The importance of safe drinking water to public health and the nation’s economic welfare is undisputable.
It’s a fact that hasn’t been lost on Tony Glebus, who has been heard by many of the 450 residents living in Lewis, NY, to say that “once the water starts flowing so will the money,” and “it takes a little of both to stay afloat.”
As town supervisor he is always willing prove the relationship using examples in his own community. Most notably, the recent announcement that the $25 million Essex County Jail will soon be built in his community—thanks to nearly $2 million in upgrades to the town’s drinking water infrastructure.
While to most water system boards the relationship between water and money is crystal clear, things often start to turn a little murky once they start looking for the financial resources needed to get their own projects started.
In this issue we’ll take a look at the financial resources that are available to water systems and where the money can be found.
Additional Resources
http://www.epa.gov/efinpage/guidbkpdf.htm [1]
Recycling the Money
According to a 1995 survey completed by the U.S. Environmental Protection Agency (EPA), over the next 20 years the nation’s drinking water systems will need well over $138 billion to maintain, repair and expand the nations aging infrastructure in order to maintain and meet growing demands.
Approximately one-quarter ($37.2 billion) of this total national need is for small systems serving fewer than 3,300 people. Systems that often find it difficult to obtain the resources they need.
In an effort to meet this need, Congress established the Drinking Water State Revolving Fund (DWSRF) program as part of the Safe Drinking Water Act (SDWA) Amendments of 1996. The Drinking Water SRF was modeled after the EPA’s Clean Water State Revolving Fund (CWSRF) which was created in 1987 to fund water quality protection projects for wastewater treatment, nonpoint source pollution control, and watershed and estuary management.
The EPA distributes Drinking Water SRF funds to each of the 50 states and Puerto Rico in the form of capitalization grants. For their part, states must provide matching funds equal to at least 20 percent of each grant. The money is then loaned out to water systems at a reduced interest rate through each state’s revolving loan fund (SRF).
The idea is that as each loan is repaid, the money is returned to the program where it can again loaned out, providing a continuing source of funding for infrastructure projects.
It is important to remember that no two SRF programs are the exactly same. Each state is given a certain amount of “flexibility” in their oversight of each program.
Project categories that are eligible to receive Drinking Water SRF funds include:
•Treatment: Projects designed to maintain compliance with regulations for containments.
•Transmission and Distribution: Installation or replacement of transmission and distribution lines.
•Source: Rehabilitation of wells or development of sources to replace contaminated sources.
•Storage: Installation or improvement of eligible storage facilities.
•Consolidation: Merging of water supplies if a water supply had become contaminated or if a system is unable to maintain its operation.
•Creation: New community water systems.
Additional Resources
www.epa.gov/safewater/dwsrf.html [2]
www.epa.gov/efinpage/featured/fm3-31-01.pdf [3]
Finding the Money
In order to apply for funds through the Drinking Water SRF, water systems need to contact their state primacy agency.
A listing of state primacy agencies can be accessed in the Safe Drinking Water Trust eBulletin “Resource Links” section under the “State and Territorial Drinking Water Protection Programs” heading.
Many states also rely on the coordinated technical assistance efforts provided by organizations, such as the Rural Community Assistance Partnership and the National Rural Water Association, to direct water systems to available state funding sources. This relationship allows the states to conserve resources by working from an existing framework to provide immediate assistance.
This relationship also provides water systems greater access to funding and technical resources, creating a critical link in helping small utilities provide safe drinking water to their customers.
Clearing the Way—and the Red Tape
In addition to the EPA supported funding sources, other federal organizations including the United States Department of Agriculture, the U.S. Department of Housing and Urban Development (HUD), and the Department of Commerce offer a variety of loan and grant programs for rural water systems.
Over the years it has become clear that many water systems will find it necessary to rely on multiple loan and grant funding sources in order to get the job done while keeping water rates affordable.
Additional Resources
www.epa.gov/safewater/dwsrf/pdfs/guide_dwsrf_funding_infrastructure.pdf [4]
Looking Within
Another source of funding available to some municipal systems is the issuance of bonds. The most commonly used bond types are general obligation bonds that are repaid through taxes levied against property, and revenue bonds that are repaid with the revenue generated by the projects they supported.
However, these forms of financing generally require voter approval.
A more recent source of financing that is gaining acceptance in growing communities across the country is system development charges, generally known as impact fees.
These are charges designed to recover capacity costs from new customers. They are designed to help relieve the burden that would be placed on existing water customers when new demands for water strain the system.
According to a study completed by the EPA, in 1986, roughly 35 percent of utilities in nine southeastern states imposed impact fees. Current trends show that this form of financing is becoming more accepted.
However, it is important to remember that impact fees are only useful when communities are experiencing periods of growth.
Additional Resource
www.friends.org/issues/downloads/qa/sdcs.pdf [5]
www.aterwynne.com/resources/documents/NWPPALegalColumn.pdf [6]
http://ohioline.osu.edu/cd-fact/1558.html [7]
Looking to the Future
While testifying before the subcommittee on Water Resources and the Environment House Transportation and Infrastructure Committee last year, Mark Rounsavall, director of the Southern RCAP, called for additional support for federal water financing for small and very small communities based on a laundry list of problems that limit these communities financial resources including:
•Limited tax bases.
•Higher margin of elderly residents creating higher social service costs.
•Heavily concentrated economic bases.
“RCAP recommends that a small revolving fund program be established as part of the Clean Water SRF to assist communities with pre-development costs and small system upgrades and critical capital improvements,” he said.
Using the Southern RCAP’s revolving loan fund as an example of what can be done to provide for the smaller dollar needs often experienced by rural utilities, he explained the problem that many small systems face when applying for loans and grants.
“It appeared to us that it might well be easier for a utility to get a million dollars, than it would be to find a loan of $75,000.”
Hoping to avoid a situation where systems are forced to ignore improvement needs until the situation becomes critical, RCAP and other organizations continue to press for greater help for small systems.
Additional Resources
www.win-water.org/win_legislative/win_testimony/03-19-03Rounsavall.pdf [8]