EPA	Guidance for States on Implementing the Capacity Development Provisions of the Safe Drinking Water Act

Includes:	Guidance for States on Ensuring that All Community Water Systems and Nontransient , Noncommunity Water Systems Demonstrate Technical, Managerial, and Financial Capacity

Guidance for States on Minimum Requirements for State Capacity Development Strategies (to Avoid SRF Withholding)

Guidance for States on Assessment of Capacity for the Purposes of Awarding SRF Assistance

Prepared for the

Small Systems Working Group

National Drinking Water Advisory Council

Revised FINAL DRAFT

Do not cite or distribute

July 19, 1997

Small Systems Working Group Members

Kevin Brown

Division of Drinking Water

Utah Department of Environmental Quality

Jack Bryck

Dayton & Knight, Ltd.

Judy Chambers

Borough Manager, Mercersberg , PA

Mary Gaiski

Pennsylvania Manufactured Housing Association

Jason Gray

Virginia Water Project, Inc.

Robert Hinton

Public Staff

North Carolina Utilities Commission

Diane Kiesling

Commissioner

Florida Public Service Commission

Ted Michaels

Natural Resources Group

National Governors' Association

David Monie

SB Water Company, NJ

Gary Morgan

Rural Utilities Services, USDA

Bridget O'Grady

Association of State Drinking Water Administrators

Yvette dePeiza

Division of Water Supply

Mass. Dept. of Environmental Protection

Teresa Rissmiller

Mount Joy Township Authority, PA

Peter E. Shanaghan

Office of Groundwater and Drinking Water, U.S. EPA

Jim Sheldon

Cedar-Knox Rural Water Project, NE

John P. Sheltens

City of Hot Springs, SD

Donna Shell

Environmental Information Center, VA

Rich Siffert

Drinking Water Division

Washington Department of Health

Gerald Smith

Drinking Water Protection

Minnesota Department of Health

William A. VanDeValk

Lamont, VanDeValk Engineers, P.C.

Julie Ward

Great Lakes Rural Community Assistance Program

Rita Wayco

U.S. EPA, Region 4

Table of Acronyms

Acronym	Meaning
AHERA	Asbestos Hazard Emergency Response Act
AMHI	Adjusted Median Household Income
AMWA	Association of Metropolitan Water Agencies
ASDWA	Association of State Drinking Water Administrators
AUC	Annual User Charges
AWWA	American Water Works Association
BAT	Best Available Technology
CCE	Comprehensive Compliance Evaluation
CCN	Certificates of Convenience and Necessity
CCP	Composite Correction Program
CCR	Consumer Confidence Report
CERCLA	Comprehensive Environmental Response, Compensation, and Liability Act
CFR	Code of Federal Regulations
CG	Capitalization Grant
CIP	Capital Improvement Plan
CPE	Comprehensive Performance Evaluations
CWS	Community Water System
DEP	Department of Environmental Protection
DOH	Department of Health
DWRSF	Drinking Water State Revolving Fund
EDU	Equivalent Dwelling Unit
EPA	Environmental Protection Agency
EWS	Early Warning System
FVT	Financial Viability Test
G&A	General and Administrative
GO Debt	General Obligation Debt
IRS	Internal Revenue Service
IUP	Intended Use Plan
LIHEAP	Low-Income Home Energy Assistance Program
MABEL	Municipality's Ability to Pay Model
MCL	Maximum Contaminant Level
MHI	Median Household Income
Acronym	Meaning
MOU	Memorandum of Understanding
NARUC	National Association of Regulatory Utility Commissioners
NAWC	National Association of Water Companies
NCWS	Noncommunity water systems
NDWAC	National Drinking Water Advisory Council
NETA	National Environmental Training Association
NPDWR	National Primary Drinking Water Regulations
NRRI	National Regulatory Research Institute
NRWA	National Rural Water Association
NTNCWS or NTNC	Nontransient, Noncommunity Water System
O&M	Operations and maintenance cost
OGWDW	Office of Ground Water and Drinking Water
PACNIF	a financial capabilities model used by PENNVEST
PIPPS	Percentage-of-income payment plans
POTW	Publicly Owned Treatment Works
PUC	Public Utility Commission
PWS	Public Water System
RCAP	Rural Community Assistance Programs
RCRA	Resource Conservation and Recovery Act
RCW	Revised Code of Washington
RUS	Rural Utility Service
S&P	Standard & Poors
SDWA	Safe Drinking Water Act
SDWIS	Safe Drinking Water Information System
SRF	State Revolving Fund
TNCs or TNCWS	Transient Noncommunity Water systems
TNRCC	Texas Natural Resource Conservation Commission
TSC	Target Service Charge
WAC	Washington Administrative Code
WQS	Water Quality Standards
WUFS	Water Utility Financing Study

Table of Contents

Chapter 1:	Introduction to Technical, Managerial,

and Financial Capacity of Water Systems	I-1

Chapter 2:	Guidance for States on Ensuring that All

CWSs and NTNCWSs Demonstrate Technical,

Managerial, and Financial Capacity	II-1

Chapter 3:	Guidance for States on Minimum Requirements

for State Capacity Development Strategies

(To Avoid SRF Withholding)	III-1

Chapter 4:	Guidance for States on Assessment of Capacity

for Purposes of Awarding SRF Assistance	IV-1

CHAPTER 1:

Introduction to Technical, Managerial, and Financial Capacity of Water Systems

Prepared for the

Small Systems Working Group

National Drinking Water Advisory Council

Revised FINAL DRAFT

Do not cite or distribute

July 19, 1997

INTRODUCTION

The 1996 Amendments to the Safe Drinking Water Act ( SDWA ) place strong emphasis on technical capacity, managerial capacity, and financial capacity as integral components of the implementation strategies of the Act. The Amendments create a focus on enhancing and ensuring the technical, financial, and managerial capacity of water systems to comply with National Primary Drinking Water Regulations ( NPDWRs ). To avoid reduction in its Drinking Water State Revolving Fund ( DWSRF ) allotment, each State is required to obtain legal authority or other means to ensure that new systems have adequate capacity, and to develop and implement a strategy to assist existing systems in acquiring and maintaining capacity:

Section 1420(a): STATE AUTHORITY FOR NEW SYSTEMS- A State shall receive only 80 percent of the allotment that the State is otherwise entitled to receive under section 1452 (relating to State loan funds) unless the State has obtained the legal authority or other means to ensure that all new community water systems and new nontransient , noncommunity water systems commencing operation after October 1, 1999, demonstrate technical, managerial, and financial capacity with respect to each national primary drinking water regulation in effect, or likely to be in effect, on the date of commencement of operations.

Section 1420(c): CAPACITY DEVELOPMENT STRATEGY- (1) IN GENERAL- Beginning 4 years after the date of enactment of this section, a State shall receive only--(A) 90 percent in fiscal year 2001; (B) 85 percent in fiscal year 2002; and (C) 80 percent in each subsequent fiscal year, of the allotment that the State is otherwise entitled to receive under section 1452 (relating to State loan funds), unless the State is developing and implementing a strategy to assist public water systems in acquiring and maintaining technical, managerial, and financial capacity.

The Act also provides that the Environmental Protection Agency (EPA) will assist State capacity development efforts by providing information and guidance:

Section 1420(d): FEDERAL ASSISTANCE-(1) IN GENERAL- The Administrator shall support the States in developing capacity development strategies. (2) INFORMATIONAL ASSISTANCE- (A) IN GENERAL- Not later than 180 days after the date of enactment of this section, the Administrator shall--( i ) conduct a review of State capacity development efforts in existence on the date of enactment of this section and publish information to assist States and public water systems in capacity development efforts. . . (4) GUIDANCE FOR NEW SYSTEMS- Not later than 2 years after the date of enactment of this section, the Administrator shall publish guidance developed in consultation with the States describing legal authorities and other means to ensure that all new community water systems and new nontransient , noncommunity water systems demonstrate technical, managerial, and financial capacity with respect to national primary drinking water regulations.

Enhancing and ensuring the technical, financial, and managerial capacity of small water systems is widely believed to offer great potential for correcting and preventing noncompliance with NPDWRs and for ensuring reliably safe drinking water. The capacity development provisions in the Act offer a simple and flexible framework within which States can organize their efforts to address the challenges facing small systems. States are provided the latitude to design and implement systems that are tailored to their unique needs and circumstances.

This chapter presents the background information necessary to understand the Guidance documents that are provided in Chapters 2 through 4 to assist states in implementing the capacity development provisions in the Act. Included in this chapter are: 1) a timeline describing the issues, purposes, and deadlines for each of the Guidance documents; 2) a discussion of the demographics of systems affected by the provisions; and 3) working definitions of technical, managerial, and financial capacity that will be used throughout this document.

CAPACITY DEVELOPMENT GUIDANCE TIMELINE

This volume contains three Guidance documents to assist the states in implementing the capacity development provisions of SDWA . Those documents are:

•	Guidance for States on Ensuring that All New CWSs and NTNCs Demonstrate Technical, Managerial, and Financial Capacity

•	Guidance for States on Minimum Requirements for State Capacity Development Strategies (to Avoid SRF Withholding)

•	Guidance for States on Assessment of Capacity for the Purposes of Awarding SRF Assistance

Figure 2 outlines for each Guidance the related statutory requirement, the implementation issue raised by the requirement, the proposed Guidance, the core requirements of the Guidance, and the statutory deadline for publishing the Guidance.

SYSTEM DEMOGRAPHICS 1

The capacity development provisions of SDWA apply to several types of public water systems. Several provisions apply to all public water systems ( PWS ), which include: 1) community water systems (CWS); 2) nontransient , noncommunity water systems ( NTNCWS ); and, 3) transient, noncommunity water systems ( TNCWS ). Others apply only to community water systems and nontransient , noncommunity water systems.

A public water system is a "system for the provision to the public of piped water for human consumption, if such system has at least fifteen service connections or regularly serves an average of at least twenty-five individuals daily at least 60 days out of the year." (40 CFR §141.2) They include community water systems; nontransient , noncommunity water systems; and transient, noncommunity water systems. Approximately 172,000 public water systems exist nationwide.

A community water system is defined as a "system for the provision to the public of piped water for human consumption, if such system has at least fifteen service connections or regularly serves an average of at least twenty-five individuals daily at least 60 days out of the year." (40 CFR §141.2) There are approximately 55,000 community water systems serving over 246 million people. Of the roughly 55,000 systems, approximately 20 percent of systems (serving over 157 million people) use a surface water source or ground water under the direct influence of surface water. The remaining 80 percent of systems (serving almost 89 million people) receive their water from a ground water source.

In terms of system size, slightly over 86 percent of community water systems are classified as "very small" or "small." Although they comprise a significant majority of CWSs , they serve just over 10 percent of the population served by community water systems. Roughly 8 percent of community water systems are classified as "medium" systems; these systems also serve approximately 10 percent of the population served by CWSs . The remaining 6 percent of community water systems are classified as "large" or "very large," but these systems serve close to 80 percent of the population served by community water systems. Most "very small," "small," and "medium" community water systems use ground water as their primary source, while a majority of "large" and "very large" systems draw from surface water sources as their primary supply.

Community water systems can be classified into two major ownership types—privately owned and publicly owned. Within the privately owned category, a substantial number of systems are "ancillary systems," i.e., they provide water as an ancillary function of their principal business or enterprise. An example is mobile home parks (Figure 1). Like NTNCWSs , they provide water to their customers, but provision of water is not their principal business. The incidence of ancillary systems varies significantly by system size. In small CWSs serving between 25 and 100 persons, over half (53 percent) are ancillary systems. In larger CWSs serving more than 10,000 persons, only 0.1 percent are ancillary systems.

A nontransient , noncommunity water system is defined as "a public water system that is not a community water system and that regularly serves at least 25 of the same persons over 6 months per year." (40 CFR §141.2) Examples of establishments served by nontransient , noncommunity water systems include schools, factories, office/industrial parks, and major shopping centers. Most are privately owned, although some are publicly owned (e.g., schools). Approximately 20,000 NTNCWSs exist across the nation, serving approximately 6 million people. Over 96 percent of nontransient, noncommunity water systems use groundwater as their primary source. They typically are small systems; 99 percent of NTNCWSs are classified as "very small" or "small."

Figure 1

Ownership by System Size

DEFINING CAPACITY

The concept of water system capacity suggests the capability to perform as a water system in accordance with accepted performance criteria. Capacity encompasses the technical, managerial, and financial capacity of the water system to achieve, maintain, and plan for compliance with applicable drinking water standards given available water resources and the characteristics of the service population.

Technical, managerial, and financial capacity are three general but highly interrelated dimensions of water system capacity:

Technical capacity refers to the physical infrastructure of the water system, including but not limited to the source water adequacy, infrastructure adequacy (source, treatment, storage, and distribution), and the ability of system personnel to implement the requisite technical knowledge.

Managerial capacity refers to the management structure of the water system, including but not limited to ownership accountability, staffing and organization, and effective linkages.

Financial capacity refers to the financial resources of the water system, including but not limited to the revenue sufficiency, credit worthiness, and fiscal controls.

Capacity focuses attention on the water system's ability to transform source water into water that complies with safe drinking water standards. As illustrated in Figure 3, external factors may impact a system's ability to achieve and maintain technical, managerial, and financial capacity. By affecting capacity, these factors influence a system's ability to provide safe drinking water to its customers. These factors can be grouped broadly into institutional factors (such as regulatory and political issues) and socioeconomic factors (such as household income of customers). These external factors may have positive or negative influence on water system capacity and the end result of compliant drinking water.

KEY QUESTIONS

Technical, managerial, and financial capacity are individual yet highly interrelated dimensions of systems capacity, as illustrated in Figure 4. A system can not sustain capacity without maintaining adequate capability in all three dimensions. Indicators of capacity within each of these areas can be framed by key sets of issues and questions, including but not limited to the following:

Technical capacity

Source water adequacy. Does the finished water meet the provisions of the SDWA ? Does the system have access to a reliable source of safe drinking water? Is the source adequately protected?

Infrastructure adequacy. Is the system capable of providing water that complies with SDWA standards? What is the condition of the system's infrastructure components, including well(s) and/or source water intakes, treatment, storage, and distribution? What is the life expectancy of the system's infrastructure components? Does the system have a capital improvement plan?

Technical knowledge and implementation. Does the system have a certified operator? Is the system operated with technical knowledge about applicable standards? Are personnel able to implement this technical knowledge effectively? Do the operators understand the technical and operational characteristics of the system?

Managerial capacity

Ownership accountability. Are the system owner(s) clearly identified? Can they be held accountable for the system?

Staffing and organization. Are the system operator(s) and manager(s) clearly identified? Is the system properly staffed and organized? Do personnel understand the management aspects of regulatory requirements and system operations? Do personnel have adequate expertise to manage water system operations? Do personnel have the necessary licenses and certifications?

Effective external linkages. Does the system interact well with customers, regulators, and other external entities? Is the system aware of available external resources?

Financial capacity

Revenue sufficiency. Do revenues cover costs? Are rates and charges for water service adequate to cover the cost of service?

Credit worthiness. Is the system financially healthy? Does it have access to financial capital through public or private sources?

Fiscal management and controls. Are adequate books and records maintained? Are appropriate budgeting, accounting, and financial planning methods used? Does the system manage its revenues effectively?

Table 1 provides a list of general indicators of technical, managerial, and financial capacity of water systems. This list is not meant to be comprehensive, but rather to serve as a general guide for identifying key issues within each dimension of capacity. The indicators of capacity are

broadly applicable regardless of the size or type of system. Very small, simple systems can demonstrate capacity in less sophisticated ways than can larger, more complex systems.

Many, if not most, aspects of water system operations involve more than one kind of capacity. A program of infrastructure replacement and improvement, for example, requires technical knowledge, management planning and oversight, and financial resources. In other words, a water system with adequate capacity draws on strengths within all three capacity dimensions-- technical, managerial, and financial.

As noted in Figure 4, combined technical, managerial, and financial capacity is particularly relevant in terms of short and long term planning by water systems. Short and long term planning will facilitate compliance with applicable drinking water regulations, as well as better service for customers. All water systems, regardless of size or ownership structure, should be guided by a plan for the system's future operations over a reasonable planning horizon.

Methods of short and long term planning grow in complexity with system size and expertise. Basic business planning by smaller systems is an indicator of capacity, as well as a capacity development strategy. Short and long term planning is not limited to stand-alone options, but may include a plan for restructuring. Short and long term planning by larger water systems may also address the needs of proximate smaller systems. In all cases, it is essential that short and long term planning and capital facilities planning be grounded in realistic cost estimates.

CONCLUSIONS

The concepts of technical, managerial, and financial capacity figure prominently in the 1996 SDWA . In accordance with the Act, the States will have substantial flexibility in designing and implementing capacity development programs that best suit the needs of their citizens and water systems. The framework provided here is designed to assist that endeavor by identifying several key criteria for assessing water system capacity.

Figure 2. Context for Capacity Development Related Guidances

Table 1: Indicators of Technical, Managerial, and Financial Capacity of Water Systems

Technical Capacity
Source water adequacy	Adequate source water quality (meets provisions of SDWA)
Adequate long term source water quantity
Source water protection plan
Infrastructure adequacy	Condition of well(s) and/or source water intakes
Condition of treatment, storage, and distribution
Current and prospective adequacy of infrastructure (source, treatment, storage, and distribution)
Emergency preparedness
Infrastructure replacement program
Infrastructure improvement program
Capital improvement plan
Implementation of technical knowledge	Certified Operator
Operation and maintenance expertise
Understanding of technical aspects of regulatory requirements
Understanding of system's technical and operational characteristics
Managerial Capacity
Ownership accountability	Clear ownership identity
Management information systems
Staffing and organization	Clear identification of operator/manager
Training and continuing education
Sufficient staff with appropriate expertise and experience
Staff with appropriate licenses and certifications
Procedures and policies for system management and operation
Understanding of management aspects of regulatory requirements and system operations
Effective linkages	Awareness of available external resources
Communication with other systems
Communication with customers
Communication with regulators
Financial Capacity
Revenue sufficiency	Revenues cover expenditures
Appropriate rates and charges
Billing and collections practices
Revenues for depreciation and reserves
Cost-of-service studies
Credit worthiness

Positive credit rating
Access to financial capital through public and private sources
Healthy financial ratios
Bonds and assurances
Appropriate debt/equity ratios
Fiscal management and controls

Adequate books and records
Annual budgeting and reporting
Appropriate accounting practices
Valuation of utility assets
Capital facilities planning with realistic cost estimates
Appropriate management of revenues
Financial investment strategy

Figure 3

Factors Impacting Technical, Managerial, and Financial Capacity

Note: This figure identifies external factors that impact a system's ability to achieve and maintain technical, managerial, and financial capacity. By affecting capacity, these factors influence a system's ability to provide safe drinking water to its customers.

CHAPTER 2:

Guidance for States on Ensuring that All New CWSs and NTNCWSs Demonstrate Technical, Managerial, and Financial Capacity

Prepared for the

Small Systems Working Group

National Drinking Water Advisory Council

Revised FINAL DRAFT

Do not cite or distribute

July 19, 1997

SUMMARY OF REQUIREMENTS

To comply with the provisions of §1420(a), States must submit to EPA the following items. Each of these minimum federal requirements is described in detail in the discussion above.

Criteria	Requirements
1. A Basis of Authority	•	The State must demonstrate that it has the "legal authority or other means" to ensure the technical, managerial, and financial capacity of new community water systems and new nontransient , noncommunity water systems, including the authority to prevent creation of a new system that does not demonstrate technical, managerial, and financial capacity.
2. Demonstration of Control Points in the New System Development Process	•	The State must demonstrate that it has one or more clear control points in the new system development process during which it can exercise its legal authority or other means to ensure the capacity of new systems
3. Plan for Periodic Evaluation of the New System Capacity Assurance Program	•	The State must present a plan for program evaluation as part of their initial demonstration of authority for new systems under §1420(a) that must outline: 1) a means of verifying program implementation; and 2) a means of evaluating the program.

INTRODUCTION

The Safe Drinking Water Act ( SDWA ) Amendments of 1996 ( Pub.L. 104-182) authorize a Drinking Water State Revolving Fund ( DWSRF ) to assist public water systems to finance the costs of infrastructure needed to achieve or maintain compliance with SDWA requirements and to achieve the public health objectives of the Act. Section 1452 authorizes the Administrator of the U.S. Environmental Protection Agency (EPA) to award capitalization grants to the States. Section 1420(a) of the Act directs the Administrator to withhold a portion of a State s allotment under §1452 unless the State "has obtained the legal authority or other means to ensure that all new community water systems and new nontransient , noncommunity water systems . . . demonstrate technical, managerial, and financial capacity with respect to each national primary drinking water regulation in effect, or likely to be in effect, on the date of commencement of operations." Section 1452(a)(1)(G)(I) provides detailed information on the process of withholding funds under the Act's provisions related to new system capacity.

Section 1420(d)(4) instructs the EPA Administrator to publish "guidance developed in consultation with the States describing legal authorities and other means to ensure that all new community water systems and nontransient , noncommunity water systems demonstrate technical, managerial, and financial capacity with respect to national primary drinking water regulations." This guidance and its appendices fulfill this requirement.

This guidance document—developed in consultation with States and other stakeholders— provides the criteria that EPA will use in evaluating State authority for new systems for purposes of implementing the requirements of §1420(a) of the Act. The criteria include: 1) a basis of authority; 2) demonstration of control points in the new system development process; and 3) a plan for evaluating the program on an ongoing basis.

THE STATUTORY BACKGROUND

General Issues. The SDWA Amendments establish an integrated environmental law. There are linkages among different parts of the law which create a tapestry of provisions; prevention programs are integrated with, and essential to the success of, new regulatory flexibilities . For example, one of the prevention programs is capacity development. For new systems, the Amendments require States to ensure that all new community and nontransient, noncommunity systems demonstrate technical, managerial, and financial capacity. Ensuring capacity, which in turn will prevent costly non-compliance, will facilitate the regulatory flexibility in the Amendments.

Read in the context of the Amendments as an integrated whole, the statutory basis for the criteria that are presented below is clear. First, when the statute says a State must have the "legal authority or other means" to ensure the capacity of new systems, it means that the State must have the authority to intervene in the process of new system development to obtain the necessary demonstration of technical, managerial, and financial capacity. The conference committee report makes clear that the phrase "legal authority or other means" means that States must have the "actual authority" to ensure the capacity of new systems.

In other words, as described more fully in the criteria, the States must be able to demonstrate that they have, and can exercise, authority to prevent the creation of a new community or nontransient , noncommunity system that does not have technical, managerial, and financial capacity. This implies that there must be some "control point" at which the State can say "no" to the development of a new system that does not have adequate capacity.

Second, the guidance recognizes a central theme that runs throughout the Amendments—an approach to State programs that is flexible and recognizes the diversity of State approaches to achieve the objectives of the Amendments. In programs to deal with new system creation, States may involve a variety of different agencies at the State and local levels of government. This guidance accepts the diversity of approaches. It requires only that there be a clear, unambiguous demonstration of State authority to ensure that no new community and nontransient , noncommunity system will be created if it lacks adequate capacity. Section 1420(a) of the statute emphasizes this point when it says that the Administrator will withhold a portion of a State's allotment unless the State has obtained the legal authority or other means "to ensure" the intended result.

How this statutory mandate is achieved is up to the State. The statute does not require that a particular State agency (e.g., the primacy agency) be responsible; it simply requires that some State agency be responsible. It does not preclude delegation of responsibility to other agencies or to local governments. The statute does, however, require that there be clear State authority to ensure that new systems have adequate technical, managerial, and financial capacity.

Third, the statutory emphasis on all three aspects of capacity—technical, managerial, and financial—requires a comprehensive view of capacity. To comply with this requirement, it is not sufficient for States to focus on only one aspect, e.g., technical capacity. Chapter 1 defines and each of the three dimensions of capacity.

Finally, it is implicit in §1420 that the definition of system capacity be forward-looking. To demonstrate capacity, the system must have technical, managerial, and financial capacity on the first day of operation and over time. Thus, when states evaluate the capacity of new systems, they must assess both current and forward-looking capacity.

CRITERIA

1. A Basis of Authority

Under §1420(a), the State must demonstrate that it has the "legal authority or other means" to ensure the capacity of new community water systems and new nontransient , noncommunity water systems. This authority must provide the State with the capability to intervene in the process of new system development in order to obtain necessary assurances of technical, managerial, and financial capacity. As explained in the introduction, the phrase "legal authority or other means" means that States must have the "actual authority" to ensure that new systems have adequate capacity. To meet the requirements of this provision, States must identify and demonstrate this authority. Examples of "legal authority or other means" are provided in the EPA document, Information for States on Ensuring that All New CWSs and NTNCs Demonstrate Technical, Managerial, and Financial Capacity.

Implicit in this requirement are the following:

•	The State must specify which agency of State government is responsible for purposes of demonstrating that the State meets this statutory requirement. This agency could be the State SDWA primacy agency. The State, at its sole discretion, may decide which agency is responsible, but there must be a responsible agency.

•	The State agency responsible for making determinations of technical, managerial and financial capacity need not always be the SDWA primacy agency. Certification authority for new investor-owned systems, for example, may rest with the State public utility commission. Collaborative arrangements among agencies for controlling new system development must be documented through statutory or other means (such as memoranda of understanding).

•	The responsible State agency (or combination of agencies) must possess and demonstrate when necessary the "actual authority" to prevent the creation of a new system on the basis of an inadequate demonstration of technical, managerial, and financial capacity. "Actual authority" may take the form of statutory authority, regulations, or other effective and demonstrable means of preventing the creation of a new system due to an inadequate demonstration of capacity.

•	Active involvement of local and county entities in addressing capacity concerns is one means of addressing new system capacity. The basis of authority for obtaining the necessary assurances of technical, managerial, and financial capacity may be placed initially at the local level, but the state is ultimately accountable for meeting the capacity requirements of the Act and must have the final authority to ensure new system capacity.

2. Demonstration of Control Points in the New System Development Process

A control point is defined as a point at which the State (or other unit of government) can make an authoritative decision as to the adequacy of a new system, in terms of its technical, managerial, and financial capacity. Each State must demonstrate that it has one or more clear control points at which it can exercise its legal authority or other means to ensure the capacity of new systems by providing them with the opportunity to prevent the creation of a system that lacks technical, managerial, and financial capacity. Many control points are available at both the State and local levels of government. While actions by local governments can be an important part of the process, the State must have at least one control point that allows it to exercise its authority directly. The existence of this authority does not preclude the State from providing advice or technical assistance that could help to ensure that a system has adequate capacity.

Examples of generic control points in the new system development process are described in the EPA document, Information for States on Ensuring that All New CWSs and NTNCs Demonstrate Technical, Managerial, and Financial Capacity.

3. Plan for Periodic Evaluation of the New System Capacity Assurance Program

States must develop a plan for periodic evaluation of their new system capacity assurance program. The EPA Administrator must make continuing year-by-year determinations with regard to withholding under §1452(a)(1)(G)( i ). At the outset, State programs will be assessed prospectively; but evaluations of program implementation and effectiveness will become more important in succeeding years. States must therefore present a plan for program evaluation as part of their initial demonstration of authority for new systems under §1420(a). The plan must outline a means of verifying program implementation and evaluating the program.

CHAPTER 3:

Guidance for States on Minimum Requirements for State Capacity Development Strategies (to Avoid SRF Withholding)

Prepared for the

Small Systems Working Group

National Drinking Water Advisory Council

Revised FINAL DRAFT

Do not cite or distribute

July 19, 1997

SUMMARY OF REQUIREMENTS

To comply with the provisions of §1420(c), States must complete and submit to EPA the following items, discussed in detail above.

Criteria	Requirements
1. Solicitation and Consideration of Public

Comment	•	The State must certify that it engaged in a proactive process of soliciting public comments on the listed elements.

•	The State must describe all significant public comments and its response to them.
2. Consideration of §1420(c)(2)(A-E)	•	The State must describe the issues considered by the State relative to each of the listed elements and explain why each element was included or excluded from the State's capacity development strategy.
3. Capacity Development Strategy	•	The State must show a rational basis for concluding that the elements chosen by the State —when taken together and considered as a whole—are likely "to assist public water systems in acquiring and maintaining technical, managerial, and financial capability" (§1420(c)(1)) by describing the manner in which the selected elements fit together and achieve the statutory objective.

•	The State must describe its plan for assessing progress toward improving the technical, managerial, and financial capacity of public water systems in the State.
4. Strategy Implementation	•	The State must describe how it intends to implement its strategy.
5. Systems in Significant Noncompliance	•	Every three years, the State must prepare, update, and submit to the Administrator a list of community water systems and nontransient noncommunity water systems that have a history of significant noncompliance and, to the extent practicable, the reasons for noncompliance.

•	The State must submit within five years of enactment of this section a report to the Administrator on the success of enforcement mechanisms and initial capacity development efforts in assisting community water systems and nontransient , noncommunity water systems to improve technical, managerial, and financial capacity.

INTRODUCTION

The Safe Drinking Water Act ( SDWA ) Amendments of 1996 ( Pub.L. 104-182) authorize a Drinking Water State Revolving Fund ( DWSRF ) to assist public water systems in financing the costs of infrastructure needed to achieve or maintain compliance with SDWA requirements and in achieving the public health objectives of the Act. Section 1452 authorizes the Administrator of the U.S. Environmental Protection Agency (EPA) to award capitalization grants to the States. §1420(c) of the Act directs the Administrator to withhold a portion of a State's allotment under Section 1452 unless the State is "developing and implementing a strategy to assist public water systems in acquiring and maintaining technical, managerial, and financial capacity."

This document provides the criteria that EPA will use in evaluating State capacity development strategies for purposes of implementing the withholding requirements in §1420(c) of the Act. Each State will have considerable flexibility in preparing its capacity development strategy. Only minimum criteria will be reviewed to ensure that the State meets the provisions of §1420(c). The five criteria include: 1) solicitation and consideration of public comments; 2) consideration of §1420(c)(2)(A-E); 3) description of the capacity development strategy; 4) strategy implementation; and, 5) systems in significant noncompliance. The sources of this guidance are the Administrator's authority to issue guidance and regulations under the SDWA and the specific provisions of §1420 of the Act.

Benefits of a State Capacity Development Strategy. The SDWA Amendments introduced a new focus on prevention. The Amendments seek to prevent new problems by ensuring that water systems have the capacity to provide safe water and by adding programs to protect our sources of drinking water. Achieving increased technical, financial, and managerial capacity can avert compliance problems that cost more to address than would implementing a capacity improvement program.

The new prevention approach in the Amendments has two key elements:

•	A clear State lead, with flexibility and resources to achieve results.

•	A strong effort to provide information to the public and involve stakeholders in decision-
making processes.

The integration of incentives and regulatory flexibility applies in the area of capacity. The Amendments seek to improve the ability of water systems to provide safe water reliably by requiring States to ensure adequate capacity in new systems and to prepare capacity development strategies for public water systems. These strategies are intended as a plan for a State program to improve the technical, managerial, and financial capability of water systems to deliver safe drinking water reliably. The tools and approaches that States develop as part of their capacity development strategy will make the implementation of the law more workable, consistent, and effective. For descriptions of tools and approaches available to States, see EPA's Information for States on Preparing Capacity Development Strategies.

CRITERIA

1. Solicitation and Consideration of Public Comment

The Act provides that the States, in preparing their capacity development strategies, "shall consider, solicit public comment on, and include as appropriate" the elements listed in Section 1420(c)(2)(A-E).

To meet its statutory obligations with regard to public comment, a State must:

•	Certify that it engaged in a proactive process of soliciting public comments on the listed elements;

•	Certify that the proactive process of soliciting public comment on the listed elements occurred as part of (not in response to) the preparation of its capacity development strategy; and,

•	Describe all significant public comments and the State's response to those comments.

Definitions. For the purposes of this requirement, several terms must be defined.

A proactive process is defined as a process that has the following characteristics:

•	The State notified the general public—through appropriately visible channels—of the opportunity to provide comment on elements A-E as part of the preparation of the State's capacity development program.

•	The State identified, before soliciting public comment, the groups that might be interested in the preparation of a capacity development strategy. These are likely to be the same types of groups identified in §1420(c)(2)(E).

•	The State ensured that each of the identified groups received a request for public comment on the listed elements.

•	The State provided an accessible mechanism for receiving public comment.

Significant public comment refers to any public comment that contributes to or addresses in a substantive manner the development of a comprehensive State strategy. Significant public comment includes those comments suggesting changes to or support of any State position.

Response to significant public comment refers to the State's responsibility to describe the manner in which it used or did not use all significant public comment in the preparation of its capacity development program. The response must outline clearly the reasons for and process by which the State decided to use or not to use such comments.

States with Existing Strategies. Some States have implemented or presently are implementing capacity development strategies. Having a strategy does not exempt a State from the responsibility to solicit and consider public comment on that strategy. Each State with a strategy must solicit and consider public comment on the State's treatment of the listed elements in its existing strategy. One means of doing this is by including the existing strategy as part of the IUP . Specifically, each State with an existing strategy must certify that it used a proactive process to solicit public comment, and the State also must describe all significant public comments and the State response to each of them.

2. Consideration of §1420(c)(2)(A-E)

Section 1420(c)(2) provides that the State "shall consider, solicit public comment on, and include as appropriate" the listed elements A through E. The requirement is that the State consider each of the listed elements. These five elements, which are listed in §1420(c)(2)(A-E) of the statute, require the State to consider the following:

•	Methods or criteria to prioritize systems [§1420(c)(2)(A)]

•	Factors that encourage or impair capacity development [§1420(c)(2)(B)]

•	How the State will use the authority and resources of the SDWA to assist public water systems [§1420(c)(2)(C)]

•	How the State will establish the baseline and measure improvements [§1420(c)(2)(D)]

•	Procedures to identify interested persons [§1420(c)(2)(E)]

To comply with this requirement, the State must describe the issues considered by the State relative to each of the listed elements and explain why each element was included or excluded from the State's capacity development strategy.

3. Capacity Development Strategy

EPA must review two aspects of the State capacity development strategy. First, a State must develop a strategy. This means that there must be a rational basis for concluding that the elements chosen by the State —when taken together and considered as a whole—are likely "to assist public water systems in acquiring and maintaining technical, managerial, and financial capability" (§1420(c)(1)). A State must describe the manner in which the selected elements fit together and achieve the statutory objective. EPA will not evaluate the desirability or potential effectiveness of each element. It will, however, evaluate whether there is a rational basis for concluding that there is a strategy.

Second, a State must describe its plan for assessing progress toward improving the technical, managerial, and financial capacity of public water systems in the State. Further, §1420(c)(3) requires a triennial report from the State agency responsible for carrying out the capacity development strategy to the Governor on "the efficacy of the strategy and progress made towards improving the technical, managerial, and financial capacity of public water systems in the State." The State will not meet this requirement if its strategy will not produce an assessment.

4. Strategy Implementation

EPA will defer to each State's determination of the manner of implementation of a State plan. States must only submit to EPA a description of the manner in which they intend to implement their capacity development strategy.

5. Systems in Significant Noncompliance

As required by §1420(b), each State must prepare, periodically update, and submit to the Administrator a list of community water systems and nontransient , noncommunity water systems that have a history of significant noncompliance. States must also indicate, to the extent practicable, the reasons for noncompliance. To simplify this step, States may select one "standardized" reason for noncompliance that best describes the system. The standardized reasons are:

A.	Short term training problems

B.	Short term financing problem

C.	Long term technical, managerial, financial capacity problem

D.	Recalcitrance

E.	Data error

F.	Unknown

This list of community water systems and nontransient , noncommunity water systems that have a history of significant noncompliance serves as a tool to help inform, and to a limited extent focus, the preparation of the state's capacity development strategy. The list is not intended as an enforcement tracking tool. Rather, it should be used as a means of identifying the number of systems with a history of significant noncompliance that have long term technical, managerial, and financial capacity problems versus those that have short term problems and of illustrating progress in this area.

Each State must also submit within five years of enactment of this section a report to the Administrator on the success of enforcement mechanisms and initial capacity development efforts in assisting community water systems and nontransient noncommunity water systems to improve technical, managerial, and financial capacity. Both requirements must be met as part of a State's capacity development strategy.

Definitions. For the purposes of this requirement, several terms must be defined.

Periodically update, for the purposes of this requirement, is defined as once every three (3) years. The first list must be prepared and submitted to the Administrator within one (1) year of the enactment of §1420, and each subsequent list must be submitted to the Administrator triennially.

A history of significant noncompliance is defined as being found in significant noncompliance during (at least) any three (3) quarters during the previous three (3) years.

Minority Opinion

NOTE: The following minority opinion was written and submitted by 2 members of the Group (Jim Sheldon and Theresa Rismiller ).

It is our concern that the proposal includes Guidance for States on Minimum Requirements for State Capacity Development Strategies (to Avoid SRF Withholding). It is our position that the law is very clear relative to the requirements for state strategy. While the SDWA Amendments of 1996, Section 1420, includes authority for EPA guidance for subsection (a) New Systems - it does not include such authority for subsection (c) State Strategies. To the contrary, 1420(d) Federal Assistance states, "The Administrator shall support the States in developing capacity development strategies." This subsection further states that EPA shall publish information "to assist States and public water systems in capacity development efforts."

It is therefore our position that Section 1420 clearly states that EPA should provide information pertaining to state strategies but not guidance. We understand that the majority of the work group felt there was consensus to require guidance for state strategies (Section 1420). However, the majority of the work group felt that EPA did have authority to publish guidance under the SRF section (Section 1452(g)(3)) which was their controlling factor for the establishment of this guidance. We support EPA publishing "information" for states to use for developing strategies but not guidance.

Whether the final decision of the National Drinking Water Advisory Council is to provide guidance or information for State Capacity Development Strategies (to Avoid SRF Withholding), we offer the following language to be utilized for the content of said document. This still preserves the state flexibility intended in the SDWA of 1996.

State Capacity Development Strategies (to Avoid SRF Withholding)

To avoid withholding, a State shall consider, solicit public comment on, and include as appropriate the elements listed in the Act including:

1-	Methods or criteria to prioritize systems

2-	Factors that encourage or impair capacity development

3-	A description of how the State will use the authority, resources, and other means

4-	Establish a baseline and measure improvements in capacity

5-	Identify interested persons/parties

States must submit to EPA (1) that the State has considered the elements of Section 1420(c)(2)(A-E), as directed and (2) a description of the State's strategy based on its consideration of these elements and other elements it feels appropriate. It is recognized that State strategies developed under this section will be diverse and EPA should give deference to a State's determination as to content and manner of implementation of a State plan, so long as the State has solicited and considered public comment on the listed elements and has adopted a strategy that incorporates appropriate provisions.

This proposal tracks more closely with the intent of the amendment as made clear by (1) Conference Committee Report and (2) Senator Kempthorne 's remarks on the Conference agreement.

(1)	Report 104-741 August 1, 1996, Capacity Development (sec. 119)

The phrase "legal authority or other means" is intended to require a State to have the actual authority to ensure that all new community water systems demonstrate the technical, managerial and financial capacity to comply with the Safe Drinking Water Act. These could include regulations, training, and bonding requirements. States are also to adopt and implement a capacity development strategy. This is intended to encourage States to continue to focus resources on capacity development initiatives. States are required to consider, solicit public comment on, and include as deemed appropriate by the State, a number of elements and criteria. The Conferees do not expect that every State will adopt the same capacity development strategy and do not expect States to include elements in section 1420(c) that the States determine are not appropriate. It is not expected that every State will give the same consideration to each of the elements listed in section 1420(c). Rather, the Conferees expect that, as suggested by existing State capacity development programs, State capacity development strategies developed under this section will vary according to the unique needs of the State. The Conferees encourage this diversity and indicate that EPA should give deference to a State's determination as to content and manner of implementation of a State plan, so long as the State has solicited and considered public comment on the listed elements and has adopted a strategy that incorporates appropriate provisions.

(2)	Senator KEMPTHORNE , Author of the Act, excerpts from Conference Report Senator's Floor Statement.

"The bill also gives States the sole authority to design and implement capacity development strategies to ensure that drinking water systems have the financial, technical and managerial resources they need to comply with this law. Under the old regulatory approach, we would have required States to adopt a strategy and submit it to EPA for review and approval. But we do not do that here. Once a State adopts a capacity development strategy, EPA has no authority under this law to second-guess it or penalize the State by withholding Federal funds."

We believe strongly that Congress has signaled a new approach for regulating, at both the federal and state levels, which should not be compromised by well-meaning stakeholder groups recommending higher levels of control than that contemplated by Congress. We urge the NDWAC to respect Congressional intent in this matter.

CHAPTER 4:

Guidance for States on Assessment of Capacity for Purposes of Awarding SRF Assistance

Prepared for the

Small Systems Working Group

National Drinking Water Advisory Council

Revised FINAL DRAFT

Do not cite or distribute

July 19, 1997

SUMMARY OF REQUIREMENTS

To comply with the provisions of §1452(a)(3)(A) and §1452(a)(3)(B), States must complete and submit to EPA the following items, discussed in detail above.

Criteria	Requirements
1.	Procedure to Assess Technical, Managerial, and Financial Capacity	To meet its statutory obligations under this provision in the first year of implementation, a State must:

Provide as part of its IUP an assurance that it will assess the technical, managerial, and financial capacity of water systems and a brief description of the procedure that will be used to conduct the assessment of capacity both at present and for the foreseeable future.

To meet its statutory obligations under this provision in subsequent years, a State must:

Summarize as part of its operating plan the results of its assessment from the previous year and describe any changes to its procedure for assessing capacity both at present and for the foreseeable future.
2.	Procedure for Assessing Whether DWSRF Assistance Will Help to Ensure Compliance (if a system is not presently in compliance)	To meet its statutory obligations under this provision in the first year of implementation, a State must:

Provide as part of its IUP an assurance that it will assess whether such assistance will help to ensure compliance and a brief description of the procedure that will be used to conduct the assessment.

To meet its statutory obligations under this provision in subsequent years, a State must:

Summarize as part of its operating plan the results of its assessment from the previous year and describe any changes to its procedure for assessment.
3.	Procedure for Assessing Whether the System Has a Long-Term Plan to Develop Adequate Technical, Managerial, and Financial Capacity (if a system lacks capacity)	To meet its statutory obligations under this provision in the first year of implementation, a State must:

Provide as part of its IUP an assurance that it will assess whether the system has a long-term plan to undertake feasible and appropriate changes in operations necessary to develop adequate capacity and a brief description of the procedure that will be used to conduct the assessment.

To meet its statutory obligations under this provision in subsequent years, a State must:

Summarize as part of its operating plan the results of its assessment from the previous year and describe any changes to its procedure for assessment.

INTRODUCTION

The Safe Drinking Water Act ( SDWA ) Amendments of 1996 ( Pub.L. 104-182) authorize a Drinking Water State Revolving Fund ( DWSRF ) to assist public water systems in financing the costs of infrastructure needed to achieve or maintain compliance with SDWA requirements and to achieve the public health objectives of the Act. Section 1452 authorizes the Administrator of the U.S. Environmental Protection Agency (EPA) to award capitalization grants to the States. The States, in turn, provide assistance to eligible water systems. Under §1452(a)(3)(A), a State may not provide assistance to a system that lacks the technical, managerial, or financial capability2 to maintain SDWA compliance or is in significant noncompliance with any requirement of a national primary drinking water regulation or variance. Two exceptions to this requirement are provided in §1452(a)(3)(B). This provision allows States to provide assistance to a system that lacks technical, managerial, or financial capacity if:

The use of the financial assistance from the DWSRF will ensure compliance; and

The system lacks adequate capacity, the owner or operator of the system agrees to undertake feasible and appropriate changes in operation to ensure technical, managerial, and financial capacity to comply with SDWA over the long-term.

As part of a Capitalization Grant Application, each State must agree to review the technical, managerial, and financial capability of all systems that receive assistance. The purpose of this guidance is to provide direction to the states in developing a method for assessing system capacity for the purposes of Awarding SRF assistance. This is a requirement separate from the capacity development strategy required under §1420(c) of the Act. The source of this guidance is the Administrator's authority to issue guidance under §1452(g)(3) of the Act.

This guidance document—developed in consultation with States and other stakeholders— provides the minimum requirements for State assessment of a system's technical, managerial, and financial capacity for the purposes of distributing SRF funds. To ensure the implementation of §1452(a)(3)(A) , a State must describe its procedures for:

•	assessing technical, managerial, and financial capacity at the present and for the foreseeable future;

•	assessing whether SRF assistance will help to ensure compliance (if a system is not in compliance); and

•	assessing whether the system has a long-term plan to develop adequate capacity (if a system lacks capacity).

EPA recognizes that the assessment of system capacity is an iterative process that may change as a State prepares its capacity development strategy and evaluates the success of the strategy. This guidance provides for a phased approach for States to develop and describe their assessment procedures. In the first year of implementation, States must provide a prospective description of the procedures they will use to assess system capacity. In subsequent years, States must summarize the results from the previous year's assessment and describe any changes to the procedures for assessing technical, managerial, and financial capacity. This provides States with the opportunity to change their assessment procedures to meet the needs of their capacity development strategies. For tools and approaches that States can use to assess system capacity, see Information for States on Assessment of Capacity for the Purposes of Awarding SRF Assistance.

In developing procedures for assessing system capacity, States should recognize that these assessments are to be used as part of a systematic process that will better enable the State to carry out other tasks required by or vital to the law and the drinking water program. It is through examination of the broad goals of the program and of its strategy that a State can select the tools and approaches to assessment that will most effectively benefit its overall program. Viewing each component of the capacity development process—including the method for assessing systems— as one part of an integrated whole will enable States to develop a comprehensive, integrated strategy for capacity development that will make the implementation of the law more workable, consistent, and effective.

CRITERIA

1. Procedure to Assess Technical, Managerial, and Financial Capacity

Section 1452(a)(3)(A) of the Amendments provides that a State may not provide assistance to a system that lacks the technical, managerial, and financial capability to ensure and maintain SDWA compliance. To comply with this provision, a State must have a procedure to assess the technical, managerial, and financial capacity of water systems at present and for the foreseeable future.

To meet its statutory obligations under this provision in the first year of implementation, a State must:

Provide as part of its IUP an assurance that it will assess the technical, managerial, and financial capacity of water systems and a brief description of the procedures that will be used to conduct the assessment of capacity at present.

Provide as part of its IUP an assurance that it will assess the technical, managerial, and financial capacity of water systems and a brief description of the procedures that will be used to conduct the assessment of capacity for the foreseeable future.

To meet its statutory obligations under this provision in subsequent years, a State must:

Summarize as part of its operating plan the results of its assessment from the previous year and describe any changes to its procedure for assessing capacity both at present and for the foreseeable future.

2.	Procedure for Assessing Whether DWSRF Assistance Will Help to Ensure Compliance (if a system is not presently in compliance)

Section 1452(a)(3)(B) permits States to provide assistance to systems described in §1452(a)(3)(A):

If the use of the financial assistance from the DWSRF will ensure compliance; and

If the system lacks adequate capacity, the owner or operator of the system agrees to undertake feasible and appropriate changes in operation to ensure technical, managerial, and financial capacity to comply with SDWA over the long-term.

To determine which systems are eligible for assistance under §1452(a)(3)(B), States must develop a procedure for assessing whether such assistance will help to ensure compliance in a system that is not presently in compliance.

To meet its statutory obligations under this provision in the first year of implementation, a State must:

Provide as part of its IUP an assurance that it will assess whether such assistance will help to ensure compliance and a brief description of the procedures that will be used to conduct the assessment.

To meet its statutory obligations under this provision in subsequent years, a State must:

Summarize as part of its operating plan the results of its assessment from the previous year and describe any changes to its procedure for assessment.

3.	Procedure for Assessing Whether the System Has a Long-Term Plan to Undertake Feasible and Appropriate Changes in Operations Necessary to Develop Adequate Capacity (if a system lacks capacity)

Section 1452(a)(3)(B) permits States to provide assistance to systems described in §1452(a)(3)(A):

If the use of the financial assistance from the DWSRF will ensure compliance; and

If the system lacks adequate capacity, the owner or operator of the system agrees to undertake feasible and appropriate changes in operation to ensure technical, managerial, and financial capacity to comply with SDWA over the long-term.

To determine which systems are eligible for assistance under §1452(a)(3)(B), States must develop a procedure for assessing whether the system has a long-term plan to undertake feasible and appropriate changes in operations necessary to develop adequate capacity (if a system lacks capacity).

To meet its statutory obligations under this provision in the first year of implementation, a State must:

Provide as part of its IUP an assurance that it will assess whether the system has a long-term plan to undertake feasible and appropriate changes in operations necessary to develop adequate capacity and a brief description of the procedures that will be used to conduct the assessment.

To meet its statutory obligations under this provision in subsequent years, a State must:

Summarize as part of its operating plan the results of its assessment from the previous year and describe any changes to its procedure for assessment.

Minority Opinion

NOTE: A minority opinion was offered by 2 members of the Group (William VanDeValk and Donna Shell) during the discussion of the content for this guidance document. At the Working Group's request, the following table summarizes the requirements for the guidance as proposed by the minority opinion.

Criteria	Requirements
1.	Procedure to Assess Technical, Managerial, and Financial Capacity	To meet its statutory obligations under this provision in the first year of implementation, a State must:

Provide as part of its IUP a comprehensive description of its procedures for assessing capacity both at present and for the foreseeable future.

To meet its statutory obligations under this provision in subsequent years, a State must:

Summarize the results of its assessment from the previous year and describe any changes to its procedure for assessing capacity both at present and for the foreseeable future.
2.	Procedure for Assessing Whether DWSRF Assistance Will Help to Ensure Compliance (if a system is not presently in compliance)	To meet its statutory obligations under this provision in the first year of implementation, a State must:

Provide as part of its IUP a comprehensive description of its assessment procedures.

To meet its statutory obligations under this provision in subsequent years, a State must:

Summarize the results of its assessment from the previous year and describe any changes to its procedure for assessment.
3.	Procedure for Assessing Whether the System Has a Long-Term Plan to Develop Adequate Technical, Managerial, and Financial Capacity (if a system lacks capacity)	To meet its statutory obligations under this provision in the first year of implementation, a State must:

Provide as part of its IUP a comprehensive description of its assessment procedures.

To meet its statutory obligations under this provision in subsequent years, a State must:

Summarize the results of its assessment from the previous year and describe any changes to its procedure for assessment.