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Office of Water • April 2005 • EPA-832-R-05-001
                                                                                                                                                                                                           PROVEN



                                                                                                                                                                                                           I NTEGRITY



                                                                                                                                                                                                           AN D



                                                                                                                                                                                                           PERFORMANCE

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                                          DEDICATION

                                         Robert GiK (1946 - 2004)

                                         We would like to dedicate this report
                                         to the memory of Robert Gill, EPA
                                         Region 2.  Bob had many accom-
                                         plishments working first with Ohio's
                                         water program and then with EPA.
                                         From the very beginning of the
                                         CWSRF program, Bob's dedication to
                                         public service and his personal
                                         integrity helped ensure that the pro-
                                         gram would achieve the highest level
                                         of performance. He provided leader-
                                         ship and highly valuable guidance
                                         that is truly missed by all of his state
                                         and EPA colleagues.
                                              Clean Water
                                              Slate? devolving Kund
                                                                                                                   CWSRF Programs -A Tradition of Integrity and Performance  	2
                                                                                                                   CWSRF Programs - Getting the Job Done 	4
                                                                                                                   The Annual CWSRF Funding Process - Structured for Effectiveness and Integrity ....6
                                                                                                                   2004 Focus - Measuring Environmental Results .
Innovative Financing for Water Quality Projects	11
Achievements in National Clean Water Financing	12
CWSRF 2004 Performance Highlights	14
CWSRF Program 2004 Financial Performance Overview	18
EPA's Business Plan to Support the CWSRF Program	23
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Congress created the Environmental
Protection Agency's Clean Water
State Revolving Fund (CWSRF)
program in 1987 to serve as a long-
term funding source for projects
that clean and protect the nation's
waters.  Seventeen years of integrity
and performance have proven the
CWSRF's reputation as an efficient,
innovative federal-state program.

Operating in all 50 states and in
Puerto Rico, the  CWSRF has made
nearly 15,300 loans for projects
through 2004, and now has over $50
billion in funds available for assis-
tance. Due to continuing federal
support and impressive state-level
management, annual funding has
increased at a compound rate of 15
percent per year.  The CWSRF has
averaged $4.4 billion in annual assis-
tance since 2000. The program has
accomplished this feat without expe-
riencing any loan losses. Given
these strong financial conditions,
state CWSRF programs have
achieved high regard in the banking
industry. The  next page summarizes
the CWSRF's funding levels for
investment in water quality.

The CWSRF program's integrity
stems from its unwavering commit-
ment to address  the nation's most
pressing clean water needs and to
achieve strong financial perform-
ance.  From an environmental per-
spective, the CWSRF program has
                                                                             been a sound investment for states
                                                                             and the federal government. EPA-
                                                                             approved, state-level priority systems
                                                                             direct funds to high priority projects.
                                                                             When creating the priority list, each
                                                                             state considers applicant communi-
                                                                             ties' current regulatory compliance
                                                                             status, imminent public health and
                                                                             environmental threats, and the rela-
                                                                             tive importance  of the affected
                                                                             waterbodies.  CWSRF assistance has
                                                                             helped thousands of communities
                                                                             implement important projects by tar-
                                                                             geting funding to where it is most
                                                                             needed. Since 1996, over 60 percent
                                                                             of all CWSRF loan agreements have
                                                                             been made  to communities of fewer
                                                                             than 10,000 people.

                                                                             This 2004 Annual Report provides an
                                                                             overview of this year's CWSRF pro-
                                                                             gram accomplishments and status
                                                                             and forecasts its plans for continued
                                                                             success. The report also highlights
                                                                             the effort now underway to imple-
                                                                             ment a new reporting system to bet-
                                                                             ter communicate the environmental
                                                                             results of CWSRF program assis-
                                                                             tance. Twenty-eight states are now
                                                                             testing this  system.
Clean Water
State Revolving runt!
                                          The CWSRF program's integrity stems from its unwavering

                                          commitment to address the nation's most pressing clean

                                          water needs and to achieve strong financial performance.
                                     Clean Water State Revolving Fund
                                     National Performance Summary Statement
                                     Fund Activity - Estimated ($ Millions)
                                    Annual Fund Activity
                                        Federal Capitalization Grants
                                        State Matching Funds


                                        New Funds Available for Assistance
                                        Project Commitments (Executed Loan Agreements)


                                        Project Disbursements
                                        Cash Draws from Federal Capitalization Grants


                                    Cumulative Fund Activity
                                        Federal Capitalization Grants
                                        State Matching Funds


                                        Funds Available for Assistance
                                        Project Commitments (Executed Loan Agreements)


                                        Project Disbursements
                                        Cash Draws from Federal Capitalization Grants


                                    Source: EPA's CWSRF National Information Management System.
  2004


 1,092.8
  241.7


 5,227.4
 4,605.9


 4,308.8
 1,415.3
21,896.4
 4,614.6


52,052.4
47,905.4


40,705.5
19,825.5
  2003


 1,251.3
  260.0


 4,548.6
 4,738.3


 3,835.4
 1,329.6
20,803.6
 4,372.9


46,825.0
43,299.4


36,396.6
18,410.2
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                      o
Lasting success rises from a strong
foundation.  The CWSRF program's
achievements build on the breadth of
experience and ingenuity in the 51
state CWSRF programs.

The Clean Water Act of 1987 gave
states significant flexibility to design
financing programs that best meet
their water quality infrastructure
needs. The CWSRF is primarily a
low-interest loan program, though
states can and do  offer a wide range
of other assistance options. These
are outlined in Exhibit 1.  Many
states also "leverage," using their
federal capitalization grants and
other fund assets as security for tax-
exempt bonds. Since the start of the
CWSRF program,  27 states have
raised $16 billion by issuing debt,
significantly expanding their ability
to make low-interest loans. State
programs have not only provided key
funding for wastewater treatment,
but have also funded important
water quality projects on farms,
stream cleanups at abandoned
mines, and land purchases to protect
drinking water sources.
STATES  ORGANIZE TO
MEET THE  CHALLENGE

Each state  has effectively organized
its CWSRF program to address its
financial and environmental program
management objectives. In addition,
state associations including the
Council of Infrastructure Financing
Authorities and the Association of
State and Interstate Water Pollution
Control Administrators serve a vital
role through capacity building pro-
                                                                                      Exhibit 1:
                                                                                      CWSRF Assistance Options
                                                                                                                                  STATE  AGENCIES  THAT  MANAGE  CWSRF  PROGRAMS
                                                                                     1
              Loans

              Refinancing

              Bond insurance

            • Guarantees

            • Leveraging
              (Bond issuance)

            • Sub-state funds
grams that train members and sup-
port their efforts to overcome state
program management challenges.

As the CWSRF expands, state pro-
grams complete more work each
year. Annually, states as a whole
process thousands of CWSRF finan-
cial transactions for active loans, pro-
vide assistance to hundreds of loan
applicants and loan recipients, devel-
op detailed annual program plans
and reports, work with state legisla-
tors and governors on program
design and operation, and coordi-
nate efforts with multiple state-level
financing programs. It is through
the hard work of dedicated employ-
ees that the CWSRF has reached its
current status as a notable environ-
mental finance program.  The next
page arrays the many organizations
that dedicate resources to the mis-
sion of the CWSRF program.
EPA Region 1 - Boston, Massachusetts
Connecticut Department of Environmental Protection
Connecticut Office of the Treasurer
Maine Municipal Bond Bank
Maine Department of Environmental Protection
Massachusetts Water Pollution Abatement Trust
Massachusetts Department of Environmental Protection
New Hampshire Department of Environmental Services
Rhode Island Clean Water Finance Agency
Rhode Island Department of Environmental Management
Vermont Department of Environmental Conservation
Vermont Municipal Bond Bank

EPA Region 2 - New York, New York
New Jersey Department of Environmental Protection
New Jersey Environmental Infrastructure Trust
New York State Environmental Facilities Corporation
New York Department of Environmental Conservation
Puerto Rico Environmental Quality Board
Puerto Rico Infrastructure Financing Authority

EPA Region 3 - Philadelphia, Pennsylvania
Delaware Department of Natural Resources
 and Environmental  Control
Maryland Department of the Environment
Pennsylvania Infrastructure Investment Authority
Pennsylvania Department of Environmental Protection
Virginia Department  of Environmental Quality
Virginia Resources Authority
West Virginia Department of Environmental Protection
West Virginia Water Development Authority

EPA Region 4 - Atlanta, Georgia
Alabama Department of Environmental Management
Florida Department of Environmental Protection
Georgia Environmental Facilities Authority
Kentucky Infrastructure Authority
Kentucky Division of Water
Mississippi Department of Environmental Quality
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 - Chicago, Illinois
Illinois Environmental Protection Agency
Indiana Department  of Environmental Management
Indiana State Budget Agency
Michigan Department of Environmental Quality
Michigan Municipal Bond Authority
Minnesota Public Facilities Authority
Minnesota Pollution Control Agency
Minnesota Department of Agriculture
Ohio Environmental Protection Agency
Ohio Water Development Authority
Wisconsin Department of Natural Resources
Wisconsin Department of Administration

EPA Region 6 - Dallas, Texas
Arkansas  Soil and Water Conservation Commission
Arkansas  Development Finance Authority
Louisiana Department of Environmental Quality
New Mexico Environment Department
Oklahoma Water Resources Board
Texas Water Development Board

EPA Region 7 - Kansas City, Missouri
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
Missouri Environmental Improvement
 and Energy Resources Authority
Nebraska  Department of Environmental Quality
Nebraska  Investment Finance Authority

EPA Region 8 - Denver, Colorado
Colorado Water Resources and Power Development Authority
Colorado  Department of Public Health and Environment
Colorado  Department of Local Affairs
Montana Department of Environmental Quality
Montana Department of Natural Resources and Conservation
North Dakota Department of Health
North Dakota Municipal Bond Bank
South Dakota Department of Environment and Natural Resources
Utah Department of Environmental Quality
Wyoming Department of Environmental Quality
Wyoming Office of State Lands and Investments

EPA Region 9 - San Francisco, California
Arizona Water Infrastructure Finance Authority
California State Water Resources Control Board
Hawaii Department of Health
Nevada Department of Conservation and Natural Resources

EPA Region 10 - Seattle, Washington
Alaska Department of Environmental Conservation
Idaho Department of Environmental Quality
Oregon Department of Environmental Quality
Washington Department of Ecology
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ECONOMIC  BENEFITS

The CWSRF's investment in water
quality has substantial economic
impacts. Tourism requires rivers and
lakes to be clean and beaches to be
healthy. Our nation's waterways
sustain commercial and recreational
fisheries that attract over 25 percent
of the population. And irrigated
agriculture, public water utilities, and
industry depend on clean water.

But water use is growing to the point
where, according to a 2003 report by
the General Accounting Office, 36
states will experience freshwater
shortages by 2013 in non-drought
conditions.  Maintaining and
improving water quality is an impor-
tant part of managing this valuable
resource and attracting economic
development. For example, micro-
bial contamination  closes hundreds
of beaches and contributes to at least
a half-million cases of illness a year
from impure drinking water. As a
financial engine for wastewater treat-
ment—and dramatic increases in
infrastructure needs are projected for
the next 20 years—the CWSRF will
provide important economic benefits.

A recent independent study of the
economic impact—specifically the
impact on jobs—of water infrastruc-
           Clean Water: An Annual Economic Snapshot
             5 billion instances of water-based recreation
             1 billion coastal visits generate over $50 billion
      $12.5 million in sheUfish landings (2003)
                                                                  ture funding validated CWSRF pro-
                                                                  gram benefits.  The authors, tasked
                                                                  by EPA's water policy staff in the
                                                                  Office of Water to answer a
                                                                  Congressional  request, used three
                                                                  models to gauge short-term adjust-
                                                                  ments and longer-term employment
                                                                  and GDP trends. The economists
                                                                  concluded that a sustained one bil-
                                                                  lion dollar increase in debt-financed
                                                                  water infrastructure,  such as CWSRF
                                                                  funding, would permanently add
                                                                  approximately 5,000  jobs over the
                                                                  next ten years.  An initial increase
                                                                  would range from 16,000 to 22,000
                                                                  jobs depending on economic condi-
                                                                  tions.  Forecasts show that the
                                                                  majority of employment gains occur
                                                                  in local infrastructure projects and in
                                                                  water infrastructure equipment man-
                                                                  ufacturing.  Overall, the study's esti-
                                                                  mates of economic benefits are con-
                                                                  servative because the authors stop
                                                                  short of projecting the employment,
                                                                  production, and productivity impacts
                                                                  of valuable water quality and public
                                                                  health gains.
State CWSRF program financing
innovations have opened the doors
to thousands of projects with
important water quality benefits.
States have taken hold of the
CWSRF's flexibility to maximize the
environmental impact of its funding.
They continue to finance wastewater
utility upgrades and rehabilitation;
at over 90 percent of loan volume,
municipal utility borrowers are well
served. CWSRF program managers
have also reached out to smaller
borrowers to curtail water pollution
from farms, septic systems, and
urban sources. Nonpoint source
loans totaled $176 million in 2004.
While this only accounts for 4 per-
cent of total funding, it represents
26 percent of assistance agreements.

CWSRF programs have  a track
record of designing new financing
approaches for nonpoint source
projects.  To rehabilitate or replace
leaking septic tanks, states often set
up linked-deposit programs with
local banks.  The  banks then make
affordable loans to residents, limit-
ing costs  and risks to the CWSRF.
Agricultural  loan programs regularly
involve partnerships with conserva-
tion districts to identify  effective
projects.  Reducing sediment, nutri-
ent, and pesticide runoff to water-
bodies usually means increasing
resource efficiency on the farm.
Some states also  reward utilities that
invest in nonpoint source projects in
                                                                                                                                                            conjunction with infrastructure proj-
                                                                                                                                                            ects by further reducing the interest
                                                                                                                                                            rate on the CWSRF loan.

                                                                                                                                                            States also use CWSRF financing to
                                                                                                                                                            purchase land to protect in-stream
                                                                                                                                                            habitats and drinking water aquifers.
                                                                                                                                                            They fund wetland mitigation
                                                                                                                                                            banks, acid mine drainage cleanup,
                                                                                                                                                            stream bank restoration projects,
                                                                                                                                                            and an array of storm water manage-
                                                                                                                                                            ment practices and treatment tech-
                                                                                                                                                            niques. This final category, a mix of
                                                                                                                                                            combined and sanitary sewer over-
                                                                                                                                                            flows and nonpoint source impacts
                                                                                                                                                            that large and small communities
                                                                                                                                                            are struggling to contain,  shows
                                                                                                                                                            how the CWSRF responds to the
                                                                                                                                                            nation's clean water agenda. The
                                                                                                                                                            following two pages show examples
                                                                                                                                                            of the range of CWSRF projects and
                                                                                                                                                            financing approaches.
12 billion gallons of we
                                            58 billion of soft drinks (2001)
                                                                                                                 "The CWSRF has put more conservation on the ground

                                                                                                                 than any grant program." Rich Baden, Executive
                                                                                                                 Director, Spokane County Conservation District (WA)
03
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      Achievements  in  National  Clean Water   Financing
   PORTLAND, OREGON
                                              MONTANA
   $12.4 million in CWSRF loans extend-
   ed sewer lines to replace septic tanks,
   converted a treatment plant from chlo-
   rine gas to sodium hypochlorite to
   address security concerns, and funded
   50 watershed revegetation projects. An
   innovative program of reduced interest
   rates encouraged the utility to support
   habitat restoration.
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                      To reduce nutrient-laden agricultural
                      runoff, the CWSRF program has
                      made 175 loans to farmers and
                      ranchers, most for center-pivot
                      irrigation equipment, which cuts
                      water use by half.  With $15 million
                      loaned since 2000, demand is
                      increasing thanks to partnerships
                      with local conservation districts.
                                                                               IOWA

                        BISBEE, ARIZONA
To tackle severe inflow and infiltration
problems and to restore compliance at
the wastewater treatment plant, the
city, state, USDA Rural Development,
and North American Development
Bank agreed to finance $30 million in
improvements, over one third from the
CWSRF program.
              The CWSRF established a
              special program to make
              loans for residential septic
              tank repair and replace-
              ment. Working through
              approximately 150 local
              banks, the effort has made
              195 loans for over a million
              dollars in just two years.
                                                                STILLWATER, OKLAHOMA
A sewage treatment plant upgrade and
expansion protected stream habitat and
drinking water intakes. At $14.2 million,
all from the CWSRF, the project was
under budget and won the American
Public Works Association (Oklahoma
Chapter) Environmental Project of the
Year award in 2003.
                                                             WILLARD, NEW MEXICO
                                     A $63,000 CWSRF loan leveraged over
                                     $400,000 in federal and state funds to
                                     install decentralized treatment clusters
                                     and new septic tanks.  To stem nitrate
                                     leaching to the sole drinking water
                                     source, the village of 240 people estab-
                                     lished a wastewater management utili-
                                     ty to maintain these systems.
                                                                                                                                                                        FALL RIVER, MA
                KENT, DHIO
       ).5 million in CWSRF funding has
     helped build a 3-mile long, 20-foot
     diameter tunnel to control combined
     sewer overflows. Once operational, the
     tunnel will improve water quality in
     Mount Hope Bay.
               Dam modifications have gone a long
               way toward restoring fish habitat and
               migration routes in the Cuyahoga
               River. $3.9 million in incentives from
               an innovative CWSRF program
               allowed several local wastewater utili-
               ties to "sponsor" the work in conjunc-
               tion with infrastructure projects.

MONMOUTH  COUNTY, NEW JERSEY
A comprehensive upgrade to a wastewater
plant serving 80,000 people and treating
nearly 12 million gallons per day received
a $52 million CWSRF loan. New pumps,
screens, aeration basins, pumping stations,
sludge thickeners, biofilters, and more
were operational in 2003.
                                                                                                           DWENSBORO, KENTUCKY
                                                                                                                                                      GREENE COUNTY, PENNSYLVANIA
$26 million in CWSRF funds
installed new technology at a sput-
tering treatment plant and extended
the collection system to eliminate
18 smaller facilities and many fail-
ing septic tanks. Regionalization
minimized combined sewer over-
flows to protect the Ohio River.
                                                                                                                                                      Billions of gallons of highly acidic, toxic mine water
                                                                                                                                                      threatened a major tributary of the Monongahela River. A
                                                                                                                                                      $4.3 million CWSRF loan financed treatment and proper
                                                                                                                                                      effluent discharge to protect drinking water supplies and
                                                                                                                                                      recreational uses and preserved 100 local jobs.

                                                                                                                                                    CLAYTON COUNTY, GEORGIA
                                                                                    Constructed wetlands are the final
                                                                                    step at the sewage treatment facility,
                                                                                    cleaning the effluent so it can be
                                                                                    reused. A $9 million CWSRF loan
                                                                                    supported this efficient use of natural
                                                                                    biological processes.
                                                                                                                                                                                                          1 3

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       CWSRF Loans Save Communities 20% (2004 Average)
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The Clean Water Act requires the
51 state-level CWSRF programs to
undergo an annual financial audit.
Each state and Puerto Rico, or EPA's
Office of Inspector General, conducts
these audits according to the gener-
ally accepted auditing standards
established by the Governmental
Accounting Standards Board
(GASB). GASB offers guidelines to
the governmental accounting profes-
sion to determine the best fund
structures for state programs such as
the CWSRFs.  States often define
their CWSRF programs as ongoing
enterprise funds under the GASB
definitions of funds. The standard-
ized financial statements used in
enterprise fund reporting for CWSRF
programs include the following:

Statement of Net Assets
This statement describes a fund's
assets and liabilities  as of the end of
the fund's fiscal year. Assets include
both financial assets and capital
assets.  Liabilities include both current
and long-term liabilities. CWSRF
fund assets include grant funds that
have been drawn from the federal
treasury to date, but do not include
total grant awards. Several years ago,
a new GASB rule created the state-
ment of net assets as a replacement
for the balance sheet statement. The
"net asset" section of the statement of
net assets replaced the "equity" section
of the balance sheet.
Statement of Revenues,
Expenses, and Earnings
This statement describes the per-
formance of the CWSRF fund over
the reporting period. The statement
of revenues, expenses, and earnings,
reports on the overall performance
of the fund during the reporting
period.

Statement of Cash Flows
This statement provides a detailed
accounting of the actual flow of cash
into and out of the CWSRF fund.

Because the 51 constituent CWSRF
programs are independent state-
level entities, no nationally audited
CWSRF program financial reports
are available. However, using EPA's
CWSRF National Information
Management System, national
aggregate financial statements have
been developed and are included
below. The statements are best
viewed as non-audited, cash flow-
based financial reports.
                                                                                                                             2004 Financial Statement Highlights
                                                                                                                             Statement of Net Assets

                                                                                                                             • Total assets increased by $4.3 billion.

                                                                                                                             • CWSRF program equity (also called net assets) totals $26.5 billion.

                                                                                                                             • Program liabilities increased by $2.2 billion, reflecting the net growth in CWSRF bonds
                                                                                                                               outstanding for state matching funds and leveraged program financing.

                                                                                                                             Statement of Revenues, Expenses, and Earnings

                                                                                                                             • Total program revenues exceeded expenses by $2.0 billion, an 11 percent increase from 200c
                                                                                                                             • Interest earnings from loans and investments totaled more than $1.2 billion.
                                                                                                                              Administrc
                                                                                                                             Statement of Cash Flows
                                                                                                                                                              ?RF programs were greater than $2.0 billion.
                                                                                                                               Leveraged bond proceeds added $3.0 billion to
                                                                                                    asn now.
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       Clean Water State Revolving Fund
       National Performance Summary Statement
       Statement of Net Assets - Estimated ($ Millions)
                                                                                2004
                                                                                            2003
Assets
Cash and Cash Equivalents
Debt Service Reserve - Leveraged Bonds
Loans Outstanding
Unamortized Bond Issuance Expenses
Total Assets
Total Assets
Liabilities
Match Bonds Outstanding
Leveraged Bonds Outstanding

9,485.4
5,868.1
29,334.3
282.3
44,970.1
44,970.1

642.4
17,863.9

8,274.4
5,049.7
27,069.8
262.0
40,628.9
40,628.9

636.2
15,667.6
    Total Liabilities

Net Assets
    Federal Contributions
    State Contributions
    Transfers of Non-Federal Funds from (to) DWSRF
    Other Net Assets
    Total Net Assets

Total Liabilities and Net Assets
                                                                             18,506.3
 19,825.5
  3,545.6
   (286.6)
  3,379.3
 26,463.8

44,970.1
                     16,303.8
 18,410.2
  3,362.4
   (294.9)
  2,847.4
 24,325.1

40,628.9
       Note: Under the new GASB 34 rules, "equity" is termed "net assets," and is defined as the difference between assets and liabilities.
       Statement presents a compilation of reporting from 51 state programs and is not audited.
       Source: EPA's CWSRF National Information Management System.
                                                                                                                   Clean Water State Revolving Fund
                                                                                                                   National Performance Summary Statement
                                                                                                                   Statement of Revenues, Expenses, and Earnings - Estimated ($ Millions)
                                                                                                                          Operating Revenues
                                                                                                                              Interest on Investments
                                                                                                                              Interest on Loans
                                                                                                                      2004

                                                                                                                      423.8
                                                                                                                      830.8
                                                                                                                              Total Operating Revenues

                                                                                                                          Operating Expenses
                                                                                                                              Bond Interest Expenses
                                                                                                                              Amortized Bond Issuance Expenses
                                                                                                                              Administrative Expenses	
                                                                                                                                                                                          1,254.6
                                                                                                                                                                                           798.5
                                                                                                                                                                                            12.4
                                                                                                                                                                                            43.8
                                                                                                                              Total Expenses
                                                                                                                                                                                           854.7
                                                                                                                   Note: Statement presents a compilation of reporting from 51 state programs and is not audited.
                                                                                                                   Source: EPA's CWSRF National Information Management System.
                                                                                                                      2003

                                                                                                                      428.3
                                                                                                                      785.5
                                                                                                                                         1,213.8
                                                                                                                                          786.0
                                                                                                                                           10.4
                                                                                                                                           46.6
                                                                                                                                          843.0
Nonoperating Revenues and Expenses
Federal Contribution
State Contributions
Transfers from (to) DWSRF
Total Nonoperating Revenues (Expenses)
Total Operating and Nonoperating Revenues
Increase (Decrease) in Net Assets
Net Assets
Beginning of Year
End ofYear

1,415.3
183.2
8.3
1,606.8
2,006.7
2,006.7

24,862.6
26,869.3

1,329.6
194.2
(86.8)
1,437.0
1,807.8
1,807.8

23,054.8
24,862.6
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22

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       Clean Water State Revolving Fund
       National Performance Summary Statement
       Statement of Cash Flows - Estimated ($ Millions)
       Cash Flows from Capital and Related Financing Activities
           Beginning Balance - Cash and Cash Equivalents
           Ending Balance - Cash and Cash Equivalents
                                                                               2004
    0.0
8,247.4
9,485.4
       Note: Statement presents a compilation of reporting from 51 state programs and is not audited.
       Source: EPA's CWSRF National Information Management System.
                     2003
Cash Flows from Operating Activities
Cash Draws from Federal Capitalization Grants
Contributions from States
Loan Disbursements Made to Borrowers
Loan Principal Repayments
Administrative Expenses
Interest Received on Loans
Net Cash Provided by Operating Activities

1,415.3
183.2
(4,308.8)
2,044.3
(43.8)
830.8
121.0

1,329.6
194.2
(3,835.4)
1,666.9
(46.6)
785.5
94.3
Cash Flows from Noncapital Financing Activities
Net Leveraged Bond Proceeds
State Match Bond Proceeds
Cash Received from Transfers with DWSRF
Interest Paid on Leveraged and State Match Bonds
CWSRF Funds Used for Refunding
Principal Repayments of Leveraged Bonds
Principal Repayments of State Match Bonds
Net Cash Provided by Noncapital Financing Activities

3,061.1
58.5
8.3
(798.5)
(31.4)
(734.2)
(52.3)
1,511.6

2,039.4
65.8
(86.8)
(786.0)
(248.7)
(554.8)
(58.5)
370.4
    0.0
Cash Flows from Investing Activities
Interest Received on Investments
Deposits to Debt Service Reserve for Leveraged Bonds
Net Cash Provided by Investing Activities
Net Increase (Decrease) in Cash and Cash Equivalents

423.8
(818.4)
(394.6)
1,238.0

428.3
(97.8)
330.5
795.2
7,452.2
8,247.4
                        To help sustain the success of the
                        CWSRF program, EPA has adopted
                        a comprehensive business plan that
                        integrates and enhances key com-
                        ponents of the proven federal-state
                        partnership.
TRANSPARENCY
IN  OVERSIGHT

Strong relationships between state
program administrators and EPA
managers have safeguarded the
CWSRF programs and allowed for
innovation. Program oversight has
been efficient and effective. As pro-
grams become more complex and
staff turnover increases, however, it
becomes difficult to devote time and
attention to all management areas.
To improve accountability and trans-
parency, EPA issued guidance for the
annual program review process in
2004. An accompanying checklist
ensures consistency nationwide and
encourages better preparation for the
annual review process. Starting in
2005, a series  of standard internal
EPA operating procedures will set
baseline procedures for key program
management  tasks, complementing
the  annual review guidance and
training regimen. The first will
address cash transactions from the
federal treasury.
                                           TRAINING

                                           Regional training workshops are an
                                           essential part of the CWSRF pro-
                                           gram. These sessions educate new
                                           and veteran employees, clarify leg-
                                           islative and policy changes, dissemi-
                                           nate information on innovative
funding practices and solutions to
common problems, and provide a
forum for discussion of new initia-
tives. A mature CWSRF now
demands a more sophisticated train-
ing approach. EPA is planning a
rotating series of introductory, pro-
grammatic, and financial training
sessions that will include all program
administrators every other year. The
annual Council of Infrastructure
Financing Authorities training work-
shop will remain an important part
of the program. To reach even more
managers and to allow the content
of these workshops to address the
most current issues, the Agency is
also developing training videos.
Basic and more advanced sessions
will become available over the
Internet in the next year or two.
RECOGNITION

The high level of professionalism
among program managers has
resulted in many innovations that
have made the CWSRF a model gov-
ernment subsidy program. For
example, they can take credit for the
CWSRF's invaluable national data
system.  To acknowledge their
important work and its results, EPA
will initiate awards and accredita-
tion-like programs over the next few
years. The awards program will first
focus on borrowers, showcasing
projects nationwide. It will expand
to recognize key achievements of
state programs and perhaps individ-
uals. An accreditation-like program
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                                                                                                                          CWSRF-at-a-Glance
       for EPA regional program managers
       will recognize the expertise involved
       in managing CWSRF programs.
REDEFINING
PERFORMANCE

Beyond strengthening its foundation,
the CWSRF program aims to provide
leadership for the future of water
infrastructure finance. A focus on
financial performance has made the
CWSRF programs engines for water
quality improvement. Until now,
there has been no comprehensive
effort to document these results.  The
state-EPA initiative to assess envi-
ronmental impacts, discussed earlier,
comes at  a time when wastewater
infrastructure needs are mounting
and more detailed study of water-
bodies is  making increasingly effi-
cient pollution control possible. This
environmental benefits effort, inte-
grated priority systems, and recent
state innovations position the
CWSRFs  to make better decisions
about how to finance clean water
projects in the future. With increased
pressure to justify funding, an envi-
ronmental accounting system will
become a key aspect of a state pro-
gram's communications strategy.

In 2008, the CWSRF program's
twentieth anniversary,  EPA will host
a water infrastructure finance confer-
ence to explore these and other criti-
cal issues.  The conference will bring
together the financial, technical,
planning, and management stake-
holders who work with the CWSRF
program and other water quality
financing programs. Participants will
focus on how to improve the per-
formance of financing for sustainable
water quality.

Through these current and upcom-
ing projects and key partnerships
with other Office of Water programs,
federal agencies, and, most impor-
tantly, the state programs, EPA's
CWSRF program will continue to
finance America's investment in
clean water.
                                                                                                                          Funds Available for Projects (Billions of Dollars)

                                                                                                                                                           2004    1988-2004
                                                                                                                          Total Funds
                                                                                                                          Federal Capitalization Grants
                                                                                                                          State Match
                                                                                                                          Net Leveraged Bonds
                                                                                                                          Net Loan Principal Repayments
                                                                                                                          Net Earnings
                                                                                                                          Net Transfers with DWSRF
                                                                                                                          (Less Administration)
$5.2
1.09
0.24
2.24
1.31
0.37
(.01)
(.04)
$52.1
21.9
4.6
16.0
6.9
3.8
(.3)
(-9)
Return of 2.05 Times the Federal Investment
92% of Funds Committed to Projects
2.3% Average CWSRF Interest Rate in 2004,4.8% Market Rate
20% Average Savings over Market Rate Loans
27 States Leverage; 20 Issue Match Bonds
36 States Fund Nonpoint Source Projects
27 States Use Integrated Priority Systems
43 States Conduct Separate Audits
40 States Fund Separate Grant or Loan Programs
                                                                                                                                                                           Assistance Provided to Projects (Billions)

                                                                                                                                                                                                             2004   1988-2004

                                                                                                                                                                           Total, by Project Type               $4.6       $47.9
                                                                                                                                                                           Wastewater Treatment              4.37         45.2
                                                                                                                                                                           Nonpoint Source                   0.18          1.8
                                                                                                                                                                           Estuaries                             0           0
                                                                                                                                                                           Unallocated                       0.06          0.8
                                                                                                                                                                           Total, by Population Served
                                                                                                                                                                           < 3,500
                                                                                                                                                                           3,500 - 9,999
                                                                                                                                                                           10,000  - 99,999
                                                                                                                                                                           100,000 and Above
# of Loans, by Population Served    1,290      15,286
< 3,500                             622       7,157
3,500 - 9,999                        184       2,417
10,000 - 99,999                      298       4,005
100,000 and Above                  186       1,707

Source: EPA's CWSRF National Information Management System
$4.6
0.45
0.51
1.12
2.52
$47.9
5.0
6.0
16.3
20.6
                 For more information about the Clean Water State Revolving Fund, please contact:

                                      Clean Water State Revolving Fund Branch

                                       U.S. Environmental Protection Agency

                                   1201 Constitution Avenue, NW (Mailcode 4204M)

                                             Washington, DC 20004

                                             Phone: (202) 564-0752

                                              Fax: (202) 501-2403

                                    Internet: www.epa.gov/owm/cwfinance/cwsrf

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