Sponsorship Lending and the Clean Water
State Revolving Fund
The U.S. Environmental Protection Agency's (EPA) Clean Water State
Revolving Fund (CWSRF) was established by the 1987 amendments to the
Clean Water Act (CWA) as a low-interest source of funding for a wide range of
water infrastructure projects. The program represents a powerful partnership
between the EPA and the states, as it has the flexibility to fund a variety of
projects that address their highest priority water quality needs. The CWSRF
can finance both wastewater treatment system improvements and nonpoint
source (NPS) projects; however, many NPS projects lack a revenue stream,
which makes it difficult to repay a CWSRF loan. Sponsorship lending helps to
address this repayment issue for NPS projects, allowing critical water quality
projects to move forward.
How It Works
Sponsorship lending pairs a traditional publicly owned treatment works
(POTW) project with a nontraditional one, usually an NPS project. A
municipality receives a loan with a reduced interest rate as compensation for
also undertaking (i.e., sponsoring) a nontraditional project thus allowing
municipalities to address pressing watershed restoration or protection
priorities without placing a repayment responsibility on NPS projects. This
arrangement works best when the cost of the combined project is equal to or
less than the cost of a stand-alone POTW project when financed at normal
CWSRF interest rates. For example, a $1,000,000 loan at 3.8% interest
would result in a total repayment of $1,436,707 over a 20-year term. A
$1,393,442 loan at 0.3% interest results in the same repayment amount.
Therefore, a municipality could borrow $1,000,000 for a traditional POTW
project plus $393,442 to implement NPS projects at no additional cost. For
added incentive, a CWSRF could further reduce the interest rate so that the
municipality would save money rather than break even. The transaction is
illustrated in the diagram below.
Traditional POTW Project Examples:
• Upgrade, repair, and replacement of
wastewater treatment systems
• Wastewater re-use and recycling
projects
• Collection systems improvements
• Interceptor, force main, or pump
station projects
Nontraditional Project Examples:
• Preservation and restoration of
wetlands and riparian areas
• Land conservation
• Agricultural Best Management
Practices
• Green street implementation of
permeable pavement, bioretention
cells, and green alleys
For additional information, please
contact:
Kelly Tucker: 202-564-0608 or
Frances Josephs: 202-564-9541
You can also view our most recent webinar
on sponsorship by visitingthe following
website:
https: //www epa.. gov/cwsrf/cws rf-webi na rs
Loan Amount
Interest Rate (r)
Total Repayment
Over Twenty Years
CWSRF Loan
$1,000,000
3.8%
$1,463,707
CWSRF Loan with
Sponsored Project
$1,393,442
0.3%
$1,463,707
CWSRF
$1,200,000
r=3.8%
Additional Funds for
Sponsored Project
*Same repayment amount
despite larger loan amount
when you include a
sponsored project!
CWSRF loan CWSRF loan with
Sponsored Project
Community Sponsor
i
Restoration Project
Implementing Partner
1. Community and implementing partner enter into sponsorship agreement.
2. CWSRF provides funding to community for wastewater treatment and
restoration projects.
3. Community provides CWSRF funding for sponsored restoration project.
4. Community repays CWSRF program.
July 2017
Document Number 832F17005
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Getting A Project Funded
Eligible applicants who are interested in utilizing sponsorship lending should seek out the CWSRF program in their
state, since there are several models of sponsorship that states may utilize when financing a loan. Additionally,
financing of a project may vary depending on the priorities, policies, and laws within each state. Currently, there are
five CWSRF programs that have implemented sponsorship lending: Delaware, Idaho, Iowa, Ohio, and Oregon.
Sponsorship Project Highlight: Idaho
The Idaho CWSRF sponsorship program provides an incentive to address NFS water quality issues while also
implementing point source upgrades. In 2011, the City of Driggs received a $10,5 million CWSRF loan for a point
source project to improve treatment and transmission capabilities at the Teton Valley Regional WWTP by
constructing a new headworks, ultraviolet disinfection building, and manholes, while backfilling two lagoons. This
project was combined with a $150,000 NPS project to stabilize over a mile of previously damaged streambed. The
city's sponsorship of this project provided fundingto the "nonprofit," Friends of Teton River, to construct an inset
floodplain, stabilize 5,600 feet of stream channel and 11,200 feet of eroding streambanks, build and restore pools
and riffles for fish habitat, and revegetate more than 10 acres of floodplain with native vegetation. Not only was the
water quality improved in both Teton Creek and the Teton River, but the possibility of flooding was reduced along
with an improvement in stream function and habitat for the benefit of Yellowstone cutthroat trout and other native
fish and wildlife species. The overall interest rate on the total amount borrowed by the city was lowered to 0%, and
$1,877,284 of principal forgiveness was also provided. These generous funding terms allowed for the completion
of the NPS project without impacting city rate payers.
Sponsorship Project Highlight: Iowa
The Iowa Clean Water SRF Water Resource Restoration
Sponsored Projects effort provides an incentive for cities
and wastewater utilities to address NPS water quality
issues while they're addressing their point source
upgrades. In 2013, the City of Clinton received a CWSRF
loan to construct two pump stations as part of a sewer
separation project intended to reduce the amount of
untreated wastewater discharging directly into the
Mississippi River. To supplement the new storm sewer
system, the City also sponsored a green infrastructure
project to reduce the volume of stormwater entering the
system. The City installed bioretention cells with native
plantings, permeable pavement and sidewalk pavers,
green alleys, and Silva Cell frames for tree plantings. The
total cost of this project was $7.2 million of which $6.5
million was borrowed for the sewer separation project
plus $655,000 for the sponsored project. The overall
interest rate on the total amount borrowed was lowered
to 0.76%, which has made the loan repayments equal to
what they would have been for just the wastewater
project at Iowa's normal CWSRF interest rate of 1.75%.
Urban tree planting in the downtown area in City of Clinton
For more information about the CWSRF please contact us at:
United States Environmental Protection Agency
Clean Water State Revolving Fund Branch {
Office of Water, Office of Wastewater Management
1200 Pennsylvania Avenue, NW (Mailcode 4204M) ^
Washington, DC 20460
https://www.epa .gov/cwsrf
Clean Water
State Revolving Fund
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