Public-Private Partnerships Can “Bridge the Gap” to Resource Sustainability
The realization Florida’s water resources need multiple and creative solutions settled deeper into the collective awareness in 2016 and 2017. Man’s footprint on Florida’s natural resources is apparent, with natural conditions swinging from flood to drought conditions, and back again, within a matter of months. A mounting urgency to alter the course of resource trends in the near-term and better prepare for Florida’s future is upon us. Florida’s legislature has provided a set of tools to better attain sustainability, but realizing the full potential has, thus far, proven challenging.
The legislature states its over-arching, water resource objective by directing the Florida Department of Environmental Protection (FDEP) and the water management districts (WMDs) to “take into account cumulative impacts on water resources and manage those resources in a manner to ensure their sustainability.”1 Certainly, conservation land acquisition and restoration projects exist throughout Florida. However, these large-scale restoration projects take extraordinary amounts of time, funding, and land to accomplish. On the other side of the spectrum, private lands are regulated to achieve water-resource objectives, yet there are limits to what regulation can achieve because these programs are mandatory and project-specific. Opportunities abound for near-term, innovative solutions to address water-resource needs. Florida’s Public-Private Partnership (PPP) program makes feasible, shorter-term, implementable storage, treatment, and recharge solutions, while other longer-term solutions are planned, designed, and constructed. Between regulation and long-term restoration projects, PPPs can bridge the gap.
Florida has taken many steps toward accomplishing these partnerships. Florida’s legislature proactively enacted laws encouraging PPPs “to accomplish water storage, groundwater recharge, and water quality improvements on private agricultural lands.”2 In recent years, the legislature and WMDs generously funded PPPs.3 Inherently, the PPP program relies on private landowner voluntary participation. To induce engagement in PPP projects, private landowners need incentives and certainty in program implementation. Under Florida’s statutory framework, PPPs can be swiftly employed to store excess surface water, augment water-quality treatment, recharge aquifers, and even provide refugia for protected species. PPPs can be flexibly designed to complement a range of state programs. 4
Across the United States, benefits from partnering with landowners to achieve sustainable ecosystems and water resources are being realized.5 As reviewed by the Property and Environment Research Center,6 conserving endangered species; improving the quality of water in receiving, drinking waterbodies; and recharging aquifers are all examples of public benefits that can result from partnering.7 The concept of partnering with private landowners to accomplish public resource benefits is not new. In fact, it has proven successful here in Florida.
This article touches on early examples of PPPs in Florida, reviews PPP contractual terms, and discusses state and federal regulatory programs and hurdles. A review of these topics sheds light on possible innovations to boost PPP implementation.
Early Examples of PPP in Florida Were Successful
In the early 2000s, the South Florida Water Management District (SFWMD) struggled with Lake Okeechobee water-quality issues and extreme rain events, which generated detrimental high-volume discharges to coastal estuaries via the Central and Southern Florida Flood Control Project. Seeking immediate improvement to both quality and quantity issues, SFWMD turned to area landowners, and the Florida Ranchlands Environmental Services Project (FRESP), a voluntary test program, was born as a pilot program in 2003.8 FRESP’s goal was “to design a ‘payment for environmental services’ (PES) program in which willing ranch-owner ‘sellers’ could enter into contracts with state-agency ‘buyers’ to provide water retention and nutrient load reduction services above and beyond regulatory requirements critical to improving the health of Lake Okeechobee and the estuaries….”9 Proving successful and cost-effective, the FRESP program evolved to the Northern Everglades Payment for Environmental Services (NE-PES) in 2011, when SFWMD released its first solicitation for ranchers to submit proposals to provide environmental services.10 SFWMD also contracts with landowners via their water farming or dispersed water management program, which focus on water management areas designed to 1) retain on-ranch storm water; 2) divert excess flows for storage on fallow farm land; and/or 3) provide nutrient removal through diverting off-site water to management areas for treatment as well as attenuating excessive flows.11 The program received widespread support.12 Spreading northward, the St. Johns River Water Management District (SJRWMD) and Suwannee River Water Management District (SRWMD) embraced pilot programs to address both aquifer recharge and water-quality improvements in 2016.13 The FRESP and NE-PES experiences elucidate key contractual terms, giving insight into opportunities to streamline and collaborate with state planning.
Restructuring the Deal: Hallmarks of PPP Agreements and Options to Improve
A challenge in PPPs is orchestrating water-resource concerns with legislative funding and agency and landowner interests. Through experience, Florida agencies and landowners are developing awareness of PPP project types, associated contract terms, and regulatory constructs. Lessons learned from these programs provide opportunities for agency guidance and action regarding PPP frameworks, lending structure and certainty to what is now a statewide, ad hoc endeavor.
• Linking to Agency Planning through Project Type and Resource Benefits —Florida’s legislature encourages PPPs that accomplish public purposes, such as water storage, groundwater recharge, and water-quality improvements; thus, agency contracts center on these benefits.14 A foundational issue is the parties’ sharing a common vision of the PPPs’ purpose because it is the basis of the service a landowner provides and the basis for payment.15 While a uniquely situated landowner and governmental entity may readily discern an immediate PPP opportunity that “just can’t be passed up,” most PPPs would benefit from coordination with agency planning. Several vehicles to accomplish this linkage exist.
Each WMD prepares an annual consolidated report on management of water resources, one example of the plan — project coordination.16 PPP projects could be included in the annual reports and five-year work plans that the WMDs prepare.17 The annual reports must contain specified elements that lend themselves to identifying when and where PPPs may further a public purpose(s). Required plan elements include information on all water-quality or water-quantity projects that are a part of the districts’ five-year work plan.18 A list of projects to implement basin management action plans (BMAP), minimum flow or level (MFL) recovery strategies, a priority ranking, cost estimates, and an estimate of each project’s benefit to the subject watershed are all required. To prioritize state funding and inform stakeholders, the projects proposed for state funding must have a priority ranking. A watershed grading system is required and represents the level of impairment or violation of an MFL. Thus, treatment, excess water storage, and aquifer recharge needs are all topics that can be analyzed and identified in a BMAP or regional water supply plan and integrated into the annual reports and five-year work plan.19 In this manner, projects and resource needs are matched and prioritized. As part of these efforts, agencies should identify whether PPP projects could be viable, near-term options. linking a PPP program to existing state and WMD planning efforts, it is possible to identify regions and issues well suited to near-term improvement through PPP, increasing the likelihood of funding.
• Minimizing Uncertainty Through PPP Contract Terms —Another challenge is overcoming the uncertainty inherent in PPPs. addressing this in select contract terms, the certainty of Florida’s PPP program may be enhanced.
1) Year-to-Year Funding: PPP contracts, while often executed for a 10-year term, routinely only provide annual funding; therefore, annual legislative appropriation and an agency decision to fund the selected project are likely needed. 20 Risk of year-to-year funding creates landowner uncertainty, which is magnified by the cost of reverting any infrastructure back to pre-existing condition. For example, if a berm is built and the project is not funded the next year, then a landowner may experience substantial cost to remove the berm, returning the land to prior condition. If the contract is funded for many years, then the landowner may have sufficient return to absorb reversion costs. Also, if a waterbody’s total maximum daily load is substantially exceeded and the region’s BMAP21 indicates PPP projects could provide water-quality treatment for the region, then landowners may reasonably infer PPPs in the area have increased likelihood of continued funding.22 linking plans and projects, landowners gain knowledge about the likelihood of continued funding, a key inducement given the multi-year efforts to bridge the state’s water-resource gaps. This has occurred in the Northern Everglades and Estuaries Program where the legislature recently recognized “a continuing source of funding is needed to effectively implement the program…,”23 and also expressed its intent to support PPP relationships to facilitate restoration in this watershed. This program could serve as a model.
2) Project Funding Structure Must Incentivize Voluntary Participation: PPP relationships are based on paying landowners for providing environmental services above and beyond what is required by law. The agency pays a fee for services rendered by the landowner, and this fee is based on achieving resource goals, beyond regulatory requirements, such as storing excess water or removing pounds of nutrients.24 Calculation of the fee varies by agency, with some agencies paying landowners for excess nutrients removed, while others pay a set annual fee.25 The latter payment structure is based on the land being set aside for the defined purpose, regardless of the actual volumes of water stored, treated, or recharged. This recognizes performance may be variable because it is driven by rainfall and does not place the risk of lack of rainfall on landowners. Because a landowner gives up certain uses of the land while implementing the PPP, landowner participation is more effectively incentivized through payment of a set annual fee. The set fee could be the entire compensation, or a hybrid approach could be implemented, whereby a set fee is provided for the service of committing land to the purpose, with additional compensation related to specific project performance, such as pounds of nutrients removed.
Resolving Regulatory Uncertainty — The Final Step Toward Certainty
Florida’s PPP program makes feasible, shorter-term solutions, while longer-term solutions are planned, designed, and constructed. Because these projects are not permanent, a key landowner interest is reverting the property back to its baseline condition.26 Storing excess water and treating it on a property can lead to changes, such as increased wetland footprint and potential new use by protected species. Recognizing reversion to baseline conditions as a key aspect, the legislature adopted F.S. §373.4591(2), which defines agency responsibilities and procedures for developing a baseline condition, determining the extent of wetlands during and after a PPP. While state regulatory programs are now better structured to facilitate PPP implementation and provide certainty, the federal wetland regulatory programs are not similarly designed and could be improved through state facilitation with federal regulators and private landowners.
• Pilot Program Helped, But Setbacks May Impede Future Projects —The FRESP program (described above) long recognized the need for a streamlined federal regulatory process. Agencies and the private sector made progress to establish the U.S. Army Corps of Engineers’ (USACE) Regional General Permit (RGP) SAJ-106,27 and the U.S. Fish and Wildlife Service (FWS) and U.S. Department of Agriculture (USDA) Natural Resources Conservation Service (NRCS) Consultation Guidance for the FRESP program, which was later expanded to include the NE-PES Boundary.28 These federal programmatic approvals expedited project implementation by authorizing defined water management practices that provide retention and nutrient removal, so long as certain conditions were met. Currently, these federal approvals, which were geographically limited in scope, are suspended.29 Landowners who may be interested in participating in PPP projects are now forced to pursue federal and state wetland approvals on a case-by-case basis, generating duplicative, expensive, and time-consuming effort with uncertain results. Options under the federal Endangered Species Act (ESA) exist, and, with state cooperation and leadership, can be implemented effectively.
To reduce the current burdensome approach, state and federal agencies can reinstate the programmatic approvals for implementing these PPP projects that benefit water resources. State agencies have been exploring potential federal agreements that are available under the ESA as a method to ensure a landowner can manage the risk of future protected species use of a property. Landowners should be included in formulating the approvals so conditions are acceptable. In addition to the USDA-NRCS Consultation Guidance for the FRESP program, vehicles for such an agreement include Partners for Fish and Wildlife Program Cooperative Agreements,30 or potentially Safe Harbor Agreements or Candidate Conservation Agreements.31 Recognizing the ESA’s purely regulatory structure did little to incentivize landowners to benefit listed species and, in fact, created disincentives to maintain protected species habitats. FWS devised this set of agreements and associated enhancement of survival permit to provide authorization to enhance habitat through beneficial management actions, recognizing the benefits to the species.32 These policies and agreements encourage landowners to undertake conservation measures to benefit species for a period of time, and then allow the land to revert back to baseline condition without consequence of an incidental take enforcement or FWS assertion of additional, new restrictions on the land to protect species that may come to use it during the interim time period.
Florida is in a position to take a leadership role in formulating, for the state, a set of programmatic approvals that establish parameters for the types of work to be undertaken on PPP projects, set base conditions, and for returning land to base condition. Then, individual projects can be implemented under these overarching approvals, streamlining the process. Depending on the extent of PPP implementation throughout Florida, the state could consider funding a staff position, for example, at the NRCS, devoted to PPP implementation to provide statewide consistency and expedite the permitting process.
• PPP Should Allow Flexibility to Capture Additional Environmental Benefits —Contract and permitting provisions should not foreclose the ability for a landowner to demonstrate further benefits and receive additional payment for environmental services. For example, there are opportunities for a landowner to generate multiple environmental services. A dispersed water project could start as a storage project, but also generate water-quality benefits within a BMAP area that could be incorporated as a BMAP project or through a water quality credit trading agreement. A storage project could generate conservation benefits to protected species, and should be eligible to seek a conservation banking approval. All of these additional benefits, if a landowner can fairly demonstrate they are occurring, should be incentives for participating in a PPP. Because of the multiple benefits of the environmental services provided and the relatively low investment on the state side, there should be multiple opportunities for incentives for a landowner to participate, yielding multiple benefits for Florida’s resources.
Conclusion
planning for and combining these programs with an eye toward nimble, near-term projects, Florida can identify areas most in need of storage, treatment, and recharge, and accomplish nearly immediate resource benefits. A conscious, organized state and federal effort is recommended — one where landowners are afforded sufficient certainty as to the financial, contractual, and regulatory structure to engage. In this manner, Florida will be able to “bridge the gap” between resource issues and landowners capable of partnering to achieve sustainability.
1 Fla. Stat. §373.4591.
2 Id.
3 See, e.g., Laws of Fla. Ch. 2017-70, §5 ln.1589; see also St. John’s River Water Management District, Fiscal Year 2016-2017 Final Budget at 11(Sept. 27, 2016), available at https://www.sjrwmd.com/static/financial/budget/FY2016-2017_Adopted_Budget.pdf; and South Florida Water Management District, FY 2016 Programmatic Line Item Report at 236, available at https://www.sfwmd.gov/sites/default/files/documents/fy16_programmatic_functional_area_line_item_budget.pdf.
4 See, e.g., Fla. Stat. §§373.036, 373.1501, 373.4595, 373.709, 373.807, and 403.067.
5 For example, state and federal partnerships with private landowners in 11 western states (Oregon, Washington, California (northern), Nevada, Idaho, Montana, Wyoming, Colorado, Utah, North and South Dakota) are aimed at helping keep the greater sage-grouse (Centrocercus urophasianus), from being federally listed under the Endangered Species Act (ESA), consistent with the decision in 2015. See 80 Fed. Reg. 59857 (Oct. 2, 2015) (finding listing of the greater sage-grouse was not warranted). In California, groundwater banking programs allow storage of surface water flows underground on private lands to maximize water supply during drought conditions. See, e.g., Property and Environment Research Center, Tapping Water Markets in California: Six Policy Reforms (Oct. 17, 2016), available at https://www.perc.org/articles/tapping-water-markets-california-six-policy-reforms (outlining policy reforms to encourage water markets, including groundwater banking programs).
6 Property and Environment Research Center (PERC), https://www.perc.org/ (an institute geared to developing innovative strategies to improve environmental quality through market and property right approaches).
7 PERC Reports, 34 The Property and Environmental Research Center (Winter 2015), available at https://www.perc.org/sites/default/files/perc_reports/WEB-FINAL_PERCReports_Winter2015.pdf.
8 FRESP was a collaborative pilot program with several partners, including Florida Department of Agriculture and Consumer Services, FDEP, SFWMD, World Wildlife Fund, and six ranchers.
9 See Florida Ranchlands Environmental Services Project, http://www.fresp.org/; Sarah Lynch and Leonard Shabman, Designing a Payment for Environmental Services Program for the Northern Everglades, National Wetland Newsletter (July/Aug. 2011); Sarah Lynch and Leonard Shabman, Regulatory Challenges to Implementing a Payment for Environmental Services Program, National Wetlands Newsletter (Nov./Dec. 2011).
10 See Florida Ranchlands Environmental Services Project, http://www.fresp.org/; R. Thomas James and Joyce Zhang, Ch. 10: Lake Okeechobee Protection Program — State of the Lake and Watershed, 2011 S. Fla. Environmental Report (2011), http://my.sfwmd.gov/portal/page/portal/pg_grp_sfwmd_sfer/portlet_prevreport/2011_sfer/v1/chapters/v1_ch10.pdf.
11 For an update on SFWMD implementation, see Stacey Ollis, Sara Davis, David Glassner, and Katie Hallas, Chapter 8A: Northern Everglades and Estuaries Protection Program — Annual Progress Report, 1 2017 S. Fla. Environmental Report (2017), available at http://apps.sfwmd.gov/sfwmd/SFER/2017_sfer_final/v1/chapters/v1_ch8a.pdf (“During WY2016, there were 40 DWM projects in operation and maintenance (91,662 ac-ft/yr, or 113 million m3/yr), 10 projects in planning (181,610 ac-ft/yr, or 224 million m3/yr), [seven] in design/permitting (98,645 ac-ft/yr, or 122 million m3/yr), and [three] in construction (4,888 ac-ft/yr, or 6.0 million m3/yr) in the Northern Everglades”)).
12 See, e.g., Distributed or Dispersed Water Management and Storage in the Lake Okeechobee Watershed, Audubon of Florida (May 2010); Florida’s Working Landscapes – Will They Be Around In The Future? Evolving Tools Can Assist In Their Conservation, 1000 Friends of Florida (Jan. 2011).
13 See, e.g., SJRWMD Fiscal Year 2016-17 Budget, http://www.sjrwmd.com/budget/ (including $10.2 million for SJRWMD’s agricultural cooperative funding program, which assists farmers in implementing water-saving technologies and helps fund dispersed water storage projects); Suwanee River Water Management District, North Florida Aquifer Replenishment Initiative, http://www.srwmd.state.fl.us/index.aspx?NID=381.
14 Fla. Stat. §373.4591(1).
15 Resource issues met through PPPs include 1) storage of excess water; 2) water treatment; 3) aquifer recharge; and 4) protected species conservation.
16 Florida Department of Environmental Protection, Florida Water Plan, https://floridadep.gov/water-policy/water-policy/content/florida-water-plan (where these annual reports can be found).
17 Fla. Stat. §373.036.
18 Id.
19 See Fla. Stat. §§373.036, 373.536, and 373.4595.
20 Fla. Stat. §375.041 commits funds to Florida’s Land Acquisition Trust Fund for projects in several regions of Florida.
21 To date, a barrier to implementation has been that exceeding normal requirements must be measurable and models taking into account base conditions and excess improvements in storage or water-quality treatment are typically used to calculate the benefit provided. These models are being developed and hopefully will assist in estimating benefits of PPP. Fla. Stat. §403.067.
22 Annual funding decisions are typical in PPPs as it is considered ultra viresfor a sitting board to make financial commitments for a future board. Another possibility is for a board to fully fund a project and make annual payouts.
23 Fla. Stat. §373.4595(1)(k).
24 See e.g., South Florida Water Management District, User Manual for the Potential Water Retention Model (June 14, 2012), available at http://www.fresp.org/pdfs/PWRM_Users_Manual_061412.pdf.
25 See, e.g., St. John’s River Water Management District, Governing Board Meeting Agenda, Request for Proposal at Item #4 (Jan. 12, 2016), available at http://sjrwmd.iqm2.com/Citizens/FileOpen.aspx?Type=1&ID=1052&Inline=True; South Florida Water Management District, Water Storage Strategies https://www.sfwmd.gov/our-work/water-storage-strategies.
26 Once long-term restoration projects come online, there may be a shift in utility of these private lands as dispersed water projects. That is why it is important that they be allowed to revert to baseline conditions. Once a property reverts to baseline; however, there should be no additional limitations on the use of the property.
27 Col. Alfred A. Pantano, Jr., Department of the Army, Regional General Permit SAJ-106 (Feb. 14, 2012), available at http://www.fresp.org/pdfs/SAJ-106_FinalPermit_14feb12.pdf.
28 USDA Natural Resources Conservation Service & United States Fish and Wildlife Service, Conservation Practice Effects on Federal Listed Threatened & Endangered Species — Florida Ranchlands Environmental Services Program — Northern Everglades Consultation Guidance, available at http://www.fresp.org/pdfs/FRESP_Consultation%20Matrix_7-6-2010.pdf.
29 See U.S. Army Corps of Engineers Jacksonville District Regulatory Source Book, stating that RGP SAJ-106 is suspended.
30 The Partners for Fish and Wildlife Program can only be implemented on private lands and is voluntary. State agencies are often partners in helping facilitate agreements with the federal government; see Fish and Wildlife Services, For Private Landowners: The Partners for Fish and Wildlife Program, https://www.fws.gov/southeast/our-services/partners-program/; 16 U.S.C. §§3771-74.
31 Safe harbor agreements and candidate conservation agreements are other options to consider in implementing PPP to give the private landowner assurances. Safe harbor agreements have been established in Florida to protect habitat for the endangered red-cockaded woodpecker (Picoides borealis). Safe harbor agreements are issued under §10(a)(1)(A) of the ESA and are linked to issuance of an enhancement of survival permit. 16 U.S.C. §1539(a)(1)(A). These legal mechanisms are distinguished from the §6 ESA Cooperative State Agreement concept, which largely consist of a set of prohibited actions; the identified agreements are geared toward species recovery.
32 Final Safe Harbor Policy, 64 Fed. Reg. 32, 717 (June 17, 1999); 50 C.F.R. §§17.22(c) and 17.32(c); U.S. Fish and Wildlife Service, Endangered Species, Law & Policies, https://www.fws.gov/endangered/laws-policies/policy-safe-harbors.html.
Deborah Madden is an attorney with Gunster’s Ft. Lauderdale office, focusing on environmental law. She received her J.D. from the University of Florida Levin College of Law, magna cum laude, in 2012. She represents clients in permitting, compliance, and litigation matters involving wetlands, water supply, listed species, mitigation banking, submerged lands, and coastal construction.
Luna Phillips is a shareholder with Gunster’s Ft. Lauderdale office, focusing on environmental, administrative, and governmental law. She received her J.D. from Mercer University School of Law in 1995. She assists developers, agricultural entities, and public and private companies with water-quality regulations, environmental resource and water-use permitting, and listed species approvals.
Beth Ross is a board certified, of counsel shareholder practicing at Gunster’s West Palm Beach and Orlando offices. She received her J.D. from the University of Florida Levin College of Law and specializes in Florida water law. Prior to Gunster, Ross served for 30 years at South Florida Water Management District.
This column is submitted on behalf of the Environmental and Land Use Law Section, Janet E. Bowman, chair, and Susan Martin, editor.
