Activity  Update
                                    Funding  Decen,
                                       Wastewater Systems
                                    Using the Clean Water
                                     State Revolving  Fund
                  The Clean Water State Revolving Fund (CWSRF) is a Low-
                  interest or no-interest source of funding for the  installation,
                  repair, or upgrade of "decentralized" wastewater systems in
                  small-town, rural, and suburban areas.
Decen tralized sys terns
 treat approximately
 4 billion gallons of
 wastewater daily.
Clean Water
Decentralized wastewater systems, also known as
septic or onsite systems, include individual onsite
and/or cluster wastewater systems used to collect,
treat, and disperse relatively small volumes of
wastewater. An individual onsite wastewater
treatment system relies on natural processes
and/or mechanical components to collect,
treat, and disperse or reclaim wastewater from a
single dwelling or building. A cluster system is
a wastewater collection and treatment system
under some form of common ownership that
collects wastewater from two or more dwellings
or buildings and conveys it to a treatment and
dispersal system located on a suitable site near
the dwellings or buildings. Decentralized projects
may include a combination of these systems.
There are an estimated 26 million households
that use decentralized wastewater systems.
While an estimated 10-20% of homes experience
malfunctions each year, appropriately managed
onsite systems can perform effectively to
protect human health and the environment
and are a key component of our nation's
wastewater infrastructure. EPA recommends
that decentralized systems be managed under
a central management entity with enforceable
program requirements, as stated in the EPA
Voluntary Management Guidelines.

   Activity Update
In the 1970s and 1980s, large federal investments
in the construction of wastewater facilities focused
primarily on large, centralized collection and
treatment systems. This effort did not recognize
the benefits of properly managed decentralized
wastewater systems in achieving the goals of the
Clean Water and Safe Drinking Water Acts.

In many existing communities, the initial
decision to install a particular system (i.e.,
to hook up to a centralized system or to use
a decentralized system) is primarily made
in the private sector by the developer of a
property, based on affordability, profitability,
and availability of a central sewer system. In
small communities with limited or no access
to a centralized system, developers typically
choose the most common, affordable, and
easily installed systems. Once installed, these
conventional onsite systems are often not
inspected or maintained except in emergency
situations when wastewater backs up into
homes and backyards.

Nationwide data shows that conventional
onsite system failures can be attributed to
the following:
 • Improper placement and/or site evaluation
 • Improper system selection and design
 • Poor installation practices
 • Improper operation or insufficient maintenance

Malfunctioning systems can cause
contamination of groundwaterand nearby
surface waters. Many state and local regulatory
codes have not been updated to discourage or
eliminate inadequate practices and/or allow the
use of new technologies with demonstrated
performance. As a result, small communities
may incur significant burdens where more
affordable alternative wastewater systems are
not considered or permitted.
Both individual and cluster onsite
wastewater treatment systems offer an
approach to wastewater management that is
characterized by smaller, simpler wastewater
systems sized for specific areas, communities,
or developments and not generally intended
to serve all of the foreseeable needs of a
large service area. By focusing on smaller
areas where the wastewater is treated and
reused close to where the wastewater is
generated, decentralized/cluster systems
can provide several advantages over
conventional centralized collection/
treatment/discharge wastewater systems.


 • More cost-effective due to lower
  capital costs
 • Simple, easy-to-maintain technologies
  with lower O&M requirements and
  lower energy consumption
 • Can be designed for a variety of site,
  size, and soil conditions, e.g., shallow
  water tables
 • Can provide consistently high levels of
  treatment and can meet groundwater
  standards with subsurface drip irrigation
 • Can provide enhanced opportunities for
  wastewater reuse due to the proximity of
  the treatment systems to the areas where
  the wastewater is produced (eliminating
  the need to transport raw wastewater or
  treated reuse water long distances)
 • Provide greater opportunity for "green
  development," such as conservation
  subdivisions, cluster/village development,
  preservation of green space, and land
  use planning

The key to being able to achieve these
benefits of onsite wastewater systems  is
proper management—including planning,
design, construction, operation and
maintenance, and adequate user fees to
provide financial stability for the system.
              Clean Water

Activity Update
The American Recovery and Reinvestment
Act of 2009 (ARRA;also known as "Stimulus
Funds") provides an additional $4 billion
for the Clean Water SRF. These funds are to
remain available for obligation or award to
states only until September 30, 2010. All
communities receiving ARRA funds must
have their projects under signed construction
contracts by February 17, 2010. States can
capture these funds through the state/EPA
capitalization grant process. Twenty percent of
each state's capitalization grant can go toward
"Green Reserve" projects, which are defined
as: green infrastructure, energy efficiency
projects, water efficiency projects, or innovative
environmental projects. States have only 180
days from the date of the ARRA legislation or
until August 17, 2009 to qualify projects for the
20% grant funds. Decentralized wastewater
systems are well-positioned for Green Reserve
funding as "categorically qualifying," innovative
environmental projects. States may use ARRA
funds for decentralized wastewater treatment
solutions to existing deficient or failing onsite
systems. More information can be found at

The U.S. EPA encourages states to open their
CWSRFs to the widest variety of water quality
projects. Those interested in implementing
or upgrading a decentralized treatment
system should seek out their CWSRF program,
determine whether their state CWSRF has the
legal authority to make loans for decentralized
projects, and participate in the annual process
that determines which projects are funded.

States have developed mechanisms for
providing CWSRF capital to communities
for the construction of small or privately owned
wastewater treatment systems. Pass-through
loans, clean water"sister"financing agencies,
and other local clean water funds all facilitate
the movement of funds from state-level CWSRF
capitalization grants to local, private projects.
Read our"Clean Water Success Stories"for
examples of how these funding mechanisms work.

CWSRF programs in each state and Puerto Rico
operate like banks.  Federal and state contributions
are used to capitalize or set up the programs.
These assets, in turn, are used to make low- or
no-interest loans for important water quality
projects. Funds are  then repaid to the CWSRFs
over terms as long as 20 years. Repaid funds are
recycled to fund other water quality projects.
These CWSRF resources can help supplement the
limited financial resources currently available for
decentralized treatment systems.

 Projects that may be eligible for CWSRF
 funding include:
 • New system installation  (single and
  clustered systems) to correct an existing
  nonpoint source problem
 • Replacement, upgrade, or modification of
  inadequate or failing systems
 • Costs associated with the establishment
  of a centralized  management entity*
  (permitting fees, legal fees, etc.)
 • Capital associated with management
  programs (trucks, storage buildings,
  spare parts,  etc.)

* We encourage the establishment or designation of a management
 entity for all decentralized projects.
 Acceptable management entities include cities and counties,
 special governmental units (sanitary districts, county service
 districts, etc.), public or private utilities, private corporations,
 and nonprofit organizations.
                       The EPA encourages states to open their CWSRFs to the widest variety of water quality projects
                       while still addressing their highest priority projects. Those interested in implementing or upgrading
                       a decentralized treatment system should seek out their CWSRF program, learn how their state
                       program works, and participate in the annual process that determines which projects are funded.

Activity Update
Nationally, with over $70 billion in cumulative
available funds, the CWSRF has issued nearly
$69 billion in loans since 1988. In recent years,
the CWSRF has funded over $5 billion worth
of water quality projects annually. Clearly, the
CWSRF can be a powerful financial resource for
funding decentralized systems projects.

The Clean Water Act (CWA) of 1987 authorized
the CWSRF to fund point source (§212),
nonpoint source (NPS) (§319), and estuary
(§320) projects. Decentralized system projects
that are solutions to nonpoint source problems
may be eligible as §319 or §320 projects.
Included in a long list of eligible CWSRF loan
recipients for NPS and estuary projects are
community groups, farmers, homeowners,
small businesses,  conservation districts, and
nonprofit organizations. Since the program is
managed by the states, project funding varies
according to the priorities, policies, and laws
within each state. Eligibility requirements also
vary by state.

Given that each state administers its own
CWSRF program differently, your first step in
seeking a CWSRF  loan is to contact your state
CWSRF representative. The list of CWSRF state
representatives can be found on our  website at:

Here are some suggested questions to ask your
 • Does the state have the legal authority to
  use its CWSRF for decentralized systems?
 • Does the state SRF agency have a "Green
  Reserve Projects' list?
 • Does the state CWSRF enabling legislation
  provide the legal authority to provide loans
  to an individual or private entity?
 • Has the state committed to funding
  decentralized systems in its CWSRF
  Intended Use Plan (IUP)?
 • If not, what can I do to help get these
  systems listed on the IUP?
 • Can an individual or private entity receive
  a CWSRF loan for a decentralized system?
 • If not, can I receive a CWSRF loan
  through my county?

Your CWSRF state representative will be able
to guide you through the proper channels.
In addition, you can refer to the case studies
under the "Clean Water Success Stories" section
of this fact sheet for further details on a
popular approach to implementing a CWSRF/
decentralized systems state program.

Each state must approve a source of loan
repayment as part of the application process.
Though finding a source of repayment may prove
challenging, it does not have to be burdensome.
Many users of the CWSRF have demonstrated a
high level of creativity in developing sources of
repayment. The source of repayment need not
come from the project itself.

Some potential repayment sources include:
 • Property owner's ability to pay
  (determined during loan application)
 • Fees paid by developers
 • Recreational fees (fishing licenses,
  entrance fees)
 • Dedicated portions of local, county,
  or state taxes or fees
 • Donations or dues made to
  nonprofit groups
 • Stormwater management fees
 • Wastewater user charges
           Clean Water

Activity Update

Section 319 of the Clean Water Act provides
the statutory authority for EPA's Nonpoint
Source Program. This program provides funds
to states to restore waters adversely affected
by nonpoint source pollution, and to protect
waters endangered by such pollution. Most
states have nonpoint source management plans
that allow for the use of Section 319 funds for
decentralized wastewater system projects.

The program has provided money to small
communities and state agencies to construct
decentralized wastewater systems in areas
where these systems are more cost-effective
than centralized systems. Nonpoint Source
Program funds have also been used to repair
decentralized systems where such systems are
common. Finally, these funds have been and
will continue to be used for decentralized system
technology demonstration projects.
For more information, visit their website at:

Water and Waste Disposal Loans and Grants are
available to develop water and waste disposal
(including solid waste disposal and storm
drainage) systems in rural areas and towns with
a population not in excess of 10,000. The funds
are available to public entities such as:
 • Municipalities
 • Counties
 • Special purpose districts
 • Indian tribes
 • Nonprofit organizations

Grant funds are available to reduce water
and waste disposal costs to a reasonable level
for rural users. Grants may be made for up to
75% of eligible project costs in some cases.
RUS also guarantees water and waste disposal
loans made by banks and other eligible lenders.
The facilities financed must be owned and
controlled by the borrower/grantee. Financed
decentralized systems would have to  be owned
and managed by the RUS borrower/grantee.

The programs are administered by USDA Rural
Development offices located throughout the
country. Additional information including local
contacts may be found by visiting their web
page at: www.usda.gov/rus/water.

The state-administered Community Development
Block Grant program  (State CDBG) provides
annual grants to 48 states and Puerto Rico. The
states and Puerto Rico, use the funds to award
grants for community development purposes to
smaller cities and counties. The states of Hawaii
and New York have not chosen to administer the

As a result, in those two states, HUD directly
administers the awarding of CDBG grants to
smaller cities and counties.

CDBG grants can be used for numerous activities,
including rehabilitation of residential and
nonresidential structures, construction  of public
facilities, and improvements to water and sewer
facilities. For more information, visit their website
at: www.hud.gov/cpd/cdbg.html.

In addition to funding available from the
federal government,  several states have
created infrastructure funds which can fund
the development of local onsite infrastructure.
State-funded programs supporting
decentralized systems are ongoing in several
states including Massachusetts, North  Carolina,
Pennsylvania, and Virginia.
           Clean Water

Activity Update
The Rhode Island Clean Water Finance Agency
(CWFA) has successfully developed innovative
partnership programs and lending practices.
One such program is the Community Septic
System Loan Program (CSSLP).To expand its
borrower base, the Rhode Island CWFA crafted
CSSLP in cooperation with the Rhode Island
Department of Environmental Management
and Rhode Island Housing. The CSSLP puts
low interest SRF funds within the reach of
all communities.
The CSSLP allows communities to access
SRF funds to repair or replace failed, failing,
or substandard septic systems.

Thus far, the Rhode Island Clean Water Finance
Agency has made CSSLP loans totaling $2.95
million. Approximately 400 septic systems have
been repaired or replaced to date, resulting in
significantly improved water quality in many of
Rhode Island's small communities.
                      TOWN OF COLCHESTER, VERMONT
                      Colchester received $450,000 in CWSRF funds
                      to capitalize a homeowner septic system
                      revolving loan fund. The Town's location on the
                      shore of Lake Champlain makes water quality
                      a priority, but plans to extend existing sewer
                      lines were unpopular with residents due
                      to affordability concerns.
                                            The revolving fund allows Colchester to
                                            assist local property owners in repairing
                                            and replacing septic tanks without adding a
                                            significant financial burden to the community
                                            at large. This project demonstrates that a
                                            municipality can develop and effectively run a
                                            complete financing and regulatory program for
                                            individual septic systems.
                      The Alabama Department of Environmental
                      Management has made $15 million in financial
                      assistance available to the South Alabama Utilities
                      using funds from the FY 2008 Clean Water State
                      Revolving Fund (CWSRF) loan program.

                      The proposed work will consist of the
                      construction of decentralized wastewater
                      treatment systems in three subdivisions:
                      Colleton, Labrador Run, and Johnson Road,
                      located in West Mobile County. West Mobile
                      County is a rapidly developing area with no
                      public sewer service available.
                                            The proposed use of decentralized treatment
                                            and disposal is a cost-effective, environmentally
                                            sound option for meeting public demand for
                                            sewer service and avoiding potential health
                                            concerns related to the use of septic tanks.
                                            The expected cost of the projects is
                                            approximately $1.25 million. The remaining
                                            funds will be used for paving, topsoil, seeding,
                                            and other miscellaneous improvements to
                                            the Citronelle Lagoon.
           Clean Water

For more information about the Clean Water
Revolving  Fund, or for a program  representative
in your state,  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

EPA Decentralized Wastewater Program
U.S. Environmental Protection Agency
1201 Constitution Avenue, NW (Mailcode 4204M)
Washington, DC 20004

Phone: 202.564.0657
Fax: 202.501.2397
Internet: www.epa.gov/owm/onsite
Clean Water
State Revolving Fund
Office of Water I Summer 2009 I EPA 832-F-09-005