APPENDIX A: FUNDING MECHANISMS BY FINANCING TYPE
The Blue Ribbon Panel has endeavored to make the study and analysis of its report as user-friendly and practical as possible. Therefore, the following section has been arranged so that the ideas developed by the Panel are listed according to the type of financing or funding mechanism they represent, rather than by Tributary Strategy category (point source, developed land, agricultural lands and resource protection, found on pages 23-59). Each idea listed in this section is described in full, repeating the same language found in the previous category section of the report. Icons (a pipe for Point Source, house for Developed Land, tractor for Agricultural Lands, and tree for Resource Protection) and a page reference indicate where each idea can be found in the Category section of the Report.
Revenue Generated/Redirected: Estimate not known. Description: A bond bank is an institution that pools together offerings of individual bonds. To assist smaller communities and communities without a credit rating, bond banks would be formed to pool bond offerings into a single bond issue that can then be issued at a lower interest rate than any single community's issue could command. Mechanism: Bond. Page: 27
Revenue Generated/Redirected: $5.0 million. Description: The term of state revenue bonds sold for the Biological Nutrient Removal (BNR) program would be extended from 20 to 30 years for the years 1996-2000, thereby raising the debt affordability ceiling and allowing the state to fund the additional costs of this Tributary Strategy option. Mechanism: Bond. Page: 28
Revenue Generated/Redirected: Recovery of cost of improvements. Description: A special assessment district is an independent government entity formed to finance governmental services for a specific geographic area. Residents of special districts pay taxes to finance the improvements that will benefit them. At a local level, special districts, such as sewer districts, stormwater management districts, retrofit/conversion districts, etc., have been formed to finance specific improvements. Special districts may issue revenue bonds to finance capital facilities independently, relieving the burden on general debt capacity. Mechanism: Bond, Fee, Surcharge. Page: 34
Revenue Generated/Redirected: $5-10 million. Description: Mini-bonds are bonds issued in small denominations (e.g. $500) available for purchase by the general public. Additional $10 million in debt authorization specified for Bay related projects to be issued in the form of Bay mini-bonds. Mechanism: Bond. Page: 52
Revenue Generated/Redirected: $500,000 to $10 million per year per county. $70 million state-wide per year. Assumes $20 per year per residential unit, and no charges for undeveloped, tax exempt, and agricultural lands. Description: A utility is an enterprise that performs a service and has the authority to charge fees for that service. For stormwater management, landowners are assessed a fee that is based on their parcel size and degree to which their land is developed. Typically, residential parcels are grouped into size classes with a common fee within each class. Commercial parcels are assessed individually and charged a site-specific fee. Fees are most commonly collected via existing water bill systems or as a line item on property tax statements. The revenues are usually held in a separate fund dedicated to stormwater management activities. The utility could address stormwater retrofit costs and a portion of erosion and sediment control program costs. These utilities could be established within a municipality, a county, or encompass a whole watershed. Mechanism: Bond, Fee, Private Initiative/Incentive, Surcharge. Page: 32 Case Example: pages 97, 98, 99, 100, 101
Revenue Generated/Redirected: $100,000 (1% of a $10 million allocation). Description: To allow state programs that provide grants to local entities the authority to charge fees for processing and administering the grant. These fees would be limited to the state's cost to administer the grant and could be capped at 2.5% of the allocation. The cost of administering state grant programs is not provided for in the enabling legislation, thus administrative and personnel costs must come out of existing state operating budgets. The operating budgets of agencies have continued to shrink while new mandates have been imposed on the agencies. The imposition of a processing fee on a grantee is insignificant in relation to the overall project cost and would be similar to the permit fees they already pay. Mechanism: Fee. Page: 29
Revenue Generated/Redirected: Approximately $12 million per year. Description: The concept is for a state, local government, or watershed district to charge an annual "aquifer impact fee" of $36.00 per septic system owner. An analogous "aquifer withdrawal fee," managed by drinking water agencies, could be charged to owners of on-site wells. These represent charges for the use (depletion and degradation) of the aquifer. The fees would be directed to funds dedicated to remediation of problems caused by failing septic systems and the protection of drinking water sources. Fee rates could differ for residential and business users. Mechanism: Fee. Page: 37
Revenue Generated/Redirected: Recovery of cost of improvements. Description: A special assessment district is an independent government entity formed to finance governmental services for a specific geographic area. Residents of special districts pay taxes to finance the improvements that will benefit them. At a local level, special districts, such as sewer districts, stormwater management districts, retrofit/conversion districts, etc., have been formed to finance specific improvements. Special districts may issue revenue bonds to finance capital facilities independently, relieving the burden on general debt capacity. Mechanism: Bond, Fee, Surcharge. Page: 34
Revenue Generated/Redirected: $500,000 to $10 million per year per county. $70 million state-wide per year. Assumes $20 per year per residential unit, and no charges for undeveloped, tax exempt, and agricultural lands. Description: A utility is an enterprise that performs a service and has the authority to charge fees for that service. For stormwater management, landowners are assessed a fee that is based on their parcel size and degree to which their land is developed. Typically, residential parcels are grouped into size classes with a common fee within each class. Commercial parcels are assessed individually and charged a site-specific fee. Fees are most commonly collected via existing water bill systems or as a line item on property tax statements. The revenues are usually held in a separate fund dedicated to stormwater management activities. The utility could address stormwater retrofit costs and a portion of erosion and sediment control program costs. These utilities could be established within a municipality, a county, or encompass a whole watershed. Mechanism: Bond, Fee, Private Initiative/Incentive, Surcharge. Page: 32 Case Example: pages 97, 98, 99, 100, 101
Revenue Generated/Redirected: $75,000 per year per service personnel. Description: Modify existing fee systems associated with construction oversight to cover more or all of the costs. The fee system should ensure that staff, equipment and overhead costs associated with plan reviews and inspections are covered by fees. The fee system could be based on project complexity or an hourly rate for service time devoted to a project. Time not spent directly on a project would have to be covered by another funding source (see e.g., Stormwater Management Utility Fee, or General Funds). "Full-Cost" pricing refers to two concepts. First, as an economic concept, it refers to internalizing environmental costs within the market, thus attempting to capture the "full-cost" of development. Second, in a more common sense manner, it refers to covering the full-cost associated with public sector reviews of regulated activities. Mechanism: Fee. Page: 37
Revenue Generated/Redirected: $1 million to $1.5 million per year. Assumes $100 fee per 10,000 to 15,000 systems installed each year. Description: The concept is to charge a one-time "aquifer impact fee" for the installation of a new on-site sewerage system. A similar one-time "aquifer withdrawal fee" could be charged for the installation of on-site wells. These represent charges for the use (depletion and degradation) of the aquifer. The fees would be directed to funds dedicated to remediation of problems caused by failing septic systems and the protection of drinking water sources. Mechanism: Fee. Page: 39
Revenue Generated/Redirected: $2-10 million per year. Description: Agricultural check-offs have a long history of producing small to medium amounts of money to support research, education and promotion for specific commodities. In Maryland, corn and soybean check-offs generate several hundred thousand dollars per year. A checkoff requires that every farmer who markets a certain commodity pays a fee for each unit (usually bushel or pound) that he/she markets. Producers of a commodity vote on establishing a check-off and at specified time periods, vote on renewal. If a majority vote favorably, a small surcharge is added to each unit of production when it is marketed. The funds generated are managed by a board of farmers. An environmental check-off would be far broader than any existing, but could be established and function similarly. The funds generated could be used to provide cost-share for non-structural practices such as cover crops, provide incentives for adoption of new, non-cost effective practices, pay for private sector technical assistance to farmers and/or for education. Mechanism: Fee. Page: 45
Revenue Generated/Redirected: Estimate not known. ($15 million in Kansas; $44 million in Washington State). Description: This idea draws on the example of dedicated Funds that have been established in several states for a wide variety of conservation practices. These Funds may be funded through a variety of mechanisms. In Washington State, $21 million is collected from the statewide real estate tax, $19 million from solid waste fees, and $4 million from water and sewer fees collected from utilities. This Fund is used to provide low-interest loans to local governments to repair leaking sewer lines, build stormwater facilities, and other projects which remove a significant threat to public health. Kansas has a State Water Plan Fund, a dedicated fund shared by seven state agencies involved in maintaining and restoring water quality. The Fund is fed by general fund appropriations, lottery proceeds, municipal, industrial and agricultural water use fees, pesticide and fertilizer use fees, and environmental fines. Mechanism: Usually a combination of mechanisms. Page: 52
Revenue Generated/Redirected: Estimate not known. Description: Currently, Department of Natural Resources (DNR) sells duck stamps, which are issued as a hunting license. Many people buy additional stamps for artwork. Maryland's duck stamp is selected on a competitive basis each year, which serves to increase the visibility of the program. This approach could be expanded to other activities requiring licenses (e.g. boats, fishing), or could be issued solely as collector's items to benefit conservation efforts (e.g. habitat, non-game species). Mechanism: Fee. Page: 56 Case Example: page 106
Revenue Generated/Redirected: Total federal allocation to Maryland is $218 million. Through a 20% state match and the use of tax-exempt revenue bonds, the SRF has the potential to make up to $600 million in loans to local governments, of which $400 million has been dedicated. The unallocated leverage capacity of $200 million (federal funds-$69 million; state-$13.8 million; tax-exempt revenue bonds-$117 million) remains available. Description: The SRF was established through the Water Quality Act of 1987 to replace the U.S. EPA Construction Grants Program for wastewater treatment facilities. The objective of the program is to improve water quality. Grant funds are appropriated by Congress to states, who then make loans to communities. Maryland leverages its federal grant and its state match funds to increase the amount of money available for loans through the sale of tax-exempt revenue bonds. Loans to communities are made at or below market interest rates for up to 20 years. Repaid principal and interest are then used for new loans. The idea is to extend the SRF program to the private sector so that private and public/private partnerships can use and leverage the federal and state funds to engage in such activities as the upgrade of wastewater treatment facilities, repair/connection of failing septic systems, stormwater management, agricultural best management practices and stream restoration (see page 34 for Developed Land ideas, page 42 for Agricultural Lands ideas, and page 54 for Resource Protection ideas). Suggested methods for making the SRF available to a broader audience include placing deposits in financial institutions to provide loan subsidies, which would then leverage the funds, perhaps increasing the pool by two or three times its current size. The financial institutions could also administer the loans, which is an efficient use of their resources since they are in the business of credit evaluation and loan administration. Using financial institutions could also minimize the state's costs and exposure to loan losses. Mechanism: Loan and Redirection of Existing Program. Page: 26 Case Example: pages 92, 93
Revenue Generated/Redirected: Revenue neutral. Would increase access to existing program. Description: Currently, the structural shore erosion control program administered by Department of Natural Resources (DNR) requires landowners applying for a zero-interest, 30-year loan to be in a designated shore erosion control district. This restriction was created in order to target shrinking funds, and to help ensure a consistent erosion control approach along a given stretch of shoreline. However, the current restriction limits access to the program, and may hamper the program's ability to target on the basis of environmental concern. Mechanism: Loan and Redirection of Existing Program. Page: 54
Revenue Generated/Redirected: Estimate not known. ($15 million in Kansas; $44 million in Washington State). Description: This idea draws on the example of dedicated Funds that have been established in several states for a wide variety of conservation practices. These Funds may be funded through a variety of mechanisms. In Washington State, $21 million is collected from the statewide real estate tax, $19 million from solid waste fees, and $4 million from water and sewer fees collected from utilities. This Fund is used to provide low-interest loans to local governments to repair leaking sewer lines, build stormwater facilities, and other projects which remove a significant threat to public health. Kansas has a State Water Plan Fund, a dedicated fund shared by seven state agencies involved in maintaining and restoring water quality. The Fund is fed by general fund appropriations, lottery proceeds, municipal, industrial and agricultural water use fees, pesticide and fertilizer use fees, and environmental fines. Mechanism: Usually a combination of mechanisms. Page: 52
Revenue Generated/Redirected: Revenue neutral-can improve access to capital and possibly reduce borrowing costs to farmers. Description: A local cooperative governed by a board of farmers could help members obtain loans from existing programs or financial institutions, or could leverage available funds through financing institutions, such as banks. Co-ops could secure or guaranty loans by putting up collateral for borrowings. By using their greater size, co-ops may be in a better position to influence policy decisions, not just within government, but in the private sector as well, increasing the availability of funds dedicated to agriculture. Mechanism: Private Initiative/Incentive. Page: 42
Revenue Generated/Redirected: Estimate not known. Industry would pay initial cost of nutrient management and/or conservation planning. Description: The electric utility industry has found it cost-effective to pay for installation of energy conserving equipment in homes and recover the cost, over time, out of savings in consumers' electric bill. Nutrient management plans usually save farmers money. Conservation plans and animal waste storage systems can save money or increase productivity. A large agricultural fertilizer or farm service company could develop nutrient management, conservation or animal waste management plans for farmers with an agreement that requires repayment for plan development over time out of the savings realized by the farmer. Mechanism: Private Initiative/Incentive. Page: 47
Revenue Generated/Redirected: Estimate not known. Description: A major credit card could be issued to benefit a new or existing environmental organization. For each "affinity card," a fixed amount per card, and a small percentage (on the order of 0.5%) of the spending on the card is donated to the organization. The organization is generally partially responsible for marketing the card. Mechanism: Private Initiative/Incentive. Page: 59
Revenue Generated/Redirected: The maximum generated through the Bay plates has been approximately $1 million per year. Description: The existing Bay plate program could be expanded to create a new commemorative plate each year in order to increase sales. Currently, $12 of the total $20 cost of plates goes to the Chesapeake Bay Trust for environmental education and conservation projects. Limited edition plates are also available for $100-500. Restrictions on the use and issuance of commemorative plates are set by legislation. However, the recipient of funds generated by the plates is designated by the Governor. Under current law, the recipient may not be a state agency. Mechanism: Private Initiative/Incentive. Page: 55
Revenue Generated/Redirected: Estimate not known. Cost of planting trees is passed on to the development community and new homeowners. Description: The Forest Conservation Act (FCA,1991) and the Nontidal Wetlands Act (1989) each have requirements for mitigation under certain circumstances when forests or wetlands are impacted by development. Mitigation is preferred on-site, but may be performed offsite if an appropriate location is not available on-site, or if other criteria are met. Maryland's Department of Natural Resources (DNR) has created a wetlands mitigation banking program at the state level, but no formal mitigation banking system has yet been created for forestry. The program is regulated by DNR, and implemented by local governments for local projects. Carroll County is in the process of developing a forest mitigation bank, and at least one private firm has been formed to facilitate the mitigation requirements of developers by identifying appropriate mitigation sites, implementing the required mitigation, and maintaining the mitigated area. Mechanism: Private Initiative/Incentive. Page: 50
Revenue Generated/Redirected: Would pass on tree planting costs to private sector by giving companies an incentive to plant trees to meet existing regulatory requirements. Description: Under the Clean Air Act, companies pursuing activities that will increase particular air pollutants that are currently exceeding clean air standards in that area will be required to provide "offsets" for their polluting activities. Such "offsets" could include tree planting, as trees sequester carbon from the air. Mechanism: Private Initiative/Incentive. Page: 57
Revenue Generated/Redirected: Please see page xx, "Environmental Trust Fund," for possible source of funds. Description: Existing program administered by Department of Natural Resources (DNR) Forest Service provides one-time incentive payment to landowners to plant trees along rivers and streams. Forested buffers along streams filter nutrients from upland areas, as well as improving stream habitat by providing shade, food sources, and bank stability. Mechanism: Private Initiative/Incentive. Page: 58
Revenue Generated/Redirected: Estimate not known. Description: TDRs compensate landowners in "sending areas" (usually agricultural or resource lands) for the equity in their land by using private money. This technique has been a proven success in a number of communities. However, TDR programs are often difficult to establish because receiving communities are reluctant to accept higher density development. Providing adequate incentives for receiving areas will increase their availability for TDRs, thereby increasing interest in purchasing development rights from agricultural and forested lands. Mechanism: Private Initiative/Incentive. Page: 51 Case Example: page 105
Revenue Generated/Redirected: $500,000 to $10 million per year per county. $70 million state-wide per year. Assumes $20 per year per residential unit, and no charges for undeveloped, tax exempt, and agricultural lands. Description: A utility is an enterprise that performs a service and has the authority to charge fees for that service. For stormwater management, landowners are assessed a fee that is based on their parcel size and degree to which their land is developed. Typically, residential parcels are grouped into size classes with a common fee within each class. Commercial parcels are assessed individually and charged a site-specific fee. Fees are most commonly collected via existing water bill systems or as a line item on property tax statements. The revenues are usually held in a separate fund dedicated to stormwater management activities. The utility could address stormwater retrofit costs and a portion of erosion and sediment control program costs. These utilities could be established within a municipality, a county, or encompass a whole watershed. Mechanism: Bond, Fee, Private Initiative/Incentive, Surcharge. Page: 32 Case Example: pages 97, 98, 99,100,101
Revenue Generated/Redirected: Estimate not known. ($15 million in Kansas; $44 million in Washington State). Description: This idea draws on the example of dedicated Funds that have been established in several states for a wide variety of conservation practices. These Funds may be funded through a variety of mechanisms. In Washington State, $21 million is collected from the statewide real estate tax, $19 million from solid waste fees, and $4 million from water and sewer fees collected from utilities. This Fund is used to provide low-interest loans to local governments to repair leaking sewer lines, build stormwater facilities, and other projects which remove a significant threat to public health. Kansas has a State Water Plan Fund, a dedicated fund shared by seven state agencies involved in maintaining and restoring water quality. The Fund is fed by general fund appropriations, lottery proceeds, municipal, industrial and agricultural water use fees, pesticide and fertilizer use fees, and environmental fines. Mechanism: Usually a combination of mechanisms. Page: 52
Revenue Generated/Redirected: Estimate not known. Description: Under a tax-exempt lease arrangement, a public partner finances capital assets or facilities by borrowing funds from an investor or financial institution. The private partner generally acquires title to the asset, but transfers it to the public partner either at the end or at the beginning of the lease term. The portion of the lease payment that is used to pay interest on the capital investment is tax-exempt under state and federal laws. Tax-exempt leases are a method of capital financing that could be applied to any environmental facility. Since the lease arrangements do not count against local debt limits, they may be a particularly useful tool for communities whose debt capacity is nearly exhausted. Mechanism: Public/Private Partnership. Page: 29 Case Example: pages 94, 95, 96
Revenue Generated/Redirected: Estimate not known. Description: Local governments could tap an additional source of capital if they sold such municipal utility assets as water mains and pumping stations to private investors interested in reducing their tax obligations. Private companies like AT&T and BGE depreciate their assets, such as telephone and electric power lines, over the period of the assets' useful life (30 years or more). If municipal utility assets were purchased by the private sector (profitable corporations, businesses or wealthy individuals), investors could take advantage of this depreciation schedule and enjoy several years of reduced tax obligations. The maintenance of the asset would remain with the municipality and ownership of the utility asset would revert to the municipality at the end of the depreciation schedule. Mechanism: Public/Private Partnership. Page: 28
Revenue Generated/Redirected: Estimate not known. Description: This idea would allow purchase of easements on farm or forest land. The easements would require use of best management systems to minimize environmental impact as long as the land is farmed or forested. Required practices should include nutrient management, soil conservation and water quality plan implementation, integrated pest management, use of cover crops, animal waste management, stream fencing, forest buffers, forest stewardship plans, streamside management plans, and other appropriate forest best management practices. The easement would be in perpetuity and all future farm operators must use these practices. There would be no restrictions on development, but all applicable practices would continue through covenants and deed restrictions. Mechanism: Public/Private Partnership. Page: 44
Revenue Generated/Redirected: National Wildlife Federation charges $20 for an "adopt-a-whale" kit. Assuming the cost to produce and market the materials is $10 per kit, selling 5,000-20,000 kits would raise $50,000-200,000. Description: This idea is based on the "adopt-a-whale" program created by the National Wildlife Federation and others. Individuals would be solicited to "adopt" a Bay creature. For a fee, participants would receive educational materials about their Bay creature. Mechanism: Public/Private Partnership. Page: 55 Case Example: page 102
Revenue Generated/Redirected: Estimate not known. Description: A privately run endowment fund could be established through contributions from the private sector (possibly organized through the Chambers of Commerce). Interest from the fund would be used to pay for environmental restoration projects. The fund would coordinate with state agencies to target high priority areas. Mechanism: Public/Private Partnership. Page: 58
Revenue Generated/Redirected: Estimate not known. Description: The Community Re-investment Act (CRA) was passed by Congress in 1977 in response to the poor record of many banks in making loans and providing services in low income neighborhoods. The CRA requires banks to be rated annually to ensure that minimum community re-investment standards are met. However, although 89% of banks pass these ratings, Congress still feels that banks continue to fall short in providing services to the community. Current federal CRA requirements are very general, but the State could pass legislation with more specific guidelines about activities that are eligible under the CRA. These guidelines could include environmental projects, such as redevelopment and in-fill development to encourage concentrated growth; urban forestry; stream restoration; agricultural best management practices; etc. Mechanism: Public/Private Partnership. Page: 40
Revenue Generated/Redirected: Does not generate new funds; would administer funds provided through other sources. Description: A PDR/TDR bank could be developed and funded with transfer tax revenues, general obligation bonds, and local government contributions. Such a bank could be formed by a state and local government partnership, a nonprofit entity, or some combination. In any jurisdiction in the state with a purchase or transfer of development rights program (or both), the bank would purchase the development rights of agricultural or resource land. The bank could either extinguish the rights or sell them as TDRs to developers to raise money to purchase more rights. Mechanism: Public/Private Partnership. Page: 51 Case Example: page 105
Revenue Generated/Redirected: Estimate not known. ($15 million in Kansas; $44 million in Washington State). Description: This idea draws on the example of dedicated Funds that have been established in several states for a wide variety of conservation practices. These Funds may be funded through a variety of mechanisms. In Washington State, $21 million is collected from the statewide real estate tax, $19 million from solid waste fees, and $4 million from water and sewer fees collected from utilities. This Fund is used to provide low-interest loans to local governments to repair leaking sewer lines, build stormwater facilities, and other projects which remove a significant threat to public health. Kansas has a State Water Plan Fund, a dedicated fund shared by seven state agencies involved in maintaining and restoring water quality. The Fund is fed by general fund appropriations, lottery proceeds, municipal, industrial and agricultural water use fees, pesticide and fertilizer use fees, and environmental fines. Mechanism: Usually a combination of mechanisms. Page: 52
Revenue Generated/Redirected: Total federal allocation to Maryland is $218 million. Through a 20% state match and the use of tax-exempt revenue bonds, the SRF has the potential to make up to $600 million in loans to local governments, of which $400 million has been dedicated. The unallocated leverage capacity of $200 million (federal funds-$69 million; state-$13.8 million; tax-exempt revenue bonds-$117 million) remains available. Description: The SRF was established through the Water Quality Act of 1987 to replace the U.S. EPA Construction Grants Program for wastewater treatment facilities. The objective of the program is to improve water quality. Grant funds are appropriated by Congress to states, who then make loans to communities. Maryland leverages its federal grant and its state match funds to increase the amount of money available for loans through the sale of tax-exempt revenue bonds. Loans to communities are made at or below market interest rates for up to 20 years. Repaid principal and interest are then used for new loans. The idea is to extend the SRF program to the private sector so that private and public/private partnerships can use and leverage the federal and state funds to engage in such activities as the upgrade of wastewater treatment facilities, repair/connection of failing septic systems, stormwater management, agricultural best management practices and stream restoration (see page 34 for Developed Land ideas, page 42 for Agricultural Lands ideas, and page 54 for Resource Protection ideas). Suggested methods for making the SRF available to a broader audience include placing deposits in financial institutions to provide loan subsidies, which would then leverage the funds, perhaps increasing the pool by two or three times its current size. The financial institutions could also administer the loans, which is an efficient use of their resources since they are in the business of credit evaluation and loan administration. Using financial institutions could also minimize the state's costs and exposure to loan losses. Mechanism: Loan and Redirection of Existing Program. Page: 26 Case Example: pages 92, 93
Revenue Generated/Redirected: Revenue neutral. Would increase access to existing program. Description: Currently, the structural shore erosion control program administered by Department of Natural Resources (DNR) requires landowners applying for a zero-interest, 30-year loan to be in a designated shore erosion control district. This restriction was created in order to target shrinking funds, and to help ensure a consistent erosion control approach along a given stretch of shoreline. However, the current restriction limits access to the program, and may hamper the program's ability to target on the basis of environmental concern. Mechanism: Loan and Redirection of Existing Program. Page: 54
Revenue Generated/Redirected: Approximately $4 million per year. Description: The Maryland Small Cities Community Development Block Grant Program (CDBG) is a federally funded program designed to assist local government with neighborhood revitalization, housing, economic development and improved public facilities and services. The state's program has been designed so that at least 70% of allocated funds will be used to principally benefit low and moderate income (LMI) persons. Maryland's program provides public funds for activities which meet one of the national objectives: "Gives maximum feasible priority to activities which will benefit LMI persons and households having an income equal to or less than the low income limits established by HUD; Aids in prevention or elimination of slums or blight; Meets community needs of an urgent nature or that are an immediate threat to community health and welfare. Eligible activities include loans and grants to public or private nonprofit entities for the installation of public facilities, site improvements an utilities and payment of non-federal share required in connection with a federal grant-in-aid program. Mechanism: Redirection of Existing Program. Page: 36
Revenue Generated/Redirected: Revenue neutral. Description: The current maximum cost-share for animal waste storage systems is $35,000. It is proposed that the maximum cost-share be raised to $50,000 per system. Mechanism: Redirection of Existing Program. Page: 46
Revenue Generated/Redirected: Revenue neutral; increases acreage with nutrient management plans. Description: Approximately 10,000 acres of agricultural land is preserved, in perpetuity, each year through the Maryland Agricultural Land Preservation Program. Soil Conservation and Water Quality Plans (SCWQP) are currently required for all land in the program. Nutrient management and SCWQP are two of the key agricultural practices in the Tributary Strategies. This idea would require that nutrient management plans as well as SCWQP be required on all easements. Mechanism: Redirection of Existing Program. Page: 43
Revenue Generated/Redirected: Revenue neutral. Description: Farmers are currently able to deduct the full purchase price of conservation tillage equipment from their taxes in the year of purchase. The Conservation District certifies that the equipment qualifies. The expansion of this deduction to other environmental equipment would provide an incentive for purchasing it. Initially, the deduction should be expanded to include manure spreaders, but after additional evaluation, other equipment such as waste storage structures and precision farming (computer controlled, variable rate fertilizer and pesticide application) equipment could be added. It may also be feasible to allow deductions for services such as nutrient management or conservation planning and integrated pest management. Mechanism: Redirection of Existing Program. Page: 43 Case Example: pages 103,104
Revenue Generated/Redirected: Estimate not known. ($15 million in Kansas; $44 million in Washington State). Description: This idea draws on the example of dedicated Funds that have been established in several states for a wide variety of conservation practices. These Funds may be funded through a variety of mechanisms. In Washington State, $21 million is collected from the statewide real estate tax, $19 million from solid waste fees, and $4 million from water and sewer fees collected from utilities. This Fund is used to provide low-interest loans to local governments to repair leaking sewer lines, build stormwater facilities, and other projects which remove a significant threat to public health. Kansas has a State Water Plan Fund, a dedicated fund shared by seven state agencies involved in maintaining and restoring water quality. The Fund is fed by general fund appropriations, lottery proceeds, municipal, industrial and agricultural water use fees, pesticide and fertilizer use fees, and environmental fines. Mechanism: Usually a combination of mechanisms. Page: 52
Revenue Generated/Redirected: Recovery of cost of improvements. Description: A special assessment district is an independent government entity formed to finance governmental services for a specific geographic area. Residents of special districts pay taxes to finance the improvements that benefit them. At a local level, special districts, such as sewer districts, stormwater management districts, retrofit/conversion districts, etc., have been formed to finance specific improvements. Special districts may issue revenue bonds to finance capital facilities independently, relieving the burden on general debt capacity. Mechanism: Bond, Fee, Surcharge. Page: 34
Revenue Generated/Redirected: Revenue potential is very case-specific. Description: This technique requires the creation of a special district when a government-financed enhancement is made that benefits the residents of the special district. From that time on, two sets of tax records are maintained for the district-one that reflects the value of assets up to the time of the enhancement, and a second that reflects any growth in assessed property value in the district after the enhancement. The second, incremental, portion of tax revenues are diverted to pay for the cost of the government financed project in the special district. In some cases, governments issue tax increment bonds for revitalization projects, with the bonds being backed, in part, by the anticipated increase in property values resulting from the investment. Pure tax increment financing differs from a special assessment in that property tax rates are not increased. Special assessments, on the other hand, increase the tax rate to raise additional revenues from an area that has received special benefits not provided to everyone. Mechanism: Surcharge. Page: 35
Revenue Generated/Redirected: $0.005 surcharge-$40 million per year. $0.0025 surcharge-$20 million per year. Description: A surcharge would be added to the existing prepared food and beverage sales tax. Revenues generated would be dedicated to provide cost-share, technical assistance and education to address nonpoint sources of pollution to the Chesapeake Bay. Initially, the funds would be used to address agricultural issues, but could be broadened to include urban/suburban nonpoint sources of pollution such as septic tanks, lawn management, etc. The surcharge may be time limited (e.g. 10 years) with optional renewal by the General Assembly. Mechanism: Surcharge. Page: 45
Revenue Generated/Redirected: $500,000 to $10 million per year per county. $70 million state-wide per year. Assumes $20 per year per residential unit, and no charges for undeveloped, tax exempt, and agricultural lands. Description: A utility is an enterprise that performs a service and has the authority to charge fees for that service. For stormwater management, landowners are assessed a fee that is based on their parcel size and degree to which their land is developed. Typically, residential parcels are grouped into size classes with a common fee within each class. Commercial parcels are assessed individually and charged a site-specific fee. Fees are most commonly collected via existing water bill systems or as a line item on property tax statements. The revenues are usually held in a separate fund dedicated to stormwater management activities. The utility could address stormwater retrofit costs and a portion of erosion and sediment control program costs. These utilities could be established within a municipality, a county, or encompass a whole watershed. Mechanism: Bond, Fee, Private Initiative/Incentive, Surcharge. Page: 32 Case Example: pages 97, 98, 99,100,101
Revenue Generated/Redirected: 2% surcharge would likely generate $13 million per year. Description: Retail (non-farm) sales of fertilizer are currently included in Maryland's general sales tax. An environmental surcharge on retail fertilizer products, based on the nitrogen and phosphorus content, could generate revenues for needed Tributary Strategy activities and also serve as a disincentive for over-application of fertilizer on lawns and gardens. Mechanism: Surcharge. Page: 38
Revenue Generated/Redirected: Estimate not known. ($15 million in Kansas; $44 million in Washington State). Description: This idea draws on the example of dedicated Funds that have been established in several states for a wide variety of conservation practices. These Funds may be funded through a variety of mechanisms. In Washington State, $21 million is collected from the statewide real estate tax, $19 million from solid waste fees, and $4 million from water and sewer fees collected from utilities. This Fund is used to provide low-interest loans to local governments to repair leaking sewer lines, build stormwater facilities, and other projects which remove a significant threat to public health. Kansas has a State Water Plan Fund, a dedicated fund shared by seven state agencies involved in maintaining and restoring water quality. The Fund is fed by general fund appropriations, lottery proceeds, municipal, industrial and agricultural water use fees, pesticide and fertilizer use fees, and environmental fines. Mechanism: Usually a combination of mechanisms. Page: 52 |
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Environmental Finance Center
1104 Preinkert Field House, College Park, MD 20742 phone: (301) 405-5036 | fax: (301) 314-5639 email: efc@umd.edu |