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Clean Water State Revolving Fund
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The Clean Water State Revolving Fund (CWSRF) is a self-perpetuating loan assistance authority for water quality improvement projects in the United States. The fund is administered by the Environmental Protection Agency
United States Environmental Protection Agency
The U.S. Environmental Protection Agency is an agency of the federal government of the United States charged with protecting human health and the environment, by writing and enforcing regulations based on laws passed by Congress...

 and state
U.S. state
A U.S. state is any one of the 50 federated states of the United States of America that share sovereignty with the federal government. Because of this shared sovereignty, an American is a citizen both of the federal entity and of his or her state of domicile. Four states use the official title of...

 agencies. The CWSRF, which replaced the Clean Water Act
Clean Water Act
The Clean Water Act is the primary federal law in the United States governing water pollution. Commonly abbreviated as the CWA, the act established the goals of eliminating releases of high amounts of toxic substances into water, eliminating additional water pollution by 1985, and ensuring that...

 Construction Grants program, provides loans for the construction of municipal wastewater
Sewage treatment
Sewage treatment, or domestic wastewater treatment, is the process of removing contaminants from wastewater and household sewage, both runoff and domestic. It includes physical, chemical, and biological processes to remove physical, chemical and biological contaminants...

 facilities and implementation of nonpoint source pollution
Nonpoint source pollution
Nonpoint source pollution refers to both water and air pollution from diffuse sources. Nonpoint source water pollution affects a water body from sources such as polluted runoff from agricultural areas draining into a river, or wind-borne debris blowing out to sea. Nonpoint source air pollution...

 control and estuary
Estuary
An estuary is a partly enclosed coastal body of water with one or more rivers or streams flowing into it, and with a free connection to the open sea....

 protection projects. Congress
United States Congress
The United States Congress is the bicameral legislature of the federal government of the United States, consisting of the Senate and the House of Representatives. The Congress meets in the United States Capitol in Washington, D.C....

 established the fund in the Water Quality Act of 1987. Since inception, cumulative assistance has surpassed US$65 Billion, and is continuing to grow through interest earnings, principal
Debt
A debt is an obligation owed by one party to a second party, the creditor; usually this refers to assets granted by the creditor to the debtor, but the term can also be used metaphorically to cover moral obligations and other interactions not based on economic value.A debt is created when a...

 repayments, and leveraging.

Revolving structure

All 50 states, plus Puerto Rico
Puerto Rico
Puerto Rico , officially the Commonwealth of Puerto Rico , is an unincorporated territory of the United States, located in the northeastern Caribbean, east of the Dominican Republic and west of both the United States Virgin Islands and the British Virgin Islands.Puerto Rico comprises an...

 operate a CWSRF. The 51 CWSRF programs function like environmental infrastructure
Infrastructure
Infrastructure is basic physical and organizational structures needed for the operation of a society or enterprise, or the services and facilities necessary for an economy to function...

 banks by distributing low interest rate loans for water quality projects. Loan repayments are recycled back into individual CWSRF programs. States can only use the funds to make loans, purchase local debt, or issue financial guarantees. They cannot make grants or otherwise dissipate the capital in their funds. Principal repayments plus interest earnings become available to finance new projects, allowing the funds to "revolve" over time. States can also increase their CWSRF financing capacity by issuing CWSRF backed revenue or general obligation bonds. To date, 27 states have leveraged their programs in this way, raising an additional $20.6 billion for important water quality projects.

The 51 funds are capitalized in part by federal and state contributions. For every dollar contributed by the federal government, states contribute 20 cents. Since the first federal capitalization grants in 1988, the total federal appropriation to the 51 CWSRF programs has reached over $25 billion, with corresponding state contributions of $5.3 billion. Financial leveraging techniques conducted by state funds have snowballed federal and state contributions into $65 billion as of 2007.

Program highlights

Since the inaugural CWSRF project was funded in 1988, the 51 state-run CWSRF programs have provided $65 billion in assistance for water quality projects through 20,711 loans. In 2008, the programs reached a new high for single-year financing, providing nearly $5.8 billion in assistance to loan recipients of all sizes, including farmers, homeowners, small businesses, nonprofit organizations, and major municipalities. While wastewater treatment projects have comprised 96 percent of all CWSRF funding to date, over $2.6 billion has gone to nonpoint source and estuary projects (see Figure 2). The number of assistance agreements for nonpoint source projects has grown significantly over the years, from only two projects in 1990 to 1,305 in 2007. The low cost and flexibility of CWSRF financing has helped the programs serve communities of all sizes. In 2007, two-thirds of all loans went to communities with populations below 3,500. In addition, over $1.1 billion in assistance targeted communities with fewer than 10,000 people (see Figure 3).

The programs are projected to continue to grow over time, as interest earnings and repayments of loans increase (see Figure 4). Nationally, the CWSRF program provides a remarkable return on federal investment: over the last 20 years, the program has financed $2.31 in projects for every dollar the federal government has invested (see Figure 5).

The demand for CWSRF funds nationwide can be attributed to high needs, low interest rates, and flexible financing options. The rate of fund utilization has increased steadily since 1988, signaling increased demand for funds as well as efficient state operations. As of 2007, 97 percent of all available funds were committed to projects. To meet high levels of demand, 27 states have chosen to implement leveraging approaches by issuing revenue and general obligation bonds that are secured by CWSRF assets. Through leveraging, states have increased their capacity to finance important water quality projects.

The use of leveraging in the CWSRF


27 CWSRF's leverage
Leverage (finance)
In finance, leverage is a general term for any technique to multiply gains and losses. Common ways to attain leverage are borrowing money, buying fixed assets and using derivatives. Important examples are:* A public corporation may leverage its equity by borrowing money...

 their funds to increase the amount of capital available for loan assistance. This means that these states augment their CWSRF capital by issuing municipal bonds. Typically, they loan the proceeds of the bonds while investing their capitalization funds (both state and federal). These investments serve two purposes. First, they are pledged to the bondholders as additional collateral, thus more than assuring a AAA bond rating. Second, the interest on the invested capital is used to pay subsidies to the CWSRF program's local utility borrowers.

CWSRF Benefits Reporting System

The CWSRF Benefits Reporting System (CBR), launched in 2005 and adopted by all 51 state programs, produces a quantifiable record of the environmental and public health impact of CWSRF investments. Figures 6 and 8 present data reported in the CBR System to date. CBR allows users to record anticipated water quality improvements from every CWSRF loan directed towards water quality improvement. The 51 state programs have used CBR to track the environmental impact of 4,878 projects. The data link $15.8 billion in CWSRF loans to projects that protect and restore drinking water sources, recreational areas, and aquatic wildlife throughout the country. In 2007, CWSRF programs funded more than 964 projects designed to protect and restore water bodies, including 597 projects with direct human health benefits.

Statutory authority

Clean Water Act sections 212, 319, and 320 provide the statutory authority for programs funded by the CWSRF. The CWSRF is authorized to provide financial assistance for the construction of publicly owned treatment works (sec. 212), the development and execution of state's comprehensive conservation management plans (sec. 319), and the development and execution of an estuary conservation and management plan (sec. 320).

Project eligibilities

Eligible projects under CWA section 212 include the capital costs for the construction and maintenance of publicly owned treatment works
Publicly owned treatment works
A publicly owned treatment works is a term used in the United States for a sewage treatment plant that is owned, and usually operated, by a government agency. In the U.S., POTWs are typically owned by local government agencies, and are usually designed to treat domestic sewage and not industrial...

 (POTWs).
  • Wastewater collection and treatment
  • Publicly owned municipal stormwater
    Stormwater
    Stormwater is water that originates during precipitation events. It may also be used to apply to water that originates with snowmelt that enters the stormwater system...

     projects
  • Combined sewer overflow
  • Sanitary sewer overflow
    Sanitary sewer overflow
    Sanitary sewer overflow is a condition whereby untreated sewage is discharged into the environment prior to reaching treatment facilities thereby escaping wastewater treatment. When caused by rainfall it is also known as wet weather overflow. It is primarily meaningful in developed countries,...

  • Water pipes, storage, and treatment systems
  • Green infrastructure
    Green infrastructure
    Green Infrastructure is a concept originating in the United States in the mid-1990s that highlights the importance of the natural environment in decisions about land use planning. In particular there is an emphasis on the "life support" functions provided by a network of natural ecosystems, with an...

  • Water quality portions of municipal landfill
    Landfill
    A landfill site , is a site for the disposal of waste materials by burial and is the oldest form of waste treatment...

     projects
  • Water conservation
    Water conservation
    Water conservation refers to reducing the usage of water and recycling of waste water for different purposes such as cleaning, manufacturing, and agricultural irrigation.- Water conservation :Water conservation can be defined as:...

     and reuse
  • Energy Conservation and Efficiency


Eligible projects under CWA section 319 (nonpoint source
Nonpoint source
Nonpoint source, or non-point source, or NPS, is a source that does not come from a single point.* Point source, contrasts with nonpoint source* Nonpoint source pollution, water pollution...

 projects) may include:
  • Agricultural runoff
    Surface runoff
    Surface runoff is the water flow that occurs when soil is infiltrated to full capacity and excess water from rain, meltwater, or other sources flows over the land. This is a major component of the water cycle. Runoff that occurs on surfaces before reaching a channel is also called a nonpoint source...

  • Leaking on-site septic systems
  • Stormwater runoff
  • Brownfield contamination
  • Atmospheric deposition
  • Runoff from closed landfills
  • Leaking underground storage tanks


CWA section 320 (estuary management) allows the CWSRF to fund publicly and privately owned projects, as long as the project is part of the state's Comprehensive Conservation Management Plan (CCMP) and is sanctioned in the plan.
  • Planting trees and shrubs within the watershed (drainage basin
    Drainage basin
    A drainage basin is an extent or an area of land where surface water from rain and melting snow or ice converges to a single point, usually the exit of the basin, where the waters join another waterbody, such as a river, lake, reservoir, estuary, wetland, sea, or ocean...

    )
  • Purchasing equipment required for the CCMP
  • Environmental clean-up
  • Development and initial delivery of educational programs

Projects must have a direct benefit to the water quality
Water quality
Water quality is the physical, chemical and biological characteristics of water. It is a measure of the condition of water relative to the requirements of one or more biotic species and or to any human need or purpose. It is most frequently used by reference to a set of standards against which...

 of an estuary. This includes:
  • protection of public water supplies
  • protection and propagation of a balanced, indigenous population of shellfish, fish, and wildlife
  • actions that, in order to allow for recreational activities in and on water, require the control of point and nonpoint sources of pollution to supplement existing controls of pollution


In many cases, estuary level protection plans are combined with other elements of an overall project. Where the water quality portion of a project is clearly distinct from other portions of the project, only the water quality portion can be funded by the CWSRF.

Eligible use of funds

The CWSRF employs a variety of loan assistance mechanisms.

Loans
  • Terms may not exceed 20 years.
  • Interest rates must be at or below market rate including interest-free.


Purchase of Debt or Refinance
  • A community's debt may be purchased by an SRF program.
  • Under the Extended Term Finance Policy, the purchase may have terms greater than 20 years, up to the useful life of the project.
  • Targeted to disadvantaged communities, though a waiver of the restriction may be granted.
  • An SRF program may refinance previously issued debt.


Guarantees and Insurances
  • Guarantees or insurance can be used where such assistance will result in improved credit market access or reduced interest rates.
  • The SRF program does not disburse funds for construction; such funds are procured by a borrower in the market.


Guarantee SRF Revenue Debt
  • Section 603(d)(3) of the Act authorizes CWSRF's to guaranty debt. Guaranty powers increase the funding capacity of CWSRF's as well as decrease annual payments which utility ratepayers must pay for their wastewater projects. Guaranties work very much like municipal bond insurance
    Bond insurance
    Bond insurance is a type of insurance whereby an insurance company guarantees scheduled payments of interest and principal on a bond or other security in the event of a payment default by the issuer of the bond or security...

    .
  • SRF programs may issue debt guaranteed by SRF funds.
  • The revenue generated is used to provide assistance to borrowers for eligible projects.
  • This greatly expands the capacity of a program in the near-term.


Provide Loan Guarantees
  • Similar revolving funds established by municipalities or inter-municipal agencies can receive loan guarantees.

Return on federal dollar

Over the past two decades, the CWSRF has financed $2.31 in infrastructure projects for every $1 invested by the federal government, providing a remarkable return on federal investment (See Figure 5).

EPA has projected that over a twenty-year time horizon, the initial federal investment into the CWSRF can result in the construction of up to three to four times as many projects compared to programs that utilize a one-time federal grant, depending on the allocation of resources to the program.

Due to the income stream into the program from state match, loan repayments, interest earnings, investment earning, and bond proceeds from leveraging, the return on every federal dollar investment to the CWSRF is currently $2.31.

Addressing climate change

Climate change
Climate change
Climate change is a significant and lasting change in the statistical distribution of weather patterns over periods ranging from decades to millions of years. It may be a change in average weather conditions or the distribution of events around that average...

 threatens both water quality and water quantity. The CWSRF can assist water utilities and municipalities mitigate the effects of climate change as they relate to water quality by capitalizing costs related to planning and implementing new technologies. Eligible criteria include the following.

Energy conservation

Wastewater and stormwater treatment facilities consume energy to collect and distribute treated water. The CWSRF can fund capital costs needed to power these publicly owned treatment works (POTWs) and strongly encourages the implementation of energy efficient technology.
  • Energy efficient pumps
  • Clean energy technology (e.g., solar, wind, hydroelectric, geothermal)
  • Purchase of energy audits that have a reasonable prospect of resulting in a capital project
  • Pro-rata share of capital costs for off-site publicly owned clean energy facilities that provides power to POTWs.

Green infrastructure

The CWSRF can fund the "capital costs" of green infrastructure
Green infrastructure
Green Infrastructure is a concept originating in the United States in the mid-1990s that highlights the importance of the natural environment in decisions about land use planning. In particular there is an emphasis on the "life support" functions provided by a network of natural ecosystems, with an...

 projects with direct water quality benefits. Capital costs include traditional infrastructure expenditures (such as pipes, pumps and treatment plants), as well as unconventional infrastructure costs (like land conservation, tree plantings, equipment purchases, planning and design, environmental cleanups and even the development and initial delivery of environmental education programs). One of the few things the CWSRF cannot fund is the operation and maintenance costs of a project.

Carbon sequestration

The CWSRF can finance carbon sequestration through a variety of methods, including urban heat-island reduction, energy saving achievement, and habitat preservation. Aquatic environments, green spaces, and geologic carbon storage are efficient carbon sinks that can be utilized with CWSRF loans.
  • Wetlands restoration
  • Land conservation (purchase of easement
    Easement
    An easement is a certain right to use the real property of another without possessing it.Easements are helpful for providing pathways across two or more pieces of property or allowing an individual to fish in a privately owned pond...

    s and preserved green spaces
    Open space reserve
    Open space reserve, open space preserve, and open space reservation, are planning and conservation ethics terms used to describe areas of protected or conserved land or water on which development is indefinitely set aside...

    )
  • Tree plantings (reforestation
    Reforestation
    Reforestation is the natural or intentional restocking of existing forests and woodlands that have been depleted, usually through deforestation....

    , green roof
    Green roof
    A green roof is a roof of a building that is partially or completely covered with vegetation and a growing medium, planted over a waterproofing membrane. It may also include additional layers such as a root barrier and drainage and irrigation systems...

    s, tree boxes, parks, vegetated swale
    Bioswale
    Bioswales are landscape elements designed to remove silt and pollution from surface runoff water. They consist of a swaled drainage course with gently sloped sides and filled with vegetation, compost and/or riprap...

    s and median strips)
  • CO2 scrubber
    Scrubber
    Scrubber systems are a diverse group of air pollution control devices that can be used to remove some particulates and/or gases from industrial exhaust streams. Traditionally, the term "scrubber" has referred to pollution control devices that use liquid to wash unwanted pollutants from a gas stream...

    s on power plants
    Power station
    A power station is an industrial facility for the generation of electric energy....

     that provide energy to POTWs.

Methane capture

  • Publicly owned equipment for the capture of methane
    Methane
    Methane is a chemical compound with the chemical formula . It is the simplest alkane, the principal component of natural gas, and probably the most abundant organic compound on earth. The relative abundance of methane makes it an attractive fuel...

     emitted from an anaerobic
    Anaerobic digestion
    Anaerobic digestion is a series of processes in which microorganisms break down biodegradable material in the absence of oxygen. It is used for industrial or domestic purposes to manage waste and/or to release energy....

     municipal wastewater treatment system and conversion to energy is eligible for CWSRF funding.
  • Methane capture equipment can be privately owned if the project is located within a designated National Estuary
    National Estuary Program
    In the United States, the National Estuary Program was created by the 1987 amendments to the Clean Water Act to provide grants to states where governors identify nationally significant estuaries that are threatened by pollution, land development, or overuse...

    .
  • Public or privately owned equipment to capture methane emitted from manure containing ponds on animal feeding operations
    Factory farming
    Factory farming is a term referring to the process of raising livestock in confinement at high stocking density, where a farm operates as a factory — a practice typical in industrial farming by agribusinesses. The main products of this industry are meat, milk and eggs for human consumption...

     (AFOs), not regulated as concentrated animal feeding operations (CAFOs), and convert the methane to energy is eligible for CWSRF funding.
  • This equipment can be located at CAFOs in designated National Estuaries.

Water conservation and reuse

Eligible water conservation and reuse projects include:
  • Efficient plumbing fixture retrofits or replacement
  • Grey water recycling in public buildings
  • Efficient landscape irrigation
    Irrigation
    Irrigation may be defined as the science of artificial application of water to the land or soil. It is used to assist in the growing of agricultural crops, maintenance of landscapes, and revegetation of disturbed soils in dry areas and during periods of inadequate rainfall...

     equipment for public facilities
  • Publicly owned stormwater treatment and reuse
  • Publicly owned wastewater distribution lines to support effluent reuse/recycling uses, including piping the effluent to the property line of a privately owned effluent consumer, as well as publicly owned equipment to reuse effluent
  • Water quality trading for construction projects that generate water pollution control credits or capital projects that may be located offsite the POTW
  • Replacing inefficient irrigation practices with efficient drip irrigation
    Drip irrigation
    Drip irrigation, also known as trickle irrigation or microirrigation or localized irrigation , is an irrigation method which saves water and fertilizer by allowing water to drip slowly to the roots of plants, either onto the soil surface or directly onto the root zone, through a network of valves,...


Public-private partnerships

Public-private partnerships, or "P3s," are one investment technique by which municipalities can finance the upgrade, expansion, repair, or implementation of new technology for wastewater infrastructure. The CWSRF, because of its unique financing authorities, is authorized to oversee (in concert with the EPA Assistant Administrator for Water), provide technical assistance, and guidance for municipalities that choose to investigate P3s for the provision of their wastewater services.

A P3, as defined by the Environmental Financial Advisory Board, is a contractual, institutional, or other relationship between government and a private sector entity that results in sharing of duties, risks, and rewards of providing a service in which the government has an interest, recognizing that the government retains ultimate responsibility for insuring that social needs and objectives are met.

P3s are sought by states and local governments as a way to reduce the financial burden of water pollution and infrastructure needs. It has been estimated that, of the costly capital improvements, upgrades, expansions, and new compliance requirements imposed on water and wastewater utilities, local governments bear 95% of the costs. Among local government expenditures, only education is higher.

See also

  • Drinking Water State Revolving Fund
  • Sewerage
    Sanitary sewer
    A sanitary sewer is a separate underground carriage system specifically for transporting sewage from houses and commercial buildings to treatment or disposal. Sanitary sewers serving industrial areas also carry industrial wastewater...

  • Water supply and sanitation in the United States
    Water supply and sanitation in the United States
    Issues that affect water supply and sanitation in the United States include water scarcity, pollution, a backlog of investment, concerns about the affordability of water for the poorest, and a rapidly retiring workforce...

  • Water Pollution
    Water pollution
    Water pollution is the contamination of water bodies . Water pollution occurs when pollutants are discharged directly or indirectly into water bodies without adequate treatment to remove harmful compounds....


Further reading


External links



51 CWSRF programs:


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