Drinking Water State Revolving Fund Program
Delivering Sustainable Public Health Protection for America
2005 ANNUAL REPORT
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Message from Assistant Administrator
Benjamin H. Grumbles
Office of Water
I am pleased to present the Drinking Water State Revolving Fund's 2005 Annual
Report. The DWSRF is now an $ 11 billion Federal/State partnership, which is
focused on protecting human health and supporting the sustainability of our nation's
drinking water infrastructure. This report highlights the accomplishments and
financial position of this exceptional program.
Since its inception in 1997, the DWSRF has provided assistance to over 4,300
projects improving health protection for over 100 million Americans. The program
has provided nearly $9-5 billion in assistance. About 73% of projects and 39% of
assistance has been provided to small communities (serving <10,000 people). The
DWSRF Program is comprised of 51 state and territorial programs, each tailored
to meet the unique needs and goals of its citizens. Innovation and flexibility are
hallmarks of this program, as the numerous examples in this report illustrate.
Ensuring the long term sustainability of our nation's drinking water infrastructure is
a key challenge before us. The DWSRF offers multi-faceted support for meeting this
challenge. Drinking water utilities have access to low interest loans; and states can
provide zero interest loans, principal forgiveness, and extended repayment periods to
disadvantaged communities. Through optional set-asides, states can fund programs
to protect source waters and to enhance management and operations of drinking
water utilities.
This report will be the first of many to come, and I look forward to sharing the
accomplishments and growth that have made the Drinking Water State Revolving
Fund such an important and effective program.
Sincerely,
Benjamin H. Grumbles
Assistant Administrator
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Table of Contents
Built for Success 4
Basics of the Programs 6
Powerful Tools to Protect Public Health 10
Accountability and Effectiveness 12
2005 Focus - Defining Program Benefits 14
Four Pillars of Sustainability 16
Achievements in National Drinking Water Financing 18
Achievements and Innovation through DWSRF Set-Asides 20
DWSRF 2005 Performance Highlights 22
DWSRF Program 2005 Financial Performance Overview 26
Additional Innovative DWSRF Efforts 31
DWSRF-at-a-glance 32
For More Information [[[ 32
Note: All data are for states' fiscal years ending June 30, 2005, as updated through December 31, 2005. These data are
reported by states to the Drinking Water National Information Management System (DWNIMS). Full state data reports, a
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DRINKING WATER STATE REVOLVING FUND PROGRAMS/2005 ANNUAL REPORT
Built
Congress created the Environmental
Protection Agency's (EPA's) Drinking
Water State Revolving Fund (DWSRF)
program in 1996. The goal of Congress was
to establish an innovative program that would
ensure the continued provision of safe drinking
water by helping public water systems (PWSs)
fund infrastructure upgrades and by improving
the institutional capabilities of PWSs. The
DWSRF also helps states undertake activities
to support their drinking water programs. In 9
years, the DWSRF programs have matured and
established themselves as the premier source of
public drinking water infrastructure financing.
Operating in all 50 states and Puerto Rico,
the DWSRF programs have financed nearly
4,400 projects with loans totaling almost $9-5
billion through 2005- The programs collectively
have made more than $ 11 billion in funds
available to assist PWSs in protecting public
health. Since 2000, the DWSRF has averaged
more than $1.3 billion in annual assistance to
drinking water systems. No DWSRF program
has ever experienced a default on a loan, which
makes these programs highly regarded by
financing institutions. Exhibit 1 summarizes the
DWSRF's funding for investments in drinking
water quality.
The DWSRF programs are founded upon
the singular focus of assisting state drinking
water programs and drinking water systems in
meeting their responsibility to protect public
health. Since 1997, the DWSRF programs
have improved public health protection for
100 million people. The DWSRF programs
have achieved strong financial performance
while ensuring that water systems, especially
disadvantaged water systems, have access to the
financing they need to meet the drinking water
health-based standards from the Safe Drinking
Water Act (SDWA) or to continue to meet the
drinking water health-based standards from
SDWA.
From public health and financial perspectives,
the DWSRF programs have been a sound
investment for states and the federal
government. EPA and states collaborate to
ensure that available funds are directed to the
highest priority public health needs. Factors
considered for prioritization include imminent
threats to public health, failure to meet
drinking water health-based standards, and
disadvantaged community status. DWSRF
programs have helped thousands of small and
large communities receive safe drinking water
by targeting funds where they are most needed.
Since the program's inception, almost 73% of all
DWSRF loans have been made to water systems
serving fewer than 10,000 people.
The 2005 Annual Report provides an overview
of this year's program accomplishments and
status and highlights the program's plans for
continued success.
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BUILT FOR SUCCESS
EXHIBIT I
National Performance Summary Statement
Fund Activity - Estimated ($)
Annual Fund Activity
Federal Capitalization Grants
State Matching Funds
New Funds Available for Assistance
Project Commitments (Executed Loan Agreements)
Number of Projects Financed
New Set- Aside Funds Available for Assistance
Project Disbursements
Cash Draws for Federal Capitalization Grants
Cash Draws for Set-Asides
Cumulative Fund Activity
Federal Capitalization Grants
State Matching Funds
New Funds Available for Assistance
Project Commitments (Executed Loan Agreements)
Number of Projects Financed
New Set- Aside Funds Available for Assistance
Project Disbursements
Cash Draws for Federal Capitalization Grants
Cash Draws for Set-Asides
2004
757,358,798
271,909,038
1,672,551,152
1,612,152,496
657
138,820,449
1,279,197,446
709,072,148
112,214,750
5,745,493,355
1,474,422,140
9,636,444,206
7,980,535,959
3,796
924,087,844
5,789,249,821
3,296,979,555
587,698,949
2005
820,296,680
144,558,534
1,509,403,309
1,462,665,315
582
124,845,480
1,271,766,102
646,985,390
104,377,322
6,565,790,035
1,618,980,674
11,145,847,515
9,443,201,274
4,378
1,048,933,324
7,061,015,923
3,943,964,945
692,076,271
Source: EPA's DWSRF National Information Management System.
Increase in Project Commitment (dollars): 18.3%
Increase in Number of Projects: 14.1 %
Increase in Funds Available: I 5.7%
Increase in Federal Capitalization Dollars: 14.3%
• Role of Federal Funding Decreased from 59.6% to 58.9"
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DRINKING WATER STATE REVOLVING FUND PROGRAMS/2005 ANNUAL REPORT
Basics of the
DWSRF Program
Passed by Congress in 1974 and amended
in 1986 and 1996, SDWA regulates the
nation's public drinking water supply
in order to protect public health. SDWA
authorizes EPA to set national health-based
standards for the presence of contaminants
in drinking water. It also allows EPA, the
states, and drinking water systems to work
together to implement these standards. The
Act originally stressed treatment as the primary
means of providing safe drinking water; the
1996 Amendments greatly expanded the law's
purview by recognizing the need for capacity
development, source water protection, operator
training, public information, and funding for
water system improvements as vital to meeting
SDWA's goals.
Section 1452 of the 1996 SDWA Amendments
authorizes the DWSRF program to address the
most pressing public health needs related to
drinking water in each state. Focused on public
health, the program gives states important
tools, such as set-asides and special loan
considerations, to address the needs of small
systems and disadvantaged communities and to
advance other programs authorized by the 1996
Amendments.
The federal government annually provides
money that states can loan at below-market
interest rates to pay for qualifying improvements
to drinking water system infrastructure. Before
a state can receive a capitalization grant, it must
match money equal to 20% of the grant to its
revolving loan fund. States can set aside up
to 31% of each year's grant allocation to pay
for managing the DWSRF program and for
providing technical assistance to water systems.
Set-aside funds can also be used to pay for
local assistance, other state programs to protect
drinking water sources, and promoting drinking
water system capacity (see details in Exhibit 2).
States use the principal and interest payments
received from loan recipients to provide more
loans.
States can leverage their capitalization grants
by issuing tax-exempt bonds to increase the
amount of money available to meet the demand
for DWSRF loans from public entities. Twenty
states have issued leveraged bonds, raising $3-9
billion since the DWSRF program's inception,
which is added to the capitalization grants, state
match funding, and interest to enlarge the funds
available for loans in those states.
The flexibility inherent in the DWSRF programs
as established by SDWA means each state can
tailor its program to meet its needs and the
needs of its PWSs. This flexible, state-centric
approach also promotes innovative approaches
to achieving SDWA's public health protection
goals.
DWSRF programs are proof that the adage
"Nothing succeeds like success" is true. Each
year, these programs are reviewing more
applications, processing more transactions, and
tracking more loans and more loan repayments.
In addition to coordinating with other state
and federal programs, DWSRF programs
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BASICS OF THE DWSRF PROGRAM
are working with and educating members of
their state governing bodies. They are also
meeting myriad state and federal reporting and
recordkeeping requirements and identifying
and targeting the needs of their systems. States
deserve credit for the growing status and
strength of their DWSRF programs—and for
the impressive record of zero loan defaults.
While the details of each state's programs may
be different, responsibility for administering
the program rests with the agency assigned
primary enforcement responsibility (also known
as primacy) for the state's public water system
supervision (PWSS) program. Often, that
agency is the state public health department.
In most states, this primacy agency works with
state financial and environmental departments
to manage the DWSRF program. Pages 8-9
show the agencies involved in administering
each of the nation's 51 DWSRF programs.
Treatment:
• Projects to meet drinking water health-based
standards for contaminants that cause acute and
chronic health effects
Transmission & Distribution:
• Installation or replacement of transmission and
distribution mains, pumps, and other distribution
system infrastructure
Source:
• Rehabilitation of wells or development of sources to
replace contaminated sources
Storage:
• Installation or improvement of eligible storage facilities
Consolidation:
• Consolidation of water systems is eligible (for
instance, consolidating a system with a contaminated
source or a system that is unable to maintain
technical, managerial, or financial capacity)
! These set-aside percentages are the maximums of the federal grant that can be taken,
but each state has the discretion as to how much to set aside (up to the allowed
amount)
'* States must provide a dollar-for-dollar match for these expenditures
** No more than 10% per activity per capitalization grant
4% Administration and Technical Assistance:
• Administer the DWSRF program and provide technical
assistance to public water systems
2% Small System Technical Assistance:
• Provide technical assistance to small systems serving no
more than 10,000 people
10% State Program Management**:
• Administer the state PWSS program
• Administer and provide technical assistance through
source water protection programs
• Develop and implement a capacity development
strategy and/or operator certification program
I 5% Local Assistance and Other State Programs***:
• 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 ;
based source water protection measi
• Make expenditures to establish and implement wellhead
protection programs
Provide technical or financial assistance to systems as
part of a capacity development strategy
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State Agencies that Manage DWSRF Programs
EPA Region I
Connecticut Department of Public Health
Connecticut Department of Environmental Protection
Connecticut Office of the Treasurer
Maine Department of Human Services
Maine Municipal Bond Bank
Massachusetts Water Pollution Abatement Trust
Massachusetts Division of Municipal Services
Massachusetts Division of Watershed Management/Drinking
Water Program
New Hampshire Department of Environmental Services
Rhode Island Clean Water Finance Agency
Rhode Island Department of Health
Vermont Water Supply Division
Vermont Facilities Engineering Division
EPA Region 2
New Jersey Department of Environmental Protection
New Jersey Environmental Infrastructure Trust
New York State Department of Health
New York State Environmental Facilities Corporation
Puerto Rico Department of Health
Government Development Bank for Puerto Rico/Puerto
Rico Infrastructure Financing Authority
EPA Region 3
Delaware Department of Health and Social Services
Delaware Department of Natural Resources and
Environmental Control
Maryland Water Quality Financing Administration
Maryland Water Management Administration
Pennsylvania Infrastructure Investment Authority
(PENNVEST)
Pennsylvania Department of Environmental Protection
Virginia Department of Health — Office of Drinking Water
Virginia Resources Authority
West Virginia Department of Health and Human Resources
West Virginia Water Development Authority
Note: Lead agency denoted in italics
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EPA Region 4
Alabama Department of Environmental Management
Florida Department of Environmental Protection
Georgia Environmental Facilities Authority
Georgia Environmental Protection Division
Kentucky Infrastructure Authority
Kentucky Division of Water, Drinking Water Branch,
Kentucky Environmental and Public Protection Cabinet
Mississippi State Department of Health
Mississippi Department of Environmental Quality
Mississippi State Tax Commission
North Carolina Department of Environment and Natural
Resources
South Carolina Department of Health and Environmental
Control
South Carolina Budget and Control Board
Tennessee Department of Environment and Conservation
Tennessee Comptroller of the Treasury
EPA Region 5
Illinois Environmental Protection Agency
Indiana Finance Authority
Indiana Department of Environmental Management
Michigan Department of Environmental Quality
Michigan Municipal Bond Authority
Minnesota Public Facilities Authority
Minnesota Department of Health
Ohio Environmental Protection Agency
Ohio Water Development Authority
Wisconsin Department of Natural Resources
Wisconsin Department of Administration
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EPA Region 6
Arkansas Natural Resources Commission
Arkansas Department of Health
Louisiana Department of Health and Hospitals
Louisiana Department of Environmental Quality
New Mexico Finance Authority
New Mexico Environment Department
Oklahoma Department of Environmental Quality
Oklahoma Water Resources Board
Texas Water Development Board
Texas Commission on Environmental Quality
EPA Region 7
Iowa Department of Natural Resources
Iowa Finance Authority
Kansas Department of Health and Environment
Kansas Department of Administration
Kansas Development Finance Authority
Missouri Department of Natural Resources
Nebraska Department of Environmental Quality
EPA Region 8
Colorado Water Resources and Power Development Authority
Colorado Water Quality Control Division
Colorado Department of Local Affairs — Division of Local
Government
Montana Department of Environmental Quality
Montana Department of Natural Resources and
Conservation
North Dakota Department of Health
North Dakota Public Finance Authority
South Dakota Department of Environment and Natural
Resources
Utah Department of Environmental Quality — Division of
Drinking Water
Wyoming Office of State Lands and Investments
Wyoming Department of Environmental Quality
Wyoming Water Development Office
Note: Lead agency denoted in italics
At the November 2005 Council of Infrastructure Finance
Authorities meeting in Chicago, Illinois, the DWSRF
presented its first awards for Recognition for Sustainable
Public Health. This award recognizes one state in each EPA
region that has an outstanding DWSRF program and has
implemented innovative practices that have furthered the
program's public health goals. These awards will be given
biennially. The 2005 winners are:
• Region I - Maine
• Region 2 - New Jersey
• Region 3 - Pennsylvania
• Region 4 - Mississippi
• Region 5 - Minnesota
• Region 6 - Arkansas
• Region 7 - Kansas
• Region 8 - South Dakota
• Region 9 - Nevada
• Region 10-Washington
EPA Region 9
Arizona Water Infrastructure Finance Authority
California Department of Health Services
Hawaii Department of Health
Hawaii Safe Drinking Water Branch
Hawaii Wastewater Branch
Nevada Division of Environmental Protection
Nevada Drinking Water State Revolving Loan Fund
Department of Conservation and Natural Resources
EPA Region 10
Alaska Department of Environmental Conservation
Alaska Department of Environmental Conservation/Division
of Environmental Health
Idaho Department of Environmental Quality
Oregon Department of Human Services
Oregon Economic and Community Development
Department
Oregon Department of Environmental Quality
Washington State Department of Health
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DRINKING WATER STATE REVOLVING FUND PROGRAMS/2005 ANNUAL REPORT
Powerful Tools to Protect
Health
Characterizing the DWSRF simply as a
source of funding grossly understates
the extent of its impact in protecting
public health. The DWSRF is not solely—
or even primarily—a banking program.
Rather, the DWSRF offers states a powerful,
multifaceted suite of tools designed to advance
the public health objectives of SDWA.
The value of the DWSRF as a financing tool
is very much in evidence in the case studies
and data provided throughout this annual
report. What makes the DWSRF unique is the
innovative use of targeted set-asides that address
some of the key underlying conditions that
affect drinking water systems' abilities to protect
public health (see Exhibit 3). States elect to
"set aside" those funds (from zero percent to
the maximum allowable percentage) from the
federal capitalization grant for other supportive
public health purposes to protect drinking water
quality (see the number of systems assisted in
Exhibit 4). The DWSRF set-asides provide
states with the tools they need to create a more
sustainable drinking water sector state-wide by
improving system management, enhancing the
technical skills of system operators, increasing
efficiency, and improving source water
protection. In effect, state DWSRF programs
have the ability to address public health
protection in two critical ways: they provide an
accessible and affordable source of financing for
necessary infrastructure improvements, and they
address underlying issues that impact a system's
institutional capabilities.
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POWERFUL TOOLS TO PROTECT PUBLIC HEALTH
The set-asides include:
Administration and Technical Assistance (4%)
Almost every state sets aside some portion of
its annual DWSRF allotment to administer
its DWSRF program and to provide technical
assistance to PWSs.
Small System Technical Assistance (2%) All
but two states have set aside up to 2% of their
annual DWSRF allotment to provide technical
assistance to water systems that serve 10,000
or fewer people. Activities paid for with these
funds have included planning grants to small
systems, visits from circuit riders, and special
small system training.
State Program Management (10%) This set-
aside allows states to use up to 10% of their
annual allotment to develop and implement
their capacity development and operator
certification programs, administer their source
water protection program (which includes
providing technical assistance to prevent
contamination of sources), or fund a portion of
their PWSS program.
Local Assistance and Other State Programs
(15%) States may use up to 15% of their
annual allotments to fund a variety of activities
and assistance associated with source water
protection, wellhead protection, and capacity
development.
EXHIBIT 3
Cumulative DWSRF Set-aside Spending 1997-2005
(in millions of $)
II
1997 1998 1999 2000 2001 2002 2003 2004 2005
Administration & Technical Assistance
State Program Management
Small System Technical Assistance
' Local Assistance & Other State Programs
EXHIBIT 4
Number of Systems Receiving Set-aside Assistance
1997 1998 1999 2000 2001 2002 2003 2004 2005
" Small Systems Technical Assistance
Local Assistance & Other State Programs
"The favorable interest rates of the DWSRF mean that we can do projects even in rural
areas where modest income can he a harrier to needed improvements."—Mike Duffalo,
borrower, Indiana County, PA
M
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DRINKING WATER STATE REVOLVING FUND PROGRAMS/2005 ANNUAL REPORT
Accountability and
Effectiveness
EPA and the states work together to ensure
complete program accountability and
the efficient and effective use of public
resources. EPA's role is to provide support and
oversight. Staff members from headquarters
and the regions work closely with state program
staff to ensure all program requirements are met.
Annual oversight in the form of program reviews
ensures each program's financial integrity and
performance. The Agency also provides a broad
range of support to state programs.
States are eligible to receive annual capitalization
grants from funds appropriated by Congress (see
Exhibit 5 for details on the funding process).
Each state's grant allotment is proportional to
the total state need identified in the most recent
EXHIBIT 5
DWSRF Funding Process
State submits
application
EPA makes
federal grant
State adds
20% match
State sets
aside up to
31%
State supports
drinking water
program
State provides
technical
assistance
State DWSRF
State loans
systems
Water systems
repay loan
national survey and assessment of drinking water
infrastructure needs. These surveys are conducted
every 4 years, most recently in 2003- Before
receiving a grant, a state must agree to deposit
matching funds equal to 20% of its grant into the
state revolving loan fund. The federal government
has provided $6.6 billion in capitalization grants
since the DWSRF program's inception.
In order to receive a capitalization grant, a state
must show EPA that it has the ability to manage
the program and that it will comply with the
statutes and regulations applicable to it. The state
must agree to deposit all program funds, except
funds used for set-asides, into its DWSRF and
must agree to a timeline for providing assistance.
The state also must agree to use generally accepted
accounting principles and to conduct audits in
accordance with the Single Audit Act, as required
by the Office of Management and Budget. As a
best management practice, EPA encourages each
state to conduct independent audits of its DWSRF
program to ensure the fund's financial integrity.
States must meet requirements related to state
capacity development and operator certification
programs or risk being subject to withholdings of
20% of their DWSRF grant funds. To date, all
states have met these program requirements, and
none has been subject to grant withholding.
Each state also is required to develop an
annual Intended Use Plan (IUP) that describes
how program funds will be used. The IUP
must include a comprehensive list of eligible
infrastructure projects and a list of the highest
priority projects expected to receive funding in that
year. Details of the IUP and priority list depend
on how the state has designed its DWSRF program
and on the criteria the state uses to rank projects.
States must give priority to projects that:
>• Address the most serious risks to public health.
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ACCOUNTABILITY AND EFFECTIVENESS
>• Are necessary to ensure system can meet
SDWA's drinking water health-based standards.
> Assist systems most in need on a per-household
basis.
In addition, some states give bonus points for
other criteria such as water efficiency, security
needs, consolidation, and restructuring.
The law allows states to make loans for the eligible
projects of publicly owned, privately owned, and
nonprofit community water systems (CWSs) and
nonprofit non-community water systems. Entities
that will create a new CWS to address a public
health problem caused by unsafe drinking water
sources also can receive assistance. There are five
basic categories of eligible projects:
> Treatment: Projects to continue to meet
drinking water health-based standards for
contaminants that cause acute and chronic
health effects.
>• Transmission and Distribution: Projects to
install or replace transmission and distribution
mains, pumps, and other distribution system
infrastructure.
> Source: Projects to rehabilitate wells or develop
new sources to replace contaminated sources.
> Storage: Projects to install or improve eligible
storage facilities.
> Consolidation: Projects to consolidate water
systems are eligible (for instance, if a water
system has a contaminated source or if a system
is unable to maintain technical, managerial, or
financial capacity).
Items specifically excluded from DWSRF funding
are:
> Expenditures for monitoring, operations, and
maintenance.
> Projects whose primary purpose is to facilitate
growth.
> Projects to construct or rehabilitate dams and
reservoirs (unless the reservoir is for finished
water or part of the treatment process).
> Projects to obtain water rights (unless they are
owned by a system being purchased through
consolidation).
> Projects needed primarily for fire protection.
Once a state receives its grant, it can set aside
up to 31% for Administration and Technical
Assistance (4% maximum), Small System
Technical Assistance (2%), State Program
Management (10%), and Local Assistance and
Other State Programs (15%). States must match
funds reserved under the 10% State Program
Management set-aside dollar-for-dollar.
States use their capitalization grant allotments,
minus set-asides, to finance projects from the
IUP In 2005, DWSRF programs financed 582
projects totaling $1.6 billion (see Exhibit 6).
Principal and interest payments from DWSRF
loan recipients flow back into the DWSRF, where
they become available for new loans.
EXHIBIT 6
'SRFs Financed 4,378 Projects
Number of Projects Financed
. Annual Cumulative
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DRINKING WATER STATE REVOLVING FUND PROGRAMS/2005 ANNUAL REPORT
2005 Focus - Defining
Program Benefits
During 2005, EPA and the states
worked together to refine the DWSRF
programs' data classification and
reporting system for projects that receive DWSRF
financial assistance. As a result, program
managers will be better able to define and
articulate the program's many benefits.
The DWSRF was established to improve public
health protection, in part, by providing financial
assistance for projects that facilitate meeting
drinking water health-based standards. These
projects can take several forms. For example:
> A system that is failing to meet drinking
water health-based standards and poses
an immediate threat to public health can
undertake a DWSRF project that helps the
system meet all applicable standards. Paying
for projects of this type is a critical part of the
DWSRF program.
> A system that is meeting all drinking water
health-based standards can use DWSRF
financial assistance to make improvements or
upgrades that enable it to continue to meet all
of these standards.
> A state program can provide DWSRF
financial assistance to systems that must make
improvements to meet new drinking water
health-based standards.
Early in the DWSRF program, states had the
option of categorizing projects as "return to
compliance." While useful, this category did
not provide enough detail for program managers
to fully capture the purpose and benefit of each
project. To address that problem, the states and
EPA developed and implemented a new data
classification and reporting approach in which
states assign projects to one of four categories:
> Financial assistance to meet drinking water
health-based standards
> Financial assistance to continue to meet
drinking water health-based standards
> Financial assistance to meet new drinking
water health-based standards
* Other
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2005 FOCUS - DEFINING PROGRAM BENEFITS
These categories make possible a more accurate
representation of the DWSRF program, and they
help states and EPA better understand—and
describe—how the program is helping systems
and protecting public health.
By the end of November 2005, 48 states had
voluntarily provided data, using these new
categories, for all loans approved in 2005 (see
Exhibit 7). Twenty-five of the states had also
re-categorized loans awarded throughout the
history of the program. These new data provide a
compelling, single-year snapshot of an innovative
program making great strides in protecting public
health by helping systems meet all drinking water
health-based standards. Of the more than $1.4
billion in financial assistance awarded in 2005,
approximately:
> 30% will help systems meet drinking water
health-based standards
> 36% will help systems continue to meet
drinking water health-based standards
> 13% will help systems meet new drinking
water health-based standards
The remaining 21% of the financial assistance will
be used to help systems meet state drinking water
health-based standards or to otherwise further
SDWA's public health protection objectives (see
Exhibit 8).
In 2006, the states and EPA will continue
refining the program's data classification and
reporting system. The goal is to further improve
their ability to identify how the program is
helping systems meet drinking water health-
based standards. As part of this effort, states will
continue to look at—and reclassify if necessary—
every project since the program's inception that
has received DWSRF assistance.
EXHIBIT 7
Annual DWSRF Funds Spent on Meeting Drinking Water
Health-based Standards
(in millions of $)
1997 1998 1999 2000 2001 2002 2003 2004 2005
Meeting Future Standards • Continuing to Meet Standards Meeting Standards
Note: Until2005, only categorization available was "Return to Compliance."
EXHIBIT 8
2005 Breakdown of Purpose for Assistance to Meet
Drinking Water Health-based Standards
$ Assistance for Meeting Drinking Water Health-based Standards
Other
(meeting state
health-based standards,
consolidation, etc.)
Meeting Future
Standards
Meeting Standards
Continuing to
Meet Standards
"As a result of the [DWSRF] 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, borrower, Camp Verde Water System, AZ
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DRINKING WATER STATE REVOLVING FUND PROGRAMS/2005 ANNUAL REPORT
Four Pillars of Sustainability
In September 2002, EPA released its study
on the nation's infrastructure financing
needs. The Clean Water and Drinking Water
Infrastructure Gap Analysis, commonly referred
to as the "Gap Report," identified a gap between
projected clean water and drinking water
investment needs over the twenty-year period
from 2000-2019 and current levels of spending.
The report noted that, if investments in water
and wastewater systems remain flat and do not
increase, a "gap" will occur. Under a flat or "no
revenue growth" scenario, the report estimated
a drinking water capital payment gap of $102
billion. The operations and maintenance
(O&M) gap was estimated at $161 billion for
drinking water. "Revenue growth" scenarios,
which assumed that spending and investments
would increase by 3% per year over and above
inflation, indicated that the capital and O&M
gaps for drinking water dropped to $45 billion
and $0, respectively.
After much deliberation, and taking into
account input from a public forum convened
by EPA's Administrator in January 2003, the
Agency developed a sustainable infrastructure
strategy based on the "four pillars" of better
management, full-cost pricing, water efficiency,
and watershed approaches. By embracing the
Four Pillars, EPA recognized that the then-
current financing challenges necessitated a
multi-faceted approach to managing and
sustaining the nation's water infrastructure
assets. It was necessary to address both the
supply and the demand problems in order to
better optimize available resources.
Better management, the first pillar, comprises
practices such as asset management,
environmental management systems,
consolidation or collaboration between water
systems, and public-private partnerships that
offer significant savings.
The second pillar, full-cost pricing, is an
important means of ensuring that sufficient
resources or revenues are available to adequately
maintain critical water system infrastructure.
Pricing can also be a tool for encouraging
efficient water use.
Efficient water use, the third pillar, provides an
opportunity to avoid some capital expenditures,
discourage unnecessary water use, and maintain
the financial integrity of a system. Options
available to promote efficient use include
metering, water reuse, water-saving appliances,
landscaping, and public education.
Watershed approaches, the fourth pillar, offer
the benefits of systemic, integrated, and cost-
effective management to protect and maintain
water supply and quality through source water
protection—including land acquisition and
collaborative partnerships.
16
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FOUR PILLARS OF SUSTAINABILITY
The Four Pillars of Sustainable Infrastructure
offer tremendous opportunities for reducing the
investment gap over time. They can supplement
and complement the existing DWSRF program.
DWSRF, in turn, is a powerful tool for EPA and
states to create incentives and provide resources
to help water systems implement the Four Pillars
while continuing to provide critical financial
support to keep drinking water affordable in
communities across the country. Set-asides,
which are designed to work with state Capacity
Development Programs, are a fully integrated
package of flexible and effective tools that states
can use to educate their water system operators
about sustainable infrastructure practices and
provide technical assistance with the aim of
capturing financial savings and operational
efficiencies.
In 2005, EPA expanded its effort to use the
flexibilities and resources of the DWSRF to
promote the Four Pillars approach. EPA sees
DWSRF programs, in concert with other
EPA-state voluntary partnership programs such
as Capacity Development and Source Water
Protection, continuing to play a leading role
in providing drinking water systems access
to affordable capital and to information on
changing system management in order to meet
their local infrastructure needs.
Better Management
State DWSRF programs can use their loan funds to promote better management by providing bonus points to
on their priority lists that have implemented or will implement an asset management system and/or environme
management system. If built into a system's proposed project, the costs of devices and technologies needed to impro\
water system management are eligible for DWSRF financing. States can provide DWSRF loans to consolidate or region
drinking water systems. DWSRF programs can also use various set-asides to train, educate, and provide technical
assistance to water system operators wishing to design and implement asset management, environmental management,
water system partnership programs.
Full-Cost Pricing
State DWSRF programs can promote full-cost pricing by awarding priority list points to systems that will implement f
cost pricing in order to improve their financial capacity (and to repay the loan). In addition, states can use the set-asic
develop programs, such as technical assistance and operator training, to help system operators understand and implen
full-cost pricing schemes.
Water Efficiency
Many states already require water conservation plans as part of their DWSRF application process, while other states
provide bonus points to systems that have implemented water efficiency measures or have built water efficiency measi
into their proposed capital projects. To promote water efficiency, DWSRF loans can fund efficiency improvements such as
water meters, water efficient devices, and dual pipe distribution systems. States can use their DWSRF set-aside resources
to provide technical assistance and education directly to water systems. Assistance could include help performing water
loss audits, detecting leaks, designing local ordinances, educating the public, and monitoring drought conditions.
Watershed Approaches
The key aspect of the watershed approaches for drinking water systems is source water protection,
water sources and for ground water sources (also called wellhead protection). Again, DWSRF programs are promoting
the watershed approach using both loans and set-asides. Systems can receive loans to acquire land around their source
waters that will allow them to reduce and control contamination risks. In addition, systems can use loan funding to
purchase capital, such as fences and security systems, to protect source waters. States have been using set-asides to he
water systems map the watersheds of their source waters, identifying both threats and potentials for improving protection.
States can use set-asides to help systems educate and partner with the residents and businesses in the watersheds of their
source waters. There are specific wellhead protection and source water protection portions of the set-asides that allow
states to provide special loans and assistance for these purposes.
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DRINKING WATER STATE REVOLVING FUND PROGRAMS/2005 ANNUAL REPORT
Achievements in National Drinking
Water Financing
COULEE DAM, WA
The town of Coulee Dam received a $ 1.6 million
loan from Washington's DWSRF to upgrade its
unfiltered surface water supply system and meet
the drinking water health-based standards of the
Surface Water Treatment Rule. The town used its
loan to construct a slow sand filtration plant, which
will guarantee the town high-quality and safe drinking
water and remove the public health risks the town
previously faced.
1,100 people served
TALENT, OR
The City of Talent's drinking water sources were
once described as "the worst in Oregon" due
in part to a serious cryptosporidiosis outbreak
in 1992. With a $2 million loan from Oregon's
DWSRF that included disadvantaged assistance, the
City was able to begin purchasing treated water
from the Medford Water Commission to resolve
its chronic public health issues.
5,050 people served
The Seeley Lake Water District was in significant
noncompliance with the Surface Water
Treatment Rule since the early 1990s and had
been under an Administrative Order since 1994.
The system received a $ 1.3 million loan from
Montana's DWSRF to construct a new surface
water treatment plant and raw water intake.
The completion of the new facility, serving
1,900 residents, ensured that the system met all
applicable drinking water health-based standards
and the Administrative Order was closed out.
/,900 people served
WASILLA, AK
This small city outside of Anchorage
was served by a ground water well
that was high in nitrate and declining
in productivity. Alaska's DWSRF
awarded the City a $3 million loan to
bring a second source online. The loan
covered the costs of planning, drilling
the new well, installing transmission
lines, adding a storage reservoir, and
installing new treatment. The new
well is now the City's primary source
and is nitrate free.
M
5,000 people served
FORT APACHE INDIAN RESERVATION, AZ
The Fort Apache Indian Reservation is home to 14,000
members of the White Mountain Apache Tribe. To address
frequent housing shortages, the White Mountain Apache
Housing Authority designed the Apache Dawn Housing
Project. The project received a $3 million disadvantaged
community loan from the DWSRF to finance construction
of a drinking water treatment plant that will provide safe
drinking water to the residents of the housing project.
/ 4,000 people served
MOBRIDGE, SD
The Missouri River supplies Mobridge's
3,500 residents with drinking water, but
the City's 50-year-old water treatment
plant had inadequate backwash facilities,
sedimentation capability, and control
equipment. South Dakota's DWSRF
loaned the City $ 1.32 million to upgrade
its water treatment facility and ensure
a reliable drinking water supply for its
residents.
3,500 people served
JACKSON, NE
The Village of Jackson is an economically
disadvantaged community of 230 people
in northeastern Nebraska. To meet the
drinking water health-based standards
for radium-226, radium-228, and Gross
Alpha Particle Activity, the ground water
system in Jackson received a $250,000
loan from Nebraska's DWSRF with
$ 125,000 of principal forgiveness. This
loan was used to install a new well
in a different aquifer, build a water
treatment plant for iron removal, and
make needed improvements to its
distribution system. With this assistance,
Jackson was able to afford the project.
230 people served
18
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ACHIEVEMENTS IN NATIONAL DRINKING WATER FINANCING
CLARA CITY, MN
Clara City, a town of 1,300,
was subject to an enforcement
action by the State's drinking
water program due to elevated
nitrate/nitrite levels that were
first detected in 1998. The
City received a $3.1 million
loan from Minnesota's DWSRF
with $500,000 of principal
forgiveness to build a new well,
reverse osmosis treatment
plant, storage tower, and water
main, which resolved the city's
nitrate/nitrite issues.
1,300 people served
OSHKOSH, Wl
The City of Oshkosh was served
by a 100-year-old water system
that was vulnerable to microbial
contaminants. Wisconsin's DWSRF
loaned the City $25.6 million
to build a new water treatment
plant, and the 55,000 residents
of Oshkosh now have a safe and
reliable source of drinking water.
55,000 people served
CAPE MAY, NJ
Cape May City received its drinking water from the Cohansey
Aquifer, which was being threatened by saltwater intrusion
because of demand on the aquifer. The New Jersey DWSRF
awarded a $ 1.3 million loan to the City to install a desalination
plant, which allowed the City to draw from the brackish Sand
Aquifer, preventing excessive drawdown from the Cohansey
Aquifer.
12,880 people served
MOUNT PLEASANT, IA
Radionuclides, such as radium,
are man-made or natural
elements that emit radiation.
Mount Pleasant Municipal Utilities
struggled with high levels of
radium. The system received
a $5.9 million loan from Iowa's
DWSRF to install a new treatment
system that allowed the water
system to meet the drinking
water health-based standards for
radium.
8,000 people served
INDIANA COUNTY, PA
The Indiana County Municipal Services Authority (ICMSA) operates in rural,
western Pennsylvania where small, non-viable water systems consistently cause
public health problems. An $ I 1.8 million DWSRF loan from Pennsylvania will allow
ICMSA to consolidate 7 systems, 2 of which were in violation of the Surface Water
Treatment Rule; bring a new surface water source online; and eliminate the public
health threats that plagued this area.
7,181 people served
LAMAR COUNTY, GA
Most residents of this rural county south of Atlanta receive drinking water
from private wells. In 2001, wells serving 1,300 people became contaminated
with fecal coliform bacteria, causing severe public health problems. Georgia's
DWSRF awarded a nearby community water system $3.5 million in interest-free
disadvantaged community loans (with $300,000 of principal forgiveness) to install
the mains, meters, and hydrants needed to extend its service to the affected
residents.
/,300 people served
GUAYAMA, PR
The water system serving the city of Guayama, Puerto Rico was not meeting
the drinking water health based standards in SDWA and did not have sufficient
capacity to supply the area's demand. The system received a $2.9 million loan to
build two new distribution tanks with pumping stations and new distribution lines
to ensure adequate supply and meet all applicable drinking water standards. The
area now enjoys reliable water service and consistently safe drinking water.
5,575 people served
19
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DRINKING WATER STATE REVOLVING FUND PROGRAMS/2005 ANNUAL REPORT
Achievements and Innovation
through DWSRF Set-asides
HAYDEN, ID
The Rathdrum Prairie Aquifer is a sole source aquifer
that serves 450,000 people in Idaho and Washington.
Currently, aquifer protection is accomplished on a town-
by-town basis with mixed results. To promote aquifer
protection techniques, the Panhandle Health District,
along with local, state, and federal partners, is building a
new center that showcases best management practices.
The 7-acre site will demonstrate rainwater recovery,
native forest and native prairie restoration, bioretention
basins, bioswales, xeriscaping, and permeable paver
technology. The Idaho DWSRF contributed $72,000 from
the Local Assistance Set-aside, with a 40% local match, to
the planning phase of the project.
MINNESOTA
The Minnesota Department of
Health uses resources from the
Local Assistance DWSRF Set-aside
to provide wellhead protection
assistance to systems serving fewer
than 3,300 people. To date, the
State has helped ISO communities
develop wellhead protection plans.
NEBRASKA
Nebraska uses its DWSRF program in several ways to
encourage water efficiency. To receive DWSRF funding
in Nebraska, a system must have metered connections
or include meter installation in the proposed project.
Disadvantaged systems are eligible for additional financial
assistance if they have average metered water use of less
than 100 gallons per person per day. Nebraska also uses
its Small System Technical Assistance Set-aside to assess
the infrastructure of systems serving 10,000 or fewer
persons.
NEW MEXICO
New Mexico uses its State Program Management Set-
aside to supplement its operator certification program
Using these funds, the State has developed a database
to track public water supply compliance with State
operator certification regulations. The State also funds
classroom operator training held throughout the State
and has issued a contract to develop curricular material
and instructor's guides for train-the-trainer workshops
to improve skills of volunteer peer instructors.
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ACHIEVEMENTS AND INNOVATION THROUGH DWSRF SET-ASIDES
INDIANA
The Indiana Department of Environmental
Management is using $400,000 from Indiana's
DWSRF State Program Management Set-aside
to assist systems that are at risk for failing to
meet drinking water health-based standards for
radionuclide and arsenic contamination. The state
provides professional services, such as planning and
engineering design, to help these systems identify
solutions that allow them to meet applicable
drinking water health-based standards and put
them in position to seek DWSRF loans if necessary.
OKLAHOMA
Oklahoma uses its DWSRF Local Assistance
Set-aside to help small systems develop source
water protection strategies. Contractors assist
communities in locating potential sources of
pollution, developing contingency plans, and
implementing management practices and
controls to protect drinking water sources.
MASSACHUSETTS
The Massachusetts Water Loss Prevention Grant Program
was established in 2005 with $800,000 in resources from
the state's Local Assistance DWSRF Set-aside. The program
reduces water wastage that unnecessarily depletes aquifers
by helping systems complete water audits, leak detection,
or public education. In its first year, the program was able to
help 17 communities improve their water efficiency.
NEW JERSEY
Small systems often have difficulty completing the planning
and design requirements of the DWSRF loan process
because of the high costs of engineering services. The New
Jersey Department of Environmental Protection began
using resources from its Small Systems Technical Assistance
Set-aside to contract with the New Jersey Water Association
to provide engineering services to small systems. Several
systems have already received assistance to replace their
undersized water mains and to upgrade their treatment
plants.
POTS NETS, DE
The 6,150 residents of the Pots Nets coastal communities
depend on the Columbia Aquifer for their drinking water.
Routine compliance monitoring detected elevated mercury
levels in two community wells. Worried for public health
and unsure of the cause or extent of the problem, the
communities turned to Delaware's DWSRF program. Using
$500,000 from the Local Assistance Set-aside, state officials
assembled a team of experts to investigate the nature of the
contamination. With the discovery that the contamination
was limited to the two affected wells, the system was able
to abandon the polluted wells and rely on its other wells in
order to protect public health.
FLORIDA
Florida uses its 2 percent Small System Technical Assistance
Set-aside for a contract with the Florida Rural Water
Association (FRWA) to provide water audits and leak
detection. Florida issues consumptive use permits, which
limit the amount of water a utility is allowed to withdraw
from any source. When a system requests an increase in
its allowable water use, the water districts generally refer
systems to FRWA for a water audit and leak detection.
Systems have saved money by avoiding the treatment and
pumping costs for water that would have been lost.
21
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DRINKING WATER STATE REVOLVING FUND PROGRAMS/2005 ANNUAL REPORT
DWSRF 2005
Performance Highlight
In 2005, the DWSRF programs continued
to succeed in providing water systems with
access to the affordable capital needed to
protect public health.
Assistance Continues to Grow
By awarding nearly $1.5 billion in 2005, the
DWSRF programs have brought their total
awards to $9-5 billion in less than 10 years (see
Exhibit 9).
Funding Critical Projects
In 2005, the DWSRF programs funded
drinking water projects critical to public health
across the country. As shown in Exhibit 10, the
majority of projects included some combination
of upgrading and/or replacing drinking water
treatment and distribution infrastructure,
which are the key water system components for
removing (or inactivating) contamination and
delivering that safe water to the public. Water
systems also borrowed money to diversify and
replace their water sources and to upgrade
and replace their treated water storage. Less
common, but still critical, was the growing
number of water systems borrowing money to
acquire land to protect their water sources.
Serving All Communities
The DWSRF programs continue to serve
communities of all sizes across the country.
Approximately 93% of all funds awarded in
2005 were to publicly owned CWSs. More than
half of all loans were made to systems serving
no more than 3,300 people (see Exhibit 11).
These small systems are often the same ones
that have the least access to capital and are the
most vulnerable to financial difficulty. Most
of the assistance dollars went to larger water
systems serving at least 10,000 people, but that
is explained by the fact that the size of these
systems necessitated larger projects on average.
EXHIBIT 9
DWSRF Cumulative Assistance Reaches $9.5 Billion in 2005
22
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DWSRF 2005 PERFORMANCE HIGHLIGHTS
EXHIBIT 10
DWSRF Programs Fund Drinking Water Needs through 2005
Portion of Funding
Other
2%
Land Aquisition
0%
Purchase of
Systems
0%
Portion of Agreements
i— Land Aquisition
Planning and Design (only)
2%
Purchase of
Systems
0%
Planning and Design (only)
4%
Total value of assistance agreements is $9.5 billion
Total number of assistance agreements is 4,196
EXHIBIT I I
Communities Served by DWSRFs in 2005 (by population served)
Dollar Amount of Assistance
Fewer than 501
10,001-100
39%
Number of Assistance Agreements
100,001 and Above
7%
23
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DRINKING WATER STATE REVOLVING FUND PROGRAMS/2005 ANNUAL REPORT
EXHIBIT 12
DWSRF Loans Save Water Systems Money
DWSRF Loans Save Communities
Money
As the market interest rate on borrowing money
for water infrastructure has dropped over the
last 6 years, the average interest rate on the
DWSRF has continued to decline (see Exhibit
12). In 2005, water systems could continue to
save money by borrowing from the DWSRF
programs, which had an average interest rate
on 20-year loans hovering just above 2% (on
average 2% lower than the market rate).
EXHIBIT 13
DWSRFs Return on the Federal Investment through
2005
High Return on Federal Investment
Even as a relatively young program, the DWSRF
continues to succeed in providing a high return
on federal investments since 1997 (see Exhibit
13). The ratio of DWSRF disbursements to
federal outlays, 1.7 (meaning that for every
$1 drawn from the Federal Treasury for this
program, $ 1.70 is available for water system
assistance), is growing and will continue to grow
in the future as loans are repaid and state loan
funds grow. This is particularly impressive since
16% of the federal investment is used for set-
asides rather than water system loans.
24
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DWSRF 2005 PERFORMANCE HIGHLIGHTS
Available DWSRF Funds Are
Quickly Used for New Project
Assistance
Due to low interest rates and broad financing
eligibilities, DWSRF funds continue to be in
high demand (see Exhibit 14). In 2005, 85%
of all available funds were committed to new
projects. This efficient rate of fund utilization is
one reason that the return on federal investment
will continue to grow impressively over time.
EXHIBIT 14
DWSRF Funds Committed to Projects through 2005
Communities Most in Need Benefit
from the DWSRF
Since 2000, at least 28% of all loan agreements
have been made with disadvantaged
communities (see Exhibit 15). These
communities, in particular, often have difficulty
accessing capital. One of the key roles of the
DWSRF is to help these communities access
the affordable capital they need to provide safe
drinking water to residents. The DWSRF has
a number of special provisions to aid these
communities, including negative interest
rates, principal forgiveness, and extended loan
repayment periods. Since the inception of the
program, disadvantaged communities have been
able to make more than $1.6 billion in capital
investments because of the DWSRF.
EXHIBIT 15
DWSRF Assistance to Disadvantaged Communities
T $1,800
+ $1,200
+ $600
1997 1998 1999 2000 2001 2002 2003 2004 2005
Percentage of All Agreements that
Go to Disadvantaged Communities
Cumulative Assistance (in millions)
to Disadvantaged Communities
25
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DRINKING WATER STATE REVOLVING FUND PROGRAMS/2005 ANNUAL REPORT
DWSRF Program 2005
Financial Performance
Overview
Forty-three DWSRF programs are
independently audited. The remaining
8 programs rely on their Single Audit.
The DWSRFs of the 50 states and Puerto Rico
are independent entities, each producing its
own financial reports and statements. EPA has
produced financial statements for the DWSRF
program nationally based on data reported by
the states to EPA's National Drinking Water
Information Management System. For the
national DWSRF program (representing all 51
separate DWSRFs), EPA has provided:
> A Statement of Net Assets
> A Statement of Revenues, Expenses, and
Earnings
> A Statement of Cash Flow
These statements are best viewed as non-audited,
cash-flow-based financial reports. Exhibit 16
showcases some highlights of the 2005 financial
statements for the DWSRF programs.
Statement of Net Assets
This statement (Exhibit 17) describes a fund's
assets and liabilities as of the end of the fund's
fiscal year. Assets include both financial and
capital assets. Liabilities include both current
and long-term liabilities. The DWSRF assets
include grant funds that have been drawn from
the federal treasury but do not include total grant
awards.
Total assets of the loan funds were $9-5 billion
in 2005, an increase of 16% over 2004.
Outstanding loans account for 62% of the
funds' assets. Cash and cash equivalents are an
additional 26% of the funds' assets. The funds'
liabilities consist of leverage bonds and match
bonds. Outstanding leverage bonds increased
by 14%, to $3-4 billion, in 2005- Match bonds
were $285 million in 2005, an increase of 11%
over 2004. Most of the $5-8 billion in net assets
are state and federal contributions.
The set-aside funds had total assets of $6.4 billion
in 2005- This is an increase of 5% over 2004.
They have no liabilities.
Statement of Revenue, Expenses,
and Net Earnings
This statement (Exhibit 18) describes the
performance of the funds over the reporting
period. Operating revenues of the loan funds
increased by $46 million between 2004 and
2005, an increase of more than 21%. Most of
the increase was in interest on fund investments.
Operating expenses fell $23 million to $126
million. Net non-operating revenue fell by nearly
$100 million because fewer federal funds were
taken in 2005 compared to 2004. Total revenue
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DWSRF PROGRAM 2005 FINANCIAL PERFORMANCE OVERVIEW
of the loan fund exceeded total expenses in 2005
by $889 million, a decline of 3% from 2004.
The operating revenues and expenses of the set-
aside funds had minor changes between 2005 and
2004. Small system technical assistance increased
$2 million, or 18%. Grants made under the set-
aside programs decreased by $7 million, or 21%.
The federal contribution declined 7% to $104
million. Revenues exceeded expenses by only
$400,000.
Statement of Cash Flows
This statement (Exhibit 19) provides a detailed
accounting of the actual flow of cash into and
out of the DWSRF programs. For the loan fund,
loan disbursements to be repaid totaled $1.2
billion in 2005, a modest increase over 2004.
Both cash draws from the federal capitalization
grants and state contributions fell (by $62 million
and $93 million, respectively) because fewer
federal funds were taken in 2005 compared to
2004. Gross leveraged bond proceeds fell $298
million. Overall, cash and cash equivalents
increased by $175 million as compared to an
increase of $463 million in 2004.
Total cash flows for operating expenses were
$200,000 higher in 2005 than 2004. The federal
contribution was lower, while the net grants from
l452(k) set-asides were higher.
"The significance of these loans to Indian Country cannot be overstated.
—Steve Owens, lender, AZ WIFA
005 Fi
Total assets increased by
$1.3 billion between 2004
and 2005 (fund is growing
even absent of federal
grants because operating
revenue exceeds operating
expenses).
DWSRF program equity
(also called net assets)
totals $5.8 billion.
Program liabilities increased
by $446.5 million, reflecting
the net growth in DWSRF
bonds outstanding for
state matching funds
and leveraged program
financing.
Total program revenues
exceed expenses by
$889 million, a 3%
decrease from 2004.
Interest earnings from
loans and investments
totaled more than
$262.4 million.
Administrative expenses
were 10.2% of
operating revenues.
Loan principal
repayments to DWSRF
programs were greater
than $257.5 million.
Leveraged bond
proceeds added $502.8
million to program cash
flow.
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DRINKING WATER STATE REVOLVING FUND PROGRAMS/2005 ANNUAL REPORT
EXHIBIT 17
Statement of Net Assets (millions of $)
Loan Funds
Assets
Cash and Cash Equivalents
Debt Service Reserve - Leveraged Bonds
Loans Outstanding
Unamortized Bond Issuance Expenses
Total Assets
Liabilities
Match Bonds Outstanding
Leveraged Bonds Outstanding
Total Liabilities
Net Assets
Federal Contributions
State Contributions
Transfers - Other SRF Funds
Other Net Assets
Total Net Assets
Total Liabilities and Net Assets
Set-Aside Funds
Assets
Cash and Cash Equivalents
Loans Outstanding
Total Assets
2004
2,291-3
859-7
4,946.2
43.0
8,140.3
256.7
3,002.3
3,259-0
3,297-0
1,190.0
310.1
84.1
4,881.2
8,140.3
2004
1.1
4,9
6.1
2005
2,466.1
1,044.6
5,918.7
46.8
9,476.2
285.2
3,420.3
3,705.5
3,944.0
1,293.7
354.8
178.2
5,770.8
9,476.2
2005
1.5
4.9
6.4
Liabilities
Total Liabilities
Net Assets
Federal Contributions
Other Net Assets
587.7
(581.6)
692.1
(685-6)
Total Net Assets
Total Liabilities & Net Assets
6.1
6.1
6.4
6.4
28
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DWSRF PROGRAM 2005 FINANCIAL PERFORMANCE OVERVIEW
EXHIBIT 18
Statement of Revenues, Expenses, and Earnings (millions of $)
Loan Funds
Operating Revenues
Interest on Fund Investments
Interest on DWSRF Loans
Total Operating Revenues
Operating Expenses
Bond Interest Expense
DWSRF Funds Used for Refunding
Amortized Bond Issuance Expense
Total Expenses
Nonoperating Revenues and Expenses
Federal Contribution
State Contributions
Loan Forgiveness Expenses
Transfers from (to) CWSRF
Total Nonoperating Revenues (Expenses)
Increase (decrease) in Net Assets
Net Assets
Beginning of Year
End of Year
Set-Aside Funds
Operating Revenues
Interest on l452(k) Loan Account Investments
Interest on l452(k) Loans
Total Operating Revenues
Operating Expenses
Administrative Expenses Under the 4% Set-Aside
Expenses Under the 2% Set-Aside,
Small Systems Technical Assistance
Expenses Under the 1 0% Set- Aside,
State Program Management
Grants made under the l452(k) Set-Aside
Total Expenses
Nonoperating Revenues and Expenses
Federal Contribution
Total Nonoperating Revenues (Expenses)
Increase (decrease) in Net Assets
Net Assets
Beginning of Year
End of Year
2004
67-5
148.5
215-9
116.1
31.1
1.7
148.8
709-1
196.6
(45.5)
(8-3)
851.9
919.0
3,962.3
4,881.2
2004
0.01
0.04
0.05
26.9
11.4
38.9
32.3
109.5
112.2
112.2
2.8
3-3
6.1
2005
103-1
159-2
262.3
121.7
2.1
2.2
126.0
647-0
103-7
(42.2)
44.7
753.1
889.5
4,881.2
5,770.8
2005
0.02
0.03
0.06
26.8
13-4
38.3
25-6
104.1
104.4
104.4
0.4
6.1
6.4
29
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DRINKING WATER STATE REVOLVING FUND PROGRAMS/2005 ANNUAL REPORT
EXHIBIT 19
Statement of Cash Flows (millions of $)
Loan Funds
Operating Activities
Cash Draws from Federal Capitalization Grants
Contributions from States
Loan Disbursements to be Repaid
Loan Principal Forgiven
Loan Principal Repayments
Interest Received on Loans
Total Cash Flows from Operating Activities
Noncapital Financing Activities
Gross Leveraged Bond Proceeds
Bond Issuance Expense
State Match Bond Proceeds
Cash Received from Transfers with CWSRF
Interest Paid on Leveraged and State Match Bonds
DWSRF Funds Used for Refunding
Principal Repayment of Leveraged Bonds
Principal Repayment of State Match Bonds
Net Cash Provided by Noncapital Financing Activities
Cash Flows from Capital and Related Financing Activities
Investing Activities
Interest Received on Fund Investments
Deposits to Debt Service Reserve for Leveraged Bonds
Net Cash Provided by Investing Activities
Net Increase (Decrease) in Cash and Cash Equivalents
Beginning Balance - Cash and Cash Equivalents
Ending Balance - Cash and Cash Equivalents
Set-Aside Funds
Operating Activities
Federal Contribution
I452(k) Loan Disbursements Made to Borrowers
I452(k) Loan Principal Repayments
Interest Received on I452(k) Loans
Administrative Expenses Under the 4% Set-Aside
Expenses Under the 2% Set-Aside,
Small Systems Technical Assistance
Expenses Under the 10% Set- Aside,
State Program Management
Grants made under the I452(k) Set-Aside
Total Cash Flows from Operating Activities
Noncapital Financing Activities
Net Cash Provided by Noncapital Financing Activities
Cash Flows from Capital and Related Financing Activities
Investing Activities
Interest Earnings on I452(k) Loan Account Investments
Net Cash Provided by Investing Activities
Net Increase (Decrease) in Cash and Cash Equivalents
Beginning Balance - Cash and Cash Equivalents
Ending Balance - Cash and Cash Equivalents
2004
709.1
196.6
(1,233.7)
(45.5)
240.0
148.5
14.9
800.7
(11.4)
75.4
(8.3)
(116.1)
(31.1)
(80.9)
(13.5)
614.8
0
67.5
(234.4)
(167.0)
462.7
1,828.6
2,291.3
2004
112.2
(2.7)
0.2
0.0
(26.9)
(11.4)
(38.9)
(32.3)
0.2
0
0
0.01
0.0
0.2
0.9
1.1
2005
647.0
103.7
(1,229.5)
(42.2)
257.1
159.2
(104.8)
502.8
(6.0)
40.9
44.7
(121.7)
(2.1)
(84.9)
(12.3)
361.4
0
103.1
(184.9)
(81.8)
174.8
2,291.3
2,466.1
2005
104.4
(0.3)
0.4
0.0
(26.8)
(13.4)
(38.3)
(25.6)
0.4
0
0
0.02
0.0
0.4
1.1
1.5
30
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ADDITIONAL INNOVATIVE DWSRF EFFORTS
Additional Innovative
DWSRF Efforts
Oglethorpe County, GA
Oglethorpe County anticipates increased drinking water
demand as the nearby City of Athens expands. Georgia's
DWSRF has loaned $7 million to the four incorporated
towns in Oglethorpe County—Maxeys, Lexington,
Arnoldsville, and Crawford—to expand and upgrade their
systems. As part of these improvements, the DWSRF
funded emergency connections between the towns. On
July 29, 2005, Lexington experienced a massive water
main break that drained the entire system and left 239
residents without water. Crawford opened the DWSRF-
funded emergency
connection between
the two towns to
allow engineers to
locate and fix the
break.
3,091 people served
Rock County
Rural Water
System, MN
The Rock County Rural
Water System provides
drinking water to 3,100
people from several wells
that have nitrate levels
exceeding federal limits.
To address this issue, the
water utility blends water,
but this solution may not be sustainable. For a long-term
solution, four technical experts, funded from a Local
Assistance DWSRF Set-aside, have helped Rock County
prepare a wellhead protection plan. State staff used a
groundwater flow model to delineate the capture zone for
the well. They determined that the contamination was
from an abutting livestock operation. The water system
worked with the landowner to re-direct drainage from the
animal yard away from the well. As a result, nitrate levels
are dropping in the wells, and public health is protected.
3,100 people served
Passaic Valley Water Commission, NJ
Passaic Valley's Little Falls Water Treatment Plant needed major
upgrades. New Jersey's DWSRF awarded the system a $70
million loan to replace its existing flocculation/sedimentation
process with a new ballast flocculation system, install new
ozone generators and ozone contactors, rehabilitate and replace
existing chemical storage and feed systems, replace raw water
pumping systems, upgrade and retrofit existing gravity filters
to convert the filters to biologically active carbon filters, and
install filter-to-waste piping.
300,000people served
New Jersey
The New Jersey
Department of
Environmental Protection
expanded its operator
certification program to
include all community
and non-transient non-
community water systems.
The operator certification
program is funded
through the State Program
Management DWSRF
Set-aside.
Aqua Pennsylvania, PA
Aqua Pennsylvania, a subsidiary of the largest U.S.-based publicly
traded water company, serves approximately 1.4 million people
in Pennsylvania. The company consolidates small, non-viable
systems that have struggled with maximum contaminant level
(MCL) exceedances, boil water orders, water pressure problems,
and unreliable supply issues. Aqua Pennsylvania has been
awarded millions of dollars in loans from Pennsylvania's DWSRF
to consolidate troubled systems and to upgrade treatment plants,
install adequate storage facilities, replace aging and undersized
water mains, and address other reliability and water quality issues
associated with the systems it has purchased. The result has
been happier, safer customers and fewer systems failing to meet
drinking water health-based standards.
/, 400,000 people served 3 |
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DWSRF-at-a-glance
HIBIT20
nds Available for Projects (Millions of Dollars)
$1,509.4
820.3
144.6
511.2
257.1
103.1
State Match
Net Leveraged Bonds
Net Loan Principal Repayments
:t Transfers with CWSRF
1997-2005
$11,145.8
6,565.8
2,750.2
872.2
499.3
353.9
1,048.9
EXHIBIT 2 I
Other Key Statistics
Return of 1.7 Times the Federal
Investment
2.2% Average DWSRF Interest Rate in
2005 (4.2% Market Rate)
es Conduct Separate Audits
$493 Million Additional Grants and Loans
ite rrograms
IIBIT22
\ssistance Provided to Projects (Millions of Dollars)
oject lype
anning and Design Only
onstruction
ansmission & Distribution
restructuring
..and Acquisition
$1,462.7
31.7
1997-2005
$9,452.1
4,129.3
3,116.6
Total, by Population Served
Less than 501
501 to 3,300
00,001 and Above
$1,462.7
81.7
$9,452.1
424.1
1,640.8
3,672.8
2,067.5
For more information about the
Drinking Water State Revolving Fund,
please contact:
Drinking Water State Revolving Fund Program
U.S. Environmental Protection Agency
1201 Constitution Avenue, NW (Mailcode 4606M)
Washington, DC 20004
Phone: (202) 564-205 I
Fax: (202) 564-3757
I nternet: vwvw.epa.gov/safewater/dwsrf
Office of Ground Water and Drinking Water
May 2006
EPA 816-R-06-003
f of Loans by Population Served
-ess than 501
1 to 100,000
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