United States
                         Environmental Protection
                         Agency
                            Office of Water
                            (4204)
                            Washington, DC 20460
                          EPA 832-F-99-057
                          October 1999
             DA   Funding of  Small  Community
             ^"*  Needs Through  the Clean
                         Water State  Revolving Fund
 Program Overview: How SRF Works
 The Clean Water State Revolving Fund (SRF) pro-
 gram was authorized by Title VI of the  Clean
 Water Act (CWA) Amendments of 1987. The SRF
 program replaced  the long-running  Federal
 Construction Grants program providing indepen-
 dent and permanent sources of low-cost assistance
   Did you know ... ?

     The following states distributed the most
      SRF funding to small communities since
      1988 (in millions):
      Pennsylvania
      Ohio
      Texas
      New Jersey
      New York
$376.7
$334.5
$321.2
$219.6
$214.5
      Small communities have received about 23
      percent ($5.2 billion) of the total available
      SRF funding since 1988.

      3,897 assistance agreements (loans) have
      been awarded to small communities since
      1988.

      States in EPA Regions 3 and 5 have awarded
      the most assistance agreements to small
      communities; 953 and 741 respectively.1
for water quality infrastructure projects. EPA pro-
vides "seed money" to all 50 states and Puerto
Rico to capitalize state loan funds. States adminis-
ter the SRF program to provide financial assis-
tance to local communities.

Low interest loans are the primary form of SRF
financial assistance, which can also include pur-
chasing insurance or guaranteeing  loans. The
"revolving" nature of the SRF is such that as loan
payments are made, funds are recycled to support
additional water quality projects. Total assets of
the SRF program exceeded $27 billion in 1998.

SRF funding allows states to address their highest-
priority water quality needs. Funding is most com-
monly used to support wastewater treatment sys-
tems (including decentralized systems), nonpoint
source controls, and estuary protection activities.


Funding Trends
Since 1988 the SRF has lent $22.9 billion to com-
munities nationwide. Small communities (10,000
or fewer people) account for $5.2 billion. Very
small communities (3,500 or fewer people) have
received 44 percent of that $5.2 billion. Table 1
provides a state-by-state summary of loan dollars
and agreements. This information  was  compiled
from the SRF database maintained by EPA.

Figure 1 summarizes the distribution of SRF dol-
lars to small communities relative to total  SRF
1 EPA Region 3 States: Delaware, District of Columbia, Maryland, Pennsylvania, Virginia, and West Virginia. Region 5 States: Illinois,
Indiana, Michigan, Minnesota, Ohio, and Wisconsin.

-------
      Figure 1. Relationship Between SRF Dollars to Small
             Communities and Total SRF Dollars
     53,500
     53,000
     52,500
     52,000
     51,500
    .51,000
      S500
        SO
                      Reporting Year
funding during the past 11 years. Certain states
may provide a higher percentage of their total state
allocation to small communities, but  their total
SRF allocation is smaller than other states. Small
communities averaged  23  percent of  total SRF
funding with some annual variability; since 1993
small communities have received from 18 to 29
percent of the total on an annual basis. SRF fund-
ing to small communities has nearly doubled from
$456 million in 1993 to $866 million in 1998.

SRF assistance to small communities also may be
evaluated in terms of the  number of  assistance
agreements  (loans). Only two states  had capital-
ization grants in SRF's inaugural year (1988) and
only three agreements  were awarded  that year.
More states applied in 1990 and, as Figure 2 illus-
trates, the number of agreements has  risen steadi-
ly since then.  In 1998,  1,139 SRF  assistance
Agreements  were awarded, with 701  of those
going to small  communities. A total of 3,897 of
6,816 SRF assistance agreements has  been award-
ed to small communities since  1988.

While small communities received about 23 per-
cent of SRF dollars, they account for 57 percent of
SRF agreements awarded between 1988 and 1998.
Small communities have never received less than
50 percent of the total number of loans. The appar-
ent disparity between percentage of agreements
and percentage of dollars indicates that loans to
small communities are usually for lesser amounts
of money than loans to large ones. A possible
explanation for the smaller awards is that relative-
ly smaller and less expensive wastewater treat-
ment systems are being built for communities of
10,000 or fewer people.

Although SRF funds a portion of wastewater treat-
ment needs,of small communities, their needs are
relatively large. EPA's 1996 Clean Water Needs
Survey (CWNS) says the total documented need
for wastewater treatment and  collection systems
for small communities amounts to $13.8 billion.
The 1990 U.S. Census Bureau data indicate that
more than 80 percent of the houses in the United
States without access to wastewater treatment are
in small  communities.  Figure 3 shows  the costs
associated with specific categories of  need  (as
they are defined by the Needs Survey) and reveals
that small communities clearly have the greatest
need for new collector sewers and secondary treat-
ment.  Each  of these needs will require approxi-
mately $4 billion  of small community funding
nationwide.

The Needs Survey states that small communities
with limited financial, technical, administrative,
and legal resources encounter difficulties qualify-
ing for and repaying SRF loans. Small  financial
bases limit the ability of small and rural commu-
nities to  finance wastewater projects. Many  of
these communities  also  lack access  to private
credit markets. Consequently, these communities
may delay addressing their needs.
    Figure 2. Relationship Between SRF Agreements with
      Small Communities and Total SRF Agreements
    1400
    1200
    1000
    800
    600
    400
    200
      0
                    Reporting Year

-------
                    Figure 3. Documented Needs of Small Communities by Clean
                                 Water Needs Survey Need Category
z
CM
O


I
SB
u
            Combined Sewer Overflows

               New Interceptor Sewers

                New Collector Sewers

        Sewer Replacement/Rehabilitation

           Infiltration/ Inflow Correction

                  Advanced Treatment

                  Secondary Treatment
                                       500    1,000    1,500   2,000  2,500   3,000   3,500  4,000   4,500

                                                   Cost in millions, Jan. 1996
Future SRF Direction for Small
Communities
Despite their comparatively weak economic sta-
tus, small communities still must comply with the
CWA requirements for wastewater collection and
treatment and  must continue  to  address human
health risks. In recognition of financial constraints
on small communities, President  Clinton's Clean
                                                 Water Initiative of 1994 proposed the establish-
                                                 ment of special  subsidies to  make loans more
                                                 affordable for small communities as part of the
                                                 reauthorization of the CWA.  These potential sub-
                                                 sidies may include zero or negative (down to neg-
                                                 ative two percent) interest rates on loans, exten-
                                                 sion of the loan repayment period from 20 to 30
                                                 years, or loan forgiveness.
  Additional copies of this Fact Sheet may be obtained by contacting the Office of Water Resources Center in EPA at (202) 260-7786 and
  referring to the document number EPA 832-F-99-057. You may also visit our Website (http://www.epa.gov/OWM/smallc.htm) to obtain
  other summaries of this information.                                       

-------
Table 1. State Clean Water SRF Assistance in Dollars and Number of Agreements by
               Community Size (Fiscal Years 1988 through 1998)
State
Alabama
Alaska
Arizona
Arkansas
California
Colorado
Connecticut
Delaware
Florida
Georgia
Hawaii
Idaho
Illinois
Indiana
Iowa
Kansas
Kentucky
Louisiana
Maine
Maryland
Massachusetts
Michigan
Minnesota
Mississippi
Missouri
Montana
Nebraska
Nevada
New Hampshire
New Jersey
New Mexico
New York
North Carolina
North Dakota
Ohio
Oklahoma
Oregon
Pennsylvania
Puerto Rico
Rhode Island
South Carolina
South Dakota
Tennessee
Texas
Utah
Vermont
Virginia
Washington
West Virginia
Wisconsin
Wyoming
Total

Totals
420.8
97.4
188.1
205.8
1,269.0
260.3
643.0
65.9
849.4
280.8
150.7
80.2
803.8
225.8
215.3
255.2
249.5
186.8
175.6
345.9
1,356.9
746.4
645.5
193.8
658.8
49.8
91.4
95.5
179.1
1,019.2
78.7
3,519.3
308.0
82.3
1,217.9
206.5
273.2
460.8
190.9
117.5
165.1
90.9
346.9
2,004.3
114.5
62.1
504.4
295.1
238.1
573.4
64.9
22,920.5
Amount of SRF Assistance
(Millions of Dollars)
Population < 10,000
$
56.3
32.4
47.7
80.5
70.4
85.8
172.6
23.1
70.7
130.4
74.8
29.4
174.5
112.7
107.2
60.3
131.4
50.9
84.4
80.3
81.9
147.0
187.9
58.7
129.0
29.7
45.8
20.0
28.5
219.6
15.4
214.5
107.1
20.3
334.5
42.1
109.2
376.7
97.5
3.8
53.8
32.2
96.6
321.2
38.2
31.4
228.8
118.8
166.7
149.0
33.5
5,215.2
Percent
ofTotal
13.4
33.2
25.4
39.1
5.5
33.0
26.8
35.1
8.3
46.5
49.7
36.6
21.7
49.9
49.8
23.6
52.6
27.2
48.1
23.2
6.0
19.7
29.1
30.3
19.6
59.7
50.1
20.9
15.9
21.5
19.6
6.1
34.8
24.7
27.5
20.4
40.0
81.8
51.1
3.2
32.6
35.4
27.8
16.0
33.4
50.6
45.4
40.3
70.0
26.0
51.7
22.8
Population < 3,500
$
17.3
10.8
21.2
27.5
25.8
38.5
40.1
2.8
16.8
39.9
65.3
21.3
65.4
76.5
31.0
42.8
58.8
8.9
12.7
34.6
20.5
84.5
114.8
28.4
48.3
21.0
29.4
4.9
8.7
78.3
2.7
88.6
55.1
18.6
154.9
21.7
23.5
203.6
69.8
0.0
5.1
25.4
26.6
146.0
12.5
19.7
91.9
49.7
111.7
55.7
7.5
2,287.1
Percent
ofTotal
4.1
11.1
11.3
13.4
2.0
14.8
6.2
4.2
2.0
14.2
43.3
26.6
8.1
33.9
14.4
16.8
23.6
4.8
7.2
10.0
1.5
11.3
17.8
14.7
7.3
42.2
32.2
5.1
4.9
7.7
3.4
2.5
17.9
22.6
12.7
10.5
8.6
44.2
36.6
0.0
3.1
27.9
7.7
7.3
10.9
31.7
18.2
16.8
46.9
9.7
11.6
10.0
Number of SRF Agreements

Total
Number
108
51
31
80
146
60
119
318
198
87
30
44
255
48
119
114
125
48
67
131
525
139
465
97
114
41
61
20
57
152
35
334
98
69
512
54
127
371
64
86
40
101
113
287
35
65
127
177
157
68
46
,816
Population < 10,000
Number
59
25
18
58
27
43
70
315
50
54
19
28
113
35
90
81
95
20
43
77
137
54
196
40
71
32
47
8
25
57
18
158
58
53
319
34
79
329
50
5
16
69
66
156
15
55
92
127
140
34
37
3,897
Percent
ofTotal
54.6
49.0
58.1
72.5
18.5
71.7
58.8
99.1
25.3
62.1
63.3
63.6
44.3
72 9
75.6
71.1
76.0
41.7
64.2
58.8
26.1
38.8
422
41.2
62.3
78.0
77.0
40.0
43.9
37.5
51.4
47.3
59.2
76.8
623
63.0
62.2
88 7
78.1
5.8
40.0
68.3
58.4
54.4
42.9
84.6
72.4
71.8
89.2
50.0
80.4
57.2
Population < 3,500
Number
34
12
11
37
11
29
29
313
15
24
12
20
61
29
62
68
64
7
13
54
48
33
138
24
46
24
39
3
12
30
12
102
35
50
244
23
48
269
40
0
4
59
35
86
7
25
63
77
117
21
10
2,629
Percent
ofTotal
31.5

35.5
46.3

48.3
24.4
98.4
7.6
27.6
40.0
45.5
23.9
60.4
52.1
59.6
51.2
14.6
19.4
41.2
9.1
23 7
29 7
24.7
40.4

63.9
15.0
21.1
19.7
34.3
30.5
35.7
72 5
47.7
42.6
37.8
72 5
62.5
0.0
10.0
58.4
31.0
30.0
20.0
38.5
49.6
43.5
74.5
30.9
21.7
38.6

-------