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HomeMy WebLinkAbout1975-06-17; City Council; 3392; Municipal waste treament grantsCITY OF CARLSBAD AGENDA BILL NO. 33 7 2L, Initial: DATE; June 17, 1975 - . _ _____ Dept.Hd- ^ — •-. - - _ DEPARTMENT: Public Works Subject: MUNICIPAL WASTE TREATMENT GRANTS Statement of the Matter The Environmental Protection Agency (EPA) has announced that they will hold a public hearing in San Francisco on June 19, 1975. The subjects of the hearing will be proposed amendments to the Federal Water Pollu- tion Control Act. The proposed amendments are a result of a letter from the Office of Management and Budget suggesting changes such as: 1) a reduction of the Federal share; 2) limiting Federal financing to serving the needs of existing populations; 3) restricting the types of projects eligible for grant assistance; 4) extending the 1977 date for^meeting water quality standards; and 5) delegating a greater portion of the management of the construction grant program to the States. As of this writing, further information concerning EPA's position on .the recommendations has just been received and is being analyzed. Because of the potential of impact on our Phase III project and the closeness of the date of public hearing, staff is requesting that the subject be scheduled for Council discussion at the June 17, 1975 meeting in the event Carlsbad wishes to take a position. Exhibits 1. staff report .--... 2. Notice of Public Hearing Recommendation That City Council discuss the impact to the-City based on the latest information available. If the proposed amendments are found to impact the City, Council should instruct staff to present testimony, either in person or in writing, for inclusion in the public record on EPA's hearing concerning the proposed amendments to the Federal Water Pollution Control Act.- . ' Council action: 6-17-75 The staff was instructed to present written testimony for inclusion in the public record on EPA's hearing as recommended by staff. • . MEMORANDUM June 11, 1975 TO: City Manager FROM: Public Works Administrator SUBJECT: Public hearings on potential legislative amendments to Federal Water Pollution Control Act The Environmental Protection Agency is holding public hearings in order to respond to a series of questions asked by the Office of Management and Budget concerning the Federal Water Pollution Control Act (PL92-500). The five questions being addressed in the public hearings are: 1. Shall Public Law 92-500 be amended to reduce Federal share of construction grants from current level of 75% to a level as low as 55%? 2. Shall Federal funding be limited for projects containing large reserve capacity to serve projected growth? 3. Shall types of projects eligible for grant assistance be limited? 4. Shall the 1977 compliance date be extended? 5. Shall the states be delegated a greater portion of management in the construction grants program? Attached is a copy of the EPA discussion papers on these five questions and a copy of the position paper adopted by the County Board of Super- visors. DISCUSSION Question 1 - Potential action here is to reduce the Federal share of funding from its current level of 75% to as low as 55%. The potential effect to Carlsbad by this action would be to: 1. increase Carlsbad's share of the Phase III upgrading by approximately $1.5 million; 2. lessen the chances of a successful general obligation bond issue; 3. delay the project. The Vista Sanitation District and the San Marcos County Water District are also facing the possibility of a bond issue. Increasing the chances of failure of a bond issue election of any of the agencies involved in the Encina Water Pollution Control Facility upgrading would affect all agencies. The net result would be to delay the program and the subsequent conformance with discharge standards. Question 2 - The issue is the amount of allowable project capacity beyond present-day needs. The proposal in this instance is to require the rest of the nation to conform with the same standards of financing eligibility currently used in the State of California. The outcome of this issue will have no significant impact on the City of Carlsbad. City Manager June 11, 1975 Page Two Question 3 - The issue involved is restricting the types of projects which will be eligible for Federal funding. Inasmuch as the Encina Water Pollution Control Facility is within that range of projects currently eligible for financing and remaining eligible if the changes occur, the chances of our being impacted are minimal. Question 4 - The issue is extending the Federal compliance date. There are several possibilities involved, ranging from retention of existing compliance dates and stringent enforcement to extending the compliance date an additional six years. It is estimated that 50% of the nation's municipalities (9,000) which serve approximately 60% of the projected 1977 population will not be able to comply with discharge standards. The Encina project, if we can keep to our proposed time table and if there are no State and Federal project approval hang-ups, will begin construction in 1977 with proposed completion scheduled by mid-1979. The cumulative effects and benefits of Public Law 92-500 are to the general public. This is acknowledged by several statements in the EPA papers by the Federal government's involvement in establishing discharge standards and by providing Federal monies for construction funding. I believe that it is inappropriate for the Federal government to withdraw from a previously-stated position (75% funding) simply because they have been made aware of the total cost of complying with the discharge standards they have set and which they do not propose to change. Therefore, it is suggested that the course of action in this question be that the 1977 compliance date be maintained so that projects currently underway will be encouraged to complete construction, but that the law be amended to provide for administrative discretion to grant time extensions based on the availability of funds, including Federal funds. Question 5 - The proposal here is to grant additional responsibility to the States for project control. Increased State management would result in cutting significant amounts of red-tape and duplicate processing without decreasing the effectiveness of the program. Existing State discharge standards are as stringent, if not more so, as those contained in Public Law 92-500. Granting more State control in lieu of Federal control would result in significant savings of time and associated con- struction cost increases, as well as the cost of duplicate project processing. The County raises a couple of additional points in their discussion. The first is the requirement to return 50% of the funds recovered from industrial users to the Federal government. It is my opinion that this process is used to insure that industrial users pay their share and, while I agree that the process is cumbersome and not cost-effective, the EPA is not inclined to change it. The second question raised concerns the need to provide secondary treatment for ocean dischargers on the Pacific Coast. There is considerable discussion and study City Manager June 11, 1975 Page Three concerning the need for secondary treatment on the Pacific Coast. The question should be resolved before large amounts of Federal, State and local funds are committed to construct and operate a process that may prove to be unnecessary. RECOMMENDATION It is recommended that the City Council instruct staff to give testimony to the Environmental Protection Agency in writing and, if Council wishes, in person at the June 19 hearing. Our position should be to oppose reduction in the current level of Federal finan- cing, to concur in the present compliance date but encourage legis- lative changes to allow administrative discretion to grant time extensions based on availability of funding. We should also support delegation of project control to the States and the resolution of the questions concerning the necessity of secondary treatment for ocean dischargers on the Pacific Coast. The requirement to return 50% of revenues from industrial users to the Federal government should be opposed as being counter-productive to the professional goal of raising more local funds for water pollu- tion control. If the Joint Advisory Committee adopts a similar position, staff, in the capacity of EWPCF administrator, should be authorized to represent the joint owners. Ronald A. Beckman RAB/de attach. c EM VI RON MENTAL PROTECTION ACJKNCY MUNICIPAL WASTE TREATMENT GRANTS Public Hearings on Potential Legislative Amendments to the Federal Water Pollution Control Act Notice was published in the Federal Register on May 2, 1975, (40 FR 19236), of a series of four public hearings to discuss possible Administration proposals to amend the Federal Water Pollution Control Act Amendments of 1972, 33 USC 1251 et. seq. The notice indicated that five papers would be prepared fo^ pubic review prior to the public meetings. These papers are presented here with the intent that they assist in focussing discussion at the meeting. The papers do not encompass all the points that might be made oa these candidate proposals and are not meant to confine the discussion. Several background points should be considered when reviewing each of the five papers. Papers 1, 2. 3; These papers discuss possible modifications to the present provisions of Title II of the Act which authorizes the construction grants program. They were developed after the 1974 Survey of State Needs indicated that approximately $350 billion in municipal facility construction is needed to meet the requirements of the Act. The magnitude of this indicated need appears to be beyond the funding capability of the Federal budget, and proposals have been made to selectively reduce the need for Federal funds, without negating the o major water quality objectives of the Act. These papers, in a summary fashion, present these proposals. These proposals have been previously discussed, in a preliminary way, with selected groups with whom the Agency frequently meets to discuss the implementation of the Act. A groundrule observed in preparing these discussion papers has been that none of the proposals would retroactively apply to the $18 billion presently authorized and allotted. Paper 4; This paper discu.sses a proposed extension of the July 1977 date for compliance by municipal dischargers with the secondary treatment requirements established by section 301(b)(l)(B) of the Act. This proposal has been suggested previously and discussed with representatives of State agencies and several public groups. Paper 5; This paper discusses a proposed amendment to the Act to authorize an increased delegation of responsibility to the States for managing the construction grants program. Amendments to achieve this objectives have been introduced in the House of Representatives as H. R. 2175 and H. R. 6991 which are identical bills. EPA has generally endorsed these Amendments. Dated: May 22, 1975 Edwin L. Johnson Acting Assistant Administrator i'or Water and Hazardous Materials C Paper No, 1- -Reaction of the Federal Share Statement of Issiie This paper deals with the issue of whether PL 92-500 should be amended to reduce the Federal share for construction grants from the current level of 75 percent to a level as low as F»5 percent, The objectives of such an amendment would be twofold. The fir jt is to permit the limited funding available to go further in assisting needed projects. The second objective is to encourage greater accoimtability for cost effective design and project .management on, the part of the grantee by virtue of his greater investment in the project, Background Statutory Reference- -Section 202(a) of PL 92-500 sets the current Federal grant share at 75 percent. Under legislation in effect from 1.966 to 1972, the Federal grant share ranged from 30 to 55 percent. From 1956 to 1966, the Federal share was 30 percent, with restrictions that effectively reduced the grant, share for large projects to less than 30 percent. 197 4_Needs Survey- - The recently completed 1974 Needs Survey reports total needs of $342 billion for facilities eligible for construction grants under PL 92-500. At a 75 percent Federal share, these needs, if satisfiedr would require almost $260 billion in Federal funding. The most critical categories reported in the Survey- -secondary treatment, advanced treatment, and interceptor sewers --need over $46 billion,, which would require Federal funding of nearly $35 billion. The question is raised as to whether these needs --the total amount or even, the amount for the critical categories-- can be accommodated in the Federal budget in time to meet the 'iP~7 and ''.983 municipal pollution control requirements of PL 92-500, o 2 Incentives--It has been traditionally held that a community's incentives for building treatment plants are relatively low because the primary bene- ficiary is not the community itself but, instead, downstream communities. More recently, the environmental ethic and, the enforceable effluent standards issued under PL 92-500 appear to have significantly strengthened these incentives. A community has traditionally had more incentive to build collection and interceptor sewers, since the beneficiaries reside within the community. In considering these factors, a reduction of the Federal grant share would reduce incentives to construct needed facilities. However, there is no way of quantifying this effect, especially because of the short history of municipal effluent standards. Increased Local Share--Reduction of the Federal share will require an increase in local or State funding. With recent changes in the economy, including both inflation and recession, it is not possible to predict the effect of a reduced Federal share on local financing capabilities. Issues to be Discussed The following questions will be discussed in the public hearings: 1. Would a reduced Federal share inhibit or delay the construction if needed facilities? 2. Would the States have the interest and capacity to assume, through State :?rant or\loan programs a larger portion of the financial burden of the program ? 3. Would communities have difficulty in raising additional funds in capital markets for a larger portion of the program? 3 4. Would the reduced Federal share lead to greater accountability^oa the part of the grantee jor cost effective design, project management, and postconstruction operation and maintenance?. 5, What impact wpxtld a reduced Federal share have on water quality and on meeting the goals of PL 92-500? Paper No. 2--Limiting Federal Funding of Reserve Capacity to Serve Projected Growth Statement of Issue This paper deals with the issue of whether PL 92-500 should be amended to limit the amount of reserve rapacity of facilities that would be eligible for construction grant assistance. Reserve capacity is defined as that portion of the capacity of sewers, treatment plants, and other facilities designed to serve future population, industrial, and commercial growth. Under a proposed amendment, eligible reserve capacity could range from zero to some specified finite value such as that needed to serve 10 or 20 years of estimated growth. A zero limit would prohibit Federal funding of reserve capacity to serve growth occurring after construction of the facilities is completed. A 10-and 20- year limit would permit Federal funding of reserve capacity to serve 10 years of growth for treatment plants and 20 years for sewers. The limiting of eligibility for reserve capacity is not intended to preclude the cost-effective sizing and design of the facilities. The grantee would be permitted and, in fact, encouraged to provide cost effective reserve capacity, but he would be required to fund 100 percent of this capacity. The objectives to be achieved by limiting eligibility for reserve capacity are twofold. The first objective is to permit limited Federal authorizations for the construction grant program to go further in funding the backlog of projects. The estimates in the recently completed 1974 Needs Survey appear to exceed any reasonable capacity for funding within the Federal budgets for the next several years. The second objective is to induce more careful sizing and design of capacity to serve future growth; this will alleviate tendencies 2 to provide excessive growth -relate c| reserve capacity and reduce the secondary environmental impacts of growth that could result from such capacity. Background Statutory References--Section 204(a)(5) of PL 92-500 specifically authorizes Federal funding of reserve capacity in facilities eligible for construction grant assistance. This Section provides that the EPA Admini- strator must determine "that the size and capacity of such works relate directly to the needs to be served by such works, including sufficient reserve capacity. The amount of reserve capacity provided shall be approved by the Administrator on the basis of a comparison of the cost of constructing such reserves as a part of the works to be funded and the anticipated cost of providing expanded capacity at a date when such capacity will be required. " Definition--In the broadest sense, reserve capacity includes several components: (1) capacity required to serve estimated population growth within the service area, (2) capacity to serve anticipated new industrial and commercial sources, (3) capacity required to handle, fully or partially, wet-weather flows, (4) capacity required to handle flows from existing sources in a service area which are not connected to the system but will be connected during the life of the system, (5) capacity included in the system as a hydraulic safety factor to accommodate daily and seasonal fluctuations, and (6) capacity included to provide for projected increases in per capita flow rates. In this paper, reserve capacity includes only components (1) and (2). 3 Present Practice--Under current regulations, eligible reserve capacity is determined on the basis of cost-effective analysis performed by the grantee in the Step I, facilities planning stage of the grant. This analysis is reviewed by the States and/or EPA and, if it conforms to good analytical practices as defined by EPA guidelines, the reserve capacity determined by the analysis is found to be eligible. Basically, the analysis encompasses a projection of population, industrial, and commercial growth and^a comparison of total present monetary worth of various sizings of the facilities designed to serve alternative periods of growth. In addition, the nonmonetary impacts (the secondary impacts of growth) of the alternatives are compared. The adequacy of the cost-effective analysis varies from "rule of thumb" designs to fairly sophisticated evaluations. Generally, these analyses have resulted in approved eligible reserve capacities of up to 20 years for treatment plants and 30 to 50 years for interceptor sewers. Recent studies--Two recent studies have addressed the problems associated with current practices in basing eligible reserve capacity on cost-effective analyses. The first is a study on interceptor sewers conducted for the Council on Environmental Quality; This study was critical of EPA's present practice in that it occasionally permits excessive reserve capacity for interceptors, which facilitates growth and its attendant secondary environ- mental impacts. *• 4 The second is an unpublished EPA study analyzing 68 treatment plants and interceptors. Recent construction projects which had received Federal grants were selected at random from around the country. Each project was evaluated to determine the amount of reserve capacity provided. The EPA study found that reserve capacity in 53 treatment plants provided for an average of 18 years of increased flow, and reserve capacity in 15 inter- ceptors, for 47 years of increased flow. There are two partial explanations for the large amount of reserve capacity found in this small sample of interceptors. First, large economies-of-scale are realized in interceptor construction--for example, a 10 percent increase in capacity represents only a 3 to 5 percent increase in cost. Second, traditional design periods are very long, usually about 50 years. California Experience--In 1973, California instituted its own policies on reserve capacity. The State certifies, as eligible, the costs of treatment plant capacity required to serve projected residential and commercial flows within 10 years of commencement pf construction, but only industrial flows existing at the commencement of construction are eligible. For interceptors, outfalls, and sewer lines, the cost of capacity for 20 years of growth is allowed. California's system does not limit the amount of capacity which the grantee may build, but simply limits the capacity the State will certify as eligible for construction grant funds. For every grant, the State Department of Finance and the State Water Quality Control Board determines the population projections to be used in calculating eligible reserve capacity. 5 This so-called "10/20" program was chosen by California because it did not have enough construction funds to provide grants for every eligible project. The State felt too much money was being used for reserve capacity to serve population growth, thus delaying the funding of needed project and inducing adverse environmental impacts. The plan was the subject of public hearings before its enactment. One result of California's approach was an increase in the administrative task of determining the eligible portion of the total project cost. For projects funded in FY 1973 and 1974, the State allocated costs between eligible and ineligible portions on a straight-line, or pro rata basis. For FY 1975 projects, costs are separated using a marginal cost, or incremental cost analysis. The difference between the two types of allocation is that the incremental analysis reflects the actual costs of reserve capacity by taking into account economies-of-scale, while the pro rata system does riot. Reserve Capacity Included in 1974 Needs Survey--One of the reasons for considering the limitation of eligiblity for reserve capacity is that it conserves Federal funds authorized for construction grants and enables more, if not all, of these funds to be used to correct the "backlog" of facilities needs. To address this point, the recently completed 1974 Needs Survey was examined to determine the amount of growth related reserve capacity included in future needs. In Category I, secondary treatment, growth related reserve capacity appears to represent about 20 percent of the $12. 6 billion needs reported in the 1974 Needs Survey. For Category II, advanced treatment, the 1974 Needs Survey reported needs of $15. 7 billion. At this time it is impossible tq estimate what portion of this need is for growth, although the ratio of growth to backlog is probably rather small. It is alfio difficult to estimate what part of interceptor needs — Category IVB-- ir, for growth^ without making a ca.se-by-case investigation. However, on t.h',- basis of 3 small random sample of interceptors, growth needs are estimated to represent from 30 to 50 percent of reported needs, which the I&74 anr-rey set at $lr/. 9 billion. In summary, of the $46. 2 billion in needs reported for treatment plants and interceptors in the 1974 Needs Surveys, $12 bullion or more appears to represent needs to serve population growth. Issues to be Discussed The public hearings will address at least the following questions on this issue of limiting eligibility for growth-related reserve capacity. -1- Does current Practice lead to overdesign of treatment works? Studies suggest that current practices permit substantial capacity to serve population growth. If true, this results in secondary environ- mental impacts and monetary inefficiencies. The 75 percent Federal grant rate appears to introduce an incentive for overdesign. 2. What could be done to eliminate problems with the current program, short of j. legislative change ? Population projections could be coordinated on a statewide basis and limited to the lowest of the Census Bureau's projected fertility rates. EPA and the States could give greater emphasis to overseeing better cost effective analyses in facilities planning; however, this would require more manpower than now available and could lead to project delays. o o 7 3. What are the merits and demerits of prohibiting eligibility of growth- related reserve capacity? Would this alleviate over-design and its attendant monetary inefficiencies and secondary environmental impacts? Would municipalities, particularly rapidly growing communities, be able to accommodate 100 percent funding of necessary, cost-el'L'ective growth-related reserve capacity? Would this lead to underdesign and create a backlog problem for the future? 4. What are the merits and demerits of limiting eligibility for growth- related reserve capacity to 10 years for treatment plants and 20 or 25 years for sewers? Would this be sufficient to eliminate over-design? Could this be efficiently and effectively administered? Can the California experience be achieved in other States? 5. Are there other alternatives? c o Paper No. 3--Restricting the Types of Projects Eligible for Grant Assistance Statement of Issue This paper deals with the issue of whether PL 92-500 should be amended to restrict the types of projects eligible for construction grants funding. PL 92-500 authorizes funding of the following types of projects: I Secondary treatment plants II Tertiary treatment plants as needed to meet water quality standards IIIA Correction of sewer infiltration/inflow IIIB Major sewer rehabilitation IVA Collector sewers IVB Interceptor sewers V Correction of combined sewer overflows VI Treatment or control stormwaters The above classification is the same as that used in the 1974 Needs Survey. The issue is whether any of these categories should be eliminated from eligibility. The principal purpose to be achieved in limiting eligibilities is to reduce the Federal burden in financing the construction grants program. A secondary purpose is to limit Federal participation to those types of projects that are most essential to meet the water quality goals of PL 92-500 and to require that some projects be fully financed by local and State authorities where such projects are clearly within their responsibilities and capabilities. A proposal to limit eligibilities to categories I, II and IVB is being considered; however, other combinations are also being evaluated. o 2 Background Many types of actions may be involved in efforts to reduce water pollution. Certain of these actions, such as installation of treatment plants and interceptor lines, involve large amounts of capital for construction of facilities. Other actions, relying little if at all on construction of facilities, involve the extent and timing of pollutant loadings to the actual treatment and collection system by which such methods as frequent street sweeping or direct reduction of wastewater generation through legal or pricing mechanisms. Prior to PL 92-500, Federal financial support was limited to treatment plants and interceptors. Other facilities were considered the responsibility of local governments, although specific Federal and State programs provided assistance in some cases. These limitations encouraged local governments to favor the few eligible types of projects, such as large treatment plants, rather than to bear the Lull cost for more effective solutions such as correction of infiltration/in flow problems. PL 92-500 permitted funding of many previously ineligible construction- oriented approaches to water pollution control, increasing the incentive for local governments to develop projects economically efficient with respect to all construction-oriented approaches. PL 92-500 did not provide assistance for operating and maintenance costs, for most management alternatives to construction facilities, or for most nonpoint source control measures such as sediment catchments. Therefore, although the current grant program may have fewer biases than its predecessor programs, it has not eliminated all of the biases in local governments' incentive. 3 Any restrictions in eligibilities might produce some of the same biases that the Amendments worked to eliminate. However, section 313 of PL 92-500 explicitly requires applications for construction grants to be accompanied by a demonstration that the proposed project is "over the life of such works, the most cost-efficient alternative. " In theory, this compels a locality to select the least costly actions, whether management- or construction-oriented, whether eligible or not eligible for Federal financial assistance. In fact, cost-effectiveness analysis seldom generates irrefutable conclusions. Since the most cost-efficient solution may be one for which there is little State or federal assistance, there is a clear incentive for local governments in their cost-effectiveness analyses to favor actions that are eligible for assistance. The areawide planning program may in the future provide greater reliability in determining cost-effective solutions than an individual facilities plan currently does. However, areawide planners, like facilities planners, may hesitate to produce a plan that identifies means which are ineligible for Federal cost-sharing as the most cost-effective. Several arguments have been advanced for restricting existing eligibilities in some manner: Ensure that Federal funds provide greatest water quality benefits - - Effective use of Federal resources requires that the limited funds available be allocated to obtain the greatest water quality benefits relative to costs, taking into account local willingness and capacity 4 to invest in facilities. Because of this, States, in conjunction with EPA, have developed a system of priorities for funding projects. In an effort to structure these priorities so that they reflect anticipated project benefits, projects have been ranked in large part according to the type of facility to be built. As a result, treatment plants and interceptors have high priority, while collector sewers, correction of wet weather overilows, and stormwater treatment and control generally have low priority. Congress, however, has allocated available funds among States partly according to total needs for all eligible facilities, including both low and high priority facilities. Relative needs for these facilities vary widely among States and EPA Regions. It will become increasingly difficult therefore to ensure on a national basis that high- priority projects are funded before low-priority projects, and thus ensure that maximum water quality benefits are being derived from Federal expenditures. A statutory elimination of certain eligibilities, this argument runs, would have three closely-related effects: (1) legislate greater adherence throughout the nation to priorities, promoting maximum benefits; (2) simplify administration of the program by giving clearer statutory authority to established priorities; and (3) simplify Congressional allocation of funds among States in an equitable, efficient manner more closely in accord with established priorities by eliminating those facilities for which needs can be least reliably ascertained. 5 Reduce Federal budgetary commitments--In 1974, States estimated their eligible needs for all these facilities at $356 billion, inch'ding $235 billion for storm water treatment and/or control. Since Congress is unlikely ever to appropriate this amount, explicit restrictions ';>:ro'i"'.d clarify the nature and extent of Federal commitment over the i.exc few years and facilitate the budget-making process. Encourage State and local self-sufficiency--Restrictions in eligibility would encourage State and local governments to assume increased responsibility both in determining environmental needs and financing pollution-control facilities. Greater self-sufficiency, in turn, would probably result in States and localities setting water quality goals tnat more accurately reflect their perceived benefits. Encourage wiser investment decisions--Reduction in eligibility might discourage construction-oriented solutions for certain problems, such as stormwater runoff, that may better be handled by management techniques. Reduction in eligibility for facilities with a high proportion of local benefits and for which there is adequate local willingness and ability to finance, such as collection sewers, would prevent the expenditure of I^ederal funds which could finance projects with higher water quality benefits. Similarly, elimination of eligibility for certain elements would reduce the tendency for localities to delay needed or desired investment in hopes of receiving a grant. On the other hand, there are several arguments for retaining or even broadening current eligibilities. 6 Encourage examination of broad options--Among construction-oriented elements, broad eligibilities encourage selection of the most cost-effective system. Rather than focusing attention on one or two types of construction solutions, such as a larger treatment plant instead of less-costly correction of infiltration/inflow, or advanced treatment for sanitary wastes rather than treatment or control of stormwater runoff, all major construction approaches would be encouraged. Preserve administrative flexibility--Facilities integral to an effective wastewater management system, such as collector sewers, can be supported by Federal funds when they are beyond local financial capability. By allowing such selective funding, broad eligibilities preserve program flexibility and allow EPA to overcome obstacles which might otherwise delay construction of high-priority facilities. Increase incentive to achieve the goals and requirements of the Act-- PL 92-500 set very high goals, including waters suitable for swimming by 1983 and the elimination of discharge of pollutants by 1985. Broad eligi- bilities--coupled with adequate resources--provide greater support to the efforts of local government to meet these goals. , Prevent inequitable changes--Some communities may have received financial assistance for facilities which a legislative amendment would make ineligible, thereby denying similar grants to other municipalities with equal qualifications. (.'oasidc't-atioiia Any proposal must be judged, primarily by how it will affect attainment of the Act's objective "to restore and maintain the chemical, physical, and biological integrity of the Nation's waters. " Along with the environ- mental impact, however, consideration must be given to economic impacts such as employment, inflation, and efficient allocation of resources, as well as to considerations such as ease and equity of administration. The basic questions which must be explored in evaluating alternative proposals are the following: 1. What would the net environmental impacts be of the major alternatives under consideration? Upon what specific premises should an evaluation of the environmental impact be based? 2. How would the various changes affect administration of the program? What are the major differences between administrative problems resulting from restricting, as opposed to eliminating, certain types of eligibilities? What sorts of restriction could most easily be enforced? 3. What changes in investment and employment in waFtewater pollution control would result from adoption of any of the major alternatives? What changes in total employment in the entire economy? What are the probably impacts on inflation in costs for pollution control facilities and in costs of other goods arid services? 8 In examing these basic questions, it may be useful to consider other closely related questions: 1. What impact do different eligibility structures have on the determination of need for a particular facility? A need may be perceived for a, facility for a variety of reasons- a secondary treatment plant to meet the requirement of the Act, a stormwater treatment plant to allow high water quality standards to be achieved throughout the year, collector sewers to replace failing septic tanks, etc. Since all needed facilities cannot be built at once, a grant system ideally should seek to provide the greatest improvement in water quality. Would restricted eligibilities facilitate or hinder the achievement of this objective? Are the differences in benefits accruing from different types of facilities sufficient to justify restriction by category? What problems are currently and would in the future be associated with accomplishing this objective if, in order to preserve flexibility, it is done administratively rather than by legislative amendment? Eligibility for certain elements may lead a local agency to construct such a facility when in fact an equally effective management alternative to the problem is less expensive, in terms of all Federal, State, ana local costs. It has been argued that this problem is especially evident in ameliorating the impact of urban stormwater runoff. c o 9 Do certain eligibilities in fact create this difficulty, and if so, how might it be alleviated? 2. Is there adequate local incentive to undertake needed investment in certain types of facilities, even in the absence of Federal financial assitance? Where a high proportion of the benefits of pollution abatement actions accrue to an individual locality, it would be expected that the locality would have adequate incentive to undertake investment without Federal assistance. But when Federal funds support such projects, (thereby substituting for local funds which would have been invested anyway), fewer Federal funds are available for projects with more nonlocal benefits thus less local incentive to invest. The result, would be less total investment in wastewater pollution control facilities. How does the proportion of local benefits, and thus localr incentive to undertake investment without financial assistance, vary among types of facilities? The concept of benefits, of course, implies that localities receive positive gains from their actions. There is also the possibility that enforcement actions brought against localities for not complying with specific requirements of the Act would serve as a major incentive to undertake investment without assistance. This might raise serious questions of equity, of course, but does suggest one means of increasing local incentive to invest in the absence of Federal assistance. o o 10 How do, or might, enforceable provisions of the law affect incentive to construct different types of faculties? 3. Is there adequate local financial capability to undertake investment in different types of facilities ? If there is a definite need for a facility, but inadequate local financial capability, it is unlikely to be constructed without financial assistance, even if there is considerable local incentive. As a result, a grant program oriented toward financial assistance may be needed to ensure that appropriate levels of investment are attained. Financial constraints on local governments resulting from the current recession may be significantly reduced by the time any amendment would become effective, presumably after FY 1976. Other Federal grant programs, such as the community development block grant program of the Department of Housing and Urban Development, might provide local governments with funds needed for certain types of facilities even if eligibility under the Act were eliminated. In addition, different ways to finance different types of facilities-- for example, special bonds for collector sewers--may facilitate financing when the local government has encountered difficulties financing other types of facilities. Are there differences--such as cost or financing methods -- among types of facilities eligible for assistance that would lead to different impacts on local financial capability if certain eligibilities were reduced or eliminated? Paper No. 4--Extending 1977 Date for the Publicly Owned Pretreatment Works to Meet Water Quality Standards Statement ol Issue This paper >l-uls with the issue of whether PL 02-500 should be amended to extend the date by which publicly owned treatment works arc- to achieve compliance with requirements of Section 301 of the statute. Sections 301(b)(l)(B) and 301(b)(l)(C) of PL 92-500, require that publicly owned treatment works (POTW's) achieve effluent limitations based upon secondary treatment or a more stringent level of treatment, if necessary, to meet water quality standards. These effluent limitations are to be attained no later than July 1, 1977. The only exception is where grants to POTW's were approve:! before July 1, 1974. These POTW's are required to complete construction within four years of the construction grant approval date. It is currently estimated that 50 percent or 9, 000 municipalities serving 60 percent of the 1977 population will not be able to comply with the above requirements. This stems almost exclusively from the fact that municipalities have depended, with EPA acquiescence, on construction grants to assist them in constructing the necessary facilities to enable them to meet these requirements. This dependence has encountered two problems. Kirst, the amount of construction grant funds thus far authori7cd--$18 billion.-- is not sufficient to cover- the 1977 nseds which are estimated by the 1974 Needs Survey to be at least $46 billion (based on categories I, II and IVB which are secondary treatment plants, tertiary treatment plants when required to meet water quality standards, and c o 2 and interceptor sewers, respectively). As a result, a part of the 9, 000 municipalities have not received a grant to construct the facilities needed to comply with the 1977 requirement. Second, a great many of the projects funded under the construction grants program cannot be feasibly completed by 1977 to enable compliance with the Section 301 requirements. Because of a variety of problems and delays in revising the construction grants program to incorporate the many new requirements of PL 92-500, because of the longer project planning and design periods required to meet these new requirements and because of other factors, only $4. 8 billion of the $18 billion has been obligated. Consequently, only a small portion of the projects that will be constructed under the $18 billion have been started and a majority of these have not yet reached construction stage. Moreover, the time period to bring a project to completion is typically 2 to 5 years and occasionally exceeds 5 years. Accordingly, even some of the projects initiated about the time of, or shortly after the passage of, PL 92-500 cannnot be completed within the Section 301 time period. Alternatives Five principal alternative solutions to the problem of noncompliance have been identified. In cases where a proposed extension of secondary treatment requirements results in a violation of water quality standards, EPA is assuming that Congress would provide an exemption from compliance with water quality standards. 3 The fine alternatives are: 1. Retain the 1977 date and enforce against violators, 2. Retain the 1977 date without enforcing against those dischargers that cannot realistically be expected to meet the deadline due solely to funding problems, 3. Seek statutory amendments that would maintain the 1977 date but would provide the EPA Administrator with discretion to grant compliance schedule extensions on an ad hoc basis, based upon actual time required with the expenditure of good faith efforts to build the necessary facilities, 4. Seek statutory amendments that would maintain the 1977 date but would provide the Administrator with discretion to grant compliance schedule extensions on an ad hoc basis based upon the availability of Federal funds, 5. Seek a statutory extension of the 1977 deadline to 1983 and require compliance regardless of Federal funding. Alternative (1) implicitly denies any connection between the availability of construction grant funds and EPA's compliance/en for cement of municipal permits. This appears to be politically unrealistic, few if any communities are expected to finance their own POTW's and thereby jeopardize Federal support, whether confronted by an enforcement threat or not. Under most circumstances, the community would probably take the issue to court rather than attempt to raise its own funds. In fact, the State of Virginia, in anticipation o 4 of possible EPA enforcement activity, has challenged EPA's enforcement authority claiming "a Federal share" of the cost of compliance with Section 301 and thereby arguing that enforcement is viable only where funds have been made available in sufficient time to comply with the deadline. The United States District Court (Eastern District, Virginia) is expected to rule on this issue in approximately 60 days. The policy supported by Alternative (1) has the added consequence of aggravating existing equity problems created by limited funding capabilities and the inability to spread available funds among the needed facilities in the State since the statute requires that the Federal government pay 75 percent of the construction costs. This effectively prevents the Administrator from making grants in amounts less than 75 percent and thereby providing funding of all needed facilities at lesser levels of Federal participation. Furthermore, the logic of taking enforcement action against a facility that is physically unable to meet 1977 requirements because of construction limitations can be questioned. However, the EPA does not feel constrained to take specific remedial action such as sewer moratoriums where appropriate. On the other hand, the aggressive enforcement program supported by Alternative (1) might motivate reluctant communities to speed construction where possible to avoid severe penalties for violation of permits. o 5 Alternative (2) reflects current EPA policy in part. This policy has been to issue five-year permits providing for full compliance with 1977 requirements to all publicly owned treatment works where no major construction is needed to achieve compliance with Section 301, where construction scheduled for completion by the 1977 deadline is presently underway, or where the source is sufficiently high on the State's priority list for funding and the proposed construction schedule is such that compliance with the 1977 requirements is probable. Short-term permits (expiring prior to the Section 301 deadline) are issued to municpal facilities that cannot realistically be expected to meet required discharge limitations by the 1977 deadlines. These permits include effluent limitations established so as to require optimum operation and maintenance of existing facilities and completion of any modifications to facilities which could reasonably be undertaken with State and local monies or revenue sharing funds in the absence of a Federal construction grant. Following this policy, EPA strictly monitors and enforces compliance schedules and requirements established in permits. As a result, EPA has not initiated enforcement action against municipalities whose violations of the statutory deadline can be shown to have resulted solely from the lack of Federal funds, and their discharge is in complaince with an issue permit. 6 Th'- inherent weakness of this option lies in the potential loss of a very effective tool--permits and enforcement rather than grants--for achieving compliance with Section 301 requirements. Furthermore, this option does not prevent possible citizen suits on the matter nor does it limit potential State enforcement activity. Twenty-two States have already received National Pollutant Discharge Elimination.System (NPDES) program approval and thus have independent enforcement authority. Municipalities may thus be vulnerable to differing standards of compliance. Alternative (3) enables EPA to grant extensions to municipalities based upon physical construction limitations that cannot, under any circumstances, be overcome, but without any full commitment to Federal funding support. Under this alternative EPA could still mandate construction without Federal funds, although it is unlikely to do so. By granting the Administrator discretion to extend compliance deadlines on a project- by-project basis, this alternative provides for a more uniform and aggressive enforcement policy than those possible under alternative (2). Facilities capable of meeting the 1977 deadline are required to do so, and strong enforcement action is taken when they fail. Facilities granted extensions are placed on specific compliance schedules subject to a vigorous monitoring program to alert the EPA Regional Offices to slippage. Enforcement action would then to taken as appropriate. However, it may be difficult to limit the application of this alternative to municipal dischargers, since industrial dischargers who have also experienced construction delays could make similar 7 arguments. This problem is aggravated by the dependence of some industrial dischargers upon the successful construction of municipal plants to complete their treatment requirements. Current EPA policy expects the industrial facility to satisfactorily treat its wastes until such time as it can hook up into a municipal system, even if such treatment might require construction of a treatment plant to bp utilized for a very short time period. Alternative (4) seeks Congressional agreement to provide 75 percent funding for the construction of facilities needed to comply wit|i the 1977 deadline. This alternative links the availability of Federal finding with the enforcement provisions contained in Section 309. A significant problem in adopting this alternative is the fact that eligible construction costs, as now defined in the Act, would provide 75 percent funding for "eligible projects. " Eligible projects may achieve effluent reductions far greater than required for the 1977 deadline. As the Needs Survey observed, the cost of eligible facilities, under PL 92-500 is $342 billion dollars, a significantly greater figure than that required for compliance with the 1977 deadline. Thus, it becomes apparent that should alternative (4) be adopted, eligibility would need tq be redefined in such a manner as |to prevent the Federal share from being used to construct facilities more sophis- ticated than necessary to achieve the 1977 deadline. This alternative has significant Federal budgetary implications not found in other options. If the Federal government assumed responsibility for 8 construction of all publicly owned treatment works required to provide secondary treatment, current Federal funding levels would probably be more than tripled. Alternative (4) also carries the same compliance ramifications evident under Alternative (3), since responsiveness to the problem of construction delays is implicit in this option. Alternative (5), which changes the municipal compliance date to 1933, offers an across-the-board extension regardless of the problems of any given POTW. It could possibly jeopardize the entire NPDES program. Industrial facilities would insist on similar extensions, particularly those under great financial strain to comply with their effluent limitations. Water quality standards would be violated unless new regulations were written providing for some sort of exemption. However, this alternative is somewhat responsive to the national economic situation. Furthermore, it allows for more flexibility in local decision making procedures. It is also unambiguous, requiring compliance regardless of Federal funding. Thus it eliminates the problem of administrative subjectivity as well as compliance uncertainty inherent under alternatives (2), (3), and (4). Furthermore, alternative (5) would also accommodate the suggestions of an EPA task force to allow the postponement of construction of the municipal treatment works with an ocean discharge, pending environmental assessments of specific outfall sites to determine the most effective technology. Considerations EPA is interested in a public response to these alternatives. It is important that policy formulation reflect the relative priorities and trade- offs of affected communities. Apart from the obvious question of which alternative is preferred, there are other considerations: 1. Should PL 92-500 be amended to permit prefinancing of POTW's subject to Federal reimbursement? 2. Is it fair to require industry to meet the 1977 deadline while extending it for municipalities? 3. Is it fair to make industrial requirements more stringent pending municipal compliance, as is th^e case with joint systems? 4. Should an outside limit be provided to the Administrator granting extensions, for example five years from date of amendment, or should the possible compliance deadlines be open-ended? 5. Will EPA lose credibility supporting an across-the board extension for municipal compliance, especially in cases where it is unnecessary? Or are the current economic priorities such that such an extension is only reasonable? 6. How big a difference would these alternatives make on local funding or State financing? 7. Should EPA consider changing the definition of secondary treatment to allow for classifications according to size, age, equipment, and process employed? Extensions of the 1977 10 deadline might therefore be unnecessary, since the amended secondary treatment requirements could be responsive to many of the construction problems causing current compliance delays. 8. Would a two-year extension for compliance be preferrable to the six-year extension promoted under Alternative (5)? Is this alternative unnecessarily lenient? 9. Until such a time when a solution to current compliance delays is adopted, should EPA issue letters of authorization to those POTW's that cannot achieve compliance with the 1977 deadline instead of issuing short-term permits? Letters of authorization are admini- stratively simpler than short-term permits. Paper No. 5,--Delegating a Greater Portion of the Management of the Construction Grants Program to the States A. Background With the recent release of the full $18 billion in construction grant funds, it is important that all construction grant applications be processed as efficiently as possible, while maintaining financial and environmental integrity. One current proposal for improving the performance of the program is to delegate a greater number of functions and responsibilities directly to the States with EPA assuming more of an overview role. If States were able to assume a greater degree of program management, it might be possible to expedite the flow'of funds into necessary construction projects, thereby obtaining both environmental and economic benefits. A bill, H. R. 2175, has been introduced which would permit the Administrator to delegate to the States the broad range of grant processing functions, including those that go beyond just the review and approval of documents. Included also is a provision to compensate the States directly out of State allotments for administrative costs which they incur-- up to a maximum of 2 percent of a State's yearly allotment. Under the H.R. 2175, EPA activities v/ould be largely confined to overall policy making and to auditing and monitoring the grant activities performed by the States. However, EPA would remain responsibile for any Environ- mental Impact Statements necessary on individual projects. Current procedures authorize States to certify that such key documents as construction plans and specification and operation and maintenance manuals fulfill all legal and administrative requirements. EPA can then approve them withoiit further review. 2 The bill would authorize the State agency to certify that plans, specifications, and estimates for a proposed project meet the requirements of the Act, and that the proposed project conforms to applicable arewide and State plans, is entitled to priority, and relates directly to the needs to be seved by such works, including sufficient reserve capacity. Finally, the State agency would be able to certify as to such matters as bidding procedures, cost sharing requirements, cost effectiveness, and user charge and industrial cost recovery requirements, as well as legal, institutional, managerial, and financial capabilities. The proposed measure would also provide for State certification of the fulfillment of various requirements for facilities grants under Title II of the PL 92-500 is intended to (1) reduce duplication of efforts by the States and the Federal government, (2) avoid substantially enlarging the number of Federal personnel needed to carry out the provisions of the Act, and (3) enhance the policy expressed in PL 92-500 to "recognize, preserve, and protect the primary responsibilities and rights of States" in the prevention, reduction, and elimination of pollution. EPA has had a continuing policy of delegating to the States, to the extent possible, responsibility for conducting functions related to the Act—provided that the quality of the State's performance will equal or exceed requirements for fulfilling these functions. The proposed amendment would allow the States, as they become ready, to assume responsibilities commensurate with their capabilities, and would, as well provide funds to reimburse them for the responsibilities assumed. o B. Alternatives Ttu: general intent of the proposed legislation is to process grants more effectively and efficiently and to give more attention to activities an J problems at the State level. Alternative course for making the processing of grants mqre efficient include: (1) centering all of the re sponsibilitic s in EPA or, (2) continuing the present mix or EPA/State grant activities, but improving the overall procedures. With greater delegation of responsibility to the States, some time will be necessary for1 the States to organize and acquire adequate staff. C. Considerations In considering this issue, the public may wish to discuss the following questions: (1) exactly what functions in the review and approval of construction grant applications should be delegated, (2) should all parts of the construction grafts process be delegated, (3) in addition to ordinary staffing problems, what difficulties may be encountered in State staffing when a Kedoral financial commitment is involved, (4) will the funding level suggested in the proposed bill be adequate, (5) in actual practice, will greater delegation of program responsibility to the States make the program more efficient without compromising environmental concerns, (6) how much time would be required for individual States to assume additional responsibilitj.es, and (7) are there alternative funding schemes, either Federal or non-Federal. o o H.R. 2175 A BILL To amend title II of the Federal Water Pollution Control Act to provide for State certification. Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, That title II of the Federal Water Pollution Control Act (33 U. S. C. 1281 et seq. ) is amended by adding at the end thereof the following new section: "CERTIFICATION" "Sec. 213. (a) The Administrator may discharge any of his responsi- bilities for actions, determinations, or approvals under sections 201(g) (2) and (3), 203(a) and (d), 204(a), (b)(l), and (b)(3), and 212(2) (B) of this Act with respect to projects or proposed projects for treat- ment works by accepting a certification by the State water pollution control agency of its performance of such responsibilities. "(b) The Administrator shall not accept any certification provided for in subsection (a) of this section unless the Administrator determines that the State water pollution control agency has the authority, responsi- bility, and capability to take all of the actions, determinations, or approvals for which certification is submitted under subsection (a) of this section. "(c) If the Administrator determines after public hearings that a State water pollution control agency, with respect to any requirement, condition, or limitation for which he has accepted a certification under 2 subsection (a), fails to meet the requirements of this Act, he may suspend his acceptance of certification as to such requirement, condition, or limitation with respect to any project, or with respect to all projects in such State, as he determines necessary, and during such suspension he shall be responsible for such requirement, condition or limitation. "(d)(l) The Administrator is authorized to conduct interim and final inspections and audits, and to require such information, data, and reports as he may determine necessary to carry out this section. "(2) Nothing in this section shall affect or discharge any responsi- \ bility or obligation of the Administrator under any other Federal law, incuding the National Environmental Policy Act of 1969 (42 U. S. C. 4321 et seq.). "(e)(l) The Administrator shall reserve an amount not to exceed 2 per centum of the allotment made to each State for each fiscal year under section 205, after the date of enactment of this section. Sums so reserved shall be available for making grants to such State under paragraph (2) of this subsection for the same period as sums are available from such allotment under subsection (b) of section 205, jand any such grant shall be available for obligation only during such period. Any grant made from sums reserved under this subsection which has not been obligated by the end of the period for which available shall be added to the amounts last allotted to such State under section 205 and shall be immediately available for obligation in the same manner and to the same extent as such last allotment. * « • *• 3 "(2) The Administrator is authorized to grant to any State exercising, or proposing to exercise certification authority under this section, from amounts reserved to such State under this subsection,, the reasonbable costs, as determined by the Administrator, of carrying out such authority. "(f) The Administrator shall promulgate such rules and regulations as may be necessary to carry out this section. The initial rules and regulations necessary to carry out this section shall be promulgated not later than the ninetieth day after date of enactment of this section. "