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SECTION 1. SHORT TITLE.

This Act may be cited as the ''Small and Rural Communities
Wastewater Infrastructure Act''.

SEC. 2. PUBLICLY OWNED TREATMENT WORKS SERVING SMALL AND DISADVANTAGED
COMMUNITIES.

Title VI of the Federal Water Pollution Control Act (33 U.S.C. 1381
et seq.) is amended--
(1) by redesignating section 607 as section 608; and
(2) by inserting after section 606 the following:

''SEC. 607. PUBLICLY OWNED TREATMENT WORKS SERVING SMALL AND
DISADVANTAGED COMMUNITIES.

''(a) Allocation of Funds for Small Treatment Works.--
''(1) In general.--Of the funds received by a State in
capitalization grants under this title for a fiscal year--
''(A) not less than 5 percent shall be used to
provide assistance to publicly owned treatment works
that regularly serve 5,000 or fewer persons, to the
extent that there are sufficient applications for such
assistance;
''(B) not less than 10 percent shall be used to
provide assistance to publicly owned treatment works
that regularly serve between 5,001 and 20,000 persons,
to the extent that there are sufficient applications
for such assistance; and
''(C) not less than 15 percent shall be used to
provide assistance to publicly owned treatment works
that regularly serve between 20,001 and 50,000 persons,
to the extent that there are sufficient applications
for such assistance.
''(2) Use of funds in other categories.--If a State is not
able to use an amount of funds to provide assistance to
publicly owned treatment works in accordance with paragraph
(1)(A), (1)(B), or (1)(C) because there are not sufficient
applications, the State, to the maximum extent practicable,
shall use that amount of funds to provide assistance for
another purpose specified in paragraph (1).
''(3) Limitation on statutory construction.--Nothing in
paragraph (1)(A), (1)(B), or (1)(C) shall be construed to limit
the amount of funds received by a State in capitalization
grants under this title that may be used by the State for the
purposes described in that paragraph.
''(b) Preconstruction Assistance for Small Treatment Works.--
''(1) Authority to make preloans.--Notwithstanding any
other provision of this title, a State may use funds received
in capitalization grants under this title for making preloans
to eligible recipients in accordance with the requirements of
this subsection.
''(2) Eligible uses of preloans.--A preloan received by an
eligible recipient under this subsection may be used for the
following costs incurred in connection with an eligible
project:
''(A) Project development.
''(B) Environmental studies.
''(C) Legal and administrative expenses.
''(D) Project design.
''(E) Such other costs as the Administrator
determines appropriate, as prescribed by regulation.
''(3) Ineligible use.--A preloan received by an eligible
recipient under this subsection may not be used for costs
related to land acquisition.
''(4) Maximum individual preloan amount.--The amount of a
preloan made under this subsection in connection with an
eligible project may not exceed 10 percent of the estimated
cost of the project.
''(5) Maximum aggregate preloan amount.--Not to exceed 15
percent of the funds received by a State in capitalization
grants under this title for a fiscal year may be used to
provide preloans under this subsection.
''(6) Repayment of preloans.--
''(A) In general.--For purposes of repayment, a
preloan made to an eligible recipient in connection
with an eligible project shall be treated as part of
the principal amount of the primary loan made by the
State for the project. Except as provided by
subparagraph (B), repayment of preloan amounts shall
not be required until payments begin for the primary
loan amount and interest on preloan amounts shall not
begin to accrue until interest begins to accrue on the
primary loan amount.
''(B) Deadline for primary loan application.--
''(i) In general.--If an eligible recipient
under this subsection in connection with an
eligible project does not apply for a primary
loan for the project in the 3-year period
beginning on the date of issuance of the
preloan, the State may require, at the
discretion of the State, repayment of the
preloan with interest.
''(ii) Exceptions.--A State shall not
impose a penalty under clause (i) on an
eligible recipient that receives a preloan for
an eligible project, if the State determines
that the eligible recipient did not comply with
the 3-year deadline established by clause (i)
due to--
''(I) a delay in environmental
reviews conducted by a Federal or State
agency; or
''(II) insufficient funds in the
State's water pollution control
revolving fund established under this
title for the State to make a primary
loan for the project.
''(7) Definitions.--In this subsection, the following
definitions apply:
''(A) Eligible project.--The term 'eligible
project' means a project eligible for assistance under
section 603(c)(1) for construction of a public owned
treatment works that will regularly serve 50,000 or
fewer persons.
''(B) Eligible recipient.--The term 'eligible
recipient' means a municipality or intermunicipal,
interstate, or State agency seeking assistance for an
eligible project.
''(C) Preloan.--The term 'preloan' means financial
assistance provided by a State from the State's water
pollution control revolving loan fund established under
this title for an eligible project before approval of a
primary loan for the project.
''(D) Primary loan.--The term 'primary loan' means
a loan made by a State from the State's water pollution
control revolving loan fund under this title for an
eligible project after a preloan is made for that
project.
''(c) Additional Assistance for Disadvantaged Communities.--
''(1) Criteria for designation of disadvantaged
communities.--The Governor of a State, after providing an
opportunity for public review and comment, may establish
criteria to designate disadvantaged communities that--
''(A) have a population of 50,000 persons or fewer;
and
''(B) would experience a significant hardship
raising the revenue necessary to finance a project
eligible for assistance under section 603(c)(1) if
assistance is not provided under this subsection.
''(2) Additional assistance.--
''(A) In general.--In any case in which a State
provides loan assistance to a municipality or
intermunicipal, interstate, or State agency for a
project under section 603(d), the State may provide
additional assistance in connection with the loan if
the project is to benefit a disadvantaged community
identified by the State using the criteria developed
under paragraph (1).
''(B) Types of additional assistance.--Additional
assistance under subparagraph (A) shall consist of--
''(i) forgiveness of all or a portion of
the principal of the loan;
''(ii) not requiring or reducing interest
to be paid in connection with the loan;
''(iii) extending the loan repayment period
to not to exceed 30 years; or
''(iv) any combination thereof.''.

SEC. 3. APPLICATION PROCESS REFORM.

(a) In General.--Not later than 3 years after the date of enactment
of this Act, the Administrator of the Environmental Protection Agency
shall--
(1) consult with States, utilities, nonprofit
organizations, and other Federal agencies providing finance
assistance to identify ways to expedite and improve the
application and review process for obtaining financing from a
State water pollution control revolving loan fund under title
VI of the Federal Water Pollution Control Act (33 U.S.C. 1381
et seq.); and
(2) take such administrative actions as the Administrator
determines appropriate to expedite and improve the process.
(b) Report to Congress.--Not later than 3 years after the date of
enactment of this Act, the Administrator shall submit to Congress a
report that contains recommendations to further expedite and improve
the application and review process referred to in subsection (a)(1),
including recommendations for any legislative actions that may be
needed.
Small and Rural Communities Wastewater Infrastructure Act - Amends the Federal Water Pollution Control Act (commonly known as the Clean Water Act) to allocate at least 5%, 10%, or 15% of funds received by a state in capitalization grants to provide assistance to publicly owned treatment works that serve populations of 5,000 or fewer persons, 5,001 to 20,000 persons, or 20,001 to 50,000 persons, respectively.

Authorizes a state to use funds received in capitalization grants for making preloans (financial assistance from the state's water pollution control revolving loan fund) to municipalities or intermunicipal, interstate, or state agencies for costs incurred in connection with project development, environmental studies, legal and administrative expenses, and project design for construction of a public owned treatment works that will regularly serve 50,000 or fewer persons. Prohibits a preloan from being used for costs related to land acquisition.

Authorizes a state agency to provide additional assistance in connection with a state water pollution control revolving loan if a project is to benefit a disadvantaged community with a population of 50,000 persons or fewer by: (1) forgiving all or a portion of the principal of the loan; (2) not requiring or reducing interest to be paid in connection with the loan; and (3) extending the loan repayment period to not to exceed 30 years.

Requires the Administrator of the Environmental Protection Agency (EPA) to identify, implement, and make further recommendations regarding ways to expedite and improve the application and review process for obtaining financing from a state water pollution control revolving loan fund.