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Cleaner Rivers for the Capital Region Final 5-17-12 EMBARGOED

Cleaner Rivers for the Capital Region Final 5-17-12 EMBARGOED

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Published by Lydia DePillis

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Published by: Lydia DePillis on May 23, 2012
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BROOKINGS
| May 2012
1
Cleaner Rivers for theNational Capital Region:
Sharing the Cost
Carol O’Cleireacain
1
Clean water isnon-negotiableand expensive.To ensure thesuccess of theClean RiversProject, theregion needs abetter nancingsystem beyondD.C. Water’snarrow ratebase.”
Summary 
n
D.C.Water,formerlytheD.C.WaterandSewerAuthority(WASA),hasembarkedona20-year,$2.6billionCleanRiversProjectinitiativetonearlyeliminatesewagedischargeintoareawaterways.
Like many cities, Washington is partially served by a combined sewersystem (CSS) that carries both storm water and sewage. The District’s CSS is the legacy othe ederal government, which built the system and governed the city until limited homerule in 1973. Today, heavy rains that exceed the capacity o the combined system triggerthe release o overfow storm water and sewage into area rivers, ultimately fowing into theChesapeake Bay. The Clean Rivers Project, mandated by a 2005 consent decree with the U.S.Environmental Protection Agency, will build underground tunnels to store overfow stormwater and sewage during rainstorms until it can be sent to a treatment plant.
n
D.C.WaterwillnancetheCleanRiversProjectbyissuinglong-termbondsbackedpri-marilybyrevenuefromwaterusageandanew“imperviousarea”charge.
It is also explor-ing the extent to which “green inrastructure” can contribute to reduced storm water. Theederal government has supported the project, but its contributions are not guaranteed norhave the amounts been predictable. Despite D.C. Water’s active and orward-looking manage-ment, the Clean Rivers Project raises multiple concerns. These include the burden it will placeon District rate payers; the possibility o crowding out D.C. Water’s other maintenance andimprovement projects; whether and how the beneciaries o cleaner water downstream shouldcontribute to the cost; the project’s interaction with other expensive pollution-reduction man-dates in the city and region; the lack o nancing orecasts or the second hal o the project;and the possibility that D.C. Water ultimately may not be able to aord the project as currentlystructured.
n
D.C.WaterandtheMetropolitanWashingtonCouncilofGovernmentsshouldconvenearegionalcoalitiontodiscussoptionstopayfortheCleanRiversProjectinthecontextofotherwaterqualitymandatesintheregion.
The regional coalition should discuss options toexpand the project’s payment base to include a broader range o clean water beneciaries, inaddition to calling or the ederal government to make regular and predictable contributionstowards the Clean Rivers Project.
 
BROOKINGS
| May 2012
2
I. Combined sewer overows are a major problem in the District and are alegacy of federal control and neglect.
T
he nation’s capital, like other older American cities, is partially served by a combined sewersystem (CSS) in which pipes carry both storm water and sewage or waste water. In dryweather, waste water fows to the Blue Plains Advanced Wastewater Treatment Plant at thesouthern tip o the District along the Potomac River. Ater heavy rains, however, the capacityo the combined sewer is oten exceeded, and a mixture o sewage and storm water—combined seweroverfows (CSOs)—discharges into the Anacostia and Potomac rivers and Rock Creek, leading ultimate-ly to downstream destinations, including the Chesapeake Bay.Both storm water and waste water present serious water quality challenges. Storm water is dirty, nomatter how it is conveyed. It picks up oil, grease, sediment, and animal waste rom streets, gardens,and roos and sends it untreated to surrounding waterways. Prolonged development has increasedthe amount o surace areas—rootops, roadways, and parking lots—that do not absorb water. Theseimpervious suraces increase the runo o storm water and snowmelt, making the clean water taskmore urgent, as well as causing erosion and other environmental problems. Untreated sewage leadsto multiple problems: it compromises the saety o drinking water, makes water unt or swimming orshing, and causes oensive odors. Actions to improve water quality must address both storm waterand waste water, but this paper ocuses on sewage in storm water, specically the need to identiy airand sustainable options to pay or the very expensive inrastructure improvements already underwayto reduce CSOs.Washington’s sewers date back to the nineteenth century, when the ederal government built an80-mile CSS that still survives today. Most o what Americans think o as the ederal government—theCapitol, the Supreme Court, the Mall and museums, the major monuments, and the White House—liesin the oldest one-third o the city covered by the CSS. Separate storm sewers, which also are old, servethe remaining two-thirds o the city.
2
 Today’s combined sewer overfows are the direct result o a ederal decision in the nineteenth cen-tury to design, build, and then retain the combined sewers. The ederal government was responsibleor the District’s inrastructure until the institution o limited home rule in 1973. A recent study by D.C.Appleseed asserts that the original Army Corps design and construction o the CSO system has proved“signicantly deective,” with resulting damage to the regional watershed’s ecosystems.
3
 Responsibility or water distribution, sewer pipes, and sewage treatment now rests with D.C. Water,ormerly known as D.C. Water and Sewer Authority (WASA). D.C. Water is an independent authoritywith a regional board o directors appointed by the District; Montgomery and Prince George’s coun-ties in Maryland; and Fairax County in Virginia. In addition to serving the District and its residents,D.C. Water also serves the suburban counties represented on the board by treating waste water atBlue Plains rom these jurisdictions. A separate entity, the Department o the Environment (DDOE),is responsible or the city’s separate sewer system, which covers two-thirds o the city and channelsstorm water only, and not waste water. The somewhat complicated relationship between D.C. Waterand the DDOE is discussed in Appendix A.The District’s status as the nation’s capital signicantly reduces its tax base and scal capacity.Previous analysis has addressed the scal constraints imposed on the District by its lack o a stateand the special relationship between the District and the ederal government.
4
A high proportion oproperty and sales are exempt rom taxation (government, diplomatic, educational, nonprots, amongothers). Congress prohibits the District rom taxing the earnings o workers living in the suburbs andworking in the city. The city’s high poverty rates and long-term population decline (recently reversedor the rst time in decades) urther erode the tax base, limiting the city’s ability to meet its scalneeds, including the ability to maintain and improve its inrastructure. When serious mismanage-ment and economic downturn led to nancial crisis in the 1990s, the ederal government imposed aFinancial Authority, which balanced the budget and restored scal solvency. Throughout this period,the District suered rom restricted spending and, oten, urther deerrals o needed maintenance,capital replacement and modernization o inrastructure.Recognizing the need or a long-term solution, President Clinton in 1997 proposed a RevitalizationAct to help address the underlying structural causes o the District’s scal crisis. Highly visible needs,
 
BROOKINGS
| May 2012
3
as well as the signicant limits and constraints on the city’s ability to und capital projects, led Clintonto include a National Capital Inrastructure Authority (NCIA) to und $1.4 billion in repairs and con-struction. Unortunately, it did not survive into the nal Revitalization Act.
5
 However, a 2008 report by the Congressional Budget Oce (CBO) recognized the strong case orederal investment in inrastructure, such as the Clean Rivers Project, whose benets “accrue tobroad geographic areas and are not restricted to a class o users that can be charged more directly.”The CBO specically cited as an example “wastewater treatment plants or communities whose watereventually fows into a major resource such as the Chesapeake Bay.”
6
 
II. In response to federal mandates to reduce combined sewer overows,D.C. Water developed the “long-term control plan,” which will take 20 years at an estimated cost of $2.6 billion.
N
ational policy, beginning with the Clean Water Act (1972),
7
requires localities to obtainpermits to discharge CSO fows into surrounding waters, monitor CSO releases, andimplement a long-term control plan (LTCP) or minimizing the impact o CSOs on waterquality.
8
 In March 2005, D.C. Water reached a legal agreement with the Environmental Protection Agency(EPA), which enorces environmental policy, to reduce CSOs. The LTCP, now known as the CleanRivers Project, was slated to reduce CSOs by 96 percent by building three large-scale tunnels to storerain overfows until they can be conveyed to Blue Plains or treatment. The Clean Rivers Project isestimated to cost $2.6 billion over 20 years and is part o D.C. Water’s Ten Year Capital ImprovementPlan. The capital plan addresses inrastructure, including acilities, pipes, tanks, machines, and tech-nology. D.C. Water’s revenue— user ees and charges and ederal grants— pays or the capital plan andits operating budget, which covers the day-to-day plant operation and equipment. This arrangementmeans that uture improvements and daily operational needs compete or the same income anddrive the rates, ees, and charges paid by customers.The debt service to pay or the current capital plan is a main reason or D.C. Water’s budgetincreases. The Clean Rivers Project is a substantial part o the capital plan. Other mandated improve-ments, such as the enhanced nitrogen removal project and new technology to recycle bio-solids, arealso costly, as is replacing the aging water and sewer pipes.
9
According to D.C. Water, 44 percent othe FY 2010–2019 capital plan is meeting ederal mandates (court orders, regulatory standards, per-mit requirements); 13 percent is to address potential acility ailures.
10
 Although the Clean Rivers Project is a 20-year initiative, the capital plan provides annual esti-mates o the costs and spending only through FY 2019. From FY 2010–2019, D.C. Water expects tospend $1.25 billion on CSO inrastructure, accounting or 30 percent o the capital plan expendituresthrough FY 2019.
III. Paying for the Clean Rivers Project is a major challenge.
T
o meet the Clean River Project’s multi-billion-dollar mandate, D.C. Water issues bonds topay or the capital construction. Revenues will service and pay o these bonds as D.C. Wa-ter continues to provide normal water and sewer services and upgrades its ongoing opera-tions. Given that the utility’s traditional revenue source is ees on users within the Districtas well as regional wholesale users o water treatment services, some creative thinking about newrevenue sources is in order. Both D.C. Water and city residents should consider whether the revenueis adequate to cover not only the debt service to bondholders over this lengthy period, but also ongo-ing maintenance, new technology, and other needs. No one wants the general maintenance budget tobe starved, causing deerred maintenance problems down the road.

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