Event ID:
725971
Event Started:
10/17/2007 1:00:58 PM ET
YOU'LL BE ABLE TO LISTEN TO A RECORDING OF TODAY'S LIVE WEBCAST. ON THE LEFT-HAND SIDE BAR IS A BUTTON FOR THE ONLINE FEEDBACK FORM. YOU'LL BE REMINDED OF THIS AT THE END OF THE SEMINAR TODAY. WE REQUIRE THAT YOU MUTE YOUR PHONE DURING THE SEMINAR. THE WEBCAST HAS SEVERAL QUESTION AND ANSWER INTERMISSIONS BUILT IN AT WHICH.YOU'RE WELCOME TO TAKE YOUR PHONE OFF MUTE AND ASK A QUESTION. WEAVE A LOT OF PEOPLE PARTICIPATING TODAY ONLINE AND ON THE PHONES SO WE MAY NOT GET TO ALL THE QUESTIONS TODAY. NOW PLEASE JOIN US ON SLIDE 1 OF THE PRESENTATION. IF YOU'RE VIEWING TODAY'S SLIDES ONLINE, BY NOW YOU HAVE CLICKED ON THE GO-TO SEMINAR BUTTON AND YOU'RE BEING IN SLIDE No. 1 OF THE PRESENTATION. IF YOU'RE FOLLOWING THE SLIDES ONLINE, NOTE THE NAVIGATION BUTTONS AT THE TOP OF THE PAGE. I'LL RUN THROUGH SOME OF THE BUTTONS. TO SUBMIT SOME OF THE QUESTIONS, CLICK THE BUTTON SHOWING A QUESTION MARK. YOU DON'T HAVE TO WAIT UNTIL THE QUESTION AND ANSWER PERIODS TO SUBMIT YOUR QUESTIONS. IN FACT, WE ENCOURAGE THEM TO SUBMIT THEM IN ADVANCE OF THE QUESTION AND ANSWER SESSIONS. IF YOU EXPERIENCE ANY TECHNICAL DIFFICULTIES WITH AUDIO STREAM AT ANY TIME DURING TODAY'S PRESENTATION, YOU MAY USE THE QUESTION MARK BUTTON TO ALERT US. PLEASE INCLUDE A TELEPHONE NUMBER WHERE YOU CAN BE REACHED AND A TECHNICIAN WILL HELP YOU TROUBLE SHOOT THE PROBLEM. IF YOU WOULD LIKE TO ACTIVATE THE CLOSED CAPTIONING FEATURE, SIMPLY CLICK ON THE CC BUTTON. IF YOU'RE GOING TO USE CLOSED CAPPING, YOU MUST HAVE INTERNET EXPLOSION 5.5 OR HIGHER. THE SPEAKERS WILL ANNOUNCE THE NUMBER OF THE SLIDES SO YOU'LL KNOW WHEN TO ADVANCE. PHONE PARTICIPANTS PLEASE MONITOR YOUR NOISE LEVELS. SO MUTE YOUR BUTTONS. EVERYBODY'S MUTED SO I BELIEVE SO I BELIEVE WE'RE READY TO KICK OFF THIS SESSION.
AS AN OVERVIEW OF WHAT WE'RE GOING TO BE HEARING ABOUT TODAY, WE'LL BE TALKING ABOUT HOW COMMUNITY LEADERS AND LOCAL OFFICIALS OFTEN FOCUS WATERSHED PROTECTION EFFORTS ON ONE OR TWO FUNDING SOURCES SUCH AS THE ENVIRONMENTAL PROECTION AGENCY'S SECTION 319 FUNDS. THIS APPROACH TO FUNDING IS UNDERSTANDABLE GIVEN THE COMPLEXITY OF THE PROBLEMS, ISSUES AND POTENTIAL SOLUTIONS AVAILABLE. FINDING PUBLIC FUNDS USUALLY IN THE FORM OF GRANT IS OFTEN THE EASIEST AND LEAST POLITICALLY COSTLY FINANCING SOLUTION TO VERY ENTRENCHED ISSUES AND PROBLEMS. YET ANYONE WITH EXPERIENCE INDISLIENG WATER HEADREST STORE RACIAL PROJECTS DOES NOT KNOW THERE IS NOT PUBLIC GRANTS TO RESTORE WATER SHEDS IN HABITAT AREAS. LEVERAGES SUSTAINABLE FUNDING SOURCES IS A KEY TO SUCCESSFUL IMPLEMENTATION OF ANY COMMUNITY EFFORTS. INCLUDING WATER HEADREST STORE RACIAL AND PROTECTION. ESSENTIAL ELEMENTS OF DEVELOPING A WATERSHED FINANCE STRATEGY AND KEY STEPS IN THE FINANCING PLANNING PROCESS WILL BE DISCUSSED. CONCEPTS WILL BE DEMONSTRATED THROUGH PRESENTATION OF SUCCESSFUL WATERSHED FINANCE CASE STUDY EXAMPLES. SO LET'S MEET OUR SPEAKERS. OUR FIRST SPEAKER, TIM JONES, IS AN ENVIRONMENTAL PROTECTION SPECIALIST FOR THE U.S. EPA. TIM HAS PROVIDED ENVIRONMENTAL FINANCE TRAINING TO COMMUNITY WATERSHED ORGANIZATIONS AND SOLID WASTE MANAGERS FOR OVER 10 YEARS WITH THE U.S. EPA. TIM PROVIDED TRAINING TO FARMERS AND ENVIRONMENTAL TRAINING TO ELEMENTARY SCHOOL TEACHERS AS A PEACE CORPS VOLUNTEER IN CHILI AND ST. VINCENT AND THE GRENADINES. DANISE IS AT THE WORD RESOURCES INSTITUTE. DAN COMES TO THE WORLD RESOURCES INSTITUTE FROM THE UNIVERSITY OF MARYLAND WHERE HE SERVED AS THE DIRECTOR OF THE ENVIRONMENTAL FINANCE CENTER. THROUGHOUT HIS CAREER, HE'S WORKED EXTENSIVELY WITH COMMUNITIES, LOCAL OFFICIALS AND WATERSHED ORGANIZATIONS IN THE CHESAPEAKE BAY WATERSHED AND MID-ATLANTIC ON A BROAD VARIETY OF ENVIRONMENTAL FINANCE ISSUES. DAN'S AREAS OF EXPERTISE INCLUDE FINANCING AND ENVIRONMENTAL POLICY AS IT RELATES TO STORM WATER PROTECTION, LOW IMPACT DEVELOPMENT AND GREEN INFRASTRUCTURE. HE HAS WRITTEN SEVERAL PAPERS AND IMPORTANT EMERGING ISSUES INCLUDING FINANCING, LAND PRESERVATION, THE ROLE OF FINANCING INFRASTRUCTURE, AND LOW IMPACT TECHNIQUES ON URBAN WET WEATHER MANAGEMENT. NOW THAT I'VE INTRODUCED OUR SPEAKERS. LET'S GET STARTED. TIM, TAKE IT AWAY.
THANK YOU, ANN. THIS IS TIM JONES FROM THE EPA'S OCEAN AND WETLANDS WATER SHEDS. I WANT TO WELCOME YOU TO THE WEBCAST WHICH I HEARD IS SOLD OUT. SO EVERYBODY IS INTERESTED IN THIS TOPIC OR TIRED OF WRITING GRANTS. WE'LL GO TO SLIDE 2 NOW, AND THIS IS JUST AN OVERVIEW SLIDE, SORT OF WHAT INTRODUCING THE TOPIC. DAN WILL BE TALKING ABOUT SOURCES OF FUNDING, INSTRUMENTS AND INSTITUTIONS RELATED TO WATERSHED FINANCE THAT CAN HELP YOU DO THINGS. ONE IS TO BUILD YOUR ORGANIZATION INTO A MORE SUSTAINABLE ONE AND IMPLEMENT ON THE GROUND PROJECTS. SO WHETHER YOU'RE A NONPROFIT, A CONSULTANT OR GOVERNMENT AGENCY, I THINK YOU'LL LEARN A LOT ABOUT WATERSHED FINANCE IN THIS WEBCAST. AND ALSO HOPEFULLY SEE THAT WE ALL HAVE A ROLE TO PLAY IN THIS ENTERPRISE. SO TURNING TO SLIDE 3 NOW, WHY ARE WE INTERESTED IN WATERSHED FINANCING? WELL, IF YOU LOOK AROUND, WHILE WE MADE SOME PROGRESS IN CLEANING UP WATER BODIES AROUND THE COUNTRY, WE STILL HAVE A LONG WAY TO GO. AND AS ANN MENTIONED EARLIER, THERE JUST AREN'T ENOUGH GRANTS TO PAY FOR ALL THE SOLUTIONS THAT WE NEED. THE GAP IN FUNDING IS APPROXIMATELY $600 BILLION OVER THE NEXT 10 TO 15 YEARS JUST IN TERMS OF THE WASTEWATER AND DRINKING WATER SYSTEMS WE HAVE IN THE COUNTRY. SO, INDEED, WE'RE AT A CROSSROADS. SO TURNING TO SLIDE 4, JUST BASICALLY AN OVERVIEW KIND OF A ROADMAP TO TODAY'S WEBCAST, AS I MENTIONED, WE'LL BE TALKING ABOUT SOURCES OF FUNDING, THE INSTRUMENTS AND THE INSTITUTIONS RELATED TO FINANCE, WATER HEAD FINANCE AND SECONDLY, LOOKING AT THE PROCESS. HOW TO ASSESS YOUR SOURCES,INSTITUTIONAL CAPACITY AND HOW TO IMPLEMENT STRATEGIES. THIRD, WE'LL LOOK AT WHAT ARE SOME OF THE KEY ELEMENTS, WHAT ARE SOME OF THE INGREDIENTS YOU NEED TO CREATE AND IMPLEMENT SOME OF THESE WATERSHED STRATEGIES, AND WE'LL BE FOCUSING ON TWO CASE LAWS IN WEST VIRGINIA AND MARYLAND VERSUS A NONTRUST AND THE STRATEGIES THEY'VE REVIEWED TO FINANCE LANDS PROTECTION THERE. AND MONTGOMERY COUNTY, MARYLAND AND HOW THEY HAVE DEVELOPED AND IMPLEMENTED A SUCCESSFUL STORM WATER UTILITIES THEY'VE IMPLEMENTED TODAY. I'M HAPPY THAT YOU'RE ALL ONBOARD AND LISTENING TODAY AND THAT IS TO THINK CREATIVELY ABOUT FINANCING MECHANISMS. AS ANN MENTIONED GRANTS ARE ONE APPROACH. IT'S ONE PART OF THE PUZZLE. BUT REALLY WE HAVE TO GO BEYOND THEM. AND IT'S GOING TO TAKE, YOU KNOW, AN OPEN MIND, REALLY, TO CONSIDER SOME OF THESE POSSIBILITIES THAT DAN WILL BE DISCUSSING IN A MOMENT. AND THEN SECONDLY, HOPEFULLY YOU'LL TAKE SOME OF THESE IDEAS BACK TO WHEREVER YOU ARE AND TRY SOME OF THEM OUT AND, OF COURSE, EPA IS ANXIOUS TO HEAR IF YOU DO TRY SOME OF THESE OUT.
This is Dan. I'd first like to thank Ann for the promotion. I actually manage wri's water quality program and am happy to report directly to the director of the people and ecosystems program so keep me from getting in trouble and not taking over somebody's position. Let's jump to slide No. 7. I think the best place to start is by defining what financing is, and obviously the focus of today's discussion is water sheds. But there are a few concepts and terms that I think are going to be important as we move through the presentation. The most important thing is financing is a process. And it's usually a more intensive process than most people realize. But primarily what we're talking about is acquiring, allocating and investing money or fiscal resources.
We'll talk about revenue and capital and instruments but really what we're talking about is the management of money and applying that money in the most efficient and effective way possible. The goal of financing is always the same. It is to maximize return or maximize the value of investment. It does not matter what's being financed. Whether it's public or private, small or large. The goal is always the same. And it's an important concept because what financing is not is why we do anything. Again, it's how we get there, when we start applying the process, but it is not why we do anything. So now we're moving on to slide No. 8. Why finance? You've already heard two people and I'm going to make it three tell you that there aren't enough grants so I think we've established that point. And what that really means is that financing instead of funding provides a long-term solution to what you're trying to accomplish. And it focuses primarily on efficiency. Efficiency is a word that gets a lot of people uncomfortable because they fear that we're talking about cost-effectiveness over actual on the ground results or things that are important in our community. That's not what we're reaferg to here. We're assuming the protecting the watershed is important. What we're going to do it in the most cost-effective way possible. That's the meaning of efficiency that we're going to focus on today. And what we really are saying then, going back to our primary goal, we're talking about maximizing the community's return on investment. Slide No. 9, why finance? It's a community process. Almost by definition, when you start talking about acquiring and allocating people's money, they're going to get themselves engageed at some point or another and that's an extremely important part of the process. And so moving -- when you move beyond funding and start talking about financing, you by definition incorporate all the institutions, stakeholders and organizations that are going to be necessary. And effective financing as we're going to talk about later in the presentation, actually mirrors the resource itself. So water sheds are a really effective way of looking at this issue because water sheds by definition are very complex and, therefore, the solutions to paying for and financing water shed protection and restoration are also very complex so the financing complex provides a really good framework or platform for looking at the restoration efforts itself. So next slide. Finally, financing is literally how we get things done. It is -- it's basically in many ways the foundation of a lot of our environmental and natural resource protection efforts. So again it, provides a really good and effective way of talking about implementation and accomplishing our watershed goals. Slide No. 11, we need to go through a few core parts of the financing process. And these will work their way into the remainder of the presentation. And they're three that we want to focus on, and it probably goes without saying that we're kind of taking a very high level financing 101 approach to this presentation and each of these issues could be a full semester of a college course obviously, and we're -- and there are many other financing components that go into very complex financing processes but all of them in one way or the other are distilled down to these three things. The first is revenue sources. This is going to make itself clear and the instruments is the next step to the resources and finally the institutions or the organizations that are necessary to implement the financing process. Slide No. 12, so we start with sources, and really financing is money. In one way or the other we'll talk about there, financing assumes that there's some type of revenue source or resource, and basically this is really the most, in my opinion, the most important first step or first consideration when we'll talking about watershed financing because we're ultimately talking about the payer of the cost. Quite honestly, ultimately the source of any financing effort is us, it's the citizens, taxpayers, ratepayers, as people we are the source so consider that next time you're participating or evaluating a public debate on how we should pay for something. And when we start talking about who's responsibility it is to pay, ultimately we are the ones that pay. Moving on to slide No. 13, revenue sources for watershed financing specifically are often very diverse and there are a number of things that you need to look at to determine what revenue sources are most appropriate. The efficiency that's involved with the source, is the source efficient itself and what we have seen often in watershed and natural resource protection we have a tendency as a community to go out for the amount of money that we think is politically possible opalatable and it can often do more harm than good. Is the revenue source equitable, in other words, who is paying, and here you start getting into issues we don't have time to play should the polluter pay or the benefiter pay, all of those things have to be determined and finally community and political will. This is really where most of the political battles are fought over water shed financing, who is going to pay, where will the revenue source come from and in my home state of Maryland it's an issue on top of everybody's minds right now how we're going to pay for watershed financing. Slide No. 14, instruments is the second component that we need to talk about. And a lot of people get financing source and financing instrument confused. A financing source, and I apologize, I miss the bullet point on the last slide but we can talk about that now. We're talking about taxes, fees, tolls, that's the source. That's the source of the money. Again ultimately we're all the source of those revenues. But the source for the financing process are those things. Taxes, fees, tolls, those types of things. The instruments connect that source to the cost associatedwith you're trying to accomplish. The goal is the same maximize and return on the investment and the right instruments actually help us achieve that goal that is the purpose of the financing instruments themselves. Slide No. 15, just like with financing sources, how you determine which instrument is most appropriate is determined by things like efficiency. Effectiveness, organizational structure, how big the project is, what scale it is. Are we talking about a big water, financing the restoration of the Chesapeake watershed or financing the protection of a local watershed, the types of instruments you will use to achieve your goal will be different in those two cases.
When we start talking about some of these different financing instruments, you'll see the capacity plays a very significant role in determining which one is most appropriate.
Going to slide No. 16 we're going to talk about three specific financing instruments. And again, just like sources, there are many of them, and there are many others that we can talk about but there are three that are critically important that help kind of set the framework and part of our discussion, especially when we start talking about the process and the case studies. The first is debt. And from a public sector point of view, this is probably the most common and the most important financing instrument. And debt is quite simply an obligation to pay or to do something and when we're talking about the obligation to pay, we're talking about would things, loans and bonds. And they really are pretty much the same thing. It's just the process for paying the money back as little bit different. Debt is important because debt is basically the essence of financing. It allows for revenue streams to turn into large sums of money in the short-term and that money can be used to solve critical problems immediately, and that's why debt is so important. You can just look at your own situation of buying a house. If you had to pay the entire cost of the house, which we used to have to do a few generations again, most of us would not be able to afford to live in a home. It's the ability to get debt that allows us to accomplish financing goals. It's really -- debt is really important with watershed protection and restoration and natural resource protection and restoration because time is money and time is really, really important. And so using debt allows us to implement things right now or today and service that debt or pay it back over time. And that makes a lot of people uncomfortable, especially fiscal, people who have a tendency to be fiscally conservative but from a natural resource point of view, that part of the process is critically important. Acting today is often ecologically it can save a lot of money like inflation and the time value of cost will.
Slide No. 17, grants, again we've -- there's been three of us who have told us there are not enough grants. But grants will always be a very important of the finance process when we're talking about watershed protection especially. Grant funding has served as a foundation for watershed protection and natural resource protection for years. And it will probably continue to be that way. Grant funding is an excellent way to seed programs and basically, it's kind of like the equivalent of venture capital here. When you have a project or a process that is innovative and in some ways maybe a little bit risky, it's often difficult to leverage other finance resources but grant is a good way to get projects seeded and off the ground. There are two forms of grant, the first are government grants and like 319 grants, those are just kind of one off, apply for a grant type programs. But government grants are much bigger in certain watershed areas, specifically looking atsubsidies, so if you look at agricultural subsidies, they can be very long-term and the foundation of water quality protection programs if used the right way. However, that aside, you know, there are again some of these subsidy programs that are long term. For the most part, grants are not long-term solutions, they are short-term opportunities to move things forward.
Slide No. 18, market-based programs is a their component that we want to look at. Just like everything else, again, we can have an entire day talking about each of these issues but the reason it's important to talk about them now is one of the key components or the instruments of financing is because not all of financing happens within government or the public sector. A lot of it happens, most of it happens in our everyday lives and we've referred to that as the marketplace. And so some examples that youmight be familiar with when we talk about market-based programs, fiscal incentives which is using public money to actually create an incentive to do something else or this can be reducing tax or fee obligations, or it can be -- well, that's the primary one. It's the opposite basically of tax and you provide a tax break. Purchasing and transferring development rights. One of the case studies we're going to look at is a land trust that uses land protection which is a very effective watershed and water quality protection tool. Even the professionals of donating an easement is a financing too many or a market-based finance tool and voluntary programs. We're going to talk about a couple areas where voluntary financing efforts have been very helpful. That is primarily's market-based approach to watershed protection. We're starting to see more and more of it.
Slide No. 19, and the third component that we need to look at is institutions. This is probably the most overlookedded component of the three or part of the financing process and its in some ways the most critical part of the process because again we go back to our ultimate goal, that is efficiency and reduce costs in the right institutional capacity and structure creates efficiency and reduces cost and allows the financing process to actually happen. For example, we're going to talk about a community that's implemented a storm water utility. I would argue that one of the most important innovations that has resulted from storm water financing has the development of institutional capacity in local communities to implement and to finance water quality programs and watershed protection. Clearly the revenue component, clearly using that revenue through different financing instruments is important but having a place where this is done and done efficiently has been very important and no more important than in Montgomery County, Maryland that we'll talk about at the end of this presentation. So institutions are really, really important.
Slide No. 20, institutions come in all shapes and sizes all across the political and community spectrum. Local, state and federal governments obviously play a very important role in watershed and natural resource financing, you also have utilities and authorities, by definition, they're independent institutions that often can be function outside traditional local and state government. Nonprofits and n GO's. When we go back to the issues of grants, when we say grants for years have served as a foundation, the organizations that were getting the grants why ngo's and watershed organizations. That'll continue to be the case. The first case study we're going to look at is a land trust. A nonprofit that's very, very critical in that community's watershed protection efforts. So it does not have to be the public sector that serves as an inner instructional capacity.
For profit corporations and businesses, they are clearly part of the financing solution and quite honestly, if you're doing the financing and if you've utilizing private revenue, it will be the private sector that serves the institutional capacity. And we come back to who's the ultimate institution? it's us and often we play a direct institution role especially when we start talking about philanthropic giving. So slide No. 21 -- questions?
thank you, Dan. We will ape pause briefly here to take some questions. First let's begin with those submitted online. Just a reminder, you can submit questions at any time by clicking on the question mark button at the top of the page. Our first question is for Tim. You mentioned that there was a funding gap and I didn't quite catch that. Six span, is this the gap between the funding needs and the funding resources or the grant funding resources? This question is tr Mary and Helen in Montana.
Hello, Mary. This is Tim. And actually the gap is over a little bit over $600 billion. Over the next 10 to 15 years for wastewater and drinking water infrastructure.
Thanks, Tim. Now we have some questions for Dan. We had a question from James in Tucson, Arizona. And he's asking what role can universities play. I'm especially interested in the specific roles for faculty, staff, administration and, most importantly, the students?
Wow! Well, I guess obviously the primary role for a university or an academic institution is to inform. This actual presentation is sponsored by the environmental finance center which is the University of Maryland. And that is the role of the environmental finance center is to inform on these issues. Looking at specifically the process, other than financing and dealing with watershed or water quality issues that are directly related to that institution, I'm not sure that academic institutions get directly engaged in the process. But I suppose that's possible. And I guess the final answer would be research is critically important. You know, obviously there's a lot we need to know about the water sheds themselves and the physical dynamics of watersheds but we don't know everything there is to know about what it's going to take to allocate and invest resources in the most appropriate way. So I guess the final part, the main thing is do what you do as a research institution, academic institution, so --
Thanks, Dan. We had another online question from Jennifer in Maryland. She asked if you could please clarify the difference between sources and instruments.
Yeah. And we need to make sure that's clear before we move on. Source is the money itself. So sources are taxes in many different forms, fees. For example, if you are -- if your home is connected to a public sewer system, your sewer bill as source of revenue. Tolls, when you drive through a tunnel or over a bridge, that is a source of revenue. The instrument is what happens with that money or how that money is actually used to hit the ground. That's how the money is invested. So let's take the example of the source which is a tax. An instrument that you would use is to collect the tax and then issue debt through, say, a bond at the public level. The debt is then used to pay for whatever it is you're trying to accomplish. The revenue source or the taxes actually services the debt or pays the money back. So revenue or money itself is the source. The tool or the instrument was debt which was actually taking that money and turning into something to actually make it hit the ground. Hopefully that clarified that and as Ann said at the beginning, if we're not making that clear, I should say, I'm not making that clear, let me know when we're done. Send me an e-mail and I'll try to clarify it either.
Thanks, Dan. And Tim, if anyone would like to ask a question over the phone, please unmute yourself and give us your name and organization before your questions.
This is Susan in Honolulu. And the question is a clarification on slide 15, and it has to do with scale. Are you saying that the project size, that is, whether it's local as opposed to regional, influences if not determines the right financing component fit?
The answer is yes, and then there's an additional point. Scale can refer to watershed size or scale can be geographic. So, for example, where we are speaking to you from is within the Chesapeake bay watershed. It is an interstate watershed so the types of financing tools and instruments are affected by the fact that we have multiple jurisdictions in states. So there are certain things we can and cannot do because of that. So having it within a single jurisdiction and community influences the type of instruments you can have. But scale refers to the size of the financing effort, if it's a lot of money or a little bit of money. So if it's a $2 million upgrade to a wastewater treatment plant, then the appropriate tool or instrument would be again debt or some other form of debt or bond, something like that. If it is a $2,000 community tree planting exercise, you probably don't need to issue a bond to get the revenue to do that. It can be raised in other places. So, again, scale is geographic, but scale is also a fiscal issue.
Any other questions?
Hi, that's lain live from EPA here region 8. I just had a question. In your experience, how common have you found maybe opportunities where utilities and watershed groups have collaborated and worked together on south protection plan or watershed protection effort? And if not what do you think are the key barriers that would need to be overcome to make that kind of collaborative effort more commonplace?
I'm not sure who you were asking the question to, Tim.
Either one, whoever may have that experience or knowledge.
I think Tim does so --
Well, there are examples of environmental organizations such as our national he is estuaries. That builds support for user fees. That is a primary one. There's also outreach and education that can be done, for example, on water conservation, water efficiency, that can help utilities reduce their costs and focus on other priorities. And so similarly, if an environmental group is helping out with green infrastructure, things that would reduce storm water runoff into the utility and there by reduce the burden on the storm -- on the wastewater treatment plant, the utility, that would be a good partnership to work with. And I'm sure there are more, you know, -- here's Dan for more.
I'll give you two places that you may want to look into. The first one that everyone talks about is New York City and their source water protection effort which relied on a partnership with local community and watershed groups in the upper part of the watershed. A lot has been written and researched on that particular case study. And then another one is Philadelphia. And the response to their source water assessment, it is not -- they have not had the financing component like New York City has had but it has been a very good collaboration among the utility and a lot of community groups that participated in that partnership. That specifically referred to as the Schuylkill river and a lot of work has been done there.
Thank you, Dan and Tim. I think at this time we're going to move on to our next session so back to you, Dan, with the presentation and moving on to slide 22.
Now we're going to -- we're going to talk about the process of financing itself and actually we'll move on and go ahead and straight to slide 23. There are four parts of the process that we're going to talk about. And as we tried to show with this graph, this is not a linear process. But we have to start somewhere so where we're going for start is with assessing, attracting and leveraging capital and that's on slide 24 is where we're going to start the discussion. Actually let's go to slide 25. I've introduced a new term here and essentially I've replaced capital or revenue with capital. When I talked about market-based programs, that was essentially this transition. Capital is a broader term, and it really doesn't matter which one we use right now but what we're referring to when we say capital, again we're referring to fiscal resources but typically we start to expand the source of that capital, the source of that revenue so it's just to kind of expose you to different terms right now but really we're going to use them interchangely. The key poijts to attract and leverage capital, this is the part where we get the money. That's what we're referring to here. And really this is a capacity exercise. So the first thing you have to look at, you have a watershed protection project that you're trying to do. Let's say you have a stream revitalization or habitat project. The first thing you got to know do you have the resources as a community, not necessarily local government but as a community itself to solve this problem or to financing this problem. So you're looking first what you have. Then you have to evaluate and recommend new revenue sources and capital and revenue approaches. Finally, you need to get everybody engaged in the process. And you're going to see me throw this in in many different places and the bottom line it's got to be a community process and most successful projects that we have seen as we'll talk about later has been one that have included a broad number of stakeholder groups and people. So when you're assessing, attracting and leveraging capital, you've got to have everybody engaged.
Slide No. 26, key issues to consider, do you have sufficient levels of revenue like I said, to solve the problem. What types of revenue sources are most appropriate, public or private and are they associated legal barriers? This is in my opinion, the most politically-- this is where the real political dynamics come into the financing process. This is where you start to figure out who is going to pay. For example, again, I often am going to refer back where I live and where I do a lot of my work which is the Chesapeake watershed. There is a debate in the state of Maryland how to fund Chesapeake bay related programs and the question is who should pay, how should they pay, what should be the revenue source, how much do we have and how much more are we going to need? This is the most political part of the process. Even though the types of instruments that are going to be used are critically important, even though the right institutional capacity is going to be important, the issue on everybody's mind is where's the money going to come from, what's going to be the source of money? This is the big part of the process. So we're kind of again doing the financing 101 approach here. I don't mean to be little how big a part of the process is or how important it is. We have to talk about the others but this is where most of the political debate comes into play.
Slide No. 27, we're going to look at institutional capacity and that's one of the most forgotten about parts of the financing process often.
Slide 28, key point in the process, who has the financing obligation? Is it public or is it private? If it's public, again you have to go through the discussion. Is it a federal obligation? A state obligation? A local obligation? We're going to talk about a storm water financing program in Montgomery County, Maryland. Most people would agree that storm water by definition as local financing obligation. I said most people, not all people. And there are some discussions about where state and federal responsibilities come into play. But for the most part, storm water is considered to be a local government financing obligation. But there are also private obligations as it relates to storm water. And one of the things that a lot of communities are looking to is in the building and the development process, what responsibility do we have in paying for or financing in the marketplace. So, for example, in new development. We talked about no impact development tools. If we were to require that or have those Incorporated into the development process at the beginning, that's a private financing obligation because the cost associated with those are included in the product itself. Next is the capacity to leverage and allocate resources in place in the community. Let's go back to storm water. And storm water really became a critical financing issue I would argument after 1987 with the amendment to the clean water act. And one of the first things the communities did look at where they had a bigger obligation to finance or implement storm water program specifically to water quality. Many communities looked at their capacity to actually care of or to meet permanent goals and everything else that goes with storm water management. There was an institutional analysis. Do we have the programs or the resources in place in the right place in order to accomplish what we need to accomplish. What we found out, a lot of communities found out they had redundancies. So a lot of capacity issue was actually consolidation and it brought multiple programs or projects into a single place. And so capacity isn't always about getting bigger. Sometimes it's about getting more smaller and getting more efficient and more streamlined and again with storm water that was critically important.
Slide No. 29. If institutional capacity is lacking where do the breakdowns occur? The water shed in a rural part of the country, there was not the capacity at the public level today what needed to be done in terms of land protection so a public institution had to step in and fill that capacity issue. So where it's lacking, you have to figure out why it's lacking and what the most appropriate role is obviously for different institutions. If new institutions you go through the process of developing them. Sometimes as I said it's a matter of consolidation in the cacapan in the form of land struft.
Slide number 30, the next step is evaluating, adjustting the regulatory framework. This is a new concept kind of throwing at everybody here and I suppose we could have talked about regulation as a key component of financing but we didn't for several reasons, primarily because there are types of financing, specifically in the private sector that don't require a regulatory framework. But this is a critically important part of natural resource protection and restoration and a lot of the times it is what these programs are predicated on or sort of the primary framework. So why law and regulation? The primary reason in my opinion, is that laws and regulations help us as a community to correct failures in the marketplace. For those of you who have never taken an economic class, I encourage you to do so. And a concept that you will hear over and over is an externality. If your water shed is degraded or needs to be restored, then that means what we're doing as a community is not being accounted to. The cost for restoring is anstern nality and that's really important with financing, regulations also have a tendency to encourage us to be very innovative. As soon as we're told we have to do something, and it's going to cost money, we have this almost innate ability as a species to figure out how to do it cheaper and regulations are helpful in developing that type of efficiency and innovation. And we see it all over our communities. We see it in all kinds of issues, not just environmental. Anywhere where there's a regulatory compliance that's necessary, you will see innovation start to happen.
Slide No. 32, key questions and issues to consider. First are regulations even necessary. We don't look at where there may be more efficient or appropriate solutions to a problem. If that sternnality is happening are there more tools and more appropriate and cost-effective to implement other than regulations. If regulations are appropriate and are necessary, who has the regulatory responsibility? When I said the debate over where the sources of revenue should come from,i.e., the taxes fees, things like, that being the most politically hot, this is number two and it's right up there with that particular issue. Discussing who has regulatory responsibility is really, really delicate and again a very politically charged issue. But it's really important and you can probably anticipate what we're going to say is being the most -- the key barometer about where the regulatory responsibility lies is efficiency. Let's go back to storm water. There are those who would say that states have a financing or regulatory obligation when it comes to storm water. I would happen to agree because the broader, when you start looking at regulations, a broad scope can often create efficiency, equity tability and other things that create cost-effectiveness and efficiency but a state approach there is important. Land use control is often the most efficiently regulated at the local level. So the discussion about who has responsibility should be based on issues of efficiency. And will regulation shift cost and if so to whom. I should probably say regulation will shift cause. So, for example, if your community has identified, for example, if you have a wastewater treatment plant that's emitting too many nutrients into a watershed, oneway to regulate is to say you can't do that any more. If you regulate them, that means the community, local government doesn't have to pay for cleaning up that water body. However, the people in that community do have to pay and so this cost may shift around and the discussion or the figuring out where those costs shift to ultimately who will be the source of the financing again becomes critically important. So it may remove the direct costs from one institution or one level of government or part of the community to another but it has not removed the costs. They're still there. They're just the responsibility of somebody else.
Slide No. 33 -- this fourth part of the process is what most of us who do financing prefer to focus on because this is where it's actually fun. Here you have the revenue in place. You have the right regulatory framework. Your institutional capacity there. Now let's start spending money. That's usually the easier part of the process once you've gotten there.
Slide No. 34, key issues to consider, really what I'm talking about here and the reason why we added this part of the process in place is because this is where communities often get through those other parts of the process and then things breakdown because they're not looking at efficiency or cost-effectiveness when they implement programs. What we're saying totion focus on performance, not specifically on programs. A lot of work that I do is related to water quality which is obviously just a component of watershed protection but often a very critical component of watershed protection. We have a tendency and this is not unique to any community or watershed in the country but we have a tendency to focus on programs and established programs as opposed to what specifically works the best as opposed to performance. What we're suggesting is if you focus on performance, you will reduce costs. Basically it's one dollar per whatever it is that you're trying to accomplish, that should be the metric that you're using for the most part. Invest in future success -- here aim kind of pitching particular issues that I think are important for the spending of the money. We often try not to spend too much time talking about how money should be spent but from an invest point of view, it's invest in information, research and monitoring. We had a question about what is a university's role in the financing process. This is where universities can play a real role. The more we know about the water sheds themselves, the more we know about the process and the tools and the resources that are going to be necessary to restore and protect water sheds, the less risk there is in the investment process and when risks go down, costs go down. So this is from a financing perspective. This is a critically important part of the process. So even a better understanding physically of water sheds, water quality, natural resource protection means that ultimately we can invest money in a more efficient and effective way. And so there's a real financing component to it. So the third one is invest in incentives. Try to find those tools or those things that create behavior change or create incentives for behavior change. Because ultimately what we're trying to do is change what we're doing as a community that's causing water sheds to be degraded or to not be protection protected so programs need to create the right incentives. We have to invest the programs that are a going to correct the problems in the long term. And coordinate with our programs and priorities. When we talk about the capapan watershed, one of the things the trust did was identify where multiple communities priorities are. Land protection and watershed protection, those are two did you ever very different things but the Corps was able to couple those two things together and were able to identify key projects and land that needed protection because they were looking at multiple community priorities and looking at ways to an achieve them. They did that very develop effective.
That's a summary of the financing process. It's not linear. I would say that most communities do start by looking at where is the money going to come from? Unfortunately that's often where they stop. But all of these kind of have to work in concert with each other. All of them are critically important. And I think now we'll take some more questions.
thanks, Dan. We will now pause for a few questions. Let's begin with those submitted online. As just a reminder, you can submit questions online at any time by clicking on the question mark button at the top of the panel. First we have a yes from Joe in Jefferson city, Missouri. And he asked Dan, do you include potential in-kind services provided by volunteer organizations in a calculation of capital resources?
It would not be -- labor is not a capital resource. The answer -- well, in short the answer is yes. If you're specifically -- if you're a community organization and you have free labor, that is reduction in cost. And Seau you often, especially if you're talking about grant programs, you have to account for that, and you have to show that, and that actually adds to the bottom line or to be technical about it, subtracts from the bottom line which is a good thing. By the way, I want to go all the way back to the very beginning. And you'll understand why I'm going to do that with this question in a second. Genl Gwen, goal of financing is to maximize value. In the private sector, in the private sector means more money by maximizing value. In the public sector, really not supposed to do that. That has a tendency to get public officials in trouble. In the public sector, maximizing return almost always means reducing costs. So if part of your cost reduction is voluntary labor, then it's a very good tool. It is a financing tool, and I would imagine especially with a lot of community-based programs is a real important tool for a lot of reasons other than cost reduction. We said getting community involved. That's a good way to do and then you can hit them up for tax.
Thanks, Dan. Another question we have is from Carolyn in Hawaii. We currently have a 319 project. And she asks if you have any ideas on how to generate funding in a community with a total population of about 165,000 people and with 41% of them living below poverty.
That sounds like a pretty complex problem, and I might need to actually come out there and help you figure out how to solve it. I have to be honest with you, I would encourage you to send me an e-mail. I think that your answer is complex enough that it would take a lot of time to answer appropriately in a way that would provide you with any utility. So if you could send me an e-mail, I'd be happy to have an exchange of e-mails with you or arrange for a time to talk. I don't mean to push you off but I think that would be more effective.
Thank you.
Another question we have is from rocky in D.C. and she asks is there an adequate process or approach for determining how to allocate revenue for various watershed restoration efforts such as applying wastewater fees for agriculture?
Well, the process for prioritizing and determining what should be financed is going to be dependent on the watershed itself. And the processes unique for the watershed itself. For example, the capanan, they went through a process to rest store, if you're talking about a water quality project, clearly so, for example, if you have annuity if I indication problem in your watershed, the areas that you're going to focus are those that you get the greatest return. The one that has the lowest cost would be the one that you would go.
I do financing, I look at things from the term of efficiency. One of the things that we assumed in this process by the way, in this discussion is that there there are watershed protection plans in place. But we could probably add another bubble to the process and say having an understanding of what you are ale trying to finance is clearly very important. But -- and it's important for several reasons. One is that often communities go through the watershed planning process without an understanding of what their capacity is going to be to finance and we would recommend that financing work its way into the process at the very beginning. So I don't mean to punt the issue. I'm just suggesting it's going to depend on the watershed itself and where you see the priorities in your watershed protection strategy.
Thanks, Dan. We have a question also online from Elliott in Richland county in South Carolina. And he asks what suggestions do you have for engaging multiple municipalities both large and small around a watershed issue that affects them all? How do you do deal with a watershed that's got a lot of municipalities, how do you get them all together?
Hi, this is Tim. I think one way to get them all engaged is to try to focus on a problem that would -- is at the local level. And that they could all see a benefit from. I think that that would be one way to try to get people to focus together on a common or joining together and working together. Dan, if you want to --
Financing is often very difficult to do in multiple jurisdictions though we should say also multiple institutions. Watershed or water quality financing often happens outside of government or traditional government framework. So, for example, large utilities often cross over different jurisdictions so if you live in a community that, for example, has the ability to have authorities or utilities that cross over jurisdictional lines, that is one opportunity as it relates to financing. But it is often very difficult, there are certain tools and instruments that cannot be used across different jurisdictions. So perhaps the most important thing is what Tim just said which is some type of communication or understanding of where there are common problems and opportunities for solving those problems. And even though the process, the financing process itself might be implemented individually or within specific communities, coordinating that process can be very important. Again I'll come back to where we are, the Chesapeake bay watershed. The restoration in the Chesapeake bay watershed has been predicated on that type of corpse and coordination on not just different states but local governments.
If anyone would like to ask a question over the phone, unmute yourself and give us your name and organization before you ask your question. Any questions?
Yes, hello. This is Brad in region 6. I have a question.
Go ahead.
I was wondering if there is a higher success rate for obtaining private financing if you have a watershed being developed? Looks like a bank would require of new company that is seeking financing, they would have to have an investment plan. What kind of level of detail too would they be looking for in a watershed plan to attain that private financing? I'll hang up and listen.
Well, the -- your question is infinitely more complex by inserting the word private when you start talking about money or private revenue or private investment. Private investors are going to be looking for a fiscal return on their money. So your watershed protection plan, if you're talking about acquiring private revenue private resources dollars is going to have to provide some opportunity for those investors to make a return on their money. And they have different tools and metrics that they're going to use to gauge what that opportunity is. That said, if you're looking at the innovative ways for attracting capital, the most important thing you can have is a plan and an understanding of the resource itself and where you have identified the priorities within your watershed. And then a specific understanding of the costs associated with what you're trying to accomplish. Now this doesn't mean you have to get down to, you know, to every dollar. That level of detail, but you have to have a real understanding of scale and exactly of what's going to be accomplished. You also need to be able to show that you have the communities engaged and ready to participate. In other words, you have the opportunity for success. That's going to be critically important. When we talk about the cakapa n watershed, they were able to attract capital and revenue because they had the community in place, and we're looking at land protection. They had landowners lining up to actually participate in easement programs and that sent a strong signal to the funders that they had an opportunity to be successful. Again the issue of private capital or private revenue in investment implies a fiscal return, and so that is a bit more complex. But the bottom line there is that they're going to see an opportunity for getting a return on that money.
Thanks, Dan. I just add that some of the he is estuaries plans and with the buy in of all the sectors in the community and, as a result of that, buy-in people were willing to come to the table with their resources because they were part of building that plan and that builds a trust and contribute that you need in order to convince people that what you'll do with your resources will be well spent and also that you'll get some credit for your contribution. So I think it's like both the plan, a long-range plan with a lot of involvement and then long-range lifespan of the organization. So you can build that trust and credibility over time.
Thank you, Tim and Dan.
We're also hearing from another person in Kansas who is saying they appreciated the question from Hawaii about funding in an area with a large amount of population living at or below the poverty level. They say this is also a problem in Kansas as well as in many other places and one that they would like to hear the answer to at some point.
Yeah, I think that means that I'm not going to be allowed to punt and say that you can send me an e-mail also. You know, one of the things that is inherent about financing environmental protection is that the tools that we use or propose to use are often regressive. And what we mean by that is they impact poorer communities relatively more than they impact wealthier communities. And that is a real problem that we face, not just in watershed protection but all across the environmental spectrum. I would also point out, however, that we have tools in place throughout our society and our community to provide subsidies to those communities that are needing them. So we know how to do this at the public level specifically. The bottom line is the entire community is going to have a -- will benefit from watershed protection, water quality protection. Land protection, the things that go into watershed protection and restoration. Therefore, you need to leverage the resources of the entire community. If you are trying to finance a project in a community that is disadvantaged economically, by definition the revenue is going to have to come from other places. And I know that I'm not getting real specific and I know a lot of you would like specific examples and we've seen them. For example, we've seen communities proposed that have a septic problem or an onsite system where new development in order to come in has to pay to upgrade or deal with a water quality problem in existing communities that don't have the resources themselves to pay for it. So you're basically saying if you want to build a new community here in this watershed, you're going to have to help us pay for some of the problems we have, especially in those communities that don't have the money. So there's innovative programs like that, it was the builder that recommended this program just to get the community in place in this example I'm talking about. So it's not often draconian in its implementation. There are also a lot of state and federal programs that are diagnose going to defray the cost. I sound like I'm punting herebut I would have to say that the issues are as unique as the communities, but there are techniques and processes that you can through with a lot of these issues. It's really hard to redistribute revenue and resources in an effective way.
Thanks, Dan. I would just add that there's a couple of programs that come to mind. One is the [ Indiscernible ] step program, I think it stands for small town environmental program and they have a strategy that they layout which involves smart engineering, use of volunteers, and community leaders to reduce the costs involved in environmental restoration first. And then to use local resourcesof your community to tackle some of the programs. So that's actually the main point I had. And we could try to add that as a resource when we put out the rebroadcast or have it on the website.
Okay. Thanks, Dan and Tim. These are complex questions. I'm going to now move on to the rest of the presentation. As we move on, please move to slide 37. I'd like to take just one moment here to tell you about our next Webcast. The watershed academy Webcast team will sponsor its 28th free seminar on November 28th. I don't know if we could get those -- the numbers to align like that very often. So remember November 28th. This Webcast will highlight smart growth issues. And if you're interested in that, please visit the watershed academy Webcast page at www.EPA.gov/water shedwebcast for more information. Now back to the Dan for the rest of the presentation and the examples that he's going to provide.
Okay. Let's go directly to slide 39. We're going to talk about two communities. And I got to tell you right now that the two questions about disenfranchised communities are now going to stick with me and I'm sure I'm going to answer that one again. So you guys tripped me up on that and I appreciate that.
Slide 39, we're looking at three characteristics of effective water shed financing that we've seen across the country. The community-based multiple stakeholder groups is the first successful one.
You ought to have them engaged. It'll make it a whole lot of easier if you're asking for people's money.
The capapin, they integrate multiple funding sources, multiple institutions. They have tremendous leadership that is relentless in identifying kind of a Patchwork approach to their financing process and it's very, very effective. Water sheds are incorporated a lot of different things in the community and the financing should also. So, you know, they kind of incorporate in multiple landowners, multiple land uses, landscapes and all the things that go with that. So this doesn't sound very technical or very finance-based but these are the three things that we've seen that are common to all the programs.
Slide No. 40, we're going to take a look at two case studies. It's no coincidence that they're located in the mid-Atlantic region. This is where I'm from and I do a lot of work. But my guess they're not unique and there are similar examples all across the country if not the world. The first is the cacapin and lost rivers land trust in West Virginia, and we're going to be looking at how they financed a very aggressive land protection strategy and then the second one is Montgomery County, Maryland and looking at their storm water management plan which is similar to others hundreds across the country but a specific example of how this program that is being financed all around the country.
Slide No. 41, we're going to look at both these case studies looking at the same criteria. The first was how they were able to attract, and I don't know if you're developing revenue sources is appropriate but attracting and leveraging and applying revenue sources. Second, looking at institutional capacity, understanding what were deficiencies and what was the most way to build on existing capacity. Third, the role of regulations. In one case study it was not as important as in the other. Storm water regulations have played a significant role. And final what were the investment strategies and how did the two communities put the money on the ground in the most efficient way possible.
The cacapin, West Virginia is not a wealthy state so this is directly for our participant in Hawaii. We're dealing with a community here that is rural, it does not have a very high per capita income. Yet, they were able to do some very amazing things with financing. And so hopefully this provides an example. Again I'm not exactly sure what you're dealing with but this is an example of one community that was able to deal with this issue or this dynamic very effective. The cacapin are lost rivers, they flow south to north. It reappears at catcapin, it's a tributary that flows into the river which is that blue stripe going. 625-square-mile watershed. It is located entirely in the state of West Virginia in Hampshire, Hardy and Morgan counties. It is actually one of the -- it is a very undisturbed, relatively undisturbed watershed in the Washington, D.C.-baltimore Maryland area, I say relatively undisturbed because we're in an urban area here. So if there's anyone calling from rural areas in the west, if you come here, you might not think it is pristine but for most of us here, it pretty much is. It has pressures even though it's relatively pristine. It is a mountainous state so much of the agriculture that happens in the state happens in river valleys so as a result of animal production, there are bacterial contamination problems in the river and it has been listed for that. It is also experiencing significant development pressures specifically from the Washington, D.C. and Baltimore areas. For example, after 9-11, you can imagine people in this area were a little bit concerned after that, and there was a spike in second home sales for people who were looking for an escape route in case the big one hit. And so very quickly over the last five or six years we've seen rapid development happen in parts of this watershed. And then the third major stressor was a new highway that crossed the watershed. That's that purple line that you're looking at there. It goes east to west and itbisects in 11 different ways. What highways bring is also going to have an impact and this was a real motivating factor for the land trust. Slide No. 44, the land trust was established in 1995. It was established by local landowners who were concerned about the watershed and the quality of life. Kind of the rural heritage and what this river and the watershed meant to their community. What you don't see is some of the statistics. The land trust had 500 acres under easement six years ago, they now have 900 acres under easement, another thousand that will be eased very quickly and 15 in the pipeline. i.e., those are landowners that have shown an interest and the land trust is looking for the resources to get that land permanently protected. So this is a very successful organization that's moving very, very quickly to try to deal with some of their problems. In 2002, this is where when we talked about you need -- we're assuming that you have a plan in place that you're trying to finance. This event, healing waters, cacapin means healing water in the nation tiff American language in that area. This is where they developed their plan. And they had resource experts from all across the country come in and work with them to identify those areas in the watershed from an ecological point of view and heritage point of view were most critical to protect. And they followed it up with financing plan to say how are we going to prioritize financially to find out how to protect and how we should follow up and they followed it up with another meeting to figure out how they were going to get this on the ground. This is important. This is a process. Financing is a process. It doesn't happen overnight especially something as complex as water sheds. And this group went through a very detailed structured process to figure out exactly what they needed to finance, what the costs associated with the problem was and what resources they had available and what their strategy bringing resources into the watershed was going to be.
Slide No. 45. The trust set a goal of raising $200,000 annually by 2010. That is a very aggressive fundraising goal. This is a land trust that has one paid staff person who wasn't even getting paid until a couple of years ago. Who worked primarily on a probable by project basis and it's financing identifying large properties that needed to be protected, finding the financing to get that property protected and so identifying annual revenue streams as very difficult thing to do. But it's critically important mght. When we started looking at things like debt and when we're dealing with land protection, that's often what we're talking about, having annual revenue streams is really, really important. But also from an organizational point of view, from those of you calling in from a nonprofit or a private sector institution, you know how important it is to have consistent revenue coming in just so you can do what it is that you do. I know a lot of you are calling from these types of institutions and this is a very difficult thing to do. And so they really need a structure for how they're going to do that. And one of the ways is to be more diverse in their type of funding. They have relied exclusively, especially for the support of the organization exclusively on grants and they realize they can't do that any longer. For one thing, the executive director who's really good at financing lands protection deals was spending her time writing grant proposals, and it was not a sustainable approach. If you were having finding certain grants over the last several years, they've been going into the watershed. She was really successful to get grant money to come in but she couldn't rely on that any longer. Consider a lot of cost reducing measure. This primarily was a very detailed gis-based evaluation of particular properties and understanding where the biggest bang for the buck was when it comes to land protection. For example, connecting state and federal protected lands, that was the most cost-effective approach. So creating hubs and corridors, they were able to actually reduce their total land protection needs to a few properties, certainly in the short time that would have the greatest impact on the watershed so it significantly reduced costs. Again, identifying sustainable revenue streams, easier said than done. Examining market-based opportunities. Actually I would argue that all land trusts are developed based on market based programs and opportunities. Easements, and isolate not sure if everybody is familiar with an easement the land owner gives away their right to do things on the land and it's codified in the deed and it's forever. That's market based. There's nothing requiring the land oarns to do that. Sometimes the easements are the result of regulation. So if your community is running a new water line, they might ease property that says they have right to come on here and maintain lines. But when we're talking about land protection, this is a market-based program. Sometimes landowners do this for fiscal reasons. I.e., they get tax breaks when you give away development rights, you get tax credits for. That but for the most part, this land trust has relied on voluntary ease.
and those are usually done for altruistic reasons. But it's a market-based tool. This is really important for this small land trust. They partnered with a larger land trusts that gave them the ability to monitor and to enforce and to back up what they were doing. Very, very important, if they weren't able to do that, they wouldn't have the capacity to do what they wanted from a financial capacity. The state's institutional capacity actually I would argue was increased almost as much as this organization capacity was increased by the state but that symbiotic relationship was very important.
And then the hedge funding approach to watershed protection. You're trying to remove spikes, quick gains and quick declines, that's what hedging does. And it's very important for this organization because this allows you to take a long-term vision of what you're trying to accomplish. So what this usually means is diversifying many different tools. Let's just assume even if you decide after this presentation you know what, we're still going to go out and hire a grant writer because we think that's the most important thing. Even diversifying your grant writing and your grant funding is a really good first step. So, you know, don't rely on just a 319 grant, try to look into some other places. Diversifying funding also allowed organizational stability. And so, you know, again, a land trust has to be-- by the way, land trusts are different than any other nonprofit in that by definition they have to be in existence in perpetuity. When a land is eased, it's eased forever and these land truferts need to be there. So having organizational stability is really important. By removing these peaks and valleys, quick gains and declines, another thing is you're able to ride out different dynamics and budgeting processes specifically at the government level, but you're able to ride some of these things out. You're thinking how am I supposed to do that? And I admit it's not easy to do but this is the direction that you should be going when you're looking at these issues, and we're explain how they were able to do that now on slide 47.
Another thing is cost reducing measures. Collaboration was number one. By far, this helped this organization reduce its cost. They partnered with a very large land trust that ironically was not nearly as effective at protecting land specifically in this watershed but had institutional capacity to back them up. That reduced the cost to the cacapin land trust significantly. I'm going to shorten it to the cacapin land trust. So the collaboration literally had a bottom line effect. This goes back to the person's question about volunteers being a revenue tool. This was a real revenue tool for this institution. Looking at regulation, this is something that -- this is a debate that goes on a lot in land trusts specifically. Should we be pushing local communities to get more aggressive on regulatory controls, specifically zoning, and you hear zoning does not protect lands but it does shift community priorities and lead to land use decisions that may be more sustainable and also a way for the organization to reduce its costs because it may not need to ease development rights because of the zoning or regulations are most appropriate. And finally leveraging community priorities. One of the really important things in this watershed is their Heritage and agriculture has been a strong, a core part of this community's heritage for generations. A lot of the organization's mission is focused on water quality but they were able to convince a lot of farmers to protect their land and then able to get particular best management practices related to water quality as part of the easement process. So they were able to couple two very important community priorities and ultimately reduce the cost. If you tried to approach both of those, for example, having one watershed organization focusing on water quality and the land trust focusing on land protection it would be more expensive.
Slide No. 48, identifying sustainable revenue streams. This is as unique as the organization and the watershed. And this watershed they have one of the most popular camps, youth camps in the country. And a lot of the young people that go to this camp are from families that have needs, financial needs and the organization is looking into going to those people to help protect this watershed. So who's the financing source? Very private. It's actually the individuals coming into the watershed and I don't know again going back to the question from Hawaii, what your community is like. But if there's opportunity to leverage revenue from people who are coming into your community to use the resources, that would be the top of my list of priorities and that's what this organization is looking to do. Monitoring and management opportunities, they're able to do certain things that might be the priority of other institutions and they're possibly able to get resources to help support their activities in these areas. Mitigation moneys, corridor h, that highway going across the watershed, whether or not the community agreed with the highway coming in, lots of people D. lots of people didn't, this organization saw an opportunity once a decision was made to build a highway. And they were able to use mitigation money from the state to protect thousands of acres of farmland and important resource areas in this watershed. So it was a major, major financing tool that they were able to take advantage of. A major donor campaign, I'm not going to spend too much time talking about this because everybody wants to have a major donor campaign. Easier said than done but they're trying to figure out how to do this, how to sell their watershed and their institution to those people with the resources and finally state and federal funds, I would not recommend making this, the foundation of your financing plan but it can be a very important part of it. And this organization like many others is going to do everything they can to leverage state and federal funds. It's very appropriate when you look at it in concert with all of these other things that they're looking at.
Slide No. 49, examining market-based programs. Development rights programs by definite anything are market-based. For the most part, they have voluntary but there's also going to lands owner that we'll pay you to give up your right to develop. A big step for a lot of land trusts but it can be effective. There are other communities that can transfer development rights and there are -- Montgomery County, Maryland. We're going to talk about their storm water program. They're held up as an example of transfer development rights program can work effectively and the county was able to protect about 35,000 square acres of protected land right in the center of the country, agriculture land, very, very effective program. And then tourism, the cacapin is a prus teen watershed. It's a popular canoeing and kayaking area until the river disappears but they're talking about how to use tourism to actually support land protection activities and the watershed and specifically their organization.
Let's look at the four criteria, revenue, clearly a plan for diversifying and I would argue they've been very diversified over the years especially when you look at in the gaition money that they've used. There's been a couple of land protection projects, one specifically that protected 4,000 acres of farmland and had five or six different financing resources and tools that were brought together in one place. Institutional capacity -- this is a critical issue for the community because this organization is serving -- is providing institutional capacity that it would in have otherwise. So from the community's perspective, this organization is critical. From the organization's perspective, its own capacity is also critical. Constant topic of discussion, critical need, and so the institutional issue goes both ways, both internally and externally. Regulatory framework, the organization is working with agencies to look at regulation but for the most part, they're regulatory approach is, for example, in mitigation money. That was a requirement you know state and federal law that the state mitigate the impact of that highway and they were able to take advantage of that. This organization for the most part has chosen not to get aggressive in pushing local regulation and land use protection from a regulatory perspective. That's a decision that it made. And so it's trying to work around that particular component of the financing process. Investment, they were looking at bang for the buck and that healing waters project and the process of identifying key protection areas reduced their cost. This organization will never be able to protect the entirewatershed. It's never gun to be able to ease every acre within this watershed so priority tiding reduced the cost of what they were trying to accomplish. So prioritization and lands president aggravation was a key issue.
We're going to talk now about a totally different issue, storm water protection and we're talking from a very rural issue and watershed priority and need, to a New York Stock Exchange Montgomerie county, Maryland. I'm not sure how well the colors are coming through but in the center of that map, about two third of the way up, you'll see a pink county called Montgomery County. It is a suburb of Washington, D.C. which is almost square looking jurisdiction just below it.
slide No. 53, it is had a a population of one million and growing. It is very affluent, very urban, I should say, however, clarify that like any community that is the size of Montgomery County, on average it's very of fluent but not everybody is and there are pockets in this community that are quite the opposite and they're Incorporated into the financing process too. So I will be the first to admit that having means as a community in general provides a lot of financing opportunity, but not everybody in the community has means. And we'll talk about that in a minute. And by definition, they have lots of urban storm water runoff. We'll talk a lot about the law that has impacted storm water but the community this size basically, they were one of the firsted that to implement storm water management planning, and they were one of the first communities of this size the first to put the financing tools in place.
Slide No. 54. Storm water utilities. I just want to have a little bit of primer on this before we move forward. When I refer to a utility, I'm talking about an enterprise that was developed specifically to support urban storm water programs. We're talking about the storm water equivalent of a wastewater or a drinking water utility and there are many of these across the country, about 500 or so as you see on the last bullet point that exists across the United States and it's growing all the time. Primarily they resulted from the passage of the 1987 water quality act which were the amendments to the clean water act but not exclusively. There have been storm water utilities in existence sense the '70s so otherwise there are other things motivating communities to finance storm water management. Flooding was often the primary reason why they did this but often other things like water quality or habitat protection. We saw a few communities and statessed that storm water utilities but for the most part, the relevant testify, I would say exponential growth has been the result of the amendments to the clean water act in 1987 and basically what that meant was storm water was not going to be managed as a point source. I.e., it was permitted so these communities had to get a permit for managing storm water. And that was going to require money.
Slide No. 55, Montgomery County had multiple program goals. The first was they were permitted and the permitting program that's under the npeds permitting program. But it's called an MS 4, municipally separate sewer storm systems. And so don't get all hung up on the acronyms here but basically there were two types of communities, Phase I and Phase II. And Phase I just meant you're big, 500,000 people or more. Montgomery County is a Phase I, they now had a permit obligation and they figured out how to financing that obligations. And they wanted to create efficiencies and reduce redundancies in their own storm water programs. So in some ways this goes beyond regulatory pressure and this goes Goetz to the need and the desire to spend but resources more efficiently. And finally was to establish and maintain fiscal capacity. They looked a the operation maintenance of their storm water program and they wanted to have a codified dedicated that you sustainable financing or revenue stream that would support their program. That is not unique to Montgomery County, Maryland and if you did a case on just about all the storm water programs across the country, these three things are going to show up in there some place.
Slide No. 56, when you have a storm utility, two things happen. There's a responsibilities of storm water management that's coming into a single place or enterprise but you also have the opportunity to raise revenue through fees and that's what Montgomery County was doing. So everybody in Montgomery County pays a storm water fee, it's technically a tax because it's located and collected off the tax bills in the county, but we're going to call it a feejust because everybody else does. Everybody in the county pays for, nobody is exempt. It is a fee because if you're a church you have to pay for it even those institutions that are not taxed pay this fee. If it shows up on tax bills, they have other ways of getting you. But everybody has to pay it. And this is why when we go back to talking about what revenue sources are most appropriate. This community realized that even tax exempt institutions had an obligation to pay for those problems so a fee-based system made more sense than a tax-based system and there are many communities that made the opposite decision. Revenue is collected as part of the tax bill.
Slide No. 57, the rate is based on an equivalent dwelling unit, it's average, it's the average size. So this was the edu means here's the average that we're going to charge across the county and it's based on the average size of a home. And the average size of a home in Montgomery County is 2400 square feet. You can decide if you think that's loot a a little or average. But in Montgomery County, it's 2400 square feet is the equivalents dwelling unit, and that means if you have a home that is bigger than that, you pay more. If you have a home that is smaller than that, you would pay a fraction of one edu. But it's based on that particular square footage. The rate is established annually and actually Montgomery County, the original fee was about $12 per year and it has gone up as the county council has looked at the need of the city, they have increased the program. The current rate is about $25 per edu so on average a household in Montgomery county, pays $25 per year. By the way, I should have added a slash per year after that edu, that is $25 per year. That is actually less than what we have seen nationally across the country, the average fee is about $45 per month. Quite honestly, that number is driven by political palatability or political will. It's not driven by the needs of the programs itself and what we're starting to see are storm water programs that are lacking resources.
They developed a new program for part of the agency within the department of the environment. But what they really did was reduce redundant programs and this we see all across communities that storm water -- the storm water management or the passage of the 1987 water quality act led to real efficiencies because you see in communities all the time, and, by the way, you see it in other places too, like habitat restoration, multiple programs or agencies are doing the same thing. Just for different reasons. So, for example, the parks department might be doing storm water management projects to protect natural resources when in parks and, at the same time, you could have the same type of thing going on with the highways or the road construction group and what they realized is all of that should be brought in one place. That reduced redundancies. It receipted a lot of efficient and finally this program focuses on operations and maintenance of the system. You need to remember that financing is as unique as the communities that's doing the financing. Montgomery County, Maryland decided that only the operations and maintenance needed to be paid for out of this fee that they collect. If they needed to pour concrete or do some type of capital infrastructure improvement, build something, they needed to have debt financing, that is done through the county's general fund. And by general fund we're referring to the primary tax revenue that comes in. They still financed the capital infrastructure through their general fund. That is the way that most storm water programs function. More than 85% of storm water programs financing capital infrastructure improvements through general funds or through some other fund other than the fee that they are collecting. The primary reason for doing this is because the political will issue we talked about. If you're only going to collect four or five dollars but your costs are 10 to $15 per household per month, that money has got to come from somewhere. I would argue that a lot of communities like Montgomery County made that decision because of efficiency and effectiveness. Every communities should have a right to determine that for themselves. They feel it was most effective doing it that way.
I can anticipate where questions are going to be coming from now.
Regulatory framework, storm water is now regulated and, as a result, we have permitting programs. I know that regulation is not the only reason why communities have decided to finance storm water but it sure has not hurt. And what we have seen since 1987 and really Suns the enforcement of Phase I and now Phase II of the ms 4 permitting process, all the sudden storm water utilities started to jump up or pop up. And so the regulatory framework was critically important for this particular watershed protection activity. One of the ream problems that we face with protecting and financing watershed protection is we don't have very many regulations in place to help us do it. And so we have to have some other ways for motivating people to do what needs to be done. Again Montgomery County, the Phase I community under the ms 4 permitting program and it's enforced by the state which means they've got to do it. They've got to get it done.
Slide No. 6 ty, the program pays for the maintenance of storm water facilities so their strategy is simple, inspection, construction, limited construction and reconstruction as long as it fits within their budget that they collect with their $25 per edu and then modifications to the system. Any large-scale infrastructure improvements are financed in another way. Financing tools, they don't really have any. Their financing tool is pay-as-you-go. And this is again not unique to this particular community. But they do not for this particular utility. Now it's important to say that the financing storm water management in general in Montgomery county uses a broad variety of financing tools because they're using debt financing and through the general fund program but for this particular utility, it's pay-as-you-go.
Slide 61, back to our four criteria, the revenue is sustainable. It's dedicated. I did not put sufficient in there, but it is sufficient based on the goals of the program and this particular enterprise that they put together and were trying to accomplish. I keep hitting this issue because I paid attention to the debate that went on with regard to this enterprise fun and there was a lot of concern by specifically environmental groups and there was a feel that they should collect the entire cost associated with storm water management. And that was a debate that happened back and forth. So you'll hear some people say that the revenue is not sufficient. I think it is a definition Al issue. I would argue that it is. They have the capacity to manage this problem within a single agency p regulatory framework, I'm background to say if the foundation of the process. But it's not exclusive. But I really feel like the 1987 law has been critical to getting storm water financing going and to dealing with this problem in a sustainable way. It's not been sufficient. A lot of communities are not taking the steps they need to take, but it's been a very important first step. This particular program again, their investment strategy focused on maintenance. When I say focused on maintenance, I'm not trying to be little this. We could do another entire other session on the issue of full cost pricing and appropriate financing. Tim mentioned the $600 billion infrastructure gap associated with wastewater and drinking water infrastructure. There is a primary reason to Y that happened. There are many different reasons but the primary reason why we have that gap is that wastewater and drinking water systems have not been focusing on the operations and maintenance of their system. And, as a result, the systems are decaying and they're falling apart and to fix them is going to require a lot of money. We have been paying attention to this problem and financing this problem through the years, we would not have a gap. So having a system like Montgomery County, Maryland, storm water system that's actually paying for the operations and maintenance of their system is a really important financing issue because it means that overall, their costs will be reduced because they're taking care of the problem now. It's a full cost pricing of the issue or what they're trying to accomplish. You know, there are few truth in financing, but one of them it is cheaper to protect than it is to restore and that goes for infrastructure also. It helps to pay to keep paying as you go, and make sure that you're maintaining things appropriately. So I think I got my point across on that one. Very important to the financing process.
Slide 62 -- financing, again, is the process for success. This is how we will get watersheds protected and restored. This is what will be required. I know there are a lot of other motivations in our community for protecting natural resources but for the parts of the process that are going to require us to actually deal with costs is the financing process that's going to allow us to do that in the most efficient way possible, and that means we'll actually be successful. If I haven't made the point yet, it requires everyone to participate. That's why it's appropriate for every institution and organization to be participating in this conversation because financing again is ultimately how we get things done and that requires everybody and we've seen two examples of where that is the case and how it is important that everybody get engaged in the process. And that's it.
We'll have some questions but click on the home button at the top of your screen. You'll be returned to the seminar's homepage which has thespeakers' homepage and phone number. I'd ask you to move to slide 65 and you'll see the links for additional resources. We'll try to add the website that Tim referred to to that links page. There's also a link for feedback. For those of you who are participating online, you can take a look at the left-hand side bar and there's a links button there as well as a feedback button. And for those of you participating by phone, please use the links that are provided. We're going to address our audience questions. Let's begin with those submitted online.
Tim, there's one question now for you first. Darlene from Asheville, North Carolina says that she would like to have information on the organization that you talked about in the last session. She was wondering if you could provide that?
Happy to, Darlene. It's called the small towns environment program and their website is www.r institute.org/step/step.htm, and just looking quickly at their brochure or the website, they do show that they've been able to save roughly 50 to 75% on costs for wastewater treatment. And drinking water systems by using some of their techniques of volunteer -- using volunteers smart tech engineering and utilizing spark plug folks in the community to make things happen. So I encourage you to check that organization out.
Thanks, Tim. We have a question now from Shara from Topeka, Kansas and she asks does the 2400 square foot refer to the footprint of the actual dwelling or the entire lot size?
I'm pretty sure it's the dwelling. But I'll clarify that for you. But that's the point of the edu is looking at the actual impact on the land, footprint on the land so I'm pretty sure it's the dwelling.
I think that's a safe bet. I live in Montgomery County, and I think that's correct. I do have $25 charge on my property tax bill. I can attest to that.
Dan, one other question for you from Valerie in Michigan. She asks what are some examples of market-based opportunities for watershed protection organizations other than land trusts?
Well, it will depend on which part of watershed protection that you're looking at. For example, water quality is a major issue in a lot of communities, major issue of concern, and so the market-based program that a lot of people are looking at is being an opportunity is trading. Water quality trading. So that's a big issue more than a watershed organization is going to want to take on. But that's an example of it. A lot of the market-based programs are going to require a regulatory approach and this is where watershed organizations can be very impactful by understanding where watershed regulations are critical and working with their elected official to put their watersheds in place. Let me give you an example. In the state of Maryland, the state has identified onsite accept ticks to be a major water quality concern and part of that strategy is to upgrade 4350 systems at an estimated cost of $3 billion. I would argue that a more efficient way of approaching this problem would be through some type of regulatory approach where the costs associated with managing wastewater from onsite systems is Incorporated into the market. I.e., you require functioning systems every time there is a transaction. Now that doesn't get to the water quality problem. You could get as aggressive as saying we will not allow traditional systems to be sold in our state any longer and some people have suggested that or it could be as simple as saying you have to in particular areas that are critical or critical to water quality, there you have to upgrade but you have to do it through the market process somehow. So those are the types of things that are going to be really important. Market-based tools again, what we're referring to is incorporating the entire cost into whatever it is we're doing in our community. For that reason, storm water programs are a market-based tool because we're saying the cost associated with this is going to be accounted for so it depends on what issue you're dealing with. In four of the different things we were looking can be a market-based tool that you can rely on.
Thanks, Dan. Just one example I thought of is tax incentives, tax credits forcep tick tank upgrades, that's I believe a Massachusetts state program that they've passed so a market-based mechanism in that it encourages people to do those upgrades and they get a benefit through their reduced taxes.
Thanks to both of you.
One last question online. We have a question about the cacapin watershed. The question, Dan, is the large high fecal coliform due to the manure agriculture and they're asking has there been a reduction in fecal levels after the acquisition program and are the ease.
specifically targeted at areas where there's high concentration of livestock?
A lot of the land trust work has not focused in the southern portion of the watershed as of yet though they have just met with the executive director recently and she indicated that they're now moving into that area. So the answer to your question has there been a direct connection between easement activity and introduction in the consistent Tam contamination, probably not. The pollution is from Turkey, poultry and a lot of cattle farming going on in the watershed. The second part to your question have they included water quality protection in the easements and the answer was yes. That's what I was referring to by coupling, emitted through the corridor a through the highway permit graduation funds was to protect farmland but require best management practices that were either going to improve or continue to improve water quality. So all of the things that go with best management practices that go with water quality practices and respect pierian, that's an additional land capacity for the land trust because they're monitoring traditional activity, have you cut down forest and built houses they're going to have a requirement to make sure that these best management practices stay in place so it's important to work out arrangements with state agencies and others to make sure that monitoring and enforcement was also taking place.
Okay. At this time if anyone would like to ask a question over the phone, please unmute yourself and give us your name and organization before your question.
I'm Betsy from Rhode Island dem.
Go ahead.
Okay. The question is in regard to the Montgomery County storm water utility, are therein send tiffs for homeowners to reduce impervious surface by using pavements like rain barrels and rain gardens. Is there some reduction in the fee or is that included at all?
Yeah, [ Indiscernible ] implementing particular best management practices, rain barrels are a big one, rain gardens are another one, reducing impervious surface is another. Homeowners are actually moving driveways with pavers, things like that. So there's a reduction in the fee. It creates an institutional issue for the communities that are doing. This you have to have the capacity to actually ensure that the best management practices are hitting the ground. This is not unique to Montgomery County. There are communities all across the country that are using the fee as an incentive to change behavior. By the way, again, go back to this market-based issue, that's exactly ultimately what we would like to have with all of our programs, tools, taxes and fees that they would somehow change the behavior associated with what you're trying to accomplish. Storm water fees really are not set high enough to do that in most cases and even to this point, most of the people that are implementing, putting in rain barrels, putting in rain gardens are doing it because they want to do the right thing. You're talking about a community where the median household income is pretty high. And so $25 a year is probably not creating a behavior change that might be necessary.
This is Kristine from Hawaii with the state division of forestry and wildlife. My question has to do with what you talked about regarding political wills and passing things like fees and taxes and credits, maybe regulatory rules and regulations, and I guess I'm wondering if you could provide some steps that organizations should think about if they're trying to develop this political will for this type initiatives.
That's an excellent question. Things that have been critically important, refer to my community and watershed that I've worked in a lot with the Chesapeake bay has been gauging the political will or community will to actually solve these communities so surveying community has been very, very important. And most people are willing to pay and protect and restore watershed so going through some type of process that engages communities' priorities is going to be really, really important. Money, there are certain times that it's going to be easier to move things forward than other times.
Our time is up and this includes our watershed Webcast. And entire the Webcast team, I'd thanks to thank Tim Jones for presenting today. I'm signing off. Have a great day.
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