Clean Water State Revolving Fund Overview

From Beachapedia

by Elena Neibaur, July 2023

Abstract

The EPA Clean Water State Revolving Fund empowers communities nationwide to address key water quality issues by providing funding for wastewater and stormwater infrastructure projects. This is essential as challenges from aging systems, climate change, and population growth continue to outpace resources. This article explains the workings of the Clean Water State Revolving Fund and provides guidance for participation and advocacy to guide infrastructure improvements.

The City of Kodiak, Alaska, in collaboration with local partners, used $4.5 million in CWSRF funds to establish a composting facility that processes tons of sludge from the municipal wastewater treatment facility, effectively reducing landfill waste. Image Courtesy of EPA.

Introduction

Coastal water quality is threatened by stormwater runoff and failing wastewater systems, which are worsened by aging infrastructure, climate change, and population growth. Each year, nearly 10 trillion gallons of untreated stormwater runoff and over 900 billion gallons of untreated sewage enter our waterways and ocean due to failing wastewater infrastructure and sewage spills.[1] This sewage, loaded with bacteria, viruses, and parasites, can cause various illnesses in humans. Sewage is also loaded with nutrients like nitrogen that disrupt coastal ecosystems by triggering harmful algal blooms, leading to the death of fish and coral reefs.

The Clean Water State Revolving Fund (CWSRF) has been the largest federal source of public funding dedicated to addressing wastewater and stormwater issues. In 1987, CWSRF was created by an amendment to the Clean Water Act (CWA) as a financial assistance program that supports water quality improvement projects. The program is administered by U.S. Environmental Protection Agency (EPA) in partnership with states and territories, offering flexibility for the 50 states, DC, tribes, and U.S. territories to finance projects that address their own specific water quality concerns.[2] From 1987 to 2022, the federal fund provided states with $49.6 billion, which, due to the revolving nature of the fund, resulted in access to a total of $163 billion for community water quality improvement projects (see Table 1).[3]

Table 1: Summary of funds spent and eligibility for the CWSRF from 1987 to 2022. Data sourced from EPA.







What Makes it a Revolving Fund?

The CWSRF operates as a "revolving fund” at the state level, financing water projects that are then repaid back into the fund, allowing for continuous lending and reinvestment. The Drinking Water State Revolving Fund (DWSRF), a parallel program that finances projects to ensure safe drinking water, operates similarly to the CWSRF through revolving funds managed at the state level. The funds are sourced from federal grants, state matching funds, loan repayments, and interest earnings (see Figure 1).[3][4]

Figure 1: CWSRF revolving fund cycle - federal and state provide money for water projects, funds are replenished through loans and interest earnings. Image courtesy of National Resources Defense Council.

The key steps involved in the CWSRF are detailed below.

1.    Appropriation Funding: Funding for federal programs and activities is made possible through the approval of an appropriations act. Each year, Congress allocates funds to the EPA for the CWSRF program which then distributes this fund as “capitalization grants” to the 50 states, Puerto Rico, tribes, DC, and US territory administering agencies.[3] These grants are allocated to support and capitalize the CWSRF program at the state level, using a predetermined formula managed by the EPA, which considers factors such as a state’s (or territory’s) population and water quality needs.[5] Occasionally, Congress passes supplemental appropriations acts, as seen in the case of the 2021 Infrastructure, Investment and Jobs Act, referred to here as the Bipartisan Infrastructure Law (or “BIL”), to provide additional funding.

2.    State Match: To supplement the capitalization grant and boost the total funding for water infrastructure projects, states are required to contribute a matching share, typically 20 percent, within their respective states.

3.    Loan Distribution: States run their own CWSRF programs and have flexibility in distributing loans – they can set their own interest rates from 0% to market rate and establish repayment periods up to 30 years.[3] This flexibility allows them to support a variety of water quality infrastructure projects from constructing of municipal wastewater facilities to managing nonpoint pollution sources, developing decentralized wastewater treatment systems, creating green infrastructure projects, and other initiatives. The favorable loan terms allow states to support communities in implementing both traditional and innovative water quality improvement solutions.

4.    Repayment and Revolving: As awarded recipients repay the principal and interest on their loans, the money flows back into the state's CWSRF. This repayment replenishes the fund and allows for new loans to be distributed, creating a sustainable, "revolving" source of funding for water quality projects. States have considerable discretion in establishing their own qualification criteria for these loans, provided they:

  • tackle the most significant public health risks,
  • ensure adherence to the Clean Water Act, and
  • aid systems based on state affordability criteria.[2][3]

5.    Additional Revenues: In addition to loan repayments, other sources of revenue such as bond proceeds, loan interest, and investment earnings can also be deposited back into the fund, replenishing the revolving fund to allow future project financing.[3]

How Funds Get Distributed to States

Each year, Congress appropriates funds for the CWSRF program of about $1.75 billion.[6] Some CWSRF funds are pre-allocated to earmarked projects before capitalization grants are allocated, bypassing competitive review processes. While this can advance specific projects, it can also lead to an inequitable overall allocation of funds, as it reduces the significant portion of capitalization grants that states, tribes, and US territories can receive and direct based on their needs. Read more about earmarked projects here.

The remaining appropriations are divided among the 50 states and Puerto Rico, with funds also set aside for tribes, Guam, Northern Marianas, American Samoa, and the US Virgin Islands. The annual appropriations are distributed to state environmental agencies or other managing entities, and have mainly remained steady since 1989 (see Figure 2).[7] [8][9] A preset allocation formula is used to determine the amount of funds each state, DC, and US territory receives, which has remained largely unchanged since 1987.[2] While the exact formula is not shared publicly, reports suggest it considers factors such as water quality needs, population, and land area, with each state guaranteed at minimum 0.5% of total CWSRF funds.[10] [11] Each state manages and places its portion of the money, known as the annual federal “capitalization grant,” into its CWSRF fund, along with a required 20 percent state match. The state then uses this fund to provide financial assistance for wastewater and stormwater projects. Leverage bonds, investment earnings, and loan repayments are also deposited into the fund on a rolling basis. To learn more about past allotment amount visit EPA’s CWSRF Allotments of Federal Funds to States.

Figure 2: The graph shows the total appropriated funds (shown in blue) for CWSRF program from FY1989 to FY2023, including CWSRF monies earmarked for particular projects. Supplemental appropriated funds (shown in green) include $4 billion in FY2009 from the American Recovery and Reinvestment Act and $3.9 billion for FY2022 and FY2023 funding from Bipartisan Infrastructure and Investment Jobs Act. Sourced from EPA and a Congressional Research Service Report.

Some reports have acknowledged that the current allotment formula does not accurately reflect today’s water quality needs or population in most states.[2][10][11] EPA’s Clean Watersheds Needs Survey is a study (usually done once every four years) where states, US territories, and DC assess and report to Congress their priorities based on capital improvement needs for wastewater, stormwater, combined sewer overflows, nonpoint source pollution control, and decentralized wastewater management systems across publicly owned treatment facilities. The survey data aids in budgeting and distributing funds from the CWSRF and assists local governments in justifying infrastructure investments. Although they usually occur every four years, the last report was in 2012 and a new report is being analyzed and will be published in a formal Report to Congress. A 2016 EPA report, based on the previous 2012 Clean Watersheds Needs Survey, estimated that $270 billion over a 20-year period, was needed for wastewater infrastructure improvements to meet statutory water quality and public health requirements. To better distribute funds based on current needs, EPA recommended that Congress update the CWSRF allocation formula on a regular basis, using current information that more accurately reflects changes in water infrastructure priorities across the country over time.

How Funds Get Distributed from States to Projects

States must develop an annual Intended Use Plan (IUP) outlining the proposed applications of CWSRF resources and detailing how these uses align with the CWSRF's objectives.[2] The IUP should include a Priority Project List (PPL) slated for funding, all applications received, short- and long-term program goals, set-aside expenditures, and the criteria and method for funds distribution. The public should be given the opportunity to review and comment on the IUP before its submission to the EPA. While the IUP is an annual requirement, many states update their lists more frequently to attract projects, with revisions ranging from bi-annual to bi-monthly.[2] At least 10% of funding must go towards green initiatives, known as the Green Project Reserve, which includes projects related to green infrastructure, energy efficiency, water conservation, and green innovative.[12] To access a state's IUP, please visit the Southwest Environmental Finance Center's SRF site, select the desired state, and choose the CWSRF IUP for that state.

How Projects Get on A State’s IUP List

Projects seeking CWSRF funding must be prioritized based on each state's established ranking criteria and fall within the 11 eligible categories (see Table 2).[13]

Table 2: The 11 categories under which CWSRF projects must fall to be considered eligible. Data sourced from the EPA.

To get a project prioritized for funding consideration, eligible applicants must submit a ranking form (referred to by different names depending on the state such as pre-application forms or nomination forms). Eligible applicants vary by project but mainly include:

• municipalities,

• nonprofit organizations,

• private entities,

• publicly owned treatment facilities, and

• other eligible parties.[13]

These ranking forms need to include project details, such as how it will address public health and/or environmental issues. Applicants must submit forms within the open application period and are reviewed annually, though some states review submissions year-round and update their Project Priority Lists multiple times (learn more about your state’s process and find local contacts here).[14] Using the submitted forms, projects are then assigned a score based on the State’s ranking criteria (specifics of the ranking criteria, including number of points, often varies by state) and included in the PPL. States have different approaches to project ranking and may encompass factors such as project readiness, use of available subsidy, continuation from a previous year's PPL, system size, affordability, and more.

To better illustrate these diverse approaches, provided in the section below are two case studies from Florida and Washington.

Figure 3: Process of How the State Revolving Fund Works. (Image originally from State Revolving Fund Advocacy Toolkit by River Network, modified to focus on CWSRF entities and process).
CWSRF KEY UPDATES: BIPARTISAN INFRASTRUCTURE LAW
The 2021 Bipartisan Infrastructure and Investment Jobs Act (BIL) allocated over $50 billion to the EPA for water infrastructure investments, aimed at improving the nation's drinking water, wastewater, and stormwater infrastructure.[15] Of this funding, $12.7 billion is specifically dedicated to the CWSRF, including $1 billion for emerging contaminants like PFAS (read more on PFAS here). This increased funding provides states with the opportunity to expand their efforts in addressing water quality challenges and investing in vital infrastructure projects. With greater financial resources available, communities can address a wider range of water infrastructure needs, including upgrading aging systems, implementing innovative technologies, and enhancing resilience to climate change impacts.

The CWSRF funding provided by the BIL have some differences than the usual appropriated program, and include:[2]

PFAS.png
  • reducing the state's funding match from 20% to 10% for supplemental for 2022 and 2023;
  • states must direct at least 49% of funds to projects in disadvantaged communities that meet affordability criteria or green initiatives;
  • states can also use $5 billion allocated funds for emerging contaminants like lead and PFAS, with no matching funds or repayment required; and
  • up to 2% can be used for technical assistance to aid communities in the SRF process.

State Case Studies

Florida

Overview

From 1989 to 2021, Florida’s CWSRF, managed by the Florida Department of Environmental Protection (FDEP), has leveraged $2 billion in EPA capitalization grants into about $5 billion in total financing for water quality projects across the state.[16] For fiscal year 2021 (July 1, 2020-June 30, 2021), Florida received approximately $53 million from the EPA for the CWSRF program, which was distributed as follows:[16]

  • 87.1% for centralized wastewater treatment
  • 5.1% for stormwater projects
  • 0.3% for energy conservation
  • 5.9% for water conservation
  • 1.4% for nonpoint source projects
  • 0.2% for other categories.[16]

Among all the projects, close to 14% of the capitalization grant was spent on the Green Project Reserves categories.[16]

Types of Aid

The program offers a 20-year repayment period for loans at below-market rates, which are determined based on income, poverty, and unemployment metrics of a project area, generally averaging less than half the market rate.[17] Additionally, disadvantaged communities might qualify for grants or further loan subsidies. Florida has a Small Community Wastewater Construction Grants program for communities with a population under 10,000 that provides grant funds to projects that also receive a CWSRF loan.[17]  In 2021, Florida dedicated $21 million to assist 12 disadvantaged communities, which are economically challenged areas identified as needing essential upgrades to improve water quality.1

Project Application Process

Eligible applicants interested in having their project considered can submit a Request for Inclusion throughout the year, which is reviewed for consideration on the project priority list at the next quarterly meeting. Each year, FDEP agrees on a list of the top projects, which can be changed during the year to include new projects or shift the schedule of current projects until funds are exhausted. Each change requires a public meeting.

Ranking System

Florida prioritizes projects for funding based on a nine category scoring system.[18] Projects that help mitigate public health risks and improve water quality to meet Basin Management Action Plan goals receive higher scores.[18] Extra points are added to economically disadvantaged small communities using the Affordability Index, which takes into account median income, unemployment, and poverty rates in the project's service area.[19]

Community Engagement

Public engagement is facilitated through quarterly meetings where public comments can be submitted on the annual Intended Use Plan. Quarterly meetings are typically held on the second Wednesday in August, November, February and May, and details are posted on the Florida Administrative Register usually about a month before the meeting.[20] To learn of other federal or state funding opportunities for water quality restoration projects, visit Protecting Florida Together.

Florida CWSRF Project Highlight: Minuteman Causeway Stormwater/Streetscape Improvement Project

Figure 4: Minuteman Causeway Stormwater/Streetscape Improvement Project. Image Courtesy of the EPA.

In 2017, Cocoa Beach built a $5.2 million city-wide stormwater system to reduce nutrients entering the Banana River Lagoon, part of the Indian River Lagoon system– a designated Estuary of National Significance. [21] The CWSRF provided $1.8 million to supplement a 319 Nonpoint Source grant for the 8.34-acre project on Minutemen Causeway, one of the city's oldest roads.[22] New stormwater treatment systems were installed along this main east-west corridor across the coastal barrier island to capture and cleanse runoff before it leaches nitrogen and phosphorus into the groundwater. The project improves the water quality, enhances Cocoa Beach's appeal, and helps attract new businesses to this Atlantic beach community.

Washington

Overview

From 1989 to 2021, Washington’s CWSRF, managed by the Department of Ecology (DOE), has leveraged about $1 billion in EPA capitalization grants into about $2 billion in total financing for water quality projects across the state.[23] For fiscal year 2021, Washington received approximately $27 million from the EPA for the CWSRF program, which was distributed as follows:[23]

  • 97.4% for centralized wastewater treatment
  • 0.3% for stormwater projects
  • 0.3% for nonpoint source projects.

Among all the projects, a little over 14% of the capitalization grant was spent on the Green Project Reserves categories.[23][24]

Types of Aid

Washington's CWSRF provides loans at below-market rates with repayments spanning up to 30 years, with interest rates set depending on specific loan terms.[25] The state also offers assistance to hardship communities including reduced interest rates, forgivable principal loans, and Centennial grants. DOE allocates five percent of the CWSRF to pre-construction projects in small communities, defined as populations under 25,000 people, offering forgivable loans or Centennial grants when the community's median household income falls below 80% of the state’s median income. In 2021, Washington dedicated $28 million to assist 22 disadvantaged communities, which are economically challenged areas identified as needing essential upgrades to improve water quality.[23]

Project Application Process

Eligible applicants can apply to multiple sources of water quality funding annually, including CWSRF, through a single Water Quality Combined Funding Program application. Washington's DOE annually adopts a priority list in their Intended Use Plan.

Ranking System

Washington prioritizes projects for funding based on an eight category scoring system worth up to 1000 points.[26] To qualify for funding, a proposal must achieve a minimum score of 600 points, with at least 250 points for Water Quality and Public Health Improvements.[26] Applicants from economically disadvantaged, small communities can receive up to 50 points in the Financial Hardship category, which uses the Affordability Index to consider median income, unemployment, and population trends of a project area.

Community Engagement

Washington ensures public involvement through State Revolving Fund workshops held annually, and 30 day public comment periods on the annual Intended Use Plan, announced through the Washington State Register. For example, in 2021, DOE’s public comment period was January 14-February 14 for comments on the draft Intended Use Plan list, with a virtual meeting held via WebEx on February 3.[26] To learn of other federal or state funding opportunities for water quality restoration projects visit DOE’s water quality grants and loans.

Washington CWSRF Project Highlight: Mashel River Protection Project

Figure 5: Mashel River Protection Project. Image courtesy of the EPA.

The Mashel River, a vital tributary to the Nisqually River and federally designated critical habitat for salmon, serves as the primary water source for the town of Eatonville and many rural residents. It's still recovering from intensive commercial forestry and clear-cut logging in the past, leading to environmental issues like erosion, sedimentation, poor water retention, and lack of fish habitats. To counter these challenges, the Nisqually Tribe, alongside the Nisqually Land Trust, innovatively utilized the $14.2 million low-interest loan from DOE to buy 1,240 acres of land along the Busy Wild Creek, to permanently manage forest lands for stream restoration.

Opportunities for Community Engagement

1.    Get involved at the local level

Engage early and often because your community won't get CWSRF money if it does not apply and get on the state's priority list! It's critical that government funds for infrastructure are distributed equitably, ensuring all communities, particularly those in greatest need, have an opportunity to benefit. Advocates must stay informed through their state's SRF administering agencies on timelines, application requirements, and public comment opportunities for the State’s IUP.  Remember state agencies must consider and respond to public comments, so consistent engagement can help maintain accountability. To get involved, access your state's IUP by visiting the Southwest Environmental Finance Center's SRF site.


2.    Ensure there is available funding

While this program has a revolving nature, it’s still important for the federal government to include funding in each year’s appropriation bill. Surfrider, as well as other nonprofits across the US, advocate for this funding annually, such as through our current Fund the BEACH Act & EPA Clean Water programs FY2024 campaign. The BEACH ACT is an important coastal water quality testing program that helps identify pollution hotspots and keep the public safe and informed of poor water quality (learn more here). The EPA-managed CWSRF and BEACH Act programs help improve our nation’s waterways, advance wastewater infrastructure, and ensure that all sewage in the US is adequately collected and treated to protect public and environmental health. To add to these efforts, Surfrider staff and volunteers also track and advocate for complimentary state and federal policies, and operate the Blue Water Task Force, a national network of chapter volunteers monitoring bacteria levels at more than 450 ocean, bay, estuary and freshwater sampling sites across the US.


For federal clean water advancements during fiscal year 2024, Surfrider is asking Congress to:

  • appropriate $15 million to the EPA BEACH Act (only half of the fully authorized level of $30 million) to support water quality testing agencies across the nation, providing better health protection for more people;
  • appropriate $3 billion for the CWSRF to build on the great momentum that was initiated through the 2021 BIL to upgrade failing wastewater infrastructure and stop sewage spills at the source; and
  • increase support for the EPA’s Border Water Infrastructure Grant Program to address the sewage pollution crisis and advance environmental justice at the US-Mexico border.


Join us in our efforts and take action to support the EPA’s clean water programs

There are other infrastructure funding opportunities in addition to CWSRF that can help address our nation’s wastewater and stormwater issues. To learn about other resources, please visit the websites below.

Long-term, low-cost supplemental loans for regionally and nationally significant projects.

Grants for sewer overflow and stormwater infrastructure projects.

Funding for local wastewater and stormwater infrastructure, including the U.S. Department of Agriculture's rural Water and Waste Disposal Loan and Grant program, the Department of Housing and Urban Development's Community Development Block Grant program, and the EPA's Water Infrastructure Finance and Innovation Act program.

EPA’s financial and technical assistance to small and rural communities to establish and improve wastewater treatment services.

A toolkit that includes a list of water infrastructure funding and financing mechanisms.

Resources

Surfrider Foundation

Clean Water Initiative & Annual Clean Water Reports

Blue Water Task Force Volunteer Water Quality Testing Program

Beachapedia

Beach Water Quality Monitoring Programs in Coastal States

Wastewater Infrastructure Series

References

  1. ↑ Surfrider Foundation. 2023. Clean Water Report.
  2. ↑ 2.0 2.1 2.2 2.3 2.4 2.5 2.6 Kanzig, E. River Network. 2022. A State Revolving Fund Advocacy Toolkit.
  3. ↑ 3.0 3.1 3.2 3.3 3.4 3.5 Environmental Protection Agency. 2023. About the Clean Water State Revolving Fund (CWSRF).
  4. ↑ Hammer, B. Natural Resources Defense Council. 2022. A Fairer Funding Stream: How Reforming the Clean Water State Revolving Fund Can Equitably Improve Water Infrastructure Across the Country.
  5. ↑ Environmental Protection Agency. 2016. Review of the Allotment of the Clean Water State Revolving Fund (CWSRF). Report to Congress. EPA-830-R-16-001.
  6. ↑ Hansen, K. et al. 2022. Uncommitted State Revolving Funds. Nicholas Institute for Environmental Policy Solutions, Duke University. NI R 22-01.
  7. ↑ Ramseur, J.L. 2022. Oversight of the Clean Water State Revolving Loan Fund formula : hearing before the Committee on Environment and Public Works. CRS Report 7-5700, Congressional Research Service, Washington, DC.
  8. ↑ Ramseur, J.L. and Tiemann, M. 2019. Water Infrastructure Financing: History of EPA Appropriations. Congressional Research Service, CRS Report 96-647.
  9. ↑ Environmental Protection Agency. 2023. Clean Water State Revolving Fund (CWSRF) Allotments of Federal Funds to States.
  10. ↑ 10.0 10.1 Ramseur, J.L. 2023. Clean Water State Revolving Fund Allotment Formula: Background and Options. Congressional Research Service, CRS Report 96-647
  11. ↑ 11.0 11.1 Environmental Protection Agency. 2016. Review of the Allotment of the Clean Water State Revolving Fund (CWSRF). Report to Congress. EPA-830-R-16-001.
  12. ↑ Environmental Protection Agency. 2012. GPR Project Eligibility Guidance.
  13. ↑ 13.0 13.1 Environmental Protection Agency. 2016. Overview of Clean Water State Revolving Fund Eligibilities.
  14. ↑ Environmental Protection Agency. 2023. State CWSRF Program Contacts.
  15. ↑ Environmental Protection Agency. 2022. Bipartisan Infrastructure Law Clean Water and Drinking Water State Revolving Funds (SRFs).
  16. ↑ 16.0 16.1 16.2 16.3 Environmental Protection Agency. 2023. Florida Clean Water NIMS Data Report.
  17. ↑ 17.0 17.1 Florida Department of Environmental Protection. 2022. CWSRF Program.
  18. ↑ 18.0 18.1 Florida Department of Environmental Protection. 2022. Clean Water State Revolving Fund Intended Use Plan for Use in State Fiscal Year 2023.
  19. ↑ Florida Department of Environmental Protection. 2014. State Revolving Fund Loan Program.
  20. ↑ Florida Department of Environmental Protection. 2023. State Revolving Fund.
  21. ↑ Environmental Protection Agency. 2018. PISCES Recognition Program 2018 Compendium.
  22. ↑ Environmental Protection Agency. 2018. Cocoa Beach, Fla. Recognized by EPA for Excellence and Innovation in Clean Water Infrastructure.
  23. ↑ 23.0 23.1 23.2 23.3 Environmental Protection Agency. 2023. Washington Clean Water NIMS Data Report.
  24. ↑ Department of Ecology State of Washington. 2021. Annual Report Washington’s Clean Water State Revolving Fund (CWSRF).
  25. ↑ Department of Ecology, State of Washington. 2022. State Fiscal Year 2022 Final Water Quality Funding Offer List and Intended Use Plan.
  26. ↑ 26.0 26.1 26.2 Department of Ecology State of Washington. 2022. State Fiscal Year 2022 Final Water Quality Funding Offer List and Intended Use Plan.

|} |}

Retrieved from "https://beachapedia.org/w/index.php?title=Clean_Water_State_Revolving_Fund_Overview&oldid=43248"