Clean Water

St Ate Revolving Fund

Funding Drought Resiliency Projects

Droughts occur throughout the United States, and
in any given year at least one region is experiencing
drought conditions. Droughts do not have the same
immediate effects as floods or hurricanes, but they
can be more costly than other natural disasters.
Depending on its severity and duration, drought can
devastate crops and forests, lead to shortages of food
for livestock and wildlife, increase the risk of wildfires,
and have a negative effect on local and regional
economies. The frequency, intensity, and duration of
drought events are increasing throughout the country,
a pattern that is expected to continue shifting outside
of historical trends in the future.

Drought can result in significant water supply
and quality challenges for communities and their
wastewater systems. To address water supply
challenges, water reuse, water efficiency, and
related measures can be implemented to conserve
and augment limited water supplies while meeting
water quality goals and requirements. At the same
time, restrictions on water usage during a drought
and greater adoption of water efficient practices can
result in declining wastewater flows in collection
systems. This can increase the concentration of salts
and organic material going to a treatment facility
and impact the performance of facilities that may
not be optimized for more concentrated wastewater

both for treatment for discharge and potential reuse.
Long-term planning and investments are essential
to ensure that our wastewater infrastructure can
help communities adapt to drought conditions while
minimizing impacts to ongoing operations. The Clean
Water State Revolving Fund (CWSRF) can provide low-
cost financing for activities that address and promote
community and utility resiliency to drought.

How the CWSRFs Work and Who May
Qualify

The CWSRF is a source of low-interest financing
for a wide range of wastewater infrastructure and
water quality projects. The program is an effective
partnership between EPA and all 50 states and
the territory of Puerto Rico. Each program has the
flexibility to finance a variety of projects that address
its most pressing water quality needs. The state-
and territory-administered programs each operate
like banks with federal and state contributions that
capitalize the programs. These funds are used to
make low-interest loans to local communities for
water quality projects and are then repaid to the
CWSRFs over terms as long as 30 years or the useful
life of the project, whichever is less. Repayments
are recycled back into the fund to finance additional


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projects. The below-market rate loans offered by the
program save borrowers significant resources over
the life of the loan compared to traditional financing
sources.

Financial Benefits of CWSRF Financing

•	CWSRF assistance options deliver significant
benefits and incentives to borrowers. CWSRF
assistance can provide the following benefits:

•	Coverage of up to 100% of project costs;

•	Discounted loans below the market rate down to
zero percent in some states;

•	Deferred payments of principal and/or interest;

•	Terms of up to 30 years and extended term
financing that reduces annual principal and
interest payments;

•	Revenues for loan repayments can come from any
source;

•	Reliable access to capital through the use of
programmatic, portfolio, and co-financing;

•	Access to additional subsidies;

•	Credit enhancements such as guaranteeing local
debt or purchasing bond insurance, that lower the
cost of loan repayments for borrowers;

•	Access to affordable assistance for project
development, planning, and technical assistance.

Getting a Project Funded

EPA encourages states to consider financing a wide
variety of eligible water quality and public health
projects based on a state's specific needs. Utilities and
municipalities that want to learn more about CWSRF
financing opportunities should contact their state's
CWSRF program to learn more about the process
states use to determine which projects are funded. A
directory of CWSRF state programs can be found at
https://www.epa.gov/cwsrf.

CWSRF Assistance for Drought
Resiliency Projects

The CWSRFs provide financial assistance for a wide
range of eligible water infrastructure projects to assist

EPA 832F22012, August 2022

communities' efforts to become drought resilient.

These projects, however, do not need to be solely
designed to mitigate drought; they may also have
other benefits that can strengthen and protect water
infrastructure. These activities include, but are not
limited to:

•	Planning activities that assess a wastewater
system's vulnerability to drought impacts that
are reasonably expected to result in a capital
project (e.g., risk/vulnerability assessments, water
audits, water conservation plans, emergency
preparedness/response/recovery plans, drought
management plans, and climate adaptation
plans);

•	Water conservation and efficiency projects that
reduce the demand for a wastewater system's
capacity through reduced water consumption
(e.g., installation or replacement of water meters,
water efficient appliances, and plumbing fixtures);

•	Projects involving the reuse or recycling of
wastewater, stormwater, or subsurface drainage
water, including the purchase and installation of
wastewater treatment equipment sufficient to
meet reuse standards and precipitation harvesting
equipment; or

•	Distribution systems to support effluent reuse,
including recharge transmission lines, injection
wells, and equipment to reuse effluent (e.g., gray
water, condensate, and wastewater effluent reuse

systems).

Encouraging Drought Resilient
Infrastructure

Each CWSRF publishes programmatic goals in their
Intended Use Plan and Annual Report that may
support drought resilience through activities such as
water conservation, water reuse or recycling, climate
resilience, and more. There are ways the CWSRF
can support and encourage drought resilience for
both wastewater systems and communities. CWSRF
incentives, such as through priority setting systems,
are an effective tool that states use to encourage
drought resilient projects. Each CWSRF program
has a unique priority setting system that evaluates
and ranks projects. Ranking criteria primarily focus
on public health and water quality but can also

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address concerns such as drought resiliency. States
can encourage projects that promote overall system
resiliency through targeted ranking criteria (e.g.,
offering priority points) and funding incentives
(e.g., reduced interest rates and/or waiving fees).
Additional subsidies (e.g., principal forgiveness,
negative interest rate loans, and grants) can also be
used to encourage drought resiliency projects.

CWSRF programs can also use their administrative
resources to provide technical assistance and training
in the development of these projects. Additionally,
several state programs have invested in water
infrastructure funding programs that can provide
financial assistance for drought resilient projects that
complement CWSRF eligibilities or even co-fund with
other projects. Also, many CWSRFs are members of
funding coordination groups that meet to collaborate
with other state and federal funding sources that
can fund drought resilient projects. Other activities
that support drought resiliency include assessing
emergency funding availability, and marketing and
outreach regarding availability of CWSRF resources.

Water Reuse and Drought

Water reuse is the practice of reclaiming water
from a variety of sources, treating it, and reusing it
for beneficial purposes. Since the source water for
most water reuse projects is municipal wastewater,
which is less dependent on variations in the local
climate, it can provide a reliable, local source of
water that can enhance resilience and mitigate the
impacts of drought on a community. In addition,
because wastewater is locally sourced, communities
practicing water reuse will be less dependent on
imported sources of water. This is very important
for communities in the western states that have an
ongoing history with drought, such as California.
Having a local and climate-resilient supply of water
through reuse provides greater certainty in cost as
the cost of water reuse is less dependent on the
availability of natural supplies. It can also better
position utilities and their customers to use water
resources more efficiently.

Since the start of the CWSRF program, there have
been approximately 26 state programs, including
Arizona, California, Florida, Nevada, and Texas, that
have provided assistance for water reuse projects.
Other states, however, like Georgia and Hawaii, have

EPA 832F22012, August 2022

seen an increase in water reuse projects over the last
several years. The following are some examples of
state practices and programs that target water reuse
in drought-prone states:

California Water Recycling Funding Program:

California has a Water Recycling Funding Program
(WRFP) with the sole purpose of financing
water reuse projects in the state. This program
received $625 million through Proposition 1 bond
funding in 2014 for loans and grants for planning
and construction. Loans from this program are
administered through the CWSRF program and utilize
many of the same processes. In addition, many
water reuse projects are co-funded through grants
and loans provided at 1 percent interest through
the CWSRF. There are also separate criteria for the
WRFP that give priority to potable reuse projects
over non-potable reuse projects. As of October
2021, 46 projects received financing with almost
$260 million in grants and $1.1 billion in CWSRF loan
financing. While it is unlikely that many other states
will implement a water reuse focused program at this
scale, it is a good example of coordinating other state
funding sources to leverage CWSRF resources.

Oklahoma Water for 2060 Initiative:

The Oklahoma CWSRF Program includes a statement
of support for water reuse in both their short- and
long-term program goals. The program also has a goal
of supporting the Oklahoma Water for 2060 Initiative.
This initiative includes several recommended actions
related to water reuse including identifying successful
projects and opportunities for water reuse to support
the overall goal of using less fresh water in 2060
than was used in 2010. The cost of water reuse
infrastructure was identified as a constraint to future
reuse opportunities and the CWSRF program can
help address these cost concerns. Such initiatives can
serve as a catalyst for spurring innovation in a CWSRF
program, improving coordination in water resources
management across state agencies, the utility sector,
and even the private sector.

State Water Implementation Fund for Texas:

For communities that apply for or receive any state
financial assistance over $500,000, the Texas Water
Development Board requires the development and
submission of a water conservation plan. Water reuse


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can be incorporated into these plans as an element
for reducing water demand. Similar requirements
help ensure that communities receiving CWSRF
assistance are considering the long-term sustainability
of water resources when planning infrastructure
improvements.

In 2013, Texas created the State Water
Implementation Fund for Texas (SWIFT) program
to fund projects in its state water plan. SWIFT was
initially established through a fund transfer from
Texas's "rainy day fund" but was later leveraged
through the issuance of revenue bonds. SWIFT
provides low-interest loans for water supply projects
and operates much in the same way as the CWSRF
program. SWIFT can be used to support eligible water
reuse projects and co-fund projects with the CWSRF
program. Special consideration in SWIFT is given for
rural communities, agricultural water conservation,
water conservation, and water reuse projects.

CWSRF Case Studies

How communities are using the CWSRF
to finance the impact of drought on their
wastewater systems.

Califonia:

The Orange County Water District (OCWD) received
a low-interest loan for approximately $182 million
from the CWSRF to use towards financing the
construction of OCWD's Groundwater Replenishment
System (GWRS) Final Expansion and Water Production

EPA 832F22012, August 2022

Flow Enhancement projects. This important water
reuse project will expand OCWD's existing 100
million gallons per day (MGD) GWRS to produce
an additional 30 MGD drought-resistant water
supply for its service area. The GWRS purifies
wastewater from the Orange County Sanitation
District (OCSD) that would otherwise have been
discharged to the ocean and puts it through a three-
step advanced purification process consisting of
microfiltration, reverse osmosis membranes and
advanced oxidation process of ultraviolet light in
combination with hydrogen peroxide. The project
will also include constructing a pump station, two
flow equalization tanks, rehabilitating pipelines,
headwork modifications of incoming sources of
wastewater, and expanding treatment capacities
of the advanced recycled water purification facility.
The result is high-quality water that's injected into
a seawater intrusion control barrier and pumped to
recharge basins where it naturally percolates into
the Orange County Groundwater Basin managed by
OCWD. It will also provide an additional 31,000 acre-
feet per year drought-proof water supply at a lower
cost than imported water. GWRS water accounts
for up to one-third of the water that is annually put
into the groundwater basin; an asset that provides
up to 77 percent of the annual water needs for the
region. Upon completion, the GWRS will be recycling
all of OCSD's reclaimable wastewater and will
produce sufficient water for one million people. The
anticipated date of construction completion for this
project is approximately August 2023.

Photo Courtesy of Orange County Water District


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The total cost of the GWRS Final Expansion and
Water Production Flow Enhancement projects are
$310 million. Customers will realize a total savings of
nearly $42 million over the life of the loan. In addition
to the CWSRF loan, the OCSD's remaining costs will
be paid for through a $3.6 million grant from the
California Department of Water Resources Integrated
Regional Water Management grant program, a $1.1
million grant from the U.S. Department of the Interior
Bureau of Reclamation Title XVI Water Infrastructure
Improvements for the Nation program, $3.8
million in grant funding from Proposition 13, $1.2
million in grant funding from Proposition l's Water
Recycling Program, and a $135 million loan from
the U.S. Environmental Protection Agency's Water
Infrastructure Finance and Innovation Act program.

Florida:

Florida's CWSRF Program provided a loan to the
Town of Baldwin for $2,373,472 to construct a
reclaimed water transmission main to the Brandy
Branch Power Plant near Jacksonville, Florida. This
project will send all the effluent from the town's
wastewater plant to the power plant to be used
for cooling water at the power plant. As a result,

EPA 832F22012, August 2022

the amount of groundwater withdrawn from the
aquifer will be reduced, which in turn reduces the
impact of the power plant on the aquifer during
drought conditions. The funding package included
$222,110 in principal forgiveness and a $1,811,101
grant from the Floida Department of Environmental
Protection's Small Community Wastewater Grant
Program, as well as a $889,350 grant from the
St. Johns River Water Management District.
Construction on this project began in November
2018 and was completed on September 17, 2019.
Previously, the town's effluent was discharged to
surface waters, so this project not only provides
beneficial reuse but also reduces nutrients
discharged to local water bodies.

Texas:

The increasingly drought prone City of Wichita Falls
proposed a permanent reuse project that would
deliver indirect potable reuse water from the River
Road Wastewater Treatment Plant to the city's
raw water source, the Arrowhead Lake. This $33.5
million CWSRF loan is a green project reserve loan
with over $252,000 of principal forgiveness. Since
completion, this project is allowing the plant to meet

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Photos Courtesy of Florida Department of Environmental Protection

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stringent effluent limits that will allow up to 16 MGD
of processed wastewater to be added to the lake.
Improvements will consist of a chemical coagulation,
filtration, and reaeration system along with a new
pump station and a 15-mile outfall pipeline that
will run to the lake to make the city compliant with
the newly established Texas Pollutant Discharge
Elimination System (TPDES) discharge requirements.
In recent years, Wichita Falls imposed strict water
restrictions on the community, which have reduced
the average MGD use by approximately 72 percent
during the summer season. This reuse system will
provide a long-term solution that will assist the city in
meeting their source water needs.

Arizona:

Arizona has been in a sustained long-term drought
since 1994, which has had significant impacts on
Arizona's water supplies. As a result, communities
have increased their use of reclaimed water to
mitigate the effects of drought and offset the use
of drinking water supplies. The City of Safford
expressed that water shortage is a severe threat to
the community and ensuring water availability is one
of the city's top priorities. To increase the availability
of potable water, Safford installed a reclaimed water
pipeline in 2020. The pipeline conveys reclaimed
water from the Gila Resources WWTP to the Graham
County Fairgrounds for direct non-potable reuse,
reducing the volume of potable water currently used
for irrigation and taking full advantage of the effluent
that would otherwise be discharged into the Gila

EPA 832F22012, August 2022

River. The project will capture 130.5 million gallons
of Class A+ reclaimed water that is created each year
but is currently not being utilized.

The reclaimed water will immediately replace potable
water used at City properties and recreational
facilities at the Fairgrounds for outdoor water use.
In the future, Safford hopes to use the reclaimed
water at the Graham County General Services
Building, Graham County Courthouse, and City
Hall. The Water Infrastructure Finance Authority of
Arizona provided a $3,225,000 loan to the City of
Safford for the reclaimed water pipeline project. The
loan was for 30 years at a 1.9% interest rate, with
$900,000 in principal forgiveness. As the current
drought continues and water availability lessens,
responsible and conservative water use remains
essential. This project helped to reduce the burden
of water shortages on the City of Safford and put the
reclaimed water to the most beneficial use possible.

Additional CWSRF Resources on Drought

Funding Resilient Infrastructure and Communities with the Clean Water State Revolving Fund: https://www.
epa.gov/cwsrf/funding-resilient-infrastructure-and-communities-clean-water-state-revolving-fund

State Revolving Funds: Financing Drought Resilient Water Infrastructure Projects: https://www.epa.gov/
waterfinancecenter/state-revolving-funds-financing-drought-resilient-water-infrastructure-proiects

Integrating Water Reuse into the Clean Water State Revolving Fund: https://www.epa.gov/sites/default/
files/2021-04/documents/cwsrf water reuse best practices.pdf

Overview of the Clean Water State Revolving Fund Eligibilities: https://www.epa.gov/sites/default/
files/201607/documents/overview of cwsrf eligibilities may 2016.pdf

EPA WaterSense: https://www.epa.gov/watersense


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