Executive SummaryFor years the Chesapeake Bay and its tributaries have been recognized as Maryland's most important natural resource. But this vast watershed is a resource in trouble. Pollution, in the form of excessive nutrients, is slowly killing it. The Chesapeake's problems are not without solutions, however. In 1983, and again in 1987, Maryland, together with the Bay states and the federal government, signed formal agreements to reduce the flow of damaging nutrients to the Bay by 40% by the year 2000. Nutrients pose the greatest threat to the Bay, and their reduction is the single most important act to help protect and restore the estuary's enormous ecological, recreational and economic value. In 1992 ambitious and far-reaching amendments to the Agreements focused restoration efforts on the Chesapeake's tributaries and extended the 40% nutrient reduction goal to these tributaries. The 1992 amendments triggered the development of Maryland's Tributary Strategies. Now, in 1995, these detailed plans, jointly written with input from the state's counties, municipalities, businesses, farmers, and citizens, lay out, tributary by tributary, what Maryland must do to reduce nutrient flows into the Bay and its rivers. A key issue, one vital to the success of Maryland's Bay restoration effort, is how to pay for these nutrient reduction activities. Establishment of Blue Ribbon Panel In Maryland, about $200 million is spent each year from federal, state, local and private sources to protect and restore water quality in the Chesapeake Bay. Estimates from the Tributary Strategies effort indicate that we will need an additional $60 million, on an annualized basis, to put in place all of the nutrient reduction activities needed to meet the 40% reduction goal. How to bridge this $60 million gap equitably was the reason, in June of 1994, that Governor William Donald Schaefer appointed a Blue Ribbon Panel on Financing Alternatives for Maryland's Tributary Strategies. The Panel was asked to identify a menu of innovative and equitable financing ideas that would help fill the gap between current spending on Bay restoration activities and full realization of the 40% goal. Basic to the Panel's considerations was the issue of fairness and the need to assure that the burden of costs is distributed appropriately among those who pollute as well as those who enjoy and benefit from the Bay and its tributaries. Basic Principles The Panel began its deliberations with the understanding that:
Panel Findings After several months of discussion and review, the Panel concluded that:
A Menu of Ideas The Panel's charge was to produce a menu of funding ideas for each broad category of activity under the Tributary Strategies. As well as focusing on developing new ideas to finance Tributary Strategy activities, the Panel identified changes to make better use of financing vehicles already in place. This report presents the funding menu first by nutrient source (categories of point source, developed land, agricultural land and resource protection), and then by financing type (bond, fee, loan, private initiative/incentive, public/private partnership, redirection of existing programs and surcharge). This cross-referencing allows the same ideas to be retrieved in either an issue-specific or financing-specific manner. Among the menu of more than thirty-five funding ideas are the following highlights. In the Point Source and Developed Land categories, the report contains ideas such as the formation of stormwater utilities, the sale of municipal utility assets to private investors as tax shelters, and full-cost pricing of service fees. In Agricultural Lands, ideas include the formation of local agricultural cooperatives to assist farmers in accessing more funding at lower costs. Another idea suggests expanding the tax deduction for certain environmental farm equipment. For Resource Protection, the Panel listed options such as forest mitigation banking, the sale of mini-bonds to finance tree planting and stream restoration, a state-wide environmental trust fund and expanding the Bay license plate program. One particularly noteworthy idea that makes use of existing funds is to expand the State Revolving Loan Program (SRF) to allow for loans to those in the private sector involved in Bay restoration activities. Finally, the Panel strongly recommends that funding and implementation of nutrient reduction efforts should take place on a watershed basis through the establishment of "watershed districts." Watershed districts would formalize the relationship among local jurisdictions that reside in the same watershed, help them address common objectives of the Tributary Strategies and encourage the development of common solutions, especially financing solutions. Conclusion The Panel concluded that business as usual will not get us a cleaner Bay, and that contrary to past experience, in the future, financing ideas must be developed along with environmental policy. The Panel's goal was to produce a menu of financing ideas that would be both innovative and equitable. Therefore, the financing ideas developed in this menu are meant to be used creatively, mixed and matched and applied selectively by those who benefit from their use. No one idea alone can guaranty the success of our 40% reduction goal. The Panel urges that this report be used as the beginning of an inquiry into a range of potential funding sources to help finance the Tributary Strategies. Such discussion is essential to ensure the participation of all stakeholders in the Bay watershed and to attain the goals embraced in the Chesapeake Bay Agreements. The newly created Tributary Teams will be leaders in using and developing the ideas identified in this report. Only a partnership between all levels of government and the private sector will bring us closer to realizing a restored Chesapeake Bay.
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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 |