The Northeast-Midwest Institute hosted the fifth session of its Great Lakes Primer and Orientation Program on the Clean Water and Drinking Water State Revolving Funds (SRFs) last Thursday. These state-administered loan programs, sustained through annual appropriations from Congress, supply low-interest loans for water and wastewater infrastructure investments to states across the country. Information about the revolving loan program was provided by panelists Eric Brown, Director of Policy and Government Affairs at the Great Lakes Commission; James Polidori, Senior Program Specialist at the Great Lakes Commission; Karin Berkholtz, Deputy Director of the Minnesota Public Facilities Authority; Pam Foster, Clean Water Revolving Fund Coordinator at the Minnesota Pollution Control Agency; Becky Scott, Environmental Loans Section Manager at the Wisconsin Department of Natural Resources; and Matt Marcum, Environmental Loans Section Manager at the Wisconsin Department of Natural Resources.
The briefing began with an overview of SRFs. Brown explained that SRFs are valuable tools for states to ensure that water infrastructure needs and upgrades are accomplished, allowing states to allocate funding based on well-established impact and needs. However, when funding is redirected away from the state SRF capitalization grants to congressionally-selected projects, it limits a state’s ability to carry out water infrastructure projects in their Intended Use Plans. Polidori discussed the redirection of Clean Water and Drinking Water SRF appropriations via Congressionally Directed Spending (CDS). For instance, he shared that redirection of Clean Water SRF appropriations for CDS increased from 27% to 53% between fiscal years 2022 and 2023. Meanwhile, the redirection of appropriations for the Drinking Water SRF increased from 35% to 54% during the same years.
Polidori explained that while supplemental funding for SRFs through the Infrastructure Investment and Jobs Act (IIJA) may offset some of the dollars removed from SRF program appropriations for CDS right now, the impacts will likely be more consequential once IIJA funding is exhausted.
State SRF programs are investments that grow over time. The revolving nature of the loan program amplifies federal funding, and SRFs generate significant interest rate savings, as the low-interest loans help recipients reduce overall project costs when compared to projects financed on the open market. The combination of SRFs with other state grant and loan programs then builds critical projects, reduces costs to taxpayers and ratepayers, protects public health, and improves water quality.
Congressionally Directed Spending on water infrastructure projects, however, is distributed as grants, not loans, which means that the money does not revolve. If the trend of increased CDS continues, fiscal sustainability and long-term activity of the state SRF programs may decline, harming the development of urgent projects in states.
Focusing on regional SRF programs in the Great Lakes, representatives from Minnesota and Wisconsin elaborated on their site-specific projects administered through SRFs and other state grant and loan programs. In Minnesota, Berkholtz and Foster described the SRF funding at work in the cities of Austin and Aurora. The project in Austin, Minnesota had a total project cost of $112,921,453 for major upgrades and expansion of the waste water treatment facility, but roughly $4,781,701 was saved in interest on the $42,216,633 Clean Water SRF loan. Benefits included an 81% phosphorus reduction and an improvement in local industry jobs. Similarly, in the town of Aurora, the community saw large interest savings on both their Clean Water SRF loan and their Drinking Water SRF loan, allowing water treatment problems to be solved in an affordable manner. Learn more about Minnesota’s Clean Water Revolving Fund here and Drinking Water Revolving Fund here.
In Wisconsin, Marcum and Scott explained that both smaller and larger municipalities benefit from the state SRF program. For example, financial assistance was allocated to Milwaukee, a city of 780,000 people, for sewage improvements and lead service line replacement, totaling approximately $81 million. On the other end of the spectrum is the, $418,000 in funding for Rockland, a town with a population of 182, for necessary upgrades to their wastewater treatment plant to meet new phosphorus limits. Although different in size and price, both projects were important for the health and viability of each community. Marcum and Scott also provided information on the growing demand for funding in Wisconsin. Increased levels of principal forgiveness available through the IIJA have driven total demand to exceed the amount of funding available. This high demand is expected to continue after IIJA funding ends. Federal investment in SRFs, they said, is key to maintaining America’s water infrastructure and water quality. Failure to adequately fund SRFs will lead to delayed projects, higher costs for municipalities and rate payers, less principal forgiveness for high priority projects, erosion of program stability, and the public health implications associated with diminished water quality. Learn more about Wisconsin’s Environmental Loans Program here.
If you missed the briefing, see a recording here.
The Great Lakes Commission has developed fact sheets for each Great Lakes state that highlight the impact of Congressionally Directed Spending on SRF programs. Find each of them here: Illinois | Indiana | Michigan | Minnesota | New York | Ohio | Pennsylvania | Wisconsin
You can also find the GLC’s SRF landing page here.