III. CMI Funding Structure

The CMI funding formula was crafted by the Legislature and incorporated into the state's principal environmental statute, the Natural Resources and Environmental Protection Act.

As justification for such a major expansion of environmental spending, lawmakers declared the initiative to be "of paramount public concern in the interest of health, safety and general welfare of the citizens of this state." [12]

Sales of the CMI bonds by the state Department of Treasury are contingent upon market conditions and the pace of expenditures. To date, three bond series have been issued, generating $153,620,000 for CMI programs. In addition to repaying the $153 million in principal, taxpayers owe bondholders an additional $91,234,136 in interest. Administering the bond sale cost $346,000 more. Thus, taxpayers must repay about $1.60 for every dollar spent on CMI projects.

By law, in any given year, the governor must include in his budget recommendation to the Legislature an appropriation sufficient to pay all bond principal and interest due. Michigan's credit rating depends on the timely discharge of this debt service. In the event of a budget shortfall, then, bond obligations may force lawmakers to cut spending or raise taxes - either of which carries political risks depending on one's constituency.

CMI bonds and interest are exempt from state and local taxation. The state thus enjoys privileged access to capital unavailable to private stewardship efforts. A federal tax exemption also may be granted on the interest earned by bondholders depending upon how the state applies the borrowed funds.

Although by law the Legislature ultimately decides how bond proceeds will be distributed to agencies that administer the various components of CMI, lawmakers rarely deviate from the recommendations these agencies are required to submit to the governor as well as to the House and Senate natural resources and appropriations committees.

CMI funds are not supposed to supplant General Fund appropriations to the Department of Environmental Quality or Department of Natural Resources. Nor are CMI projects supposed to "unfairly compete" with private businesses that offer similar or identical services - unless justification is provided in writing. CMI funds cannot be used in connection with municipal or commercial marinas, casinos or stadium projects.

Finally, lawmakers capped the administrative costs of CMI at 3 percent of expenditures.

Following are descriptions of all CMI programs and the bond proceeds allotted to each according to the statutory formula:

1. Brownfield Cleanup and Redevelopment .......... $335 million

  1. Up to $263 million for state-managed environmental cleanups of contaminated properties to promote commercial redevelopment, create jobs and revitalize neighborhoods.

  2. Funds are also to be used to correct leaking underground storage tanks.

  3. Not less than $40 million or more than $60 million is earmarked for state cleanup of contaminated property that poses an "imminent or substantial danger to public health, safety or welfare, or the environment."

  4. $20 million in grants and loans to municipalities for locally managed cleanups of publicly owned contaminated sites. Communities are limited to one grant per year, not to exceed $1 million. The interest rate of loans is capped at 50 percent of the prime rate; repayments may be deferred for up to five years, but must be concluded within 15 years.

  5. $12 million for grants to local communities to remediate municipal landfills listed, or nominated for listing, on the Superfund National Priorities List.

2. Waterfront Redevelopment .......... $50 million

  1. $47 million for grants to local communities for "innovative" waterfront improvements that contribute to the revitalization of neighborhoods and increase public access to the Great Lakes, their connecting waterways, a river, or lake. These funds may also be used to acquire waterfront property. A 25 percent local match of project cost is required.

  2. $3 million for grants to local governments to preserve and restore lighthouses to promote local economic development.

3. Clean Water Fund .......... $90 million

  1. The bulk of the $90 million is designated to improve and expand monitoring to identify water quality trends, evaluate water protection programs and detect emerging problems.

  2. Funding is also available to:

    1. Improve local watershed management plans, stem storm-water run-off, and create land-use plans;

    2. Identify and eliminate illicit connections to storm sewer systems;

    3. Provide the state matching funds required to access a federal grant for the reduction of agricultural runoff to surface waters;

    4. Locate and plug abandoned wells.

    5. Identify and fix failing septic systems that threaten or impair state waters;

    6. Protect cold-water trout streams and lakes.

4. Nonpoint-source Pollution Control .......... $50 million

  1. Primarily to fund grants to local governments and nonprofit groups to control the runoff of agricultural sediment, nutrients and pesticides into rivers, lakes and streams.

  2. Funds also available for the purchase of land or development rights to replace livestock operations and other agricultural sources of potentially contaminated runoff.

5. Contaminated Sediment Cleanup .......... $25 million

  1. This funding expands efforts already underway to remove sediments from lakes and rivers contaminated by toxins such as polychlorinatedbiphenyls (PCBs), mercury and DDT.

6. Pollution Prevention .......... $20 million

  1. $10 million to create an endowment to fund pollution prevention assessments for small businesses, municipalities and public institutions.

  2. $5 million to capitalize a revolving loan fund for small businesses to purchase less-polluting equipment. Loan interest is capped at 5 percent, and loans cannot exceed $100,000.

  3. $5 million to advance voluntary pollution prevention efforts, including:

    1. Development of an environmental education curriculum for middle schools;

    2. Grants to public and private organizations to implement regional pollution prevention projects;

    3. Start-up funding for local governments to operate household hazardous waste collections.

7. Lead Hazard Remediation Program .......... $5 million

  1. Funding to eliminate lead exposure in 300 homes where children reside, including risk assessments and structural renovations. Administered by the Department of Community Health.

8. State Parks .......... $50 million

  1. Priority is given to installation or upgrade of drinking water systems and restrooms at state parks and recreation areas.

  2. Funding is also available to improve boating access, modernize campground electrical systems, repair roads and signs, and construct picnic shelters.

9. Local Recreation Grants..........$50 million

  1. Grants ranging from $15,000 to $750,000 to construct, expand, develop or rehabilitate local recreation facilities.

  2. Eligibility based, in part, on how the project would serve the needs of "special" populations, including minorities, senior citizens, low-income individuals and the handicapped. Proximity to urban areas is also a criterion.

  3. Funding is to be allocated by region, with 3.6 percent of funds for Upper Peninsula counties; 14.4 percent to mid-Michigan counties; 72 percent to lower-Michigan counties. [13]

  4. Ten percent of the funds are reserved for regional parks.

  5. Funds cannot be used for land acquisition.