Just before funding for the federal government was set to expire, Congress passed the omnibus appropriations bill, which was then signed into law by President Biden on December 30. The $1.7 trillion package will fund the government through September 2023 and contains numerous provisions relevant to the housing industry.

The spending bill also contains includes provisions sought by Virginians for Effective and Efficient Permit Processing (VEEPP) – a coalition established by the Home Builders Association of Virginia (HBA of Virginia), Virginia Association of Commercial Real Estate (VACRE), and the Virginia Environmental Restoration Association (mitigation bankers) – to address growing concern over staffing shortages, budgetary constraints, and permitting delays at the U.S. Army Corps of Engineers (USACE) Norfolk District Regulatory Branch.

Championed by U.S. Senators Mark Warner (VA) and Tim Kaine (VA), the provisions: (i) provide additional funding to the USACE Regulatory Branch specifically to address staffing shortages at the District level; (ii) direct the U.S. Army Corps of Engineers to provide Congress a report within 90 days on staffing shortages and permit backlogs in each of the last five years; and (iii) direct the U.S. Army Corps of Engineers to provide Congress a plan within 90 days for rectifying the staffing shortages.

While the delays at the Norfolk District will not be resolved overnight, the inclusion of these provisions in the federal budget bill is a significant milestone given the USACE Regulatory Branch’s budget has been virtually flat for a decade. The effort was further complicated by the upcoming shift in the political balance of power in Washington, which sparked a heated debate over spending priorities and ultimately led to a compromise in which non-defense funding increased only minimally

As a result of Senator Warner and Senator Kaine’s efforts, this long-overlooked issue is now on lawmakers’ radar and the USACE Norfolk District (and others) receive some long-overdue funding to begin addressing chronic staffing shortages.

Background

The USACE Norfolk District Regulatory Branch (“the Norfolk District”) is responsible for permitting construction activities across Virginia and providing various “services” that are essential to the planning and development process, including confirming wetland and stream delineations, issuing jurisdictional determinations, and issuing Nationwide Permits and Individual Permits. The USACE is also responsible for reviewing and approving new mitigation banks, which generate the wetland and stream mitigation credits needed by developers to offset a project’s environmental impacts.

There has been growing concern among residential builders and developers about staffing shortages and budgetary constraints at the Norfolk District Regulatory Branch, particularly over the last three years. While the District has implemented efficiency measures to address staff workload challenges, a combination of increased development activity (residential and non-residential) and staff attrition has hindered their ability to provide timely reviews of permits and applications, resulting in substantial, and sometimes project-jeopardizing, delays.

The personnel shortage has also delayed the approval of new wetland and stream mitigation banks, which has constrained the supply of much-needed mitigation credits in many regions of the state.  For example, the Ecological Restoration Business Association, reported that “…Corps Districts that previously processed mitigation bank approvals in two to three years are now so staffing challenged that bank approvals are taking an average of six years and counting.”  Virginia’s residential and commercial development community, as well as local governments, have experienced first-hand the effect of delayed mitigation bank approvals, as credit shortages and volatility in credit pricing has deterred and delayed projects in several regions of the state.

A decade of “flat budgets” for the USACE Regulatory Branch

While the issue has reached an acute level in the last three years, the staffing shortages and budgetary constraints at the Norfolk District have been building for many years.

Congressional funding to the U.S. Army Corps of Engineers, overall, has steadily increased over the last ten years, growing from $4.8 billion in FY12 to over $8 billion in FY22. While continued investment in the USACE’s overall budget is justified, the USACE Regulatory Branch line item has remained flat at roughly $200 million during the same period, well below the level of funding that would be available had Congress annually adjusted the Regulatory Branch’s budget for inflation.  Instead, the Regulatory Program’s flat-lined budget has required the Norfolk District and others to “do more with less”.

For example, one USACE District Regulatory Branch indicated that they were 24% below authorized staffing levels even after the passage of the Bipartisan Infrastructure Law (BIL) in 2021 (The BIL provided additional short-term resources for District offices to hire staff).

The Norfolk District Regulatory Branch has experienced similar issues, shrinking from 55 employees in FY11 to 41 employees in FY21. The District also publicly acknowledged the issue in a November 2021 public notice announcing several best practices to ensure timely reviews: “ Due to increased workload and reduced staffing levels, we are experiencing a backlog of projects, resulting in extended processing delays.”

While annually adjusting the USACE Regulatory Branch’s budget for inflation would have provided some relief, many public and private-sector stakeholders believe even that level of funding falls short of what the USACE Regulatory Branch needs to efficiently administer the program, particularly given the complex and continually evolving regulatory landscape.

“Virginians for Effective and Efficient Permit Processing” Coalition (VEEPP)

Earlier this year, the Home Builders Association of Virginia, the Virginia Association for Commercial Real-Estate (VACRE), members of both organizations (Bob Kerr, Wetland Studies and Solutions; Speaker Pollard, Williams Mullen), and the Virginia Environmental Restoration Association (mitigation banking industry) began working to educate Virginia’s congressional delegation about the impact of the Norfolk District’s budgetary constraints and staffing shortages on local, state, and federal policy priorities.

The organizations formally established a coalition – Virginians for Effective and Efficient Permit Processing (VEEPP) – and sought funding in the federal budget for the USACE Regulatory Branch specifically to facilitate the hiring of additional staff.

The coalition, which from the outset also included the Virginia Economic Development Partnership (VEDP), ultimately expanded to include local governments (Chesterfield, Henrico, James City, Newport News, Norfolk, and Prince William), the Virginia Chamber of Commerce, regional chambers of commerce from Northern Virginia, Hampton Roads, Richmond, and Roanoke), and several environmental organizations.

U.S. Senators Warner, Kaine lead efforts to increase Regulatory Branch budget;

In September, several representatives of the VEEPP coalition met with Virginia’s U.S. Senators Mark Warner (D-Virginia) and Tim Kaine (D-Virginia) about the need to seek additional funding for the Regulatory Branch during the then-ongoing budget negotiations.  Although deliberations had been ongoing for some time, Senators Warner and Kaine recognized the critical role of the USACE Regulatory Branch in various public policy priorities and agreed to work with their colleagues to identify a solution. Proving that bipartisanship isn’t dead in D.C., Senator Warner was able to enlist the help of the Senator John Kennedy (R – Louisiana) to ensure that the provisions made it through the final days of negotiations.  As the Ranking Member (i.e., the “top” Republican) on the Senate Energy and Water Development Subcommittee (Appropriations), Senator Kennedy’s understanding and support of the initiative was essential to its inclusion in the final bill.

Their efforts resulted in two notable provisions being included in the budget bill signed into law last week:

• Additional $8M to the U.S. Army Corps of Engineers Regulatory Program: “The agreement includes $218,000,000 for the Regulatory Program. Funds above the budget request are included to address capacity needs across the Corps related to staffing shortages in Corps districts. The Corps is encouraged to budget appropriately in order to process permits in a timely fashion.”
• Report to Congress on District-Level Staffing Shortages and Plan to Rectify: “The Corps is directed to provide to the Committees not later than 90 days after enactment of this Act a report on staffing levels and permit backlogs in each of the last five years, as well as a plan for rectifying the staffing shortages. The Corps is directed to brief the Committees on the results of the report upon completion.”

These two provisions represent substantial progress on an issue that has largely avoided congressional attention for many years.  However, the recent Final Rule from the U.S. Fish and Wildlife Service on the Northern Long-Eared Bat, other pending regulatory actions, and the persistent shortage of wetland and stream mitigation credits will require the housing industry, commercial developers, mitigation bankers, and other stakeholders to remain engaged in the process and advocating for future increases for the U.S. Army Corps of Engineers Regulatory Branch and the Norfolk District.

For more information, contact HBA of Virginia’s Vice President of Government Affairs at AClark@HBAV.com