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United Nations Environment Programme
Division of Technology, Industry and Economics
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Newsletter and Technical Publications
<International Source Book On Environmentally Sound Technologies
for Wastewater and Stormwater Management>

4.9 Financing (Topic i)

4.9.1 Federal and provincial/state funding

In Canada and the United States the responsibility for provision of wastewater collection, treatment and disposal is the responsibility of local municipal and regional or county governments.

Funding for large municipal wastewater treatment projects in both Canada and the United States is typically provided by three levels of government: 1) Federal; 2) Provincial or State; and 3) municipal. The percentage contribution is often determined by the size of the project (with larger projects receiving greater levels of senior government funding), the general economic conditions at the time, and to some degree the political situation. Municipalities apply for senior government funding and then provide for the balance through municipal taxes and debt financing.

For example, in Canada, a recent federal program for infrastructure development, now completed, provided grants to successful applicant municipalities for upgrade of municipal infrastructure including wastewater treatment. A recent upgrade of a primary plant to secondary treatment in Vancouver, British Columbia, Canada worth $560 million was jointly funded from the federal infrastructure program, a provincial grant, and funds raised by municipal taxes.

Funding is also provided at times through non-municipal government agencies (e.g. US EPA, Environment Canada, and State/Provincial Environmental Departments) through technology grant programs and/or research and study grants. In the United States, the US EPA administers a Revolving Fund Loan program, and State agencies are authorized to provide loans to eligible municipalities at zero to one half of the market interest rate, such as a recent case in Massachusetts.

The 1996 EPA Needs study identified almost $140 billion dollars worth of capital projects (not including land acquisition or operations and maintenance) that would be eligible for the Revolving Fund Loan program over the next 20 years. Most of the projects are in New York, (over 11%), with Illinois and California also needing a lot of work (over 8% each). Most of the needs of smaller communities with population less than 10,000 are in the areas of secondary treatment and collection, representing almost 11% of total documented costs.
The following summarizes the breakdown of the estimated $140 billion dollars of work required (Christen, 1998):

  • $44 billion for wastewater treatment
  • $10.3 billion to upgrade existing collection systems (suggested low)
  • $21.6 billion to construct new collection systems
  • $44.7 billion to control combined sewer overflows
  • $8.4 billion to control municipal stormwater and urban runoff
  • $1.1 billion for groundwater, estuary and wetland protection programs.

Sources of US funding are listed in the following:

  • Catalog of Federal Domestic Assistance
  • Foundation Directory
  • National Directory of Corporate Giving
  • Corporate and Foundation Grants
  • Environmental Grant-Making Foundations
  • Federal Grants and Contracts Weekly.

As an example of the varied sources of funding for wastewater treatment projects in the US, a project in Suwannee Florida installed a STEP system and central treatment plant to prevent contamination of nearby oyster beds in Suwannee Sound by failing septic tank systems (high groundwater). The project was funded by the US Department of Agriculture Rural Development, the Suwannee Water District, the Florida Department of Environmental Protection, and Congress.

Other funding resources (typically for non-point sources) include (Poppe et al. 1997):

  • US EPA Sec. 319 grants to states for nonpoint source projects
  • US Department of Agriculture Natural Resource Conservation Service - Environmental Quality Incentives Program, and Wildlife Habitat Incentives Progra
  • Fish and Wildlife Foundation
  • State Wallop-Breax

4.9.2 Municipal funding

In Canada, municipal funding for wastewater treatment plant capital costs and operations costs, which cannot be procured from the federal or provincial government is generated from taxes, charges to industries for discharge to the municipal system, and fees from developers for increased loading on existing plants, new collectors and interceptors.

In the United States, the above methods are also used, plus bond sales and special privilege taxes on known polluters, and user fees. An example of the latter is a tax on farmers within the Everglades Agricultural Area, to help finance the Florida Everglades Restoration program. The Florida courts have ruled that polluters should pay in proportion to the pollution they have caused, rather than spread cost over taxpayers (Christen, 1998). Some municipalities have procured used equipment for upgrades to help cut costs.

In both countries, sale of products such as repurified water and biosolids have helped to reduce operating costs.

4.9.3 Private agencies

There is a trend in the United States to privatize utilities which are providing services to citizens. The driving force behind privatization of a central wastewater treatment system is generally to generate sale proceeds which are used to upgrade facilities to bring them into environmental compliance. Other reasons have included reducing public debt, gaining expertise in operations, and resolution of local labour issues. In January of 1997, there were more than 400 municipalities in the US involved in wastewater and water privatization contracts.

About 70% of the privatization market in the US is held by Professional Services Group, Operations Management International, Wheelabrator EOS, and JMM Operational Services. Metcalf and Eddy Companies Inc. has 65 contracts (Dresse & Beecher, 1997). Historically, contracts have been mainly 3 to 5 year agreements involving operations and maintenance, but the trend is towards longer term, 25 years or so, contracts. Some municipalities have even leased facilities to private companies over the long term, but this is still rare as there is a public nervousness regarding mixing protecting public health and environment with profits.

The trend towards privatization has prompted an optimization movement (benchmarking) within the municipal wastewater workers sector, where similar facilities compare operations and costs to identify areas in which savings can be realized. In some cases, municipal workers promise to make optimization changes and save a certain amount over a period of time such as 6 years, in return for the city not bidding out operations.

Privatization of operation and maintenance contracts has also been done in Canada, for example in Banff, Alberta, although most Canadian municipalities still operate their own facilities. There is a trend, however, for facilities installed for small developments to be design/build/operate contracts, where a private utility is structured which is responsible for designing, building and operating the treatment plants..

Government regulators do not regulate what type of agency (private or public) operates the plant, as long as the operators are properly qualified (often certification is required) to operate the process and the plant meets permit requirements.

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