Master s Thesis Research Summary

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1 Master s Thesis Research Summary EXAMINATION OF THE RELATIONSHIPS BETWEEN PUBLIC FUNDING FOR WATER AND SEWER INFRASTRUCTURE AND INDICATORS OF NEED IN THE APPALACHIAN REGION FROM 2000 THROUGH 2003 Matthew T. Richardson (Author), and Jeffery Hughes (Principle Advisor) University of North Carolina at Chapel Hill, School of Public Health, Department of Environmental Sciences and Engineering, 2005 Abstract The funding of drinking water and sewer infrastructure in the United States has dramatically changed from the large federal grants of the 1970s to today s complex system of grants and loans provided by many federal and state agencies. Meanwhile populations are increasing, regulations are more complex, and the systems are aging. Several recent national studies concluded that the current level of spending is inadequate to meet the nation s infrastructure needs resulting in a gap of $300 billion to $1 trillion over the next 20 years. The Presidential administration has recently proposed tightening the budgets even further. With the value of public funding programs in question, the demonstration of measurable results is required. Using the Appalachian region as a case study, this analysis developed a baseline funding database that documents the source, amount, and destination of $4.6 billion in public funding transactions for water related infrastructure from 7 Federal and 41 State funding programs. Needs are represented by eight variables: Publicly Owned Treatment Works (POTW) National Pollutant Discharge Elimination System (NPDES) compliance, Safe Drinking Water Act compliance, waterborne disease outbreaks, Environmental Protection Agency (EPA) Clean Watersheds Needs Survey (CWNS) results, combined sewer overflow systems, residential septic tank density, race, and median household income. The analysis poses the question: Was $4.6 billion in public water and sewer infrastructure funding distributed to the areas with the greatest need? Two sets of regression models were run: the combination of all programs together, and the seven Federal programs individually. The county-level multiple regression results are reported in terms of funding program eligibility requirements. Combining all funding programs together indicated the expected positive relationships with POTW NPDES compliance, waterborne disease outbreaks, and EPA s CWNS results. The individual program model captured the differences among the programs and targeted recommendations were developed for each program. With a few directed policy changes, such as incorporating waterborne disease outbreak data into funding distribution prioritization processes, the analysis suggests that improvements in the efficacy of public water and sewer infrastructure funding are both measurable and achievable. Introduction / Background US citizens trust that our drinking water and sewer (W&S) utilities will provide clean, safe water that protects public heath and the environment in the near and long term. This policy analysis was conducted to help the Appalachian Regional Commission and policy makers at local, state and federal levels address concerns about the adequacy of W&S services in the Appalachian area. The funding of drinking water and sewer infrastructure development projects in the United States has dramatically changed from the large federal grants of the 1970s. Today, when a water or wastewater system needs capital to repair, replace, improve or extend service, it generally has to borrow money and look for smaller grants wherever it can find them. The funding picture is a sort of patchwork quilt of sources. Page 1

2 Approximately $7.3 billion was provided annually by Federal and State sources nationwide for W&S capital improvement projects in the 1990s (GAO, 2001). Second only to education, W&S infrastructure in the US is one of the most costly items in a local government s budget (AMSA and WEF, 1999; EPA, 1999). These large capital expenditures for W&S infrastructure can hamper local government s ability to provide other critical public services (e.g. police and fire protection). Unfortunately this more complex system has evolved into a significant difference between the amount of funding provided and level of need for support. Scientific, political, and governmental organizations alike have acknowledged a financial gap that ranges from $300 billion to $1 trillion dollars over the next 20 years (EPA 2002; GAO 2001; CBO 2003; WIN 2001). Unfortunately, recent Presidential administrative budget proposals call for even less Federal funding for water related infrastructure (OMB 2005; Duncan 2005). Objectives With an ever decreasing source of Federal funding and increasing needs, it is imperative that what little amount of funding there is is distributed with the greatest degree of efficacy. This analysis was conducted to explore the relationships between public funding for W&S infrastructure and indicators of W&S infrastructure need. From 2000 through 2003, approximately $4.6 billion was distributed in Appalachia for W&S infrastructure projects from 2000 through 2003 (EFC, 2004a). Were these dollars allocated to the areas with the greatest need? The research is based on the central hypothesis that society expects W&S infrastructure funding policies to provide financial support to those regions with the greatest level of need. Research objectives include: identify the source, destination, and amount of each public W&S infrastructure funding project transaction in Appalachia from 2000 to 2003; isolate and justify indicators of W&S infrastructure need; regress various datasets; and comment on the relationships between the variables. Methodology Research methods are based on a statistical multivariable regression defined by a dependent variable: the annual amount of public funding for W&S infrastructure received by each county normalized on a per capita basis. Eight indicators of W&S infrastructure need were used as the independent variables. A funding database was compiled from 48 different programs (seven federally supported programs and 41 state specific programs). Only programs that distribute greater than $1 million annually for W&S infrastructure were included. Some datasets required a transaction by transaction review and professional evaluation to determine if the investments were used for W&S infrastructure. Figure 1 depicts the geospatial arrangements for public W&S infrastructure funding (the dependent variable). Defining W&S infrastructure needs and forecasting these costs are inherently uncertain given the innumerable factors involved in financing public W&S infrastructure. Many variables were considered, but not used for this analysis due to extensive data limitations, particularly in state to state comparisons (e.g. TMDL/303(d) impaired waterway listings and percent of income spent on W&S services). Table 1 lists the eight indicators of need. Clean Watershed Needs Survey results Median Household Income CWNS MHI Results from EPA CWNS per Capita (Categories I-IV only) Income per household Dollars per capita Dollars per household per year Positive Table 1: Indicators of Need and Expected Relationship with Funding Variable Acronym Description Units 1 Hypothesized Name Relationship Timeframe 2000 to ~2020 Data Source EPA, 2000 Negative 1999 US Census, 2000 Page 2

3 Variable Name Description Units 1 Hypothesized Relationship Acronym Timeframe Data Source Combined Sewer Overflows CSO Permitted Combined Sewer Overflow Systems Permitted systems Positive EPA, 2004a National Pollutant Discharge Elimination System noncompliance NPDES POTW NPDES Violations per POTW NPDES permit issued violations per POTW Positive EPA, 2005 Septic System Density Septic Residential sanitary septic systems Systems per square mile Positive 1990 US Census, 1990 Safe Drinking Water Act noncompliance SDWA SDWA violations per community water system (monitoring and reporting violations excluded) violations per system Positive EPA, 2004b Waterborne Disease cases WBD Waterborne Disease cases (day care and child care outbreak locations excluded) People affected by Water-borne Disease outbreaks Positive CDC, 2004 Percent nonwhite residents Race Percent non-white residents ( 1 Each variable is normalized to a per county basis) Percent of population Positive 1999 US Census, 2000 The analysis is circumscribed by spatial and temporal boundaries. The area studied is the Appalachian region at a county level resolution, as defined by the Appalachian Regional Commission in 2002 (ARC, 2005). Comprised of 418 counties and independent cities, extending from Alabama to New York in 13 different States, and managed by four different EPA regions, this area is as equally diverse and challenging politically, socially, and geographically as the US. The county level resolution was used to demonstrate the connections between Federal, State, and local levels of government. Unlike communities in more populous, higher-growth areas of the country, many communities in Appalachia cannot generate the revenue to pay for capital improvements on a pay-as-you-go basis, have little or no access to private capital markets and external financial support is often required. Four years of W&S infrastructure related transactions from January 1, 2000 through December 31, 2003 were used in the analysis (EFC, 2004a). Timelines for the independent variables vary, largely based on what was readily available. Results From 2000 through 2003, public funding programs distributed approximately $1.1 billion annually for W&S infrastructure capital in the Appalachian region (EFC, 2004a). Two sets of regression results are reported: all funding programs (AFP) together versus the indicators of need; and, the seven individual federally supported programs (FSP) versus the indicators of need. Histograms and maps were developed for each variable and are available upon request. Page 3

4 Public W&S infrastructure funding in the Appalachian region from 2000 through 2003 was largely distributed through federally supported programs (77%) rather than the state specific programs. This parallels most national W&S funding analyses and substantiates the presumption that the role of State and local governments in W&S infrastructure financing are increasing while the Federal government s role is decreasing (CBO 2003; AMSA and WEF, 1999). The funding data also indicates that the EPA Clean Water State Revolving Fund (CWSRF) program plays a very important function in funding W&S infrastructure in Appalachia. This parallels national W&S infrastructure funding studies, but elevates the level of concern relative to the February, 2005 Presidential administration proposals to significantly reduce the CWSRF budget (approximately 33% from 2004 levels [OMB, 2005; Duncan, 2005]). Examining the eight indicators of need versus the combination of All Funding Programs (AFP) together and each of the Federally Supported Programs (FSP) revealed the following statistically significant relationships. Table 2: Select Analysis Results Regression Program Attribute Coefficient (Standard Error) 1,2 AFP (n/a) Violations of NPDES Permits from POTWs (15.32) 1 2 AFP (n/a) EPA s CWNS results (0.018) AFP (n/a) Waterborne Disease Cases 1.34 (0.41) AFP (n/a) Septic Tank Density (1.02) FSP Drinking Water State Revolving Fund Violations of the Safe Drinking Water Act from Community Water Systems (2.65) FSP USDA Violations of NPDES Permits from POTWs (8.12) FSP FSP Housing & Urban Development CDBG Housing & Urban Development CDBG Violations of NPDES Permits from POTWs 5.51 (2.57) Median Household Income (0.50) FSP CWSRF EPA s CWNS results 0.04 (0.02) FSP CWSRF Septic Tank Density (1.09) FSP CWSRF Waterborne Disease Cases 1.38 (0.30) The denotes significance at the 1% confidence level Coefficient Units are $ / Capita An exemplary coefficient description is as follows: based on this research, it is found that, on average, an increase of one POTW NPDES violation is associated with an increase of $54 per capita in public funding from AFPs, holding all other independent variables constant. Page 4

5 The EPA s Clean Watersheds Needs Survey (CWNS) document the capital costs for collection, treatment, stormwater management, and non-point source pollution control. The research indicates that needs identified by the CWNS are positively related to the distribution of W&S infrastructure funding in Appalachia. By looking at AFPs from an overall W&S infrastructure policy perspective, it is apparent that funding for W&S infrastructure is being distributed to those counties with elevated levels of need, wherein need is indicated by the results of the EPA CWNS. The analysis indicated a strong, positive relationship between funding and POTW NPDES violations, particularly from the USDA and HUD CDBG programs. These funding programs generally do not include wastewater treatment plant compliance in their eligibility criteria. Treatment facilities that receive violations are in non-compliance which potentially represents increased public health risk. The observed relationships are likely a result of numerous violations extending over a period of time that eventually alarm utility managers and community leaders that there is a larger, root problem. The local utility managers and elected officials use this data to build a case for financial support from USDA and HUD-CDBG to address their NPDES violations. The funding program managers may use this information in the funding application prioritization process to document genuine problems and need. Although communities maybe hesitant to document POTW non-compliance, this analysis indicates a strong positive relationship between funding and violations, implying that it may be in the best interest of the community to reveal non-compliance during their search for W&S infrastructure funding. Onsite residential sewer systems adequately treat wastes until population demands cause the density of systems to exceed the regional wastewater adsorption capacity. Centralizing wastewater systems not only addresses environmental preservation and public health concerns, but also economic development and affordability issues (Knowles, 1998; Borchardt et. al., 2003). Conventional septic system densities greater than 40 systems per square mile may result in groundwater contamination (EPA, 1977). Septic system density (decentralization) is not a component of the infrastructure funding application prioritization processes (with the exception of the CWSRF program). This analysis shows a negative relationship between funding and septic tank density indicating a programmatic bias - more funding is being distributed to counties with fewer septic systems. Current W&S infrastructure funding policies are potentially obstructing the ability of communities to evolve from decentralized (septic) to centralized wastewater systems. From an overarching policy perspective, W&S infrastructure funding policies in the US are primarily aimed towards the large, capital intensive W&S infrastructure projects that address hundreds to thousands of residents simultaneously, rather than one home at a time (e.g. expanding to Phase II or III treatment systems rather than bringing a community online). Although a positive relationship was hypothesized, the research shows that a region with more septic systems is indicative of an area with fewer centralized systems, and is therefore less eligible for these public funding programs. In sum, centralization is a complicated process and septic system density may not be the best indicator of W&S infrastructure financial need. For those who advocate that public monies should be used to improve decentralized systems or to convert them to centralized systems, this research identified a negative relationship with funding. The analysis revealed a very strong, positive, statistically significant relationship between Safe Drinking Water Act (SDWA) compliance from community water systems (with monitoring and reporting violations excluded) and the EPA Drinking Water SRF (DWSRF) program. This relationship was as expected given that four of the six categories of EPA DWSRF eligibility are related to compliance and contamination. DWSRF personnel have reported that environmental compliance is a very important factor in their funding decision processes (EFC, 2004b). The analysis shows that DWSRF funds are distributed to counties with elevated need, using Community Water system SDWA compliance as an indicator of need. Waterborne disease (WBD) cases play a notable role W&S infrastructure funding in Appalachia, based on this analysis, particularly with the Federal EPA CWSRF program. WBD outbreaks can have far reaching impacts in local media and alert the problem directly at the community level. The community members elect the local government officials who make W&S infrastructure funding decisions to request funding. These analysis results imply that WBD cases maybe a component of the EPA CWSRF funding Page 5

6 application prioritization process. CWSRF program managers indicated that public health is very important in the funding decision process (EFC, 2004b). Since the CWSRF program is carried out by each individual State it could not determined if WBD outbreaks are directly included in the funding application prioritization process. For communities that identify WBD outbreaks through the funding application process, this analysis suggests that there is a high likelihood that they would receive CWSRF program distributions. With a few directed policy changes, such as incorporating waterborne disease outbreak data into funding distribution prioritization processes, the analysis suggests that improvements in the efficacy of public water and sewer infrastructure funding are both measurable and achievable. Figure 1 Page 6

7 References AMSA and WEF The Cost of Clean. ARC (Appalachian Regional Commission) About ARC. Accessed online at Borchardt, Mark A., Po-Huan Chyou, Edna O. DeVries, and Edward A. Belongia Septic System Density and Infectious Diarrhea in a Defined Population of Children. Environmental Health Perspectives 111:5: CBO Future Spending on Water Infrastructure: A Comparison of Estimates, CBO Call Number: HD4461.F , Washington DC. Center for Disease Control and Prevention (CDC) Compilation of 1989 through 2004 Annual Surveillance Summaries for Waterborne-Disease Outbreaks (Drinking and Recreational Waters). [County provided by Dr. Michael Beach s Dept. at CDC] Duncan, John. Jr (R-TN) Water Resources and Environment Subcommittee Chairman Duncan Stresses Need For Adequate Wastewater Infrastructure Funding, February 16, 2005, Environmental Finance Center (EFC), 2004a. Master Funding Database (MFDB) by University of North Carolina, EFC department. Environmental Finance Center (EFC), 2004b. Drinking Water and Wastewater Infrastructure Funding Survey. Prepared for the Appalachian Regional Commission, Washington DC by UNC, EFC. EPA Waste Disposal Practices and Their Effects on Groundwater, Office of Water Supply, Washington DC: EPA 570/ EPA Sector Notebook Project-Profile of Local Government Operations, Appendix A of Profile of EPA Clean Watersheds Needs Survey (CWNS) 2000 Report to Congress, Office of Wastewater Management, August 2003, Washington DC: EPA-832-R EPA The Clean Water and Drinking Water Infrastructure Gap Analysis. Office of Water, Washington DC: EPA 816-R EPA. 2004a Report to Congress: Impacts and Control of CSOs and SSOs. August 26, EPA 833-R EPA. 2004b. Safe Drinking Water Act Information System and Federal Database. Data accessed via SDWIS/Fed and information from Mr. Lee Kyle at EPA on June 20, EPA Envirofacts Enforcement & Compliance History Online (ECHO), Permit Compliance System (PCS), Clean Water Act (CWA) NPDES permits and compliance database; Customized Query. January February GAO Information on Federal and State Financial Assistance. Report to Congressional Requesters. November 2001, GAO Washington DC. Knowles, Graham SepticStats An Overview. December West Virginia University Research Corporation. OMB Program Assessment Rating Tools Assessment Detail, PART Program Summaries, and PART data. Accessed February 12, 2005 at US Census Bureau Septic dataset : Summary Tape File 3, Tables H23 and H24. US Census Bureau Median Household Income dataset. Summary File 3, Tables P52 to P93. County Populations and Race Datasets. Summary File 1, Tables P1 to P10. Water Infrastructure Network (WIN) Water Infrastructure Now, Washington DC. Page 7