To amend the Federal Water Pollution Control Act to assist municipalities that would experience a significant hardship raising the revenue necessary to finance projects and activities for the construction of wastewater treatment works, and for other purposes.

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Clean Water Affordability Act of 
2010''.

SEC. 2. CAPITALIZATION GRANT AGREEMENTS.

    Section 602(b) of the Federal Water Pollution Control Act (33 
U.S.C. 1382(b)) is amended--
            (1) by striking ``and'' at the end of paragraph (9);
            (2) by striking the period at the end of paragraph (10) and 
        inserting ``; and''; and
            (3) by adding at the end the following:
            ``(11) the State will use at least 15 percent of the amount 
        of each capitalization grant received by the State under this 
        title after September 30, 2011, to provide assistance to 
        municipalities of fewer than 10,000 individuals that meet the 
        affordability criteria established by the State under section 
        603(i)(2) for activities included on the State's priority list 
        established under section 603(g), to the extent that there are 
        sufficient applications for such assistance.''.

SEC. 3. WATER POLLUTION CONTROL REVOLVING LOAN FUNDS.

    (a) Extended Repayment Period.--Section 603(d)(1) of the Federal 
Water Pollution Control Act (33 U.S.C. 1383(d)(1)) is amended--
            (1) in subparagraph (A) by striking ``20 years'' and 
        inserting ``the lesser of 30 years or the design life of the 
        project to be financed with the proceeds of the loan''; and
            (2) in subparagraph (B) by striking ``not later than 20 
        years after project completion'' and inserting ``upon the 
        expiration of the term of the loan''.
    (b) Additional Subsidization.--Section 603 of such Act (33 U.S.C. 
1383) is amended by adding at the end the following:
    ``(i) Additional Subsidization.--
            ``(1) In general.--In any case in which a State provides 
        assistance to a municipality or intermunicipal, interstate, or 
        State agency under subsection (d), the State may provide 
        additional subsidization, including forgiveness of principal 
        and negative interest loans to benefit a municipality that--
                    ``(A) meets the State's affordability criteria 
                established under paragraph (2); or
                    ``(B) does not meet the State's affordability 
                criteria if the recipient--
                            ``(i) seeks additional subsidization to 
                        benefit individual ratepayers in the 
                        residential user rate class;
                            ``(ii) demonstrates to the State that such 
                        ratepayers will experience a significant 
                        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 recipient, 
                        that the additional subsidization provided 
                        under this paragraph is directed through a user 
                        charge rate system (or other appropriate 
                        method) to such ratepayers; or
            ``(2) Affordability criteria.--
                    ``(A) Establishment.--On or before September 30, 
                2011, 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 necessary to finance a project or activity 
                eligible for assistance under section 603(c)(1) if 
                additional subsidization is not provided. Such criteria 
                shall be based on income data, population trends, and 
                other data determined relevant by the State, including 
                whether the project or activity is to be carried out in 
                an economically distressed area, as described in 
                section 301 of 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, affordability criteria that meet 
                the requirements of subparagraph (A), the State may use 
                the criteria 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 criteria under 
                subparagraph (A).
            ``(3) Limitation.--The total amount of additional 
        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 September 30, 2011.''.

SEC. 4. UPDATING OF GUIDANCE.

    (a) Definitions.--In this section, the following definitions apply:
            (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 one 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 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 
                        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, State affordability criteria, 
                                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.

Summary: Clean Water Affordability Act of 2010 - Amends the Federal Water Pollution Control Act (commonly known as the Clean Water Act) to revise requirements for capitalization grant agreements with states for establishing water pollution control revolving funds. Requires states to set aside 15% of funds for assistance to municipalities of fewer than 10,000 individuals that meet specified affordability criteria. Authorizes the fund to be used to make loans at terms not to exceed 30 years or the design life of the project to be financed with the proceeds of the loan (currently 20 years). Authorizes a state to provide additional subsidization, including forgiveness of principal and negative interest loans, to benefit a municipality that: (1) meets affordability criteria, or (2) does not meet such criteria if the recipient seeks the additional subsidization to benefit ratepayers that will experience a significant hardship from the increase in rates necessary to finance the project or activity for which assistance is sought. Establishes affordability criteria to assist in identifying municipalities that would experience a significant hardship raising the revenue necessary to finance a project or activity eligible for assistance.

Requires the Administrator of the Environmental Protection Agency (EPA) 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: (1) assessing financial capability of a community to make investments necessary to make water quality-related improvements, and (2) implementing water quality-related improvements.