United States
Environmental Protection
Agency
Office of Water
(4204)
Washington, DC 20460
EPA832-F-99-001
June 1999
Funding Decentralized Wastewater Systems
Using the Clean Water State Revolving Fund
Clean Water State Revolving Fund is a low
JL interest or no interest source of funding for the
installation or repair and upgrading of "decentralized"
waste-water systems in small-town, rural, and suburban
areas. "Decentralized" wastewater systems include:
onsite disposal systems such as septic sj/stems with
drainfields, alternative systems such as mounds and
cluster systems. Cluster systems are designed^to treat the
wastewater from two or more dwellings or businesses,
but not entire communities. The 1990 U. S. Government
Census indicates that 25 million households use
decentralized systems. In 1995, according to the Census
Bureau, two-and-one-half million systems malfunctioned.
This estimate is probably conservative. It is anticipated
that as our communities continue to expand into suburban
and rural areas, that the number of decentralized systems
and associated system failures will increase.
Background
Inthe 1970s and 1980s, large federal investments in the
construction of wastewater facilities focused primarily
on large, centralized collection and treatment systems.
This effort did not recognize the benefits of properly
managed decentralized wastewater systems in achieving
the goals of the Clean Water and Safe Drinking Water
Acts.
Source: National Small Flows Clearinghouse
Benefits of Properly-Managed
Decentralized Treatment Systems
Properly-managed decentralized wastewater
systems are viable, long-term alternatives to
centralized wastewater facilities, particularly in
small and rural communities.
Why install a decentralized system?
Because they
* protect public health and the
environment.
Properly managed decentralized systems can
provide the treatment necessary to protect
public health and the environment. They can
be sited, sized, designed, installed and
operated to meet all federal, state, and local
water quality requirements.
»• are appropriate for low density
communities.
Decentralized systems are usually the most
appropriate technology and most cost-effective
option for rural areas and much of the urban
outskirts.
*• are appropriate for varying site conditions.
Decentralized systems can be designed for a
variety of site and soil conditions, including
shallow water tables, bedrock and small lot
sizes.
Problems Associated With Decentralized
Wastewater Systems
In many existing communities, the initial decision to
install a particular system (i.e., to hookup to a
centralized system or to use a decentralized system) is
primarily made in the private sector by the developer of
a property, based on affordability, profitability, and
availability of a central sewer system. In small
communities with limited or no centralized system,
developers typically choose the most common,
affordable and easily installed onsite systems. Once
installed, these conventional onsite systems are often not
inspected or maintained except in emergency situations
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up into homes and backyards.
Capacity oftkeCWSRjF
disco
systems can cause contamination of
dwater and nearby surface waters. Many state and
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gulatory codes have not been updated to
ge or eliminate inade^uatepractices and/or allow
of
•N
•ationally, the CWSRF has in excess of $27 billion
in assets and has issued $23 billion in loans since
988
currently is
billion worth of water quality projects annually.
Clearly, the cwSRF can ge a powerful financial
formance. As a result, small communities may incur resource for funding decentralized systems projects-
significanteconomic burdens where alternative
vater systems are not considered or permitted.
Who May Qualify
ilticjjwide data show mat conventional Qnsite system
! attributed to the following:
CWSRF to fund point source (§212), nonpoint
sourc^^§31^)^^nd" estuary1 "" 7§320) ^rejects""
IlilllllH^^
system projects that are solutions to
and/or site evaluation
ienTIelection and design
nonpoint source problems may be eligible as a §319 or
ation practices
aSofncient opefatipjiand maintenance
§320 project. Included in a long list of eligible CWSRF
loan recipients for NFS and estuary projects are
community groups, individuals, conservation districts,
profit organizations. Since the program is
managed by the states, project funding varies according
tie Clean Water State Revolving Fund (CWSRF)
Dgrams in each state and Puerto Rico operate like
federal and state contriputions are used
Ililize or set up the programs. These assets!, in turn,
I to make low or no-interest loans for important
to the priorities, policies, and laws within each state.
Eligible applicants also vary by state.
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Given that each state administers its own CWSRF
program differently, your first step in seeking a
uality projects. Funds are then repaid to the
'SRFs over terms as long as twenty years. Repaid
CWSRF loan is to contact your state CWSRF
representative. The list of CWSRF state representatives
to
wter
projects. can be found on our website (www.epa.gov/owm). Here
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1IIIIIIIIB
; can help supplement the limited
jsources currently available for decentralized
terns. Projects mat may be eligible for
are some suggested questions to ask your representative:
1. Has the State committed to funding decentralized
iinding include
•Jew
Ill
fern!
iem
tern installation (single and clustered
systems in its CWSRF Intended Use Plan (IUP)?
• whsLSfBjjg JQ, Jejp get these systems listec
on the" ffjpT
to correct an existing nonpoint source
3. Can an individual or private entity receive a CWSRF
' I'c " """ ' ' " 1""""
acement, upgrade, or modification of inadequate 4. If not, can I receive a
joan through my
ig systems
county?
gement entity*
ablis
.lEIlllll
(permitting
fees, etc.)
Your CWSRF state representative will be able to guide
you through the proper channels. In addition, you can
3rtaj associated.. wift __ centralized _ gajiagement
isle.:
refer to the Ohio case study under the "Success Stories"
, trucks, storage buildings, spare parts, section to obtain further details on a popular approach
implementing a CWSRF/decentralized systems state
2e the. eslablishment or designation of a
-for" "all ..... decentralized projects.
Sources of Loan Repayment
T"' ach state must approve a source of loan repayment
ibe management entities include cities and
as, special governmental units (sanitary districts, JL_/as part of the application process. Though finding
' service districts,tetcO, public or private utilities, a source of repayment may prove challenging, it does
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have demonstrated a high level of creativity in developing
sources of repayment. The source of repayment need not
come from the project itself.
Some potential repayment sources include
4 property owner's ability to pay (determined
during loan application)
4 fees paid by developers
4 recreational fees (fishing licenses, entrance fees)
4 dedicated portions of local, county, or state taxes
or fees
4 donations or dues made to nonprofit groups
4 stormwater management fees
4 wastewater user charges
Success Stories
Tn August 1997, the Ohio EPA and the Mahoning
JL County General Health District entered into an
agreement to create a linked deposit program to make
low-interest loans available to individual homeowners in
need of upgrading or replacing their home sewage
disposal systems.
The process for obtaining a CWSRF loan is as follows:
1. The homeowner obtains a permit, which contains
specifications on the proper installations, operation,
and maintenance of the onsite system, from the
county.
2. The homeowner is then issued a certificate which he
or she can take to any bank that participates in the
Linked Deposit Program.
3. The lending institution, using its own criteria, decides
whether or not to offer the applicant a loan and at
what interest rate and term. j
4. The lending institution then notifies the Ohio EPA.
The Agency then deposits the loan amount in the
institution at a reduced interest rate.
5. Savings from the reduced interest rate are lthen passed
on to the loan applicant.
Thus far, there have been 10 loans made to individuals
totaling $53,335. Over the nextthree years, Ohio's EPA
Water Pollution Control Loan Fund will make $ 1,425,000
available for use in this program. A similar program is
being launched in Cuyahoga County, Ohio with
$1,950,000 earmarked for the first three years of the
program.
In June 1995, the Maine Municipal Bond Bank
(MMBB) and the Maine State Housing Authority
(MSHA) entered into a Memorandum of Understanding
(MOU) to make low interest loans to finance septic
systems for owner-occupied, single-family residences
through the MSHA loan programs. The funds are used
for the rehabilitation or replacement of septic systems.
The interest rate is set at 1% with a maximum term of
20 years. The MSHA remits to the MMBB on a
monthly basis any repayments for loans received during
the prior month, which are put back in the CWSRF.
Through November 1998,294 loans have been made to
individuals totaling $ 1,277,152.
In 1994, Pennsylvania instituted a program to fund on-
lot sewage disposal systems for the individual
homeowner using their CWSRF. The Pennsylvania
Infrastructure Investment Authority, the Pennsylvania
Housing Finance Agency, and the Pennsylvania
Department of Environmental Protection collaborated
on the development of this special funding program,
which allows a homeowner to borrow up to $25,000 at
an interest rate of 1% per annum to fund the
rehabilitation, improvement, repair, or replacement of an
existing on-site treatment system. These loans are
processed through participating local lending
institutions. To date, this program has provided loans
totaling $1.8 million to 230 property owners across the
state.
In 1995, Minnesota created several sub-programs
within its CWSRF to address nonpoint source pollution.
Once such program is the Tourism Loan Program,
administered through the Department of Trade and
Economic Development, which loans CWSRF funds to
private owners of small lake resorts for replacement or
upgrade of onsite treatment systems. The loans are
made in participation with a local bank, with the state
financing 50% of the costs at 2% interest and the bank
financing the remaining 50% at a market rate. The
program has lent $368,401 for 28 projects. The
Department also administered the Small Cities Loan
Program, which provided CWSRF loans at 0% to small,
unsewered communities to upgrade or replace all failing
onsite systems. In 1997, the program lent $1.2 million
to six. communities. The Small Cities program has since
been replaced by other funding mechanisms for small,
unsewered areas.
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lengesAi
USDA
tie tPA encourages states to open their CWSRFs to
5 widest variety of water quality projects while still
eir highest priority projects. Those
Water and Waste Disposal Loans and Grants are
available to develop water and waste disposal (including
solid waste disposal and storm drainage) systems in
lllHjEESilH
i^^
plenienimg or upgrading an decentralized
tern should seek out their CWSRF program,
rural areas and towns with a population not in excess of
10,000. The funds are available to public entities such
ibw their state program works, and participate in
annual process that determines which projects are
as municipalities, counties, special-purpose districts,
Indian tribes, and nonprofit organizations. Grant funds
nded.
are,.availableto_reduce water and waste disposal costs to
DT_.rural users, Grants may be made
are information about the Clean Water State
Igvolving Fund, or for a program representative in your
ant
j • I''T . V / I'•
for ,up to 75 percent of eligible project costs in some
cases. RUS ajso guarantees water and waste disposal
banks and other eligible lenders. The
lean Water State Revolving Fund Branch
IlilU
. S. Environmental Protection Agency
borrower/grantee. Financed decentralized systems
would have to be owned and managed by the RUS
ilcode4202)
borrower/grantee.
260-7359Fax:(202)26
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