HJR 640: Joint Subcommittee to Study Options to Provide a Long-Term
Funding Source to Clean Up Virginia's Polluted Waters, Including the Chesapeake
Bay and its Tributaries
The joint subcommittee
held its third meeting on September 29, 2005. The agenda included presentations
on the requirements for cleaning up state waters, alternative approaches
for reducing pollution from point and nonpoint sources, estimates of the
costs of clean up, and options for funding the cleanup.
THE CLEANUP OF STATE WATERS
Mr. Bob Burnley,
Director of the Department of Environmental Quality, discussed the legal
obligation of the state to clean up its polluted waters. Large segments
of the Chesapeake Bay, its tidal tributaries, and the southern rivers
are listed under the Clean Water Act as impaired waters because they exhibit
at least one of the following properties: low dissolved oxygen levels,
poor water clarity or algae bloom conditions, or poor quality fish food.
Under the State Water Control Law and Section 303 of the federal Clean
Water Act, Virginia is required to clean up these waters. In addition,
while the Chesapeake Bay 2000 Agreement does not legally obligate Virginia
to restore the water quality of the Bay, it does represent a commitment
by the state and the signatories to the agreement to clean up the Bay
The question was
raised by members of the joint subcommittee as to the consequences of
Virginia not cleaning up its impaired waters. An official of EPA responded
by discussing the possible sanctions that could be imposed upon Virginia
for not meeting the requirements of the Clean Water Act. He suggested
that since the water quality program is a federal program with authority
to administer the program delegated to the state, EPA has the option of
taking over the program and administering it out of the regional office.
If EPA found that Virginia was not making a good faith effort to clean
up its impaired waters, it has the option of taking the following actions:
(i) developing the Total Maximum Daily Loads for Virginia's impaired waters
(TMDLs), (ii) setting water quality standards for Virginia, (iii) reviewing
and issuing wastewater discharge permits, or (iv) withdrawing the authority
to administer the program.
REDUCING POINT AND NONPOINT SOURCES OF POLLUTION
Mr. David Schnare,
of the Thomas Jefferson Institute, briefed the joint subcommittee on several
alternatives for reducing nutrients from point and nonpoint sources. His
remarks reflected three themes:
- We know more than
we realize but perhaps still don't know as much as we need to.
- We rely heavily
on mathematical models and perhaps not enough on empirical information.
- A free market
and the profit motive have produced the least expensive, most effective
He described four
examples that reflect these themes and represent particular cost effective
- Using spray irrigation
of wastewater in which the costs of nutrient reduction is one-half the
costs of using advanced water treatment. This approach is useful in
small and some medium sized municipalities in rural settings.
- Controlling the
amount of chicken litter phosphorus through the use of a proprietary
silica blend. It significantly reduces phosphorus, slightly lowers bird
losses, and reduces litter moisture, litter volume, ammonia, and dust.
- Reducing the impact
from urban lawn fertilizers by either (i) banning lawn fertilizers,
with an exception for purchased nitrogen reduction credits from other
sources, or (ii) tax lawn fertilizer (e.g. $5 lbs N), with the tax dedicated
to fund urban wastewater treatment.
- Promoting more
continuous no till agronomy. Such an approach results in no discharge
of sediment, increased crop yields, lower fuel and fertilizer costs,
minimum equipment (requires only a single tractor), and reduced time
in the field.
Dr. Schnare suggested
that the state, in developing and implementing its clean-up strategy,
promote rather than inhibit free markets and the incentives and innovations
free markets produce. Secondly, Virginia should make public investment
decisions like we would any public investment, within our ability to pay
the costs over the long-term and in balance with other public needs.
Mr. Russ Baxter,
Assistant Secretary of Natural Resources, provided a more refined estimate
of the clean-up needs for the upcoming FY'07-08 biennium. For point source
upgrades, the needs will be between $190-230 million. Since the Water
Quality Improvement Fund currently has a balance of $66 million, approximately
$124-164 million of additional state funds will be needed through June
30, 2008. He cautioned the joint subcommittee that by December 2005 a
more accurate estimate of the point source grant funding needs will be
available with the completion of the Nutrient Credit Exchange Association
project. The implementation costs for meeting nonpoint source pollution
control measures will total approximately $90 million over the next biennium,
with the Department of Conservation and Recreation being able to effectively
expend $39.5 million in FY'07 and $50.6 million in FY'08. Based upon these
estimates the total costs of meeting the clean-up needs over the next
two years will be $214-254 million.
Delegate Scott Lingamfelter
discussed the challenges and solutions for cleaning up the Chesapeake
Bay. He suggested that emphasis be placed on mitigating any risk involved
in the clean-up effort. This will involve a program that provides effective
oversight, has an engaged staff, has a strategic plan that links state
and local priorities of work, as well as ties finances to a specific program
of work. The project plan should include phases with attainable goals
with funding aligned to each phase.
To carry out this
program, Delegate Lingamfelter recommended the establishment of a Chesapeake
Bay Clean-Up Authority. Membership of the authority could be a combination
of legislators, executive branch officials, and persons with pertinent
experience. The authority would be led by an executive director who has
a strong background in finance and program management. The staff would
consist of a finance director, marine scientist, engineer, agronomist,
and hydrologist. They would be responsible for developing the "Chesapeake
Bay Clean-Up Strategic Plan" through the Department of Environmental
Quality and would oversee the execution of the plan. The authority would
issue up to $1 billion in bonds through the State Treasurer to be paid
off over a 10-20 year period. Fifty percent of the revenues generated
by the bonds would be dedicated to point sources and 50 % to nonpoint
sources. Delegate Lingamfelter estimated that under a 10-year scenario
the debt service would be $1.32 billion and for a 20-year scenario it
would be $1.64 billion. The debt service on the bonds would be paid through
a dedicated portion of the recordation tax revenue and $50 million per
year from the general fund.
In addition to Delegate
Lingamfelter's proposal, staff presented a number of funding options.
The following criteria may be used in considering funding sources:
- A nexus between
the source of funding and the use of the funds.
- The ease of collection.
- The breath of
applicability to the general public.
- The stability
of the funding source.
- The amount of
- The ease of understanding.
- Practical feasibility.
Some funding mechanisms
for possible consideration could include using current general funds (without
designating a particular revenue source) or dedicating specific current
revenues, such as:
- Recordation Tax.
The year-to-year growth in recordation tax revenues has averaged about
$60 million for the past decade.
- Insurance Premium
Tax. The State Corporation Commission license tax revenues from farm
owner, homeowner, and commercial multi-peril insurance policies are
approximately $42.7 million per year.
Sales Tax. House Bill 2777 and Senate Bill 1235, as introduced, would
have dedicated for clean up of the state waters, one-twelfth of the
revenue (up to $160 million a year) from the 2% sales tax currently
deposited into the general fund .
for possible consideration could include new taxes or fees, such as:
- Surcharge on Insurance
Policies. Insurance premiums collected from farm owner, homeowner, and
commercial multi-peril policies were approximately $1.9 billion in 2004.
Each one percent charged on the insurance premiums would generate $19
million per year. Insurance companies would collect the new surcharge.
- Capital Gains
Tax on Real Estate. A sliding scale capital gains tax could be imposed
on gains from the sale of certain real estate. The scaled tax would
depend on the percentage size of the gain and the length of the holding
period. The tax on personal residences and certain farms could be excluded.
This approach is similar to the capital gains tax proposed in 1989 (HB
The next meeting
of the joint subcommittee will be held November 14, 2005, at 1:00 p.m.
in House Room C of the General Assembly Building in Richmond.
The Hon. Vincent
F. Callahan, Jr.
Marty Farber, David
Rosenberg, and Mark Vucci