United States

Environmental Protection

Agency

Office of Water EPA-832-N-00-001

Spring 2000

A NEWSLETTER FOR THE CLEAN WATER AND DRINKING WATER SRF PROGRAMS

ON THE NATIONAL SCENE

The Congressional Outlook On Wastewater Infrastructure Issues

Carrie Jelsma, Staff, Subcommittee on Water Resources

and Environment

What’s happening on “The Hill” regarding wastewater infrastructure and wet weather flows?

In the 106th Congress, both the House of Representatives and the Senate are considering

how to address the rising costs of making sure the U.S. has adequate wastewater infrastructure, and to control wet weather problems. 

The Price Tag Is Going Up 

Last year the American Metropolitan and Sewerage Authority and the Water Environment

Federation published the “Cost of Clean” report that estimated more than $330 billion is

needed over the next 20 years to repair and improve the nation’s wastewater infrastructure.

This is more than double EPA’s 1996 estimate that approximately $140 billion would be

needed over the next 20 years. EPA is also revising its 1996 Clean Water Needs survey with

its “Needs Gap” analysis. While not yet final, it indicates costs over the next 20 years could

be more than $300 billion. Even though EPA’s “Needs Gap” analysis and the “Cost of Clean”

report employ different methodologies, the point is clear—the price tag is going up for making sure that our national wastewater infrastructure will help provide clean and safe water.

Rough estimates reveal that the “gap” between how much is currently being invested in

wastewater infrastructure compared to how much will be needed is about $5-6 billion a

year. This is derived by subtracting the estimated $10-11 billion a year in combined federal, state and local investment from the estimated $16 billion a year that will be needed over

the next 20 years. 

So, the questions Congress, EPA and other stakeholders are trying to answer include

determining how much more investment is needed, who is going to pay for it, and what are

the best types of financing, such as loans or grants, among other options. 

Proposals To Help Fill “The Gap”

Both the House and Senate have held several hearings and will continue to consider, and

possibly act on, various proposals to address the wastewater infrastructure needs “gap” and 

CONTINUED ON PAGE 2
2 NATIONAL SCENE from page 1

other wet weather flows issues. While many proposals have

been introduced addressing these issues, the following are

some of the highlights. 

The President’s FY 2001 Budget Request

On February 7, 2000 the President transmitted the FY 2001

budget proposal to Congress. Similar to FY 2000, EPA

requests $800 million to capitalize the Clean Water State

Revolving Fund (CWSRF) for FY 2001, and recommends a

total of $4 billion be provided through FY 2005. This request

is in accordance with the Administration’s goal to provide

enough capitalization for the CWSRF to revolve at approximately $2 billion a year. 

For the past several years, Congress has appropriated

more than EPA has requested for the CWSRF. For example, in

FY 2000 Congress appropriated $550 million more (+40%)

than requested for a total of $1.35 billion. In fact, many in

Congress have expressed concern that EPA has not requested

higher amounts. In response, EPA has stated an interest in

working with Congress and others to reevaluate what an

appropriate federal contribution would be in light of the rising

wastewater infrastructure needs.

In addition, the President has reproposed “Better

America Bonds,” that would allow state, local and tribal governments to issue $10.75 billion in bonding authority.

Communities would have access to zero-interest financing for

eligible projects because investors who buy the 15-year bonds

would receive tax credits in lieu of interest payments. Eligible

0.5

1.6

4.0

6.4

8.4

11.4

14.4

17.1

19.9

23.1

26.1

1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999

.5

1.1

2.5

2.3

2.0

3.1

3.0

2.7

2.8

3.2

3.0

Billions of Dollars

CWSRF Assistance Provided to Projects
To increase state flexibility in addressing water quality

problems, H.R. 2720 would expand the types of projects eligible for loans to include activities of which the principal benefit is improved or protected water quality. Examples include

restoring or protecting riparian areas, water use efficiency

and pollution prevention measures, among others. H.R. 2720

also would require EPA to provide guidance for and technical

assistance to small systems. For disadvantaged communities,

the proposal would extend loan repayment periods and provide principal write down. So far, 57 members have sponsored this bill.

Last October, Sen. Voinovich (R-OH) introduced a similar CWSRF reauthorization bill, S. 1699, which has the same

title as the H.R. 2720. Both the House and Senate have held

hearings on their CWSRF reauthorization proposals. 

The Combined Sewer Overflow Control

And Partnership Act

Last February, Rep. Barcia (D-MI) and others introduced H.R.

828, “The Combined Sewer Overflow Control and Partnership

Act of 1999.” This bill would authorize $2.25 billion of

grants for planning, design, and construction of CSO controls

(and storm sewer overflow controls where appropriate). It

would also codify EPA’s CSO control policy, require that regulatory agencies for CSO communities review water quality

standards and designated uses before developing long-term

CSO control strategies, and provide specified timeframes to

complete CSO control projects. H.R. 828 has 48 sponsors.

Last April, Sen. Smith (R-NH) and others introduced a companion bill, S. 914, that has 16 sponsors, and the same title as

H.R. 828. Both the House and Senate have held hearings on

these proposals. 

The Urban Wet Weather Priorities Act of 2000

This February, Reps. LaTourette (R-OH), and Pascrell (D-NJ)

introduced H.R. 3570, the “Urban Wet Weather Priorities Act

of 2000.” This bill seeks to create national consistency in the

regulatory oversight of urban wet weather flows and would

3

projects include those that protect water quality, preserve and

enhance green space, and clean up brownfields. 

The House and Senate have introduced bills to implement last year’s similar bond proposal, H.R. 2446, the “Better

America Bonds Act,” and S. 1558, the “Community Open

Space Bonds Act.” H.R. 2446 has 124 sponsors and S. 1558

has six. Last year, questions arose regarding cost estimates,

agency accountability and program implementation that the

Administration intends to clarify with its FY 2001 bond proposal. Recent press reports have had mixed analysis regarding how much support this year’s bond proposal will receive. 

The Clean Water Infrastructure Financing Act of 1999

In August 1999, Reps. Kelly (R-NY), and Tauscher (D-CA)

introduced H.R. 2720, the “Clean Water Infrastructure

Financing Act of 1999” to reauthorize the CWSRF. H.R. 2720

would authorize a total of $15 billion in additional federal

capitalization for FYs 2000-2004. The proposed authorization would increase the average annual revolving loan levels

above the Administration’s goal of having the CWSRF revolve

at approximately $2 billion a year.

CONTINUED ON PAGE 4
4

NATIONAL SCENE from page 3

address three primary areas of national concern–CSOs, SSOs,

and urban storm water problems. The proposed bill also

would create watershed management demonstration projects,

determine cost-effective wet weather management and control

methods, and authorize over $3 billion in grants.

Other Options

Another idea, in early stages of discussion, is to create some

sort of clean water trust fund. For example, the Water

Infrastructure Network (WIN) is working toward finding a

permanent funding source, such as a trust fund, for waterrelated infrastructure needs including clean water, drinking

water and nonpoint source pollution. WIN plans to release a

report this March on potential funding sources, that also will

highlight the federal role in funding infrastructure projects.

WIN consists of about 40 local and state water and waste

water, environmental and natural resources, agriculture,

labor, engineering, and construction interests. 

Carrie Jelsma is a Professional Staff Member on the House

Transportation and Infrastructure Committee, Water

Resources and Environment Subcommittee. Her statements do not reflect the positions of Members of Congress.

DWSRF Implementation

States continue to make progress in implementing the DWSRF

program. As of the end of 1999, $2.3 billion of the $3.6 billion appropriated for the program has been awarded. States

have closed more than 950 loans - a significant increase from

the 350 reported at the end of 1998. The total amount of

assistance provided nation-wide exceeds $1.9 billion and several states, including New York, Kansas, and Colorado, have

significantly increased the amount of funds available for providing assistance by leveraging their programs. States continue to focus attention on small systems which frequently have

difficulty gaining access to other sources of capital financing.

Seventy-five percent of the loan agreements and 41 percent of

loan funding have been provided to systems serving fewer than

10,000. Approximately 21 percent of the federal funds allocated for infrastructure assistance had been disbursed to

recipients of assistance as of the end of September 1999.

States have reserved almost $400 million to conduct setaside activities. The percentage of reserved set-asides

decreased from the FY 1997 appropriation, primarily due to

the fact that all states took advantage of a one-time only setaside for source water delineations from FY 1997 funds. An

average of 14 percent was reserved from the 51 FY 1998

grants and the 33 FY 1999 grants that had been awarded as of

the end of 1999. More than $90 million has been reserved 

to administer the DWSRF program, $37 million to provide

technical assistance to small systems, $87 million for state

program management activities, and $182 million for local

assistance which includes funding for source water delineations and loans for protection measures. Approximately 15

percent of the federal funds allocated for set-asides had been

expended as of the end of September 1999.

Many states have reported that they face challenges in

implementing their loan funds and set-aside activities due to

state-imposed restrictions on hiring. Additionally, those states

that have been able to hire have found it difficult to find qualified applicants in a tight labor market. It is hoped that these

pressures will ease in the future, because states will face a
challenge in the next several years as they work to implement

new drinking water regulations. 

Addressing Nonpoint Source

Pollution with the CWSRF

In recent years, state CWSRF programs have been increasingly

effective in addressing nonpoint source pollution. In 1999,

36 percent of the program’s assistance agreements were for

nonpoint source projects–up from 11 percent in 1995. The

CWSRF seems to be addressing nonpoint source pollution in

new ways every day. The following paragraphs highlight several recent developments that will help state CWSRF programs

in these efforts.

Upgraded nonpoint source management programs.

Twenty-one states have upgraded their nonpoint source management programs. Upgraded programs reflect nine key elements identified in the May 1996 guidance, “Nonpoint Source

Program and Grants Guidance for Fiscal Years 1997 and

Future Years” (found at www.epa.gov/owow/nps/guide.html).

These elements include an identification of waters and watersheds impaired or threatened by nonpoint source pollution, a

process to progressively address these waters and flexible,

targeted, iterative approaches to achieve and maintain beneficial uses of water as expeditiously as possible. EPA expects

that almost all states will have upgraded programs in fiscal

year 2000. These program upgrades should make it easier

for state CWSRF programs to identify priority nonpoint source

pollution problems and projects that will address them.

Nonpoint source needs in the

2000 Clean Water Needs Survey.

The 1996 Clean Water Needs Survey assessed nonpoint source

needs, but few states documented these needs systematically.

As a result, project-level nonpoint source needs are unavailable and modeled totals under-represent the nation’s true

needs. Although EPA does not expect the 2000 Clean Water

Needs Survey to document all nonpoint source needs, it will

try to improve this documentation significantly. The survey

will identify and locate specific sources of nonpoint source

pollution, identify projects that would address these sources,

and estimate costs for needed projects. This effort will enable

state CWSRF programs to identify specific sources of nonpoint

source pollution and projects that would address them.

Clarification of CWSRF policy.

EPA recently issued a policy memorandum clarifying the eligibility of certain types of projects for CWSRF funding. Several

states have inquired about the eligibility of CWSRF loans to

private entities for nonpoint source projects with elements

that resemble point source “treatment works.” Treatment

works, as defined in section 212 of the Clean Water Act, are

ineligible for CWSRF funding if they are privately-owned. The

following types of projects may have elements that resemble

treatment works: septic tank replacement, stormwater containment, and some agricultural best management practices

(e.g., lagoon systems). This recent policy states that a project

is eligible for CWSRF funding as a section 319 or section 320

project unless it has a required NPDES permit or is determined ineligible by statute.

5
6

STATE ACTIVITIES AND TRENDS

State Focus: Funding Combined

Sewer Overflow Projects with

Michigan’s CWSRF Program

Tom Kamppinen, Michigan Department

of Environmental Quality

In the mid 1980s, Michigan began to address wet weather discharges from combined sewer systems throughout the state.

A combined sewer system is a sewer system that was designed

to carry both sanitary waste and stormwater runoff. These

systems were designed in the late 1800s and early 1900s.

This effort was the result of several factors including the

Remedial Action Plan for water quality problems in the Rouge

River in southeast Michigan and public comments received

during the issuance process of the National Pollutant

Discharge Elimination System (NPDES) permits for the city of

Grand Rapids. 

To address the combined sewer overflow (CSO) discharges, Michigan developed a strategy that established the

goals of meeting water quality standards, protecting designated uses, and achieving the Clean Water Act objectives of providing fishable, swimmable water. The CSO strategy consisted

of three phases, which were incorporated into the NPDES permits as follows. First, the permittees were required to optimize operation of the collection systems to minimize wet

weather discharges and eliminate dry weather discharges of

sewage. Second, the permittees were required to develop and

implement plans to provide adequate treatment to protect the

public and eliminate raw sewage discharges. Third, the permittees were required to develop and implement long-term

plans to provide adequate treatment of CSO discharges to

comply with water quality standards. Communities were provided default design criteria with the option to demonstrate

that a lesser technology would protect public health, eliminate

raw sewage discharges, and meet water quality standards,

during a design storm event.

During the public noticing of the NPDES permits in the

Rouge Basin, communities challenged the default criteria for

adequate treatment. As a result, agreement was reached with

the twelve communities and Wayne County on a demonstration

study where various facilities would use different design criteria and evaluate the results. Other features were also

designed into some basins providing shunts to direct flows

greater than the design storm to the receiving stream, allowing the basin to capture first flush and fully treat smaller

storms. In addition, Wayne County was successful in receiving

a series of federal grants to evaluate impacts of wet weather

flows, study nonpoint source impacts, construct CSO retention

basins of different design, and separate sewers. This effort is

commonly known as the Rouge River Wet Weather

Demonstration Project. The basins are now complete and

performance evaluations are ongoing. Based on the results,

the communities and Wayne County will proceed with Phase II

and Phase III of this CSO program for the remaining outfalls.

Initially, the Department of Environmental Quality identified 70 communities as having CSOs. All CSO facilities now

have NPDES permits issued requiring communities to develop

long-term CSO control plans and implementation schedules.

During this effort, the CWSRF has played a major role in

assisting municipalities in meeting their permit requirements.

Since 1989, a total of $1.076 billion in assistance has been

provided to 165 projects. We have funded 84 individual CSO

projects (46 communities) totaling $492 million. This

equates to 46 percent of Michigan’s CWSRF money going to

correct CSO discharges (see Figure 1).
7

The types of projects funded range from a small community of 700 people costing $955,000, to the cities of Grand

Rapids for $65 million, Lansing for $65 million, and Saginaw

for $75 million. Grand Rapids, Michigan’s second largest city,

has reduced the discharges of combined sewage by 90 percent. The project included a retention basin serving the east

side of the city and separation of combined sewers on the

west. In addition to the CWSRF loans, the city received a 55

percent construction grant for $18.6 million in 1990. This

effort has substantially reduced the public health advisories in

the Grand River below Grand Rapids. 

The city of Lansing (population 125,000) is also on the

Grand River, and is addressing its $175 million CSO program

over a period of 30 years by constructing new sanitary sewers.

The long-term period reflects the difficult task of large cities

separating sewers due to construction scheduling and community-wide construction impacts.

The city of Saginaw, which will complete construction on

its last loan in 2000, will achieve compliance with its NPDES

permit and the State of Michigan and EPA CSO policy.

Saginaw received its first loan in 1991 and is utilizing a combination of separation, rehabilitation of sewers for

inflow/infiltration removal, and retention basins.

The alternatives chosen by communities reflect local

conditions and are engineered to meet a community’s needs.

In small communities, separation is the most common

approach. When separation is chosen, new sanitary sewers

are the most effective choice as it avoids the need for additional expense of rehabilitation of the combined sewers or the

need for equalization basins.

There is much more to accomplish. The city of Detroit

has submitted its long-range CSO Plan estimated at $1 billion.

The first segment of this plan was funded in 1999 ($40.66 million). The remaining segments are scheduled in the city’s

NPDES permit to be under construction by 2005. The size of

this project exceeds the capacity of the CWSRF to provide the

desired level of assistance. Other significant projects include

the Twelve Towns drainage project in Oakland County for $140

million, Port Huron for $60 million, Bay City for $30 million,

and other smaller but still important water quality projects.

Here are some interesting observations in Michigan’s program. In fiscal year 1999, the CWSRF funded $245 million in

projects. Had grants been used rather than revolving funds, the

state could have provided only $59 million in assistance. In fiscal year 2000, Michigan has $350 million of projects seeking

assistance with only $210 million available. This amount

reflects 25 percent of the total national appropriation for fiscal

year 2000. The demand for next year looks even greater.

While Michigan has not funded any nonpoint source projects in the CWSRF, it can be readily seen that the larger environmental bang for the buck is assisting communities in correcting the discharge of raw sanitary sewage from their combined sewers. This does not mean Michigan has done little in

addressing nonpoint pollution. On the contrary, in 1998,

Michigan voters passed an environmental bond program that

provides assistance to brownfield cleanups and $50 million

for nonpoint source programs.

While Michigan may be unique in its situation with CSOs,

it does point out the ability of the CWSRF to meet each state’s 

V. Combined

Sewer Overflow

46%

I. Secondary

Treatment

23%

IVB. New

Interceptor

Sewers

23%

IIIB. Major

Rehabilitation

4%

IIIA. Minor

Rehabilitation

2%

IVA. New

Collection Sewers

8%

II. Advanced

Treatment

1%

FIGURE 1

Michigan CWSRF Funding by Category

(FY 1988–present)

CONTINUED ON PAGE 8
8

STATE ACTIVITIES from page 7

water quality issues; something the construction grants program or similar proposed earmarked programs cannot do.

The CWSRF program has resulted in projects going to construction in half the time, 60 percent coming in at or under

budget, and meeting performance requirements at a consistently high level. In Michigan, the CWSRF program is administered by the Department of Environmental Quality,

Environmental Assistance Division, Municipal Facilities

Section, along with the Michigan Municipal Bond Authority.

What’s ahead? After another $1-2 billion in CSO needs,

we will be facing the need to upgrade and expand facilities

previously funded in the grant program that have reached

their useful life. The need for the revolving fund is there.

Depending on new initiatives such as TMDLs, etc. the question

is, at what level?

For more information, contact Tom Kamppinen at

(517) 373-4718.

State Focus: Texas and Capacity Development

An interview with Carol Limaye, Texas Natural

Resources and Conservation Commission 

It used to be called viability - the ability of a water system to

maintain operations and provide customers with safe drinking

water. The 1996 SDWA Amendments introduced a new term -

capacity - to refer to the technical, financial and managerial

ability of a system to operate properly. Two provisions were

included in the law - the first requires states to ensure that all

new systems have adequate capacity, and the second requires

states to develop a strategy to assist existing water systems in

acquiring and maintaining capacity. These capacity development provisions are closely linked to the DWSRF program -

states are subject to loss of DWSRF grant funds if they fail to

implement them. States are also required to assess the

capacity of DWSRF assistance applicants before providing

funding. Several of the set-asides provide funding for developing and implementing capacity development programs and

providing direct assistance to water systems lacking capacity.

While some states were uncertain about how this new focus

on capacity would impact their state programs, others saw the

new provisions as a validation and natural extension of the

work they had already been doing and were excited about the

opportunity to have funding for their programs. Although

capacity-related work has been largely restricted to state

drinking water programs, finance agencies which provide

assistance to water suppliers are now seeing the benefits to a

comprehensive approach in working with water systems. After

all, ensuring repayment of loans is better assured if the lender

can be certain that the system is being properly maintained

and is capable of maintaining a revenue stream. One state

that has taken the lead with respect to capacity development is

Texas. The Texas Natural Resources and Conservation

Commission (TNRCC) oversees the drinking water program in

the state and works with the Texas Water Development Board

(TWDB) to implement the DWSRF program. We asked Carol

Limaye from TNRCC to provide some information on their

capacity development program.

Q: Did Texas have a “capacity development” program before the 1996 SDWA Amendments?

A: Yes. Although the primacy program and the utility regulatory program were in separate state agencies before 1992,

staff from the two agencies would often work together in an

attempt to move water systems towards compliance. When the
9

two programs were merged into the same agency in 1992, there

was more opportunity to see all aspects of the financial, managerial, and technical (FMT) resources of water systems. A

Viability Task Force was formed in 1994 which included staff

from the drinking water and utility regulation programs (including rate change approvals, service area delineations, drinking

water monitoring and enforcement). The Task Force laid the

groundwork for TNRCC’s capacity development program.

Q: Is the capacity development program directed

towards a certain class of systems? If so, how have

you found working with them?

A: The program screens all sizes and types of new public

water systems. New systems must attempt to obtain service

from neighboring systems before applying for approval of

engineering plans and specifications. The proposed new system must also submit a business plan. We have found that

entrepreneurs proposing water systems to support land development often need basic information on financial concepts

and technical requirements. 

For existing systems, our on-site assistance program is

targeted towards systems which serve under 15,000 in population and have health and compliance problems. Although

the assessment and assistance program is voluntary, less than

5 percent have declined to be assessed. Some small systems

expressed concern that they do not have the staff time or

financial resources to engage in budgeting and business planning. The systems which have participated in planning have

found the process to be beneficial.

Q: Can you give an example of a specific activity

being conducted by TNRCC to support the drinking

water program?

A: Long before the implementation of the capacity development strategies, TNRCC was providing technical assistance

and conducting programs for comprehensive performance

evaluations (CPE), operator certification, source water protection, and drinking water monitoring. Those programs are

now coordinated with the capacity development program.

The new activity most supportive of the SDWA capacity

development requirements is the assessment and review of the

FMT capabilities of new water systems. The engineering plans

and specifications of certain systems will not be approved

until they have submitted an acceptable business plan. TNRCC

has the authority to require existing systems to submit a business plan if they have a history of non-compliance or a pending enforcement action. Systems which require Certificates of

Convenience and Necessity to define their service areas must

demonstrate that they have FMT capability. TNRCC uses

agency staff and contractors to assess the FMT capabilities of

existing systems and provide assistance. These new activities

address financial and managerial issues which have not traditionally been addressed by technical assistance and reviews.

Q: How have you worked with the TWDB to

incorporate the concept of capacity into their

application review?

A: If a system on the Intended Use Plan is invited to apply for

a DWSRF loan, the TNRCC prepares a capacity assessment

report for the TWDB. The capacity assessment has two phases: On-Site and Office Review. The On-Site Assessment uses a

standard form to assess the FMT aspects of the system. The

form indicates the “non-negotiable” strengths a system must

have to demonstrate FMT capability (budget, reports to the

governing board, periodic rate review, emergency planning

etc.). Other strengths may not be essential for FMT capability,

but are considered important and their presence or absence is

noted on the report. The office review checks for compliance

with drinking water standards and other requirements of the

agency. TNRCC then certifies to the TWDB whether or not the

system has the FMT capability to comply with drinking water

regulations. TWDB and TNRCC staff have worked together to

implement and refine this process.

CONTINUED ON PAGE 10
10

STATE ACTIVITIES from page 9

Q: Do you have examples of where the capacity

assessment has identified issues with potential

DWSRF assistance recipients? What plan of action

resulted from the findings?

A: Since the program began, several DWSRF systems have

been found not to have sufficient FMT capacity even with the

corrections to be made by the DWSRF project. Those systems

are following a Corrective Action Plan to address the deficiencies before proceeding with a DWSRF loan. One system’s plan

includes hiring a certified operator, conducting a rate study,

establishing billing, collection and service termination procedures and establishing a preventative maintenance program.

Another system’s plan calls for operator training schedules,

emergency planning and conducting a rate study. TWDB can

require these items to be resolved before funds are released

to the DWSRF applicant. 

Q: Has set-aside funding helped in implementing

your program? How are you using the funds now or

planning to use them in the future?

A: The set-aside funds have been used to contract with other

organizations to provide on-site assistance and other services

which include the following:

• Assess the FMT capabilities of small water systems with

health and compliance problems.

• Develop and monitor the implementation of Corrective

Action Plans based on capacity assessments.

• Assess and monitor DWSRF applicants and assist with

DWSRF applications, if necessary. 

• Assess the potential for consolidating or restructuring

selected systems.

• Assist water systems in establishing Source Water

Protection Programs. 

• Conduct CPEs for Surface Water Plants and improve training

for their operators.

• Develop an integrated data base for drinking water monitoring, economic regulation and district oversight.

• Conduct research on capacity enhancements and

impairments.

TNRCC has also used set-aside funds to support some

agency positions and acquire additional computer hardware.

Although TNRCC has used less than 10 percent of the setasides available, the set-asides have provided funding for the

state to develop its own capacity in addressing the FMT problems faced by small water systems.

Q: Are there any other cross-program/agency connections that you’re trying to make to spread the

concept of capacity development to other parties?

A: Yes. Within the agency, the capacity development program

staff has worked with the 16 TNRCC Regional Offices to coordinate activities and on-site visits. Staff is also presenting information to the Local Government Assistance Team of the TNRCC. 

TNRCC is interested in working with all funding agencies.

Recently, the Texas Department of Housing and Community

Affairs (TDHCA) conducted joint training sessions with TNRCC

staff on water system FMT capability. TDHCA administers the

community block grant program for non-entitlement counties.

Both agencies recognize the need to coordinate activities so

that funding is targeted to viable systems or used to restructure non-viable systems.

Water associations and other stakeholders, known as the

Drinking Water Advisory Group, have been meeting with

TNRCC staff on a quarterly basis for updates and input into the

rule changes and initiatives of the TNRCC. The members of

that group are briefed on the status of the capacity development program and the DWSRF program at every meeting.

The state legislature has extended the requirement for FMT

assessments to applicants for other funding programs of the

TWDB. The principles of assessing and reporting on FMT capabilities have been applied to state loans and grants for water

and wastewater systems in economically distressed areas.

For more information about the Texas capacity development program, contact Carol Limaye at (512) 239-6120 or

Doug Holcomb at (512) 239-6960.
11

State Activities and Trends Briefs

Washington CWSRF Closes First Loans to Indian Tribe

The Swinomish Indian Tribal Community is the first Native

American community to receive financial assistance from the

CWSRF. The Swinomish community has received more than

$1.2 million from the State of Washington for wastewater and

stormwater treatment.

The Swinomish community has received two loans from

the State of Washington. In March 1998, the Swinomish

received a $961,000 loan to refinance existing debt. The

community used these funds to purchase capacity in an existing wastewater treatment plant in neighboring La Conner,

Washington. In August 1999, the Swinomish community

received a second loan for $240,000. The Swinomish are

using these funds to build a stormwater treatment facility on

tribal lands. The stormwater treatment facility will consist of

wet ponds, biofiltration swales, and constructed wetlands. 

Although these are the first examples of a tribal community receiving CWSRF funding, Native American tribes are eligible for funding in every state. Section 603(c) of the Clean

Water Act provides that CWSRF funds shall be used to provide

financial assistance to any municipality, intermunicipal, interstate, or state agency for construction of publicly-owned treatment works. Section 502(4) of the Act defines “municipality”

to include “an Indian Tribe or an authorized Indian Tribal

organization.”

For more information, contact Brian Howard at

(306) 407-6510.

Replacement Fund Innovation in Arizona DWSRF

A critical consideration for drinking water utilities is ensuring

that sufficient funds are available for the operation and maintenance (O&M) of water systems. Failure to maintain sufficient O&M reserves can affect the capacity of a water system

to provide safe drinking water to customers. Private water

companies often have a difficult time obtaining approval for

rate increases from public utility commissions that would

allow them to maintain reserves for O&M. 

In order to ensure that water systems maintain capacity

after receiving a DWSRF loan, the Arizona Water

Infrastructure Financing Authority (WIFA) requires that a system establish a replacement fund to replace and repair equipment that may fail during the course of the loan. WIFA

requires that loan recipients make monthly payments to a

debt service reserve that provides initial security on the loan.

Five years into the loan repayment period these payments are

instead deposited into a replacement fund. Payments to the

replacement fund continue until the loan is repaid. 

This mechanism benefits both the state and the water system. The replacement fund provides an additional level of

security on the loan for WIFA should the debt service reserve

prove inadequate to meet a default, and the water system is

able to establish a fund to provide replacement costs both

during and after the loan period–something that has been historically difficult for them to achieve. WIFA has worked with

the Arizona Corporation Commission, which regulates private

utilities in the state, to bring them on board–with the result

that the commission has approved rate increases for systems

receiving assistance to cover the debt service reserve and

replacement funds in addition to the funds needed to repay

principal and interest on the loan.

For more information, contact Greg Swartz at

(602) 230-9770.

CONTINUED ON PAGE 12
STATE ACTIVITIES from page 11

Project View

What do the SRF programs fund? How do they provide public

health and water quality benefits? In this space we are highlighting projects that are typical of those funded by the Clean

Water and Drinking Water SRF programs. This issue focuses

on projects that address compliance with the Clean Water Act

and the Safe Drinking Water Act.

CWSRF

Many CWSRF loans are used to replace aging sewage treatment works with compliance violations. The city of Hoover,

Alabama (population 40,000) has done so after receiving two

loans from the Alabama SRF program for more than $18 million. The city used these funds to design and construct a new

1.2 million gallon per day wastewater treatment plant and

holding pond to replace an older facility. The new plant has

enabled the city to eliminate sewer system overflows, bypasses

of untreated or partially treated wastes, and effluent violations. The plant discharges to the environmentally sensitive

Cahaba River, and for this reason the facility’s NPDES permit

has advanced limits. Most notably, the permit allows discharge to the river only between the months of December and

April, when streamflow is greatest. Also included in the project is an infiltration/inflow study to determine sources of

stormwater intrusion into the sanitary sewer collection system, design and construction for the rehabilitation of this

sewer collection system, and design and construction for the

rehabilitation of several existing wastewater pumping systems.

DWSRF

Two projects from Washington demonstrate how the State’s

DWSRF program is helping both small and large public water

systems fund projects needed to ensure compliance with the

Safe Drinking Water Act. Both of these loans completed funding packages for systems that were under Agreed Orders from

12

the Department of Public Health related to compliance with

the Surface Water Treatment Rule. The State provided a

$45,423 loan to Camp Zanika Lache (population served -

100) for a project needed to allow the system to discontinue

use of unfiltered creek water as a source of drinking water.

The system used the funds to install a new well and make

additional improvements, including pumps, storage, distribution and a standby disinfection system. A $1 million loan was

provided to the City of Walla Walla (population served -

31,000) to install an ozone system to allow it to resolve disinfection compliance issues. The system also constructed two

new distribution reservoirs to replace existing uncovered

reservoirs which will be used for raw water storage instead.

Additional examples of projects being funded in Washington

can be found in the state’s February 2000 Water Tap newsletter, available on-line at http://www.doh.wa.gov/ehp/dw/watertap.pdf.
13

IN THE WORKS

Training Needs

In the summer of 1998, EPA conducted nationwide training

for state and EPA regional staff on financial issues for the SRF

programs. Nationwide training with a sole focus on the

DWSRF program was last conducted in the summer of 1997.

Since that time “SRF 101” training has been conducted on an

as requested basis. During the fall of 1999, EPA conducted a

DWSRF 101 training requested by Region 7. While a small

group of staff from Kansas, Missouri, Iowa and Nebraska was

anticipated, the training ended up attracting more than 80

people from 10 states. Obviously, with the addition of new

staff, and with staff turnover, there is still a need for training

in the DWSRF program. Last spring the Association of State

Drinking Water Administrators (ASDWA), Association of State

and Interstate Water Pollution Control Agencies (ASIWPCA),

and Council of Infrastructure Financing Authorities (CIFA)

collaborated to conduct a survey of training needs for the

CWSRF and DWSRF programs. Questionnaires were distributed to state personnel working in the various agencies that

implement the SRF Programs. ASDWA compiled the results of

the survey and issued a report in August 1999. A total of 279

responses were collected from DWSRF (55%) and CWSRF

(41%) financial and programmatic staff in 47 states. The survey asked respondents to identify beginner, intermediate and

advanced training needs in the financial/legal and engineering/program administration arenas. The top two financial/

legal topics were analysis of financial statements and introduction to project financing. The top two engineering/ project administration topics were cross-cutting federal authorities in the SRF programs and environmental review. Results

from the survey have been used to develop an agenda for state

DWSRF training planned in a few EPA regions during the summer of 2000 and will also be used to develop future plans for

training conducted by EPA and the respective associations.

Drinking Water Needs Survey 

Site visits to small systems are continuing, but the primary

data collection period has closed and the results are being

tallied for the next Report on Drinking Water Infrastructure

Needs, scheduled for release in February 2001. An impressive 98 percent of the questionnaires distributed to water systems were returned to EPA. A preliminary assessment indicates that the number of projects identified by systems is

greater than that reported during the first survey. Results

from this new survey will be used to update the formula used

to allot DWSRF funds among states beginning with the FY

2002 appropriation. EPA has been asked to consider

whether the allotment formula should be changed to address

several states that restrict privately-owned public water systems from receiving DWSRF funding. Concerns have been

raised by associations representing private utilities, members

of Congress, and several states that it is not equitable for a

state to receive an allotment based on total infrastructure

needs when the state will only finance that portion of the

needs associated with publicly-owned systems. While EPA

has not made a final decision concerning future changes to

the allotment formula, it has raised the issue to states and

other stakeholders at meetings. EPA will release a notice in

the Federal Register sometime this fall that will propose and

seek comments on revisions to the existing formula based on

the results of the latest needs survey. 

Report to Congress on Transfers

This August, EPA must provide Congress with a report on the

use of the provision in the 1996 SDWA Amendments that gives

states the flexibility to transfer an amount equal to 33 percent

of their DWSRF grant to the CWSRF program, or an equivalent amount from the CWSRF to the DWSRF program. As of

the beginning of 2000, New York, New Jersey, Colorado,

Maryland, and Montana had transferred funds from their

CWSRF to their DWSRF programs. All states, with the exception of Colorado, transferred repayments. 

CONTINUED ON PAGE 14
14

IN THE WORKS from page 13

SRF Work Group Meeting

The State/EPA SRF work group will have its seventh meeting

this May in Washington, D.C. Several sub-groups have been

formed to address specific issues including audits, sprawl,

financial measures, and environmental indicators. These subgroups also include state and EPA staff who are not official

members of the work group. State staff are encouraged to

contact representatives of the work group to inform them of

any issues that they would like to have the group address. A

membership listing of the work group and sub-groups can be

found on the DWSRF website. There are currently 18 state

representatives on the work group with equal representation

from the CWSRF, DWSRF, and financial program areas. A

process has been developed for rotation of members on the

group that will result in 6 new members every year. State staff

interested in participating on the work group should contact a

member to learn more. 

CWSRF Progress Report

The CWSRF issued its first progress report in 1995, highlighting a successful transition from the Construction Grants program to the new revolving fund concept. Five years later, the

program remains a remarkable success story, but its continual innovation has led to increased sophistication–and a need

for a progress update.

A new report of progress should be available this summer. It will highlight the program’s success addressing a variety of water quality problems, working with a variety of borrowers, and managing the program to fully utilize its growing

financial resources. It will also discuss ways in which the

CWSRF can address future challenges.

FAXBACK FORM

Please fax to EPA Headquarters:

CWSRF PROGRAM (Attn: S. Hoover) • 202-260-0116

or

DWSRF PROGRAM (Attn: V. Blette) • 202-401-2345

Comments on Current Newsletter:

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Suggestions for Articles or Event Announcements

in Future Newsletters:

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15

EVENTS

1. Association of Metropolitan Sewerage

Agencies Annual Meeting

Location: Washington, D.C.

Date: May 20-24, 2000

Information: See AMSA website

2. National Rural Water Association Rally

Location: Washington, D.C.

Date: May 21-23, 2000

Information: www.nrwa.org

3. Water and Growth in the West Conference

Location: Boulder, CO

Date: June 7-9, 2000

Information: www.colorado.edu/law/NRLC/Conference

2000.html

4. American Water Works Annual

Conference and Exposition

Location: Denver, CO

Date: June 11-15, 2000

Information: See AWWA website

5. Watershed Management and Operations

Management 2000

Location: Fort Collins, CO

Date: June 20-24, 2000

Information: www.asce.org/conferences/water2000

6. Association of State and Interstate

Water Pollution Control Agencies Annual Meeting

Location: San Diego, CA

Date: August 13-16, 2000

Information: See ASIWPCA website

SRF LINKS

1. CWSRF/DWSRF@EPA

Both SRFs maintain pages on the EPA website with information on the programs. Both sites contain guidance, policy

documents and contact lists for state and regional staff.

The URLs are as follows:

• CWSRF: www.epa.gov/owm/finan.htm

• DWSRF: www.epa.gov/safewater/dwsrf.html

The DWSRF site includes a link to a Local Drinking Water

Information page, which has state by state information on

drinking water systems and programs. Where available,

this page includes a link to state DWSRF programs.

2. National Associations

• Association of State and Interstate Water Pollution

Control Agencies: www.asiwpca.org

• Association of State Drinking Water

Administrators: www.asdwa.org

• American Water Works Association: www.awwa.org

• Association of Metropolitan Water Agencies:

www.amwa-water.org

• Association of Metropolitan Sewerage Agencies:

www.amsa-cleanwater.org

• National Association of Water Companies:

www.nawc.org

3. State Programs

Many SRF programs have websites that are used to provide

program information and application materials. This

newsletter places a spotlight on Maryland.

• Maryland CW/DWSRFs

websrvr.mde.state.md.us/wqfa/
IN THIS ISSUE.......

On the National Scene

• The Congressional Outlook on Wastewater

Infrastructure Issues

• DWSRF Implementation

• Addressing Nonpoint Source Pollution with the CWSRF

State Activities and Trends

• State Focus: Funding Combined Sewer Overflow Projects

with Michigan’s CWSRF Program

• State Focus: Capacity Development in Texas’ DWSRF Program

• Washington Closes First CWSRF Loans to Indian Tribe

• Replacement Fund Innovation in Arizona’s DWSRF

In the Works - Report on Ongoing SRF Activities

• Training Needs

• Drinking Water Needs Survey

• Report to Congress on Transfers

• SRF Work Group Meeting

• CWSRF Progress Report

Events • SRF Fax Back • SRF Links

United States

Environmental Protection

Agency

Washington, DC 20460

Official Business

Penalty for Private Use

$300