United States Office of Water EPA 816-F-00-028

Environmental Protection (4606) November 2000

Agency

The Drinking Water State Revolving Fund:

Protecting the Public through Drinking

Water Infrastructure Improvements

The Challenge

The Nation’s 54,000 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 254 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.

The Drinking Water State Revolving Fund

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. Recognizing this fact, Congress established

the Drinking Water State Revolving Fund (DWSRF)

as part of the 1996 Safe Drinking Water Act (SDWA)

Amendments. The goal of the program is to provide

States with a financing mechanism for ensuring safe

drinking water to the public. States can use federal

capitalization grant money awarded to them to set up

an infrastructure funding account from which

assistance is made available to public water systems. 

Loans made under the program can have interest

rates between 0 percent and market rate and

repayment terms of up to 20 years. Loan repayments

to the State will provide a continuing source of

infrastructure financing into the next century. 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.

Available Funding

Congress provided $1.275 billion for the DWSRF 

program in fiscal year 1997. The amount of funding

each State was eligible to receive in 1997 was based

on a formula used to award State program grants

under the Public Water System Supervision program. 

Congress has provided an additional $3.145 billion

for the DWSRF program for fiscal years 1998 through

2001, including $825 million for fiscal year 2001. The

amount of funding each State is eligible to receive for

fiscal years 1998 through 2001 is based on the total

eligible need determined for each State by the

Drinking Water Infrastructure Needs Survey which

the Environmental Protection Agency (EPA) released

in January 1997.

Eligible Systems and Projects

Both publicly and privately owned community water

systems and nonprofit 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. 

Determining Funding Priority

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. 

Public Involvement

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. 
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.

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 Statedefined 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. 

Preventing 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 a

portion of their capitalization grant 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.

Set-Asides for Other Program Management

Purposes

States have the flexibility to take set-asides for

several different activities that can help develop their

drinking water programs. A State can use up to 10%

of its capitalization grant (with a 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. 

More Information

For more information about the Drinking Water State

Revolving Fund, consult the informational page for

the program on the EPA Office of Ground Water and

Drinking Water (OGWDW) Internet website at

http://www.epa.gov/safewater/dwsrf.html. 

Information about the DWSRF and other drinking

water issues is also available from the EPA Safe

Drinking Water Hotline at 1-800-426-4791 or via email

at hotline-SDWA@epa.gov.

To get the contact for the DWSRF Manager in a

specific State, consult the contact list on the

OGWDW website or contact the Association of State

Drinking Water Administrators at (202) 293-7655

(http://www.asdwa.org). 

The EPA DWSRF program is administered by the

Infrastructure Branch, Office of Ground Water and

Drinking Water, U.S. Environmental Protection

Agency, 1200 Pennsylvania Avenue, NW (Mailcode

4606), Washington, DC 20460, Phone: (202) 260-5526

Fax: (202) 401-2345.