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Thursday, February 17, 2011

Drinking Water State Revolving Fund (DWSRF): Program Overview and Issues

Mary Tiemann
Specialist in Environmental Policy

The Safe Drinking Water Act (SDWA) Amendments of 1996 authorized a drinking water state revolving loan fund (DWSRF) program to help public water systems finance infrastructure projects needed to comply with federal drinking water regulations and to meet the act’s health objectives. Under the program, states receive capitalization grants to make loans to public water systems (privately and publicly owned) for drinking water projects and certain other SDWA activities. Since FY1997, Congress has provided more than $13 billion for this program, including $2 billion in stimulus funding. Through June 2008, the DWSRF program had provided a total of $14.6 billion in assistance and supported 6,177 projects.

The Environmental Protection Agency’s (EPA’s) latest (2007) survey of capital improvement needs for public water systems indicated that water systems need to invest $334.8 billion on infrastructure improvements over 20 years to ensure the provision of safe water. EPA reports that this amount is similar to the 2003 needs estimate of $276.8 billion ($331.4 billion when adjusted to 2007 dollars). The survey reflects continued improvement in reporting of needs for infrastructure rehabilitation and replacement, and also funding needs related to compliance with several revised regulations and security-related needs.

Key issues related to the DWSRF program include the gap between estimated needs and funding; the growing cost of complying with SDWA standards, particularly for small communities; the ability of small or economically disadvantaged communities to afford DWSRF financing; and the broader need for cities to maintain, upgrade, and expand infrastructure unrelated to SDWA compliance.

In the 111
th Congress, drinking water infrastructure funding generally, and the DWSRF program specifically, received attention. The American Recovery and Reinvestment Act of 2009 (ARRA; P.L. 111-5, H.Rept. 111-16) provided $2 billion for the DWSRF program for drinking water infrastructure projects, and $4 billion for a similar Clean Water SRF that funds municipal wastewater infrastructure projects. Under the DWSRF program, the stimulus funds have been allocated as capitalization grants to the states, which states have used to provide financial assistance (subsidized loans and grants) to public water systems for infrastructure projects. The conference report modified several program practices for projects receiving stimulus funds. The 111th Congress also completed FY2009 appropriations work with the Omnibus Appropriations Act, 2009 (P.L. 111-8), which included $829 million for the DWSRF program, and provided another $1.387 billion for the program for FY2010 in P.L. 111-88. For FY2011, the DWSRF program has been funded at FY2010 levels through continuing resolutions.

Further in the 111
th Congress, the Senate Environment and Public Works Committee reported, amended, S. 1005, the Water Infrastructure Financing Act, which would have authorized $14.7 billion over five years for the DWSRF program. In July 2010, the House passed, amended, the Assistance, Quality, and Affordability Act of 2010 (H.R. 5320, H.Rept. 111-524), which proposed $4.8 billion over three years for this program. Both bills would have applied Davis-Bacon prevailing wage provisions to projects financed in any way by a DWSRF, as did ARRA and P.L. 111-88. Introducing an alternative infrastructure funding approach, H.R. 3202 proposed to establish a dedicated water infrastructure trust fund supported by specified product and corporate taxes rather than appropriations of general revenues. No final action occurred on these bills.

Date of Report: February 10, 2011
Number of Pages: 14
Order Number: RS22037
Price: $29.95

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