This report was prepared by the Department of Environmental Quality (Department or DEQ) pursuant to Item #377 K in the Commonwealth’s 2020-2022 biennium budget (2020 Va. Acts Ch. 1289). This budget item provides that:

"The Department shall assess alternative reimbursement models and reimbursement amounts for nutrient removal grants provided to projects serving a locality or localities with: (i) high fiscal stress as defined by the Composite Fiscal Stress Index; (ii) median household incomes below the Commonwealth's average; and (iii) the capacity of ratepayers to absorb the additional costs of financing nutrient removal projects. The Department shall provide a report detailing its findings and recommendations to the Chairs of the House Appropriations and Senate Finance and Appropriations Committees no later than December 15, 2020." (Va. Acts Ch. 1289 Item #377 K).

The Department has reviewed pertinent sections of the Code of Virginia, the Virginia Water Quality Improvement Fund Guidelines (WQIF Guidelines), and Guidance Memorandum No. 06-2012, Amendment #1 (Guidance Memo). These documents currently provide for an alternative reimbursement model and reimbursement amount for nutrient removal grants provided to projects serving localities with high fiscal stress, below average median household incomes and limited capacity of ratepayers to absorb project financing costs. Specifically, the current Act provides the DEQ Director with flexibility to approve a higher WQIF grant amount to a local government that submits a request for a grant that exceeds the authorized grant amount. In considering such requests, the DEQ Director is to consider the local government’s comparative revenue capacity, revenue efforts, and fiscal stress as reported by the Commission on Local Government (COLG).