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Model Report

Evaluating Claims of Inability to Pay from Municipalities, Sewer Authorities and Drinking Water Authorities

Last Revision Date: 11/18/2009 View as PDF
General Information Back to Top
Model Abbreviated Name:

MUNIPAY
Model Extended Name:

Evaluating Claims of Inability to Pay from Municipalities, Sewer Authorities and Drinking Water Authorities
Model Overview/Abstract:
Since its development in 1994, the MUNIPAY computer model has been used extensively by EPA staff to evaluate claims from municipal defendants that they cannot afford to pay for compliance, clean-up and civil penalties. MUNIPAY addresses these claims from municipalities, towns, drinking water authorities and sewer authorities. The model evaluates the financial data that the party submits directly to the EPA. MUNIPAY also requires the user to input the cost of compliance, clean-up and a proposed civil penalty amount. The model determines how much the party has in currently available funds, and how much money the party could safely raise through issuing additional debt (to be repaid through higher taxes and/or user fees). Then MUNIPAY adds these figures together to determine how much the party can afford. The model is designed for settlement negotiations. Should EPA and a party fail to agree on what the party can afford, the EPA would use an expert witness to testify about the party's ability to pay in a trial or hearing. This model does not require any knowledge of accounting, finance or computers.
Keywords: Ability to pay, municipal finance, financial capability
Model Technical Contact Information:
Agency Contact:
Jonathan Libber
U.S. EPA
Office of Enforcement and Compliance Assurance (OECA)
Office of Civil Enforcement
Special Litigation and Projects Division (SLPD)
U.S. EPA/OECA (Mail Code: 2248-A)
(202) 564-6102
libber.jonathan@epa.gov

Jonathan Libber of the US EPA/OECA supervised the development of MUNIPAY and supervises its revision and upgrades. Industrial Economics, Inc. of Cambridge, MA has been responsible for all development and improvement of the model.

Model Homepage: http://www.epa.gov/compliance/civil/econmodels/index.html
Substantive Changes from Prior Version: Annual update of the model’s financial values (completed end of July 2008)
Plans for further model development: An annual update of the financial values which should occur in about a year from now.

User Information Back to Top
Technical Requirements
Computer Hardware
Able to run Windows 95 or more recent version of Windows
Compatible Operating Systems
Windows 95 or more recent version of Windows
Other Software Required to Run the Model
Model has a GUI.
Download Information
MUNIPAY is available to be downloaded from the U.S. EPA, Office of Enforcement and Compliance Assurance (OECA), Office of Regulatory Enforcement (ORE), Special Litigation and Projects Division (SLPD).
Using the Model
Basic Model Inputs
All data is taken from information supplied by the municipality in question. The information focuses on the municipality’s finances and demographic trends. Once the data is entered, the user evaluates the ability of the individual to pay a proposed civil penalty, clean-up costs and compliance costs.
Basic Model Outputs
The model will determine, based upon the municipality’s extra cash and ability to borrow, what penalty, compliance cost or clean-up payment, if any, is affordable.
User Support
User's Guide Available?
Documentation can be downloaded.

The help system provides an overview of the model and provides a comprehensive explanation of the model’s inputs, related model issues, and how to understand the model’s outputs. The help system can be read in advance and/or accessed at any time the model is being used be pressing the F1 key. Once accessed, the help system will open up the topic most relevant to the part of the model the user is currently working on.

Availability of User Support
Federal, State and local enforcement agency personnel can contact the Helpline at 888 326-6778. Private parties can contact Jonathan Libber of the EPA at (202) 564-6102
User Qualifications
User needs only moderate level of technical education and/or modeling experience. While users can self teach themselves using the on-line help system. A 3 hour training course is recommended to ensure that inputs are correct and that output is understood, this course is only available for Federal, State or local government personnel.

Model Science Back to Top
Problem Identification
MUNIPAY is designed to evaluate claims from municipal type defendants that they cannot afford to pay for compliance, clean-up or civil penalties. It covers not only municipalities, but local enterprise funds (e.g. the local sewer or drinking water authority) and municipally or locally owned utilities (e.g the city provides electricity to its residents). Since most of our enforcement professionals do not have the capability of reviewing municipal or enterprise financial records to determine the validity of these inability to pay claims, EPA developed a relatively simple tool that can help us evaluate these claims. MUNIPAY examines financial data that the party submits directly to the EPA. MUNIPAY determines how much the party has in currently available funds, and how much money the party could safely raise through issuing additional debt (to be repaid through higher taxes and/or user fees). Then the model adds these figures together to determine how much the party can afford. It requires no knowledge of accounting, finance or computers. MUNIPAY also requires the user to input the cost of compliance, clean-up and a proposed civil penalty amount. The model also conducts a socio-demographic analysis of the community involved to give context to the financial analysis. If the model indicates the defendant is close to it affordability limit, and the socio-demographic analysis indicates the community’s economic base is deteriorating rapidly, the affordability analysis will probably need adjusting.
Summary of Model Structure and Methods
For the socio-demographic analysis, the model takes data from the current US Census and compares it to data from the previous census to determine if any significant trends exist to bolster or undermine the financial analysis. Then it looks at the excess cash flow to which the entity has access. If that amount of money is insufficient to cover all the compliance and clean up expenses along with any civil penalties, then the model evaluates how much money this entity can borrow to see if that is sufficient to cover environmental expenditures and civil penalties.
Model Evaluation
For QA/QC, the contractor verified that calculations were similar to those an independent financial analyst might perform.

Key Limitations to Model Scope
The model does not evaluate inability to pay claims from not-for-profit entities (e.g. a not-for-profit school or hospital), State governments, and charitable organizations


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