United States
           Environmental Protection
             Office of Water
November 2000
The Drinking Water State
Revolving Fund
Financing America's Drinking Water
                               —A Report of Progress


The Environmental Protection Agency's (EPA) Drink-
ing Water State Revolving Fund (DWSRF) program is a
significant tool available to states to fund high-priority infrastructure
projects and state and local activities needed to ensure the provision
of safe and affordable drinking water. The DWSRF program is well on
its way toward meeting the goal of helping to ensure that permanent
institutions exist in each state to provide financial support for drinking
water needs for many years to come. Through June 30, 2000:

^  EPA has provided more than $2.7 billion in grants to all 50 states
  and Puerto Rico to capitalize revolving loan funds for infrastructure
  projects and to fund state and            /	
  local activities.
^  States have made close to 1,200
  low-interest loans totaling more
  than $2.3 billion for needed
  drinking water infrastructure
  projects to meet public health and
  compliance objectives.
>•  Seventy-five percent of all loans
  have gone to small water systems.
^-  States have reserved $445 million
  for activities that support their
  drinking water programs, enhance
  the management ability of water
  systems, and protect sources of
  drinking water.
"As a result of this program,
we now provide safer
drinking water to over 2,000
people.  We would not have
gotten  this far without the
Drinking Water State
Revolving Fund."

                      —Stan Bullard
              Vice President of Camp Verde
              Arizona Water System which
              received a loan to address high
              arsenic levels in its drinking
              water source

A New Era in
                          Providing safe, clean drinking water to
                          the 254 million people served by
                     approximately 54,000 community water
                     systems in the United States is an important
                     goal of federal, state, and local officials.
                     While our drinking water is among the
                     safest in the world, the owners and operators
                     of the nation's public water systems know
                     that they must make significant infrastruc-
                     ture improvements to continue supplying
                     safe drinking water to their customers. A
                     1995 EPA survey of drinking water infra-
                     structure needs identified a 20 year need of
                     more than $138 billion. Approximately one-
                     quarter ($37-2 billion) of this total national
                     need is for small systems, which serve up to
                     3,300 people.

                     Many public water systems, particularly
                     small water systems,  have difficulty obtain-
                     ing affordable financing for infrastructure
                     improvements. Recognizing this  fact,
                     Congress established the Drinking Water
                     State Revolving Fund (DWSRF) program as
                     part of the Safe Drinking Water Act
                     (SDWA) Amendments of 1996.  Congress
                     authorized $9-6 billion in new federal grants
                     to help ensure that the nation's drinking
                     water remains safe and affordable. The
                     DWSRF program was modeled,  in part,
                     after the Clean Water State Revolving Fund
                     (CWSRF) program initiated in the late
                     1980s under the Clean Water Act. The
                     CWSRF program has provided more than
                     $30  billion in assistance from $18 billion in
                     federal funds for projects addressing waste-
                     water treatment and non-point sources of
EPA distributes DWSRF funds to each of
the 50 states and Puerto Rico in the form of
capitalization grants. To date,* EPA has
awarded more than $2.7 billion in DWSRF
grants for drinking water projects and state
and local activities. States use the grants  to
capitalize revolving loan funds from which
low-cost loans and other types of assistance
are provided to eligible systems to finance
the costs of infrastructure projects. States
must provide matching funds equal to at
least 20 percent of each grant. To date, state
matching funds have added more than $540
million to the program. Loan repayments
made by assistance recipients return to the
loan fund
and provide
a continuing
source of
financing for
ture projects.

The 1996 SDWA Amendments also
included new regulatory requirements and
other provisions that emphasize comprehen-
sive public health protection through
preventing drinking water contamination
problems.  To  give states the financial
resources for this new emphasis, each state
was given the flexibility to set aside up to 31
percent of its DWSRF grant to fund
activities that support its drinking water
program, enhance the managerial capabili-
ties of water systems, and protect sources of
drinking water.
                     *Data included in this report are from a wide variety of sources, including: DWSRF program information (through June 30, 2000); EPA's 1995
                     Drinking Water Infrastructure Needs Survey (EPA 812-R-97-001); and the Safe Drinking Water Information System (SDWIS) FY99Q4 Frozen
                     Database (national data for community water systems).

      Infrastructure  Projects
                               States have loaned more than $2.3
                               billion to eligible water systems for
                          projects ranging from the installation or
                          upgrade of treatment facilities to the
 DWSRF Loans Made
                         creation of new
                         water systems
                         needed to
                         address public
                         health con-
                         cerns.  Since
                         the first loan
                         was made to
                         the Town of
                         Pennsylvania in
                         April 1997,
                         1,200 loans
                         have been
made. Seventy-five percent of these loans
were made to small systems (40 percent of
total assistance). More than one-third of
the projects receiving loans have been
completed, and communities nationwide
are enjoying the benefits of a safer, more
affordable supply of drinking water as a

Eligible Systems and
Publicly and privately owned community
water systems and nonprofit noncommu-
nity water systems can receive DWSRF
funding. To focus on the needs of small
systems, Congress required that states
provide a minimum of 15 percent of their
funds to systems serving 10,000 people or
less.  Most states have far exceeded this
minimum requirement.
Eligible projects are those needed to main-
tain compliance with health-based standards
or otherwise further the public health
protection goals of the SDWA, such as
installation and replacement of failing
treatment and distribution systems. As
EPA's survey of drinking water infrastruc-
ture needs showed, there is a tremendous
need associated with drinking water projects
throughout the country.  In New York
alone, more than 1,250 projects totaling
$4.6 billion have been identified by systems
that have indicated an interest in receiving
funds. To ensure that the most critical
infrastructure needs are met, each state has
developed a priority system for funding
projects. States must give priority to eligible
projects that: (1) address the most serious
risks to human health, (2) are necessary to
ensure compliance with the requirements of

Project Categories	
• Projects to maintain compliance with regulations
  for contaminants that cause acute and chronic
  health effects.
Transmission and Distribution
• Installation or replacement of transmission and
  distribution mains.
• Rehabilitation of wells or development of sources
  to replace contaminated sources.
• Installation or improvement of eligible storage
• Consolidation of water supplies if a water supply
  has become contaminated or if a system is
  unable to maintain technical, financial, or
  managerial capacity.
Creation of New Systems
• Creation of new community water systems to
  replace contaminated sources or to consolidate
  existing systems that have technical, financial, or
  managerial difficulties.

the SDWA, and (3) assist systems most in
need on a per household basis. States rank
the projects and then offer loans to those
with the highest priority.

Flexible Financing  Tools
Promote  Results
A wide range of tools to fund infrastructure
projects are available to states through the
DWSRF program. The most significant
advantage of the DWSRF program is that it
allows states to offer loans to water systems
at below-market  interest rates. The savings
from lower interest rates can be significant
for a community. For example, a water
system receiving  a $5 million loan at a 2
percent interest rate, as opposed to a 6
percent interest rate, would save $2.5
million over the course of its 20 year
repayment period.

Using program assets as security, a state can
also issue bonds to "leverage" its program.
Over time, leveraging can generate a
significant amount of additional funding
for projects. More than ten states are using
the assets of the program to leverage in their
DWSRF programs so that they can meet
the demand for financial assistance.  For
example, leveraging has enabled New York
to make more than $460 million in loans
while receiving only $200 million in federal
grants, and Kansas has made more than $82
million in loans using its $45 million in

Many systems serving disadvantaged
communities are not able to  afford even the
low-interest rate loans made  available
through the DWSRF program and require
additional assistance to complete a project.
The DWSRF program provides states with
additional flexibility to address these
systems.  A state may take
an amount equal to 30
percent of its capitalization
grant to provide additional
loan subsidies (e.g.,
principal forgiveness,
negative interest rate loans)
to communities which are
classified as "disadvan-
taged" based on
affordability criteria
developed by the state. A
state may also extend loan
terms for these systems to
up to 30  years.  Another
method for making loans more affordable is
to coordinate DWSRF funds with other
sources of funding. Other federal financial
assistance programs (e.g., the U.S. Depart-
ment of Agriculture's (USDA) Rural
Development program and the U.S.
Housing  and Urban Development's (HUD)
Community Development Block Grant
program) are available to assist water
systems in addressing drinking water
infrastructure needs.  Many states also have
their own assistance programs for drinking
water improvements.  Public water systems
benefit from state DWSRF programs that
have fostered cooperation with other
funding sources because they get an afford-
able funding package that covers the total
project costs. The DWSRF program and
other funding programs benefit because
coordination allows their funds to go
Financing Tools Available
Through the DWSRF    I
 • Low-interest loans between 0 percent and the
   market rate with a 20 year repayment period.
 • Refinance or purchase local debt to reduce a
   community's cost of borrowing.
 • Purchase insurance or guarantee local debt
   to improve credit market access or reduce
   interest rates.
 • Leverage program assets by issuing bonds to
   increase the amount of funds available for
 • Provide disadvantaged assistance by taking
   an amount equal to 30 percent of a capitaliza-
   tion grant for loan subsidies or extending the
   repayment period to up to 30 years.

Scanning electron micrograph
of Giardia lamblia. Giardia and
other microbial contaminants
can cause severe illness.
     The DWSRF program is playing a
     significant role in providing assistance
to public water systems to ensure compli-
ance with the SDWA and address the most
serious risks to human health. The projects
presented here show how states are making
loans to help water systems meet the
challenge of providing safe and affordable
drinking water to all of their customers.

Funding Public Health and
A 1995 EPA survey of drinking water
infrastructure needs found that $12.1
     billion was needed to address current
     SDWA requirements.  Approximately
     84 percent of that need was for
     improved treatment for microbial
     contaminants regulated under the
     Surface Water Treatment Rule and the
     Total Coliform Rule. The remaining
     needs were associated with nitrates,
     which can cause acute health effects in
     children, and other contaminants
     such as radionuclides that pose
     chronic health risks. The following
     projects show how the DWSRF
program is providing assistance to address
these contaminants.

T  Microbial contaminants
More than 167 million people receive
drinking water from surface water sources
such as rivers and lakes.  Microbial contami-
nants such as Giardia, Cryptosporidium, and
Coliform bacteria that can be present in
surface water must be removed to ensure
public health protection.  These contami-
nants can lead to gastrointestinal illness and,
in extreme cases, death. The Surface Water
Treatment Rule requires filtration of surface
water sources to remove microbiological
contaminants. Gold Beach, Oregon
received a $500,000 DWSRF loan to build
a filtration plant to ensure that the surface
water source for the town's drinking water
meets the requirements of the Surface Water
Treatment Rule.  The new filtration plant
also helped to ensure inactivation of Giardia
which is common in coastal Oregon
waterways.  Concord, New York received a
$47,713 DWSRF loan  to replace a private
water system  that was vulnerable to micro-
bial contaminants due to aging private
septic systems in the area. The project
involved building a new storage tank,
pumping station, and distribution mains to
ensure a safe and reliable water supply for
the town's 100 residents.

T Nitrates
In some small rural communities, ground
water is impacted by high nitrate levels as a
result of agricultural practices or failing
septic systems. High nitrate levels can cause
serious health problems, especially for
infants whose ability to absorb oxygen can
be inhibited by nitrate (i.e., blue baby
syndrome).  In Quartzite, Arizona,
DWSRF assistance was combined with
other sources of funding to address ground
water contaminated by failing septic
systems.  Quartzite's water system was under
a Consent Order from the Arizona Depart-
ment of Environmental Quality for high
nitrate levels and was first on the state's
priority list. The project, serving 2,000
people, will complete an extension of the
town's distribution service to 85 percent of
the community and consolidate more than

50 public water systems. Due to ongoing
problems with high nitrate levels in the
ground water, Spivey, Kansas received a
$78,000 loan from the DWSRF program to
extend pipelines and connect to a safe
public water system to serve its 99 residents.

v   Radionuclides
Radionuclides are man-made or natural
elements that emit radiation. Radionuclides
can increase the risk of cancer depending on
the radionuclide a person is exposed to
through drinking water consumption.  In
Jackson, Nebraska, DWSRF assistance was
combined with other sources of funding to
address municipal wells with high  radionu-
clide levels (i.e., radium and alpha particles)
that were in violation of the Nebraska Safe
Drinking Water Act.  The project involved
installing a new well and constructing a new
treatment plant. With 75 percent  grant
assistance, Jackson was able to afford the
project and provide safe drinking water to
its 230 residents.

Funding Disadvantaged
To help meet the unique needs  of economi-
cally distressed communities, states have the
flexibility to establish disadvantaged
community programs as part of their
DWSRF programs. Through a disadvan-
taged community program, a state may
provide additional subsidies such as princi-
pal forgiveness or extend loan repayment
periods to up to 30 years. This additional
assistance can make a substantial difference
in terms of improving system compliance,
getting needed projects underway,  and
maintaining affordable water service.
Several states have established programs for
disadvantaged communities and many
others have expressed interest in doing so.

^- With a median household income of
$19,712, the small coastal community of
Winter Harbor, Maine qualified for
disadvantaged assistance for much-needed
infrastructure improvements to its water
system. The community had created a
water district by purchasing its system from
a private owner. At the time of the pur-
chase, the households served by the system
were under a boil water order and the
system was out of compliance with the
Surface Water Treatment Rule, had a source
of questionable quality, no filtration, and
inadequate disinfection. The water system's
rates were $300 per household per year
which was substantially above the state's
goal rate of $276 per year (based on 1.4
percent of median household income). The
gap between the goal rate and the actual rate
qualified Winter Harbor for maximum
disadvantaged assistance.  DWSRF assis-
tance was combined with assistance from
the Maine Rural Development Council to
fund the construction of a new well,  a
pump station with treatment, a transmis-
sion line, and a storage tank. A $1.1
million loan from the DWSRF program
included principal forgiveness for 75
percent of the requested loan amount, with
the remaining loan amount at a 0 percent
interest rate. Financial assistance made it
possible for Winter Harbor to switch its
water supply from a non-potable surface
water source to a ground water source with
adequate disinfection and storage while
offering affordable rates to the community.

With a DWSRF loan, an aging water system in Braddock Heights
was abandoned and replaced with a new system
Funding Small Water
Approximately 93 percent of community
water systems are small systems, many of
which serve fewer than 3,300 people.
Almost one-half of these systems are
privately owned. Small systems have certain
characteristics that make compliance with
minimum standards difficult without
outside assistance.  These characteristics
include very small staff, extremely limited
                       financial resources,
                       and a small,
                       customer base.
                       These systems
                       often need finan-
                       cial assistance to
                       provide safe water
                       to their communi-
                       ties, but find it
                       difficult to obtain
                       favorable interest
                       rates when
                       applying for loans
                       to make infra-
                       structure improve-
                       ments. With its
                       ability to offer
                       low-interest rate
                       loans, the  DWSRF
                       program is an
                       important source
                       of affordable
                       funding for small
^-  Before receiving a DWSRF loan, the low-
income community of Mendon, Vermont,
which is home to approximately 100 year
round residents,  received untreated surface
water from a system that had been on a boil
water order since 1971. In 1988, EPA
issued a final Administrative Order to the
system requiring that corrective action be
taken. Mendon  applied for and received a
loan that included  disadvantaged assistance
to extend a water main from the nearby city
of Rutland to serve the community's homes.
The disadvantaged assistance resulted in a
$180,000 subsidy to the community, with
the remaining loan amount at a 0 percent
interest rate. The water main extension has
been completed and is fully operational.
Operations at the privately owned system
serving Braddock Heights, Maryland were
revoked by the Public Service Commission,
and the Maryland Department of the
Environment ordered Frederick County to
take over the aging system. The Frederick
County Water Authority received a $4.4
million DWSRF loan to design and build a
new water treatment plant, storage tank,
and distribution  system for the community
of about 350 homes.  Comfrey, Minnesota,
population 433,  was one of the first cities
included on the state's DWSRF priority list
for improvements to its water treatment
plant due to a copper exceedance problem.
However, during the loan application
process, the city was devastated by a series
of tornadoes. All but 15 of the 250 homes
were damaged, and most of the city's

infrastructure and municipal facilities were
destroyed. Covering costs to replace the
damaged infrastructure through traditional
bond methods would have been very
difficult since there was essentially no tax
base remaining in the wake of the storms.
As a result, the DWSRF program provided
$575,262 in funding ($375,025 of it in
principal forgiveness) for the needed
drinking water infrastructure repairs. The
project was an important part of the city's
efforts to rebuild the community and
protect public health.

Funding Consolidation to
Improve  System  Capacity
Capacity development is an important part
of the DWSRF program's focus on prevent-
ing contamination problems in drinking
water. All systems receiving DWSRF
program assistance must demonstrate that
they have the technical, financial, and
managerial capacity to ensure compliance
with the SDWA over the long-term.  When
a public water system is unable to provide a
safe and reliable supply of drinking water
due to any number of problems with
capacity, often the most economic and cost-
effective solution is consolidation with
neighboring systems. Consolidation may
involve the construction of an entirely new
system or the expansion of an existing
system.  Many state DWSRF programs give
bonus points in their priority systems to
projects that will consolidate systems.
^- In Jefferson County, Florida, initial
interest in creating an area-wide drinking
water system grew out of a request from a
small private utility for an expansion of its
service area.  Area residents in the rural
community served by private wells attended
a series of meetings  asking to be included in
a new area-wide water system because over
400 samples from their wells tested positive
for Coliform bacteria and the potential for
surface runoff contamination caused
genuine concern for disease outbreaks. In
addition, leaking underground storage tanks
had contaminated area aquifers with
gasoline, and a chemical plant leak had
contaminated an aquifer near one of the
small communities. As a disadvantaged
community, Jefferson County received a $6
million financial assistance package which
included 85 percent in principal forgiveness
from the DWSRF program and grant
assistance from the USDA Rural Develop-
ment program.  The multi-community
water system will provide safe,  reliable
drinking water to almost 900 families and
will consolidate  over 30 small,  unreliable
systems into one reliable system operated by
a nonprofit cooperative at a monthly cost of
about $25 per customer.  Ottowa County,
Ohio received a $21.2 million  loan to
consolidate seven public surface water
treatment plants and more than 115
privately owned ground water systems that
had significant problems with contamina-
tion. The new regional water system
serviced by a 6 million gallon per day
surface water treatment plant will provide
water to approximately 23,000 people.
"This is a problem I
have identified for
many years and have
been trying to take
action to do some-
thing about... (I)
credit (Ms.) Couver
and other community
volunteers with
helping build support
for the new water
system by spreading
the word about con-
tamination prob-
        — Dan MacDonald
        Jefferson County
        Health Depart-
        ment as quoted in
        the Tallahassee

                            F Programs
   (Based on data through June 30, 2000)
                      $ = Total Capitalization Grants Received in Millions of Dollars
                      (%) = Percentage of Total Grants Reserved for Set-aside Activities

                                    $28M (23%)
                                      $95M (14%)
                                      $20M (16%)
                                      $36M (31 %)

                                 $27M (28%)
                                $30M (26%)

                                   Each state has the flexibility to set aside
                                   up to 31 percent of its capitalization
                              grant to conduct activities and establish and
                              implement programs that place a strong
                              emphasis on preventing contamination
                              problems through source water protection
                              and encourage better system operations
                              through enhanced water system manage-
                              ment.  There are four general set-aside
                              categories—each of which carries a limit on
                              the amount of the capitalization grant that
                              can be used for activities eligible under that

                              Although the need to address infrastructure
                              projects through the revolving loan fund is
                              great, all states have recognized the impor-
Set-aside Categories and Eligible Activities
Administration and Technical Assistance
• Administer the DWSRF program and provide technical
  assistance to public water systems.
Small System Technical Assistance
• Provide technical assistance to small systems.
State Program Management
• Administer the state PWSS program.
• Provide technical assistance through source water
  protection programs.
• Develop and implement a capacity development
  strategy or an operator certification program.
Local Assistance and Other State Programs              15%*
• Delineate and assess source water protection areas.
• Provide loans to systems to acquire land or
  conservation easements.
• Provide loans to systems to assist in voluntary,
  incentive-based source water protection measures.
• Make expenditures to establish and implement
  wellhead protection programs.
• Provide assistance to systems as part of a
  capacity development strategy.
^States must provide a dollar-for-dollar match for expenditures made under this set-aside.
**No more than 10% per activity per capitalization grant.
tance of preventative measures and have
reserved a portion of their grants to conduct
activities that support their drinking water
programs. To date, approximately 16.5
percent ($445 million) of the total amount
of funds that have been provided to states
through capitalization grants ($2.7 billion)
has been allocated to set-aside activities.

States are using set-asides to directly fund
state programs, including managing the
DWSRF.  Approximately $55 million of the
$106 million reserved for state program
management activities is being used to
support public water system supervision
(PWSS) programs which must prepare to
implement new regulations addressing
contaminants in drinking water. States are
also using funds to develop and implement
new state programs required by the 1996
SDWA Amendments.  For example, each
state is required to develop or revise pro-
grams for the certification of drinking water
system operators and to implement a
capacity development program to ensure
that new and existing systems demonstrate
that they have the adequate technical,
financial, and managerial capacity to
operate safely.

The SDWA Amendments also require each
state to assess potential sources of contami-
nation at all public water systems within the
state. Approximately $115 million of the
$193 million reserved for local assistance
activities is being used to delineate source
water protection areas for public water
systems and assess potential sources of
contamination.  States are also providing

direct assistance to systems to address source
water protection by, for example, imple-
menting wellhead protection measures to
protect ground water sources of drinking
water or by providing loans to water systems
to acquire land or conservation easements to
ensure that sources of drinking water are
not impacted by land uses which could
introduce contamination to the source.

States are also using set-asides to provide
technical assistance to public water systems
directly or through a third party  Much of
this assistance is directed at small systems
which have greater problems maintaining
technical, financial, and managerial capac-
ity States have reserved $40 million for
technical assistance activities that specifi-
cally target systems serving 10,000 people
or less.
                                           DWSRF Set-Aside^
                                                        (in millions of $)
       Total Grants
       $2.7 (billion)
                  Local Assistance/Other
                  State Programs
                                                 State Program
   State Program Management Set-Aside
   (in millions of $)
   State Program
   Management $106
                             Local Assistance Set-Aside
                                                      (in millions of $)
        Development —,
Public Water
System Supervision
       Source Water
Wellhead  ,, /\
Protection  ,X
                                         Source Water
                                         protection   Loca| Assistance

Benefits  of Source
Water Protection
/ Protects public health

preserving wildlife areas, enhancing recre-
ational opportunities, and reducing flood
damage.  In Maine, the Auburn Water
District and Lewiston Water Department
received a loan for $570,000 to purchase
434 acres of land in the watershed of the
"Basin," a small pond which drains  directly
into Lake Auburn, which serves as a source
for the two water systems. The systems
collaborated with the Lewiston-Auburn
Watershed Commission and the
Androscoggin Land Trust (ALT) and
negotiated a joint easement under which the
Commission will review the landowner's
forest management plan to ensure that best
management practices for water quality are
used and ALT will share overall easement
monitoring responsibilities.  By protecting
land around Lake Auburn, the water
systems will be able to maintain water
quality standards.

T  Implementing source water pro-
   tection measures
Protecting source water by preventing
contamination is in the best interest of
water systems.  California has reserved more
than $8 million from its capitalization
grants to support loans to community water
systems for source water protection  projects
that are directly related to protecting
vulnerable water sources from contamina-
tion.  Types of projects that may be  funded
include fencing cattle and other animals
from sensitive areas, restricting  public access
to critical areas in protection areas, evaluat-
ing agricultural practices and educating on
best management practices, installing signs
at boundaries of zones or protection areas,
and building structures to protect the source
by diverting contaminated runoff.

Facilitating Partnerships
The provision of safe drinking water relies
on the coordinated efforts of partners who
can aid and benefit from each other.
Partnerships allow states to
conserve resources by working
from an existing framework to
provide  immediate assistance
rather than spending time
developing new programs that
may replicate other efforts
within the state.  Furthermore,
through the consolidation of
financial resources, partnerships
increase the amount of assistance
that states can provide to

T  Partnering with colleges, universi-
   ties, and extension services
Continuing education is critical in ensuring
that owners and operators of water systems
are knowledgeable about the newest tech-
nologies and regulations affecting the water
industry. Pennsylvania considers  education
to be so important that it requires each
DWSRF borrower to submit a plan every
five years during the period  of loan repay-
ment (generally 20 years) detailing the
system's continuing education plans. Other
mid-Atlantic states (Delaware, Maryland,
Virginia, and West Virginia) also have
established relationships with technical
assistance providers at educational centers to
provide  continuing education credits for
system operators.
Benefits  of Partners
Uses existing frameworks and
Leverages resources by combining
funds with other agencies or organi-

Benefits of Enhancing
System Capacity
 J Promotes greater long-term
   compliance with safe drinking
   water standards
 / Helps systems provide reliable
   safe drinking water in a cost-
   effective manner
T  Partnering with existing technical
   assistance providers
In many states, there are organizations that
have been providing technical assistance to
small rural water systems and districts for
years. State affiliates of the National Rural
Water Association (NRWA) and Rural
Community Assistance  Programs (RCAP)
offer a critical link in helping small utilities
provide  safe drinking water to their custom-
ers. New Jersey is working with the state's
RWA and the state section of the American
Water Works Association to develop an
outreach program to help systems determine
the best method of treatment, explain the
          DWSRF program, and help
          systems apply for DWSRF
          funding.  In addition, many
          states (North Dakota, Kansas,
          and Vermont to name a few) are
          entering into contracts with
          their RWA and RCAP organiza-
          tions to target assistance to small
          systems. An example of the type
          of activity that states are con-
          ducting in working with these
          providers is the  funding of
          circuit riders who travel between
          water systems to provide techni-
          cal assistance to operators.  In
          Georgia, three circuit riders were
funded through an ongoing contract with
the state's RWA to help  systems improve
their technical and managerial ability to
comply  with state and federal drinking
water regulations.  The circuit riders made
more than 640 field visits to water systems
during state fiscal year 2000.  Ninety-four
percent  of the visits were to systems serving
fewer than 3,300 persons and 69 percent
were to privately owned systems.

T  Partnering with other agencies
   and environmental groups
The activities that states must undertake to
conduct source water assessments naturally
lend  themselves to developing partnerships.
Some assessments require expertise that may
not be readily available within a state's
drinking water program to determine the
susceptibility of source water to contamina-
tion in areas with complex geological
conditions. Therefore, many states are
partnering with the U.S. Geological Survey
to provide assistance in completing the
required assessments. Because implement-
ing protection measures often begins at the
local level, educating the public about the
importance of drinking water protection is
critical.  Pennsylvania has awarded grants to
local environmental  outreach groups to
develop and implement community educa-
tion programs to promote source water

Enhancing Technical,
Financial, and Managerial
It is important to ensure that public water
systems improve their technical abilities,
managerial skills, and financial resources so
that they can provide safe drinking water to
the public consistently, reliably,  and  cost-
effectively. By enhancing system operations
and ensuring the capacity of public water
systems, states can promote greater long-
term compliance with the SDWA.

T   Helping systems prepare for
    infrastructure improvements
Many state DWSRF programs have seen
small systems drop out of consideration for
loans because the systems have not done
adequate planning to determine what type
of project they need to undertake to im-
prove their infrastructure. Virginia offers
planning and design grants of up to
$25,000 to rural, financially stressed
community water systems serving up to
3,300 persons. The grants can be used to
fund the preparation of preliminary engi-
neering plans and specifications or to
undertake similar technical assistance
projects. New Mexico has developed a
team approach using staff from the Envi-
ronment Department, Finance Authority,
regional Environmental Finance Center,
and engineering consultants to better
prepare small systems for projects.  The state
is helping systems that are targeted for
assistance prepare preliminary engineering
plans and specifications,  conduct environ-
mental reviews, and undertake similar
technical assistance projects. The goal is
that these funds will assist water system
owners in preparing applications for
assistance from the DWSRF program and
other funding sources for infrastructure

v   Reducing the number of small
    water systems lacking capacity
Almost 60 percent of community water
systems serve fewer than  500 people. These
very small water systems  often lack the
economies of scale that come with  a larger
customer base to maintain adequate capac-
ity.  Several states are developing strategies
to reduce the number of small systems by
encouraging consolidation and
regionalization of water systems. Utah is
using set-aside funds to implement regional
planning for small systems on a county-
wide basis.  As part of the regional planning
process, recommendations are made to
small systems to regionalize operations or to
consolidate with neighboring systems as

T Helping systems manage their
Many small systems lack the resources to
maintain adequate financial accounting
systems and develop comprehensive busi-
ness plans.  Comprehensive business plans
can be used to generate reliable information
about costs and other issues needed to make
sound decisions about a water system's
future. Virginia is using funds to help small
systems develop comprehensive business
plans. The state has contracted with the
Southeast Rural Community Assistance
Project, Inc. (SE/RCAP) to provide hands-
on assistance in developing business plans
for existing waterworks, first targeting the
high-priority, vulnerable systems.

Four Years of
                        The past four years have seen consider-
                         able progress in getting the new
                    DWSRF program up and running. States
                    have done an impressive job in implement-
                    ing their DWSRF programs. Over a short
                    period of time they had to obtain legislative
                    authority, develop priority systems for
                    ranking projects, and begin identifying
                    projects for funding. Their efforts are
                    paying off, as demonstrated by the volume
                    of loans that have been made and examples
                    of high priority projects addressing public
                    health protection that have been funded.
                    While states have found that many small
                    public water systems require significant
                    amounts of assistance to get through the
                    loan application process, they have been
                    able to provide more than 75 percent of
                    their loans to these systems.  Public water
                    systems  are using DWSRF assistance to
                    address much-needed projects that they
                    may have postponed in the past due to a
                    lack of affordable financing.
Set-aside funds are being used to help states
develop and implement new programs
required by the 1996 SDWA Amendments.
States are using funds to complete source
water protection assessments of public water
systems and are looking to provide assis-
tance to help systems address potential
sources of contamination.  The technical
assistance that states are providing is helping
public water systems improve their techni-
cal, financial, and managerial capacity and
prepare them to receive DWSRF assistance
to make infrastructure improvements.

Although the DWSRF program has con-
tributed to the efforts to provide safe
drinking water, both states and public water
systems will face challenges in the future.
The recognition that the quality of drinking
water can be impacted by contamination
from many different sources means that
states will have to work closely with other
governmental entities and private business
                   J3WSRF Program At-A-Glance
                   (through June 30, 2000)
                    Total Funds Appropriated
                    (Fiscal Year 1997-2OOO)
                            $3.6 billion
                    Total Capitalization Grants to States
                            $2.7 billion
                    Percentage of Total Grants Reserved
                    for Set-aside Activities
                         ($445 million)
                    Total Loans Made to Systems
                           1,2OO loans
                          ($2.3 billion)
                    Percentage of Total Loans
                    Awarded to Small Systems
                         ($932 million)

owners to ensure that measures are being
put into place to prevent contamination.
States will also need to commit additional
resources to implement new regulatory
requirements and to provide better outreach
to water systems and the public as they
work to ensure that all citizens have access
to safe sources of drinking water.  Public
water systems will need resources  to comply
with existing and new regulations and
maintain their ability to provide safe
drinking water in the face of aging infra-
structure, shifting populations, and avail-
ability of water.

The DWSRF program is a significant tool
available to states and water systems to meet
the challenges of the future.  Addressing the
issues and great needs associated with
providing safe drinking water will require a
committed effort on the part of federal,
state, and local governments as well as
private businesses.
Continued investment in the
DWSRF program will help states
and public water systems ensure
that our drinking water is safe and
affordable. Because every child in
any community in America should
be able to turn on the tap and enjoy
a glass of safe, clean drinking water.
       c                     >

Where to go for
more information about
the  DWSRF program
                   Visit the EPA Office of Ground Water and Drinking Water
                   website at www.epa.gov/safewater/dwsrf.html to find -

                   Policy and Guidance Documents ~ Fact Sheets ~
                   Reports ~ Funding Information ~ EPA & State Contacts ~
                   Links to State Programs


                   Contact the Safe Drinking Water Hotline at 1 -800-426-4791