EPA Drinking Water State
Revolving Loan Fund
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Under the DWSRF program, established through the 1996 amendments to the Safe Drinking Water Act (SDWA), EPA awards grants based on documented long-term needs, to all 50 states and Puerto Rico to help capitalize drinking water infrastructure loan funds. The SDWA also provides that EPA use a portion of the DWSRF’s annual federal appropriation to fund direct grants to assist tribes, the District of Columbia, U.S. Virgin Islands, American Samoa, Guam and the Commonwealth of Northern Marianas.
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Additional information: EPA Drinking Water State Revolving Loan Fund |
The DWSRF program provides important options for states to assist low-income and otherwise disadvantaged communities. The DWSRFs enable states to provide subsidization to water systems in the form of below-market rate financing, with interest rates as low as zero percent, for infrastructure projects. The SDWA requires that states, to the maximum extent practicable, prioritize infrastructure projects that:
Additional subsidization is also available to some water systems in the forms of principal forgiveness, negative interest rates or grants. In some states, access to such programs is limited by the utility size or whether it is investor or municipally owned.
- Address the most serious risk to human health;
- Are necessary to ensure compliance with the SDWA; and
- Assist systems most in need on a per household basis according to affordability criteria established by the state.
Additional subsidization is also available to some water systems in the forms of principal forgiveness, negative interest rates or grants. In some states, access to such programs is limited by the utility size or whether it is investor or municipally owned.
In addition to financing, the SDWA allows states to set aside up to 31% of their annual capitalization grants for various activities that support the delivery of safe water. This includes activities that complement the loan fund’s role in protecting public health, such as assisting communities with project development or helping water systems build technical, managerial and financial capacity. The opportunities offered by these set-asides can be especially vital for low-income communities, enabling them to become ready to proceed to project financing and construction and to succeed in operating and maintaining both their existing and new infrastructure to comply with SDWA public health requirements.
Under the SDWA, states must ensure their infrastructure loan funds will be available for providing financial assistance in perpetuity. Thus, states need to manage their loan fund portfolios in a manner that ensures adequate repayment streams. They similarly need to balance additional subsidization and set-aside utilization over time with the requirement that their loan funds revolve in perpetuity.
DWSRF decision-making, while complex, is conducted in an open manner. The SDWA requires states to develop annual Intended Use Plans (IUPs) addressing the factors discussed above. EPA must review and approve the IUPs prior to awarding capitalization grants. As an integral part of IUP development, states must provide for public review and comment. States must also issue detailed biannual reports that describe how they implemented their IUPs. Most states choose to issue these reports annually.
In October 2018, Congress enacted the American Water Infrastructure Act of 2018 that strengthened the DWSRF by increasing authorized funding, extending the time allowed to repay loans by 10 years, and increasing the subsidy for disadvantaged communities. The law also requires EPA to estimate for all LSLs, both the portion on private property and public property as part of its quadrennial Drinking Water Infrastructure Needs Survey Assessment. As a result, in coming years states will need to develop estimates of the number of LSLs in service that EPA will use in the national report that is due in 2023.
DWSRF decision-making, while complex, is conducted in an open manner. The SDWA requires states to develop annual Intended Use Plans (IUPs) addressing the factors discussed above. EPA must review and approve the IUPs prior to awarding capitalization grants. As an integral part of IUP development, states must provide for public review and comment. States must also issue detailed biannual reports that describe how they implemented their IUPs. Most states choose to issue these reports annually.
In October 2018, Congress enacted the American Water Infrastructure Act of 2018 that strengthened the DWSRF by increasing authorized funding, extending the time allowed to repay loans by 10 years, and increasing the subsidy for disadvantaged communities. The law also requires EPA to estimate for all LSLs, both the portion on private property and public property as part of its quadrennial Drinking Water Infrastructure Needs Survey Assessment. As a result, in coming years states will need to develop estimates of the number of LSLs in service that EPA will use in the national report that is due in 2023.