A little more than a year after the passage of the Water Resources Reform and Develop Act (WRRDA), the U.S. Army Corps of Engineers (USACE) has issued the draft guidance required by section 1018. And, from a local perspective, the draft guidance is quite good and appears to reflect a softening on some crediting issues that have plagued locally constructed projects for nearly five years.

Background

If we climbed into the “wayback” machine we would find that over the past decades Congress has passed a number of provisions that allowed non-Federal sponsors to do work in advance of Federal planning or construction and then treat those costs as a credit toward the non-Federal sponsor’s cost share on the related Federal project. One of the most popular provisions for this was Section 104 of the Water Resources Development Act of 1986. Section 104 was highly liberal in its ability to lock in potential credit, with very few limitations. Unfortunately for aggressive non-Federal sponsors, the Office of the Assistant Secretary of the Army (ASA) became concerned that as non-Federal sponsors were able to “lock in credit” for planning or construction activities, each of those investments made it harder and harder for USACE to ultimately recommend a project which didn’t align perfectly with the already-constructed and locally-performed work. In other words, USACE awarding credit was actually driving USACE decisions to be made later. As a result, the ASA decided that credit could no longer be issued under Section 104, and instead should be evaluated under Section 221 of the Flood Control Act of 1970 (as that section was amended by section 2003 of WRDA 2007).

Unfortunately, from a non-Federal sponsor perspective, section 221 and USACE’s original implementing guidance were very limiting. For example, they required that the USACE planning process be significantly completed, thus delaying local investment that could otherwise quickly reduce risk; they arguably changed the rules on lands and related rights (LERRDs), such that a non-Federal sponsor’s cost share could actually go up; they precluded non-Federal sponsors from using credit from one separable element on another separable element; they could be interpreted as affecting the without-project condition, narrowing the non-Federal investments eligible for credit and changing the benefit-cost ratio; and many other limitations.

In response, Downey Brand worked with a number of affected non-Federal sponsors to create the National Coalition of Flood Project Partners (NCFPP). The NCFPP petitioned the ASA for less-limiting rules. While the ASA did issue revised guidance, the guidance did not lift the limitations that were inhibiting local investment in fast flood risk reduction.

The New Draft Guidance

As a result of the lack of administrative process, the NCFPP requested that Congress intervene, and the result was section 1018 of WRRDA 2014. But based upon USACE’s and the ASA’s previous aversion to more liberal crediting provisions, we fully expected that the guidance required under section 1018 would be as limiting as possible. However, we are pleasantly surprised with several key provisions:

  • First, as expected, USACE codified the provisions in Section 1018, such as the provision assuring that cost-benefit ratios were measured properly, and that lands and related rights (LERRDs) did not negatively affect the non-Federal sponsor’s cost share.
  • But second, USACE actually showed great flexibility in determining the milestone at which credit may first be locked in. Under Section 104, credit could be obtained through a simple letter, and the USACE district could send the letter at almost any time. Under the old Section 221 guidance however, USACE was prohibited from signing a crediting MOU until after the draft engineer’s report was released to the public, a milestone very late in the USACE planning process. In the new draft guidance, the milestone is now set at the Tentatively Selected Plan (TSP) conference, a point in the planning process that is earlier than the release of the draft Engineer’s report.
  • Third, the USACE guidance also confirms that if a non-Federal sponsor needs to lock in the credit earlier, the sponsor can apply to the ASA for special permission. Most interestingly, however, the draft guidance provides a series of factors that the ASA will evaluate in considering a waiver, and that list of factors is very similar to a list that we provided to Congress and the ASA a year ago! The list includes factors such as (i) Whether the proposed work is a modification of an existing Federal project; (ii) Whether the proposed work will follow an existing levee alignment in the case of a flood risk management project; (iii) Whether the proposed work balances and integrates the wise use of flood plains to ensure public safety; (iv) Whether the proposed work significantly reduces flood damage risk to human life, property or critical infrastructure; and (iv) Whether the proposed work will likely be included in the final project recommendation.
  • Fourth, the draft guidance also moves the “decision” from the ASA to the USACE MSC (Major Subordinate Command, USACE speak for Division) for the final determination of whether the locally-constructed work was integral to the USACE project being planned or constructed. This change can cut six months or more from the approval process, and thus reduce transaction costs by tens of thousands of dollars.

A number of other provisions are also tweaked in ways that make seeking and utilizing credit easier for the non-Federal sponsor. For these reasons, in addition to any project-specific comments that you may have, we strongly encourage you to comment by September 28th, supporting the draft guidance. In our view, Jan Rasgus and Tab Brown did an excellent job preparing draft guidance that strikes a healthy balance between USACE-needed control and flexibility for the non-Federal sponsor.

Comments can be submitted at the Federal eRulemaking Portal referencing docket COE-2015-0013. Comments may also be submitted directly to Jan at Janice.E.Rasgus@USACE.army.mil.