NACWA is pleased to announce the availability of several new resources for its members on financial capability and affordability issues.  Principles for Assessment and Negotiation of Financial Capability: A Compilation of Resources is the culmination of a year-long effort to build on the concepts first outlined in NACWA’s 2005 white paper (), Financial Capability and Affordability in Wet Weather Negotiations.  The new compilation () contains three new documents and an in-depth introduction with suggested strategies for clean water agencies in the midst of discussions or negotiations on the cost of the services they provide.  While ideal for agencies currently working on the terms of a consent decree or other order, the new documents can also be helpful for any community trying to assess their financial capability to meet current and future clean water demands.

Following the release of its 2005 white paper, NACWA learned that EPA was considering revising its 1997 guidance on financial capability.  This document, Combined Sewer Overflows: Guidance for Financial Capability Assessment and Schedule Development, is often cited in negotiations with the federal government on wet weather programs and has presented serious problems for many communities.  The chief concern with EPA’s 1997 guidance centers on its use of a percent of median household income (generally 2 percent of MHI) threshold as the determining factor of whether a community’s spending on a particular program is affordable or not.  Using Targeted Action Funds, NACWA initiated the development of these documents being released today in an effort to influence EPA’s possible revision of the 1997 guidance.  The concepts laid out in the new documents encourage a more holistic approach to assessing the affordability of a particular program and cast doubt on many of the assumptions currently used by EPA and enforcement officials.

NACWA understands that EPA will likely not make very many substantive changes to the 1997 guidance.  EPA will likely take some of the advice it received from the Agency’s Environmental Financial Advisory Board (EFAB) regarding the assumptions in the guidance, but will likely not make many of the changes NACWA has advocated.  Nevertheless, EPA’s guidance and past experience with negotiations on the subject suggest that there are a number of opportunities for utilities to take advantage of the concepts discussed in these new documents in the course of their own negotiations.

NACWA would like to extend special thanks to the member volunteers who reviewed several drafts of these documents and provide guidance throughout the project:  Adel Hagekhalil, Division Manager, Wastewater Engineering Services, City of Los Angeles Bureau of Sanitation; Lisa Hollander, First Assistant General Counsel, Northeast Ohio Regional Sewer District (NEORSD); Tim Houghton, Executive Assistant, Honolulu Department of Environmental Services; and Martin Umberg, Sewers Chief Engineer, Cincinnati, Metropolitan Sewer District of Greater Cincinnati.

The compilation can be downloaded as a single PDF document from the NACWA website.  NACWA plans to continue advocating for changes in EPA’s guidance, but encourages its members to take advantage of these resources in the interim.

New Resources for Clean Water Agencies on Financial Capability Considerations

The new compilation is comprised of an introduction and overview section that provides some suggested strategies for using the concepts laid out in the subsequent documents.

NACWA’s Annotated Guiding Principles (Document 1) and associated conceptual model (Document 2) offer assistance in developing a holistic analysis of a community’s unique local conditions that will ultimately dictate what that community can afford.  As laid out in the Guiding Principles, NACWA believes that a comprehensive assessment of a community’s ability to pay for a particular clean water program requires much more than a review of median household income.  EPA’s guidance on assessing financial capability does permit for the consideration of “additional considerations” and NACWA’s Guiding Principles and conceptual model provides an outline for NACWA members to submit such considerations for EPA review.

In Document 3 of the compilation, NACWA has reviewed the EFAB comments on EPA’s 1997 guidance.  EFAB has offered comments that echo many of those made by NACWA in its 2005 White Paper yet do not call for the fundamental changes advocated by NACWA.  The issues raised by EFAB on the validity of some of EPA’s assumptions should provide NACWA members an opportunity to make or reinforce arguments to deviate from a strict adherence to EPA’s guidance during negotiations with the government.