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Water: Drinking Water State Revolving Fund

Frequent Questions

 

1. What is the DWSRF program?
2. Why is the DWSRF program needed?
3. How does the program work?
4. How does EPA decide how much funding each state receives?
5. What types of projects are eligible for funding?
6. How do states determine funding priorities?
7. How do states involve the public?
8. How does the program help small communities?
9. How does the program help prevent future threats to drinking water?
10. What are the activities funded under set-asides?


What is the DWSRF program?
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. As part of the 1996 Safe Drinking Water Act (SDWA) Amendments, Congress established the Drinking Water State Revolving Fund (DWSRF) program. The goal of the program is to provide States with a financing mechanism for ensuring safe drinking water to the public. 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.

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Why is the DWSRF program needed?
The Nation's 53,000 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 272 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.

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How does the program work?
States used federal capitalization grant money awarded to them to set up infrastructure funding accounts from which assistance is made available to public water systems. States can make loans to public water systems that have interest rates between 0 percent and market rate and standard repayment terms of up to 20 years. Loan repayments to the state will provide a continuing long-term source of infrastructure financing.

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How does EPA decide how much funding each state receives?
Every four years EPA completes a survey {link to needs survey?} of drinking water infrastructure needs for every state. The amount of annual DWSRF funding {link to allotments?} that each State is eligible to receive is based on the state’s proportionate share of the total national needs identified in that survey. Each state is, however, guaranteed a minimum of 1% of the total amount available to all states from the annual appropriation from Congress.

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What types of projects are eligible for funding?
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.

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How do states determine funding priorities?
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.

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How do states involve the public?
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.

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How does the program help 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.

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How does the program help 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.

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How does the program help prevent 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 up to 31% of their capitalization grants 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.

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What are the activities funded under set-asides?
States have the flexibility to take set-asides for several different activities that can help support their drinking water programs. A State can use up to 10% of its capitalization grant (with an accompanying 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.

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