» Advocacy Alerts Archive

NACWA is encouraged by the U.S. Environmental Protection Agency’s (EPA) January 18 memorandum to its regional offices that commits the Agency to an ongoing dialogue with the U.S. Conference of Mayors, NACWA and other key stakeholders on determining the financial capability of communities to meet their Clean Water Act (CWA) obligations.  The memorandum transmits a document entitled “EPA’s Dialogue with Local Government – Financial Capability Framework” that describes the issue and the topics that will be discussed during the dialogue.  In the coming months, based on input from the ongoing dialogue, EPA will work to develop “an approach to provide clarification” on key issues and to help ensure “consistent implementation among EPA Regions.”

EPA’s commitment to an ongoing dialogue and additional guidance is an important step forward on the issue of financial capability as well as the Agency's broader integrated planning initiative.  This Advocacy Alert provides a brief summary of the memorandum and framework and discusses next steps.

EPA Announces Dialogue, Planned Clarification on Financial Capability

Building on discussions between EPA and the U.S. Conference of Mayors over the last few months, EPA sent its regional offices a document entitled “EPA’s Dialogue with Local Government – Financial Capability Framework” (Financial Capability Framework) January 18, committing the Agency to address a number of implementation issues and “provide more robust ways to present additional community-specific information within a financial capability analysis.”

The announcement from EPA comes at a time when communities across the country are struggling to meet their current CWA requirements.  The Financial Capability Framework underscores that EPA recognizes “these challenging conditions” and that it is “working with states and local governments to develop and implement new approaches that will achieve water quality goals at lower costs and in a manner that addresses the most pressing problems first.”  NACWA and the Conference of Mayors have been outspoken critics of EPA’s approach to assessing financial capability and more broadly the Agency’s implementation and enforcement of the CWA, putting unprecedented costs on communities and ratepayers often without regard to less expensive and effective alternatives and without regard to the impacts on the municipal economy more broadly.  In June 2012, EPA released its Integrated Planning Framework – intended to help communities prioritize and better sequence clean water investments – in an attempt to address some of these concerns.  But the Integrated Planning Framework’s reliance on financial capability considerations further underscored the need to update and refine the approaches outlined in EPA’s 1997 “Combined Sewer Overflows: Guidance for Financial Capability Assessment and Schedule Development.”

While there were no surprises in EPA’s memorandum – much of what the document covers has been stated before in previous Agency communication – the commitment to an ongoing dialogue and additional guidance is an important step forward.  NACWA understands that the dialogue will take place pursuant to Executive Order 13132 on federalism, which ensures municipal input into the regulatory process.  The list of organizations that participate in these federalism consultations includes the Conference of Mayors, the National League of Cities and the National Association of Counties.  NACWA participates in these discussions as they pertain to CWA issues due to its technical and policy expertise. The Financial Capability Framework states that EPA and local government representatives will focus on the following during the dialogue:

How to expand the use of benchmark indicators of household, community and utility affordability, such as increasing arrearages, late payments, disconnection notices, service terminations, and uncollectable accounts;

• How to meet the obligations of the CWA by utilizing flexibilities in the statute and implementing regulations to prioritize necessary investments;
• How rate structures present both limitations and opportunities; [EPA encourages the use of lower rates or subsidies for lower income customers]
• How innovative financing tools, including public private partnerships, are related to affordability;
• How to facilitate consistent policy implementation at EPA Regional offices; and
• How other community specific factors, including obligations under the Safe Drinking Water Act, should be considered in developing appropriate compliance schedules
• As an outcome of this dialogue, EPA has committed to developing “an approach to provide clarification of the financial capability analysis” and to ensure consistent implementation among EPA’s regional offices.

NACWA Next Steps

NACWA will be participating in the dialogue with EPA and the U.S. Conference of Mayors and will be able to draw upon its previous papers on the financial capability issue as well as a new Targeted Action Fund initiative, currently underway, to address financial capability in an integrated planning context.  NACWA will also raise concerns with some of the memo's language, including the propriety of the Agency weighing in on local rate-setting issues, while also continuing to flag the need to clarify issues surrounding the two percent of median household income figure, among many others.

While the new EPA memorandum and ongoing dialogue will hopefully lead to meaningful guidance and more consistent implementation, the effort stops short of a wholesale revision of the 1997 financial capability guidance – something NACWA has advocated for since 2005.   In fact, EPA asserts in the Financial Capability Framework that the 1997 guidance “will continue to be a valuable guide”.  Accordingly, NACWA will continue its legislative efforts on financial capability, including work to help reintroduce and move Senator Sherrod Brown’s (D – Ohio) Clean Water Affordability Act.  NACWA has been an outspoken supporter of this legislation which, among other things, would require EPA to undergo a comprehensive revision of the 1997 financial capability guidance.