&EPA
  United States
  Environmental Protection
  Agency
Office of Water
(4204)
Washington, DC 20460
EPA 832-F-98-005
October 1998
  CLEAN WATER
  ACTION PLAN
Funding  Estuary Projects  Using the
Clean Water  State Revolving  Fund
The Estuary/CWSRF Connection
To counteract the serious threats to estuaries across the
country, EPA would like to see the Clean Water State
Revolving Fund (CWSRF) become a major source of
funding  for estuary protection.  The  51  CWSRF
programs  currently  issue  about  $3  billion  in  loans
annually.  SRF loans are issued at below market rates
(0% to less than market), offering borrowers significant
savings over the life of the loan.

Who May Qualify
Included in a long  list of eligible loan  recipients are
communities, individuals, citizens groups, and nonprofit
organizations. Since the program is managed largely by
the states, project eligibility may vary according to the
priorities within each state. Contact  your state's SRF
program for details.

History
In creating the  CWSRF in 1987, Congress envisioned
that it would be able to fund virtually  any type of water
quality project, including nonpoint source, wetlands,
estuary, and other types of watershed projects, as well as
more traditional municipal wastewater treatment systems.
Use of the  CWSRF for estuary projects and activities is
specifically addressed under Sec. 601, Title VI of the
Clean Water Act.

Capacity of the CW-SRF
The 51 CWSRF programs (one in each state and Puerto
Rico) are set  up  like banks.   Federal  and  state
contributions are used to capitalize or "set-up" the banks.
These assets, in turn, are used to make  low or no-interest
loans for water quality projects. Funds are then repaid to
the CWSRFs over terms as long as twenty years. Repaid
funds are  then recycled to fund other  water quality
projects.

The CWSRF has more than $25 billion in assets and has
issued more than $20 billion in loans since  1988.
Currently, th&JGWSRF_is-fo^^gjKacrIy $3 billion worth
of water quality projects annually.  That is more than
                         100 times the available EPA grant funding for the
                         National Estuary Program (NEP).

                         Loans vs. Grants
                         Many people believe they would rather have a grant.
                         Most state and local water quality officials are  more
                         familiar  with  grants   and,  consequently,  many
                         misconceptions persist. In fact, a loan may be a better
                         deal. Why?

                         First, No cash upfront.  Most grant programs require
                         significant cost shares (as much as 40% or more). An
                         SRF loan can cover 100% of project costs with no cash
                         up front.

                         Second, Significant Cost Savings.  SRF loans provide
                         significant cost savings over the life of the loan. An SRF
                         loan at 0% interest will cost approximately 5 0% less than
                         the same project funded by a grant program where the
                         50% cost share (match) is financed by a commercial
                         loan at the market rate of 7.5%.

                         Third, Streamlined Federal Requirements. Financing
                         a  project with  an SRF loan means  fewer federal
                         requirements than most federal grant programs. Plus, the
                         CWSRF  program   staff  are  experienced  in helping
                         applicants through the loan application process.  They
                         can also provide  a vast amount of technical assistance.

                         The National Estuary Program and the SRF
                         The National Estuary Program (NEP) was established by
                         the Clean Water Act Amendments of 1987 (section 320)
                         to protect nationally significant estuaries threatened by
                         pollution, development,  and/or  overuse.  There are
                         currently 28 estuaries in the NEP nationwide. Each local
                         NEP was nominated by their state governor(s) and
                         consists of representatives from the government agencies,
                         citizens, businesses,land the scierSififeScommpiit^.
                         Together, these  stakeholders identify :Jhe; priority
                         problems in the estuary and develop ^Comprehensive
                        7 Conservation ajadManagement Plaic(CCMP) to address
                        Hie problems.  Common issues among the NEPs include

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excess nutrients, toxic chemicals,  habitat  loss  and
degradation, pathogens, declines in fish  and wildlife
populations, and alteration of natural flows.

                             ^;,--.  _=!r..
Projects or activities listed in an approved CCMP are
eligible  for  funding under the CWSRF. Funding of
estuary  management projects are one of three  major
categories of projects (others include publicly-owned
wastewater  treatment facilities and  nonpoint source
projects) eligible for funding under the CWSRF. The
EPA has been encouraging the states to expand the use
of their  CWSRF to include the widest variety of water
quality projects consistent with the highest priority water
quality problems. Current nonpoint source and estuary
protection  projects/activities  being  funded  include:
conservation tillage  equipment,  structural  erosion
controls, agricultural waste compost  facilities, habitat
restoration, riparian zone protection, conservation district
stormwater controls, and septic system upgrades.

Success Stories
Washington State  has been  a forerunner in funding
estuary projects using their CWSRF.  Specifically, they
have  earmarked  10%  of their  CWSRF for estuary
conservation and management. Another 10% is allocated
for nonpoint source projects addressing problems such as
stormwater runoff, inadequate  septic systems, excessive
nutrient loads, and other contaminants which may also
contribute to estuary cleanup.  This allocation was
established in 1989 underthe Washington Administrative
Code  as a result of a number of factors, including the
efforts of interest groups in the Puget  Sound Basin.

Their CWSRF program is managed by the Washington
State  Department of Ecology.   However,  the  Puget
Sound  Action   Team  (PSAT),   which   oversees
implementation  of the Puget  Sound Plan  under the
National Estuary Program, has a role  in the selection of
estuary projects. The PSAT provides comments  on the
Puget Sound Management Plan to the Department of
Ecology.  These  comments  are  considered  in  the
development of priorities by Ecology's regional offices,
which, in turn, are  considered in the development of
statewide priorities.

Washington State has been exemplary in demonstrating
many uses of the CWSRF for estuary projects. In all,
Washington has funded 16, with more than $7.5 million
in SRF loans.  Their pursuit of nontraditional CWSRF
projects ranges from stormwater system enhancement
and  septic system  upgrades to  wetlands purchases.
Projects include:

The City of Kent constructed a standard flow restriction
structure with their $1.5  million CWSRF  loan.  This
presettling basin was designed to reduce suspended solids
and to capture floatables and other debris. A wet pond
within the main detention pond will further reduce
turbidity and will remove additional suspended solids and
heavy metals, thus providing opportunities  for nutrient
uptake through planted vegetation and for infiltration.

Island County Public Works Department intends to
replace the Glendale Creek's lower reach system that was
damaged during a storm in December 1996. The Creek's
lower reach conveyed by 600 feet of pipe and catch
basins through the Glendale Beach community to Puget
Sound ruptured  and is being replaced with an open
channel with  the County's $784,000 SRF loan.  The
concerns included in this project are nonpoint source
pollution, flood protection, and removal offish passage
barriers.

The City of Port Townsend is well-known for using
their  $500,000  SRF  loan  to  purchase  the valuable
Winona Wetlands.  SRF funds will  be used for land
acquisition and related activities to preserve the Winona
Wetlands, its buffers, and the critical drainage corridor
between  Winona Wetlands and the  Chinese Gardens
Lagoon.   This wetland is part of a  larger system of
hydrologically connected wetlands discharging into the
Strait of Juan DeFuca.

The $300,000 CWSRF loan issued to the Bremerton-
Kitsap County Health District is being used to provide
financial assistance to homeowners  to  repair failing
sewage disposal systems and to small farms to implement
best management practices for protecting water quality.
The area of assistance will be county-wide, with priority
being given to protection of drinking water and marine

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shoreline areas.  Costs of the program will be covered by
a combination of permit fees and interest collected on
loans.

Other Innovative CWSRF Projects ...
These projects do not fall under an estuary management
plan, but help demonstrate the flexibility inherent to the
CWSRF program.

California has  also pursued some creative, nonpoint
source funding projects using their CWSRF.  The Napa
County Resource Conservation District (Napa RCD)
received a loan that will fund their Huichica Creek
Vineyard  Sustainable  Agricultural Project.      The
project's goal  is to develop  an outdoor  classroom
designed to encourage best management practices in
perennial crops.  The loan will be used to:

•  install surface drainage improvements
•  restore  wetland areas between vineyard blocks,
   including construction of weir, planting native
   vegetation, and habitat structures for waterfowl and
   raptors
•  stabilize creek beds
•  restore  riparian vegetation

The overall project incorporates techniques that include
long-term  monitoring  of  water quality, soil nutrition,
insect pest populations, biodiversity changes, and the
economics of the vineyard.  In  addition to the CWSRF
loan, the Napa RCD received a CWA §319 (h) grant to
assist in implementing the project.

Oregon also has taken advantage  of its  CWSRF for
many nontraditional projects. In the Town of Lakeview,
the CWSRF is financing a project to expand and upgrade
a lagoon wastewater treatment system.  Included in this
project is the construction of a wetland to improve the
natural  treatment system.  The CWSRF funded the
construction of a wetland in the City of Mount Angel to
further  treat effluent  from another lagoon treatment
system.  The City  of Woodburn used the CWSRF to
fund the construction of a wastewater treatment system
using a poplar plantation for phytoremediation.
       Conservation Easement Purchase

       The Ohio EPA  recently awarded a low-
  interest SRF loan to the Nature Conservancy to
  foster creek bank  conservation.  The Nature
  Conservancy received the  $110,000 loan to
  purchase a permanent conservation easement
  along Brush Creek in Adams County,  Ohio.
  This is the first time the Nature Conservancy
  has obtained financing for  stream  restoration
  and protection from a State Revolving Fund.
       Ohio  EPA's water   quality   standards
  classify this section  of Ohio Brush Creek as
  almost achieving the exceptional warm water
  aquatic habitat classification. The  Creek is a
  significant state-wide water  resource and is
  known to  contain four  endangered  aquatic
  species, including the club shell mussel.
       The Nature Conservancy will  purchase a
  154-acre permanent conservation easement on
  property immediately adjacent to Brush Creek.
  Conservation  easements  allow  owners  to
  voluntarily place permanent restrictions on how
  their property will be used.  "Conservation
  easements are an effective way to  protect the
  quality of streams and their adjacent areas,"
  said  Ohio  EPA   Director  Donald   R.
  Schregardus. "Restoring and preserving these
  riparian areas is an important part of controlling
  contaminated runoff that threatens water quality
  and stream habitat. This type of loan is a new
  tool for protecting and preserving Ohio's water
  resources.   We hope other state  and  local
  organizations will consider using the [SRF] loan
  program in their  areas to  help protect our
Sources of Loan Repayment
Many users of the CWSRF have demonstrated a high
level of creativity in developing sources for their loan
repayment. The source of repayment need not come
from the project itself. Some possible sources include:

•   fees paid by developers on other lands
•   recreational fees
•   dedicated portion of local, county, state tax fees
•   property owner's ability to pay
•   donations or dues made to nonprofit groups and
    associations

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    stormwater management fees
    wastewater user charges

                      "" Some examples:  The Nature
                      ;. Conservancy  in  Ohio  is
                      .., repaying their loan through
                      •• their  general   operating
                       account,  which   includes
                       membership   dues   and
                    Vr fundraising assets.  The City
                     •' of   Port   Townsend,
                    ••\;' Washington used part of their
                    :V;, $5 per household stormwater
                       utility fee.
Challenges
Most states use their CWSRF resources primarily to
finance  large municipal wastewater systems.  As the
CWSRF steps up its effort to fund projects from the
National Estuary Program,  several  challenges have
emerged, including:

•    Misconceptions and lack of public outreach
     regarding the use of SRF for estuary projects
•    Inexperience in issuing loans for estuary projects

To  overcome some of these limitations,  Washington
State's  Department of Ecology  actively  markets the
CWSRF to local governments.  Before each  funding
cycle, the Department conducts statewide workshops to
describe whatprojects are eligible, what kinds ofprojects
have been most successful,  and  how to fill out loan
applications.

•    Restrictive state legislation or administrative
     provisions.  Several states have laws prohibiting
     loans to individuals.

Once again, it pays to be innovative.  For example,
Washington State developed a system where they lend
CWSRF money to counties.  These counties, in turn,
conduct outreach, develop plans, and eventually disperse
the   loan  money  to  various projects  within their
geographic area, much like a "mini-SRF" program. The
counties are responsible for paying back the loan to the
state. Given that the legislative burden is less rigorous
on the county level, this process allows greater flexibility
in distribution of loan funds.
EPA  has  been encouraging  the  states to use their
CWSRF resources to finance the widest array of water
quality projects as appropriate to effectively address the
highest priority problems in targeted watersheds. Those
interested in receiving CWSRF funds for estuary projects
must learn how their state CWSRF program works, and
participate in the state's annual process that determines
which projects are funded.

  For the Clean Water State Revolving Fund list of
    state contacts or more information, contact:

    The Clean Water State Revolving Fund Branch
        U.S. Environmental Protection Agency
         401 M Street, SW (Mailcode 4204)
             Washington, D.C. 20460
    Phone: (202) 260-7359 Fax:  (202) 260-1827
          E-mail: srf info@epamail .epa.gov
           Internet:  www.epa.gov/OWM
 For a list of National Estuary Program contacts or
            more information, contact:

          The Coastal Management Branch
       U. S. Environmental Protection Agency
        401 M Street, SW (Mailcode 4504F)
              Washington, DC 20460
    Phone: (202) 260-6502  Fax: (202) 260-9960
   Internet: www.epa.gov/owow/estuaries/nep .html

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