cant hardship from the increase in rates 
necessary to finance the project or activity 
for which assistance is sought; and 
‘‘(iii) ensures, as part of an assistance 
agreement between the State and the re-
cipient, that the additional subsidization 
provided under this paragraph is directed 
through a user charge rate system (or 
other appropriate method) to such rate-
payers. 
‘‘(2) AFFORDABILITY CRITERIA.— 
‘‘(A) ESTABLISHMENT.—On or before Sep-
tember 30, 2012, and after providing notice 
and an opportunity for public comment, a State 
shall establish affordability criteria to assist in 
identifying municipalities that would experience 
a significant hardship raising the revenue nec-
essary to finance a project or activity eligible 
for assistance under section 603(c)(1) if addi-
tional subsidization is not provided. Such cri-
teria shall be based on income data, population 
trends, and other data determined relevant by 
the State, including whether the project or ac-
tivity is to be carried out in an economically 
distressed area, as described in section 301 of 
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the Public Works and Economic Development 
Act of 1965 (42 U.S.C. 3161). 
‘‘(B) EXISTING CRITERIA.—If a State has 
previously established, after providing notice 
and an opportunity for public comment, afford-
ability criteria that meet the requirements of 
subparagraph (A), the State may use the cri-
teria for the purposes of this subsection. For 
purposes of this Act, any such criteria shall be 
treated as affordability criteria established 
under this paragraph. 
‘‘(C) INFORMATION TO ASSIST STATES.— 
The Administrator may publish information to 
assist States in establishing affordability cri-
teria under subparagraph (A). 
‘‘(3) LIMITATION.—The total amount of addi-
tional subsidization provided under this subsection 
by a State may not exceed 30 percent of the total 
amount of capitalization grants received by the State 
under this title in fiscal years beginning after Sep-
tember 30, 2012.’’. 
SEC. 4. UPDATING OF GUIDANCE. 
(a) DEFINITIONS.—In this section, the following defi-
nitions apply: 
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(1) ADMINISTRATOR.—The term ‘‘Adminis-
trator’’ means the Administrator of the Environ-
mental Protection Agency. 
(2) AFFORDABILITY.—The term ‘‘affordability’’ 
means, with respect to payment of a utility bill, a 
measure of whether an individual customer or house-
hold can pay the bill without undue hardship or un-
reasonable sacrifice in the essential lifestyle or 
spending patterns of the individual or household, as 
determined by the Administrator. 
(3) FINANCIAL CAPABILITY.—The term ‘‘finan-
cial capability’’ means the financial capability of a 
community to make investments necessary to make 
water quality-related improvements, taking into con-
sideration 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 Finan-
cial Capability Assessment and Schedule Develop-
ment’’ and dated February 1997, as applicable to 
combined sewer overflows and sanitary sewer over-
flows. 
(b) UPDATING.— 
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(1) IN
GENERAL.—Not later than one year 
after the date of enactment of this Act, the Adminis-
trator shall update the guidance to ensure that the 
evaluations by the Administrator of financial capa-
bility 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 the 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 de-
mographic groups within each region; 
(iii) prescriptive formulas for use in 
calculating financial capability and thresh-
olds for expenditure should not be consid-
ered to be the only indicator of the finan-
cial capability of a community; 
(iv) 
site-specific 
local 
conditions 
should be taken into consideration in ana-
lyzing financial capability; 
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(v) a single measure of financial capa-
bility 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 im-
provements; 
(B) with respect to the timing of imple-
mentation of water quality-related improve-
ments— 
(i) environmental improvement imple-
mentation schedules should be structured 
to mitigate the potential adverse impact on 
distressed populations resulting from the 
costs of the improvements; 
(ii) implementation schedules should 
reflect local community financial conditions 
and economic impacts; 
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(iii) implementation schedules should 
allow permittees up to 30 years to imple-
ment water quality-related improvements 
in appropriate cases in which the cost of 
implementing the improvements places a 
high financial burden on the permittee; 
and 
(iv) existing implementation schedules 
should be modified in appropriate cases 
taking into consideration the criteria set 
forth in this subparagraph; 
(C) with respect to implementation— 
(i) a determination of local financial 
capability may be achieved through an 
evaluation of an array of factors the rel-
ative 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 re-
vised to include— 
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(i) a consideration of costs imposed 
upon ratepayers for essential utilities; 
(ii) increased consideration and quan-
tification of local community-imposed costs 
in regional systems; 
(iii) a mechanism to assess impacts on 
communities with disparate economic con-
ditions 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 pay-
ments, State affordability criteria, and 
State and local tax efforts, should be 
considered; 
(vi) a consideration of low-income 
ratepayer percentages; and 
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(vii) impacts relating to program de-
livery, such as water quality infrastructure 
market saturation and program manage-
ment. 
(3) IMPLEMENTATION.—The updated guidance 
should indicate that, in a case in which a previously 
approved long-term control plan or associated en-
forceable agreement does not prohibit modification 
of the plan or terms of the agreement (including fi-
nancial capability considerations), and all parties are 
in agreement that a change is needed or that the 
plan or agreement does not prohibit reopening to ad-
dress changes in the economic or financial status of 
the community since the effective date of the plan or 
agreement, reconsideration and modification of fi-
nancial capability determinations and implementa-
tion schedules based on the criteria described in 
paragraph (2) is appropriate. 
(c) PUBLICATION AND SUBMISSION.—Upon comple-
tion 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 Transpor-
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tation and Infrastructure of the House of Representatives 
the updated guidance. 
Æ 
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