Addressing Water Affordability with the
Drinking Water State Revolving Fund
The Drinking Water State Revolving Fund (DWSRF) provides cost-saving opportunities for
communities to address water affordability for their drinking water customers.
Drinking water affordability refers to a drinking water
system's effort to provide reasonably priced water to
the community while still receiving revenue needed to
maintain water system operations. On average, U.S.
households pay less for drinking water than other
developed countries as a percentage of household
income1. However, if a water system raises their rates
to account for the high cost of building and maintaining
infrastructure, households, especially low-income
households, may face affordability issues and other
associated hardships.
Through the benefits of the DWSRF program, water
systems can keep operation and construction costs
down and pass the savings onto their customers -
potentially alleviating affordability hardships.
While the information provided below is not
exhaustive, it will equip decision makers with some
best practices and implementable ideas for how to use
the DWSRF program to maintain drinking water
affordability for their communities and water systems.
Additional EPA Water Affordability Resources:
https: //www. epa. gov/waterfinancecenter/f inancia I-

EPA OGWDW | Addressing Water Affordability with the DWSRF
The DWSRF can provide financial assistance to publicly
owned and privately owned community water systems
(CWS) and non-profit non-community water systems for
drinking water infrastructure projects. Projects must
either facilitate the system's compliance with national
primary drinking water regulations or significantly further
the health protection objectives of the Safe Drinking
Water Act (SDWA).
Each of the 50 states and Puerto Rico operates its own
DWSRF program. They receive annual capitalization
grants from the U.S. Environmental Protection Agency
(EPA), which they use to provide low-interest loans and
other types of assistance to water systems. Repayments
of DWSRF loans begin up to 18 months after project
completion, with loan terms up to 30 years for most
communities, or up to 40 years for disadvantaged
Additionally, states may use a portion of their
capitalization grant from EPA as "set-asides" to help
communities build the technical, managerial, and
financial capacities of their systems. With an emphasis
on small systems, these funds help ensure sustainable
infrastructure and public health investments.
Water systems facing compliance or long-term financial
issues can consider physical, technical, and/or
managerial consolidation with neighboring water
systems. Financial benefits of the consolidation of water
systems include reducing costs, achieving greater
economies of scale through shared services, and
increasing a system's access to funds through new
partnerships. In addition, systems that consider
consolidation or restructuring may receive higher priority
for DWSRF loans in some states.
Interest Rates
Through the DWSRF, states can provide below-market
interest rate loans for necessary infrastructure
EPA 810-F-21-007 August 2021
Under the DWSRF program, states may establish separate
eligibility criteria and special funding options for economically
disadvantaged communities.
In 2020, the average DWSRF interest rate for a loan was 1.35
percent, while the average AAA State Bond interest rate for
a loan was 2.79 percent. Using $4,300,000 (the average
amount of a DWSRF loan in 2020) as an example, the water
system would save over $700,000 for a 20-year loan with the
current average DWSRF interest rate.
Additional Subsidization
As of 2021, State DWSRF programs are required to provide
14 percent of their annual capitalization grant as additional
subsidy to communities. DWSRF programs must also provide
6 percent to 35 percent of their capitalization grant as
additional subsidy to state-defined disadvantaged
communities, resulting in 20 percent to 49 percent of
capitalization grants provided as additional subsidies to local
communities. These additional subsidies can be provided in
the form of grants, principal forgiveness, or negative interest
rate loans. A high percentage of the loans receiving
additional subsidization serve populations of 10,000 or fewer
people and disadvantaged communities, allowing these small
and disadvantaged communities to afford critical water
Extended Term Financing
Extended term financing (ETF) is a valuable tool to protect
public health and address drinking water infrastructure
investment needs. Extending the length of a repayment
period reduces a water system's annual repayment cost,
making projects more affordable for those communities. ETF
may be used in combination with additional subsidization as
a supplementary method of reducing the impact on
ratepayers. When strategically managed, ETF may result in
a significant increase in the volume of lending by DWSRF
Water systems receive DWSRF assistance directly from state
agencies. Each state has its own application procedure.
Contact information for each state is available at

^ For more information, visit: epa.gov/dwsrf

Drinking Water State Revolving Fund
Case Studies; Affordabuty in Action
How communities are using the Drinking Water State Revolving Fund to address affordability
in their drinking water systems.
Several communities in northeastern Oklahoma
were struggling to address various drinking water
challenges, including exceeding various EPA
maximum contaminant levels (MCL) and sulfur-
smelling water. To address these challenges, the
communities decided to create a regional water
provider who could provide safe, reliable drinking
water; this led to the creation of the South Delaware
County Regional Water Authority (SDCRWA). Once
created, the SDCRWA moved forward with
construction of a new surface water treatment plant
to enhance service for its current customers and
extend service to other nearby communities
experiencing drinking water system challenges. The
Oklahoma DWSRF program partnered with the
United States Department of Agriculture-Rural
Development (USDA-RD), Indian Health Services,
the Cherokee Nation, and the South Delaware
County Regional Water Authority (SDCRWA) to
provide over $15 million in funding for the
SDCRWA's new surface water treatment plant.
This project was completed in December 2019 and
allows SDCRWA to continue providing safe, reliable
drinking water to several disadvantaged
communities in northeastern Oklahoma. This
project is a good example of utilizing the DWSRF
to assist disadvantaged communities and create
sustainable partnerships for systems in need.

EPA OGWDW | DWSRF Case Studies: Affordability in Action
EPA 810-F-21-007 August 2021
The Town of Timmonsville received several
deficiencies and Consent Orders (CO) for its public
water system between 2006-2013. The town
eventually realized their best option was to connect
to the nearby City of Florence. At that time, the town
was in default on USDA-RD loan of $6 million; this
prevented the town from receiving further grant
assistance. The city took on the town's debt so this
consolidation project could proceed. This project
was funded by the DWSRF program, the city's
revenues, the US Department of Housing and Urban
Development's Community Development Block
Grant (CDBG) program, the Economic Development
Administration, USDA-RD, the South Carolina Rural
Infrastructure Bank, and the State Transportation
Infrastructure Bank. These seven entities worked
together to fund this $7.2 million project.
This project achieved its intended goals, which were
to complete the project within the approved five-
year time provided for by the CO, obtain regulatory
compliance, gain community trust for service
provided, and maintain customer rates. This
successful consolidation project, completed in
October 2019, provided the town's residents with
access to safe and affordable drinking water and
had positive impacts on the local economy.
In November 2020, EPA met with the New York
State Environmental Facilities Corporation (EFC) and
the New York State Department of Health (DOH)
regarding the state's use of ETF for DWSRF projects.
New York's proposal, to grant ETF to certain
disadvantaged communities up to 40 years (but no
longer than the design life of the project), falls
within current DWSRF law.
This action taken by New York will allow the state to
increase its ability to provide affordable loans for the
local water systems and water affordability to their
In May 2019, Port Royal completed a $1.4 million
dollar project to address aging infrastructure by using
multiple sources of funding, leveraging partnerships,
and emphasizing collaboration amongst all parties.
The project substantially decreased water loss,
increased efficiency of the system, and was affordable
for the 126 residents of the small, rural town. The
project involved replacing leaking water mains,
installing service meters, and replacing an elevated
storage tank with ground level storage paired with
bladder tanks and booster pumps. This project was
financed with a combination of loan and principal
forgiveness funds from USDA-RD and the DWSRF
program. Principal forgiveness through DWSRF was
available due to the system meeting disadvantaged
criteria, based on median household income. In
addition to raising water rates, Port Royal also
undertook a boundary adjustment to gain a larger tax
base to help provide revenue for the project. This
project's innovative financing resulted in water
affordability with a more sustainable water rate
Water systems receive DWSRF assistance directly
from state agencies. Each state has its own
application procedure. Contact information for each
state	is	available	at
https: //www. epa. aov/d wsrf/state-d wsrf-website-
For more information, visit: epa.gov/dwsrf