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Water: Clean Water State Revolving Fund

How the CWSRF Program Works

With the passage of the Amendments to the Clean Water Act (CWA) in 1987, the U.S. Congress ushered in a new era in clean water financing. Under Title VI, the new CWA called for the replacement of the long-standing federal Construction Grants program with an innovative Clean Water State Revolving Fund (CWSRF) program. For the last quarter of a century, the CWSRF program has helped communities throughout the nation meet the goals of the Clean Water Act by improving water quality, achieving and maintaining compliance with environmental laws, protecting aquatic wildlife, protecting and restoring drinking water sources, and preserving our nation's waters for recreational use.  

About the Program

Through the CWSRF program, each state and Puerto Rico maintain revolving loan funds to provide independent and permanent sources of low-cost financing for a wide range of water quality infrastructure projects. Funds to establish or capitalize the CWSRF programs are provided through federal government grants (federal funding levels ) and state matching funds (equal to 20 percent of federal government grants). Today, all 50 states and Puerto Rico are operating successful CWSRF programs. Building on a federal investment of over $36.2 billion, the CWSRFs have provided more than $100 billion in funding to communities to meet environmental standards, protect valuable resources, and ensure public health. 

CWSRF programs operate much like environmental infrastructure banks that are capitalized with federal and state contributions. CWSRF monies are loaned to communities and loan repayments are recycled back into the program to fund additional water quality protection projects. The revolving nature of these programs provides for an ongoing funding source that will last far into the future. 

The CWSRFs fund a wide range of water quality projects including all types of nonpoint source, watershed protection or restoration, and estuary management projects, as well as more traditional municipal wastewater treatment projects. 

The CWSRF is a far more flexible program than its predecessor, the Construction Grants program. Under the CWSRF, states may choose from a variety of assistance options, including loans, refinancing, purchasing, or guaranteeing local debt and purchasing bond insurance. States can also set specific loan terms, including interest rates—from zero percent to market rate—and repayment periods—up to 20 years. States have the flexibility to target resources to their particular environmental needs, including contaminated runoff from urban and agricultural areas, wetlands restoration, groundwater protection, brownfields remediation, estuary management, and wastewater treatment. 

States may also customize loan terms to meet the needs of small and disadvantaged communities , which typically have fewer financing options. Since the programs inception, over $23 billion in CWSRF funding has been directed to communities with a population of less than 10,000 for needed wastewater infrastructure and other water quality projects. Starting in 2009, the CWSRFs were given the ability to provide further financial assistance through additional subsidization. To date, over $3.9 billion in additional subsidization has been provided to various communities in the form of principal forgiveness or grants.  

Through the Green Project Reserve, the CWSRFs also target critical green infrastructure, providing more than $2.6 billion in funding for water efficiency improvements, energy efficiency, and other environmentally innovative activities since the reserve was initiated in 2009.  

Program Components

 

CWSRF Program Diagram

 

  • State CWSRF Program - CWSRF programs combine the federal and state capitalization funds with other program resources including tax-exempt revenue bond proceeds, fund investment earnings, and loan repayments to provide low-interest loans for eligible projects. States are responsible for CWSRF program operation. Often, a state will partner with other state agencies to manage and operate their CWSRF program, such as placing either an environmental agency or a financing authority in the lead management role. Thirty-one states report that two state agencies share in these CWSRF program management responsibilities.

  • Federal Capitalization and State Match Provide Initial Funding - Capitalization funds from the federal government and state matching funds (equal to 20 percent of federal capitalization) provide the seed money to initiate the funding. Nationally, federal capitalization exceeds $36.2 billion and state matching funds come to almost $6.8 billion.

  • Bond Holders Provide Additional Funding - Using fund assets as collateral, 28 states have issued tax-exempt revenue bonds to leverage their CWSRF programs and provide an additional $33 billion (net of reserves) nationally to funds available for water quality protection projects. Bond proceeds are combined with federal and state capitalization funds, fund investment earnings, and loan repayments to provide low-interest loans for eligible projects.

  • Wastewater Treatment - Approximately $95.8 billion has been provided nationally through the CWSRF program for municipal wastewater treatment facilities. Examples of the types of projects funded include secondary and advanced treatment works, collector sewers, sanitary and combined sewer overflow correction, and stormwater management.

  • Nonpoint Sources and Estuary Protection - The CWSRF program funds a significant amount of nonpoint source and estuary activities in addition to funding municipal wastewater treatment facilities. Cumulatively, CWSRFs have provided nearly $4.2 billion for activities such as watershed management, wetlands protection, contaminated urban and rural runoff control, brownfields remediation, ground water protection, habitat protection, and estuary management.

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