Ohio EPA asks for Stakeholder Input for Drinking Water Utility Asset Management Requirements

August 11th, 2017

By: Jon Honeck, PhD, Senior Policy Fellow

Providing the infrastructure for safe drinking water is one of the basic functions of local government in Ohio.  Ohio has over 4,000 public water systems, ranging from large systems in major cities that serve thousands of customers, to village systems, schools, and mobile home parks that serve less than a hundred customers.  The Ohio EPA provides environmental regulatory oversight for the industry (both public and privately-owned), ensuring that utilities meet state and federal standards for providing clean, potable water.  Maintaining and upgrading the infrastructure needed to meet these standards requires a major long-term investment on the part each local community.  Average water utility charges have been increasing faster than the rate of inflation, a trend that is expected to continue for the foreseeable future. 

Ohio Senate Bill 2, which was enacted in June, 2017, strengthened the planning and management standards for public water systems by requiring all systems to have an “asset management plan” in place by October 1, 2018.  The US EPA defines asset management in the following way:

Asset management is the practice of managing infrastructure capital assets to minimize the total cost of owning and operating these assets while delivering the desired service levels. Many utilities use asset management to pursue and achieve sustainable infrastructure. A high-performing asset management program includes detailed asset inventories, operation and maintenance tasks, and long-range financial planning.

There are many major benefits to asset management, including the ability to perform predictive maintenance before an asset fails, and creating a database to provide elected officials and the general public a detailed explanation of why capital investments are needed.  The US EPA and national organizations in the water industry have been promoting asset management for over a decade, although the effort remained voluntary.  Federal law does require applicants to the loan funds to submit a “capability assurance” plan, however, in which the system demonstrates that it has the technical, managerial and financial capability to ensure long term compliance with all public drinking water regulations.  Capability assurance can provide a solid foundation for an asset management program. The next steps are to add detailed asset inventories and connections to service levels. 

In response to SB 2, drinking water utilities will have to file an asset management plan with the Ohio EPA, even if they are not applying for a revolving loan or undertaking new construction.  This will supersede the capability assurance requirement.  Greater Ohio Policy Center (GOPC) recommended moving Ohio’s water utilities (both drinking water and wastewater) toward asset management in its 2017 report, Strengthening Ohio’s Water Infrastructure.  Whether water utilities, especially in small villages, are able to meet the short time frame of the requirement remains to be seen. 

Nationally, surveys have indicated that larger utilities have been the early adopters of asset management strategies.  Smaller utilities, especially those that have a part-time operator, may not have a smooth transition.  Michigan adopted an asset management requirement for its wastewater and stormwater utilities in 2013, but also started a new grant program to help defray the cost.  Interestingly, in the 2016 Capital Budget (S.B. 310), the General Assembly ended a requirement for applicants to the Ohio Public Works Commission to inventory their assets and develop a five-year capital budget.  The OPWC simply did not have the staff resources to review and verify all of the submissions.

The Ohio EPA is now seeking stakeholder input before beginning the formal rulemaking process. Written comments are being accepted through August 14, 2017 at DDAGW_RULECOMMENTS@epa.ohio.gov.  GOPC will continue to monitor the process as it moves from rulemaking to implementation. 


Ohio EPA Provides Update on VW Mitigation Trust Fund

August 11th, 2017

By Jason Warner, GOPC Manager of Government Affairs

In December of 2016, the Ohio EPA began accepting comments on the use of the anticipated $75 million the state of Ohio expects to receive as part of the settlement in the Volkswagen Clean Air Act civil settlement. While a Trustee was appointed by the court earlier this year, there are still ongoing negotiations with the court and parties to the settlement. This has caused the Trust Effective Date to be pushed back to sometime later this month or in September. Once the Trust has become effective, states can begin the process of becoming certified beneficiaries. This is one of the reasons why the state legislature backed away from previous efforts to appropriate $30 million from the settlement towards public transit earlier this year – the funds will not become available until after the state has been certified.

Ohio EPA has recently announced that they are in the process of drafting a mitigation plan which is expected to be completed and available for public comment sometime later this fall. The agency reports that during the December public comment period, the most requested use for funds from the settlement was for school bus replacement, transit bus replacement, and electric vehicle charging stations. These are just two of the ten allowable uses for the funds which are outlined as a part of the VW Mitigation Trust Settlement. The plan being formulated by the Ohio EPA would include all ten of the allowable uses of funds.

Greater Ohio continues to support the use of funds from the settlement being used to support transit – specifically the purchase of newer, more fuel efficient transit vehicles. As was noted in December when Greater Ohio reached out to Ohio EPA with recommendations regarding the use of settlement funds, public transportation in Ohio has been severely underfunded for years. The state currently allocates approximately $0.63 per Ohioan to transit, while Ohio’s peers, such as Pennsylvania and Michigan, invest over $24.00 per capita. As a result of deferred support, over one-third of Ohio’s 3,200 transit vehicles are still on the road despite being beyond their useful life and in need of replacement. The state mitigation plan for the VW Environmental Mitigation Trust Fund represents an enormous opportunity to replace diesel-powered city buses, repower buses with alternative fuel engines, and other alternatives that are both environmentally friendly and will make transit for cost effective.

Transportation Financing Districts Provide a More Powerful Value Capture Tool: Are Local Governments Ready to Use It?

August 7th, 2017

By Jon Honeck, PhD, GOPC Senior Policy Fellow

The state budget bill (Ohio House Bill 49), which was enacted in June, creates a more powerful value capture tool to help pay for transportation infrastructure.  Value capture refers to increases in property valuation on land near a major transportation improvement, such as a transit stop.  The new value capture procedure allows county boards of commissioners that participate in a regional transportation improvement project (RTIP) to create a “transportation financing district” to pay for streets, highways, and rail projects.  Within the district, increases in property tax revenue owing to increases in assessed valuation are converted into service payments to pay for project costs.  In essence, this is the same mechanism used in a tax increment financing (TIF) arrangement, which is a familiar form of project support for Ohio local governments.  

The new law contains guidelines for designating which parcels can be included in the district.  The district cannot include parcels that are already subject to a TIF or downtown development district, and it cannot include any areas that are used exclusively for residential purposes.  On the other hand, the district may include territory in more than one county, and may include parcels that are not contiguous with the rest of the district as long as they will also benefit economically from the project as determined by the county sponsoring the district. 

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The new law comes with significant procedural hurdles that might make it difficult to use in some circumstances.  Existing TIF law generally allows the local government to designate a TIF for up to 10 years and 75 percent of the increased valuation.  In order to exceed these limits, the local government must obtain approval from the local school board that receives property taxes from the district.  It is common for local governments to negotiate compensation agreements with school districts in these situations.

The new transportation financing law goes farther, however, by requiring the county to obtain the approval of every political subdivision and taxing authority affected by the transportation improvement district for any level of exemption (R.C. 5709.48(E)).  The level of exemption can be 100 percent, capturing the entire value of the increased valuation.  Although the new law permits the county to negotiate compensation agreements with political subdivisions, this hurdle could potentially require bargaining with many different governmental bodies. 

After the approval is obtained from the affected political subdivisions, the county must notify and obtain approval from every real property owner whose property is included in the district.  Property owners who opt out will not be included in the district.  While this would not prevent the county from creating a district, it could mean that strategically important properties would not contribute service payments to the project, even though they might benefit from it.   As a final step, the district must be approved by the Ohio Development Services Agency. 

Given the procedural hurdles, the new law might prove easier to use in more sparsely populated, “greenfield” developments with fewer property owners and political subdivisions.  This might mitigate its potential value for public transit in urban areas.  Transit systems across the country are increasingly turning to “value capture” strategies to provide funding for transit improvement and expansion, especially for light rail and streetcars.  The benefits of being near a transit stop are well-documented, and are part of the overall rationale for making transit-oriented development the cornerstone of urban redevelopment strategies.  (For further information on transit and value capture, see Reconnecting America and the U.S. Department of Transportation.)  GOPC will be encouraging ODSA to make sure that this new tool is adaptable for high density development in Ohio’s cities and is not used extensively to fuel new greenfield development.


GOPC On the Road: Warren & Youngstown

August 3rd, 2017

Greater Ohio Policy Center (GOPC) was on the road in Mahoning Valley last week! Great progress is being made in Warren and Youngstown, two Ohio cities located in the northeast part of the state. Check out some of our best pictures below.