Local governments have primary responsibility for wastewater treatment, owning and operating more than 17,000 treatment plants and 24,000 collection systems nationwide. Local ratepayers have long been relied upon to fund both construction costs and operating and maintenance costs associated with facilities serving their communities. However, the federal government has provided financial assistance for these wastewater treatment facilities since the enactment of the Water Pollution Control Act Amendments of 1956, which established the federal Construction Grants program. Through this program, the federal government provided grants directly to local governments for constructing treatment facilities but limited the federal contribution to the lesser of 30 percent of eligible construction costs or $250,000. The Federal Water Pollution Control Act Amendments of 1972, commonly known as the Clean Water Act, increased the federal share of costs to 75 percent. According to the Congressional Budget Office, federal outlays for wastewater treatment grants rose tenfold during the 1970s, reaching a high of $8.4 billion in 1980. Subsequent amendments in 1981 and 1987 reduced and then phased out the construction grant program, replacing it with the CWSRF. Instead of providing grants directly to localities, the CWSRF provides federal grants to the states, which in turn provide loans to communities and other entities to finance wastewater treatment and other water quality projects. The 1987 law established a system in which the states would use the loan repayments to finance future CWSRF loans, thereby allowing the state revolving funds to operate without sustained federal support. Congress authorized appropriations through 1994 but has continued to appropriate funds to the CWSRF each year since. The transfer of federal funds to state-level CWSRFs begins when Congress appropriates funds annually to the EPA. EPA then allots capitalization grants to the individual states. The Clean Water Act also requires states to provide state funds to match 20 percent of the total federal CWSRF capitalization grants. To receive its allotment, a state must provide an Intended Use Plan that lists potential projects to solve water quality problems and solicit public comments on that list. After completing the plan and receiving its capitalization grant, a state has up to 1 year to enter binding commitments (later converted into loan agreements) with potential borrowers to fund specific water quality projects. The majority of CWSRF borrowers are municipalities and other local units of government, although in some states nonprofit organizations, businesses, farmers, homeowners, and watershed groups are eligible to seek nonpoint source funding through the CWSRF. According to an EPA headquarters official, a single CWSRF loan may support multiple clean water projects. State CWSRF administrators set loan terms, interest rates, and repayment periods. Loan repayments are cycled back into the state-level fund and used for additional water quality projects. States also have the option of using CWSRF funds as collateral to borrow in the public bond market to increase the pool of available funds, a process referred to as “leveraging.” Figure 1 illustrates the flow of funds through the CWSRF program. States can use their CWSRF resources to construct or upgrade wastewater infrastructure, address nonpoint sources of pollution, or develop or implement management plans in federally-designated estuaries. States use a state-developed, EPA-approved, ranking system to direct funds to the highest priority projects. The ranking system considers applicant communities’ current regulatory compliance status, imminent public and environmental health threats, and the relative importance of the affected bodies of water. States are not required to fund these projects in priority order; decisions on which projects to fund first are often based on a project’s readiness to proceed. However, states must first use their CWSRFs to ensure that existing wastewater treatment facilities are in compliance with, or are making progress toward, deadlines, goals, and requirements of the Clean Water Act. After meeting this “first use” requirement, states may use their CWSRFs to construct other wastewater infrastructure or for nonpoint source pollution and estuary management projects. Taken together, states have loaned the majority of their CWSRF dollars — 96 percent or about $50 billion since 1987—to build, upgrade, or enlarge conventional wastewater treatment facilities and conveyances. Direct CWSRF support for nonpoint source activities represents only 4 percent of CWSRF dollars (about $2 billion), although it accounts for over a quarter of all CWSRF projects financed. Nationwide, 23 percent of CWSRF funds (64 percent of all CWSRF loan agreements) were devoted to water quality projects in communities with populations of less than 10,000 people. All 51 CWSRF programs use the large majority of their CWSRF resources for conventional wastewater infrastructure projects. From fiscal year 1987 through June 2005, the Clean Water State Revolving Fund program has provided over $52 billion dollars in financial assistance to local governments and others for a variety of water quality improvement projects across the nation. States provided about 96 percent of this amount—or $50 billion—to municipalities to build, upgrade, or enlarge conventional wastewater treatment facilities and conveyances. EPA reports that conventional wastewater infrastructure projects account for about 73 percent of all CWSRF-funded projects. By their nature, wastewater infrastructure projects are typically much more expensive to complete than nonpoint source projects. Figure 2 illustrates the relative funding for the types of projects receiving CWSRF assistance. Nonpoint source projects ($2 billion) Wastewater treatment projects ($50 billion) Total CWSRF funding equals $52.7 billion. According to EPA, $600 million of available CWSRF resources support short-term planning and design activities and, as such, have not yet been allocated by the states among the qualifying categories of expense. However, EPA expects that these funds will be allocated (most likely to wastewater infrastructure projects) when rolled into longer-term construction projects. Within the conventional wastewater treatment category, states may allocate their CWSRF resources among the following seven major categories of projects: Secondary Treatment includes infrastructure designed to ensure that wastewater treatment plant effluent meets EPA’s secondary treatment standards, a requirement of all new and existing wastewater treatment facilities. Advanced Treatment includes infrastructure designed to further remove nutrients and other matter from wastewater treatment plant effluent beyond secondary treatment standards. New Sewers includes the construction of new wastewater conveyances— such as collector and interceptor sewers—to carry household and industrial wastewater to treatment facilities. Sanitary Sewer Overflow correction includes efforts to prevent the occasional or incidental discharge of untreated sewage from municipal sanitary sewer systems that can occur due to inclement weather and improper maintenance or operation of sewer systems. Combined Sewer Overflow correction includes efforts to prevent or mitigate discharges of untreated wastewater from combined sewer systems, which are designed to collect rainwater runoff, domestic sewage, and industrial wastewater in the same pipe. Combined sewer systems were designed in many cities to occasionally discharge excess wastewater directly to nearby water bodies. However such overflows often pose significant public health and pollution problems and have become a national enforcement priority for EPA. Storm Water Sewers includes both storm water infrastructure and efforts to plan and implement municipal storm water management programs. Recycled Water Distribution includes projects to convey recycled water (i.e., treated wastewater) from treatment facilities to end users such as golf courses and municipal gray water systems. As shown in figure 3, nationwide, states have allocated about 60 percent of their CWSRF wastewater infrastructure dollars for secondary and advanced treatment projects at wastewater treatment facilities. The remainder supports sewers and other conveyances. Since the CWSRF’s inception, the total dollar amounts that states annually provide for wastewater infrastructure and nonpoint source projects has increased. However, CWSRF support for wastewater infrastructure has increased at a greater pace than the amount for nonpoint source projects. Figure 4 shows that states have used their CWSRFs to finance wastewater infrastructure projects since 1987 but only began to use them to support nonpoint source projects in 1990. The annual percentage of the CWSRFs states allocated to nonpoint source projects peaked in 1996 at about 10 percent. Direct CWSRF support for nonpoint source pollution control activities represents only 4 percent (about $2 billion) of CWSRFs allocated by the states but accounts for over 25 percent of all CWSRF-supported projects because nonpoint source projects are typically less expensive than wastewater infrastructure projects. The extent to which states have used their CWSRFs to support nonpoint source projects varies. To date, 37 states have reported using some portion of their CWSRF funds to directly support nonpoint source projects. Among them, Wyoming has allocated the greatest percentage of funds to nonpoint source projects (44 percent), while New York has allocated the greatest dollar amount (over $700 million). Figure 5 illustrates the percentage of funding that all 51 programs have allocated to nonpoint source projects since the CWSRF’s inception. Detailed state by state figures are provided in appendix II. To be eligible for CWSRF support, a nonpoint source pollution control project must help implement a state’s EPA-approved Nonpoint Source Pollution Management Plan. Each state determines which nonpoint source pollution control activities are eligible for funding. Nationally, there are 11 major categories of nonpoint source pollution control projects that have received CWSRF support: Agricultural Best Management Practices include projects to reduce water pollution resulting from activities related to the production of animals and food crops. Projects can include nutrient management practices for the storage and disposal of animal waste; techniques to minimize pollution related to agricultural activities such as grazing, composting, pesticide spraying, planting, harvesting, fertilizing, and tillage; and irrigation water management. Individual/Decentralized Sewage Treatment encompasses the rehabilitation or replacement of individual septic tanks or community sewage disposal systems. This category also includes the construction of collector sewers to transport waste from individual septic systems to a cluster septic tank or other decentralized facility. Groundwater-Unknown Source relates to the protection of groundwater and includes projects to protect wellheads and prevent contamination in areas where groundwater is replenished.