THE BLOG
12/04/2014 12:21 pm ET Updated Feb 03, 2015

A Tragedy to Avert

The greatest program on the planet earth to finance environmental quality is in trouble. What a shame! This shouldn't be happening!

The Environmental Protection Agency's Region 2 Office is trying to stifle an incredibly innovative initiative of the New York State Environmental Facilities Corporation to mitigate the damage of the new Tappan Zee Bridge to the Hudson River and its estuary. This is the first time in the 25-year history of this program that an EPA regional office has attempted to surrogate its judgment for that of a State. If successful, this unfortunate effort could cripple this great, nationwide environmental finance program that has arguably done more good than all other environmental finance programs combined. How ironic that an arm of the Environmental Protection Agency is trying to kill off environmental innovation! How especially ironic since at the same time the President of the United States is signing into law the Water Infrastructure Finance and Innovation Act and is standing at the foot of the new bridge calling for a forward-looking infrastructure agenda. Shouldn't Region 2 be on the same page as their President?

The program is called the Clean Water State Revolving Fund (SRF). It was created by Congress in 1987 by amendment to the Clean Water Act. There are 51 SRFs, one in each State plus Puerto Rico. To date the SRFs have provided over $100 billion of loans. Loans, not grants. The money "revolves" out to a clean water project. Then it revolves back to the SRF when the loan is repaid. Then it revolves out to another project. And so on. Of this $100 billion, 96% has gone to sewage treatment plants. In addition to these point-source sewer projects, the SRFs can finance non-point source projects as well. The other 4% of SRF funding has gone for non-point source projects. The SRFs have a third authority under the Clean Water Act: they are supposed to finance estuary protection and clean-ups - just like the Tappan Zee project. Out of all $100 billion of SRF projects numbering over 30,000, only one - yes, one - estuary project has ever been done - a tiny $4+million project for the estuary in Portland, Maine.

So, did New York State have the statutory authority to protect its most valuable estuary? Yes, for sure.

The SRFs have money. Together they have net assets of over $40 billion. Using only a 25:1 multiplier, that means that they have over $1 trillion of financial capacity. They can finance over $1 trillion of clean water projects. One international credit rating agency has suggested a 75:1 ratio for wastewater loan programs. That would mean over $3 trillion. The New York SRF has over $5 billion of net assets. By just the conservative 25:1 ratio, New York has the financial capacity to do over $100 billion projects. So, New York has many times over the amount of money needed. The Tappan Zee project isn't taking money from any village sewer system.

Over the years, the SRF office at EPA headquarters has pushed, prodded, wheedled and cajoled their 51 State programs to be more innovative with their SRF funds. When the little Main estuary project closed, EPA's SRF team wrote papers and held a webinar about it hoping to spur other SRFs to do similar projects.

The most innovative project ever financed in the SRF's 25-year history was done by New York State Environmental Facilities Corporation last Summer when it guarantied $23.4 million of bonds for residential energy efficiency projects. Energy efficiency and clean water? Yes, air deposition of nitrogen is a major polluter of our nation's waters. Power plants throw thousands of tons of nitrogen into the air that winds up in lakes and streams. The White House, the Department of Energy, and just about every state energy agency are falling all over themselves trying to replicate this stunning precedent. Meanwhile, the SRF staff at EPA in Washington are leading the cheers and doing the same.

The Clean Water State Revolving Fund is the most successful environmental finance program on the planet. And the New York State Environmental Facilities Corporation is the most innovative of all 51 state programs. It would be a tragedy for the country if this type of innovation were stifled. What happens in New York will reverberate through all 51 SRF programs. Hopefully they will all weigh in with the White House and the EPA Administrator to save the SRFs so that they can continue to innovate to save our nation's waters.