U.S. EPA releases Proposed 2022 Clean Water Act Financial Assessment Capability Guidance

EPA has just released its proposed 2022 Clean Water Act Financial Assessment Capability Guidance, which, when final, will replace the agency’s 1997 version.  EPA uses its FCA Guidance to evaluate a community’s capability to fund CWA control measures in the context of both permitting and enforcement actions, such as upgrades to publicly owned treatment works, control measures to address combined sewer overflows, sanitary sewer overflows, stormwater, and total maximum daily loads and integrated planning.

The new FCA guidance places a greater emphasis on the economic impacts of CWA investments on the lower income households of a community, rather than relying upon the median household income.  Under the new guidance, EPA considers two alternatives with respect to whether action-forcing decisions are deemed affordable.

The first alternative adopts the Residential Indicator (RI) and the Financial Capability Indicator (FCI) from the 1997 FCA Guidance and adds consideration of the lowest quintile income and poverty prevalence within a service area.  The second alternative utilizes dynamic financial and rate models that evaluate the impacts of debt service on customer bills. Additional information such as a community’s total water costs (i.e., costs for wastewater, stormwater, and drinking water infrastructure investment) may also be submitted and considered when negotiating the length of an implementation schedule for a community’s CWA obligations.

As the Guidance explains, the 2022 FCA would help to ensure that local challenges related to low-income households are more fully considered. The addition of consideration of lowest income households and poverty prevalence in a service area may identify some communities as having a “high” impact under the new Expanded FCA Matrix that may have been a “medium” impact under the 1997 FCA. In such an example, the community’s Residential Indicator and the Financial Capability Indicator may reveal that the community as a whole has the resources to invest in water infrastructure, but that those investments could potentially impose a significant burden on lower-income households unless steps are taken to avoid that result.
To download EPA’s Proposed 2022 Clean Water Act Financial Assessment Capability Guidance, Click Here.