December 12, 2016

By: Seth Brown, Founder of Storm and Stream Solutions, and THG Senior Advisor for Stormwater/Green Infrastructure, Public-Private Partnerships, & Economics

Developing the Motivation to Invest in Green Stormwater Infrastructure

A common complaint heard from municipalities regarding needed wet weather investments is that regulations are requiring them to implement more stormwater infrastructure than they can afford. The premise of this complaint is that: a) stormwater runoff is a burden, and b) investments in stormwater infrastructure are only (or at least primarily) driven by regulations. These views reflect a mindset that is inherently self-limiting and non-aspirational. In other words, community leaders with this vision (or lack thereof) create a self-fulfilling prophecy that reinforces these negative views regarding funding and financing for stormwater infrastructure. But there is another way to consider these investments.

To contrast with the negative view, communities would benefit by widening their consideration for the potential investment in stormwater infrastructure (specifically, green stormwater infrastructure, or GSI) beyond regulatory compliance but to account for other aspects, such as the numerous social benefits achieved through economic redevelopment, “green” job creation, enhanced community resilience, increased property values, and improved public health and safety.

In this way, communities will start to view GSI as an opportunity not a burden. Once this shift in mindset has been made, communities will see that investments in stormwater management go beyond regulations as well. And after community leaders see GSI as an opportunity in the broader context and understand that investments in this infrastructure type can go beyond (as well as complement) regulatory requirements, there will be a greater sense of urgency to find paths to invest in GSI as opposed to reasons why it cannot be done.

A recent article from Bloomberg BNA, co-authored by one of U.S. EPA’s GSI champions, Dominique Lueckenhoff, provides hope to communities who are motivated to make large-scale investments in GSI as numerous funding and financing options are available to communities and that these options need not come with a high price tag.

What Are the Possible Funding/Financing Vehicles for GSI Investment?

Thankfully, there are many ways that GSI can be funded and financed, as the BNA article points out. The most common form of stormwater funding is through general funds at the local government level, although there are several other or additional alternatives, such as in-lieu and permitting fees or grant programs. However, these funding sources, while common, limit overall GSI investment potential since they are not consistently funded nor are they dedicated to stormwater program investments.

Other infrastructure sectors, such as drinking water and wastewater sectors, can issue bonds for large-scale infrastructure investment through dedicating rate payer fees as securitization. Communities who have not created a dedicated funding stream for stormwater management are limited and cannot expand overall investments through the capital markets. This fact may compel some communities to consider the development of a stormwater utility, which can provide this dedicated and equitable revenue stream and open the door to large-scale GSI investments by providing a securitization for various financing options.

Public financing options are also available for GSI investment, and the first stop for communities when exploring these options should be the Clean Water State Revolving Fund (SRF). This program, which started out in the 1970’s as the “Construction Grants Program” and provided billions in needed infrastructure investment during the first 15 years of the Clean Water Act’s implementation, provides below-market financing to communities who want to invest in capital projects in the Clean Water sector. Historically, this program has focused on the wastewater sector, as is reflected by the fact that approximately 95% of these investments in EPA Region 3 (Mid-Atlantic) have gone strictly for wastewater infrastructure, and other regions reflect similar rates of investments. Considering that urban stormwater runoff and nonpoint pollution have become the water quality issue of the 21st century, this percentage must start to change. EPA has sensed this urgency to shift SRF focus more towards urban runoff, which is evident by the push made by the Agency in recent years to focus more on urban stormwater in the SRF context.

The SRF is now being considered as not just a grant or loan program, but it is being viewed as another way to expand GSI investment by lowering financing costs through securitization of municipal bonds as well as facilitating the leveraging of financing packages. In these ways, as the article points out, significant financing cost savings can be realized. For example, a community with an “Aa” rating can use SRF assistance as bond insurance to increase the bond rating to “Aaa”, which results in an interest rate reduction of 50 basis points (0.50%) that will further reduce the financing costs for a 30-year term, $50 million dollar investment by $5 million, or 10%. When viewing at a macro scale, it is estimated that GSI investments can be expanded up to $6 to $28 billion across the country (as estimated by the EPA Environmental Finance Advisory Board) through the use of SRF assistance as a guarantee.
The other significant public financing option is the municipal bond market, which drives most infrastructure investment across the country – but not so much in the stormwater sector (due to the aforementioned lack of dedicated funding). As needs change, however, so will financing decisions, especially when other innovations are revealed in the sector, such as the use of SRF assistance to enhance the attractiveness of capital market investments.

The options for private financing includes bank loans, private equity, and a new and emerging field of “socially responsible financing”. Each of these options have a role to play in financing GSI investments. For instance, bank loans provide good short-term “bridge” loans during times when other financing has not been established. Private equity is not often used, but it can play a critical role in the context of developing cutting edge technologies, which may be able to enhance performance and drive down costs for GSI in the future.

The “hottest” form of private financing these days is “socially responsible financing”, which include “green bonds” and “social impact bonds”. Green bonds, which is a bond that, “can be used to finance projects that are environmentally beneficial, such as climate adaptation, pollution prevention or water quality projects,” according to an October, 2016 report on green bonds in the market. These financial products have been on the rise over the last handful of years, but slowed in 2016, most likely in part due to issuers may be wary of added costs to certify a bond as being “green” while adding no/little additional value to the issuance. Another type of socially-driven private investments is through an instrument known as a social impact bond (SIB). These products are a misnomer, as they are not bonds in the traditional sense. They are normally used in the context of a “Pay-For-Success” (PFS) program, which uses funds from “impact investors” to finance projects that provide a payout to investors that is scaled based on the amount of “success” (however that is defined) in meeting project objectives. A driver for the PFS model is that of a (growing) segment of private investors who are seeking to not only receive a return on investments, but also want to be ensured that their investments are leading to measurable social or environmental improvements.

While the PFS model is based upon a solid premise – only pay for what works – it is sometimes the case that focusing only on measurable aspects of programs may diminish the ability to succeed, especially if more holistic and non-easily-measured factors are more effective overall in achieving “success” or if there are not easily measured aspects to focus on. A recent article in Nonprofit Quarterly stated that – in the context of PFS projects – there have been “no true success stories”, and that, “PFS interventions don’t recognize that fixing complex social programs typically requires investments and policy changes on multiple levels.” In other words, PFS is a not a “silver bullet” solution that focuses on one specific way to solve a social or environmental problem. The PFS model is most commonly associated with social issues, such as reducing homelessness or asthma rates. The only water-focused PFS was just recently established by DC Water that raised $25 million to retrofit 20 acres of impervious cover using GSI practices. It should be noted that the unit cost associated with this program, $1.25 million per impervious acre treated, is much higher than the unit cost associated with traditional GSI project implementation, which can range from $150,000 to $250,000 per impervious acre treated. The implication of this cost differential may signal to the sector that large-scale investments in GSI using the PFS model may be challenging. The relatively high unit cost for GSI associated with the PFS approach also may confuse some in the sector, which may lead to hesitation when considering GSI as an alternative to other approaches. It will be interesting to see how this PFS program performs overall, as well as the level of transferability of this model.

With many options available for funding and financing for GSI investments, it may be hard to decide on just one – but that would be missing the point. Like a good Swiss Army knife, a financing approach that includes a variety of tools allows a community to arm themselves with the ability to generate the best deal for their money. A “blended finance” approach simply utilizes the strengths of certain types of financing, such as bank loans for bridging purposes or SRF loans and credit enhancers to provide a below-market rate of return, to develop an overall financing package that meets the needs of the program while not burdening the community with high-rate financing.

Putting it All Together

Financing is only one piece of the puzzle for GSI implementation. In order to make the most of funding and financing in a program, GSI practices should be designed, constructed and maintained as efficiently as possible. The Community-Based Public-Private Partnership (CBP3) program approach provides this ability to deliver projects in a cost-effective manner by using integrated services (design-build-maintain), capturing economies of scale through large-scale implementation efforts, and a streamlined procurement process. The CBP3 program also provides a platform for blended financing, which is often missing in stormwater programs, and in this way, can leverage a dedicated funding source (e.g. stormwater fee) to generate significant GSI investments. An example of how this can all come together for a community is to consider a community with 1,665 acres of imperviousness who wants or needs to retrofit 20% of this area using GSI practices. Assuming this community has a stormwater utility that generates $2.5 million annually, the 333 acres of retrofitting can be successfully achieved by developing a financing package with a blended rate of 3.5% to deliver $10 million dollars of investment per year over a 5-year permit.

As they say, “where there’s a will, there’s a way.” In the context of large-scale GSI implementation, this adage can be changed to, “where there’s a will (to green), there’s a way (to pay for it)”. Yes, funding challenges are real in the stormwater sector – there is no doubt of that, but two things are clear: (1) there are new and innovative ways to finance GSI, and (2), the many benefits provided by GSI make this infrastructure one that can attract financing. Whether the drivers are job creation and economic development or regulatory compliance, the deployment of large-scale GSI is being increasingly viewed as a strong alternative – and now the ability to fund/finance and deliver GSI projects efficiently in order to provide large-scale implementation has been realized. In this way both the “will” and the “way” can be aligned for the benefit communities around the country.

Seth Brown is the Principal and Founder of Storm and Stream Solutions, LLC, a consulting firm providing a range of services from policy and infrastructure finance analysis in the water sector to the development and delivery of technical and policy-related training focused on topics such as stormwater and public-private partnership arrangements.

December 12, 2016

By: Greg Brumitt Founder of Active Strategies, and THG Senior Advisor for Active & Livable Communities
An Existential Challenge

There is an economic development battle going on in the United States among regions that, on its surface, is about who can attract vital businesses and the educated workforce those businesses seek. But if you look deeper, this battle is really about which regions, and even smaller communities, can develop a rich set of quality of life amenities that today’s “mobile consumer” is seeking. In many cases, this economic challenge is existential for our nation’s smaller cities and towns.

These communities, many in the middle of the country in the rust and corn belts, are struggling to establish relevancy in today’s knowledge and global economy. Yet, the most innovative of them are using their own unique assets to develop quality of life approaches to stake out their place in the market. Today’s businesses, in their efforts to attract and retain highly skilled and motivated workers, are attracted to communities that are strengthening their appeal to a discerning labor force that demands more from the places where they live than a paycheck and a house. However intuitive this seems, this thinking is still beyond the practical reach of many communities.

Bruce Katz of the Brookings Institution says rustbelt communities must reinvent themselves to survive [1]. But they must do it by “focusing on the fundamentals.” “They have to use their geographical advantages and build as much as possible on “anchor” institutions such as universities and hospitals.” In other words, identify, improve, and leverage their existing resources.

It is somewhat surprising that many struggling communities continue to follow a traditional community and economic development path in the face of increasing evidence that developing quality of life assets is becoming a ‘must-have’ for a community’s successful reinvention. Many talk a good “quality of life” game, but touting quality of life is not enough. Businesses today and the talented workforce they seek aren’t buying the old economic development sales pitch, “Hey we’ve got a railroad, come live and work here!” Today’s regional economic development efforts have to start with the question: “Is our community truly a great place to live?” Leaders must deal honestly with the answer to that question and get to work on efforts to develop a dense network of quality of life infrastructure on the ground. Ultimately, the goal is to create a vibrant environment and a brand that can drive both community pride and an attractive regional brand.

Even if they have economic development initiatives in place, many of these struggling communities have economic development plans that focus on work-only efforts, as apparently they believe that the live and play elements aren’t really important in achieving their goals. Or, they don’t fully appreciate the cause and effect that community vibrancy and culture has on the psyche, morale and downright attractiveness that translates into people retention, business growth, and changing the game in their communities. To many, economic development is all about the next factory, tech start-up, or big box retailer coming to town…and yes, that’s part of the picture…but the real challenge is what conditions must be put in place for a community to truly reinvent itself?

As it becomes more difficult to attract business and population from elsewhere, communities must learn how to leverage their existing or potential assets in ways that can help them change their culture in order to break out of old patterns and begin to develop human resources and grow businesses at the grassroots. As the economic environment becomes even more competitive and the industrial recruitment pie grows smaller, communities have to rely on themselves and their own assets for future growth.

While there are an abundance of quality of life strategies that communities can choose to pursue, the development of an integrated active living culture is showing great promise as an effort that can be transformational for struggling communities. The real beauty of an active culture development initiative is the fact that change, innovation, and growth can come from within the community and is not dependent or subservient to the machinations of the corporate industrial market. Every community can’t attract an auto plant, but each can build their own active lifestyle culture that can act as a catalyst for grassroots growth.

Ironically, many of the elements that make up a healthy, vibrant community today are anathema to traditional big-box, corporate focused economic development. What most upwardly mobile Americans are looking for today is local, handmade, natural, green, and active. These are places with cultures that feel welcoming and are easy to brand and differentiate from other places. They are not the miles of strip malls, fast food, and even the “lifestyle” centers. They are indeed places that exhibit unique urban design and regional character in architecture, retail, entertainment and outdoor recreation and in the community’s overall approach to land planning and usages. Communities striving to compete must break out and blaze a different trail.
Natural Livability?

Livability doesn’t start with the built environment; it starts with the natural assets of the region. It’s the beaches, rivers, forests, hills, creeks, and mountains that define a regional topography. National trends in population shift and regional growth supports the argument that the most important component of community quality of life, and what is really driving growth is how a community leverages its natural resources to create a healthy active culture and brand for itself. There is a reason why many communities from the Rockies west, Mason Dixon line south, and Appalachian east continue to grow at the expense of communities in the middle of the country. Yes, some of that is about how our country was settled and developed; certainly technology and globalization’s impact on the industrial middle is key. The flight from unions to right to work states certainly factors in. Like my home state of Illinois, the Midwestern states aren’t known for dramatic topography, and for the most part are dominated by agricultural land uses that precludes the existence of large scale land conservation as is seen in the mountainous west and eastern Appalachians. The underlying fact is that the continued migration west and south has partly been driven by the existence of highly accessible public lands and the active cultures that great outdoor access engenders. Warmer weather, proximity to mountains, beaches, whitewater rivers, ski areas, and the cultures that emerge are fundamentally what is driving economic growth. And, the statistics support this. From 2010 to 2015, the US Census Bureau found that all but one of the top ten states (District of Columbia is included as it has more population that Vermont and Wyoming) in terms of percentage of population growth were either west of the Rockies or southern states [2]:

Top Ten Growth States: 2010-2015 –

1. North Dakota
2. District of Columbia
3. Texas
4. Colorado
5. Utah
6. Florida
7. Nevada
8. Arizona
9. Washington
10. Idaho

That trend continues for the top twenty growth states with 18 of the 20 being in the west or south. Why is that germane to this discussion? Because, for the most part, those same states have the highest quantities of conserved public land, much of it in the form of federal and state parks, conservation and recreation areas. Conservation equals access and access is the opportunity to recreate close to home. For millions of Americans, this represents quality of life.
The Quality of Life Case for Land Conservation

If you look around the country and examine the characteristics of the most vibrant growing regions, the first thing that sticks out is their access to the outdoors. Most of the communities that are known, or emerging, as great places to live are blessed with significant portions of near-by conserved lands. It’s not a coincidence that eight of the top ten percentage in growth states in the last five years are also in the top ten states with the most federally held land, and all are in the top 20 growth states. These states are blessed with thousands of acres of National parks and monuments, US Forests and Bureau of Land Management areas. These lands, many in close proximity to major metropolitan areas, provide great opportunity for recreation access for locals and tourists alike. They are becoming more and more a place where people are moving to live, work, play, and retire. Places like Salt Lake City, Denver, Boise, Portland and Seattle are all located in a sea of public lands that drive local quality of life. And, while federal ownership is most prominent in the west, southern states also have significant federal holdings. Following the spine of the southern Appalachians, communities from Washington DC, south to Richmond, Knoxville, Asheville and Chattanooga, are all benefiting from proximity to terrain conserved by the federal government in the form of national parks, Tennessee Valley Authority projects, parkways, and US Forests. In addition to federally held lands, the nature rich states also hold significant acreage in state and local parks, forests, and conservation areas which add to their advantage.

Top Ten States with Federally Held Lands:

1. Nevada 85%
2. Utah 65%
3. Idaho 62%
4. Alaska 61%
5. Oregon 53%
6. Wyoming 49%
7. California 49%
8. Arizona 39%
9. Colorado 36%
10. New Mexico 35%

Conversely, eight of ten states with the lowest percentage of land held in conservation by federal state and local authorities are located in the middle of the country, and rank in the bottom half of states by percentage of population growth since 2010 [3].

But, while the west and Appalachian south enjoy land conservation advantages, many Midwestern communities are taking action on their own. They are creating conservancies, conservation districts, land trusts and other public-private partnerships (P3s) to conserve land and connect people to the outdoors. This has the ability to change how residents view their own communities and how others view them.
Eco-Economic Development

So how does conservation and good land stewardship support community qualify of life and economic development where leaders are savvy enough to invest in and promote it smartly? In just one example, the Outdoor Industry Association found that in rural western counties with more than 30 percent of their land under federal protection increased jobs at a rate four times faster than rural counties with no federally protected lands [4].

To illustrate the link between conserved lands, the active culture that access to land engenders, and the development that is attracted to those active cultures, let’s look at one of the more obvious examples of how conservation drives recreation, leisure, tourism, economic impact and investment in a community: the Colorado mountain town. Skiing and land conservation are inexorably linked. In the early days, the Forest Service worked with mountain communities to develop access to skiable lands and then later to develop ski area infrastructure including roads, lodges, etc. Today, in places like Aspen, Vail, and Breckenridge, we see the culmination of almost 80 years of ski area community and economic development driven by the existence of US Forest Service land conservation. There is no better example of an outdoor driven destination than a Colorado ski town.

In fact, the State of Colorado, as a whole, recognizes this as well, and along with the States of Utah and Washington has opened outdoor industry offices to leverage and grow their advantages in the outdoor market cluster. These three states understand that where there is great outdoor access, there is or can be a dense ecosystem of outdoor gear designers, manufacturers, and retailers supporting and growing the outdoor economy.

The outdoor industry has not missed the gaze of the federal government; recently the Senate passed the Recreation Economic Contributions Act, which requires the Commerce Department to include the outdoor recreation industry in the Federal government’s Gross Domestic Product (GDP) calculations. The outdoor industry’s inclusion in GDP will change the calculus of public land uses and initiate a growing understanding of the $700 billion outdoor recreation industry’s economic impact…mostly due to the opportunity to recreate on public land at all levels.

Reinventing the Culture and the Brand

So how do we take the lesson of these naturally blessed regions in the west and south and use it in rural towns and rust belt cities across the Midwest? Much of it is about changing the attitude of residents and leaders in a way that creates excitement, engagement and an environment to try new things. The initial challenge in many of these communities is the negative outlook and inferiority complexes that exist in the community…a sense that change and the good things they see happening elsewhere can’t happen there. Breaking down and overcoming this negative thinking is an incremental process based on small wins. Linking small progress over time in context to a bigger vision, allows a community to build confidence and create new collaborative processes and networks that are essential to meaningful change.

In the beginning, it’s really a matter of stepping back and assessing what components of active culture are present in your community today, and what kind of land based conservation (or urban brownfield reclamation) is in place or could be possible in your area. People can’t be active without a place to be active. These places can become gathering spots and the people using them can become a community’s first activists. As with all planning, assessment is key. Understanding and identifying assets and potential assets that a plan and a vision can be built on is the first step.

Much of the success we see in rust and corn belt communities is not just about land conservation, but about leveraging the negative for the positive. Community design that encourages and allows active recreation close to home…everyone’s home is key. It really takes rethinking how the community is designed and how people move around in it.

While the rust and corn belt will never be Colorado, there are great examples across the middle of the country of communities using their lakes, rivers, wooded terrain and even abandoned railroad corridors and urban brownfields to create fun places to recreate that is exciting to their residents and changing how others view them.

But conserving land, building a greenway or restoring a tired park isn’t the end…it’s the beginning. There has to be a larger vision and a connected strategy that integrates and builds on assets and engages, excites and mobilizes citizenry.

In Dayton, a local conservation agency launched a major outdoor recreation initiative billing Dayton as the Outdoor Adventure Capital of the Midwest. Many laughed, but not long after beginning the effort, it became the centerpiece of a plan to revitalize downtown Dayton, using that early vision as an outdoor destination was a motivator and a guide to make their downtown revitalization happen. But, more importantly, the accumulating successes encouraged residents and leaders to do more, which in turn created bigger wins and an excitement about Dayton’s potential.

This kind of active visioning can help build an integrated initiative, that can help develop a broad set of active lifestyle elements necessary for culture shift. This interdependence of elements points to the need for communities to integrate their community and economic development efforts into one seamless strategy that mobilizes the community toward a set of comprehensive goals, rather than a set of independent actions.

As the foundations of the initiative are put in place and small wins accumulate, community excitement rises and the culture gains strength. Young residents may decide to stay and get involved. Retention begins to be a reality. Typically we see a growth in local initiatives and organization focused on leveraging and pushing progress, if a strong framework has been built. As things progress, attraction begins to happen. The people that decided to stay open businesses; the word spreads and others seek out the rising community.

So the real key to community reinvention and the foundation of a great community brand is the local culture. Culture is the character of the community – it makes it open or closed to new ideas, a collaborative or difficult environment in which to work. Most importantly, when strong active cultures exist in the community, there is an environment that makes positive thinking and action possible. In the end, your community’s culture is your brand, like it or not. In case after case, the impetuous for community change is about getting people out of their houses, into the streets, parks, and trails doing active healthy things and into the cafes and breweries afterward. It is a catalyst for community change. It is a beginning.

Across the heartland many communities are working hard to integrate traditional community and economic development efforts with the development of active lifestyle cultures. These strategies that make communities more livable and attractive are becoming crucial components of long-term efforts to enhance competitiveness. They are a vital bridge to the new economy these communities are striving to reach.

Community sustainability, land and water conservation, green infrastructure, local foods/urban farming, share and maker markets, important bike/pedestrian friendly urban design, access to the outdoors and outdoor recreation are the core tactics that make up an emerging active culture. These initiatives can be a community’s introduction into thinking about community resiliency. In this broader context, community resiliency becomes a multi faceted goal to achieve a state where natural, economic, and cultural assets are in balance for the benefit of the larger community and environment.

Challenges remain, as these cultures, while potentially transformational, can lack diverse participation and is only the beginning of a community’s transformation. Funding can be especially challenging in some areas where state and local governments do not have a tradition or ability to fund cultural and quality of life initiatives. However, quality of life efforts are typically less expensive than other forms of pubic works and much can be achieved through volunteers. Active culture development is as much an attitude and brand adjustment as it is economic development. In my experience, establishing a climate of change is critical for emerging communities to turn the corner towards positive growth and development. A transformed culture is a signal to itself and to the world that this community has shed its traditional skin and is ready to join the ranks of the innovative and progressive.

[1] The Economist; Reinvention in the Rustbelt; July 11, 2015
[2] US Census Bureau
[3] US Census Bureau
[4] Outdoor Industry Association

September 25, 2016

By: Patrick McGinnis, Senior Advisor for Water Policy and Practice, THG

America’s inland waterways, built, operated, and maintained by the U.S. Army Corps of Engineers (Corps or USACE), are at a crossroads. Going forward, two paths emerge. The first path, a continuation of current financing mechanisms, funding levels, operating practices, and governance arrangements, points to continued deterioration of waterway serviceability. A crisis exists with respect to Corps locks and dams. Insufficient funding, extensive deferred maintenance, and a forced fix-as-fail repair strategy have led to unscheduled lock closures and accompanying delays. Shippers and producers are confronted with a system whose reliability is being questioned. Lock unavailability reduces efficiency, increases costs for carriers (and ultimately shippers and commodity consumers), and threatens system reliance.

A second path, involving a shift toward greater private investment, risk transfer, and innovative financing and funding arrangements including public-private partnerships (P3s), if demonstrated in one or two successful pilot proof-of-concept projects, could serve as an alternative resourcing and delivery approach to guide the system’s renewal.

No matter how decision makers elect to proceed, if public dollars are sought to modernize the system then more effective messaging that better conveys the value of the system to the American people must be prioritized.

The following observations first address the case for U.S. waterway infrastructure modernization and more effectively communicating this need to a broader bandwidth of stakeholders. Next, an opportunity is described to demonstrate an alternative path forward to financing and funding major rehabilitation of a significant component of the Upper Mississippi River System, the Illinois River Waterway, in order to transfer a larger share of risk from U.S. taxpayers to waterway users and beneficiaries.

Part I. Making the Case for Waterway Modernization Goes Beyond Waterways

We have amassed almost $20 trillion in national debt. We have a sluggish economy, stagnant wages, and a growing list of unfunded social mandates. Many Americans are frustrated, thinking institutions and key actors that could otherwise make a difference simply are not listening or do not understand what needs to be done.

Communicating the Case for Maintaining the Serviceability of Inland Waterways

Modernizing our U.S. waterways has not garnered Main Street’s attention; nor has the issue forged the political will on Capitol Hill to win requested funding. When politicians authorize improvements, they immediately get bogged down in their efforts to actually fund them. Meanwhile, bureaucrats are left to pursue major maintenance in a piece-meal, stop and start, fix it when it completely fails crisis management fashion. This “fix as it fails” strategy is on its way to leaving U.S. waterborne transportation as a weak link in our commodities supply chain, an uncertain and unreliable mode for moving large amounts of commodities with competitive efficiency. It is time to make the case for waterway modernization that will resonate with the American people, not just waterway lobbyists and users.

The popular argument for modernizing our inland waterways cannot continue to be because our locks and dams are old and need to be replaced; or because continued navigability of our waterways are central to U.S. farm interests in feeding the world; or because of speculative claims linked to the expansion of the Panama Canal forecasting an uptick in interior movement of freight (a modest percentage of which is waterborne); or that tinkering with the existing system of locks and dams will drive a requisite amount of mitigative environmental spending for wildlife habitat and local recreation interests.

The only real case for updating the locks is dependent on how effectively waterway modernization can be linked to a larger planned-for effort to muster regional economic recovery.

The American people need to see and count on a larger legitimate effort to bring back jobs, wages, the economy, and the well being of the communities where they live. They need to be able to visualize how waterway modernization is squarely linked to an actionable plan to improve their quality of life. When they see the linkage, they will concede the need to modernize our waterways, and given the populist political climate, politicians will follow.

Lobbyists and special interest groups have been largely unable or unconvincing in their efforts to make the social case for large-scale waterway infrastructure modernization. Instead, many seem resigned to fist pumping over each new federal water resources development act that authorizes major improvements but fails to muster funding for those same improvements. These new authorizations and re-authorizations produce a hollow victory when few new projects are actually funded, and unfunded major maintenance to existing projects remains largely deferred. Special interests are no longer able to use Congressional earmarks as a public interest work-around. Today, federal program managers need greater buy-in by the American people. And, to get that buy in, the people need to see real value. When the case for funding is fuzzy and real public value is difficult to recognize, cost externalities are glossed over, and the ask is large, the argument for public interest will be perceived as contrived, and the public will turn a deaf ear. The case for social relevance cannot be skated past.
Effectively Linking Waterway Modernization to Regional Economic Recovery

Waterway modernization as an engine for greater economic prosperity cannot simply be a claim put forth by a narrow bandwidth of waterway stakeholders. You cannot merely say improving the locks is important. You cannot claim lock modernization somehow links to some vague, open-ended effort to improve the economy. You must show your efforts are squarely part of a larger well-stated, planned-for effort to improve the situation for everyone. U.S. taxpayers have grown weary of publicly funding big projects and programs where they cannot see the benefit. Again, having moved past the era of Congressional earmarks, making the case for modernization to the American people in this new era of greater transparency has become acutely important.

Along our major waterways and river corridors, to date, no real “actionable” plan exists for regional economic recovery that reveals a path toward making river basin communities more vibrant and their natural systems more resilient. Until such a plan does exists, is sufficiently vetted as legitimate, and a reasonable implementation strategy is revealed that leverages greater private investment, it is difficult to imagine how the American people can be rallied to galvanize our electorate to act on the narrower issue of improving our inland waterways. The populations that inhabit our large basin catchments and live and work in our large river corridors need to recognize the linkage between working waterways and a planned-for river corridor approach to economic redevelopment.

The winning case is regional and national economic redevelopment and everyone doing their part. Politicians and the Corps of Engineers have a job to do, as do all system beneficiaries, capable private investors, and the American people. More people will care and pay attention to a narrative about economic recovery than a narrative about lock and dam repairs. The latter discussion has to be nested effectively within the former. Modernizing locks and dams is then reduced to the due diligence execution of one aspect of a larger, more compelling strategy for regional economic recovery.

How much longer can we afford to wait before we effectively communicate a thoughtful planned-for approach that reveals the linkage between waterway modernization and economic recovery that the American people will understand and trust?

Part II. Demonstrating A New Path Forward for U.S. Waterway Modernization: Shaping a Successful Regional P3 Pilot for the Illinois River Waterway

Alternative financing and funding considerations may hold the promise of transferring risk from taxpayers at a critical moment for rebuilding our U.S. Inland Waterway System, as well as rebuilding taxpayer confidence along the way. Waterway stakeholders need to take on a larger role to demonstrate that public-private partnerships (P3s) can produce a breakout strategy to advance us past the legislative and executive gridlock confounding the financing and funding of previously authorized, but unfunded, improvements to our waterway system.

To their credit, some effort is already being made by stakeholders to better understand the role that expanding public-private resource leveraging could have in capitalizing waterway modernization; however, many others continue to push back against P3s, hoping Congress will appropriate sufficient funds for the big federal fix.

A successful regional P3 pilot needs to be put forth and tested. In attempting to describe a set of necessary next steps, the following narrative focuses attention on three specific areas for consideration: cost containment and revenue generation; establishing a non-government entity to partner with the Corps of Engineers on project design and delivery; and milestones guiding development of a transparent and measurable plan of action to take the overall effort through project design, revenue assignment, and an acceptable transaction structure.

Cost Containment and Revenue Generation

Relative to cost, there should be greater evidence that stakeholders are fully testing pre-development assumptions regarding Corps project cost estimates. Major rehabilitation of existing lock sites need to narrowly focus on critical mechanical, electrical, and structural features. Current modernization and major rehab estimates need to be scrubbed for savings. Maintaining the serviceability of our inland waterways should not be used as cover to update/upgrade noncritical features at each lock site. Current cost estimates need to be value engineered to drive out all cost features that do not improve lock reliability.

The Corps also needs to disclose its overhead and indirect costs associated with engineering improvements as a percentage of total project costs (reportedly as high as 60+%) and be challenged to get those costs down below 50%. The Corps has to become a more cost effective and cost responsible partner. Indirect costs need to be capped at a more conservative percentage of total project costs, and the Corps needs to be challenged to move toward greater business process efficiency.

The matter of facility expansion needs to be tabled indefinitely. For the Upper Mississippi River, the Corps’ Navigation and Environmental Sustainability Program (NESP) is unrealistic. NESP’s call for system expansion is unwarranted and costly. Record tonnages occurred in the mid 1990’s. Today, tonnage is 30% lower than the amount the system handled effectively in the mid 1990’s. U.S. Department of Transportation projections indicate an uptick in waterborne movement of cargo, but it only comes in around 1-1.5% recovery per year over the next twenty years, which if realized, will not even fully recapture tonnages handled successfully in the mid 1990’s. Expansion of facilities to add 1,200 ft locks would be an underutilized luxury in lock redundancy that taxpayers, investors, stakeholders, or potential fee payers cannot afford. Removing expansion from consideration and instead focusing on a return to full serviceability of the existing footprint could shave millions of dollars off modernization cost estimates.

On the matter of additional revenue generation to provide an adequate return for private investors, the narrative quickly turns to a discussion of fees and tolls – a topic proving controversial with waterway users. Related to this is the matter of more effectively utilizing “existing” revenue(s). In addition to user contributions to the Inland Waterway Trust Fund, other revenues are generated annually by Corps business lines, including hydropower, navigation, and recreation. By the Corps’ own estimates, these three business lines are generating annually over $2 billion directly to the U.S. Treasury (some Corps reporting estimates are significantly higher), but the amount being returned to the Corps each year to upkeep its hydropower plants, navigational locks, and recreational areas is sorely inadequate to maintain the serviceability of this revenue-generating Corps infrastructure. This revenue, which is generated but lost somewhere in the General Treasury, needs to be accounted for and a greater portion “dedicated” to facility upkeep and modernization. Waterway users would be less inclined to push back against fees if they were more confident that a greater portion of these fees were being dedicated and returned to maintain, and when needed, available to recapitalize the system.

There is also a need and opportunity to drive costs out of the environmental mitigation actions taken by the Corps attendant to navigation improvement projects, while also ensuring actions measurably address and improve the resiliency of the system instead of producing local cosmetic habitat improvements with increased operation and maintenance requirements, which has been largely the case with past environmental mitigative efforts.

In order to move ahead with navigation improvements on the Upper Mississippi River System, and do so without further environmental litigation, Congress passed legislation in 1986 establishing the Upper Mississippi River System-Environmental Management Program (UMRS-EMP), which has funded long-term resource monitoring and a robust number of local, placed-based habitat improvement/reclamation projects. These projects have proven expensive to capitalize and in many cases expensive for local partners to operate and maintain. And, worst of all, these projects have not proven to make the natural system more resilient. Past focus on these so-called environmental restoration projects has produced costly outputs and has not improved system processes overall or produced sustainable outcomes.

Rather than focus on local habitat enhancement, there is a larger system need to recalibrate mitigation toward a focus on source water protection and system resiliency outcomes that are sustainable. For instance, riparian vegetative buffering would be much less expensive than water control structures and pumping. Buffering would advance regional source water protection and address stressors that are worsening Gulf hypoxia, an issue with strong federal interest.

Thumbnailing a P3 Approach for the Illinois River Waterway

In 2010, the Inland Marine Transportation System (IMTS) Capital Investment Strategy Team produced an IMTS Capital Projects Business Model Report at the request of the Inland Waterways Users Board that represented a collaborative effort between navigation industry representatives and USACE inland navigation experts.

The report put forth a proposed 20-year capital investment strategy generally addressing the highest priority new construction and major rehabilitation projects. With a $380 million average annual investment level, this strategy addressed at least 27 candidate projects that had been identified by Corps districts.

With a total program recommendation of $380 million per year, the average IWTF non-federal contribution would be $110 million per year, with the federal cost-sharing requirement averaging $270 million per year.

Just for sake of discussion, and generally applying the above federal/non-federal cost sharing split suggested in the IMTS Recapitalization Plan, consider modernization of the Illinois River Waterway System, a prominent segment of the U.S. Inland Waterway System. The Corps has estimated $560-600 million to rehab/repair all Illinois River locks. Perhaps a worthwhile starting point would be to challenge the Corps to revisit requirement costs to arrive at a $500M alternative.

To appreciate how cost and risk would be shared, the following scenario is offered based on a project cost estimate of $500M and ten years to complete all major work features. Let’s say the Inland Waterway Trust Fund was challenged to kick in $110M ($11M per year for ten years). The federal government could be challenged to come up with $270M ($27M per year for ten years). This $270M/$110M split would be in the ballpark with what is generally prescribed in the IMTS Plan (excepting nuances for certain levels of major rehab that are arbitrarily assigned at 100% federal cost…which someone else can explain).

This would show taxpayers a significant transfer of risk. Why? Because, although the current federal cost share formula calls for waterway improvements to be funded 50% federal and 50% Inland Waterway Trust Fund, the reality is that the overall cost of operating and maintaining the system annually comes in around 92% federal and only 8% non-federal. American taxpayers and many legislators would quickly warm to the notion of transferring a larger measure of this obligation and risk to users and the private sector and away from U.S. taxpayers.

So with $270M as the federal contribution and $110M from IWTF toward completion of the $500M project, we find ourselves still being short a $120M gap to close one way or another. To close or reduce this gap, a non-federal entity (local sponsor) should be challenged to identify revenue streams including fees, cost savings, activity bonds, and a P3 transactional structure with return on investment that would cover the remaining $120M ($12M per year for ten years), or whatever the sponsor’s portion could be driven down to, applying value engineering to drive out costs and the ingenuity of investors and private development teams.

If investing in our inland waterways is a good deal for taxpayers, which is what we are told, we may find it’s also a good fit for private investors under the right circumstances. It is time to let the private sector step up and tell us what conditions they would require to invest in reducing the vulnerability of this commercial commodities supply chain.
Informing the P3 Process and the Role of the Non-federal Entity as Local Sponsor

In responding to WRRDA 2014, which called for alternative approaches to financing/funding water resource public works projects, who are federal program managers listening to to inform the way forward? First and foremost, P3 and private investment experts—not just stakeholders—need to be brought into the room, during the project pre-development analysis and design phase. Filling up the room with well-intentioned stakeholders will not ensure a workable P3 project design that is investor worthy. The conversation has to shift from what stakeholders want to what is reasonably possible based on the informed input of experts. Stakeholders must be kept situationally aware so they can be effective advocates and critics, but in the project pre-development analysis stage, the input of experts is necessary.

Likewise, a prominent and well-informed Congressional Committee Member from Illinois, familiar with the Illinois River Waterway, needs to be recruited to serve as a federal co-chair overseeing an ad hoc effort to lead the Corps, local sponsor, stakeholders, and potential investors, through a pre-project development effort. Such an effort would identify critical project requirements and design, revenue generation, and return on investment projections, crafting an effective transactional structure for issuance of a Request For Proposal.

At the State level, an appropriate cabinet executive also needs to be recruited. The Director of the Illinois Department of Commerce and Economic Opportunity could serve as a

State Co-Chair with the Illinois Chamber of Commerce and the Chamber’s foundation having key roles in shepherding the partnering and investor recruitment process.

Revealing a Transparent and Trackable Plan of Action

The local sponsor or an initial ad hoc non-federal entity needs to develop an aggressive timetable for an Illinois Waterway Regional P3 (IWRP3) Pilot Project.

The following milestones should be considered:

  • Corps provides current condition assessment and initial set of technical work requirements.
  • Local sponsor and Corps convene Technical Requirement Peer Review Group to value engineer and scrub technical requirements, eliminating non-critical features and driving down costs.
  • Local sponsor and Corps convene Revenue Identification and Development Peer Review Group to target and develop potential revenue generation scenarios.
  • A refined Requirements Plan is next shared with a group of P3 project development experts, investors, risk managers, tax and procurement lawyers, and the National Council for Public-Private Partnership representatives, etc. Investors have to be challenged with a single question: Under what conditions would you be attracted to a project design and transactional arrangement?
  • Next, the local sponsor and Corps move to Project Design and Transaction Structure formulation to develop concepts, conditions, and key stipulations giving full consideration to investor input.
  • Next, the local sponsor would convene a Legislative Review Group to analyze necessary policy and legislative enablers necessary to authorize and support the recommended project design and contractual structure.
  • Finally, a recommended IWRP3 Pilot Project Plan would be turned over to the Congressional Committee for legislative action and to the Corps’ Pilot Program Manager to position the agency and the sponsor for the project acquisition process.



There has been too much posturing and perhaps cautious foot-dragging taking place since authorization of the P3 demonstration program in WRRDA 2014. It has been over two years since the legislation was passed. Some of the inertia is due to reluctance by waterway users to move away from the traditional resourcing approach. Regionally, there is a core of stakeholders clinging on to the hope that the UMRS-NESP platform will be funded, which calls for expansion and for taxpayers to carry most of the burden. There is also likely some pushback coming from within the federal ranks by program managers reluctant to embrace change and the larger unknowns associated with alternative resourcing and delivery of large public works projects.

As previously stated, 92% of the total cost of the inland waterway system is currently borne by U.S. taxpayers, while waterway users, via a fuel tax and trust fund, account for only 8%. This has left a resource gap in what’s needed and what’s practically available that P3s, cost containment, revenue capture, and better accounting and use of treasury revenue need to close. A larger burden of risk and responsibility must also be transferred from taxpayer to user. Most of all, we need to find the will to test old assumptions regarding project delivery, and select for efficiency and economy of effort to better serve public interests and the serviceability of our nation’s inland waterways. We cannot simply throw money at the problem. The world has become more transparent and a populist electorate simply won’t support it.


Regardless of the federal government’s current role and the current cost-sharing role of users and user-funded financing mechanisms, such as the Inland Waterway Trust Fund, new strategies demand consideration as old assumptions face up to fact-based testing. If private participation represents part of the solution, any new approach must first be vetted and demonstrated before broader application and acceptance can drive further public and investor confidence. Accordingly, identifying strong candidates, like the Illinois River Waterway, for early and valid demonstrations of workable approaches will be advantageous and the basis for expanded, scaled-up solutions that will likely successfully bundle projects across regional system segments.

Patrick S. McGinnis has served as a passionate advocate and practitioner for sustainable solutions to water resource management challenges over his thirty-five year career as a water resources professional. Mr. McGinnis’ experience and interest focuses on a broad range of economic opportunities for livable community design, strategic planning and facilitation, public/private sector interaction and consensus building. He currently serves The Horinko Group as Senior Advisor for Water Resources Policy and Practice.

July 11, 2016

Ask The Experts is a new section of THG’s quarterly newsletter, introduced in our March 2016 issue. In this section, we collect insights from subject matter experts on noteworthy developments and discussions in the environmental arena.

In advance of our upcoming Summit, The Future of RCRA – Making the Business Case, The Horinko Group will release a read-ahead white paper. For this Ask the Experts installment, and as part of the white paper development, we interviewed long-time RCRA practitioners on the successes, existing challenges, and road ahead for RCRA.

The Experts

FossDarsi Foss, Director, Remediation and Redevelopment Program, Wisconsin Department of Natural Resources, has over 30 years of policy and program experience associated with cleaning up and reusing contaminated properties, both at the federal and state levels. While at the Wisconsin DNR, she has played a significant role in the development of the state’s comprehensive clean up rules, program policy and the state’s brownfields initiative. Prior to this, while at the U.S. Environmental Protection Agency (EPA) in Washington, D.C., she worked for 4 years on policy issues pertaining to RCRA corrective action and Superfund, including the National Contingency Plan. She is a graduate of Iowa State University, and has a Bachelor’s Degree in Political Science and a Master’s Degree in Public Administration.

WrightPeter Wright, Managing Counsel, The Dow Chemical Company, counsels the company’s senior management and manages the legal issues and outside counsel with respect to Dow’s largest and most significant environmental matter, the mid-Michigan dioxin matter. He also has the global lead responsibility for counseling Dow on its merger and acquisitions and significant real property transactions. In addition he provides counsel on hazardous waste matters, sustainability, environmental disclosures, shareholder resolutions, public reporting obligations and product stewardship matters. Mr. Wright earned his J. D., summa cum laude, from Indiana University in 1986 and his A. B, summa cum laude, from Wabash College in 1981.

Questions for the Experts

Q1. What stands out to you as the top one or two examples of where RCRA has been innovative, flexible, or efficient over the last 40 years? Where has it succeeded?

  • Foss: Ms. Foss emphasized that the relationship and balance of authority between states and regional EPA offices has been essential to RCRA’s success. She has observed, based on her experience in Wisconsin, that the region’s trust in the state to take the lead on the majority of RCRA closures and corrective actions has enabled significant progress.This delegation of authority is established through the One Cleanup Program Memorandum of Agreement signed between the state of Wisconsin and EPA. Given that the state rules are substantially equivalent to EPA’s rules for RCRA corrective action (CA) and underground storage tank (UST) cleanups, EPA has made clear under this memorandum that there are limited times in which it will be involved in cleanups. This has given the regulated community comfort to move ahead with cleanups in Wisconsin.
  • Wright: Mr. Wright responded that, looking at the program broadly, RCRA has been successful in ensuring that the relevant entities are responsible for and capable of the safe and appropriate treatment and disposal of waste. Though zero waste has not been achieved, the progress made under RCRA thus far has almost eliminated the creation of future Superfund sites.

Q2. What are one or two of the most complex existing challenges for RCRA? Where might these challenges be headed in the next decade?

  • Foss: Encouraging RCRA cleanups while private industry operations are ongoing presents a major challenge. In many instances, the status quo for an operating facility becomes maintenance, or an extended interim action of sorts, until business has ended due to equipment and other barriers preventing cleanup during operations. Once operations conclude, the remaining buildings, materials, groundwater systems—that many times are outdated and expensive to operate—present many questions, especially as new land uses and the future of the property are considered.A second challenge Ms. Foss highlighted is that local government exemptions are unclear for the RCRA hazardous waste and UST programs. If municipalities are told that when they become the owner of a blighted property they will be subject to federal and state hazardous waste laws—despite a state exemption and federal Superfund exemption—it is difficult to get them to take title to these properties. In many cases, municipalities are the only hope for the revitalization of these properties and thus are in need of relief from certain requirements.
  • Wright: Existing challenges reflect in many ways challenges that have persisted for the program for many years, Mr. Wright noted. One such example is the overly complicated definition of solid waste, which has likely resulted in the excessive use of resources on management of relatively non-hazardous materials as hazardous waste. Many of the land disposal treatment standards are similarly overly complicated and unnecessarily burdensome.

Q3. Envisioning the program in 2040, what existing challenges have been resolved? What successes have been improved upon? What new contaminants, waste streams, or corrective action challenges is the program dealing with?

  • Foss: With respect to corrective action, Ms. Foss noted that the state of Wisconsin has dealt with and foresees continued challenges arising when businesses close down and other parties come in to salvage materials. Often, these secondary parties create bigger problems at the site than the original owner/operator, and the legal authority to deal with these cases is unclear. Looking down the road, as more and more large facilities are decommissioned, this challenge will be magnified and present a heightened need for clearer legal authority and enforcement tools in these instances.
  • Wright: Mr. Wright suggested a question to consider for the improved efficiency of EPA cleanup programs as a whole: does the country really need three federal cleanup programs (i.e. the TSCA program for PCBs, RCRA, and CERCLA)? In reality, he pointed out, most cleanups—other than Superfund cleanups—are state-led. At the federal level, a RCRA intervention on a corrective action measure is nowadays a very rare occurrence, as state capacity to conduct cleanups and develop robust programs has increased. Further delegating authority to states, while streamlining the federal role, could serve to simplify and clarify what are now three separate bureaucratic entities.As the program looks into the future, Mr. Wright pointed out that RCRA, like all environmental statutes, suffers because it was designed to address a specific set of issues in the past. It is difficult to apply the statute to emerging issues, priorities, and new types of waste streams. As it is, the program, which was set up for managing chemical wastes as they existed in the 20th century, is not well-equipped to manage other types of wastes, especially articles. In fact, in some areas, such as electronics waste, RCRA can serve to discourage recycling because it treats an article like a collection of chemicals. In treating all wastes like a chemical waste the program risks cutting against recycling and energy efficiency objectives.

The views expressed herein have been made by these individuals in their personal capacities and are not necessarily representative of their companies or agencies.

March 17, 2016

THG is pleased to introduce a new “Ask the Experts” column to our quarterly newsletter. In this section, we will collect insights from subject matter experts on noteworthy developments in the environmental arena.

In this first installment, we caught up with a few experts to hear their take on the Flint, Michigan water crisis, what the situation looks like as it falls out of mainstream media headlines, and what the larger implications might be for water infrastructure in this country.

The Experts

FewellBrent Fewell, Founder, Earth & Water Group, has over 30 years of experience in public policy, advocacy, and environmental law. A highly regarded thought leader on environmental policy and governance, Mr. Fewell has held positions as an environmental lawyer, a corporate executive, and as a federal official. As Principal Deputy Assistant Administrator in U.S. EPA’s Office of Water (2004-2007) he oversaw the nation’s drinking water and surface water programs.  He subsequently served as the Sr. Vice President for Environment, Health & Safety at Suez Environnement where he managed regulatory compliance for SE’s U.S.-based subsidiary, United Water.

MehanTracy Mehan III, Executive Director for Government Affairs, American Water Works Association, is an expert across the entire spectrum of water policy. His career includes service as Assistant Administrator of U.S. EPA’s Office of Water (2001-03) and as a principal for the environmental consulting firm The Cadmus Group (2004-14). Mr. Mehan has substantial experience in state water and environmental issues. He directed the Office of the Great Lakes for the Michigan Department of Environmental Quality (1993-2001) and the Missouri Department of Natural Resources (1989-92).

TobeyBruce Tobey, Partner, Pannone Lopes Devereaux & West LLC, and member of the firm’s Municipal Infrastructure Team focuses his practice on representing local and regional governments and private sector entities on public contracts, water law and governance. Mr. Tobey served as the Mayor of Gloucester, MA (1993-2002) where he worked to resolve solid waste, water and wastewater issues. He subsequently held positions at Aquarion Company and HomeServe USA, leading the company’s efforts to develop public-private partnerships with water and wastewater utilities. Mr. Tobey returned to local government as City Councilor for Gloucester (2006-2014).

A Brief Recap of the Flint Water Crisis

  • In April 2014, the City of Flint switched from purchasing treated water from the Detroit Water & Sewerage Department (sourced from Lake Huron and the Detroit River) to sourcing and treating water from the Flint River.
  • Corrosion control treatment was not applied, and the corrosive water from Flint River caused lead from aging pipes to leach into the water supply. A series of problems linked to the new water source culminated with the confirmation of extremely elevated lead levels in drinking water, endangering public health and children in particular.
  • In October 2015, Flint switched its water supply back to Detroit and in December began additional treatment to facilitate the buildup of a corrosion-preventing layer in the cities pipes.
  • In early 2016, Michigan’s Governor declared a state of emergency in Flint, the Department of Justice and Michigan Attorney General opened investigations into the crisis, and President Obama signed an emergency declaration ordering federal aid to Flint. Eight lawsuits have been filed against government officials and four officials have resigned in the wake of the crisis.
  • In February 2016, Flint’s mayor announced that the city would replace all of its water service lines containing lead piping and hopes to do so within a year. The project is expected to cost up to $60 million and funding sources are not yet secured.

Questions for the Experts

Q1. What do you see as the most important developments in the Flint crisis now that it is waning from the mainstream headlines?

  • Fewell: “Although the crisis in Flint easily could have been avoided with better decision- making regarding water treatment, it serves as a stark reminder of the critical importance of our nation’s water systems. We have the most advanced water delivery system in the history of humankind, but if those systems aren’t properly maintained or operated, they can have a devastating impact upon human health, the environment, and local economies. Our failure as a country to invest and recapitalize our water and wastewater systems is leading toward a national crisis.”
  • Mehan: “Clearly, the importance of corrosion control has been highlighted by this crisis. Moreover, the Flint case will intensify interest in EPA’s upcoming revisions to its Lead and Copper Rule (LCR) and the recommendations of the National Drinking Water Advisory Council pertaining, among other things, to the phase out of lead service lines and a sharing of the responsibility for paying for it. There are approximately 6.1 million such lines in the country. The cost of replacing them all could approach $30 billion dollars. And this is on top of the $1 trillion needed to replace and expand drinking water infrastructure generally over the next two plus decades.”
  • Tobey: “I see two lasting results from this completely avoidable tragedy. First, it has generated an unprecedented and widespread awareness of our desperate water infrastructure crisis and its growing costs. A $1 trillion price tag may be hard to comprehend, especially when it doesn’t include the removal of the private lead services lines that are the issue here. But people are finally getting the message: as a nation, as an industry and as ratepayers, we need to pony up the substantial financial resources it will take to meet our drinking water needs.Second, the Flint tragedy has empowered every American like never before to demand accountability from every level of government that touches the operation of drinking water systems. No health threat arising from water supply issues will ever be allowed to go unaddressed again, and that is a very good thing.”

Q2. Beyond the community of Flint, how widespread an issue is lead contamination in drinking water? Do you anticipate that it will be the subject of continued attention as governments and residents investigate their own drinking water systems?

  • Fewell: “Lead service lines were commonly used in the U.S. until around the mid-1950s. There are still many older communities where those lead service lines still exist. Due to the increased awareness and concern over lead pipes and fittings, the federal Safe Drinking Water Act and regulations, such as the Lead and Copper Rule, prescribe practices to minimize incidents of lead poisoning in our drinking water. The vast majority of communities are able to effectively prevent the leaching of lead from lead piping through the use of corrosion inhibitors, such as orthophosphate.”
  • Mehan: “The problem is primarily one of older cities and residential areas in places such as the Northeast and the Midwest but not exclusively so. Many of the lead service lines are on private property which adds a complicating factor in terms of financing ultimate removal.”
  • Tobey: ”While there are estimated to be more than 6 million lead service lines located throughout the Northeast, Midwest and older urban areas, they pose a manageable challenge so long as system operators do what they are supposed to: observe good, effective and required corrosion control practices. For that to be understood, a sustained national public education campaign is needed – every family needs ready access to sound and simple information about the water they drink and the challenges confronting the systems which serve them.That sort of effort will keep this issue alive and will force leaders at every level of government to find and fund solutions. And people need to understand and accept that every one of us will have to foot our piece of that cost – we all need to be a part of the solution. I learned as a Mayor that people will accept higher water and sewer bills if you explain why they are needed and then deliver the results you promised – the water industry needs to follow that same path.”

Q3. How does Flint fit into broader discussions of the water infrastructure funding gap? Could it be a catalyst for long overdue action on aging infrastructure or will it be out-of-sight out-of-mind?

  • Fewell: “It certainly is a reminder of infrastructure funding gap we’re facing as a country. For the first time, elected officials at the federal and state level are beginning to talk more about our water problems. We even witnessed an exchange during the recent GOP debate in Detroit, MI where the candidates were asked about the nation’s ailing water infrastructure. Lastly, I would be remiss not to mention the recent introduction of Senate Bill 2606, sponsored by Senators Menendez and Crapo, which, if enacted, would lift the state volume cap on tax-exempt private activity bonds that could be used to upgrade and build new community water systems.”
  • Mehan: “While the immediate cause of the tragedy in Flint was the failure to implement corrosion control, clearly the societal goal of replacing lead service lines adds yet another costly item to the list of infrastructure financing needs facing the country.”
  • Tobey: “For better or worse, the Flint fiasco has kicked the door wide open on a national discussion of the water infrastructure funding gap, and there’s no closing that door.  The funding gap is already front and center in the season’s political debates, and I don’t see that changing, especially if every consumer of water – and that would be all of us – demands action and solutions, now and over the long term.Discussions of infrastructure investment have too often focused on highways, harbors and IT networks to the exclusion of the needs of our water and wastewater systems – I believe that has been forever changed by the newly widespread national consciousness of the adverse health impacts of failing water systems. It gives me hope that a long-overdue solution will finally be crafted.”