COST SHARING IN TRANSITION: THE CASE OF PLAN 6, CENTRAL ARIZONA PROJECT1

ABSTRACT: In the past, development of Federal water resource projects depended heavily or exclusively on Federal financing of construction costs. However, pressures on the Federal budget, environmental issues, and the notion that there are economic efficiency gains when beneficiaries of Federal water resource projects increase their cost share are causing changes. The case of the Central Arizona Project Plan 6 is a noteworthy example of the transition to more non-Federal participation in water resource development. This is because the non-Federal financing is to be provided for a project already under construction. The negotiation and terms of the Plan 6 financing agreement between the Department of the Interior and multiple interests in Arizona are used as an example of how Federal water project cost sharing is in a state of transition. The negotiation process is described, a financial analysis is provided, and the terms of the agreement and policy issues that were deliberated in the Executive Branch of the Federal Government are discussed.     

A MODEL FOR ACHIEVING CONSISTENCY FOR COST SHARING IN WATER RESOURCE PROGRAMS1

ABSTRACT: Three basic principles of responsibility have influenced the Federal/non-Federal cost sharing rates for water resources programs (1) full payment by beneficiaries (2) exclusive Federal assumption of costs and (3) joint Federal/non-Federal sharing. The efforts to determine appropriate cost sharing rates have resulted in several hundred complex arrangements involving contributions, user charges and direct sales based on many variations of payment terms. This basic present value model was developed to determine the non-Federal cost shares which are expected to be paid for 32 different functional purposes emanating from Federal water resources programs and projects for both implementation and OMR stages. The model introduces the concept of a composite (implementation plus OMR) cost share as a focus developing appropriate cost sharing rates for the private, public and mixed outputs produced through public water resources investments. The model can be used as a focus for policy decisions on cost sharing which seek to achieve consistent and equitable cost shares for purposes provided while maintaining an efficient allocation of resources within water programs.     

An overview of President Carter's Water Policy (1978)

On June 6, 1978, President Carter presented his Federal Water Policy Initiatives to the Congress. These were based on a year-long and sometimes controversial study by the Water Resources Council, the Office of Management and Budget, and the Council on Environmental Quality. Reforms were proposed relative to cost sharing, planning procedures, project evaluation, and environmental protection. Omitted from the policy were recommendations on water pollution control, planning coordination, and water resources research.The views expressed are the author's, and not necessarily those of the Library of Congress.     

WATER QUALITY ALLOCATED COST FOR MULTIPURPOSE RESERVOIRS1

ABSTRACT: Low flow augmentation from multipurpose reservoirs may yield significant water quality benefits. Cost allocation assigns a portion of reservoir expense to water quality consumers, waste water dischargers who benefit from increased receiving flow. Whereas such allocation currently is not authorized for Federal projects, the procedure is increasingly appropriate for efficient multiobjective management. Waste water treatment costs, multipurpose reservoir costs, and water quality are modeled for Oregon's Willamette River. Water quality is expressed as a function of treatment and augmentation levels. Treatment cost necessary to achieve a given water quality without augmentation less treatment cost with augmentation is an alternative cost of water quality maintenance. With a cost allocation procedure, this alternative cost is used to determine water quality's share of reservoir cost. Under current conditions, water quality beneficiaries could be charged approximately seven percent of annualized reservoir expense. This charge is one-fourth the expense of additional treatment facilities required were augmentation not provided.     

TECHNICAL CLARITY IN INTER-AGENCY NEGOTIATIONS: LESSONS FROM FOUR HYDROPOWER PROJECTS1

ABSTRACT: We investigated the effect of technical clarity on success in multi-party negotiations in the Federal Energy Regulatory Commission (FERC) licensing process. Technical clarity is the shared understanding of dimensions such as the geographic extent of the project, range of flows to be considered, important species and life stages, and variety of water uses considered. The results of four hydropower licensing consultations are reported. Key participants were interviewed to ascertain the level of technical clarity present during the consultations and the degree to which the consultations were successful. Technical clarity appears to be a prerequisite for successful outcomes. Factors that enhance technical clarity include simple project design, new rather than existing projects, precise definition of issues, a sense of urgency to reach agreement, a sense of fairness among participants, and consistency in participation. Negotiators should not neglect the critical pre-negotiation steps of defining technical issues and determining appropriate studies, deciding how to interpret studies, and agreeing on responses to study results.     

A Question of Boundaries: The Importance of “Revenuesheds” for Watershed Protection1

Patterson, Lauren A., Jeffrey Hughes, Glenn Barnes, and Stacey I. Berahzer, 2012. A Question of Boundaries: The Importance of “Revenuesheds” for Watershed Protection. Journal of the American Water Resources Association (JAWRA) 48(4): 838‐848. DOI: 10.1111/j.1752‐1688.2012.00655.x Abstract: Watersheds transcend jurisdictional boundaries; raising important questions of who should pay for watershed protection, and how can watershed governance be funded? The responsibility and cost for watershed protection has progressively devolved to local governments, resulting in additional negative externalities and financing challenges. Watershed governance structures have formed at the scale of the watershed, but they often lack the financing mechanisms needed to achieve policy goals. Financing mechanisms via local governments provide a reliable source of revenue and the flexibility to address watershed specific issues. We develop a “revenueshed” approach to access the initial challenges local governments face when seeking to finance trans‐jurisdictional watershed governance. The revenueshed approach engages local governments into discussion and implementation of financial strategies for collaborative watershed governance. Legislation places water quality regulations primarily on local governments inside the watershed. The revenueshed approach extends the financial and stewardship discussion to include local governments outside the watershed that benefit from the watershed. We applied the revenueshed approach to the Mills River and Upper Neuse watersheds in North Carolina. Mills River had a partnership governance seeking revenue for specific projects, whereas the Upper Neuse sought long‐term financial stability to meet new water quality legislation.     

CITY OF TUCSON WASTE WATER EFFLUENT DELIVERY FACILITY1

ABSTRACT: The Tucson area is totally dependent on ground water, which is in increasingly short supply due to excessive overdrafts. Tucson area waste water treatment plants discharge material quantities of secondary effluent downstream, which is lost to evapotranspiration and recharge of the ground water basin. The city and the four large mining companies who share the common Santa Cruz basin ground water, recognized the common water supply problem and agreed to fund a feasibility study for mining process use of the effluent to partly alleviate the overdraft of ground water. The study analyzed the projected waste water effluent resources, potential mining company demand for waste water effluent and possible interface of an effluent delivery facility with the proposed Central Arizona Project. The effluent resources were analyzed with respect to potential demand. An optimum alignment was selected. An optimum system was detailed through design schematics, amortized cost and finance requirements, and an implementation schedule. It was concluded that a waste water effluent delivery facility could be implemented which would utilize reclaimed effluent in quantities approximating 35 percent of basin overdraft and which would provide revenue for full cost recovery over a 20 year operation period. The mining companies are studying the internal economic impacts of the project.     

水污染防治领域PPP项目投资回报机制设计

在国家相关政策的支持引导下,采用政府和社会资本合作(PPP)模式实施的水污染防治项目逐渐增多。合理的投资回报是社会资本参与PPP项目的关键所在。本文通过对水污染防治项目特点、不同付费方式及适用条件进行分析,对投资回报的内在机理进行了分析,提出水污染防治PPP项目投资回报机制设计原则,包括应符合市场配置特点,充分考虑项目风险影响,确保社会资本"盈利但不暴利"、以政府财政承受能力为底线、不以保底承诺、固定回报变相融资。在此基础上,从投资回报是社会资本方服务绩效的对价、合理设计保底需求和超额收益分享机制、合理设计服务价格及调整机制、合理拓宽可行性缺口补助投资回报方式等方面对投资回报机制要点进行了探讨,以期为同类项目的实施提供参考。     

THE SOCIAL CONTEXT OF WESTERN WATER DEVELOPMENT1

ABSTRACT: Social scientists were included in the planning and design for an integrated, trans-basin water resource project. Within this complex project, a socioeconomic impact assessment (SIA) concentrated on identifying the social, political, and economic issues and potential impacts inherent in developing a city's water rights. Before the SIA began, some of the development alternatives had already generated widespread hostility and organized opposition from communities within the watershed. The SIA involved residents of affected communities in the study design and project planning. The study found a number of components that constituted the concerns, beliefs, and expectations about perceived, potential impacts that might result from the different alternatives. In most cases these issues constituted threats to valued environmental resources, valued community resources, the social environment, the economic base, and a secure future. The social science component was a key factor in the ultimate decision to pursue a particular alternative which was sensitive to the social and political issues, minimized environmental and socioeconomic impacts, and ultimately had support among the communities potentially affected. The experience from this case study suggests that the approach used can be applied successfully in the planning of other water development projects and result in cooperation from the wide range of interest groups that often present costly obstacles to such projects.     

THE OPTIMALITY OF CAPACITY SHARING IN STOCHASTIC DYNAMIC PROGRAMMING PROBLEMS OF SHARED RESERVOIR OPERATION1

ABSTRACT: This paper is concerned with finding an optimal allocation of water entitlements for each of two users of water who share a reservoir. Two instruments of allocation are considered. The first, release sharing, involves sharing the releases from the reservoir; the second, capacity sharing, is concerned with allocating to each user of water a share of inflows, reservoir capacity and leakage and evaporation losses. Stochastic dynamic programming problems of reservoir operation under each type of sharing arrangement are formulated. It is shown that the maximum discounted expected profit from reservoir operation over the life of the storage using capacity sharing is at least as large as that obtained using release sharing and that release sharing is not Pareto efficient.     

Water supply policies and issues in developing countries

The significant progress made during the UN International Water Decade is reviewed, eight years after its inception in 1981. Major issues remain, especially in rural areas. The advantages of an integrated water resource planning framework (IWRP) are explained, including the use of this process to develop a flexible strategy for the water and sewerage sector to meet national policy objectives. Economic efficiency in supply implies optimal service quality and least cost planning, while efficient pricing policy requires the implementation of long-run marginal cost based tariffs. Better sector organization, management, accountability, options for decentralization and innovative financing methods are also discussed.     

A model of costs and resources for rural and peri-urban water supply and sanitation in the 1990s

This article develops a model of cost and financing strategies for rural and peri-urban water supply and sanitation. It suggests that significant progress towards the World Summit for Children's goal of universal access to water supply and sanitation can be made if a combination of strategies is adopted. On the cost side, significant cost reductions should be possible through efficiency in resource use and reduction of system management costs. On the financing side, it suggests restructuring the financing of the sector with improved efficiency and greater cost recovery in urban services; full recovery of operation and maintenance costs; cost sharing through community contributions in kind such as local labour and financially in rural and peri-urban water supply for basic levels of service depending on willingness and ability to pay and full cost recovery for higher levels of service; a high degree of cost recovery in rural and peri-urban sanitation; development of institutional structures for both collection and management of revenues; development of alternate financing mechanisms such as rural credit schemes and revolving funds, adapted in specific country contexts, including the required institutional mechanisms; and additional allocations from governments and external support agencies. Additional government or external financing alone, while critical, will not of itself lead to effectiveness in the use of resources. Equally, cost recovery alone cannot lead to universal access and sustainable solutions. A composite set of actions is needed within which building capacities of institutions and people is necessary for sustainability .     

ECONOMIC INCENTIVES FOR WATER CONSERVATION ON THE MONTEREY PENINSULA: THE MARKET PROPOSAL1

ABSTRACT: Literatures on price‐based urban water conservation and on market‐based mechanisms to manage natural resources suggest that market‐based management of urban/suburban water use may be feasible. A market‐based proposal that emerged from a water shortage on California's Monterey Peninsula is presented. In the proposal, conservation incentives arise both from an ability among end‐users of water to reduce consumption and sell use‐rights to water, and from a penalty price for consumption in excess of one's use rights. The amount of water associated with use rights is capped and varies according to hydrological, meteorological, ecological, and other criteria. Requirements for further study of the proposal are listed, and the role that similar market‐based mechanisms could play in urban water management is discussed.     

Developing new environmental excellence programs: Lessons from epa's environmental leadership program

Interest in the concept—and implementation—of environmental excellence is at an all-time high. A wealth of examples from individual companies, trade associations, states, industry coalitions, and the federal government illustrate the growing acceptance by a wide range of stakeholders of a management systems approach to environmental issues. Perhaps nowhere is this more clear than in the collection of public comments submitted to EPA in response to its January 15, 1993, Federal Register notice, which proposed the creation of an Environmental Leadership Program (ELP). The authors, both of whom worked on the ELP, review these public comments and offer a set of “do's and don'ts” for organizations interested in establishing an environmental excellence program. In addition, the authors outline the Green Track proposal, a plan to structure an alternate regulatory pathway based on environmental excellence.     

Water supply,waste assimilation,and low-flow issues facing the Southeast Piedmont Interstate-85 urban archipelago

Rapidly growing cities along the Interstate-85 corridor from Atlanta, GA, to Raleigh, NC, rely on small rivers for water supply and waste assimilation. These rivers share commonalities including water supply stress during droughts, seasonally low flows for wastewater dilution, increasing drought and precipitation extremes, downstream eutrophication issues, and high regional aquatic diversity. Further challenges include rapid growth; sprawl that exacerbates water quality and infrastructure issues; water infrastructure that spans numerous counties and municipalities; and large numbers of septic systems. Holistic multi-jurisdiction cooperative water resource planning along with policy and infrastructure modifications is necessary to adapt to population growth and climate. We propose six actions to improve water infrastructure resilience: increase water-use efficiency by municipal, industrial, agricultural, and thermoelectric power sectors; adopt indirect potable reuse or closed loop systems; allow for water sharing during droughts but regulate inter-basin transfers to protect aquatic ecosystems; increase nutrient recovery and reduce discharges of carbon and nutrients in effluents; employ green infrastructure and better stormwater management to reduce nonpoint pollutant loadings and mitigate urban heat island effects; and apply the CRIDA framework to incorporate climate and hydrologic uncertainty into water planning.     

THEORY AND REALITY IN ALLOCATING FEDERAL RESOURCES TO WATER RESOURCES DEVELOPMENT1

ABSTRACT: Federal spending on water resource development projects exceeds $10 billion annually. This paper examines the economic theory and practice on which the Federal water resource development plans are based. Existing theoretical and applied problems result in overinvestment. These include 1) no standard of value for the tradeoff of environmental objectives with economic objectives; 2) benefits based on “willingness to pay,” but beneficiaries pay only a fraction of a project's costs; 3) beneficiaries “shop around” among program purposes in order to reduce their commitments; and 4) benefit/cost (B/C) analyses are based on a discount rate, which is consistently below the Federal borrowing rate. Furthermore, the Government Accounting Office (GAO) frequently finds that the agency regulations are inadequate and result in inconsistent and questionable benefit computations. The President has proposed a series of water policy reforms, to reduce some of the apparent overinvestment in water resource development, but fundmental corrective action rests with the members of Congress.     

Composite market design for a Transferable Discharge Permit (TDP) system

There has been a great deal of interest in addressing water quality issues through the use of Transferable Discharge Permit (TDP) systems. Unfortunately, the attempts to start up permit markets that are able to exploit abatement cost differences between sources have not met with the success expected. Two of the reasons for the lack of success have been the problem of transaction costs and in the case of non-point sources (NPS), undefined property rights. The composite market design is a proposal for a TDP system that specifically includes agricultural non-point source (NPS) discharges and addresses both property rights and transaction cost problems. The composite market consists of three interrelated markets each serving a particular function. The two primary markets are coordinated through price information that makes it possible for a catchment-based authority to issue (sell) permits based on the marginal cost of abatement. When the composite market is mature, the total number of permits issued corresponds to a cap on discharges allowed in the catchment. The structure of the composite market allows this system to be phased in over time with existing institutions and limited demands on financing.     

Building the role of local government authorities towards the achievement of the human right to water in rural Tanzania

In recent decades, many changes have occurred in the approach to financing and operating water services in developing countries. The demand‐responsive approach is now adopted in many countries in a context of donor‐supported decentralization processes, which gives more responsibility to end users. However, the government's responsibility at different levels is enforced by the international recognition of the human right to water. This paper examines specific actions that build the role of local government authorities in this scenario. A collaboration between an international NGO and a rural district in Tanzania from 2006 to 2009 is used as an action research case study that is representative of local capacity‐building needs in decentralized contexts and rural areas. Three main challenges were detected: i) lack of reliable information; ii) poor allocation of resources in terms of equity; and iii) lack of long‐term community management support from the district. Two mechanisms were established: i) water point mapping as a tool for information and planning; and ii) a District Water and Sanitation Unit Support (DWUS) for community management. The results show how the framework provided by the goal of human right to water helps to define useful strategies for equity‐oriented planning and post‐project support at the local level.     

EFFICIENCY PROBLEMS FROM USER FEES IN MUNICIPAL WASTEWATER TREATMENT1

ABSTRACT: The Environmental Protection Agency administers a construction grant program to encourage abatement of wastewater pollution by sharing with municipalities the costs of wastewater treatment facilities. The enabling legislation (P.L. 92–500) specifies that EPA's cost share will be 75% of construction costs. It further requires municipalities to collect user fees from industrial users of the facilities to repay that part of the federal grant allocable to the treatment of industrial wastewater. The municipality must return half of the user fees collected to the U.S. Treasury; the municipality is allowed to retain the remaining half. Retention by municipalities of these user fees lowers their effective cost shares and results in the following consequences: (1) a bias for municipalities to select certain kinds of abatement techniques regardless of whether or not they are the least-cost techniques from the national perspective; (2) a bias for municipalities to select larger-than-optimal scales of abatement facilities; (3) a hidden federal subsidy to industry; and (4) grants that favor industrial communities. This article examines the legislative and regulatory requirements for user charges, derives the algebraic expressions for calculating the real federal, municipal, and industrial cost shares with user fees; computes municipal cost shares for selected values of the determinant factors; evaluates efficiency and other consequences of current user fee arrangements; and concludes that the efficiency distortions brought about by the impacts of user fees on cost sharing could be eliminated by requiring that all user fees collected from industry against the federal cost share be returned to the U.S. Treasury.