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U.S. EPA State Revolving Fund: Providing Affordable Financing. George Ames U.S. EPA IADF Conference on Financing Municipalities and Sub-National Governments, September 30, 2004. $47 b Funds $43 b Loans. SEE NEXT SLIDE !!. $26 b Funds $23 b Loans. $11 b Funds $8 b Loans. $1 b Funds

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U.S. EPA State Revolving Fund:Providing Affordable Financing

George AmesU.S. EPAIADF Conference on Financing Municipalities and Sub-National Governments, September 30, 2004

$47 b Funds

$43 b Loans


$26 b Funds

$23 b Loans

$11 b Funds

$8 b Loans

$1 b Funds

$.5 b Loans







$92 b Funds

$86 b Loans

$100 b



$68 b Funds

$64 b Loans

$47 b Funds

$43 b Loans







EPA and State Financial Partnership Has Evolved Over the Last 30 Years

  • From 1972 to 1990, EPA provided assistance through project grants for wastewater treatment capital improvements

    • More than $50 billion in direct grants to communities

    • Significant benefit for improving water quality but it did not allow flexibility to address state priorities

  • Since 1987, most of the federal government’s assistance has been in the form of capitalizing wastewater State Revolving Loan Funds

    • EPA has provided more than $20 billion in capitalization grants

Foundation of the SRF Program

  • Clean Water Act of 1987 authorized the SRF program

  • Goal: provide a sustainable source of funding for water quality projects

  • Move from Construction Grants program to SRF Loan program

  • Expanded use of monies from municipal sewage systems to include nonpoint source and estuary activities

The revolving nature of the SRFs means that funds will be available for the foreseeable future.

State funds


Federal funds


Features of the SRF Program

  • Federally and state provided “seed money”

  • State programs are allowed great flexibility

  • State implemented and operated

  • Public participation is encouraged

  • Federal involvement is limited

An srf functions as an infrastructure bank
An SRF Functions As An Infrastructure Bank

Each state operates its own SRF that makes loans for wastewater treatment and nonpoint source projects; including agricultural and urban runoff, leaking storage tanks, septic systems, and protecting drinking water sources

Srfs can provide security for bonds issued in the market
SRFs Can Provide Security for Bonds Issued in the Market

27 states issue bonds (leverage) to obtain additional funds for projects

SRFs Provide Several Different Forms

of Financial Assistance

  • Loans

  • Refinancing existing local debt

  • Credit enhancements for local debt:

    • Purchase local debt

    • Bond insurance for local debt

    • Guarantee of local debt

    • Guarantee of debt for sub-state revolving loan funds

  • Leveraging - Source of revenue or security for issuing bonds

Srf financial terms are attractive
SRF Financial Terms Are Attractive

  • Cover 100% of eligible cost – no local matching share

  • Only capital-type projects are eligible

  • Interest rates

    • Range from 0 percent to market rate

    • States set rates based on their cost of capital, state law, or borrower’s financial ability to repay the loan

  • Loan repayment

    • Up to 20-year term

    • Begins up to 1 year after project start-up

    • Wide flexibility in repayment sources

    • All repayments of loan principal and interest return to the SRF to make future loans

CWSRF Loan Volume:

Annual, typical ....... $4 billion

Total, 1988 - 2003 ... $43.5 billion

Savings with SRF Loan Averages 21%

Over Market Rate Loan

Market Rate*

CWSRF Interest Rate

Savings With CWSRF Loan















*Market rate is measured as the Bond Buyer 20-bond general obligation index.

The flow of funds from many sources results in a larger pool of money for projects
The Flow of Funds From Many Sources Results in a Larger Poolof Money for Projects

Federal Capitalization Grants




$47 Billion


Net Leveraged Bonds


Net Loan Principal Repayments





Cumulative 1988-2003

*Total is net of transfers with DWSRF and amount for administration.

Over time non federal sources are more important
Over Time, Non-Federal Sources Are More Important

Net Earnings

Net Loan Principal


Net Leveraged Bonds

State Match

Federal Capitalization Grants


Srfs finance 2 times the federal capitalization
SRFs Finance 2 Times the Federal Capitalization


Billions of Dollars (Cumulative)


SRF Assistance Provided


Federal Capitalization Grants

Srfs 15 years of successful experience in water quality financing
SRFs: 15 Years of Successful Experience in Water Quality Financing

  • $43.5 billion in projects funded over 15 years (14,200 loans)

  • $4.7 billion funded in 2003 (1,400 loans)

  • Permanent source of infrastructure financing

  • Loans fund significantly more projects than one-time grants

  • Subsidy provided by low interest rates makes financing affordable

  • State flexibility in directing funds to greatest environmental and public health priorities

  • Continuous innovation by states

    • Projects – agricultural cropland and animals, drinking water source protection, leaking storage tanks, septic systems, habitat protection, wetlands

    • Sources of funding – leveraging bonds, use SRF with other federal, state, and non-governmental funds

    • Funding mechanisms – partner with banks, local governments

  • In 1996, Safe Drinking Water Act authorized a similar SRF program for financing drinking water projects ($6.4 billion in projects funded)

Governmental controls safeguard the use and fiscal health of the srfs
Governmental Controls Safeguard the Use Financingand Fiscal Health of the SRFs

  • Federal controls on state programs

    • Clean Water Act, regulations, and program guidance

    • EPA conducts annual reviews of state programs

    • Noncompliance sanctions – withhold funds from states

    • State must have financial, managerial, and technical capability

    • Restrictions on use of SRF funds (wastewater treatment, nonpoint source, estuaries)

    • Cash is transferred to state only as costs are incurred

    • SRF monies must be kept separate from other state funds

    • Payments of loan principal and interest must return to the SRF

    • Expeditious use of funds by states is required

    • State annual reporting, accounting, and auditing requirements

Governmental controls safeguard the use and fiscal health of the srfs continued
Governmental Controls Safeguard the Use Financingand Fiscal Health of the SRFs, Continued

  • State controls on SRF and borrowers

    • State laws, regulations, and operating procedures follow federal requirements

    • State Attorney General’s opinion on operation of fund

    • Public participation – review of state Intended Use Plan and other state documents

    • Financial capability assessment of loan applicant before loan is made

    • Dedicated source of loan repayment by borrower is required

    • Review of project plans and specifications before construction begins

    • Ongoing monitoring of project construction and repayment capability of borrower

    • Project performance certification by borrower when construction is completed

    • Withhold other state aid to borrower in case of non-repayment of loan

  • Borrower controls

    • Accounting and auditing requirements

    • Desire to maintain credit rating for future borrowings

For More Information on Financing

Clean Water State Revolving Fund:

George Ames

Chief, State Revolving Fund Branch


[email protected]