projects inherent within
the current CWSRF program.

o Disadvantages

¦ Would require the creation and passage of new enabling legislation to

establish a new SRF program.

¦ Would create a new layer of bureaucracy with cross over and potential
duplicity with the Clean Water SRF Program, both of which are legislated
through the same, CWA.

Page 17:

II. Create a specific stormwater set-aside in the existing CWSRF framework and
increase awareness/ guidance on the CWSRF for stormwater projects, including
the Green Project Reserve program.

o Advantages

¦ Would not require new federal legislation.

¦ Preserves each states' ability to administer the program to maximize
efficiencies and effectiveness specific to each states' needs.

o Disadvantages

¦ Might not improve best management practices or capability of
communities if the set-aside is viewed by them as an implicit high
likelihood/guarantee to get funded.

This statement (under disadvantages) seems to contradict the argument above of the
outstanding need for storm water projects. If the need is great and the funding is available, the
logic would dictate that there will be demand.

Page 22: "Without low-cost concessionary debt, there is no compelling desire for outside, private
capital to invest." What about the developing market for "Impact bonds"?

Page 23: Affordability is, however, an issue for lower-income segments of the population across
the nation, typically the sector in each community most impacted by the lack of proper storm
water management policies:

Page 47:

-------
CWSRF: One of the most commonly used loan programs in the wastewater sector is the CWSRF
loan. Under Title VI of the 1987 Clean Water Act, states receive federal monies to capitalize
CWSRF loan programs. Through CWSRF programs, loans are made to communities to provide
low-cost financing for a wide range of different projects to protect water quality. Examples of
activities funded with these loans include nonpoint-source pollution control, watershed
protection and restoration, estuary management, wetlands restoration, brownfields remediation,
and improvements to municipal wastewater treatment infrastructure. Loans are made at low
interest rates (0 percent to market rate) for terms of up to 20 years. In addition, states use
CWSRF money to repurchase debt to get these loans to 30 years. States may set the criteria for
determining which municipalities can access the loans each year. All 50 U.S. states and Puerto
Rico operate CWSRF programs. States have the option to offer a portion of their annual CWSRF
grants as subsidization in the form of principal forgiveness or to buy down the interest rates on
their borrowers' debt. CWSRF grants may also be used to guarantee loans as a way to increase
the leverage and capacity of their lending programs. Combining guarantees and interest
buydowns in a low rate environment, such as exists today, can be a very effective method for
States to offer additional financing to local communities at levels well below market rates. Some
CWSRF and Drinking Water State Revolving Fund (DWSRF) loan programs make short-term loans
for planning, design and initial construction in localities that may later receive long-term CWSRF
and DWSRF loans. In addition, state revolving fund loans may be used to pre-finance other
federal or state drinking water loans or grants

Page 49, Section 5.2.2.1.4

Reference Footnote: https://www.goldmansachs.com/media-relations/press-
releases/current/dc-water-environmental-impact-bond-fact-sheet.pdf for the insert suggested
below:

In addition to more traditional funding sources discussed previously, there are new and evolving
approaches to funding stormwater management that could be leveraged in many cases. These
include public/private partnerships, private site stormwater development, impact bonds such as
the DC Water Environmental Impact Bond and volunteer programs. The ability to utilize such
approaches, and the impact to the stormwater program vary but are important options to
evaluate in developing a comprehensive funding strategy.

Page 76:

For the sentence, "In addition, the use of MHI as an affordability metric has been widely
criticized," I also recommend footnoting a paper by one of the leading voices on the problems
with MHI, Texas A&M Associate Professor, Manny Teodoro: http://mannyteodoro.com/wp-
content/uploads/2017/08/MTeodoro_Affordability-Method-Working-Paper-Aug2017.pdf

-------