Federal Tools to Aid in a Chicago Regional Initiative

M E M O

To: Tim Brown, Donna DuCharme, Alex Johnson

From: Scott Bernstein

Date: June 2, 1999

Re: Potential Federal Tools to Aid in a Chicago Regional Initiative

CC: Judith Stockdale, Wim Wiewel, Sheila Leahy

Thank you for spending the time in orienting me on the Regional Air Dialogue last week, it was very helpful to the task of framing the upcoming discussions for the Partnership for Regional Livability. Following are some early thoughts about framing potential federal participation in the expanded Dialogue efforts. I look forward to working with you to refine this very early rough cut.

Summary

As currently planned, the meeting in California June 28 and 29 should culminate in a commitment to "try on" the idea of a local-federal partnership in each participating region: Denver, Atlanta, Bay Area, and Chicago. It is expected that in each region, a small number of specific opportunities will be identified. Each of these opportunities will have the following characteristics: they are regional in scope, link across central city, central county and suburban interests, stimulate public - private partnerships, use public authority to buttress private investments, link across multi-issue interests, and involve the region's interests inclusively. These should clearly be value-added in nature: new kinds of investment opportunities, linkages between communities and markets, and aggregation of heretofore-disparate demands and resources, should all result from the potential initiatives to be identified.

In this context, this memorandum presents a sample set of opportunities to help illustrate potential federal assistance tools.

As we understand your efforts to date, the planning team for a Chicago initiative as part of the Partnership for Regional Livability has chosen to focus its energies in three efforts. The first is Workforce and Housing, the second is Watershed Management, and the third is around expanding a Regional Dialogue for Clean Air.

This memo addresses the third opportunity. Our working assumption continues to be that the most viable approach is one that makes the most of existing federal resources and authority first, in the context of a process that is inherently local in character. The three kinds of resources highlighted for each opportunity are (1) information and planning; (2) investment and innovative finance; and (3) regulatory innovations.

Expanding the Chicago Regional Dialogue for Clean Air

We assume that the challenges to be addressed include:

Ø The continuing non-attainment status of the Chicago metropolitan region under the Clean Air Act Amendments, and the need to identify a strategy which can be implemented with regulatory certainty

Ø The overwhelming concentration of emissions sources related to two major sectors: utilities and transportation, respectively

Ø The shift over the past several decades to an economy which from a pollution standpoint is composed of a large number of small sources, rather than an emissions inventory which is dominated by a small number of large sources

Ø The slow rate of diffusion of newer and cleaner technologies and fuels

Ø The barriers, both apparent and real, to financing the transition to a cleaner regional economy

Ø The appearance of financial burden associated with regional attainment; in particular, the belief that clean air "costs" rather than "pays"

Ø The rapid increase in asthma and other respiratory infections and the need to clarify the role played by ambient air quality

Ø The apparent split in incentives between public agencies and private actors to take action.

In addressing the federal interest, it is important to focus on the nature of a partnership that can work for Chicago. There is not existing authority to easily assemble multi-agency or inter-agency resource teams unless a clear direction and request from a local area can help align these interests. An additional caveat is that we make no assumptions about the capacity of the regional federal offices in and around Chicago to contribute to this initiative. We do, however, believe that it is important to describe these opportunities functionally, rather than by specific agency program: there may be new opportunities for multi-agency support which emerge as a result of this kind of framing.

Ideas and opportunities that have been discussed to address this set of challenges include:

1. Identifying a regional attainment strategy that can be implemented with regulatory certainty.

Ø Development of a best practices guidebook for State Implementation Plans. Federal role: Assemble quickly a team that can share and document best practices with the participants and with the state air offices.

Ø Inventory regulatory innovations that aided in the use of best practices in other jurisdictions. Federal role: assemble key staff with experience in achieving regulatory innovations to join the Dialogue and who can support the strategies identified.

Ø Develop a process that can result in expanding the Dialogue to encompass the multi-state non-attainment region. Federal role: Use the teams assembled to explore this directly with the relevant parties in Wisconsin, Indiana, and Michigan.

2. Reducing emissions sources from the utility sector. Focus on cleaner fuels, cleaner technologies, and reduced demand.

Ø Increase the use of cleaner fuels, including fuel scrubbing, substitutions, and renewable resources. Federal role: analytic support for baseline and improvement crediting, participate in purchase agreements and procurement activities.

Ø Increase the use of cleaner technologies for electrical generation, including retrofit and rehabilitation, replacement generating stations, and decentralizing to generation at the distributed or micro-grid level. Federal role: analytic support for baseline and improvement crediting, use of cooperative research and development agreements to speed technology diffusion, assistance in financing demonstration projects, demonstration of clean technologies such as fuel cells and microturbines in distributed power systems.

Ø Demonstrate the relative efficacy of demand reduction targeted at the community level. Federal role: development of cooperative agreements with municipalities, states, business and community coalitions to implement aggressive programs, as described under "Aggregation" below, identification of model energy building codes, assistance in developing new forms of financial intermediaries who can focus on enabling greater capital access for investments in energy efficiency, identify opportunities for structured workforce development as a means to sustained employment opportunity.

3. Reducing emissions sources from the transportation sector. Focus on cleaner fuels, cleaner technologies, and reduced demand.

Ø Develop alternative fuels for trucks (oxy-diesel and biodiesel) in conjunction with crackdown on particulate matter, including enlarging fueling infrastructure. Federal role: direct participation in purchase agreements and procurement (e.g., incentives for postal service and fleets in publicly supported school districts), expanded support for demonstrating new fuels, explore potential private sector franchising to expand fueling infrastructure opportunities.

Ø Expand use of clean cars and truck fleets. Federal role: direct participation in purchase agreements and procurement, provide incentives for state and local governments and federally chartered agencies to accelerate clean vehicle purchase, expedite clean vehicles implementation at region's airports as part of an expanded clean airports initiative, explore use of linked investment strategies to ease capital access barriers.

Ø Expand use of mass transit in the region. Federal roles: assist the region's mass transit operators in developing aggressive marketing initiatives; develop marketing partnerships with employer-community coalitions in transit corridors; use innovative finance tools in TEA21 to leverage employer purchase pledges and jump start high priority new starts (e.g., the Blue Line extension from O'Hare to Schaumburg, Congress extension to Oak Brook, various Metra extensions), identify opportunities to accelerate transit- and pedestrian friendly planned development commitments, develop methods for explicit crediting necessary land-use changes.

4. The need to aggregate large numbers of small sources, including new analytic and accounting systems, institutional development.

Ø Development of ground rules to encourage development of of aggregating large numbers of small improvements. Federal role: develop interim guidance, provide planning tools, identify pre-existing practices.

Ø Identify acceptable and affordable methods of detecting improvements. Federal role: work in concert with retail-point-of-sale and electronic funds transfer networks to unobstrusively track activity; help provide lower-cost technology for monitoring localized weather and ambient air quality conditions; help develop "citizen science" approaches to assist in monitoring and tracking.

Ø Inventory existing "aggregations" that could be adapted for air quality improvement purposes. Federal role: assist in conducting inventories of existing organizations and networks at the community, business and government levels, help develop pilot programs to demonstrate how to apply the necessary ground rules, identify existing federal aggregations such as federal employee credit unions and enlist their participation in pilot programs.

5. Increasing the speed of implementing solutions.

Ø Establish goals that can result in regional attainment by target dates. Federal roles: analytic support, development of proposals that can be tested for public acceptance on a community-by-community basis.

Ø Develop new mechanisms to affirmatively finance the transition to a cleaner regional economy. See below.

Ø Develop and implement a long-range educational and learning strategy. Federal roles: support for curriculum development, assistance to businesses, community and government organizations in interpreting the benefits of clean air to customers, members and constituents, development of new information infrastructure tools to assist in rapid detection of the value of alternative development patterns.

6. Financing the transition to a cleaner regional economy

Ø Market existing federal incentives to employers. Federal roles: conduct pilot programs in commuter choice, parking cash-out, and value-pricing in conjunction with employers, also assist by directly committing to participate as a major regional employer, partner with chambers of commerce, Building Owners and Managers Association, small business and community development networks, and state and local government; organize along major transit corridors.

Ø Help the financial services industry recognize economic value in energy efficiency and emissions reduction. Federal role: support the expanded use of location efficient mortgages to stimulate homeownership in more efficient locations, support the use of location efficiency and resource efficiency underwriting in a larger range of mortgage and insurance underwriting products, start applying these tools to the products directly administered by federal agencies including FHA and HUD and form new partnerships with Government Sponsored Enterprises such as the Federal Home Loan Bank, Fannie Mae and Freddie Mac to increase mortgage purchases, work with bond underwriters to help recognize the economic value of these investments, partner with the states to more quickly access necessary data on vehicle ownership and use for verification purposes.

Ø Build economic literacy. Federal roles: identify ways to build recognition of the value of resource efficiency and emissions reduction into credit counseling and homeownership counseling; strengthen capacity to provide credit counseling in schools, communities, and workplaces;

7. Addressing the appearance of financial burden.

Ø Help identify opportunities for high performance investments that improve air quality and reduce costs simultaneously. Federal role: identify best practices, assemble teams of high performance practitioners, provide analytic tools and support.

Ø Develop methods of assessing area-wide and community-wide economic effects of attainment strategies. Federal roles: identify opportunities to highlight and certify benefits within regional plans (e.g., air quality, transportation, utility plans); help build analytic capability locally to assess net economic benefits (e.g., with regional economic modeling programs, within NEPA reviews, in local government planned development reviews).

Ø Develop tools to help private sector identify development/investment opportunities. Federal roles: Help certify the air quality benefits of brownfields redevelopment, evaluate opportunities to expand eco-industrial development, support partnerships with the investment community which recognize the economic benefits of resource efficiencies and clean air in financial services underwriting, help regionalize standard code and plan review approaches to pedestrian access and transit-oriented development, support tools which assist in assembling under-used land for redevelopment.

Ø Support tools that help individuals and households recognize economic benefits. See economic literacy above.

8. Addressing the health effects of ambient air quality

Ø Accelerate the publication of mapped information on new health standards. Federal role: build multi-agency support (e.g., environment and health agencies) for expanded mapping, expanded use of internet, community information systems, radio and TV weather services).

Ø Enhance support to clarify the relationship between ambient air quality and respiratory ailments. Federal role: build expanded partnerships for research, public communications, and voluntary responses.

Ø Explore the targeting of both prevention and treatment programs, as appropriate, on a priority community basis. Federal roles: Seek consensus in medical community on geographically targeted interventions, look for opportunities to take joint action between city and suburban communities on a "sister communities" basis.

9. Moving from split incentives to joint incentives for implementation

Ø See attached memorandum on Innovative Finance

Ø Identify potential incentives for multi-jurisdictional action. Federal roles: work with Dialogue participants and the Metropolitan Mayor's Caucus to better identify barriers to joint action, craft strategies which are potentially creditable under this proposal

Ø Promote broad use of trading programs as a component of the regional attainment strategy. Federal role: establish clear ground rules for crediting and verification, and for aggregation, support pilot programs.

Ø Establish workable state and regional NOx programs in anticipation of the "SIP call." Federal roles: establish protocols and ground rules for energy efficiency set asides, and regional off-set banks; establish incentives to tie superior environmental performance to opportunities to donate any financial benefit received from trades to community development initiatives

Ø Explore creation of a regional workforce strategy aimed at regional clean air attainment. Federal roles: convene the Region V interagency working group on welfare reform and secure their participation, inventory potential job creation association with the full range of attainment strategies, coordinate with the PRL/Chicago working group on Workforce/Housing opportunities, secure necessary federal participation for support.

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Last updated July 28, 1999.