By Tom Humphrey
Sunday, February 19, 2012
NASHVILLE — A decade-old, multi-million dollar program for restoring degraded Tennessee streams has come under attack in the state Legislature even as Gov. Bill Haslam’s administration moves to give it new legal status.
Critics of the Tennessee Stream Mitigation Program, which is overseen by a non-profit foundation, characterized it as a “wholesale auction” of the state’s waterways to developers who can pay a fee for their pollution while leaving devastated downstream landowners in a lurch.
Testimony in a hearing before the House Conservation committee also raised questions about whether the non-profit Tennessee Wildlife Resources Foundation faces appropriate financial accountability under the present setup, which was put in place by a 2002 “memorandum of understanding” between state and federal agencies.
“You show me a non-profit, and I’ll show you bloated salaries and padded expense accounts,” said Rep. Frank Niceley, R-Strawberry Plains.
The essence of the 2002 memorandum would be put into state law for the first time under HB2349, introduced by the Haslam administration while a legal battle is underway over a West Tennessee development in which $947,000 was paid as a mitigation fee by a developer and a downstream private airport was devastated by flooding, according to the airport operators.
“What we have here is the Tea Party and the Sierra Club on the same side against a governor’s bill,” observed state Rep. Mike Kernell, D-Memphis, at one point during lengthy arguments.
Joey Woodard, director of the program, said in an interview that the committee was given “misinformation” about an effort that has restored thousands of miles of damaged streams in 23 completed projects with three more currently underway.
“I’m not sure whether it was just a gross misunderstanding or intentional misrepresentation,” Woodard said of the testimony before the committee. “They want you to believe it’s a slush fund. Nothing could be further from the truth.”
State law now authorizes mitigation in general, though Department of Environment and Conservation attorney Alan Leiserson told the committee the actual program “has been run without specific authorization” in state law.
The idea is that, when damage to a stream or wetland is unavoidable by a development deemed to warrant a state-issued permit, the developer can pay an “in lieu fee” to cover the environmental damage. The fee can run from $50 to $200 per foot of damaged stream.
Elizabeth Murphy, a Nashville attorney representing Wolf River Airport in the pending litigation that challenges legality of the mitigation program, told the committee the present system is effectively selling the state’s water quality “outside any regulatory function” of the state.
Mitigation efforts conducted with the money, she say, may favor “bugs and bunnies and all that stuff” while leaving farmers and other landowners actually impacted by a given project without any real help, she said.
Stewart Clifton, lobbyist for Tennessee Conservation Voters, questioned whether the bill to “put something into state law that hasn’t been there” could make it easier for developers and road builders to damage streams.
For example, Clifton said the bill does not make clear that the first priority for a permitted development is to avoid disruption of a stream. If disruption is needed and mitigation is invoked, the bill simply says that state officials “may consider” requiring that the mitigation efforts be in proximity to the damaged area. He said the “may” should be changed to “must.”
Murphy said mitigation money collected in East Tennessee can now be spent in West Tennessee, or vice versa, in a “program with no regulations.”
Woodard said that is incorrect and, under federal law and the memorandum, money from a mitigation payment must be spent in the same watershed that the damage occurred. In 80 percent of the projects completed or underway, he said, the stream rehabilitation efforts are undertaken within 25 miles of where the environmental damage occurred.
The Tennessee Stream Mitigation Program (TSMP) annual report for 2010, the most recent available, says the fund had assets of about $13.6 million at the end of the year, having received $6.9 million and spent $3.4 million for the period. About $410,000 of the expenditures went toward administrative expenses, including salaries, while the rest went to stream rehabilitation projects.
Woodard said the state started looking into mitigation funding as early as 1998 and decided to let developers make payments when damage to streams could not be avoided in a permitted development.
He said this allowed the building of a “nest egg” of about $9 million before TSMP was formally initiated under the 2002 agreement between the Tennessee Department of Environment and Conservation (TDEC), the U.S. Corps of Engineers, the Environmental Protection Agency and others.
While no exact figure was available, Woodard said “a little less than $10 million” was in the TSMP account at the end of 2011 and “around $3 million” was spent on projects during that year.
Under federal law, mitigation programs must be overseen by either a state agency, a federal agency or a non-profit organization, Woodard said. The Tennessee Wildlife Resources Foundation, which is affiliated with the Tennessee Wildlife Resources Agency, was chosen as the non-profit overseer of the program in Tennessee.
The Foundation’s 2010 report to the Internal Revenue Service, filed as required for all tax-exempt foundations, shows about $7.3 million in revenue, expenditures of about $4.1 million during the year and total assets at year’s end of about $16.9 million.
Woodard said the foundation report combines both the TSMP and other foundation activities. The foundation’s board receives no pay and the highest paid staffer is Woodard, whose salary is listed as $105,039.
At the committee hearing, Leiserson said in the course of extensive questioning that landowners suffering flooding as a result of development still have a right to sue the developer in court. Kernell said that could mean “people spending their life savings to go to court.”
Leiserson said the foundation was chosen to oversee the mitigation program because TDEC officials thought it would be a conflict of interest for those issuing permits for projects to also be taking money from those getting the permits.
Niceley criticized the foundation, saying it is “wholly controlled” by the Tennessee Wildlife Resources Agency and is not subject to accountability. Niceley has feuded with TWRA on other issues in recent years.
Woodard said there is actually “dual accountability,” with the TSMP answering to the foundation board as well as the federal and state agencies involved in the memorandum of understanding.
An “interagency review team” selected the foundation, he wrote in an email, “based on inefficiencies and bureaucratic entanglements that have hampered other programs administered by state agencies.”
“In some state administered programs it takes as long as 18 months just to secure the contracting to provide services,” he said. “The TSMP can identify, develop, and construct mitigation projects in that same 18 month window. This level of efficiency ensures lower administrative overhead and results in more of the mitigation dollars being used for the actual restoration of our streams.”
Woody Degan, president of the Wolf River Airport, said about 300 acres were cleared of trees and streams extensively changes in building the Memphis Regional Intermodal Facility in Fayette County, causing major flooding of airport offices and other facilities. When the mitigation and “in lieu fee” were challenged in the ensuing legal dispute, he said in an interview, “all of a sudden this bill came out of nowhere.”
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