Construction Grants Transition Act of 1985

Construction Grants Transition Act of 1985 - Amends the Clean Water Act (Federal Water Pollution Control Act) to extend the authorization of appropriations for five years, through FY 1990, in decreasing amounts for grants to States for the construction of publicly-owned waste treatment plants.

Authorizes appropriations for FY 1989 through 1994 for capitalization grants to States which establish Water Pollution Control Revolving Funds which would gradually take over the Federal program. Requires a participating State to: (1) enter into agreements with the Administrator; (2) establish the required Fund; (3) deposit in its Fund from State monies an amount equal to 15 percent of the capitalization grant; (4) make loan commitments for publicly-owned waste treatment plants within one year which commit all of the Fund; (5) submit required annual and intended use reports; and (6) comply with generally accepted procedures and standards.

Sets forth permitted uses of the Fund. Authorizes the Administrator to reallot a noncomplying State's capitalization grant. Sets forth required accounting procedures. Directs the Administrator to review annually each State plan and report for using the Fund.

Authorizes a State to use Federal grant funds to set up a Water Pollution Control Revolving Fund upon request.

Directs the Administrator to report to the Congress by February 10, 1990, on the operation of the State Funds.

Limits the use of Federal funds for phased-segment projects and reserved capacity after FY 1990. Continues through FY 1994 the Administrator's authority to reserve a percentage of authorized funds for grants to States for management assistance.

Continues the mandatory four percent set-aside for the innovative and alternative technology program in FY 1988, reducing such set-aside to two percent in FY 1987 and 1988 after which point such program becomes discretionary. Permits a State, beginning in FY 1989, to set-aside up to seven and one-half percent of a State's allotment to be applied instead to increase the Federal share for innovative and alternative techniques and processes.

Prohibits water quality-based waivers for nonconventional pollutants after a specified date.

Directs the Administrator to convene an estuarine management conference for no more than five years whenever the Administrator determines interstate or international control of sources of pollution is required. Requires such conference to assess the trends in the use, resources, and water quality in such estuary, identify the sources of pollution, and develop a conservation, management, and monitoring plan for restoring and maintaining the biological integrity of such estuary. Requires the participation of affected foreign nations, States, agencies, local governments, and institutions, and plan approval by the Administrator. Permits the use of Federal grant funds and Federal capitalization grant funds for plan implementation. Authorizes appropriations for conference expenses in FY 1986 through FY 1990.