March 7, 2007
NON-BONDING SOURCES OF STATE CLEAN WATER FUNDING
By: Paul Frisman, Principal Analyst
You asked what methods, besides bonding, states use to finance clean water-related projects. You specifically asked about programs in Maryland and North Carolina. We have referred the fiscal portions of your questions to the Office of Fiscal Analysis.
Maryland has created a Chesapeake Bay Trust Fund, financed by income tax check-offs, and a “flush tax” to finance the clean-up of Chesapeake Bay. North Carolina's Clean Water Management Trust Fund uses state appropriations to help local governments, state agencies, and non-profit conservation groups protect and restore surface water quality. Other states use a variety of programs to protect watershed land and water resources. Washington, for example, uses a portion of its tobacco tax revenue to improve water pollution control facilities, while Oregon allocates a portion of its lottery profits to protect its watershed. We briefly describe these and other funding methods below.
In 2005, Maryland added an annual “flush tax” of $30, or $2.50 a month, to the utility bills of property owners who use the public sewer system and to septic tank owners. The money collected from public sewer system users is used to upgrade wastewater treatment facilities. The money collected from septic tank owners is split, with 60% of it used to fund grants for septic system improvements and 40% used for a program that encourages farmers to plant wheat, rye, barley, and other grains to reduce nutrient loading in Chesapeake Bay.
Maryland expects to raise about $65 million a year from public system users and $12.6 million a year from septic tank users. Maryland will use the $65 million from sewage treatment plant users to back more than $700 million in revenue bonds. These bonds will partially fund nearly $1 billion in capital projects at 66 major sewage treatment plants. We have attached a program summary from Maryland's Department of the Environment.
Chesapeake Bay Trust Income Tax Check-off and License Plate Fund
In 1985, Maryland established the Chesapeake Bay Trust, a private nonprofit grant-making organization dedicated to restoring and protecting the Bay and its tributaries.
Most of the Trust's revenue comes from the Chesapeake Bay and Endangered Species Fund check-off on the state income tax form and from sales of the specialty “Treasures of the Chesapeake” license plate. The former generates an annual average of $600,000; the latter, $550,000. Corporate and private donations added $115,000 in 2004. In 2004, the Trust granted $1.94 million to 516 schools, community groups, nonprofits, and public agencies. Grants ranged in size from $50 to $100,000, and averaged $3,800.
The University of Maryland's Environmental Finance Center is looking at ways to leverage the Trust's funding. More information is available on its website.
Clean Water Management Trust Fund
North Carolina created the Clean Water Management Trust Fund in 1996 (N.C. Gen. Stat. 113A-251 et seq.). The Fund is an independent agency, housed for administrative purposes in the state Department of Environment and Natural Resources. A 21-member board establishes criteria, allocates funds, reviews applications and approves grants. The Fund helps local governments, state agencies, and non-profit organizations finance projects to protect and restore surface water quality. Since its inception, the Fund has awarded 943 grants totaling $711.5 million. It has leveraged more than $1.43 billion in private and other public funds. Money for the Fund comes from state appropriations. The General Assembly, which appropriated $100 million a year for FY 05-06 and 06-07, has appropriated a total of $434.4 million since the program began. We have attached a Trust Fund fact sheet. More information on the Fund is available on its website, www.cwmtf.net.
OTHER STATE PROGRAMS
Information on the following state programs comes from a working draft provided by the U.S. Environmental Protection Agency (EPA) Office of Wastewater Management's State Revolving Fund Branc