Federal Facility Contributions to Capital Costs of Sewage Treatment Projects

Several requests have been made for a decision which would settle a controversy about the responsibility for funding the costs of constructing upgraded sewage treatment plants in Virginia and Hawaii. Funds were authorized for a program of construction grants to cover 75 percent of the costs. However, the Environmental Protection Agency (EPA) excluded from grant participation any portion of a project which would serve a Federal facility. The contractors who provide the sewage service to the Navy at both locations then turned to the Navy to make up the difference in funds. The Navy contended that it could not provide the funds because in order to do so they would have to amend the existing contracts and that would require consideration of reduced rates to the Navy. The contractors contended that to amend the existing contracts and reduce rates would discriminate against their non-Federal users. Furthermore, the Navy operates a portion of the system in Hawaii and did not want to contribute to construction of the non-Federal share of the remainder of the system, contending that it would be subject to discrimination because it would be paying more for the sewer service than any other customer. It was held that (1) the EPA has had no authority to exclude a portion of an otherwise eligible project solely because that portion would serve a Federal facility; (2) there would be no need for the Navy to amend its contracts provided that the contribution merely replaces the amount that would have been provided by EPA if not for its restrictive funding policy; (3) since Congress did not intend to subsidize 100 percent of the costs of any portion of the services provided, if the Navy contributes 100 percent of the costs attributable to its percentage of use of the facility, it must receive a corresponding reduction in its service rates or some other adequate consideration; and (4) extension of service to additional facilities in Hawaii might afford adequate consideration for the Government's payment of 100 percent of the Federal facility share of new plant costs.