United States Office of Water EPA 816-F-00-011

Environmental Protection (4606) March 2000

Agency

Printed on Recycled Paper

Fact Sheet

Using DWSRF Set-Aside Funds

for Capacity Development

WHAT IS THE DWSRF?

The Drinking Water State Revolving Fund (DWSRF) program was established by the Safe

Drinking Water Act (SDWA) Amendments of 1996. The program authorizes grants to States

to capitalize revolving loan funds. States use funds to provide loan assistance to eligible

public water systems for infrastructure improvements needed to continue to ensure safe

drinking water. The program also emphasizes the prevention of drinking water

contamination by allowing States to reserve a portion of their grants to fund activities that

encourage enhanced water system management and source water protection.

WHAT IS CAPACITY DEVELOPMENT?

Capacity development refers to a State’s efforts to help public water systems improve their

technical, managerial, and financial capabilities so that they can provide safe drinking water

consistently, reliably, and cost effectively. By enhancing system operations and ensuring the

technical, financial, and managerial capacity of public water systems, States can promote

greater long-term compliance with national primary drinking water regulations.

In order to encourage States to establish and maintain capacity development programs,

§1420(a) of the SDWA requires States to obtain the authority or other means to ensure that

all new community and nontransient non-community water systems that initiate operations

after October 1, 1999 demonstrate adequate capacity prior to commencing operations. Any

State failing to obtain and implement this authority will be eligible for only 80 percent of its

total DWSRF allotment. Furthermore, §1420(c) of the SDWA requires each State to develop

and implement a strategy to help public water systems acquire and maintain capacity or be

subjected to a withholding of a portion of the State’s DWSRF program allotment. Ten

percent of a State’s allotment may be withheld in fiscal year 2001, 15 percent in fiscal year

2002, and 20 percent in each subsequent fiscal year.

A State can use a portion of its DWSRF capitalization grant to fund capacity development

programs. Up to 10 percent of a State’s allotment can be used to develop and implement a

capacity development strategy under the State program management set-aside [§1452(g)(2)]. 

A State can also use up to 10 percent of its capitalization grant under the local assistance and

other State programs set-aside [§1452(k)] to provide technical and financial assistance to

public water systems for capacity development.
WHAT ACTIVITIES ARE ELIGIBLE FOR SET-ASIDE FUNDING?

Up to 10 percent of a State’s allotment can be used for State program management [§1452(g)(2)]. Funds can be used to

develop and implement a capacity development strategy. Potential capacity development activities include, but are not

limited to:

• Hiring and training State capacity development staff.

• Preparing guidance documents, work plans, standard operating procedures, and long-term strategies.

• Revising approval processes, sanitary surveys, and other regulatory mechanisms to better address concerns.

• Targeting efforts by identifying water systems that would most benefit from collaboration or regionalization.

• Preparing contracts and using consultants to assist States in capacity development efforts.

• Obtaining stakeholder input through workshops, advisory panels, or other public participation mechanisms on

how to best develop a capacity development program.

• Conducting outreach programs to educate water suppliers and the general public on capacity development issues.

• Developing evaluation processes to assess the success of capacity development efforts.

Up to 15 percent of a State’s capitalization grant can be used for local assistance and other State programs [§1452(k)]. 

Up to 10 percent of these funds may be used to provide assistance, including technical and financial assistance, to any

public water system as part of a capacity development strategy. Potential activities include, but are not limited to:

• Providing incentive grants to plan for public water system regionalization and consolidation.

• Establishing a “buddy system” and other cooperative management programs to pair public water systems in need

of help with water systems that can provide technical advice and assistance.

• Contracting with third-party providers for technical, financial, and managerial assistance to public water systems.

• Establishing programs to promote the use of new and innovative technologies, particularly easily operated

treatment technologies for small systems.

• Contracting with third-party providers for training courses to keep water system personnel abreast of new issues.

HOW ARE STATES USING THESE SET-ASIDES?

• Massachusetts used funds to establish an ad hoc task force of interested stakeholders which is responsible for

drafting an implementation plan and addressing capacity development program development issues.

• Believing that a regional approach is better suited to dealing with small water systems, Utah is using funds to

develop a comprehensive work plan based on county-wide regional planning that will give small water systems a

chance to prepare facility and long-range financial plans. Regional administrators will be appointed and will be

responsible for their region’s capacity development program.

• Pennsylvania is using funds to increase its participation in the National Partnership for Safe Water, a voluntary

effort to encourage public water systems to survey their infrastructure, operating and maintenance procedures,

and management practices. Such national partnerships can be an efficient way to communicate and coordinate

with other members of the drinking water community.

• Examining trends in compliance data can reveal the underlying causes of non-compliance and allow assistance to

be targeted at an individual system’s problems. North Carolina is using funds to compile and analyze current

and historical data on compliance by community and non-community water systems.

HOW CAN I OBTAIN MORE INFORMATION?

Information about the DWSRF and capacity development programs are available on the

EPA Office of Ground Water and Drinking Water (OGWDW) homepage

[www.epa.gov/safewater]. For questions concerning a specific State, a list of State or

EPA Regional DWSRF coordinators can be found on OGWDW’s webpage. You can

also call the Safe Drinking Water Hotline at 1-800-426-4791.