October 2020
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Drinking Water State Revolving Fund
Helping Protect America's Public Health Since 1 997
2019 Annual Report
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A Message from the Office Director
%
I am pleased to present the Drinking Water State Revolving Fund's 2019 Annual
Report. This report is an opportunity to highlight the past year's accomplishments and
share the program's priority areas for the coming years.
In 2019, we funded over $2.8 billion in new drinking water infrastructure projects
across communities of all sizes. These projects have led directly to public health and
economic benefits for these communities. We also funded $178 million for critical
activities including operator certification, water system capacity development, and
source water protection.
This year, we worked with our state partners to design and prepare for the 2020
Drinking Water Infrastructure Needs Survey and Assessment (DWINSA). The 2020
Survey will sample the broadest array of water systems since the 1 999 Survey and will include small, medium,
and large community water systems, non-profit non-community water systems, and tribal water systems. The
Survey will feature the first-ever questions regarding a system's estimate of how many lead service lines it
has (in addition to their planned 20 year replacement need), operator workforce status and projections, and
needs for American iron and steel components for drinking water infrastructure projects.
To meet modern drinking water challenges, the Drinking Water State Revolving Fund (DWSRF) program is
focused on four major national program priorities:
1. Achieve fullest utilization of funds through dynamic cash flow modeling.
2. Market DWSRF opportunities to water systems.
3. Employ both the DWSRF loan fund and set-asides as Safe Drinking Water Act (SDWA) compliance
tools.
4. Safeguard the program's public trust through fiscal controls and accountability.
These focus areas will help us meet the Agency's Priority Goal to reduce the number of non-compliant drinking
water systems and to increase non-federal financial leveraging. Importantly, these priorities will enable the
DWSRF program maximize its potential for improving public health protection.
I welcome this opportunity to share our accomplishments with you.
Jennifer L. McLain Ph.D., Director
Office of Ground Water and Drinking Water
Office of Water
United States Environmental Protection Agency
2
2019 Annual Report
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1.
About the Drinking Water State Revolving Fund
4
II.
Highlights From 201 9
5
III.
How States Used DWSRF Infrastructure Funds
9
IV.
Meeting 21 st Century Challenges
10
V.
2019 Financial Overview
13
VI.
DWSRF Set-Asides
18
VII.
DWSRF AQUARIUS Project Highlights
20
2019 AnnudtJ Repoi
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I. About the Drinking Water State Revolving Fund
The 1 996 Amendments to the Safe Drinking Water Act
(SDWA) created the Drinking Water State Revolving
Fund (DWSRF) to help communities finance infrast-
ructure improvements needed to protect public health
and ensure compliance with drinking water standards.
Each of the 50 states and Puerto Rico operate their
own DWSRF programs and receive annual grants from
EPA, which in turn provide low-interest loans and other
types of assistance to public water systems. The
DWSRF programs are managed or co-managed by
the state agencies that oversee drinking water systems
and can therefore effectively prioritize infrastructure
funding needs to protect public health.
The SDWA directs states to give priority for the use of
DWSRF project funds to:
address the most serious risks to human health,
ensure compliance with the requirements of the
SDWA, and
assist systems most in need on a per household
basis according to state affordability criteria.
Not all drinking water problems, however, can be
solved through capital financing of infrastructure
improvements. With that in mind, Congress gave states
the option to take a portion of their federal
capitalization grant for "set-asides". Set-asides can be
used to administer state programs, provide technical
assistance and training for water systems, and fund
other activities that support achieving the public
health protection objectives of the SDWA. The
programs and activities supported by set-asides
include DWSRF administration, water system
capacity development, operator certification, source
water protection, small system technical assistance,
and the state Public Water System Supervision
(PWSS) program.
Each state determines the appropriate balance
between water infrastructure projects and
set-asides for their unique circumstances.
From 1997 through June 30, 2019, more than
$41.1 billion has been signed into 15,425 DWSRF
loans by the state programs to water systems to
fund critical infrastructure needs. Furthermore,
nearly $3.5 billion has been provided to states and
water systems to support the non-infrastructure
set-asides programs.
The DWSRF is an exceptionally versatile tool. In
2019, the DWSRF loan program improved the lives
of over 58 million Americans, returning water
systems to compliance and maintaining systems with
aging infrastructure, while also focusing on small
water systems that are most at risk. Systems serving
fewer than 10,000 people accounted for 75
percent of the loans signed by state programs.
4
2019 Annual Report
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II. Highlights From 2019
A. Continued Demand, Making Loans of All Sizes
In 2019, states provided more than $2.8 billion in
new infrastructure loans, matching the program's total
in 2018. This follows an upward trajectory over
recent years, as states maximize utilization of funds
through dynamic cash flow modeling and conduct
more effective outreach to water systems. Exhibit 1
demonstrates this trend.
The DWSRF supports water systems and projects of
all sizes across the country. While the median loan
size was about $1 million this year, the program's
loans ranged from less than a thousand dollars to
hundreds of millions of dollars (see Exhibit 2). The
State of California made the nation's smallest loan
for $825 to the Mettler Valley Mutual Water for
compliance issues. California also made the nation's
largest loan, a $158 million agreement, to the Los
Angeles Department of Water and Power for the
removal of uncovered reservoirs and construction of
a buried storage unit. This project will serve nearly
4 million people. The nation's most commonly-
occurring DWSRF loan amount (or mode) was
$20,000 in 2019 (see Exhibit 2).
Visually demonstrating the DWSRF
program's broad, nationwide reach, Exhibit 3
shows counties with DWSRF-funded projects in this
past state fiscal year (SFY; the state FY runs
June to June) (in blue) and between March
2010 and SFY 201 9 (in gray).
Exhibit 1: DWSRF National Assistance Provided (Signed Loans Only)
$3.0
$2.5
$2.0
$1.5
$1.0
$0.5
$0.0
2014
2015
2016
2017
2018
2019
2019 Annual Report
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Exhibit 2: Distribution of DWSRF Loan Amounts in SFY 201 9
In 2019, states provided 12 loans of
$10,000 or less to small communities for
asset management planning.
Average: $3,000,000
Mode: $20,000
3
Largest: $158,000,000
-Median: $1,000,000
Smallest: $825
Of the 38 loans reflected in the mode, 24
are from the State of Oregon. These loans
funded a variety of studies, including those
for consolidation alternatives, leak
detection, and water feasibility.
Exhibit 3: Map of Counties with DWSRF Projects in SFY 2019 and from March 2010 to SFY 201 8
, * *2*
-tc-i
AK
Data Source March 2010 to 12/30/2018
DWSRF Database, data pull 3/7/19
Data Source: 7/1/18 - 6/30/19 projects: NIMS
Database,
data pull 2/6/20 (7/1/18 - 6/30/19)
Data includes projects that have location
information.
Additional projects not incorporated.
North_America_Equidstant_Conic
Map produced on 3/24/20
EPA OW-OGWOW - DWPD
Counties with DWSRF Projects in SFY 2019
I I Counties with DWSRF Projects from SFY 2010 to SFY 2018
6
2019 Annual Report
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Exhibit 4 below shows leveraging in the past six
years. Note the significant increase in the last three
years. Leveraging is at a state's discretion and should
be paired with an effective outreach strategy to
increase customer demand. After evaluating cash
needs, some states choose to leverage nearly every
year, and others episodically. Regardless of
approach, state managers must carefully design their
leveraging structure to minimize idle funds.
Optimally, states will leverage when the amount of
cash needed to pay construction invoices is greater
than actual available cash on hand. With the ability
to access the bond market when cash is needed in the
future, states can confidently make more loans to
communities in the near-term, expanding the reach of
public health protection from the program.
Another way to expand the DWSRF's reach and
benefits is through co-funding. Approximately one-
quarter of the 2019 projects were co-funded with
another source, including funds from the United States
Department of Agriculture's Rural Utilities Service
Water and Environmental Programs and other state
and private sources.
Exhibit 4: Annual Net Leveraged Bonds Issued
$1,200
Si,ooo
$800
$600
$400
$200
B. Leveraging and Co-Funding Expand Program's
Reach
Increasing the amount of money available through
the DWSRF is important to meeting our nation's
drinking water needs. The state DWSRFs have two
ways to quickly raise additional money to meet
immediate needs where there are more projects than
funds available. The first is to borrow money on the
bond market. In 2019, eleven state DWSRF
programs borrowed a record $1.04 billion to assist
projects with immediate financing. The second is to
borrow money from EPA's Water Infrastructure
Finance and Innovation Act (WIFIA) program. The
Indiana Finance Authority, the WIFIA program's first
SRF borrower, closed its $436 million WIFIA loan in
2019. The creation of the State Water Infrastruc-
ture Finance and Innovation Act (SW|FIA) under the
America's Water Infrastructure Act (AWIA) of 2018,
creates a more direct way for states' DWSRF
programs to access WIFIA funding.
Record $1,038 billion in
bonds issued in 2019
2014
2015
2016
2017
2018
2019
2019 Annual Report
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American Iron and Steel
Requirement
DWSRF programs continue to successfully
implement and oversee the American Iron and
Steel (AIS) requirements. These statutory
requirements have been extended through
fiscal year 2023 and require assistance
recipients to use iron and steel products that
are produced in the United States. For details
about the AIS requirements, products that are
covered, how to document compliance and
how to apply for a waiver, visit the EPA's AIS
website.
C. Helping Water Systems Achieve Compliance
The DWSRF has been instrumental in helping the
nation's community water systems achieve and
maintain compliance with health-based standards
under the SDWA. Of the water systems receiving
DWSRF loans in 2019, nearly one-fifth (168) were
out of compliance with a health-based SDWA
standard in the previous five years. Exhibit 5 below
maps the locations of these 168 water systems.
State DWSRF managers, partnering with their state
PWSS program colleagues, can utilize the
program's extraordinary flexibility to tailor
assistance through the loan and set-aside portions
of the Fund to address a broad array of local
needs.
Exhibit 5: Public Water Systems with SFY 201 9 Loans that had a Health-Based Violation in the Past 5 Years
PWSs by Population
<=500
501 - 3,300
3,301 - 10,000
10,001 - 100,000
>=100,001
2019 Annual Report
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III. How States Used DWSRF Infrastructure Funds
In 2019, the DWSRF provided more than $2.8
billion in assistance and entered into 897 loans.
Since 1997, the DWSRF has provided more than
$41 billion in assistance, and 35 percent of this
assistance has been directed to communities with
populations of 1 0,000 or fewer.
For the second consecutive year, nearly half of the
DWSRF's funding went to transmission and
distribution projects (Exhibit 6). This closely aligns
with water systems' needs demonstrated in the Sixth
Drinking Water Infrastructure Needs Survey and
Assessment (DWINSA). The Survey confirmed that
nearly two-thirds of the nation's drinking water
infrastructure needs over the next two decades are
for these types of projects. EPA anticipates
sustained, growing demand in distribution system
projects over the coming years.
In 2019, the DWSRF facilitated loans with a broad
diversity of communities, emphasizing a strong focus
on communities serving 10,000 individuals or fewer.
Approximately 75 percent of the 2019 loans
provided were given to these smaller water
systems. Principal forgiveness was a key tool
utilized in these agreements; 69 percent of water
systems serving populations of 500 or fewer
received principal forgiveness, with 44 percent of
those water systems receiving principal forgiveness
for the full loan amount. As the charts in Exhibit 7
show, the proportion of assistance going to small
systems in 201 9 is similar to historic program values.
Exhibit 6: Assistance by Project Type (Millions of Dollars)
SFY 2019
$192
(Source)
$432
(Storage)
$755
(Treatment)
$163
(Other)
SFY 1997-2019
-$2,345
(Source)
L
(Transmission .
r~
1 and Distribution) /
i /
$15,406
LI
(Treatment)
$4,292
(Storage)
$1,282
(Other)
Transmission
and Distribution
Source
Storage
Other
Exhibit 7: Assistance by Community Size
Millions of Dollars
Number of Loans
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
S11,826
S1,009
$788
$14,973
$6,144
$368
$6,231
$497
I
S175
SFY 1997-2019
SFY 2019
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
1.073
3,424
4,99
2,872
SFY 1997-2019
312
SFY 2019
| >100,000
| 10,001 to 100,000
3,301 to 10,000
501 to 3,300
| <501
2019 Annual Report
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IV. Meeting 21 sf Century Challenges
Water Reuse
In February 2020, EPA and its partners
announced the National Water Reuse Action
Plan. The actions that are committed to in
the Action Plan will help strengthen the
sustainability, security, and resilience of our
nation's water resources by creating new
partnerships, providing accountability, and
promoting communication and transparency
with an online platform. The Action Plan's
holistic and integrated approach can include
a combination of water management
strategies, many of which may be eligible
DWSRF projects.
Given the program's size and flexibilities, there is
tremendous opportunity to maximize the use of
DWSRF funds to meet the drinking water- related
public health needs across the United States. The most
recent DWINSA shows that $472 billion is needed
over the next two decades for DWSRF- eligible
infrastructure. The DWSRF must be managed in a way
to maximize the availability of funding to meet
ready-to-proceed, documented water system needs.
Financial forecasting, including cash flow
management, is essential to the program's success.
The DWSRF must also be operated in a way to help
water systems achieve and maintain SDWA compli-
ance. In 2019, approximately 3,500 community
water systems had health-based SDWA violations. As
part of EPA's Fiscal Year (FY) 2018-2022 Transf-
ormation Strategy, the Agency aims to reduce this
total by 25 percent by 2022. Each non-compliant
water system has different challenges; some water
systems may need infrastructure investment, some
may need capacity-building resources, and others
may need to partner with a neighboring water syst-
em through consolidation or other partnerships means.
The DWSRF can and should be a part of the solution
for many of these water systems. The program can
also help SDWA-compliant water systems maintain
their ability to provide safe drinking water. Through
a successful marketing and outreach strategy,
DWSRF programs will help communities understand
how the DWSRF can meet their water system-specific
needs this decade.
As shown below in Exhibit 8, financial forecasting and
marketing/demand management form two major
structural elements for the program's success.
Exhibit 8: DWSRF Flexibilities Bridge
DWSRF Flexibilities Bridge
Financial/
Forecasting
Marketing/
Demand
Understand system
needs
Cash flow modeling
Maximize utilization
of funds from all
Have ongoing
outreach plan
F exib e oan terms and rates
Funding for non-infrastructure needs via
set-asides: CapDev, OpCert, SWP
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2019 Annual Report
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A. Using Cash Flow Modeling
A revolving fund, with its dynamic inflows and
outflows of funds, is different than a traditional grant
program and therefore must be managed in a
different way. By design, the program grows larger
each year with infusion of federal capitalization
grants and interest earnings from past loans. Cash
flow management involves modeling inflows and
outflows of monies in federal capitalization grants,
state match, principal repayments, interest earnings,
and leveraged funds. Such cash flow management
informs sound financial decisions for the program and
empowers DWSRF managers to maximize the
availability of resources for communities.
Using the DWSRF administrative set-aside, many
states have successfully built financial modeling tools
that accurately predict the revolving fund's cash
availability over time. These cash flow analysis tools
help state managers evaluate the "supply side" of
funding sources: the amount of money that is
potentially available to lend for drinking water
infrastructure construction.
States should also consider engaging in financial
leveraging through the bond market and/or WIFIA to
expand the reach of DWSRF program benefits.
With financial management based upon cash flow,
DWSRF managers can confidently market the
program to water systems, because they have a
detailed understanding of how much funding is
available to communities in the short, medium, and
long-term.
Control &
Accountability
National
Program
Priorities
Marketing
SWDA
Compliance
Funds
Utilization
The PWSS sanitary surveys can provide a wealth of
information about drinking water systems that can be
used to seek potential DWSRF customers. A sanitary
survey is a review of a public water system to assess
its capability to supply safe drinking water. The
DWSRF can be a resource to address deficiencies
found during the sanitary surveys. If a water system
currently lacks the technical capacity to develop these
capital improvement projects, DWSRF set-asides
could be used to provide technical assistance, such as
planning and design development.
Reaulatorv Deviation for Water Riahts
B. Marketing DWSRF Opportunities to Water
Systems
The most successful DWSRF programs pair financial
projections with dynamic outreach to water systems
throughout their state, supporting the "demand side"
of the program. This is accomplished by working with
the state PWSS program, the water industry, and
associations. Talking to water systems of all sizes to
understand their needs and to convey the
opportunities available through the DWSRF will build
demand.
mrnmmmmwm
rights (40 CFR 35.3520(e)(2)).
This class deviation allows DWSRF funds to be
used for the purchase of water rights under
certain circumstances.
As detailed at the beginning of this section, the
DWINSA showed that $472 billion is needed in the
next two decades for DWSRF-eligible infrastructure.
The DWINSA contains a wealth of documented water
system-level needs information useful for directly
marketing the program. These data can be used as
conversation starters with drinking water systems.
With this change, public water systems may switch
water sources in the event of contamination or
obtain rights to additional water sources in the
event of drought to meet current water needs.
1 1
2019 Annual Report
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DWSRF Eligibility Highlights
Lead service line replacement
Drinking water treatment for harmful algal
blooms (cyanotoxins) and per- and
polyfluoroalkyl substances (PFAS)
Cybersecurity measures
Water reuse and recycling
For more information and resources, visit the DWSRF
Eligibility Handbook.
C. Employing the DWSRF as a SDWA Compliance
Tool
In recent years, Congress has signaled continued
strong support for the program, such as the recent
reauthorization of the DWSRF via America's Water
Infrastructure Act (AWIA) of 2018. Congress has also
recently added new program flexibilities for state
managers to consider, in addition to existing options.
States may offer loan repayment terms up to 30
years to any DWSRF-eligible recipient, or up to 40
years for disadvantaged communities. These
flexibilities enable states to reduce annual
repayment costs for communities. States may provide
a portion of their annual federal capitalization grant
as additional subsidy to those disadvantaged
communities, further lowering the cost of critical public
health infrastructure.
Congress also recently expanded the source water
protection-related eligibilities under the Local
Assistance Set-Aside, giving states and communities
additional resources to promote preventative
activities to protect the water supply.
The DWSRF program works hand-in-hand with state
PWSS programs to prioritize loan and/or set-aside
assistance to water systems out of compliance with
the SDWA as well as to ensure that compliant water
systems maintain their status.
D. Safeguarding Public Trust Through Fiscal Controls
& Accountability
Congress entrusted the DWSRF program with critical
financial resources and programmatic flexibility to
target those resources. EPA and state partners are
accountable for the effective use of these resources
and flexibilities. Therefore, program managers must
safeguard the program's trust through fiscal controls
and accountability. To achieve this goal, we will
continue to ensure that proper internal financial
controls remain in place through regular reviews and
audits and ensure that these controls address a
broad array of financial risks while communicating
the program's financial integrity and public health
results to the public.
Water Workforce
In 2019, EPA launched the American Water
Sector Workforce Initiative as a collaborative
effort between EPA, states, and other federal
agencies. The three goals of the initiative are:
Provide federal leadership to create national
momentum and coordinate efforts,
Partner to build the water workforce of the
future, and
Bolster water careers through outreach-
making water a career of choice.
12
2019 Annual Report
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V. 2019 Financial Overview
A. Financial Success
The fundamental purpose of the DWSRF is to provide
low-cost capital to finance sustainable, long-term
public health protection. The Fund's ability to assist
projects that protect public health is dependent on
three pillars:
continued federal capitalization;
innovative, intelligent, and effective state
management; and
maintaining the Fund's growth and revolving
nature.
Since the DWSRF's inception, Congress has
appropriated more than $20 billion into the Fund.
These funds have gone both to the revolving loan
fund and the state set-asides. Together, the 51 state
DWSRF programs have effectively leveraged these
funds to provide $41.1 billion in loans to the nation's
water utilities and nearly $3.5 billion to both states
and utilities for set-aside programs to support
capacity development, source water protection, and
operator training and certification. For the loan
program, this translates into $2 in disbursements for
every $1 drawn from the U.S. Department of
Treasury.
From the 2010 appropriation onward, Congress
mandated that a certain portion of the federal
capitalization grant be provided to borrowers as
additional subsidy. This change allowed states to aid
communities most in need and incentivize particular
types of projects. Because this subsidy comes from the
federal dollars, continued federal support is needed
to maintain this benefit and continue growing the
Fund.
B. Financial Reports
The Single Audit Act designates the threshold for
auditing federal programs. Most DWSRF programs
receive a program-specific audit in addition to
auditing required under the Single Audit Act. Because
the 51 DWSRF programs are independent state-level
entities, no nationally-audited DWSRF program
financial reports are available. Developed using
EPA's National Information Management System,
national aggregate financial statements, best viewed
as non-audited cash flow-based reports, are shown
on the following pages.
2019 Annual Report
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1. Statement of Fund Activity
As shown in Exhibit 9 in SFY 2019, DWSRF programs
executed approximately $2.8 billion worth of loans. Overall
for SFY 2019, assistance provided as a percent of funds
available ("pace of funds provided") was nearly 100
percent, indicating that states have successfully directed
federal funding to drinking water infrastructure projects. This
robust percentage of funds utilization also demonstrates a
high demand for DWSRF funding. A portion of the disbursed
funds are used to provide principal forgiveness to
disadvantaged communities or to help finance specific water
systems meeting the criteria for state priority funding; in SFY
2019, more than $321 million was provided in the form of
principal forgiveness.
The amount of new funds includes new investments, net
leveraged bonds, and loan principal and interest repayments.
Exhibit 9: Statement of Fund Activity (Millions of Dollars)
Annual Fund Activity
SFY 2018
SFY 2019
Federal Capitalization Grants
794.2
1,068.5
State Matching Funds
179.9
201.0
New DWSRF Funds Available for Assistance
2,705.6
3,242.3
Project Commitments (Executed Loan Agreements)
2,814.4
2,836.7
New Set-Aside Funds Available for Assistance
180.7
241.8
Project Disbursements from the Fund
2,534.7
2,707.2
Cash Draws from Federal Capitalization Grants (Fund)1
643.4
806.2
Cash Draws from Set-Asides1
193.8
178.6
Cumulative Fund Activity2
Federal Capitalization Grants
1 9,976.6
21,061.2
State Matching Funds
3,906.2
4,107.5
DWSRF Funds Available for Assistance
39,832.2
43,138.6
Project Commitments (Executed Loan Agreements)
38,221.1
41,106.0
Set-Aside Funds Available for Assistance
3,223.1
3,461.9
Project Disbursements from the Fund
33,403.1
35,978.4
Cash Draws for Fund
16,518.3
17,324.5
Cash Draws for Set-Asides
2,968.4
3,147.0
Loan Principal Forgiven
(263.7)
(321.2)
1 This includes funds drawn from previous grants.
2 Cumulative numbers may not sum due to rounding.
14
2019 Annual Report
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2. Statement of Revenues, Expenses, and Earnings
Exhibit 10, shows the sources of funds and the
expenses of the DWSRF program nationally and how
they impact net assets. For 2019, interest earnings
exceeded expenses, adding to the growth of the
program. From 2018 to 2019, operating expenses
increased by $25.9 million, with an increase in
DWSRF funds used for refunding. DWSRF net assets
increased by approximately $1.5 billion, reflecting
the steady increase in assets since the program's
inception.
3. Statement of Cash Flow
Exhibit 1 1 shows the impact of DWSRF activities on
cash on hand. DWSRF programs require a reserve to
maintain their programs. State programs have
successfully reached a first milestone under the
Unliquidated Obligation (ULO) strategy of spending
down built up federal funds. It is expected that states
will need to draw heavily from state cash reserves in
the near future to pay invoices from the high level of
lending at which they are operating. States have
positioned their programs well by increasing their
state match bond proceeds by $2 million while gross
leveraged bond proceeds added $985 million to
program cash flows. In SFY 201 9, states paid $601.8
million in principal and interest on leveraged bonds
and state match bonds, demonstrating an increase of
$65.9 million from the previous year. Bond issuance is
one method by which states may balance their loan
demand with the need to maintain the long-term
sustainability of their revolving funds.
Exhibit 1 0: Statement of Revenues, Expenses, and Earnings (Millions of Dollars)
Operating Revenues
Interest on Fund Investments
Interest on DWSRF Loans
Total Operating Revenues
Operating Expenses
Bond Interest Expense
DWSRF Funds Used for Refunding1
Amortized Bond Issuance Expense
Total Operating Expenses
Non-Operating Revenues and Expenses
Cash Draws from Federal Capitalization Grants2
State Contributions3
Loan Principal Forgiven
Transfers from (to) CWSRF
Total Non-Operating Revenues (Expenses)
Increase (Decrease) in Net Assets
Net Assets
Beginning of Year
End of Year
1 Refunding occurs when outstanding bonds are retired with newly-issued bonds.
2 This includes funds drawn from previous grants.
3 This includes state match but excludes state match bonds.
SFY 2018
102.3
301.8
404.1
157.3
0
5.7
163.0
836.1
103.5
(263.7)
66.4
742.2
983.3
20,677.1
21,660.5
SFY 2019
140.2
315.3
455.5
163.1
21.3
4.5
188.9
806.2
122.5
306.1
(2.0)
1,232.7
1,499.3
21,660.5
23,159.8
15
2019 Annual Report
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Exhibit 1 1: Statement of Cash Flow (Millions of Dollars)
Operating Activities
SFY 2018
SFY 2019
Loan Disbursements to be Repaid
(2,534.7)
(2,401.1)
Loan Principal Forgiven
263.7
306.1
Loan Principal Repayments
1,200.1
1,280.9
Interest Received on Loans
301.8
315.3
State Contributions1
103.5
122.5
Cash Draws from Federal Capitalization Grants2
836.1
806.2
Total Cash Flows from Operating Activities
170.5
429.8
Non-Capital Financing Activities
Bond Issuance Expense
(7.1)
(7.8)
Interest Paid on Leveraged and State Match Bonds
(157.3)
(163.1)
DWSRF Funds Used for Refunding3
0
(21.3)
Principal Repayment of Leveraged Bonds
(329.5)
(382.4)
Principal Repayment of State Match Bonds
(49.1)
(56.3)
State Match Bond Proceeds
76.5
78.5
Cash Received from Transfers with Clean Water State Revolving Fund
(CWSRF)
66.4
(2.0)
Gross Leveraged Bond Proceeds
671.9
985.5
Total Cash Flows from Non-Capital Financing Activities
271.7
431.1
Investing Activities
Cash Flows from Capital and Related Financing Activities
0
0
Interest Received on Fund Investments
102.3
140.2
Deposits to Debt Service Reserve for Leveraged Bonds
45.3
50.6
Total Cash Flows from Investing Activities
147.6
190.8
Net Increase (Decrease) in Cash and Cash Equivalents
589.8
1,051.8
Cash and Cash Equivalents
Beginning of Year
7,488.3
8,078.1
End of Year
8,078.1
9,129.9
1 This includes state match but excludes state match bonds.
2 This includes funds drawn from previous grants.
3 Refunding occurs when outstanding bonds are retired with newly-issued bonds.
16 2019 Annual Report
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4. Statement of Net Assets
In SFY 2019, total assets increased by $2.76 billion,
while total liabilities increased by $1.1 billion;
therefore, net assets increased by $1.5 billion, or 6.9
percent of total 201 8 net assets. This increase reflects
the overall health of the DWSRF program, which has
shown a net asset growth of at least 5 percent per
year over the past 1 0 years (Exhibit 1 2).
Exhibit 1 2: Statement of Net Assets (Millions of Dollars)
Assets
SFY 2018
SFY 2019
Cash and Cash Equivalents
7,440.7
9,1 29.9
Debt Service Reserve - Leveraged Bonds
595.8
545.2
Loans Outstanding
18,133.3
19,253.5
Unamortized Bond Issuance Expenses'
65.1
68.3
Total Assets
26,234.9
28,997.0
Liabilities
Match Bonds Outstanding
278.7
302.2
Leveraged Bonds Outstanding
4,334.4
5,410.1
Total Liabilities
4,613.1
5,712.3
Net Assets
Federal Contributions
1 9,474.9
20,281.1
State Contributions
2,876.5
2,999.0
Transfers - Other SRF Funds
595.6
(2.0)
Other Net Assets
(1,286.6)
(1 18.2)
Total Net Assets
21,660.5
23,159.8
Total Liabilities & Net Assets
26,273.6
28,872.1
1 Unamortized bond issuance expenses are costs that have been incurred but have not been fully recognized (amortized). These costs
will be recognized (amortized) over time over the remaining life of the bonds outstanding, similar to a pre-paid expense.
2019 Annual Report
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VI. DWSRF Set-Asides
States may reserve a portion of their annua!
capitalization grants to fund non-infrastructure
programs supporting safe drinking water. Set-asides
expand the impact of DWSRF by helping to ensure
that water systems have the necessary technical,
managerial and financial capacity to get the
greatest public health protection from their drinking
water infrastructure investments. Each of the four
DWSRF set-aside categories has a different focus.
Upon receiving capitalization grants, states may
reserve funds under each of the four categories at
their discretion and up to the maximum allowable
limit. This section provides an overview of the four set-
asides and a breakdown of set-aside usage in 2019
and cumulatively.
Administration and Technical Assistance (4% Set-Aside)
States may set aside the greatest of $400,000, 0.2
percent of the current Fund value, or 4 percent of the
capitalization grant to administer their DWSRF
programs and to provide technical assistance to
water systems of any size. For example, states may
use these funds to hire staff or to assist water systems
with project plans or loan applications.
Small Systems Technical Assistance (2% Set-Aside)
States may reserve up to 2 percent of their annual
capitalization grant to fund programs providing
assistance to drinking water systems serving 1 0,000
people or fewer. Small water systems often face
greater challenges than larger systems, and they
frequently have difficulty obtaining funding. This set-
aside helps build the capacity of small systems and
better align operations with drinking water
system demand.
State Program Management (10% Set-Aside)
This set-aside may be used to fund PWSS programs
overseeing all drinking water programs in individual
states. Funding from this set-aside can be used for
source water protection, capacity development,
operator certification programs, and other activities.
Local Assistance and Other State Programs
(15% Set-Aside)
States can use up to 15 percent of their capitalization
grant (but no more than 10 percent for any single
activity) to provide loans for the purchase of land, to
support source water protection, to implement
voluntary water quality protection activities, or to
assist water systems with their capacity development.
18
2019 Annual Report
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Recent Set-Aside Usage
In 2019, states took a higher percentage of set-
asides than their historical average in all four
categories (Exhibit 1 3). Exhibit 14 shows how states
used each set-aside account in 2019 and cumulatively
since the DWSRF program inception in 1997.
Exhibit 1 3: Set-Asides Taken as a Percentage of Capitalization Grants
10%
9%
8%
7%
6%
5%
4%
3%
2%
1%
0%
9.2%
3.8%
3.2%
1
1
1.8%
1.4%
Admin & Technical
Assistance
Small Systems
Technical Assistance
State Program
Management
Local Assistance
SFY 1997 -2019
SFY2019
Exhibit 14: Set-Aside Expenditures (Millions of Dollars)
Set-Aside Category
Sub-Category
SFY2019
Cumulative (1997-2019)
Small Systems
State Program
Management
PWSS Administration
$ 59.19
$ 875.53
SWP Technical Assistance
$ 2.55
$ 99.90
Capacity Development
$ 10.47
$ 177.77
Operator Certification Programs
$ 2.35
$ 45.04
Local Assistance
& Other State Programs
Loans for SWP Land Acquisition
$ 0.00
$ 8.95
Loans for Incentive-Based SWP Measures
$ 0.00
$ 7.75
SWP Area Delineation/ Assessment
$ 3.65
$ 128.50
Wellhead Protection
$ 20.45
$ 339.06
Technical or Financial Assistance
$ 35.73
$ 501.66
All
TOTAL
$ 177.97
$ 3,145.19
19
2019 Annual Report
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VII. DWSRF AQUARIUS Project Highlights
The DWSRF AQUARIUS Recognition Program nationally recognizes DWSRF-funded projects for exceptional
focus on sustainability and protection of public health, The projects listed below were recognized as
"Exceptional" and are examples of the impact and innovation possible with the DWSRF. To learn more about
the projects recognized in 201 9, visit the 2019 AQUARIUS Recognition Program website.
Region 1
Woodland Summit Community Water Association (WSCWA), CT Loan Amount - $280,000:
WSCWA's wgter system wgs built prior
to the SDWA and was in poor condition
due to lack of maintenance and capital
investment. Iron and manganese
concentrations exceeded maximum
contaminant levels (MCLs), and radon
levels were high. The 50-year old
storage tank was never inspected and
exceeded the state's 10-year inspection
requirement. WSCWA worked with the
Rural Community Assistance Partnership
(RCAP) to utilize Check Up Program for
Small Systems (QJPSS) and implement an
Asset Management Plan (AMP). The
WSCWA's project resulted in several improvements, including the replacement of the iron/manganese filtration
systems and installation of a new radon treatment system. The WSCWA, under volunteer leadership, worked
together to adjust water rates, make this project possible, and plan for the future.
Region 2
Long Beach Township, NJ Loan Amount - $1,250,000:
The Brant Beach Water Treatment Plant (WTP) was built without any
flood protection and was severely flooded during Superstorm Sandy in
2012. The project included demolition and reconstruction of the existing
well building and generator room to comply with 500-year flood
elevation requirements and installing new equipment. The pump station
now complies with Federal Emergency Management Agency (FEMA)
flood zone regulations and SDWA. As a result of DWSRF funds, the WTP
is better protected against flooding and sustained power loss and more
resilient to future storms.
20
2019 Annual Report
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Region 3
Allegany County, MD Loan Amount - $300,000:
61 Households in rural Allegany County
had no access to the public water
supply. They received drinking water
from private wells or the local creek
(when not frozen or affected by high
turbidity). Mining activity led to a
discolored water supply. Nitrates and
fecal coliform bacteria were also found
during well testing. Households without
wells were taking water from local
streams and disinfecting it with their
own chlorine supplies. The Maryland
SRF program, partnering with other
funding agencies, installed 1 2,400 feet
of PVC water line and 25 hydrants. These households now have drinking water service through connection to
Frostburg's drinking water system.
Region 4
City of Danville, KY Loan Amount - $12,500,000:
The City's primary raw water source, Lake
Herrington, is a deep lake with a modest
surface area and is prone to seasonal total
organic carbon spikes, manganese events,
and lake turnover. Even though the City's
WTP performance was steady, they under-
took this capital improvements project to
proactively address concerns about meet-
ing the requirements of the Stage 2
Disinfection Byproducts (DBF) Rule. Chal-
lenges included: expanding and up-
grading the WTP on the existing site while
maintaining constant water production, re-
purposing the existing historic structures,
and incorporating cutting edge treatment
technologies. The project consisted of sev-
eral components including: new filtration,
chemical feed, operations laboratories at the existing WTP; a new chemical building; six new granular filters,
eight new pumps, four granular activated carbon (GAC) contactors, Supervisory Control and Data Acquisition
(SCADA) improvements, and upgrades to an 80-year old raw water intake facility. This project provided
60,000 residents throughout four counties with improved drinking water quality.
21
2019 Annual Report
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Region 5
City of Ashland, Wl Loan Amount - $300,000:
The City of Ashland replaced 1 61 residential lead service
lines (LSL) and covered 1 00 percent of the replacement
costs. The City prioritized households with children under
the age of 6, high risk groups based on socioeconomic
factors, as well as schools and daycares. This project is an
example of innovative financing, as the City provided 1 00
percent principal forgiveness, which was necessary to
comply with state laws, since no public debt can be
incurred for costs of work done on private property.
Region 6
Saint Bernard Parish (SBP) Waterworks, LA Loan Amount - $11,000,000:
The Saint Bernard Parish Waterworks was losing a
large amount of water pumped (43%) due to leaks in
the cast iron mains. Through support from the DWSRF,
the project reduced and eliminated leakage and water
main failures by replacing aged and deteriorated cast
iron waterline segments; adding fire hydrants, valves,
service lines, meters, fittings; replacing asphalt
pavement; and addressed issues with inadequate
chlorine residuals. The project met EPA's 100 percent
Green Project Reserve, in total, 61,050 feet of
waterline was replaced/added to the system.
22
2019 Annual Report
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Region 7
Public Wholesale Water Supply District No. 27, KS Loan Amount - $3,800,000:
Four water systems in the area, that had
consistently exceeded the MCL for nitrate for
four years, worked together to form the Public
Wholesale Water Supply District (PWWSD)
and find a new water source. The project
included the creation of a new Public Water
System (PWS) through construction of public
water supply wells, a disinfection treatment
facility, an elevated storage tank, and
connecting transmission pipelines. The treatment
facility was constructed to allow expansion of
the treatment process if nitrate removal
becomes necessary in the future. This new
system now provides water that is below the
MCL for nitrate for the City of Powhattan, the
City of Robinson, Brown County Rural Water
District No. 2, and Doniphan County Rural
Water District No. 6. The PWWSD is actively
planning to connect other area public water supply systems that are trying to resolve nitrate MCL violations.
Region 8
East Rapid City, SD Loan Amount - $5,000,000:
This project is the largest water regionalization project the
City has completed and included a major expansion of the
municipal water distribution system to serve those located east
of the current city limits. These residents were previously
served by individual wells and small private or public water
systems that were inadequate, unreliable, and failed to meet
EPA's safe drinking water standards. Over five miles of public
water mains and a master pressure reducing valve (PRV)
facility were constructed. There are currently 179 new active
service connections (433 people) in the project area that are
now being provided a consistent, safe drinking water supply.
23
2019 Annual Report
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Region 9
Valley Center Municipal Water District, CA Loan Amount - $4,200,000:
The project included designing and installing a geomembrane liner with a geotextile underlayrnent and
replacing a Hypalon floating cover with a new chiorosulfonated polyethylene (CSPEj floating cover.
The Reservoir's concrete liner was showing signs of movement and cracking at the expansion joints, as well as
leakage through the underdrain system. The concrete liner also served as a medium for bacterial growth,
increasing chlorine demand with corresponding chemical and operational costs. The Reservoir's cover had
reached the end of its service life, and tears in the cover could no longer be repaired. The new liner will
prevent leakage from the Reservoir and reduce bacteria by creating a barrier between the finished drinking
water and the concrete liner. This will reduce chemical and energy use to maintain chlorine residuals.
Region 10
Liberty Lake Sewer and Water District (LLSWD), WA Loan Amount - $905,000:
In 2014, Eastside Liberty Lake Improvement Club (ESLLIC) received
a DWSRF loan for water system improvements, including
replacement of 50-plus year-old well pumps, booster pumps, and
reservoir. In 2016, this project was converted to a consolidation
project between LLSWD and ESLLIC and was then eligible for 50
percent principal forgiveness. The revised project included
transferring ownership of ESLLIC to LLSWD, abandoning the
existing wells serving ESLLIC that needed major upgrades, utilizing
the existing intertie as the main water source to ESLLIC, and
conducting needed improvements to ESLLIC's distribution system to
address leaks. ESLLIC's volunteer board is now replaced by
LLSWD as the owner responsible for operation and maintenance of
the entire water system, providing long-term technical, managerial,
and financial (TMF) capacity for the customers within ESLLIC.
Water rates for ESLLIC customers dropped from $50.76, which
included the surcharge for the DWSRF loan, to $18.52 upon
consolidation.
2019 Annual Report
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State Agencies Managing the DWSRF
EPA Region 1
Connecticut Department of Public Health
Connecticut Office of the Treasurer
Maine Department of Human Services
Maine Municipal Bond Bank
Massachusetts Clean Water Trust
Massachusetts Department of Environmental Protection
Massachusetts Executive Office of Administration and
Finance
New Hampshire Department of Environmental Services
Rhode Island Infrastructure Bank
Rhode Island Department of Health
Vermont Department of Environmental Conservation
EPA Region 2
New Jersey Environmental Infrastructure Bank
New Jersey Department of Environmental Protection
New York State Department of Health
New York State Environmental Facilities Corporation
Puerto Rico Department of Health
Puerto Rico Infrastructure Financing Authority
EPA Region 3
Delaware Department of Health and Social Services
Maryland Water Quality Financing Administration
Maryland Water and Science Administration
Maryland Department of the Environment
Pennsylvania Infrastructure Investment Authority
Pennsylvania Department of Environmental Protection
Virginia Department of Health
Virginia Resources Authority
West Virginia Department of Health and Human Resources
West Virginia Water Development Authority
25
EPA Region 4
Alabama Department of Environmental Management
Florida Department of Environmental Protection
Georgia Environmental Finance Authority
Georgia Department of Natural Resources
Kentucky Infrastructure Authority
Kentucky Department of Environmental Protection
Mississippi State Department of Health
Mississippi State Tax Commission
North Carolina Department of Environmental Quality
South Carolina Department of Health and Environmental
Control
South Carolina Budget and Control Board
Tennessee Department of Environment and Conservation
Tennessee Division of Fiscal Services
Tennessee Comptroller of the Treasury
EPA Region 5
Illinois Environmental Protection Agency
Indiana Finance Authority
Indiana State Revolving Fund Loan Program
Michigan Department of Environmental Quality
Michigan Municipal Finance 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
2019 Annual Report
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EPA Region 6
Arkansas Natural Resources Commission
Arkansas Department of Health
Arkansas Development Finance Authority
Louisiana Department of Health
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
Missouri Environmental Improvement and Energy
Resources Authority
Nebraska Department of Environmental Quality
o
EPA Region 8
Colorado Water Resources and Power Development Authority
Colorado Water Quality Control Division
Colorado Department of Local Affairs
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
Wyoming Office of State Lands and Investments
Wyoming Department of Environmental Quality
Wyoming Water Development Office
EPA Region 9
Arizona Water Infrastructure Finance Authority
California State Water Resources Control Board
Hawaii Department of Health
Nevada Division of Environmental Protection
Nevada Office of Financial Assistance
EPA Region 10
Alaska Department of Environmental Conservation
Idaho Department of Environmental Quality
Oregon Health Authority
Oregon Infrastructure Finance Authority, Business Oregon
Oregon Department of Environmental Quality
Washington State Department of Health
Washington Department of Commerce
26
2019 Annual Report
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DWSRF At-a-Glance
Assistance Provided for Projects (Millions of Dollars)
2019
1997-2019
Total, by Project Type
2,836.7
41,083.6
Planning and Design Only
46.1
466.2
Construction
Treatment
755.0
15,405.6
Transmission & Distribution
1,321.6
16,747.4
Source
192.0
2,345.0
Storage
431.6
4,292.8
Purchase of Systems
1.8
296.2
Restructuring
23.4
153.6
Land Acquisitions
2.6
94.9
Other
62.6
1,281.9
Total, by Population Served
Less than 501
174.9
1,886.9
501 to 3,300
496.8
6,231.3
3,301 to 10,000
367.8
6,144.1
10,001 to 100,000
788.4
14,973.4
100,001 and Above
1,008.8
11,826.4
# of Loans, by Population Served
Less than 501
201
3058
501 to 3,300
312
4998
3,301 to 10,000
165
2872
10,001 to 100,000
168
3424
100,001 and Above
51
1073
Funds Available for Projects (Millions of Dollars)
2019
1997-2019
Total Funds
3,242.3
43,138.6
Federal Capitalization Grants
1,068.5
21,061.2
State Match
201.0
4,107.5
Net Leveraged Bonds
1,067.2
9,881.3
Net Loan Principal Repayments
898.6
8,643.0
Net Interest Earnings
236.1
2,459.0
Net Transfers with CWSRF
12.7
448.5
Less Set-Asides
(241.8)
(3,461.9)
Other Key Statistics
In 2019, every $1 federal drawn to DWSRF
programs resulted in $2 disbursed.
The DWSRF average interest rate in 201 9 was 1.6%,
compared to 3.5% market-value interest rate. This
lower interest rate results in over $500 million in
savings to local community ratepayers over the life of
these loans.
States also awarded $321 million as principal
forgiveness to communities in 2019. These grant-like
funds help keep water rates affordable for
communities.
24 states sell bonds to further leverage their DWSRF
programs.
For more information about the Drinking Water State Revolving
Fund, please contact us at:
Drinking Water State Revolving Fund Program
U.S. Environmental Protection Agency
1201 Constitution Avenue, NW (Mail code 4606M)
Washington, DC 20460
www.epa.gov/dwsrf
Office of Ground Water and Drinking Water
October 2020
EPA 816-R-20004
2019 Annual Report
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