SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Clean Water Affordability Act''.

SEC. 2. SEWER OVERFLOW CONTROL GRANTS.

    (a) Sewer Overflow Control Grants.--Section 221 of the Federal 
Water Pollution Control Act (33 U.S.C. 1301) is amended by striking 
subsections (a) through (g) and inserting the following:
    ``(a) Grants.--The Administrator may--
            ``(1) make grants to States for the purpose of providing 
        grants to a municipality or municipal entity for use in 
        planning, designing, and constructing treatment works to 
        intercept, transport, control, or treat municipal combined 
        sewer overflows and sanitary sewer overflows; and
            ``(2) make a grant directly to a municipality or municipal 
        entity for the purposes described in paragraph (1).
    ``(b) Prioritization.--In selecting from among municipalities 
applying for grants under this section, a State or the Administrator 
shall give priority to an applicant that is a financially distressed 
community, as determined by the applicable State under subsection (c).
    ``(c) Determination.--In determining whether a community is a 
distressed community for the purposes of subsection (b), a State shall 
consider, among other factors, the criteria described in section 
3(b)(2) of the Clean Water Affordability Act.
    ``(d) Cost-Sharing.--
            ``(1) Federal share.--The Federal share of the cost of any 
        project or activity carried out using funds from a grant made 
        under subsection (a) shall be not less than 75 percent.
            ``(2) Non-federal share.--The non-Federal share of the cost 
        of any project or activity carried out using funds from a grant 
        made under subsection (a) may include--
                    ``(A) in any amount, public and private funds and 
                in-kind services; and
                    ``(B) notwithstanding section 603, financial 
                assistance, including loans, from a State water 
                pollution control revolving fund.
    ``(e) Administrative Requirements.--
            ``(1) In general.--Subject to paragraph (2), a project that 
        receives grant assistance under subsection (a) shall be carried 
        out subject to the same requirements as a project that receives 
        assistance from a State water pollution control revolving fund 
        established pursuant to title VI.
            ``(2) Determination of governor.--The requirement described 
        in paragraph (1) shall not apply to a project that receives 
        grant assistance under subsection (a) to the extent that the 
        Governor of the State in which the project is located 
        determines that a requirement described in title VI is 
        inconsistent with the purposes of this section.
    ``(f) Funding.--
            ``(1) Authorization of appropriations.--There are 
        authorized to be appropriated to carry out this section--
                    ``(A) $250,000,000 for fiscal year 2009;
                    ``(B) $300,000,000 for fiscal year 2010;
                    ``(C) $350,000,000 for fiscal year 2011;
                    ``(D) $400,000,000 for fiscal year 2012; and
                    ``(E) $500,000,000 for fiscal year 2013.
            ``(2) Availability of amounts.--Amounts authorized to be 
        appropriated to carry out this section under paragraph (1) 
        shall remain available until expended.
    ``(g) Allocation of Funds.--
            ``(1) Fiscal year 2009.--For fiscal year 2009, subject to 
        subsection (h), the Administrator shall use the amounts 
        appropriated to carry out this section under subsection (f)(1) 
        to provide grants to municipalities and municipal entities 
        under subsection (a)(2) in accordance with the priority 
        criteria described in subsection (b).
            ``(2) Fiscal year 2010 and thereafter.--For fiscal year 
        2010 and each fiscal year thereafter, subject to subsection 
        (h), the Administrator shall use the amounts appropriated to 
        carry out this section under subsection (f)(1) to provide 
        grants to States under subsection (a)(1) in accordance with a 
        formula that--
                    ``(A) shall be established by the Administrator, 
                after providing notice and an opportunity for public 
                comment; and
                    ``(B) allocates to each State a proportional share 
                of the amounts based on the total needs of the State 
                for municipal combined sewer overflow controls and 
                sanitary sewer overflow controls, as identified in the 
                most recent survey--
                            ``(i) conducted under section 210; and
                            ``(ii) included in a report required under 
                        section 516(a).''.
    (b) Reports.--Section 221(i) of the Federal Water Pollution Control 
Act (33 U.S.C. 1301(i)) is amended in the first sentence by striking 
``2003'' and inserting ``2010''.

SEC. 3. UPDATING OF GUIDANCE.

    (a) Definitions.--In this section:
            (1) Administrator.--The term ``Administrator'' means the 
        Administrator of the Environmental Protection Agency.
            (2) Affordability.--The term ``affordability'' means, with 
        respect to payment of a utility bill, a measure of whether an 
        individual customer or household can pay the bill without undue 
        hardship or unreasonable sacrifice in the essential lifestyle 
        or spending patterns of the individual or household, as 
        determined by the Administrator.
            (3) Financial capability.--The term ``financial 
        capability'' means the financial capability of a community to 
        make investments necessary to make water quality-related 
        improvements, taking into consideration the criteria described 
        in subsection (b)(2)(A).
            (4) Guidance.--The term ``guidance'' means the guidance 
        published by the Administrator entitled ``Combined Sewer 
        Overflows--Guidance for Financial Capability Assessment and 
        Schedule Development'' and dated February 1997, as applicable 
        to combined sewer overflows and sanitary sewer overflows.
    (b) Updating.--
            (1) In general.--Not later than 1 year after the date of 
        enactment of this Act, the Administrator shall update the 
        guidance to ensure that the evaluations by the Administrator of 
        financial capability assessment and schedule development meet 
        the criteria described in paragraph (2).
            (2) Criteria.--The criteria described in this paragraph are 
        that, under the updated guidance--
                    (A) in assessing financial capability of a 
                community--
                            (i) greater emphasis should be placed on 
                        local economic conditions;
                            (ii) for regional systems, consideration 
                        should be given to the economic conditions of 
                        political jurisdictions and significant 
                        demographic groups within each region;
                            (iii) prescriptive formulas for use in 
                        calculating financial capability and thresholds 
                        for expenditure should not be considered to be 
                        the only indicator of the financial capability 
                        of a community;
                            (iv) site-specific local conditions should 
                        be taken into consideration in analyzing 
                        financial capability;
                            (v) a single measure of financial 
                        capability or affordability (such as median 
                        household income) should be viewed in the 
                        context of other economic measures, rather than 
                        as a threshold to be achieved; and
                            (vi)(I) consideration should be given to 
                        the economic outlook of a community, including 
                        the potential impact of program requirements 
                        over time, in the development of implementation 
                        schedules; and
                            (II) the assessment should take into 
                        consideration other essential community 
                        investments relating to water quality 
                        improvements;
                    (B) with respect to the timing of implementation of 
                water quality-related improvements--
                            (i) environmental improvement 
                        implementation schedules should be structured 
                        to mitigate the potential adverse impact on 
                        distressed populations resulting from the costs 
                        of the improvements; and
                            (ii) implementation schedules should 
                        reflect local community financial conditions 
                        and economic impacts;
                    (C) with respect to implementation of 
                methodologies--
                            (i) a determination of local financial 
                        capability may be achieved through an 
                        evaluation of an array of factors the relative 
                        importance of which may vary across regions and 
                        localities; and
                            (ii) an appropriate methodology should give 
                        consideration to such various factors as are 
                        appropriate to recognize the prevailing and 
                        projected economic concerns in a community; and
                    (D) the residential indicator should be revised to 
                include--
                            (i) a consideration of costs imposed upon 
                        ratepayers for essential utilities;
                            (ii) increased consideration and 
                        quantification of local community-imposed costs 
                        in regional systems;
                            (iii) a mechanism to assess impacts on 
                        communities with disparate economic conditions 
                        throughout the entire service area of a 
                        utility;
                            (iv) a consideration of the industrial and 
                        population trends of a community;
                            (v) recognition that--
                                    (I) the median household income of 
                                a service area reflects a numerical 
                                median rather than the distribution of 
                                incomes within the service area; and
                                    (II) more representative methods of 
                                determining affordability, such as 
                                shelter costs, essential utility 
                                payments, and State and local tax 
                                efforts, should be considered;
                            (vi) a consideration of low-income 
                        ratepayer percentages; and
                            (vii) impacts relating to program delivery, 
                        such as water quality infrastructure market 
                        saturation and program management.
            (3) Implementation.--The updated guidance should indicate 
        that, in a case in which a previously-approved long-term 
        control plan or associated enforceable agreement allows for 
        modification of the plan or terms of the agreement (including 
        financial capability considerations), and all parties are in 
        agreement that a change is needed or that the plan or agreement 
        contains a reopener provision to address changes in the 
        economic or financial status of the community since the 
        effective date of the plan or agreement, reconsideration and 
        modification of financial capability determinations and 
        implementation schedules based on the criteria described in 
        paragraph (2) is appropriate.
    (c) Publication and Submission.--Upon completion of the updating of 
guidance under subsection (b), the Administrator shall publish in the 
Federal Register and submit to the Committee on Environment and Public 
Works of the Senate and the Committee on Transportation and 
Infrastructure of the House of Representatives the updated guidance.
    (d) Authorization of Appropriations.--There are authorized to be 
appropriated such sums as are necessary to carry out this section.
Clean Water Affordability Act - Amends the Federal Water Pollution Control Act (commonly known as the Clean Water Act) to authorize the Administrator of the Environmental Protection Agency (EPA) to make grants to states for the purpose of providing grants to municipalities for use in planning, designing, and constructing treatment works to intercept, transport, control, or treat municipal combined sewer overflows and sanitary sewer overflows and municipalities for such purposes. Requires states or the Administrator to give priority to financially distressed communities.

Requires the Administrator, no later than December 31, 2010, (currently, 2003) and periodically thereafter, to report to Congress on recommended funding levels for sewer overflow control grants.

Requires the Administrator to update the guidance entitled "Combined Sewer Overflows -- Guidance for Financial Capability Assessment and Schedule Development" dated February 1997, to ensure that the evaluations by the Administrator of financial capability assessment and schedule development meet specified criteria, including criteria used in assessing financial capability of a community to make investments necessary to make water quality-related improvements and in implementing water quality-related improvements.

Requires such updated guidance to indicate that it is appropriate for the reconsideration and modification of financial capability determinations and implementation schedules to be based on such criteria.
A bill to amend the Federal Water Pollution Control Act to update a program to provide assistance for the planning, design, and construction of treatment works to intercept, transport, control, or treat municipal combined sewer overflows and sanitary sewer overflows, and to require the Administrator of the Environmental Protection Agency to update certain guidance used to develop and determine the financial capability of communities to implement clean water infrastructure programs.