Footing the Bill
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MARYLAND 1 Research, Education, Outreach September-October 1994 SPOTLIGHT ON ENVIRONMENTAL FINANCE ffiECOSTOFC_ • FOOTING THE BILL hether flowing off the decision makers alike have turned Chesapeake's vast water their attention to a nagging question: THE ISSUE AT A GLANCE shed or falling from the how much will these efforts cost, and Wsky in rain and snow, too how will we pay for them? • THE GoAL: To reduce the many nutrients find their way into Throughout the summer and early flow of nutrients into the Chesa the Bay's rivers and mainstem. Ac autumn, a Blue Ribbon Panel, peake Bay by 400A> and to hold it cording to most researchers, these chaired by Eileen Rehrmann, County there. unwanted nutrients, mostly nitrogen Executive of Harford County, has • THE CHAllENGE: To raise and phosphorus, fuel unwanted algal struggled with this funding issue, an estimated $60-90 million a growth and loss of vital oxygen in trying to rise above the normal de year to pay for new or expanded the estuary. Because of these conse bate about raising or cutting taxes. Tributary Strategies programs to quences, nutrients - from sewage, Appointed by Maryland Governor accomplish this goal. from fertilizer, from air pollution - William Donald Schaefer, the Panel • T HE PROBLEM: How to pay have come to represent the estuary's has wrestled with charts and graphs the bill, if current taxes do not most significant systemic problem. and a pile of information about waste cover the shortfall. States in the Bay region, joined by treatment plants, stormwater runoff, the federal government, have com agricultural programs and resource mitted themselves to reducing that protection. unwanted load of nutrients by 40 Their assignment: to come up percent (based on 1985 levels) by the with creative fundmg mechanisms to year 2000. But with nutrient-reduc implement a "Tributary Strategies" tion plans taking shape for each of plan, the state (and Bay Program's) the Bay's tributaries, citizens and (Continued on page 2) Maryland ts Cleanup, cont. alxmt ru·o- J thirds ofthe way toward effort to clean up the streams and fimdfng pro- rivers that feed the Bay. grams needed The1r ta~k has not been an easy to clean up one. Estimates are that <:leaning up Chestlpeake the tributaries could cost an addi Bay tributaries. tional $60-90 million a year. According to natttral re- The Nutrient Problem sollrce experts, filllfimdfng tl'l/1 rTUlke When the problem of excess possible the nutrients was discovered, the Bay 40% reductton Mates began working to stem the tide of tzutrie1lls of phosphorus and nitrogen entering necessary to the Chesapeake, beginning with 111m tbe tide waste treatmenr planrs. for the Bay's "We know how to control most bealtb. nutrienl'i," says Cecily Majerus, Gov ernor Schaefer's coordinator for Chesapeake Bay programs "We already have programs for reducing nuuienl'i from waste treatment planl'i, for example. And the level of phosphon1s entering the Bay is already down. The biggest problem The Funding Dilemma !ems for bridges and other infrastruc is nonpoinr " ture. ":'\onpoint" is a tcm1 our forebears According to many mayors and "It's a mas ... ive problem that is not would not have known, though they planners in small communities, there in the public consciousness yet," says would have understood at least part are two m•IJOr fundmg difficulties Outen. "It's like taking care of a of the problem: runoff from land connected with nutrient reduction. cavity, before it rots your teeth." that has, for example, lost the protec The first is the drying up of federal In Baltimore County, according to tive forest cover. construction grant~ - especially for Outen, his department has adapted a "If you look at cores from the waste trt.>atment facilities - and the watershed approach, working envi Chesapeake Bay bottom," says Grace second is how to finance projects to ronmenral mandates and a special Brush, researcher at The johns stem nonpoint pollution, such as re1'itoration fund into their normal Hopkins University, "you can see stormwater runoff from urban and capital budgeting process. "Some exactly when the clearing of land suburban Iande; and the runoff of people raised their eyebrows," he began." What you see, according to fertilizer from agricultural fields. says, when these environmental Brush, is an influx of sediment, and a "People don't realize that these projects were made part of the capi change in pollen type, from oak, [nonpomt problems] are structural tal budget "But I talked to the maple and ash to crops hke tobacco problems," says Donald Outen, Ch1ef budget committee," Outen says. and com "The changes in the Bay of the Bureau of Water Quality and "They understand the need. Paying began with deforestation," Brush Resource Management 10 Baltimore for water quality is no less important says, "and then became more pro County. "These problems will be than paying for potholes." nounced with the use of fertilizer." come more expensive if we ignore Outen and others often point out But the problem of nonpoint them. This is something the locals that funds arc frequently available pollution has worsened over this last will get stung by." from Federal and other sources, if half cenn1ry with population surg Outen points to erosion and the one looks hard enough. In Balti ing in the Chesapeake region- an channelizing of stream beds, for more County, for example, they are 18 percent growth is expected in example. Though the state's Tribu taking advantage of opportunities to Maryland by 2020 - and with the tary Strategies a1m at restonng water work with the Army Corps of Engi development of once-pristine areas, ways for environmental reasons, neers, the Fish and Wildlife Service suburban communities, streets and channelized stream beds can, Outen and otl1ers who can help fund envi highways have aLso become a si7.able says, cause mechanical problems, ronmental projects. "We are not source of nutrient loading to the Bay. exposing pipe lines running beneath waiting for funds to be passed down With an increase in the problem has the streams, such as sewer lines. through the usual channels," Outen come an increase in the need for Stream erosion can also cause prob- says. "We are working directly with funding. the Feds." 2 • .MARYLAND MARINE ~OTES Despite the availability of some money for nutrient-reduction efforts, Outen expects that their current budget will not be enough, as Balti Environmental Finance more County, like other counties, continues to focus on nonpoint For more than two years, the University of Maryland System issues. And beyond this, there are has operated an Environmental Finance Center, part of the often "institutional problems," ac Coastal and Environmental Polk)' Program now housed at the cording to Outen, which can make Maryland Sea Grant College. The Center puts on conferen<.:es money harder to get from the State. and roundtables in order to attract creative thinking from "I see two problems," says Outen. financial experts, planners and others. At the First Annual Mid-Atlantic Conference on Environ "One is that many state programs mental Finan<.-e, sponsored by the Environmental Finance Center and supported have a cost share element. And by the Environmental Protection Agenq•, financial creativity was not lacking. many small counties and localities Financial advisors like Scott Resnick, founder of Commonwealth Development just can't afford their share of the Associates, spoke of ~slicing and dicing," and other fmancing techniques nor cost." This means, according to mally considered the purview of Wall Street. Resnick pointed toward the use of Outen, that many such programs end stru<:tured municipal bonds that could differentiate risk and result in lower up primarily reaching the larger, interest rates. l1lese approaches could he used hy small entities that do not richer counties. normally take advantage of such techniques. The second problem, he says, is Michael Curley, a private investment banker and a member of the EPA·s that projects are often constrained by independent Env1ronmental Finance Advisory Board, asked the audience to <.:onsider all the small waterworks around the <."'llntry, all funded on a small-time the state fiscal year. "The state ex basis, paying not-so-great rates to their local banks. These waterworks, he pects the locals to spend funds in a found, were on the whole extremely reliable investments, yet, he said, only year, which locals often cannot do," about 5,000 of 60,000 nationwide have investment grade ratings. ~They have Outen says. "H usually takes a mini simply been overlooked," says Curley. mum of two years for a capital "Why not," suggests Curley, "have many of these water systems join together, project, n he says. to share a common bond?" With waterworks from all over the country pooling Outen is not alone in wondering their resources, he points out, they <.:ould negotiate large, long-term bond'i at whether there could be more flexibil g<xxl rates. The savings on their debt service alone would <.··over anticipated ity in the way fund'> are used to costs for breakdowns or other predictable problems. ~I estimate an immediate address environmental problems. cost savings of twenty-five percent on the debt service," Curley says, "and it hasn't cost the rate payer a thing." The Blue Ribbon Panel convened by There are, Curley points out, some snags. Many states do not allow dealings Governor Schaefer has also been of this type across state lines, or in some cases across county lines. Laws would examining ways in which state and have to he changed to make thL'i work. But he asked the audience to consider local governments could more easily the potential. shift funds or otherwise adapt some The Environmental Finance Center plans additional meetings and programs.