Vermont Legislature SmartTranscripts:

[Emily Bird, Director, Water Investment Division (DEC)]: What?

[Rep. Amy Sheldon (Chair)]: Great. Welcome back to the House of Norman Committee continuing our edification on the budgeting process. We welcome the Water Investment Division representatives. Welcome.

[Emily Bird, Director, Water Investment Division (DEC)]: Thank you so much for having us in. For the record, my name is Emily Bird. I'm the Water Investment Division Director at the Department of Environmental Conservation, and I'm joined today by my colleague, Gianna Petito, who is our Deputy Director for the Water Investment Division. Today, we're going to do a little bit of a deeper dive on the Water Investment Division's budget. I'm just going to get one thing situated. There we go. Great. So an outline for our presentation today. Today, we're going to cover our division's vision and mission, the water resource infrastructure work that we support and promote, a breakdown of our budget and the funding programs that it it provides resources for, and wrap up with some resources for more information. Right. So our division's vision is that Vermonters equitably benefit from clean water that provides public health, safety, use, and enjoyment, and our mission is to steward and sustain public investment in water resources and infrastructure by securing and targeting financial and technical assistance while ensuring transparency and accountability to the public and stakeholders. We have five major program areas in our division. The state revolving funds provide loan financing and technical and engineering support to water and wastewater infrastructure, as well as stormwater treatment and natural resource projects. The Clean Water Initiative Program provides budget coordination, technical and financial assistance to partners to implement clean water and facilitates tracking and accounting and reporting and communications on the results of investments in clean water. Our watershed planning program leads the tactical basin planning process, which identifies priority water quality concerns in Vermont's major 15 river basins and identifies priority actions to address those water quality concerns based on water quality monitoring and sector based assessments. Watershed Planning Program works really closely with partners across the state from regional planning commissions, conservation districts, and watershed organizations to drive that planning process. And they also provide technical project management for the Water Quality Restoration Formula Grant program and the Clean Water Service Delivery Network. Our Dam Safety Program regulates non federal and non powered dams in Vermont and owns and operates 14 dams, including the three flood control dams along the Winooski River. Our agency facilities team provides engineering, design, construction, project management support for all of ANR lands. So that includes water, wastewater, stormwater and dam rehabilitation work on ANR lands covering Department of Environmental Conservation, Forest Parks and Rec and Fish and Wildlife. Those are some of our major program areas. And at a really high level, our programs support and promote projects that enhance and restore natural infrastructure, including floodplains, wetlands, riparian buffers. They help to refurbish and upgrade drinking water and wastewater systems and associated infrastructure and establish and retrofit stormwater management tree management systems and promote dam safety and flood control. Moving into our budget overview, here is a breakdown of the DEC budget by division. As you can see, our well, maybe you can't see, but that really big blue rectangle is WID's division budget. And so we have the largest division budget in DEC, and that's largely in part due to the very high level of funding that we're able to pass through to provide financial assistance to our partners. So 92% of Wood's budget goes out as grants, contracts, and loans. This pie chart or these pie charts provide a little bit more of a breakdown on that for you. So on the far left in green, 92% of our budget goes out as grants, contracts, and loans. 8% of our budget is for operating, including personnel. The dollars that are passed through that 92% is further broken down as 73 percent loans, 16% grants, and 11% contracts. And then breaking that down by program area, 45% of those dollars that go out the door are associated with our drinking water state revolving loan fund, 27% with our clean water state revolving loan fund, two percent with Dam Safety Loan Program, and 26% with the Clean Water Initiative Program, so the Clean Water Funding. And then just breaking that down a little bit more for you, Here, we show some subprogram areas. So for the clean water side, about two thirds of the clean water funding is associated with the state revenue from the clean water fund that's shown in the dark green. And oh, I'm sorry. Oh, there it is. Okay. And then about one third is from the federal Lake Champlain Basin program that's shown in the light green for Clean Water Initiative program. Moving on to the blue, we have the Clean Water State Revolving Fund, and about half of the dollars that we anticipate going out as loans are associated with the bipartisan infrastructure law. And this coming year will be our last year of funding coming from the federal level for bill funding, and that's shown in this the striped segments of the pie chart. Moving over to the drinking water state revolving fund, we have about three quarters of the the loan funding that we anticipate to go out this year will be associated with the bipartisan infrastructure law, and about one quarter of that is the base funding to go out as loans under the drinking water state revolving fund, and then 2% is the associated with the new loan program that is going to be launched to support dam safety. So on the

[Rep. Amy Sheldon (Chair)]: Actually, I have a question from Sure.

[Rep. Larry Satcowitz (Ranking Member)]: Yeah. What I'm I'm wondering you know, there's pie charts showing the relative amounts of money that are, you know, on each section, and I'm wondering how much of distribution of funds is due to sort of policy choices and how much is due to we had an opportunity to get money. And so we did. And so this is bigger than it would have been otherwise kind of.

[Emily Bird, Director, Water Investment Division (DEC)]: Sure.

[Rep. Larry Satcowitz (Ranking Member)]: I know that know that's a big question, but I wonder if you high have

[Rep. Kristi Morris]: level response.

[Emily Bird, Director, Water Investment Division (DEC)]: Absolutely. Once I get through the budget breakdown at the division level, Gianna going to walk through some of the individual program areas. Each of the programs that we run are driven by federal and state statute and have a very specific intent and goals that they're directed to achieve. So it is all very much strategically directed based on law and rule. And our division is also positioned, based on the resources we manage, when opportunities do present themselves to leverage and bring on additional resources. We have the staff and the framework to be able to act on those opportunities and bring in additional resources to serve Vermonters. So, for example, the American Rescue Plan Act or ARPA dollars, we were able to plug those into many of the programs that we we managed to make those dollars go further. And with the bipartisan infrastructure law, that's all flowing through our state revolving funds, and we were able to provide more loan and loan subsidy as a result of that, but very much all to our core priority work and driven by statute and rule.

[Rep. Larry Satcowitz (Ranking Member)]: I'm sure it's all driven by statute, but there's still a lot of decision making process that goes on right, with within the agency in terms of, well, we are we need to do this, but we also need to do that. And sometimes maybe the because the the things that you're statutorily required to do are just maybe not possible to do given the funding that you have. Or and so there's a lot of decision making that has to actually then still happen in terms of setting priorities and deciding what's important or looking at resources that are available and making decisions based upon that as well. Does that characterize things accurately?

[Emily Bird, Director, Water Investment Division (DEC)]: I I think that's a fair characterization. And when we move into the program areas, we'll Gianna will give a really nice overview of some of that decision making process and and how budgeting is handled at the different levels, on the state revolving fund and also the Clean Water Board budget process. So hopefully, we will, I think, address a little bit more detail for your question as we move through the presentation, but please feel free to jump in if we can add more detail at any point along the way. Thank you so much. Before I move on, I just want to highlight that the bi partisan infrastructure law funding was available for federal fiscal year 2022 through 2026. As I mentioned, this year will be the last year that those dollars are flowing in through our programs. Over that five year period, the drinking water state revolving fund was able to leverage an additional $181,000,000, thanks to Bill, and on the clean water side, an additional $59,000,000. And so some of that will be all of it will be put out as loans. Some of it will be repaid back and result in a long term increase in the dollars available to revolve in our state revolving fund, and some of it also is going to loan subsidy, so principal loan forgiveness that will help make some of these projects more affordable. For example, addressing emerging contaminants, those dollars are a 100% forgivable.

[Rep. Amy Sheldon (Chair)]: Question, were those administered through the Clean Water Fund?

[Emily Bird, Director, Water Investment Division (DEC)]: Those are administered through the state revolving funds for drinking water and clean water. And so all of those we had federal grants that came in from the EPA to go out through our loan programs, and all of those dollars went through the annual prioritization process and the intended use plans for the state revolving funds, which Diana will will touch on in in a moment.

[Rep. Amy Sheldon (Chair)]: Yeah. Couple. Alright. Jenna, second. Yeah. This is not specifically about how you're spending your money,

[Rep. Larry Satcowitz (Ranking Member)]: but since you brought a lot, something I've really wondered about for a while is you talked about loans that are 100% forgivable. Sounds a lot like a grant, but I know there's got to be some sort of substantial difference or else we wouldn't be talking about them in different ways. Can you tell us a little bit about how that connection works?

[Emily Bird, Director, Water Investment Division (DEC)]: Sure. Gianna may touch on this once we get to that part of the presentation. Basically, each year, we run a solicitation process called our priority project list where communities can apply for loan funding, loan financing. It goes through a prioritization process, and then we work with either the Vermont Municipal Bond Bank or Vermont Economic Development Authority, VIDA, to provide loans. And depending on the prioritization of the project, the community it serves, they may be eligible for principal loan forgiveness. And so that would be built into the terms of the loan. And so it it does function differently than a grant even if it gets a 100% of the principal loan forgiveness. It's just a different mechanism based on how the program is set up for dollars to flow out of our lending institutions. Is there anything else you want to add?

[Gianna Petito, Deputy Director, Water Investment Division (DEC)]: I think that you're you're touching on it. Some of the main differences are really sort of the the paperwork and process alone. The the loan review going through the bond bank or Vermont Economic Development Authority is reviewing the borrower and their eligibility to access the funds. If it's a municipality, they have to go through a bond vote. So regardless of whether those things are subsidized or not, the process and paperwork and the commitment to pay back some portion of it looks very different from competitive requests for proposals of a grant that's advancing the admission of the division in alignment with nonprofit watershed mission. So they just they have a different flavor. But in terms of the general public will often think of it as free money one way or the other. So it's a I think it's a fair question, and the exact differences is just really more around the process and the paperwork and the commitments and who's involved. And maybe that ties a little little bit to your other question about how how do we, as a division, decide on this pie chart? And director Bird's reference about statute is that each of these dollars aren't necessarily sort of a big pot of funds that we say, Okay, let's put it over here to SRF, or let's put it over here to Clean Water Fund. Each of them are sort of separately appropriated under different reasons. So the SRF money or the federal money is set with certain formulas about how much Vermont will get and how much we have to commit as match. And that's coming to us as very specific line items in the capital bill. We don't take that and say, let's go put that over in the clean water That's a different budgeting process. And how much money comes to the to WID to administer from that budget process is what adds up to this pie chart in some ways. So there's there's a little bit of of movement there, but a lot of it is really tied to what's authorized in statute from different line items as well. Sorry. That's your other question, but

[Rep. Amy Sheldon (Chair)]: Did you get the answer to your question?

[Rep. Larry Satcowitz (Ranking Member)]: Yeah. No. That was helpful.

[Rep. Amy Sheldon (Chair)]: Okay. And maybe I need to rehear it. I'm not sure. But how do you decide who gets relief from their loan and who pays their loan back?

[Emily Bird, Director, Water Investment Division (DEC)]: I think we are going to get into that in a little bit more detail. Let's keep going. Great question. Happy to touch on that. Thank you so much.

[Rep. Kristi Morris]: I have a question on that too, but I was holding on. I I think that's something.

[Emily Bird, Director, Water Investment Division (DEC)]: Okay. Great. Yeah. Thank you. Look forward to that. Okay. Maybe building a little bit on what Gianna said. At the state level, we have our state revenue into the Clean Water Fund. We also work with the institutions committees through the capital bill appropriation process. We touch on sections nine and ten of the capital bill for clean water and ANR programs, and there's also loan repayment dollars that come in that we're able to program out. And all of these state sources that we are we we manage and administer help to leverage federal resources as well. So for example, from the Clean Water Fund, we were able to use Clean Water Fund dollars as significant contribution to be able to access the USDA Regional Conservation Partnership Program grant to bring in additional resources for farmers and foresters. The Clean Water Fund was also paired with American Rescue Plan Act dollars to make those dollars go further to support a lot of the stormwater infrastructure requirements in Vermont. Clean Water Fund is also used to provide match to bring in federal funding through the Lake Champlain Basin program. From the capital bill, we are able to bring in match dollars to bring in the federal grant for the drinking water and clean water state revolving funds and also to provide match to support the US Army Corps of Engineer work at ANR owned dams. So I guess the takeaway from this slide is that our operating budget houses some of the state funding and federal funds that get appropriated to our agency, but we make those dollars go a lot further by strategically pairing and leveraging with other resources at the federal level. So with that, I'm going to hand it over to Gianna, who will walk through more detail for each of these program areas. We're going to start by introducing the state revolving loan fund programs. And hopefully, this will address some of the questions that were raised, but happy to touch on those again as part of this slide as well. Gianna, thank you. Should we

[Gianna Petito, Deputy Director, Water Investment Division (DEC)]: pass our Yes, we're just gonna switch our

[Emily Bird, Director, Water Investment Division (DEC)]: laptops here.

[Gianna Petito, Deputy Director, Water Investment Division (DEC)]: We're all doing this.

[Emily Bird, Director, Water Investment Division (DEC)]: Presenter and note taking. Thanks, everyone. Thank you.

[Gianna Petito, Deputy Director, Water Investment Division (DEC)]: For the record again, Gianna Petito, deputy director for the Water Investment Division. Thank you for having us. And as director Bird mentioned, I'll do a deeper dive specifically into the SRF program. Again, that's drinking water water, but we call it one program, one set of staff working on that. And wind Clean Water Initiative program and dam safety, since those are really the main drivers for some of this big 92% pass through dollars into grants, contracts and loans that you're seeing in our budget. So with the State Revolving Loan Fund program, the Clean Water and Drinking Water SRFs are nationwide programs. They exist in federal statute, and they have for a while. So the Clean Water SRF was launched in the '80s as an amendment to the Clean Water Act. And the Drinking Water SRF followed in the '90s as an amendment to the Safe Drinking Water Act, both to support drinking water infrastructure and compliance with the safe drinking water. Essentially, every year, Congress appropriates money to both of those nationwide programs, and then each state or territory gets funding called a capitalization grant for our drinking water and clean water. And how much money Vermont gets, it's sort of based on a formula. So for the clean water, Vermont gets 0.49% of the full dollars associated to the nationwide program. And on the drinking water side, EPA calculates it based on a need survey for drinking water, which is done every few years or so. So we have some sense of what that capitalization grant's going to be, and then states are required to provide a 20% match. So we do that through the capital bill. We have, as Emily was pointing to, we have section nine A and R, which is our we use one of those lines to say match our drinking water. And then we use a section from section 10, clean water, to match the clean water SRF. So that sort of shows like the capitalization and the state mark match components, which are annual processes. And then those get fed into the state revolving fund, which provides these low interest or no interest loans, mostly to municipalities, some private entities. Then there's loan repayments back. Those loan repayments back aren't showing up in our budget. They sit with the bond bank and with VIDA. So when you're seeing the big bill, you're seeing the capitalization grant, and the capital bill is seeing our match. And then the loan repayments aren't being seen by the legislature because they're just being administered by our partners.

[Rep. Amy Sheldon (Chair)]: Do they get recycled into the same type of grants? They stay in your pool of funding? They stay in the fund,

[Gianna Petito, Deputy Director, Water Investment Division (DEC)]: in the state revolving fund. And annually, the SRF program is auditing the fund balance and analyzing what's gonna be available for next year's loans. What's the total amount we'll be able to loan out? There's a lot of different pieces to this, and I'm a novice. And if there's a lot of interest here, we can bring in our SRF program staff or the experts to help with that. But there are some different line items of the capitalization grant to be aware of and how we manage the program. For example, there are set asides on the drinking water SRF side, and Emily will speak to that a little bit, but it also supports staff time over in the drinking water and groundwater protection division to administer some of the Safe Drinking Water Act obligations assigned to the state. We also have admin fees that are charged that support some of our program staff in WID as well. So, lots of different sort of pieces to it, but just generally understanding federal dollars, state match, revolving fund. It is very often combined with other state, local, or federal programs. For example, the USDA Rural Development is a frequent partner in some of these very expensive projects, think large wastewater treatment facility upgrades as an example. And at the state level, we have the municipal pollution control grants that also articulated in statute. Those dollars are capital dollars, And we use that and pair it with some of the clean water loans to offset up to 35% of those project costs. So, different ways that these are packaged together. That's an interesting unique example where it's not forgiving the loan, but it is packaging a grant in partnership with the loan to lower the overall loan costs. So, lots of different ways these things come together. For both drinking water and clean water, there are established prioritization criteria in statute and rule that are applied to the projects that come in. And there are annual intended use plans. You can see here both the drinking water and clean water ones, the current ones here. And essentially, this is a formal process by which every year our program puts out a priority project list application, PPLA maybe, where municipalities and entities can apply and say these are the projects that are coming up. This is in a pipeline, so the program has a sense of all the need that's out there or new additional need for projects that are funded or underway, the program applies the criteria, the prioritization criteria, to say, Okay, what's really falling above the funding line versus below the funding line, below what's available? They package all that into what's called an intended use plan, put it out for public comment. And then all of that goes to EPA and is how we access or draw down the capitalization grant. We say, here's our list of priority projects based on this ranking and how much money is gonna be available in the loan this year based on the fund balance. It's a very time intensive and thought out process that gets submitted to EPA, and that's how we access the dollars. And WID is not the only partner managing this. So, the role of our staff is really supporting the priority list application, auditing the fund balance, drafting the IUPs, collecting the public input, and working with EPA to access the grant. But we also have partners in the business office that are doing a lot of the grant paperwork. We have partners in drinking water groundwater protection division overseeing sort of the engineering of the drinking water components. The Wood staff also support loan applications, and the Wood staff also have we have design and construction engineers on the clean water side who are hand holding the projects through, making sure that we're in compliance with all of the federal cross cutters and obligations that come along with accessing VA dollars. I think that's it, but I'll take I'll take questions.

[Rep. Amy Sheldon (Chair)]: Representative Tagliavia? How

[Rep. Michael “Mike” Tagliavia]: often do you find that that state revolving loan fund at the end of the year or maybe before the end of the year is not accessible because there's no money left. Does that happen often, or is this a fund that's got enough money and it's not running?

[Emily Bird, Director, Water Investment Division (DEC)]: It varies year to year, but where we are right now is demand is often more than what is able to be funded. However so whenever each year as part of the IUP process that Gianna described, there's a priority project list application. So we hear about all the projects that want to access financing. Those projects get ranked. And based on the dollars we anticipate having available to issue loans, there's a funding line that's drawn that says all the projects above can access funding. All the projects below are ranked and and can access funding if we're able to move that funding line lower. And many times there's projects above the funding line that may not be ready to proceed that year. Something may come up that could slow the project down, and then we're able to move funding down to access those those projects lower on the list. So it is a bit fluid over the course of the year. And often, we will see projects that may come in one year, not able to access or aren't ready to access that come in the next year and then are further along and able to access. So we do our best to meet all of the needs out there and provide that kind of assistance to to the towns and and some private borrowers. But unfortunately, there are years where we're not able to support every single project that comes in.

[Rep. Amy Sheldon (Chair)]: Representative Austin? Yeah.

[Rep. Sarah “Sarita” Austin]: This may be not anywhere in your area, but I'm wondering does this or any of your programs intersect with the CHIP's program? Not directly, although I think that the the CHIP program is providing has the potential to provide some excellent resources to help with development and especially housing. And and so there are certainly, at the local level, some of the projects we're promoting with the SRF could be really helpful in setting the stage to be able to bring in CHIP resources. But we're not playing a direct role in leveraging the CHIP funding. Thank you.

[Rep. Amy Sheldon (Chair)]: I just noticed that you had the Middlebury project in here, and I guess I saw a sign the other day that said it was a clean water project. That's why I asked my question. Oh, interesting. So I was curious, and it's very clear it's a state revolving fund, I would have expected, but I'm pretty sure it says clean water project sign right there by it.

[Emily Bird, Director, Water Investment Division (DEC)]: Yeah. So the clean water project signage, it applies. We have that as part of the posting for all of the projects that are funded with Clean Water Fund dollars, and the SRF programs have also incorporated that into their signage. Although the Middlebury Project is drinking water. That might have been

[Rep. Amy Sheldon (Chair)]: It really struck me, maybe in the field, the few people who walked by it and thought, I need to know

[Emily Bird, Director, Water Investment Division (DEC)]: more about that. I'm backtracking what I just said. Thank you. Yeah, we will look into that.

[Rep. Amy Sheldon (Chair)]: Also maybe it does say SRF, but I'm it was very much the logo of the Clean Water Projects that I saw.

[Emily Bird, Director, Water Investment Division (DEC)]: Great flag. Yes. Good to me.

[Rep. Amy Sheldon (Chair)]: Glad the projects. Just was curious. Yeah.

[Emily Bird, Director, Water Investment Division (DEC)]: Okay. Morris.

[Rep. Amy Sheldon (Chair)]: Thank you,

[Rep. Kristi Morris]: madam chair. This is such a valuable program to communities, municipalities, and so appreciate about. And I know the original EIL funds were for infrastructure improvements and such, so I appreciate that. My question is going to get to the longevity of state SRF overall, because if you're lending out money, and we have a couple of projects going on in Springfield that follow-up with this. And so we went to the citizens and got the bond vote to implement the projects, and that was approved upon. We've applied for funding, and some of it has been mentioned is forgivable, but it's a thirty year payback. So my point is if you're putting out I'll keep it simple. $2,000,000, and there's a million dollars coming back, a million dollars forgiven, a million dollars coming back in repayment. Over the time, does that dwindle the pot of money for the SRF to a point where it's less effective. And I and I know the answer to that because number of projects are are huge, especially when you get into wastewater.

[Emily Bird, Director, Water Investment Division (DEC)]: Mhmm.

[Rep. Kristi Morris]: Is is this program set up for longevity? And you did mention federal funding coming in annually that we get a percentage of that. Mhmm. So my my thought is the money will continue to be there.

[Rep. Larry Satcowitz (Ranking Member)]: Mhmm.

[Rep. Kristi Morris]: Maybe not to the level that we saw in the past six years since since COVID and DILs.

[Rep. Amy Sheldon (Chair)]: Fair. Thank you.

[Rep. Kristi Morris]: But so my my point is and we have another bill going through that if I may speak to a madam chair briefly, that if it's passed, would take some money out of the clean water fund, the sheets, or bottle redemption, etcetera. So I'm just looking overall that as revenues coming in decreases based off in design and intent that these programs will continue going forward. And I don't know if you can speak to that just briefly or if there's adjustments that can be made or how that problem presents itself to your department.

[Emily Bird, Director, Water Investment Division (DEC)]: Sure. Related to the state revolving funds, there's some pretty complicated cash flow modeling that that happens looking at all of the loans that have been made. Their repayment schedules all vary, And so it is a complicated process to project out what loan repayment dollars will come back in to revolve into new projects. But we have an excellent team collaborating across DEC and the bond bank to do that cash flow modeling, and that's a really useful tool to make sure that we're not overextending ourselves in terms of the loans that we offer. You point out the bipartisan infrastructure law funding. That's provided a major boost to capital that will revolve into the SRFs. We're very grateful for that. And the importance of those annual federal capitalization grants, those are critical for the long term sustainability of the state revolving fund. And I have a slide in a little bit that will speak to a concerning dynamic at play related to federal earmarks and the impact that that is having and could have on the long term sustainability of the SRFs. So we'll certainly get into a little bit of a deeper level of detail on that. You also mentioned the sheets that flow as one of the revenue streams into the state clean water fund, And that is also one of the three critical revenue sources to our clean water fund, is required to meet our long term funding plan for implementing some pretty major regulations, especially for phosphorus in Lake Champlain. We understand that some of those dollars are are proposed to support some recycling infrastructure for a short short term period of time and would be able to, I think, strategically plan through our budgeting process if that were to pass on on how we could minimize impact to programs for that short term. But any any long term diversion of funds from the Clean Water Fund would certainly come up with an impact to our programs. And so we keep a close eye on that and appreciate the support in in maintaining those revenue streams.

[Rep. Kristi Morris]: But your revenue streams come from multiple sources.

[Emily Bird, Director, Water Investment Division (DEC)]: Yes. From the for the Clean Water Fund, in addition to the issues from unreturned bottle deposits, we have the meals and rooms tax and also the clean water surcharge on property transfer tax.

[Rep. Kristi Morris]: Thank you.

[Emily Bird, Director, Water Investment Division (DEC)]: Thank you for your

[Rep. Amy Sheldon (Chair)]: question. Other questions?

[Gianna Petito, Deputy Director, Water Investment Division (DEC)]: Questions? So just in general, when it comes back to budgeting, again, we're trying to keep an eye on the federal legislation and appropriations and then estimate what that match need will be, and that will be coming in in the capital bill. We've spoke to this a bunch, but in terms of what project types we're talking about with the SRF, it's planning phase, design and construction. Again, drinking water, think about pipes, think about small village systems or treatment or storage. The Killington Municipal Water System was supported with drinking water SRF. It's part of that. And then on the clean water side, you could think of large wastewater treatment facilities, but also storm water projects or also natural infrastructure projects as well on floodplain restoration, etcetera. Overall, over the last five years, we've given about a $105,000,000 out in loans in the clean water side and over a $150,000,000 out in loans on the drinking water side. And then you were chair Sheldon, you were looking at the examples of investments. These are just some recent examples to get a sense of it. We have a drinking water SRF. It's part of the funding to support improvements to Chipman Hill water tank in Middlebury. We also have a clean water SRF project supporting separating sewer and storm water in the town of Hartford and reducing the instances of combined sewer overflows over there.

[Emily Bird, Director, Water Investment Division (DEC)]: And then would you like to speak to earmarks? Sure. We started on this a little bit here, but I just wanted well, before we move on from the state revolving funds, wanted to make sure you are all aware of a dynamic at play where federal earmarks are impacting our state revolving funds. So congressionally directed spending or CDS or also known as community project funding, CPF, I'll just refer to as earmarks at the federal level. Those that are in many of those that are in the water and wastewater sector are deducted from the National State Revolving Fund appropriation out of that category of the federal budget. And so that basically means that when these earmarked projects are appropriated, the dollars going to them across all the states get taken off the amount that is available to go to states for their SRF programs off the top. And then what's left gets apportioned out to states based on formula and need. And so this is a concerning dynamic for the long term sustainability of our state revolving funds. These earmarks are issued as grants to individual communities and to these individual projects versus going through the robust prioritization and review process of the state revolving fund programs. And those grants, unlike our loans, they do not get repaid and revolved to continue to support future projects. So we are keeping a really close eye on this dynamic. These earmarks were reestablished in federal fiscal year 2021 and resulted in a reduction in appropriations to states for the SRF from federal fiscal year 2022 through 2024. There was reprieve from this in 2025 due to the continuing resolution at the federal budget. The continuing resolution, authorized the funding levels but did not authorize your remarks. So there is a bit of a reprieve, but we are anticipating that there may be an impact to our SRF appropriation for federal fiscal year 2026. This is especially concerning on the drinking water state revolving fund side where set asides up to 31% of that federal grant can be used to support DEC staff program capacity to implement the federal Safe Drinking Water Act. And if this came to pass, I have heard an estimate from the drinking water groundwater protection division that that could right now, these set aside support about 22 full time equivalent positions, and the funding would only be significant enough to support seven positions. And those the work of those programs is really critical for addressing lead, PFAS, and other contaminants in drinking water across the state of Vermont. So this hasn't happened yet, and we're we're working really closely with our congressional delegation. This is a concern in Vermont. It's a concern across all 50 states, and we are working closely with regional and national associations to work on messaging and with Congress and trying to get ahead of this. We have had some really great work with our congressional delegation in Vermont on a and they are putting forward a proposal under this year's Water Resource Development Act or WIRDA to decouple that earmark funding from the SRFs. So we're hopeful that we may have some relief coming on that front.

[Rep. Amy Sheldon (Chair)]: Representative Satcowitz.

[Rep. Larry Satcowitz (Ranking Member)]: So just so I understand, this is spending that, for instance, a senator could say, have a project in one of my communities I'd really like to see funded. That person can manage to get it into the federal budget. The money goes to that community, but then it comes out of this bigger pot of money that goes to all the states. Is there a connection between what a particular senator from a particular state must or in terms of how much money they direct to their state to what gets allocated to the state from that federal fund?

[Emily Bird, Director, Water Investment Division (DEC)]: That's a great question. I I may have to follow-up with a little bit more detail how that works at the federal budget level. My understanding is that on the House and the Senate side, they do an open solicitation each year for earmarked projects so communities can apply. Each senator or representative, they review and rank the project applications and put forward a request to their committee for consideration of funding. And it varies state to state which projects get funded and how much money may come back to the state through earmarks. But all of that funding for earmarks just gets taken off the top. So the earmarks that come to Vermont don't necessarily impact Vermont's state revolving fund grant amount directly. It's all pulled together at the national level, taken off the top, and then there's a formula that allocates the remaining dollars out to states for their SRF. So I hope that answers your question.

[Rep. Larry Satcowitz (Ranking Member)]: Yeah. I'm just wondering about, like, if if it did if there was a connection, then we could say to our congressional delegation, please don't earmark money because it's just gonna take it from our pot of money that we have available, and then we won't have things prioritized in a way which might make more sense than just who has the loudest voice that connects to one of our, you know Mhmm. One of the members of our delegation. But it sounds like that's not what's going on. And so it really is in our best interest for them to get whatever they can and and bring it into the state until perhaps they change the way the money is distributed.

[Emily Bird, Director, Water Investment Division (DEC)]: Under the current framework, I I think that's an accurate summary. And so if we were able to decouple the earmarks from SRFs, then it would be much better for the long term sustainability of the SRFs, and then also still enable our congressional delegation to which they do now continue to advocate for additional resources for communities without it coming at a direct cost to our our SRS. Great. Thank you. So we will continue to flag this as a concern and wanted to put this dynamic on on your radar as well, and happy to keep your committee up to date as we as we learn more.

[Rep. Amy Sheldon (Chair)]: Great. Thank

[Gianna Petito, Deputy Director, Water Investment Division (DEC)]: you. So that was SRF. We're gonna move to the Clean Water Initiative Program and other programs in the Water Investment Division. The right side of the slide shows the mission of that particular program and the green wedge aligning and coordinating clean water efforts statewide is how CWIP really articulates some of its role in supporting some major interagency budgeting processes. So two ones of note or really the main ones to think about are the clean water budget and the Lake Champlain Basin program budget. And so the staff play a role in supporting those budgeting processes, drafting those budgets. And then some of that money from each of those budgeting processes also comes to the Clean Water Initiative Program to package together, to design funding and put that out on the ground in the form of grants or contracts. So not all of the Clean Water Fund comes to WID and QIPP, just a portion of it is assigned. An example here, so the blue droplets are sort of those funding program examples. And one that this committee has heard quite a bit about is the three ACRE and the different ways that Clean Water Initiative Program have packaged together ARPA dollars, Lake Champlain Basin Program dollars, and Clean Water Fund to holistically support some of the state's clean water goals in that space. So briefly on these major budgeting processes, if they're helpful for you, the first I'll talk about the Clean Water Board process. The Vermont Clean Water Initiative is actually a statutorily defined interagency initiative. And the purpose of it is to provide the staffing and financing to support our maintenance and compliance with Vermont Water Quality Standards. To ensure that the full interagency initiative is successful, the state's committed to funding it in the amount of $50 to $60,000,000 a year. So that's articulated in statute. The state also launched the Clean Water Fund and the Clean Water Board. So the role of the board is to oversee the revenue coming into the fund and make a recommendation on how it should be used in combination with some capital dollars, which is the clean water section of the capital bill. And then, I don't know why this went forward. And then package those recommendations over to the administration in December. And that then gets dispersed into sort of the big bill and the capital bill that the legislature reviews over the spring. It goes through a public process, the budget recommendation. So in the fall every year, there's a draft budget put out for public comment. And then the board considers that before they make their final recommendation. Statute also articulates for the board specific grant programs. You've heard about the Water Quality Restoration Formula Grants or the QISPs and WICs, as we affectionately call them. You might have heard about the Enhancement Grant Program or the Municipal Stormwater Infrastructure. Those are all grant programs or financial programs articulated in statute. And the board is also directed to prioritize their different line items in statute. And so that's reflected in the structure of the budget where they put most of their money in the top priority line items or initiatives. So again, the role of WIT staff is to provide the staff support to that budgeting process, managing the meetings, the public comment period, the draft budgets sheets, and then receiving and administering some portion of those funds. So the clean water budget sheets have a column that articulate which agencies are receiving and administering those funds for quick reference if you're interested. The Lake Champlain Basin program is a program that exists in federal statute, the Patrick Leahy Lake Champlain Basin program as it was renamed. The federal statute establishes the program, the membership and the authority of the US EPA to provide funding to further implementation of this program's plan for restoration and management of Lake Champlain. So WID staff support both the LCDP Lake Champlain Basin Program and DEC in an annual budgeting process, helping identify key state priorities. So this sort of shows the annual process. Just in general, it's year round. When one ends, we start the next, as we all do in budgeting processes. And there's many different budget categories. So down here, there's a personnel budget category. There's core annual projects. There's what we call TMDL implementation and state line items. Each year these things might change slightly, but it's quite a complex process. And with staff are helping provide input here. And then also similar to the Clean Water Fund, we received some portion of this directly between an award between EPA and DEC. And those are the funds that we oversee and administer, which we call the Lake Champlain Basin Program dollars, federal dollars. So those do show up as federal dollars in our budget presented to the legislature. This is just a snapshot of the operating structure of the Lake Champlain Basin program to show that it's very complex. It represents a massive partnership and a very comprehensive budgeting process. And again, WID and DEC staff are providing input and support to the budget, but also serve on some of these committees representing the state's interests in clean water. These are just, again, example project types often funded through some of the QIPP, Clean Water Initiative Program funding initiatives. So the different projects, the different funding initiatives might cover different sectors, including ag, develop land, stormwater, natural resources. We have a dam removal block grant. We have riparian woody buffer block grants. We support road infrastructure and improvements for clean water as well. And there is a online project explorer linked here if you're interested, where you can kind of look through a map and see this is not just QIPP projects, but a lot of the clean water initiatives statewide projects, and you can learn more about them. So, here's examples and snapshots of a buffer planting and a livestock exclusion planting project where you get to see when happened, who the partners were on the ground that did the work. And it's a great resource if you're interested in learning more. I'll pause there before I move on to dam safety if there's more questions on the Clean Water Fund and budget. Great. Okay. And so dam safety is our this is the the last one I'll be talking about in terms of big dollars on the budget line that you might see. The responsibilities of the Dam Safety Program include regulation of some private dams, as well as dam ownership and lands management around the dam. So VEC owns 14 dams, including three Winooski River flood control dams. This dam ownership and lands management is sort of a main driver for some

[Emily Bird, Director, Water Investment Division (DEC)]: of the

[Gianna Petito, Deputy Director, Water Investment Division (DEC)]: expenses and operating expenses in the budget. Most of our maintenance comes out of the general fund and goes into the operating budget. But if we have large scale engineering construction projects, that's typically going through the capital bill. We did get a one time general fund ARPA infusion, but that aside, it's mostly capital dollars that are supporting those larger scale expenses. And we also tend to use the capital dollars to draw down US Army Corps of Engineers. They have a dam safety program. They support preliminary design analysis and large scale restoration rehabilitation projects as well. And we have between 750% match, depending on the dam or the program that we use capital dollars to help draw down. Unlike the EPA capitalization award or the LCBT dollars, US Army Corps dollars don't flow through DEC. So those don't show up in our budget, but are part of how we help achieve the mission and goals of the department. There's also a revolving loan fund that's existed for a few years, but as I'll talk about it in a minute, there's some updates to advancing and making rule changes to our Unsafe Dams Revolving Loan Fund. So this is just a snapshot of our workflow for rehabilitation projects for the dams that we own. The long term infrastructure needs for all our dams are still under analysis, but we are doing a significant amount of asset management and planning here. So you can see this pipeline from just doing a full portfolio risk assessment to doing deeper dive comprehensive assessments to dams, to final design and rehabilitation. We've got this pipeline going. We're incrementally moving through and making these major capital improvements. And we're working on updated estimates, in the need of design and construction, as well as our long term maintenance needs, trying to get better estimates for that. And we'll work with leadership and the general assembly in future years. Next, please. We do have the Dam Safety Revolving Loan Fund. Recently received a $4,000,000 infusion to support. And it, that also exists in statute. It was amended under act 121 of 2024, which is requiring us to do some new rulemaking expanded uses of the fund, both emergency and nonemergency, to support dam either rehabilitation or removal. And so we're working on that rulemaking to be done in 2027. We have separate dam safety rulemaking that sets up the technical standards for private dams. We're trying to do those in parallel because that will really inform who's eligible to access this, again, low interest or zero interest loan program. And a quick example of an investment in dam safety. This is, a $50.50 cost share with US Army Corps of Engineers for the Wrightsville Dam to analyze if there's ways for us to improve our flexibility of operations for flood protection.

[Emily Bird, Director, Water Investment Division (DEC)]: And that's to you, Nikki. Just to wrap up really briefly, I know you you all had an opportunity to hear from Claire Madden and Sarah Coleman about our annual performance report for clean water. I want just to highlight that that's a great resource for many of our programs that are folded into the dataset that drives this report. It provides accountability around state investments in clean water, the results of those investments, and also our progress implementing phosphorus reductions for Lake Champlain and Lake Memphremagog. And the next slide here has, Gianna mentioned, a number of places under our our revolving loan funds, our clean water programs, the dam safety program, how state and federal law and guidance drives the program design and the use of those dollars. So there's a number of of links here for additional information and resources on all of that for you. If you're interested in taking a deeper dive and just want to wrap up and thank you for the opportunity to share our work with you this morning, it's a privilege to serve Vermonters in this capacity, and we're really grateful to do this alongside our very dedicated and professional colleagues. Thank you.

[Rep. Amy Sheldon (Chair)]: Thank you. Thank A lot.

[Emily Bird, Director, Water Investment Division (DEC)]: I'm sure. We're happy to answer any follow-up questions and come back if you'd like to discuss further. I know we're running short on time.

[Rep. Amy Sheldon (Chair)]: Yeah, I suspect that members will have threads they would like to follow-up with you on. Fantastic. Thank you again. Any final questions? Not seeing any, but thank you again.

[Emily Bird, Director, Water Investment Division (DEC)]: Thank you for having us. Great work. Thank you.

[Rep. Amy Sheldon (Chair)]: We have a couple of minutes to take a break.