United States                  Office of Water               EPA 816-F-00-011
                       Environmental Protection          (4606)                     March 2000

 &EPA      Fact  Sheet

                      Using  DWSRF  Set-Aside  Funds

                      for Capacity Development

                      WHAT IS THE DWSRF?
                      The Drinking Water State Revolving Fund (DWSRF) program was established by the Safe
                      Drinking Water Act (SDWA) Amendments of 1996. The program authorizes grants to States
                      to capitalize revolving loan funds. States use funds to provide loan assistance to eligible
                      public water systems for infrastructure improvements needed to continue to ensure safe
                      drinking water. The program also emphasizes the prevention of drinking water
                      contamination by allowing States to reserve a portion of their grants to fund activities that
                      encourage enhanced water system management and source water protection.

                      WHAT IS CAPACITY DEVELOPMENT?
                      Capacity development refers to a State's efforts to help public water systems improve their
                      technical, managerial, and financial capabilities so that they can provide safe drinking water
                      consistently, reliably, and cost effectively. By enhancing system operations and ensuring the
                      technical, financial, and managerial capacity of public water systems, States can promote
                      greater long-term compliance with national primary drinking water regulations.

                      In order to encourage States to establish and maintain capacity development programs,
                      1420(a) of the SDWA requires States to obtain the authority or other means to ensure that
                      all new community and nontransient non-community water systems that initiate operations
                      after October 1, 1999 demonstrate adequate capacity prior to commencing operations.  Any
                      State failing to obtain and implement this authority will be eligible for only 80 percent of its
                      total DWSRF allotment. Furthermore, 1420(c) of the SDWA requires each State to develop
                      and implement a strategy to help public water systems acquire and maintain capacity or be
                      subjected to a withholding of a portion of the State's DWSRF program allotment. Ten
                      percent of a State's allotment may be withheld in fiscal year 2001, 15 percent in fiscal year
                      2002, and 20 percent in each subsequent fiscal year.

                      A State can use a portion of its DWSRF capitalization grant to fund capacity development
                      programs. Up to  10 percent of a State's allotment can be used to develop and implement a
                      capacity development strategy under the State program management set-aside [1452(g)(2)].
                      A State can also use up to 10 percent of its capitalization grant under the local assistance and
                      other State programs set-aside [1452(k)] to provide technical and financial assistance  to
                      public water systems for capacity development.
Printed on Recycled Paper

Up to 10 percent of a State's allotment can be used for State program management [1452(g)(2)].  Funds can be used to
develop and implement a capacity development strategy.  Potential capacity development activities include, but are not
limited to:
       Hiring and training State capacity development staff.
       Preparing guidance documents, work plans, standard operating procedures, and long-term strategies.
       Revising approval processes, sanitary surveys, and other regulatory mechanisms to better address concerns.
       Targeting efforts by identifying water systems that would most benefit from collaboration or regionalization.
       Preparing contracts and using consultants to assist States in capacity development efforts.
       Obtaining stakeholder input through workshops, advisory panels, or other public participation mechanisms on
       how to best develop a capacity development program.
       Conducting outreach  programs to educate water suppliers and the general public on capacity development issues.
       Developing evaluation processes to assess the success of capacity development efforts.

Up to 15 percent of a State's capitalization grant can be used for local assistance and other State programs [1452(k)].
Up to 10 percent of these funds may be used to provide assistance, including technical and financial assistance, to any
public water system as part of a capacity development strategy. Potential activities include, but are not limited to:
       Providing incentive grants to plan for public water system regionalization and consolidation.
       Establishing a "buddy system" and other cooperative management programs to pair public water systems in need
       of help with water systems that can provide technical advice and assistance.
       Contracting with third-party providers for technical, financial, and managerial assistance to public water systems.
       Establishing programs to promote the use of new and innovative technologies, particularly easily operated
       treatment technologies for small systems.
       Contracting with third-party providers for training courses to keep water system personnel abreast of new issues.

       Massachusetts used funds to establish an ad hoc task force of interested stakeholders which is responsible for
       drafting an implementation plan and addressing capacity development program development issues.

       Believing that a regional approach is  better suited to dealing with small water systems, Utah is using funds to
       develop a comprehensive work plan based on county-wide regional planning that will give small water systems a
       chance to prepare facility and long-range financial plans.  Regional administrators will be appointed and will be
       responsible for their region's capacity development program.
       Pennsylvania is using funds to increase its participation in the National Partnership for Safe Water, a voluntary
       effort to encourage public water systems to survey their infrastructure, operating and maintenance procedures,
       and management practices.  Such national partnerships can be an efficient way to communicate and coordinate
       with other members of the drinking water community.
       Examining trends in compliance data can reveal the underlying causes of non-compliance and allow assistance to
       be targeted at an individual system's problems. North Carolina is using funds to compile and analyze current
       and historical data on compliance by community and non-community water systems.

Information about the DWSRF and capacity development programs are available  on the
EPA Office of Ground Water and Drinking Water (OGWDW) homepage
[www.epa.gov/safewater]. For questions concerning a specific State, a list of State or
EPA Regional DWSRF coordinators can be found on OGWDW's webpage.  You can
also call the Safe Drinking Water Hotline at 1-800-426-4791.