Commonwealth of Massachusetts

Water Infrastructure Finance Commission

Working Group Four

State and Federal Finance and Investment Practices

Final Minutes:  September 13, 2010

In a meeting duly posted, Working Group Four (State and Federal Finance and Investment Practices) convened at one pm in room 511C of the State House in Boston.

Members Attending:  Martin Pillsbury, Peter Shelley, Leah robins (for Rep Dykema), Brendan Jarboe (for Senator Eldridge), David Reidell (DEP), Paul Niedzwiecki, Phil Jassett, Bruce Tobey, Tom Tilas.

Also attending:  Zachary Crowley

The members selected Mr. Martin to chair the group.

Mr. Martin opened the discussion, asking for feedback and comments on the charge to the group.  The Working Group is to charged with investigating existing sources of financing and grants, state and federal trends, the role of state and federal laws and regulations in shaping infrastructure needs, prioritization of projects for funding, sunk costs/ depreciation funding, regionalization of systems, storm water utilities, financing models, broad based taxes, and public finance/municipal debt/financial products.

The members identified a number of issues they would like to pursue over the coming months, including:

Private Financing/Capital

• Suggestion to read GAO study on this topic (exec summary distributed)

Privatization

• Concern that even degrees of privatization have tremendous backlash, but also that a broad range of tools need to be addressed, including privatization.
• Perhaps changes to prevailing wage and union relations could make privatization less attractive financially
• Potentially high levels of investment early on in the privatized relationship but concerns about the state of facilities when they are returned to the Commonwealth after privatization

Regionalization

• Proposal to prohibit state financing unless regional approach is considered or perhaps utilized
• Regional approach benefits both the environment and costs (economy of scale in administration costs for example)
• Suggestion to look at Residual Designation in Milford, Bellingham and ___ where EPA is using regulatory hammer and then providing carrot of grant funding
• Suggestion to look at DEP Pollution Abatement for Waste water which could be a regulatory vehicle towards regionalization

Federal and State Funds Available

• Summary of all types of funds and trends would be helpful (Mr. Terry will provide 10 year trend data on SRF)
• Guidance on future trends would be helpful-less funding seems to be the guidance from federal government
• What types of projects are funded?  Need to focus on what funding is available and what it can be applied for
• Discussion of Clean Water Reauthorization Act and its possible impacts on federal funds if passed, particularly if storm water is included without an increase in funding for all projects.
• SRF praised for its separation from influence by political forces-concern that adding grant component would sully that purity.  Adding grant funds through SRF similar to process used in ARRA, rather than just loans, proposed by other members

New Funding Ideas

• Discussion of Private Activity Bond which state applies for and possibly includes water infrastructure financing.
• Include grant proposal in recommendation perhaps similar to financing for new energy-perhaps fund through tax on polluters
• Perhaps develop a graph of the current/projected needs vs. cost and shift curve to show impact of different finance tools

Other

• Case studies would be helpful in understanding the various topics, both in state and around the country
• Suggestion to invite Bob Ciolek to meeting group to discuss his experiences directing HEFA
• Emphasize the need to consider all ideas, many of which will likely not advance but should be examined
• Perhaps consider bottle bill and its effects on finance
• Discussion of concerns on the Cape that water costs will lead to unsustainable betterment, addressing formulas for Chapter 90 may be too large an issue

Discussion of EPA Needs Study and other understandings of the size of the need for infrastructure.  Suggested that much of this topic is being addressed by Working Group 1 and perhaps should not be a focus of this group’s discussions except insofar as determination of need matches with different types of funding.

It was agreed that the next meeting of the Working Group would be determined by email initiated by the Chair.

It is hoped that Bob Ciolek and Steve McCurdy will be able to attend.  In the future bringing staff from the offices of Senator Brown and Kerry to inform about federal finance bills relative to water would be helpful.  Having a member of DEP attending the meetings was helpful and it is hoped that they will be able to continue attending.