The Drinking
Water State Revolving Fund: Protecting the Public through Drinking Water
Infrastructure Improvements
United States Environmental
Office of Water
EPA 816-F-00-028
Protection Agency (4606)
November 2000
The Challenge
The Nation's 54,000 community water systems must make
significant investments to install, upgrade, or replace infrastructure
to continue to ensure the provision of safe drinking water to their 254
million customers. Installation of new treatment facilities can improve
the quality of drinking water to comply with national primary drinking
water standards and protect public health. Improvements are also needed
to help those water systems experiencing a threat of contamination due
to inadequate distribution and transmission pipes.
The Drinking Water State
Revolving Fund
Many public water systems find it difficult to obtain
affordable financing for infrastructure improvements which would enable
systems to comply with national primary drinking water standards and protect
public health. Recognizing this fact, Congress established the Drinking
Water State Revolving Fund (DWSRF) as part of the 1996 Safe Drinking Water
Act (SDWA) Amendments. The goal of the program is to provide States with
a financing mechanism for ensuring safe drinking water to the public.
States can use federal capitalization grant money awarded to them to set
up an infrastructure funding account from which assistance is made available
to public water systems.
Loans made under the program can have interest rates
between 0 percent and market rate and repayment terms of up to 20 years.
Loan repayments to the State will provide a continuing source of infrastructure
financing into the next century. The program also places an emphasis on
small and disadvantaged communities and on programs that emphasize prevention
as a tool for ensuring safe drinking water.
Available Funding
Congress provided $1.275 billion for the DWSRF program
in fiscal year 1997. The amount of funding each State was eligible to
receive in 1997 was based on a formula used to award State program grants
under the Public Water System Supervision program. Congress has provided
an additional $3.145 billion for the DWSRF program for fiscal years 1998
through 2001, including $825 million for fiscal year 2001. The amount
of funding each State is eligible to receive for fiscal years 1998 through
2001 is based on the total eligible need determined for each State by
the Drinking Water Infrastructure Needs Survey which the Environmental
Protection Agency (EPA) released in January 1997.
Eligible Systems and Projects
Both publicly and privately owned community water systems
and non-profit non-community water systems are eligible for funding under
the DWSRF program. Eligible projects include installation and replacement
of failing treatment facilities, eligible storage facilities and transmission
and distribution systems. Projects to consolidate water supplies may also
be eligible.
Determining Funding Priority
States develop a priority system for funding projects
based on three criteria from the Act. States rank the projects and then
offer loans to systems based on their ranking order. Priority is given
to those eligible projects that:
(1) address the most serious risk to human health;
(2) are necessary to ensure compliance with the requirements
of the Safe Drinking Water Act; and,
(3) assist systems most in need, on a per household
basis, according to State-determined affordability criteria.
Public Involvement
Public involvement is an important element of both
the DWSRF program and the SDWA Amendments. States must provide information
about their program and the projects they intend to fund in an Intended
Use Plan that is made available to the public for review and comment prior
to award of the capitalization grant from EPA to the State.
Small Communities
The needs facing small communities are considerable.
However, many public water systems serving these small communities, particularly
those with populations fewer than 10,000, often find it difficult to obtain
favorable interest rates when applying for loans to make infrastructure
improvements. The SDWA Amendments target small communities for special
consideration by the DWSRF program. States must provide a minimum of 15%
of the available funds for loans to small communities.
Disadvantaged Communities
For many communities, even the lower interest rate
loans available through the DWSRF may be too high to make loans affordable.
A State has the option of providing up to 30% of the grant awarded to
the State to provide additional assistance to these State-defined disadvantaged
communities. This assistance can take the form of lower interest rates,
principal forgiveness, or negative interest rate loans. The State may
also extend repayment terms of loans for disadvantaged communities to
up to 30 years.
Preventing Future Threats
to Drinking Water
While it is important to take care of the infrastructure
needs facing water systems now, Congress also recognized that it is important
to establish programs which will prevent drinking water problems in the
future. States have the flexibility to set aside a portion of their capitalization
grant to develop programs that encourage a strong emphasis on preventing
contamination problems through source water protection and encourage better
system operations through enhanced water systems management.
Set-Asides for Other Program
Management Purposes
States have the flexibility to take set-asides for
several different activities that can help develop their drinking water
programs. A State can use up to 10% of its capitalization grant (with
a 1:1 dollar State match) to support its State drinking water program,
or to develop and implement capacity development, source water protection,
and operator certification programs. Up to 2% of the grant may be set
aside to provide technical assistance to systems serving communities with
populations fewer than 10,000, and up to 4% of the capitalization grant
may be set aside for costs associated with administering the DWSRF program.
Up to 15% of the capitalization grant (limited to 10%
of the grant for any one activity) is available for local assistance and
other eligible activities as described in the law. Activities are aimed
at source water protection (including loans for land acquisition and conservation
easements), capacity development and wellhead protection. States could
also use part of the fiscal year 1997 appropriation to fund required source
water delineation and assessment activities.
More Information
For more information about the Drinking Water State
Revolving Fund, consult the informational page for the program on the
EPA Office of Ground Water and Drinking Water (OGWDW) Internet website
at http://www.epa.gov/safewater/dwsrf.html. Information about the DWSRF
and other drinking water issues is also available from the EPA Safe Drinking
Water Hotline at 1-800-426-4791 or via email at sdwhotline@bah.com.
To get the contact for the DWSRF Manager in a specific
State, consult the contact list on the OGWDW website or contact the Association
of State Drinking Water Administrators at (202) 293-7655 (http://www.asdwa.org).
The EPA DWSRF program is administered by the Infrastructure
Branch, Office of Ground Water and Drinking Water, U.S. Environmental
Protection Agency, 1200 Pennsylvania Avenue, NW (Mailcode 4606), Washington,
DC 20460, Phone: (202) 260-5526 Fax: (202) 401-2345.
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