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Chapter 5: Infrastructure, Local Development, and Housing Programs

Transportation networks, including highways and airports have a significant impact on wetlands.1 Because transportation projects frequent the landscape and because their expansion usually requires a great deal of land, wetlands often provide the most economical sites. To build highways or airport runways in wetland areas, however, means diverting water flows, filling wetlands, and often isolating a wetland area from adjoining lands, all of which can radically alter the character of the land and water and the organisms living there. Once constructed, runoff from these transportation corridors can contaminate nearby wetlands. In addition to the direct effects of construction and operation, transportation networks and other infrastructure (such as marinas, electrical power facilities, and waste treatment facilities) create the basis for additional development. The secondary impacts often far exceed the initial effects of the construction, but are rarely considered in planning for wetland protection.

A wide array of Federal programs promote local development and housing construction. To some extent the overall growth results from Federal economic policies designed to stimulate population growth and a healthy economy. Tax policy, trade agreements, technical assistance, grants, loans, and even recreational projects are largely justified as measures to enhance economic growth and prosperity. Many of these also lead to extensive land consumption, and in the process, wetlands are altered.

Local development programs often involve the filling of wetlands. Once built, the structures and facilities located in former wetlands frequently require costly flood control measures to protect them from storm damage. Replacing natural vegetation with concrete also exacerbates flooding. When serious flooding does occur, subsidized insurance and disaster relief offset the damages and provide incentives to rebuild in the flood prone area. This typically results in calls for more Federal flood control projects to improve protection. Wetland water quality also declines as a result of surface run-off of pollutants from residential, commercial, and industrial development. Many business centers and residential developments are situated near the water's edge for aesthetic reasons. Some locate in former wetlands due to lower-priced land. Many industries select sites in or near wetlands because they require water in their industrial processes. In many instances, the discharges and surface runoff from these industrial sites have been the sources of contaminants affecting the health of aquatic animals in wetlands, rivers, and coastal waters. These development activities frequently contribute to the loss and degradation of wetlands.

Federal-Aid Highway Program  

The Federal Highway Administration (FHWA) oversees one of the largest Federally-assisted construction programs in the Nation. The agency provides financial support to the State departments of transportation and other recipients to assist in the development of an integrated and interconnected network of high standard highways. For the most part, the program is financed through the Highway Trust Fund, which draws its monies from taxes on gasoline, tires, truck and trailer sales, as well as user fees from heavy vehicles. Funds may be used to construct, improve, or rehabilitate roads which are not classified as local or rural minor collectors (about one-fourth of the total road mileage in the Nation). Funds may also be used to replace or repair deteriorating or obsolete bridges and to build fringe and corridor parking facilities, rest areas, pedestrian walkways, and bikeways. In addition, a new Surface Transportation Program provides flexible funding for infrastructure improvements which may include highway, transit and related mobility projects, in addition to research and transportation enhancement activities. The Federal share is generally 90 percent for interstate projects and 80 percent for bridges and most other projects. The Federal share may be increased for States with large areas of public lands. Congress authorizes spending from the Trust Fund, and the monies are apportioned to the States according to formulas. The formulas vary depending on the transportation needs of one State relative to those for all States.

To qualify for Federal highway financing, States and other intended recipients must plan projects in accordance with Federal regulations, but are otherwise free to determine statewide priorities. After agricultural programs and multipurpose water projects, the Federal highway program was most frequently identified as a source of wetland loss in the various study areas. Federal requirements under section 4(f) of the DOT Act of 1966 provide a high degree of protection to publicly-owned parks, recreation areas, and wildlife refuges which are classified as significant resources from new transportation development, but the regulations do not apply to public lands not so classified or to privately-held lands.

A frequent criticism of federally-funded State transportation agencies has been that they sometimes fail to plan for highways in a comprehensive fashion, proceeding instead on a piecemeal basis. The absence of comprehensive statewide planning sometimes has resulted in independent reviews of numerous, small segments of the same project and a systematic underestimation of total project impacts. Of particular concern here is the inducement of subsequent growth, typically labelled indirect effects. Federal Highway Administration/Federal Transit Administration (FTA) procedures for implementing the National Environmental Policy Act require that environmental documents for projects address a usable transportation improvement with "logical termini." Despite this requirement, permit requests have sometimes been filed by transportation agencies for small segments later in the project development process. By subdividing a project into small parts, the level of regulatory review under various environmental statutes, including Section 404 of the Clean Water Act,2 has often been reduced. In some cases, this effectively excluded resource agencies from the review process.

The Intermodal Surface Transportation Efficiency Act of 1991 (ISTEA) revised the process under which State and local agencies must plan needed highway and transit improvements. Under regulations issued by the FHWA and FTA, transportation projects must be planned through comprehensive, statewide and metropolitan planning procedures. The procedures must integrate transportation issues with applicable social, economic and environmental concerns.

How to avoid and to mitigate unavoidable damages to wetlands resulting from highway and transit projects has become a major public issue. Prior to FHWA's mitigation policy in 1980, FHWA's policy was to mitigate adverse impacts caused by a proposed project if the expenditure was considered reasonable given the severity of the impact. Federal funding for off-site mitigation (outside the right-of-way) was resisted strenuously and permitted only as a last resort. Some States devoted their own funds to the mitigation of wetland impacts when the FHWA refused to do so. States varied, however, in the consideration which they gave to wetlands, partly because FHWA mitigation regulations allowed considerable latitude.

During the 1980's, resource agencies and the FHWA often disagreed about what constitutes a significant impact to wetlands and how much should legitimately be spent to compensate for the loss. FHWA mitigated on the basis of one acre for each acre destroyed, often ignoring the functional values associated with the lost wetlands as well as the uncertain success of mitigation projects. Further, FHWA did not object to State departments of transportation subtracting wetland acreage remaining in highway rights-of-way from the total to be mitigated.3 Confusion frequently developed over who had responsibility for overseeing the mitigating contractor's work and how to finance the maintenance of the mitigation area. Moreover, there were no guarantees that the areas set aside in compensation for lost wetlands would themselves be protected.

In 1990, the Federal Highway Administrator issued an Environmental Policy Statement that remedies some of these problems. The new policy emphasized FHWA's commitment to the goal of no net loss of wetlands, and commits the agency "to work vigorously to preserve and, where practicable, enhance the environment." Specifically with respect to wetlands, the policy calls for "all practicable measures to avoid, minimize, mitigate, and compensate for wetland impacts." The new policy did not commit FHWA to mitigating outside highway rights-of-way or to acknowledging functional values of wetlands, but it established a standard of environmental sensitivity markedly different from that to which the agency subscribed in the past.

Several additional developments have led to changes which are improving the consideration of wetlands in highway project planning. These include the following: (1) the FHWA regulations governing mitigation of privately owned wetlands were changed in 1991 to remove the acre-for-acre policy and require replacement with equivalent wetland functions; (2) the 1990 Corps/EPA Memorandum of Agreement on mitigation clarified the requirements with which FHWA and State highway agencies must comply; (3) an agreement between FHWA, EPA, and the Corps was signed in 1992 to facilitate project development and provide increased attention to wetland protection and enhancement; and (4) ISTEA made funds available for wetland mitigation measures, including habitat banking and contributions to area-wide wetland planning efforts.

Among the regions examined by the Department, highway construction was cited as an activity affecting wetlands in New Jersey, Florida, Maryland, North Carolina, Alaska, Louisiana, and Michigan.

Federal Aviation Administration Grants  

All airports listed in the National Plan of Integrated Airport Systems are eligible for grants under the Airport Improvement Program administered by the Federal Aviation Administration (FAA). The FAA is charged with maintaining a nationwide system that meets the needs of civil aeronautics and meets the requirements of the national defense, as determined by the Secretary of Defense, and meets the identified needs of the Postal Service. Airport sponsors (primarily municipalities) may receive grants for the planning and construction of airports, including land acquisition, site preparation, and construction and repair of runways, aprons and roads within airport boundaries. Private owners of designated "reliever" airports are also eligible for Federal assistance. The Federal Government will cover from 75 to 90 percent of most eligible costs of airport planning and development at listed airports.

Because of public safety considerations and lower land costs, airports often occur in areas removed from urban development. More often than not the areas where airports are sited include some wetland habitats. Prior to the 1990s, airport development and expansion have been identified as threats to wetlands in Northeastern New Jersey, California, the Florida Everglades, and Puerto Rico. Currently, the extent of wetland impacts from FAA programs is largely unknown.

FAA's formal policy of evaluating and mitigating impacts on wetlands caused by Federally funded airport development is set forth in FAA Orders 5050.4A and 1050.1D. These orders reference the Department of Transportation Order DOT 5660.1A, Preservation of the Nation's Wetlands, which implements Executive Order 11990 and sets forth a policy of assuring the protection, preservation, and enhancement of wetlands during planning, construction and operation of transportation facilities and projects. FAA also works closely with Federal and State resource agencies for advice on mitigation, in order to benefit from their greater expertise in this area. FAA retains overall responsibility through records of decision and mitigation commitments. Mitigation plans or commitments may be tied to grant agreements which provide FAA with economic leverage to ensure that airport project sponsors fulfill wetland mitigation commitments. Section 4(f) of the Department of Transportation Act of 1966 and related section 1b of the Airway Development Act of 1983 apply a higher degree of protection to publicly-owned wetlands. Wetland mitigation is funded by the FAA through the Airport Improvement Program.

Water-Based Recreational Development Programs 

Federal funds support water-based recreational developments occurring near or in coastal wetlands. Public marinas, harbors-of-refuge, and boat launches can receive monies from the Land and Water Conservation Fund administered by the National Park Service or from the Federal Aid in Sport Fish Restoration Fund administered by the Fish and Wildlife Service. A recent expansion of the Federal Aid program, known as Wallop-Breaux, slates at least 10 percent of the funding for boating and fisherman access facilities, so an increase in construction is expected. Private marina developments can receive extension services overseen in the Department of Commerce.

Rural Electrification Administration Loans 

The Rural Electrification Administration (REA) within USDA provides loans and technical assistance to assure adequate and dependable electrical and telephone service to rural areas at rates that permit full and productive use of the services. To this end, REA offers long-term, insured loans and will guarantee loans to rural electric cooperatives, public utility districts, power companies, and municipalities to supply ongoing, central station electric services in rural areas. These areas usually lie outside of the boundaries of cities, villages, or boroughs with populations exceeding 1500 inhabitants. REA activities were noted specifically in the Florida Everglades, Michigan, North Carolina, and Alaska as a factor in wetland decline where the availability of electrical power at subsidized rates encourages growth and more intensive use of wetland areas. (Rates of service charged by rural utilities are reduced because the systems are financed at below-market rates of interest. However, the per capita expense of providing service to rural areas is high, and hence, rural customers often pay absolutely higher rates than their urban counterparts.)

Although the REA will sometimes finance the entire project, it often requires that the project sponsor obtain a concurrent loan for 10, 20, or 30 percent of the total. Insured loans average about $3.3 million and guaranteed loans about $5 million. In 1985, REA obligated $562 million for insured loans and $74.6 million for guaranteed loans, and expected to add another 330,000 consumers and 25,000 miles of power lines. REA also offers and guarantees loans to assure that people in eligible rural areas have access to telephone service comparable in reliability and quality to the rest of the Nation.

Rural Water Systems 

The Rural Development Administration (RDA) within USDA provides direct loans and grants and guaranteed loans to develop water and waste disposal systems in rural areas and towns of up to 10,000 population. The funds are available to public entities such as municipalities, counties, and special purpose districts, Indian tribes, and corporations not operated for profit. Since the inception of the program, RDA has obligated $4 billion for grants and $11.5 billion for loans. The Agency has implemented a comprehensive environmental program that protects wetlands in accordance with NEPA, other environmental laws, executive orders, and departmental regulations.

Wastewater Treatment Construction Grants  

On balance, the treatment of sewage improves water quality and wetland health. Indeed, some artificial wetlands serve as tertiary treatment facilities for sewage. Nonetheless, sewage treatment is an essential element for development, and sewage facilities are usually located near rivers or lakes into which they release the treated water. Wetlands are often the only remaining open space near waterways, and hence serve as sites where treatment facilities are commonly built. Moreover, when the treatment site is prepared and sewer lines are dug, fill material is sometimes dumped in wetlands.

The operation of these facilities can alter hydrologic regimes and wetland communities when water is discharged continuously and also when it is flushed to create surges. Further, instead of creating artificial wetlands, existing wetlands are sometimes used for treating sewage. Also, sewage treatment plants produce a residual sludge containing pollutants from runoff and household and industrial wastes. These pollutants are generally not harmful in small quantities, but can prove dangerous when concentrated. Sludge is sometimes used as fill material for wetlands. When the sludge is deposited in landfills, the pollutants can seep into the groundwater or adjacent waterways.

Discharge of wastewater effluent is a regulated activity, however, and is unlikely to go unscrutinized. EPA regulations call for at least secondary treatment of wastewater effluent before it can be discharged into waters of the U.S., including wetlands. Municipal discharges must meet minimum technology requirements and conform with all applicable State water quality standards. EPA regional offices are supposed to review any proposals to use natural wetlands for tertiary treatment. Finally, any alteration of a wetland to facilitate tertiary treatment may require a 404 permit, a NEPA review, or consideration under a number of Federal and State statutes.

Federal law has authorized grants for planning, design, and construction of municipal sewage treatment facilities since 1956. The program was greatly expanded in 1972, and since then, Congress has authorized $59 billion and appropriated $48 billion for grants to aid wastewater treatment plant construction. The EPA administered the construction grant program under the authority of the Clean Water Act. EPA allocated grants among the States according to a formula based on population and an estimate of the capital cost necessary to bring a State into compliance with the law.4 Grants generally covered 55 percent of the total project costs. For innovative technology, however, 75 percent Federal funding was allowed. Wetland problems related to the siting and construction of sewage treatment facilities were identified specifically in New Jersey and Michigan.

EPA conducts periodic "needs surveys" to estimate the cost of meeting mandated water pollution control standards. The estimates tend to be impressive. The 1984 Survey indicated that States needed $109 billion to construct municipal wastewater treatment plants. The 1992 Survey estimated that $137 billion would be needed over the subsequent 20 years to address water quality problems, including $127 billion for wastewater treatment facilities.

In response to criticism that the construction grants program had become a massive public works program rather than water quality improvement program, Congress amended the law in 1981 to limit funding to projects that would clearly meet the goals of the Act. In 1987, concerned about the budget deficit, Congress instituted a transition period through 1994, after which States would assume greater responsibility for financing sewage treatment. Traditional grants continued through 1990. But Congress also authorized $8 billion to be spent between 1989 and 1994 for State revolving loan funds (SRFs) to be matched by the States. Monies borrowed by municipalities for wastewater treatment construction are repaid to the SRFs, and recycled for future construction in other communities. SRF money may not be used for the purchase of land, including mitigation wetlands. EPA can, however, require local communities to compensate for lost wetlands. The EPA does not have a clear-cut policy guiding its community mitigation requirements.

Disaster Relief and National Flood Insurance Program 

Prior to the National Flood Insurance Act of 1968, flood insurance was virtually unavailable in the United States. (Flooding has always been more destructive of life and property in the United States than any other natural hazard.) Private insurance companies were reluctant to offer flood insurance largely because of the limited actuarial data on the frequency and magnitude of floods and because of the potential for a catastrophic event that could threaten a company's solvency before sufficient reserves accumulated. Thus, Federal disaster relief programs, financed entirely out of the Federal treasury, were the main source of aid following a major flood. Although disaster relief was undoubtedly not the principal incentive inducing development in floodplains, it did help to offset the risk. Federal taxpayers shouldered the risk assumed by those locating in floodplains. Because of the high Federal costs and the inequitable distribution of the financial burden on taxpayers rather than property owners, Congress instituted the National Flood Insurance Program.

The National Flood Insurance Program (NFIP) is a composite of several Federal laws designed to provide flood insurance for communities threatened by flooding and to encourage comprehensive planning to minimize future flood losses. Under the program, the Federal Government provides insurance protection directly and through private insurance companies. To qualify for the insurance program, communities must adopt and enforce floodplain management regulations that meet NFIP standards. These regulations are designed to avoid economic damages resulting from floods either by elevating or floodproofing structures that are constructed in the floodplain or by discouraging development of flood-prone areas and guiding development away from areas threatened by flooding.5 With the NFIP Congress gave notice that: it would no longer offer a blank check in the form of disaster assistance; it wanted people to self-insure; and for properties in which the Federal Government has a financial interest, it wanted the property owner to indemnify the Federal Government against loss from flooding. Communities without flood insurance are ineligible for disaster relief in the event of floods and prospective lenders must be notified. The Department of Housing and Urban Development initially administered the program, but the responsibility has since been assumed by the Federal Emergency Management Agency (FEMA), an independent agency.

FEMA attempts to limit floodplain development by identifying flood hazard zones, assessing risk, establishing floodplain management criteria, and overseeing local management compliance. FEMA defines a floodplain broadly as any land area susceptible to being inundated by water from any source during the 100-year flood event.6 This includes partial or complete inundation of normally dry land by the overflow of inland or tidal waters or the rapid accumulation of runoff waters. FEMA regulations implementing the NFIP stipulate management criteria that States and localities are supposed to follow in floodplain areas. The regulations establish different levels of control for different risk areas within the floodplain. Thus, FEMA is involved in extensive mapping efforts to delineate the floodplain and the different risk areas within it. Flood Insurance Rate Maps (FIRMS) are prepared to reflect this information.

On the basis of the maps, States and localities are supposed to adopt measures to restrict development of land exposed to flood damage, guide development of proposed construction away from floodplains, flood-proof structures, and improve land management of flood-prone areas. FEMA is to work closely with the States and localities to see that such measures are adopted and enforced. In some areas, however, FEMA has been criticized for failing to enforce its standards:

  • In Puerto Rico, a study sponsored by FEMA and conducted by the Corps of Engineers revealed that the Planning Board had not followed the FIRMs in regulating floodplain development. As a result of the study, steps have been taken to bring the Commonwealth into compliance. However, FEMA readily acknowledges that problems remain.
  • On occasion FEMA maps have not accurately reflected the flood hazard, thus allowing development to proceed in floodplains without proper safeguards and without insurance rates that reflected the true risk. With approximately 65 percent of the mapping conducted by private sector engineering firms, 30 percent by other Federal agencies, and the remainder by State and local governments, variations in maps' accuracies would seem inevitable, despite the uniform study guidelines and specifications established by FEMA.
  • There is currently no requirement that the wetlands used in calculating existing flood control capacity be protected, and thus they are sometimes developed while their former protective qualities continue to be reflected in existing FIRMs. Although changes in flood control capacities are considered when maps are redrawn, at present, budgetary constraints and priorities allow FEMA to update only 5 percent of floodplain maps annually. This results in the use of FIRMs which are outdated and do not reflect the current flood hazards. Effective wetland and floodplain protection by the program, hinges on accurate FIRMs.
To encourage participation in the insurance program, the Federal Government initially charged subsidized rates to owners of existing properties, while owners of new or substantially improved structures were to be charged rates reflecting the risk of damage. Although Administration policy was to move toward actuarially sound rates, this proved problematic. Between 1968 and 1981 premiums covered only 46 to 47 percent of the operating expenses of the program. FEMA maintains, however, that since the early 1980s, rates have been actuarially sound for new construction,7 and notes that from 1985 to 1993 (the year of the great midwestern flood), the program did not require an appropriation.

Insofar as the National Flood Insurance Program helps to reduce development in floodplains, it serves to protect wetlands along streams, lakes, and oceans. FEMA estimates that development restrictions and building requirements discourage the encroachment and placement of fill on approximately 9,000 square miles of floodways which include many areas of wetlands. However, the NFIP remains effective only as long as (1) the program is actuarially sound and insurance rates reflect the true risks of locating in flood-prone areas, (2) mapping is accurate, and (3) development restrictions and requirements under the program are aggressively enforced.

Urban Development Action Grants  

The Urban Development Action Grant (UDAG) Program, administered by the Department of Housing and Urban Development (HUD), was established in 1977 to help cities (large and small) and urban counties to relieve their economic and physical deterioration. The program has not been funded since 1988. The program was designed to stimulate private investment by providing matching grants for economic development projects. UDAG awarded funds to a community (either a distressed area or a non-distressed area with pockets of poverty), which in turn granted or lent the monies to private developers. This improved the financial feasibility of otherwise marginal, private-sector development projects. The expectation for the program was that it would have a ripple effect and stimulate additional private investment in the area, increase local tax revenues, and create jobs.

Grants were awarded for three types of projects: industrial, commercial, and neighborhood. Neighborhood projects were often a mix of housing and commercial development, but residences could qualify. From 1978 through 1983, all UDAG applications that met threshold requirements, such as a firm commitment for private financing, were funded. In 1984, HUD instituted a competitive application system based on the amount of poverty and aged housing in the area. In 1985, UDAG grants totaled $559.3 million. This figure fell to $249.7 million in 1986. FY88 was the last year that monies were appropriated for UDAG.

HUD grant recipients are responsible for complying with all Federal environmental laws, the Wetlands Executive Order, and NEPA.8 HUD retains oversight responsibility, and is responsible for monitoring grant recipients to make sure that they have fulfilled all statutory and regulatory requirements. Monitoring is conducted after the fact, however, i.e., after a project is completed. HUD regulations require grant recipients to correct any violations, and HUD has authority to invoke sanctions, including the authority to "adjust, reduce, or withdraw grant funds or take such other action." There is a potentially important constraint on this authority, however: funds already expended on eligible activities cannot be recaptured or deducted from future grants. With after-the-fact monitoring this constraint could limit the available sanctions.

The Department identified urban development as a factor in wetland decline in Louisiana, Michigan, North Carolina, New Jersey, and Puerto Rico, but because of the multitude of factors influencing urban development, it is often difficult to determine the degree to which the UDAG program was involved in these wetland losses. Although spotty, the evidence for Puerto Rico is more convincing, and projects appear to have proceeded without adequate environmental safeguards.

Community Development Block Grants  

Block grants provide funds from the Federal Government to the States, counties, and larger cities, and are often contrasted with categorical grants. A categorical grant provides funds to a State for narrowly defined purposes, such as relieving distressed areas. Block grants are given to metropolitan cities, urban counties, and States along with broad discretion over how to use the monies. Eligible activities are also quite broad, ranging from rehabilitation of housing to economic development; from construction of public facilities to the provision of supporting public services, planning, and administration. With categorical grants, Congress determines the purpose of the grant, and the Federal Government retains significant control over the funds. With block grants, Congress determines broad priorities, but States and other grant recipients have much more latitude.

Community Development Block Grants (CDBG) aid States and larger cities and counties in developing viable urban communities with decent housing, a suitable living environment, and expanding economic opportunities, especially for those of low and moderate income.9 HUD administers the program. Within the broad mandate, the grant recipients develop their own programs and funding priorities. As with the UDAG program, grant recipients assume responsibility for complying with all Federal environmental laws, the Wetlands Executive Order, and NEPA, while HUD retains oversight responsibility. (See discussion above under UDAG.)

Urban development was a factor in wetland decline in Alaska, Michigan, and Puerto Rico, but because of the nature of block grants it is often difficult to know the degree to which Community Development Block Grants were involved in these losses. In Puerto Rico where funds are often used for roads, recreational facilities, and shoreline protection, environmental review appears to have been inadequate, and engineering studies were sometimes faulty.

Economic Development Administration Programs  

The Economic Development Administration (EDA), operating in the Department of Commerce, sponsors an array of programs, including construction grants, low-interest and guaranteed loan programs, and technical assistance funds, to encourage growth in geographic areas where the economy is lagging behind the rest of the nation. The following list describes many of these programs:

  • Grants for public works and development facilities to States or their political subdivisions, as well as private or nonprofit organizations to create permanent jobs in the private sector. Federal grants may cover 50 percent of the project cost, but in severely depressed areas Federal funding can range up to 80 to 90 percent. In 1986, grants were estimated to total $146 million.
  • Guaranteed and insured loans to private borrowers whose projects have been approved by the proper State agency. The loans provide financial assistance where funds are not available from other sources on terms and conditions furthering project goals and economic development in the area. Borrowers must obtain at least 15 percent funding from other sources, and guaranteed loan applicants must obtain at least 20 percent. Loan guarantees were estimated to total $30.4 million in 1986.
  • Grants to counties or nonprofit organizations representing groups of adjoining counties to foster development planning and implementation capability. Non-Federal sources must contribute at least 25 percent of the funding (except for Indian Tribes) in cash or in-kind contributions. In 1986, an estimated $18.2 million was to be spent on this program.
  • Technical assistance grants mainly to private, nonprofit groups, local governments, and educational institutions in support of demonstration projects, feasibility studies, management and operation assistance to increase and disseminate knowledge about promoting economic development in depressed areas. Grants were expected to amount to $7.7 million in 1986.
  • Smaller grant programs exist for adjustment to sudden and severe economic dislocation and long-term deterioration and for conducting research on economic underdevelopment.
EDA programs make funds and assistance available for projects that otherwise might not proceed. They have been identified as sources of wetlands impacts in Alaska, Michigan, North Carolina, and Puerto Rico.

Housing Programs

The Federal income tax code along with guaranteed and direct loans offered by several different Federal agencies have played a significant role in promoting single-family home ownership and the pattern of low density housing that characterizes land use in the United States. Housing along with the support facilities they spawn, including public buildings, recreational services, and demands for more infrastructure development, compete with wetlands for space. Federal tax subsidies give preferential tax treatment to homeowners in the form of income tax deductibility of mortgage interest and property taxes. This tax treatment applies to second homes as well as primary residences.

The Department of Veterans Affairs, HUD, and the FmHA all provide loan guarantees or direct loans with terms more favorable than those available in the private financial market, thereby increasing the demand for housing. The VA provides credit assistance to eligible veterans and active duty personnel, so that they can obtain private capital on more liberal terms than is available to non-veterans. The Federal Government guarantees loans made by private lenders in return for reducing or eliminating downpayment requirements, extending repayment periods, and other requirements generally applied to conventional home mortgages. Where private capital is not available in non-urban areas, the VA may make direct loans.

HUD insures lenders against loss on mortgage loans. These insured loans may be used to finance the purchase of proposed or existing 1 to 4 unit housing, as well as to refinance indebtedness on existing housing. Maximum loan limits apply, depending on the number of single family units. The program is geared to help first-time home buyers with moderate income obtain housing.

HUD also offers mortgage insurance to enable disaster victims to obtain home loans. Under one program, loans may be given to occupant mortgagors who are victims of a disaster in a presidentially-declared disaster area. The loans are to finance the purchase of proposed or existing single-family housing. Disaster victims are not required to meet the 3 percent minimum investment requirements that apply to other occupant mortgagors. Another program is to make home ownership more readily available to those displaced by natural disaster, urban renewal, or other Government actions and to increase home ownership opportunities for low and moderate income families.

FmHA provides farm ownership and operating loans, as well as emergency loans to cover losses from natural disasters.10 It also provides direct loans to assist low-income, rural families to obtain decent housing. The loans can be used for construction, repair, or purchase of housing and for sewage disposal facilities, among other things. Under another program, the FmHA makes rural, rental housing loans to construct, purchase, improve, or repair rental or cooperative multi-unit housing and to provide approved recreation and service facilities.

The array of programs is an indication of the degree to which the Government has become involved in augmenting the provision of shelter by the private sector. These programs operate under the umbrella of the Executive Order on Wetlands, but conservation and environmental protection are not the principal mission of these programs. Accordingly, the managing authorities generally give secondary consideration to wetland issues. Many wetland impacts from housing programs should be the subject of review under the 404 program, but for a variety of reasons, they do not always receive thorough scrutiny.

The Coastal Barrier Resources Act of 198211  

Coastal barriers are depositional, geologic formations such as islands, spits, and peninsulas. They exist on all United States coastlines, but are most well-developed along the Atlantic and Gulf coasts. These barriers serve as the first line of defense against wind and tidal energies, especially from the normal scour of waves, winter storms, hurricanes, and northeasters. Barriers shift into a variety of shapes and sizes to absorb ocean energies and buffer the mainland, bays, and inlets. Human developments such as houses, condominiums, hotels, shopping centers and transportation networks are drawn by the aesthetic appeal of the barriers. Yet, such development destroys expansive dunes and causes barrier erosion, thus also impairing the capacity of barriers to shield inland areas. Further, barriers are dynamic systems that support highly diverse wetland habitats, as well as wildlife and other organisms. As the barriers shift over time, human developments associated with the barriers become threatened and heroic measures are typically required to protect the investments. These are only short-run measures, and must ultimately yield to the forces of nature. In the meantime, these developments are vulnerable to storms.

Recognizing the value of these barriers, Congress passed the Coastal Barrier Resources Act (CBRA) in 1982. CBRA protects areas subject to ocean damage from the effects of infrastructure, housing, and local development programs by limiting Federal expenditures and assistance for development within designated barrier units. The Act designated almost half a million acres of relatively undeveloped coastal barriers along the eastern seaboard and Gulf Coast as subsidy-free zones; it made new development activities within these designated areas ineligible for most federally financed assistance. This includes the Federal programs discussed above, such as grants for highways, bridges, ports, and airports, urban development grants, VA and Federal Housing Administration guaranteed loans, as well as Corps of Engineers assistance. Disaster relief (except for emergency assistance) and Federal flood insurance are also denied.

The program was seen as a way to minimize the loss of human life and property, to reduce wasteful Federal spending, and to protect environmental values. Supporters of the Act claimed it would save $5.5 billion to $11 billion in the first 20 years, and maintained that it would not require additional staff to administer. They also pointed out that the Act does not regulate private behavior, but merely proscribes subsidizing harmful development with Government funds and then using the Government to indemnify those who undertook the development. The Act was also seen as an environmental protection measure, and for that reason is administered by the Department of the Interior rather than FEMA. Preventing development on coastal barriers protects fragile ecosystems, including associated coastal wetlands.

CBRA also required the Department to prepare a report to Congress with recommendations for additions to and deletions from the Coastal Barrier Resources System (CBRS). Based on the report,12 Congress passed the Coastal Barrier Improvement Act of 1990. The Act expanded the CBRS to over 1.25 million acres of shoreline, which extends more than 1200 miles, and increased the number of units from 186 to 582. Included in the expansion are new units in the Great Lakes, Florida Keys, Puerto Rico, the U.S. Virgin Islands, secondary barriers in large embayments (such as Chesapeake Bay), and wetlands associated with coastal barriers in the System.

The major limitation of CBRA from the perspective of coastal wetland protection is that it applies only to designated, largely undeveloped coastal barriers. The intent of the legislation was not to penalize existing communities but to remove Federal incentives for new development. The Act does not preclude development with private funds. 

Colorado River Floodway Protection Act of 1986  

With the Colorado River Floodway Protection Act (CRFPA) Congress applied the principles reflected in the Coastal Barrier Resources Act to an inland area. Concerned about a repeat of the flood damages that occurred along the lower Colorado River in 1983, Congress passed CRFPA to protect human health, safety, and property, and to minimize damage to natural resources. The Act eliminates all new Federal expenditures and financial assistance that promote development within the designated floodway except for public health programs. The Act also established a task force to examine strategies for managing future development in the floodway, including compensation for relocating, and to advise the Secretary of the Interior, who is charged with administering the Act. By January, 1988, representatives of the Governors of the seven Colorado River Basin States were to advise the Secretary on the precise boundaries of the floodway from Davis Dam13 to the border between Mexico and the United States. The Secretary will use their information to prepare a map to be distributed widely to each political unit within the floodway, to each Federal agency that sponsors activities in the floodway, and to each federally insured financial institution serving the floodway areas as one of its primary markets. The map will be reviewed periodically and adjusted solely to reflect changes resulting from natural forces. Although this Act just applies to a single locale, it may significantly reduce riparian wetland loss there, and could serve as an important model for other areas.


Congressional Budget Office. 1989. Reducing the Deficit: Spending and Revenue Options. Washington, DC, 400 pp.

Kussy, E. V. A. 1982. Wetland and Floodplain Protection and the Federal-Aid Highway Program. Environmental Law, vol. 13 (Fall), pp. 161-264.

Rose, M. and J. Goldstein. 1977. Economic Analysis of Selected Features of Municipal Wastewater Treatment Construction Grant Legislation. U.S. Environmental Protection Agency, Washington, DC, 138 pp.


1 Navigation projects are discussed in the preceding chapter.

2 Section 404 prohibits the disposal of dredged or fill material into waters of the United States, including wetlands, without a permit from the Corps of Engineers.

3 Narrow strips of land created next to a highway are of less ecological value than the blocks of undisturbed wetlands that formerly existed, even if the acreage is identical.

4 The intention was to have the formula for allocating funds between States reflect the needs of one State relative to those for all States and to create equity and efficiency in achieving wastewater standards. The design is flawed, however, and consequently, the formula does not fulfill any of the intended goals. See Rose et al. 1977, especially chapter 6, Evaluation of Alternative Allotment Programs.

5 The 1968 Flood Insurance Act marks a pivotal point in legislative history, not just because it established the flood insurance program, but because it constitutes one of Congress's few ventures into land-use regulation. Because of its limited authority and great reluctance to engage in direct land-use regulation, Congress chose to influence the character of floodplain development by making flood insurance available only in those communities which agreed to institute local floodplain regulations which implemented Federal standards.

6 A 100-year event is one with a one percent annual chance of occurrence.

7 Including the reconstruction of buildings which had sustained "substantial damage," defined as the cost of repair being greater than or equal to half the market value of the property. For such structures, rates were increased to make them actuarially sound, and the repaired property had to comply with the regulatory standards for new construction.

8 Grantees certify compliance to HUD. Under the terms of the required certification, the grantee's "Certifying Officer" (usually the mayor or county executive) is the "responsible Federal Official," as that term is used in following authorities: (i) section 102 of NEPA; (ii) section 104(g), title I of the Housing Community Development Act of 1974, and (iii) section 10 of the Executive Order for the Protection of Wetlands.

9 The CDBG program is really two distinct programs. The State program serves smaller, "non-entitled" communities, while the Entitlement program serves larger communities. There are two sources of funds. Entitlement funds go directly from HUD to cities and counties, while the State funding goes directly to States, and is further reallocated by each State.

10 See the section on farm credit in chapter 3.

11 CBRA was amended by the Coastal Barrier Improvement Act of 1990.

12 Submitted to Congress on January 16, 1989.

13 Located between Arizona and Nevada near Davis, Arizona and south of Las Vegas.

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