oEPA

December 2021
epa 841B21012

United States
Environmental Protection
Agency

CWSRF Best Practices Guide for Financing
Nonpoint Source Solutions

Building Successful Project Funding Partnerships


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Front cover photos:

Top left—Cover crop interseeder funded by CWSRF (Photo by Kansas Department of Health
and Environment).

Top right—Cistern collects rainwater for reuse at the Heron's Head Park EcoCenter in San
Francisco, CA (Photo by U.S. Environmental Protection Agency).

Bottom left—Permeable pavement and stormwater bioretention area in a Chicago, IL, parking
lot (Photo by U.S. Environmental Protection Agency).

Bottom right—Naturalized stormwater channel flows through residential development in
Lenexa, KS (Photo by U.S. Environmental Protection Agency).


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CWSRF Best Practices Guide for Financing Nonpoint Source Solutions I Building Successful Project Funding Partnerships

Contents

1.	Introduction	1

1.1	Addressing Pollution Using Clean Water Act Programs	1

1.2	Understanding NPS and CWSRF Program Eligibilities	3

1.3	Integrating State CWSRF and NPS Programs	5

2.	Elements of Success: Best Practices that Expand CWSRF Funding for NPS Projects.... 6

2.1	Develop Partnership Between CWSRF and NPS Programs	6

2.2	Identify and Overcome Barriers to Program Alignment	8

2.3	Establish Partnerships with Outside Stakeholders	11

3.	Elements of a Successful Coordinated Financing Approach	14

3.1	Options for Co-Funding NPS Projects	15

3.2	Successful Financing Mechanisms	16

3.3	Tapping Potential Loan Repayment Sources	20

3.4	Watch for New Repayment Opportunities	20

3.5	Emphasize Incentives to Encourage Participation	22

4.	Customizing Your Strategy	25

4.1	Test Your Approach	25

4.2	Refine Operations and Program Management	25

4.3	Operationalize Your Strategy	27

Appendix A: Clean Water State Revolving Fund Program Eligibilities	32

References:	33

Appendix B: Alternative Repayment Sources	34

Appendix C: Demonstrating Success	37

Appendix D: EPA Fact Sheets on DWSRF

Set-Asides for Source Water Protection	47

Appendix E: Resources	57

National Program Resources	57

State CWSRF/NPS Programs	57


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CWSRF Best Practices Guide for Financing Nonpoint Source Solutions I Building Successful Project Funding Partnerships

1. Introduction

The Clean Water State Revolving Fund (CWSRF) is, by far, the nation's largest fund dedicated
to the purpose of addressing water quality problems. Congress established the fund in 1987 as
a means for sustainably addressing problems caused by both point source and nonpoint source
(NPS) pollution alike, without partiality for one source type over the other. Yet today, after 33
years and $145 billion provided, more than 9 of 10 CWSRF dollars have been directed toward
addressing point source project needs.1 Addressing point source needs will continue to be
foundational to the CWSRF. However, as NPS pollution accounts for approximately three out of
four identified water quality impairments nationwide2 and less than 4% of the CWSRF has been
used to address NPS needs, we need to ramp up efforts within the CWSRF programs to address
NPS needs.3 Among the 51 state-level CWSRF programs, some have achieved particularly
notable success at using CWSRF funds to target NPS needs. These state programs have evolved
to produce creative solutions to NPS problems and offer valuable lessons for others to consider.

The purpose of this guide is to share the collective wisdom from those states that have
achieved success in this area. Best practices begin with focused intention and are typically well-
designed, flowing from a program's articulated mission and goals into the array of projects that
receive CWSRF assistance each year. This guide is designed to help state staff better align and
integrate their state's CWSRF and NPS management programs. It outlines suggested strategies
and key elements needed to expand the use of the CWSRF to address priority NPS needs as
specified in state NPS management program plans, and it identifies potential obstacles and
how to overcome them. Lastly, the guide provides case studies of successful and innovative
partnerships underway across the country.

1.1 Addressing Pollution Using Clean Water Act Programs

Multiple programs are in place to help control water pollution in the United States. The 1972
Clean Water Act (CWA) ushered in a new era of regulatory protections for America's surface
waters. The CWA made it unlawful to discharge any pollutant from point sources (i.e., discrete
conveyances such as industrial or wastewater treatment discharges or certain stormwater
discharges) into navigable waters unless a permit that set effluent limits was obtained. In 1987,
the CWA Amendments established several more national water pollution control programs,
including (1) the CWSRF (CWA Title VI), a financial assistance program to support a wide range
of water infrastructure needs, and (2) the CWA Section 319 (§319) NPS Management Program, a
program to help states control NPS pollution (i.e., pollution caused by diffuse sources across the
landscape, such as agricultural and urban runoff that is not federally regulated).

Although many U.S. waters are cleaner now than they were 50 years ago, NPS pollution remains
a significant problem. Today, about 85% of rivers and streams and 80% of lakes that states
report as impaired (i.e., shown to be violating state water quality standards) are primarily
affected by NPS pollution.4 Since 1987, eligible states, territories and tribes have received §319

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CWSRF Best Practices Guide for Financing Nonpoint Source Solutions I Building Successful Project Funding Partnerships

program funds to develop and implement NPS management programs, which help prioritize
and address NPS problems by supporting implementation of watershed-based plans and total
maximum daily loads (TMDLs), education efforts, demonstration projects, monitoring and other
activities identified in a state's §319 NPS management plan.5 State NPS program staff develop
and submit annual §319 grant work plans to the U.S. Environmental Protection Agency (EPA).
These work plans guide implementation of the state's NPS management plan, reflecting actions
to advance water quality goals and leverage and integrate activities with other programs and
funding sources to optimize available resources.

The CWSRF is a key potential financing resource to support states' NPS pollution control efforts.
Although most of CWSRF cumulative funding to date has supported solutions to wastewater
discharge from point sources, more states are recognizing that CWSRF financing can be
integrated into many types of NPS management program activities and projects. Each state,
and Puerto Rico, operates its own water infrastructure bank established for the sole purpose
of combatting water pollution from both point and nonpoint sources within state and territory
boundaries. These state water infrastructure banks are established under the federal CWSRF
program and are capitalized with federal funds (from EPA) and state matching funds. They are
called revolving funds because money loaned from these 51 institutions to address water quality
needs is paid back to these banks over time, which provides a self-sustaining revenue stream
that continues to be recycled into future water quality projects. Today, revolving dollars from
loan principal and interest repayments account for the greatest relative share of resources that
comprise the CWSRF program and continue to grow. At the federal level, the CWSRF program
has broad flexibilities and coordinates closely with states to implement their CWSRF programs;
however, many states have not yet taken full advantage of the wide range of flexibilities and
eligible project types authorized by the federal statute. Each state CWSRF defines its own goals
and operating policies, while also following federal requirements.

Since their inceptions in the late 1980s, the §319 and CWSRF programs have provided more

than $9.7 billion in financial assistance for NPS activities combined (Figure 1-1). Of the 51

CWSRF programs, 45 have provided some NPS project assistance. The $5 billion in CWSRF NPS

financing represents less

than 4% of the overall

assistance provided by

the program, highlighting

the tremendous growth

potential for NPS assistance.

Certain states have

developed innovative

mechanisms to overcome

eligibility and affordability

hurdles that have

historically made financing

NPS activities challenging.
Figure 1-1. NPS financing provided through CWSRF and §319 since 1990.

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CWSRF Best Practices Guide for Financing Nonpoint Source Solutions I Building Successful Project Funding Partnerships

1.2 Understanding NPS and CWSRF Program Eligibilities

Understanding what the CWSRF and NPS programs can and cannot fund will allow program
staff to collaborate and maximize the assistance they provide to water quality projects. The
CWSRF program is flexible in the types of projects it can finance. There are 12 statutory project
eligibilities that allow the program to finance diverse projects that address water quality from
wastewater treatment facilities, stormwater infrastructure, agricultural operations, septic
systems and more (see Appendix A for a descriptive list of CWSRF eligibilities). Preliminary
planning and design activities that are reasonably expected to result in a capital improvement
project are also eligible. This could include activities like feasibility studies, watershed-based
plans and design engineering. The CWSRF program is prohibited from financing any operations
and maintenance (O&M) activities other than start-up and testing. However, although
not financed by CWSRF, O&M is an important element taken into consideration during the
underwriting process to ensure the functionality and longevity of the NPS assets to be financed.

Legislative changes to the CWSRF since its inception in 1987 establish the importance of
including NPS projects as part of an overall strategy to help states better attain their water

quality goals. For example, the American Recovery and
Reinvestment Act of 2009 and the Water Resources Reform
and Development Act of 2014 each include provisions that
encourage more assistance for activities such as green
stormwater infrastructure and decentralized wastewater
management projects.

The §319 program can fund many types of surface water
and groundwater projects so long as those activities
have been identified in a state's NPS management plan.
The program can also fund a variety of other activities
that support the goals articulated in the plan, which
could include state and local staffing, developing and
implementing watershed-based plans and TMDLs,
education, ambient water quality and NPS effectiveness
monitoring, and other activities.

Although there is significant overlap between what these
two programs can fund, distinct differences exist as well.
Figure 1-2 illustrates the relationship between CWSRF and
§319 program eligibilities, though the list is not exhaustive.
More information on specific program eligibilities may be
found in the Nonpoint Source Program and Grants Guidelines
for States and Territories and the Overview of Clean Water State
Revolving Fund Eligibilities.6 7

Financing Watershed-
Based Plans with CWSRF

The CWSRF has a history of
financing watershed-based plans
(WBPs) using traditional lending
methods as well as alternative
financing mechanisms such as
linked deposit loans. These funds
can be used to develop WBPs or
implement projects that support
them.

In New Hampshire, the CWSRF
program offers planning loans to
municipalities with up to $75,000
in loan forgiveness that may be
used to develop WBPs.

Since its inception in 1993, Ohio's
linked deposit loan program has
provided financial assistance to
soil and conservation districts
to implement agriculture,
stormwater and forestry BMPs
identified in their WBPs.

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CWSRF Best Practices Guide for Financing Nonpoint Source Solutions I Building Successful Project Funding Partnerships

Eligible Uses of CWSRF and §319 Funds

CWSRF

Both

§319

NPDES-permitted
wastewater &
stormwater

Energy and water
efficiency

Activities addressing

NPDES permit
enforcement actions

New sewer
collection lines into
decentralized/septic-
served areas

Resilience of
treatment works

Wastewater
reclamation
and reuse

Agricultural BMPs

TMDL implementation

Habitat protection & restoration

BMPs that implement watershed-based plans

Urban runoff not associated with an NPDES permit

Abandoned mine drainage treatment & remediation

Brownfield/Superfund sites: water quality issues

Decentralized/septic wastewater system repair,
replacement & upgrades

Land acquisition for watershed protection

Development of watershed-based plans

Erosion/sediment control

Streambank stabilization

Technical assistance
& coordination
from state NPS
program staff

Salaries for regional/
local watershed
coordinators

Well capping

Landfill capping

NPS project
management &
oversight

Ambient water
quality monitoring

NPS monitoring:
general &
project-specific

Septic system
inspections

Figure 1-2. Examples of eligible uses of CWSRF and §319 funds.

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CWSRF Best Practices Guide for Financing Nonpoint Source Solutions I Building Successful Project Funding Partnerships

1.3 Integrating State CWSRF and NPS Programs

To expand and integrate CWSRF financing for priority NPS needs, state staff can take advantage
of existing partnerships, program connections and institutional knowledge. This document
helps to guide staff as they synchronize water quality goals and priorities across state programs,
experiment with ideas through pilot projects, and customize and implement a strategic plan.
The effort needed for each of these elements could vary depending on a state's existing CWSRF
and NPS program structures. Section 2 provides more information about the actions needed to
successfully coordinate between programs to expand CWSRF financing for NPS projects.

Some states face obstacles that make CWSRF and NPS program integration more challenging.
Because the CWSRF provides loans that must be repaid, it can be difficult to find an eligible
assistance recipient that has a sufficient repayment source. Some CWSRF programs have led
the way with creative delivery mechanisms for NPS projects that include sponsorship programs,
conduit lending (e.g., pass-through and linked deposit loans), and watershed and interstate
lending, among others. Many CWSRF programs have begun to offer loan forgiveness, grant
funding for technical assistance and planning and design, and reduced interest rates (well
below the current market rate) in deliberate efforts to expand into the NPS arena. Section 3
provides more information on creating a successful coordinated financing approach and how to
communicate these opportunities to stakeholders.

States increase the likelihood of long-term success when they develop strategies that
strengthen the shared goals and outcomes of both the CWSRF program and the NPS
management program. Although each state will have its own strategic approach, experience
has shown that three key elements are consistently part of a winning strategy: (1) establishing
mutual understanding and common goals, (2) engaging key stakeholders, and (3) creating an
operational plan for achieving the goals. Section 4 provides more information on customizing
and implementing a successful strategy.

The appendices present supplemental information, including a list of CWSRF eligibilities
(Appendix A); a list of potential alternative CWSRF loan repayment sources (Appendix B); case
studies from multiple states (Appendix C); fact sheets describing EPA's Drinking Water State
Revolving Fund (DWSRF) set-asides available to support source water protection, which is a
vital component of many state NPS programs because of its value in preventing NPS impacts
(Appendix D); and a list of information sources for national and state NPS and CWSRF programs
(Appendix E).

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CWSRF Best Practices Guide for Financing Nonpoint Source Solutions I Building Successful Project Funding Partnerships

2. Elements of Success: Best Practices that
Expand CWSRF Funding for NPS Projects

To expand the use of CWSRF financing to support more NPS projects, states are encouraged
to explore collaboration between their CWSRF and NPS programs. After developing mutual
goals and a shared vision, these programs can work to identify and overcome obstacles that
limit financing for NPS projects. The programs can seek broad support and participation from
key outside stakeholders, which will lay the foundation for the use of creative NPS financing
mechanisms through partnerships.

2.1 Develop Partnership Between CWSRF and NPS
Programs

A successful working partnership between a state's CWSRF program and its NPS program is
built on establishing shared goals, a strategic approach for achieving these goals, and mutually
agreed-upon procedures embraced by state managers and staff. For optimal functionality,

good communication and flexibility (particularly in the early
stages of a new partnership) is key.

CWSRF Intended Use Plan

An Intended Use Plan, or IUP, is
a document developed by states
each year describing how their
CWSRF program expects to use
its funds over the course of the
fiscal year. It is submitted to EPA
annually when the state applies
for its capitalization grant and
is statutorily required for the
life of the program, even when
there is no capitalization grant.
The IUP spells out program goals
and operations, describes how
CWSRF funds will be used, and
demonstrates compliance with
CWSRF regulations to EPA and
the public. The IUP includes a
ranked list of all projects that
applied for CWSRF that year,
otherwise known as the Project
Priority List. The IUP also
captures the projects that CWSRF
programs anticipate funding; the
Annual Report (also required)
describes how CWSRF program
funds were actually used.

Establish Good Communication

Good communication relies on transparency, frequency and
reliability. Openly sharing perspectives on program priorities
can be the start of a solid foundation for a program
partnership. Early in the process, states may wish to identify
and discuss:

•	The programmatic and institutional drivers that influence
funding decisions and criteria.

•	Both programs' perceived limitations and challenges.

•	The funding and staffing capacity available to undertake
NPS-related activities, which differ from the type of
projects traditionally funded under CWSRF (i.e., solutions
to wastewater discharge from point sources).

In addition, by gathering feedback from public stakeholder
groups who use either the §319 or the CWSRF program,
states might find new, more effective ways for the programs
to communicate and coordinate financing efforts for critical
water quality projects.

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CWSRF Best Practices Guide for Financing Nonpoint Source Solutions I Building Successful Project Funding Partnerships

Align Water Quality Goals and Priorities

NPS pollution is widespread and comes from diverse sources such as agriculture, urban runoff,
hydromodification, timber harvesting, failing septic systems, legacy mines, boating and marina
operations, and leaking storage tanks. Each state defines NPS priorities in its five-year NPS
management program plan, which must be kept up to date per EPA's CWA §319 program grant
guidelines. These 5-year plans set annual outcome-based milestones that address the state's
highest-level NPS priorities. When a CWSRF program is preparing its Intended Use Plan (IUP;
see inset), it is helpful to consider the state's NPS management program plan so it can better
align its IUP with the state's most pressing NPS water quality needs.

As part of the planning process, it can be helpful for state CWSRF staff to either review the
state's current CWA §303(d) list of impaired waters, existing TMDLs, and §305(b) report on
water quality, or work with those of are familiar with those resources, to see how they can
inform the project evaluation criteria used by each program. For most states, half or more of
§319 grant funds go toward on-the-ground projects that help implement watershed-based
plans that include the nine elements specified by the EPA in its §319 grant guidelines. Typically,
these projects go toward installing strategically placed BMPs in the state's highest priority NPS-
impaired watersheds.

In the CWSRF program, any project that receives funds must be identified on the Project Priority
List as part of the IUP. Some CWSRF programs have what is known as an integrated project
priority list, and they score and rank point source projects alongside NPS projects. It is becoming
more common for CWSRFs to have integrated project priority lists. In such cases, NPS and
CWSRF program staff can work together to ensure alignment of their respective procedures for
evaluating and prioritizing projects. For states without an integrated list, NPS projects do not
need to be scored and ranked; instead, they are often identified in a separate list or appendix in
the IUP.

Part of effective collaboration includes discussing short- and long-term state water quality
goals and how the two programs' efforts can complement each other. Staff from the state's
NPS and CWSRF programs may wish to engage in a joint annual planning exercise to coordinate
efforts. Conducting a joint planning exercise will allow the programs to meet the evolving needs
associated with NPS pollution impacts and to make adjustments to address priorities. Questions
that program staff might discuss include:

•	Are the programs targeting the correct issues and connecting with the appropriate
assistance recipients and stakeholders?

•	Is there overlap in project types that present opportunities for collaborative or innovative
funding?

•	Are there potential priority projects that exceed the funding available through the CWA
§319 program or other state funding sources?

•	Could a state's CWSRF program make changes to its evaluation criteria or administrative
rules to facilitate the financing of priority NPS efforts?

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CWSRF Best Practices Guide for Financing Nonpoint Source Solutions I Building Successful Project Funding Partnerships

The answers to these types of questions will help programs best meet the state's highest-
priority water quality goals by encouraging broader thinking about potential solutions that
capitalize on the resources contributed by each program.

Expanding partnering efforts and pursuing project implementation will affect staff resources in
both the NPS and CWSRF programs. States may wish to assess the need for staff support to grow
the program partnership while covering the base operations of both programs. Several state
CWSRF programs have stressed the importance of having staff dedicated solely to leading NPS
work and controlling internal and external communication about the program. For example, the
Ohio CWSRF has had up to four full-time employees dedicated to its NPS sponsorship program.
When seeking opportunities to collaborate, state programs may want to start small, then build
staffing and the NPS project portfolio over time as experience grows.

2.2 Identify and Overcome Barriers to Program
Alignment

Because the CWSRF is federally authorized to finance water pollution control projects, including
those that implement the state's §319 program, these two programs have many opportunities
to work together. State programs are encouraged to identify and overcome both perceived and
actual limitations and barriers to aligning programs and incorporating CWSRF financing into
NPS projects. Common barriers to using CWSRF for NPS projects include uncertainty about loan
repayment sources, concerns about higher administrative burdens associated with NPS projects,
and state-level regulations or restrictions that limit financing for NPS projects.

Barriers to Using CWSRF
Financing For NPS Projects: a
State-Level Perspective

State attendees at CWSRF focus
group meetings in Florida and
Oklahoma in 2017-2018 reported
facing challenges when exploring
the use of CWSRF financing for NPS
projects. Some of these included
the paperwork and administrative
burdens associated with federal
funding, confusion about eligibility
of different project types, and
uncertainty about the type of
assistance recipients who are eligible
to apply for and receive CWSRF
financing for NPS projects; these are
topics this guide aims to clarify.

Barrier: Identifying Loan Repayment
Source

The CWSRF is first and foremost a loan program that
reimburses borrowers on a cost-incurred basis; it
does not generally provide a lump sum of cash up
front. CWSRF programs have traditionally lent to
municipalities and other local government entities,
which have a steady revenue stream generated by tax
or utility rate revenues that they use to repay CWSRF
loans. Therefore, finding a loan repayment source
can sometimes be challenging for borrowers such as
nonprofit groups that want to implement NPS projects
but do not have a steady revenue stream available.
Fortunately, CWSRF programs have identified a variety of
creative financing mechanisms and repayment sources
to help non-traditional borrowers successfully navigate
these challenges for NPS projects (see Section 3-3 and
Appendix B for more details).

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CWSRF Best Practices Guide for Financing Nonpoint Source Solutions I Building Successful Project Funding Partnerships

Barrier: Administrative Challenges

Financing many small NPS projects versus fewer large gray infrastructure projects is often
viewed as more challenging from an administrative standpoint. It may be the case that
state CWSRF programs struggle to allocate the resources to hire staff dedicated to exploring
financing options and establishing new partnerships. Fortunately, support is available from
EPA and others such as state NPS program staff. (See Appendix E for a complete list of CWSRF
resources.) Several CWSRF programs have found that dedicating staff solely to leading NPS work
and program collaboration is important for success. Establishing accountability structures—
clearly articulating staff roles and responsibilities—can ease staff's administrative burden. As of
Fiscal Year 2020, Minnesota's AgBMP Loan Program, a subaccount of CWSRF funds, had made
17,130 loans ($290 million for NPS projects) with one to two full-time employee positions
since the program's inception in 1995. Minnesota has simplified and streamlined the way it
administers its CWSRF AgBMP program, and it has made template documents available for
other states to adopt similar programs, if desired. Refer to the Resources list in Appendix E and
Success Story #5 in Appendix C for more information.

CWSRF programs are sometimes concerned about obligating program funds in a timely manner.
With careful planning, good cash flow management practices, and effective communication,
CWSRF programs can achieve timely funds obligation while financing NPS projects that address
the state's water quality priorities (see Iowa example in Appendix C). Both the CWSRF and NPS
programs share the primary driver of restoring and protecting water quality, and both programs
require timely and expeditious use of their program funds. For instance, CWSRF emphasizes
the need to disburse CWSRF dollars efficiently and quickly to projects that are actively
incurring costs. Some believe that this is best achieved by making larger point source loans
to municipalities rather than many smaller loans to NPS projects. However, many states have
demonstrated that this does not need to be the case.

Barrier: Overcoming Obstacles to Using CWSRF for NPS Projects

Another common obstacle is that many state CWSRF programs do not offer financing for the
full range of NPS activities that are eligible under the federal statute. Part of successfully
aligning water quality goals includes identifying opportunities to expand financing to different
project types and developing strategies to address any potential state or local regulatory
barriers. For example, states may have regulatory limitations on who is eligible to receive a loan,
which can result in Community Development Financial Institutions (CDFIs) and other nonprofit
organizations not being eligible borrowers. (See Success Story #9 in Appendix C to learn how
Washington State worked with a CDFI to fix failing septic systems with CWSRF.) Making changes
to statutes or regulations can be a lengthy process, but this investment is often essential for
states that face such legal restrictions.

In such circumstances, NPS and CWSRF program staff can brainstorm options for overcoming
barriers or consult with other states that have faced and addressed similar obstacles. It could
also be useful to enlist the help of an independent third party (e.g., a consultant) to assist with
a comprehensive assessment of state statutes, administrative rules, policies and ordinances. An

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Overcoming Barriers

Q&A with Tom Harcarik, Ohio Division of
Environmental and Financial Assistance,

Water Resource Restoration Sponsor
Program (WRRSP) Team

Ohio's SRF program funds about $15 million per year in NPS projects.

What are the major challenges the program has faced and how did
you overcome them?

"A major challenge was—and still is—trying to explain the
mechanics of how the program works to implementers, sponsors
and other interested parties. Developing a scoring system to
accurately reflect the competitive merits of a wide variety of
worthy projects has also been an ongoing challenge, as has
determining which projects are actually ready to proceed when
reviewing nominations. Streams and wetlands in urban areas usually do not score as well
simply because it is harder to address all potential sources of impairment in these areas.

The cost of preparing a nomination can be high because we require appraisals and title
searches to understand what types of encumbrances could affect the property. Although
not yet required, we prioritize nominations that include biological assessments of aquatic
resources over those with only semi-quantitative habitat assessments. The cost of preparing
a nomination may be a barrier for some smaller organizations, especially when there is no
guarantee of receiving funding.

[It's important to] keep in mind that the amount of funds available for such a program
is a function of the size of your individual SRF program. A smaller SRF program will not
be able to devote $15 million per year [as Ohio has (see Appendix C).] Work within your
budgetary constraints to ensure the long-term viability of your SRF fund."

independent assessment could reveal unknown obstacles that are blocking the use of CWSRF for
innovative water quality improvement projects.

Even minor changes can facilitate the use of CWSRF for NPS projects. For example, many CWSRF
programs that score and rank NPS projects are moving their priority scoring criteria out of
state-level regulations and incorporating them as part of the annual IUP. This allows for greater
flexibility to adjust to changing conditions and address new NPS impacts without needing a rule
change. (For more information about the annual IUP, see Section 2.1.)

Several states have successfully identified and overcome regulatory barriers. For example, in
2018 Vermont made state-level regulatory changes to its CWSRF programs to lift restrictions
on eligibilities that had prevented substantial NPS financing assistance. To do this, the state
worked closely with staff from Vermont's NPS program to ensure that proposed changes
accurately captured ways to address the most critical impacts to water quality impairments. For
more information see the Vermont success story in Appendix C for details.

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CWSRF Best Practices Guide for Financing Nonpoint Source Solutions I Building Successful Project Funding Partnerships

2.3 Establish Partnerships with Outside Stakeholders

Numerous federal, state and local programs across the country work to control NPS pollution
and can provide additional resources. For example, CWSRF funds can be leveraged with
assistance from federal partners such as the U.S. Department of Agriculture's (USDA's) Natural
Resources Conservation Service (NRCS), Rural Development, Farm Service Agency and Forest
Service. Many other organizations and groups, including state and local agencies; tribal
governments; and local watershed groups, community groups and nonprofit organizations share
the same goals. Therefore, it's useful for state NPS and CWSRF managers to work together
to build support for NPS projects by casting a broad net in their communities. For any given
project, the composition of partners will vary depending on the type of NPS project funded.

Fortunately, state CWSRF and NPS programs each have their own network of partners
and contacts to draw from, and the programs could share in the outreach effort to their
respective partners. They could also seek out prospective applicants or sponsors that neither
program regularly interfaces with, such as educational institutions, associations, and other
nongovernmental organizations that could help to implement NPS projects.

For example, the Vermont CWSRF program did not have pre-existing relationships with
nonprofit groups. However, the Vermont Department of Environmental Conservation's
Ecosystem Restoration grant program had been administering §319 grants for NPS projects for
a few years and had developed relationships with several nonprofit groups. The NPS program
staff introduced key nonprofit contacts to CWSRF staff. The nonprofit groups were enthusiastic
supporters of the state's efforts to develop a new sponsorship program, and several of them
testified in the legislative hearings to help pass a new bill (Act 185) to allow the CWSRF to
pursue NPS projects.

In other states, such as Oregon, state and local government agencies partnered to address key
water quality priorities. After two serious floods damaged irrigation infrastructure, the Oregon
NPS program partnered with the Oregon CWSRF program and the Farmers Irrigation District to
secure $30.9 million in CWSRF loans. The partners used the funds to replace damaged, aging
infrastructure with underground pipes, which reduced NPS pollution and increased agricultural
yields (see the Oregon case study in Appendix C for more details).

The California and Maine CWSRF programs have supported projects that showcase effective
large-scale partnerships, including the Association of Bay Area Governments ($3.5 million
in CWSRF funds) in California and the Long Creek Watershed Restoration Partnership ($2.1
million in CWSRF funds) in Maine. Figures 2-1 and 2-2 show that each project has dozens of
stakeholders from various sectors, including private property and homeowners, municipal and
county governments, nonprofit watershed groups, and energy utilities working together to
attain shared water quality improvement goals. This kind of project-level integration requires a
strategic approach that is inclusive, engages partners early and often, and is incorporated in the
annual planning and budgeting activities of partner programs.

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CWSRF Best Practices Guide for Financing Nonpoint Source Solutions I Building Successful Project Funding Partnerships

California's Successful Intermunicipal Engagement

CWSRF Assistance

Provided -
$3.5 Million for:

- TMDL
implementation

-	Green streets

-	NPS pollution

reduction

Association of

Bay Area
Governments

-101 cities
and towns

- 9 counties

O

Joint Powers
Agreements

-Voluntary
membership

- 4 committees

-	38 board members

-	Limited statutory

authority

w

The California CWSRF has provided four loans totaling $3.5 million to the Association of Bay
Area Governments (ABAG), a regional planning organization formed by a Joint Powers Authority
that coordinates nine counties and 101 cities and towns in the San Francisco Bay Region. ABAG has
undertaken a variety of projects to reduce NPS pollution in the San Francisco Bay Estuary.

Figure 2-1. Effective Project Stakeholder Integration in Action: California8

In Kansas, a partnership between the CWSRF and NPS programs, a local government and a
nonprofit organization received EPA's 2020 George F. Ames Performance and Innovation
in the SRF Creating Environmental Success (PISCES) recognition for Excellence in System
Partnerships for their Cover Crop Interseeding Project. This project brought together the Kansas
NPS and CWSRF programs, the City of Wetmore, and Glacial Hills Resource Conservation and
Development (RC&D) Region, Inc., a nonprofit organization in Nemaha County. This coalition
worked together to establish a new cover crop equipment cost-share program to implement
agricultural BMPs that promote water efficiency and conservation, reduce nutrient and sediment
runoff, and improve water quality. The Glacial Hills RC&D is continuing to expand its reach to
more local agricultural service providers in the region with the hopes that the program might
one day expand statewide.

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CWSRF Best Practices Guide for Financing Nonpoint Source Solutions I Building Successful Project Funding Partnerships

Maine CWSRF Supports Watershed Restoration

- 83 private
landowners who
own property
with > 1 acre of
impervious cover

• • •

- Portland
- South Portland
- Scarborough
- Westbrook

-	Maine
Department of
Transportation

-	Maine
Turnpike
Authority

- EcoMaine,
a regional
waste-to-energy
facility

~»
W

It 1

pAr^i

r

BJrLB









TiiiiT



Private,





Quasi-

Commercial,



Government

Municipal

and Retail

Municipalities

Agencies

Entities

The Long Creek Restoration Project received $2.1 million in American Recovery and Reinvestment
Act loan funding from Maine's CWSRF to implement recommendations of the Long Creek Watershed
Management Plan. The project includes installing green stormwater components such as vegetative
bioswales and soil media filters to reduce pollutant loadings in Casco Bay. The successful implementation
of this project relies upon the critical participation, collaboration and support of a variety of stakeholders.

Figure 2-2. Effective Project Stakeholder Integration in Action: Maine9

The Iowa CWSRF program built strong partnerships with the Iowa Department of Agriculture
and Land Stewardship Urban Conservation Program, state §319 basin coordinators, soil and
water conservation districts, and other local partners to help applicants conduct watershed
assessments and identify appropriate NPS projects for sponsored project applications. Iowa
CWSRF staff regularly communicate with these partners and with prospective assistance
recipients. Iowa's use of effective CWSRF financing of NPS projects with the CWSRF serves as a
model for others (see the Iowa case study in Appendix C for more details).

To communicate effectively with stakeholders throughout the population, program staff can
conduct workshops, face-to-face meetings and online outreach. Maintaining a detailed catalog
of comments, questions and feedback gathered from different stakeholder groups during this
time will help program staff identify which proposed funding features (see section 3) received
the most interest and support.

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CWSRF Best Practices Guide for Financing Nonpoint Source Solutions I Building Successful Project Funding Partnerships

3. Elements of a Successful Coordinated
Financing Approach

Successfully crafting a CWSRF financial assistance package that includes both outside grants
(§319 and other) and CWSRF loan funds can be challenging, largely because of (1) the financial
capacity of the assistance recipient, including the ability to pass CWSRF credit review criteria,
and (2) the ability of the assistance recipient to repay the loan portion of the package. This can
be one of the most critical hurdles to overcome. Effective collaboration between the §319 and
CWSRF programs is essential during the early stages of project development to properly guide
potential assistance recipients toward a financing package that meets their needs and capacity.

Note that the loan terms offered by the CWSRF are unparalleled in the marketplace, with an
average interest rate of 1.2 percent (as of 2020) and repayment terms of up to 30 years or
longer in some states (Figure 3-1). The low rate can serve as an incentive to participate. For
example, the Georgia CWSRF program offers borrowers an interest rate 1% below the standard
rate for land, energy and water conservation projects. Similarly, the Maine CWSRF program
offers a 2% interest rate subsidy to support adoption of BMPs by Maine-based logging
companies. (See Appendix C for more details on the Georgia and Maine CWSRF programs.)

SRF Interest Rates vs. Market Rates

Typical SRF interest rates have been about half the market rate

*Market rate as measured by the Bond Buyer 20-Bond GO Index.

Figure 3-1. CWSRF interest rates compared to market rates (1994-2020).

3. Elements of a Successful Coordinated Financing Approach

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CWSRF Best Practices Guide for Financing Nonpoint Source Solutions I Building Successful Project Funding Partnerships

3.1 Options for Co-Funding NPS Projects

Many partnerships offer co-funding opportunities to leverage CWSRF, such as using CWSRF
loan funds to help satisfy match requirements for grants. Project applicants who are more
familiar with pursuing grants should be aware that, in most cases, CWSRF funds may be used as
match for §319 grants. CWSRF funds that have already been loaned out for a project and repaid
to the state are colloquially known as recycled funds. Such recycled funds belong to the state,
and as long as they are used to finance NPS-eligible activities, they may be used to meet the
nonfederal match requirement for a state's §319 grant.

The §319 grant match requirement can be financed as part of the total CWSRF loan amount
that is to be repaid over time. Furthermore, as noted above, the CWSRF program offers below-
market financing terms as a baseline, and assistance recipients may qualify for interest-
free terms or loan forgiveness. This represents a significant cost savings over the life of the
loan and is equivalent to receiving a partial grant (Table 3-1). These options illustrate why
successful collaboration between these two programs hinges on how well the staff understand
the opportunities and limitations they respectively offer—and how well they communicate this
information to each other.

Table 3-1. Market rates and grant equivalence in CWSRF*

*Example: If a borrower had a watershed restoration project for $1 million and chose to fund the project
with a CWSRF loan at a 0% interest rate for a 20-year term, the project would cost 18% less than if the
borrower financed the project using traditional commercial lending products at a market rate of 2%. In
this hypothetical example, the interest rate savings realized from taking on a CWSRF loan is functionally
equivalent to receiving a grant for $180,000 with an $820,000 loan at the market rate.	

Other successful co-funding partnerships with the CWSRF include various USDA programs
and EPA's Water Infrastructure Finance and Innovation Act (WIFIA) program, which can
accommodate diverse project financing needs. USDA Rural Development has a long history of

3. Elements of a Successful Coordinated Financing Approach

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CWSRF Best Practices Guide for Financing Nonpoint Source Solutions I Building Successful Project Funding Partnerships

co-funding with the CWSRF program and offers financing solutions for rural community needs.
The USDA Natural Resources Conservation Service offers multiple programs (e.g., Environmental
Quality Incentives Program, Conservation Stewardship Program) that often support elements
of collaborative §3i9-funded NPS projects. Though WIFIA typically targets wastewater and
drinking water infrastructure projects, the program has indicated interest in supporting, and
may be leveraged for, watershed-scale NPS projects (although no NPS project activities have
been funded by WIFIA to date). WIFIA may provide federal credit assistance in the form of
loans or loan guarantees to eligible entities (e.g., corporations; partnerships; federal, state,
local governmental entities) to finance all types of projects eligible under the CWSRF, including
NPS projects and decentralized wastewater treatment systems. WIFIA can finance up to 49
percent of the cost of a project, with a minimum project cost of $20 million in financing for
large communities and $5 million for small communities with a population of 25,000 or less.
Both WIFIA and the CWSRF programs are robustly capitalized and can provide millions of dollars
in financial assistance to NPS efforts. Similarly, the DWSRF, which provides set-aside funding
for source water protection efforts, can also serve as a NPS project co-funding source (see
Appendix D for more information).

3.2 Successful Financing Mechanisms

Many CWSRF programs have devised innovative alternative financing mechanisms to support
NPS projects. Some of the most effective alternative financing mechanisms include sponsorship
programs and various forms of conduit lending (e.g., pass-through lending and linked deposit
loans), which have been used successfully by numerous state CWSRF programs. In a sponsorship
program, a municipality receives a CWSRF loan with a reduced interest rate as compensation
for also taking on (i.e., sponsoring) the NPS project, thus allowing municipalities to address
NPS priorities without placing a repayment responsibility on the entity implementing the
NPS project. Conduit lending allows CWSRF programs that are limited to lending only to public
entities (e.g., municipalities) to provide financing to nonprofit organizations, watershed groups or
other private entities using arrangements that pass funds through an eligible CWSRF borrower.

Each of these mechanisms has been used for project types addressing NPS pollution. The key
is understanding which financing mechanism will best fit the projects and prospective partners
in your state. For example, agricultural BMPs have been funded through sponsorship in Ohio
and Iowa, through a linked deposit in Ohio and Arkansas, and via pass-through loans in
Minnesota and Washington. These mechanisms, and case studies for each, are featured in the
EPA publication, Financing Options for Nontraditional Eligibilities in the Clean Water State Revolving
Fund Program.10 Summaries of these and other case studies are presented in Appendix C. Figure
3-2 explains each approach and shows some places where they have been applied. Figure 3-3
provides more specific information on how each approach works. Figure 3-4 describes examples
of three CWSRF programs that are using alternative financing mechanisms to provide significant
NPS project assistance.

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CWSRF Best Practices Guide for Financing Nonpoint Source Solutions I Building Successful Project Funding Partnerships

A National Picture of Conduit Lending
and Sponsorship in the CWSRF Program

(as of March 2021)

t

Pass-Through

CWSRF program makes a loan
to another government agency
or to a municipality that then
passes the money to private
borrowers as loans for NPS
control projects.

Actively used for septic
system repair/replacement,
agricultural BMP project,
stormwater runoff controls,
riparian restoration, and
acid mine drainage overflow
prevention.

f

Linked Deposit

CWSRF program purchases
a reduced-rate certificate of
deposit (CD) from a private
financial institution. The
financial institution then loans
out the deposited funds (at
a slightly lower interest rate)
to individuals for small-scale
water quality projects.

Many states have used linked
deposits to successfully fund
projects such as septic system
replacements and agricultural
or silvicultural BMPs.

f

Sponsorship

Pairs a traditional publicly
owned treatment works
(POTW) project with an NPS
project. A municipality receives
a CWSRF loan with a reduced
interest rate as compensation
for also taking on (i.e.,
sponsoring) the NPS project,
thus allowing municipalities
to address pressing watershed
restoration or protection
priorities without placing a
repayment responsibility on
NPS projects.

Sponsorship reinforces
the idea that wastewater
treatment plant improvements
and water resource restoration
projects are complementary
efforts.

Figure 3-2. CWSRF conduit lending (e.g., pass-through and linked deposit loans) and sponsorship financing
mechanisms used across the country. (Note: This list is not inclusive. Not all states use these
mechanisms every year.)

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CWSRF Best Practices Guide for Financing Nonpoint Source Solutions I Building Successful Project Funding Partnerships

A Comparison of Lending Mechanisms
in the CWSRF Program

Sponsorship

Clean Water

State Revolving Fund

1.	Utility and NPS
implementing partner enter
into Sponsorship Agreement
independently.

2.	CWSRF provides loan to a
utility for a point source
and a smaller NPS project.
Interest rate is reduced until
repayment is equivalent
with that of just the cost of
the point source project.

3.	Utility provides funding for
the NPS/restoration project.

4.	Utility repays loan to the
CWSRF.

Pass-Through

Clean Water

State Revolving Fund

1.	CWSRF makes a direct low-
interest loan to a public
entity (e.g., Spokane County
Conservation District).

2.	The District makes loans
to farmers for no-till
equipment, direct seed
drills and tools for residue
management.

3.	Farmer repays loan to the
District.

4.	The District uses the
proceeds to repay its loan to
the CWSRF.

Linked Deposit

Clean Water

State Revolving Fund



T

1.	CWSRF invests in reduced-
interest CD (up to 5
percentage points below
market rate).

2.	Bank makes low-
interest loan to farmer or
homeowner (typically up to
5 percentage points below
bank's standard rate).

3.	Farmer repays loan to the
bank.

4.	CWSRF receives low-interest
return on CD investment
(investment is guaranteed
regardless of loan
repayment).

Figure 3-3. Comparisons of CWSRF conduit lending and sponsorship financing mechanisms.

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CWSRF Best Practices Guide for Financing Nonpoint Source Solutions I Building Successful Project Funding Partnerships

States That Fund NPS Work with CWSRF: Leading by Example

Ohio	

Water Resource Restoration

Sponsorship Program

-	Implement comprehensive
local water plans, TMDL
implementation plans, and
other environmental plans

-	CWSRF lends to local
governments, conservation
districts and financial
institutions

•	Farmers

•	Rural landowners

•	Agricultural supply
businesses

Iowa	

Water Resources Restoration

Sponsored Projects

- Allows CWSRF borrower to
apply for a locally directed,
watershed-based, NPS water
quality improvement project.

•	$79 million since 2013

•	$10 million allocated for
sponsorship each fiscal year

Minnesota	

The Agriculture Best
Management Practices
Pass-Through Loan Program

-	Comprehensive local water
plans

-	TMDL implementation

-	Erosion control

-	Animal waste management

Linked Deposit Program for
Private Borrowers

- Loans made to private
organizations or individual
homeowners for NPS projects

•	Agriculture BMPs

•	Stormwater runoff controls

•	Streambank restoration

Linked Deposit Program

- For private borrowers for
the Onsite Wastewater
Assistance Program, the Local
Water Protection Program
(agricultural BMPs), the
Livestock Water Quality
Facilities Program, and
stormwater BMPs

Clean Water Partnership
Direct and Pass-Through
Loans

-	Nonpoint source BMPs

-	Sedimentation basins
and detention ponds

-	Replace failing septic systems

-	Lakeshore and streambank
erosion controls

•$480 Million

Household Sewage

Treatment System Program

-	CWSRF offers principal
forgiveness to participating
county health departments to
assist individual households
with limited financial means
to repair or replace failing
septic systems. Funding
includes:

•	Soil tests

•	Design

•	Permits

•	Installation

$70 million in total
assistance provided

• $295Million

Loan Participation for

Private Borrowers

-	For other eligible categories
that don't fit under linked
deposits (i.e., habitat
restoration, streambank
restoration)

General NPS Program

-	To public entities for green
infrastructure, landfill closure,
stream restoration, etc.

-	$3i3Million

Tourism Pass-Through

Loan Program

-	Loans to tourism-related
businesses to improve and
replace septic systems

$205 million in total	$123 million in total

assistance provided	assistance provided

Figure 3-4. Three states providing significant NPS project assistance through CWSRF."

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CWSRF Best Practices Guide for Financing Nonpoint Source Solutions I Building Successful Project Funding Partnerships

Alternative financing mechanisms are particularly useful for NPS projects because they benefit
from the relationships that exist between conduit organizations (e.g., local banks, county health
departments, communities) and potential NPS project implementers. For partners who wouldn't
otherwise qualify for a loan and wouldn't be inclined to seek CWSRF program assistance, these
financing mechanisms can provide access to robust and reliable sources of financing. Note that
if your programs seek to overcome eligibility restrictions by introducing alternative financing
mechanisms such as sponsorship or linked deposit loans, you might need to engage the state
Attorney General's office, as well as the appropriate state government financing division, to
identify any specific implementation requirements.

3.3	Tapping Potential Loan Repayment Sources

Identifying a source of loan repayment is typically one of the most challenging factors in
using CWSRF financing for NPS projects. Traditional CWSRF assistance recipients such as
municipalities and other political subdivisions use their general taxing authority and utility
user rates as a stable source of revenue to repay CWSRF loans. Many applicants taking on NPS
projects do not have these types of revenue resources readily available. Although nonprofit
groups and other nongovernmental organizations rely on dues, membership fees and donations
to help secure revenue, these might not be enough to allow them to pursue non-grant
financing. Plus, NPS projects often do not generate direct income streams. Although this
may seem like a formidable obstacle, CWSRF programs across the country have worked with
stakeholders to find creative forms of loan repayment that could be combined with §319 grant
funding and conduit lending mechanisms.

Table 3-2 provides examples of some of the creative loan repayment strategies that states
may use to support both CWSRF and NPS projects (see Appendix B for a more complete list).
EPA's report, Funding Nonpoint Source Activities with the CWSRF, offers more information on these
repayment strategies.12

3.4	Watch for New Repayment Opportunities

To find creative solutions for loan repayment, CWSRF and NPS programs can look beyond
previously tapped funding sources. For example, the Colorado State Lottery commits most of
its yearly proceeds to various conservation, habitat protection and open space projects across
Colorado. The Conservation Trust Fund, Colorado Parks and Wildlife, and Great Outdoors
Colorado (GOCO) have used lottery proceeds to protect over 1,000 miles of river and over one
million acres of land.13 In 2019, GOCO received $68.5 million from lottery ticket sales to support
grant funding for eligible projects, including agricultural land protection, riparian corridor land
preservation and habitat conservation. Since its inception in 1992, GOCO has used more than
$1.2 billion in lottery proceeds to provide grant funding to over 5,300 projects throughout
Colorado.14 This is an example of an alternative financing source that might offer an opportunity
for co-funding NPS projects and may also be used to meet §319 grant match requirements.

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CWSRF Best Practices Guide for Financing Nonpoint Source Solutions I Building Successful Project Funding Partnerships

Table 3-2. Examples of creative loan repayment strategies used by states to support both
CWSRF and NPS projects. See Appendix B for a more comprehensive list.

Revenue source

State CWSRF example

Membership fees

The Ohio CWSRF awarded a $110,000 loan to The Nature Conservancy to
purchase a conservation easement to protect and restore a threatened section
of Brush Creek. The nonprofit repaid the loan from their general operating
account, which includes membership dues and fundraising assets.

Carbon credits

The California CWSRF made an $18.75 million loan at 0% interest to the
Yurok Tribe to acquire 22,237 acres of forestland to protect water quality and
beneficial uses. Carbon credits generated from sustainable harvesting practices
is providing a partial repayment source. The tribe was required to provide a
contract for the sale of carbon reserves as a condition to receive funding.

Sales revenues

Revenue from the sale of timber on the parcel is also providing a partial
repayment source in the above project financed by the California CWSRF with
a loan to the Yurok Tribe for acquiring forestland to protect water quality and
beneficial uses.

Equipment rentals

Washington's CWSRF provides pass-through funding via the Spokane County
Conservation District (CD) for direct seed application fees, equipment purchase
or equipment rental. A CD could also use a CWSRF loan to purchase specialized
equipment to rent out to individual farmers, and then they could use the rental
income as a repayment source for the loan.

Sale of water rights

The Oregon CWSRF provided financing to Farmers Irrigation District (FID) to
convert unlined irrigation canals to a piped, pressurized system. The project
saved so much water that FID was able to sell excess water rights to create
permanent in-stream habitat for endangered fish species.

Watershed protection
fees/taxes

Raleigh, North Carolina, water customers pay an on-bill watershed protection
fee that is used to conserve critical land in the watershed to protect drinking
water sources and reduce treatment costs. The watershed protection fee is 10
cents per thousand gallons of water used (approximately 45 cents per month
per customer) and is expected to generate $1.8 million per year.

Recreational or
license fees

Recreational fees such as boating permits, fishing licenses or park entrance fees
could provide a repayment source for CWSRF-financed projects that protect
water quality in recreational areas.

Property taxes

The Massachusetts CWSRF Community Septic Management Program uses
a "betterment agreement" that channels loans through a municipality to
individuals for septic system improvements and allows the municipality to
ensure that the loan is repaid as part of a property tax bill. The municipality
can place a municipal lien on property if the homeowner defaults on the loan.

Summit County, Colorado, uses property tax to capitalize the county's fund for
the acquisition and preservation of open space, natural areas, as well as to fund
wildfire mitigation activities (although these have not been used as a CWSRF
repayment source to date).

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CWSRF Best Practices Guide for Financing Nonpoint Source Solutions I Building Successful Project Funding Partnerships

Example Alternative Financing
Source: Colorado State Lottery Sales

Lottery proceeds were funneled through
GOCO and the Colorado CWSRF program—
providing $11 million for abandoned mine site
remediation and runoff treatment. The project
included watershed open space land purchase
and remediation of a Superfund site to address
elevated levels of cadmium, copper and zinc
in the French Gulch section of the Blue River,
which was listed on the §303(d) impaired
waters list for aquatic life. Funds included:

-	$4.-5 million CWSRF loan to Summit County

-	$550,000 GOCO grant

-	$4.50,000 Summit County open space
reserves

-	$5.5 million paid by Summit County

Other funding sources that states have used for
loan repayment include recreation licenses or
fees, rental fees for specialized farm equipment
(e.g., cover crop interseeders), and nonprofit
organization membership dues or other revenue.
Staying informed about state legislative changes
is another way to find and secure NPS project
financing. For example, California passed
a law in 2017 that gives source watershed
maintenance and restoration projects access
to the same forms of financing that traditional
water utility infrastructure has (e.g., use of
revenue bonds, which do not require taxing
authority). Knowing about this type of new law
can guide partnership building and help identify
financing sources for grant match or CWSRF
loan repayment purposes.

3.5 Emphasize Incentives to Encourage Participation

Coordinating a financing approach that supports priority NPS projects can benefit a
community's economic health as well as its environmental quality. Emphasizing the measurable
benefits realized from these projects and communicating them to a wide audience can increase
participation and support.

Highlight Cost Savings and Project Co-Benefits

While the CWSRF program's low interest rates and loan forgiveness are attractive incentives,
perhaps the best incentive for investing in water quality projects is the potential for long-term
cost savings that can be realized at the state, community and household levels. Encouraging
assistance recipients to consider a loan to address water quality needs can be challenging.
In Arizona, a Forest Thinning and Wildfire Restoration pilot project (see box in Section 4)
was successful because project partners effectively communicated how investments in forest
thinning and restoration can improve property values, create jobs, lower healthcare costs,
and reduce the impact of NPS pollution on treatment costs for household drinking water.
Illustrating the financial benefits of NPS projects in this way can resonate with a range of
different stakeholder interests. Similarly, tying NPS projects to the co-benefits of mitigating the
impact of natural hazards (e.g., from potential floods or wildfires) where applicable, can attract
different partners and investment. Describing the project in terms that resonate with a range of
stakeholders will make it more attractive and compelling.

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CWSRF Best Practices Guide for Financing Nonpoint Source Solutions I Building Successful Project Funding Partnerships

Establishing Successful Funding Mechanisms

Q&A with John True, Maine Department of
Environmental Protection, CWSRF Program
Manager

How was Maine's Direct Link program* initiated?

"We based the program on Ohio's silvicultural loan program—
folks there were very gracious and sent a lot of documents. Maine
Municipal Bond Bank (MMBB) led the effort, and the Finance
Authority of Maine (FAME) took the lead in coordinating with banks
and private institutions. Although FAME did not become a party in
the program, their assistance was crucial to its development. MMBB
runs the program currently; it buys the CDs from the commercial
banks at below market rates and the banks pass on that savings to
the loggers. Six banks are currently participating.

No legislative changes were needed to get the program off the ground. Maine already had
an agricultural loan program in place so that helped pave the way. Maine has a very flexible
state statute governing the CWSRF, which basically says anything that's allowable under the
CWA can be funded."

What do you think have been the keys to your success with the program ?

"The concept was to tie in ongoing efforts. Our philosophy in Maine is that BMPs are best
adhered to in a voluntary climate. Tying financial incentives to BMPs [with the 2% interest
subsidy] reduces the financial pressure of production, so loggers can afford to be more careful
and still afford to make environmental improvements. We've engaged loggers as partners in
protection in that way."

*For more details on Maine's program, see the Appendix C case study (Maine: Direct Link Program for Forestry).

Identify Financial Benefits of Technical Assistance Opportunities

Offering technical assistance to stakeholders who will be implementing NPS projects can
provide an indirect but powerful financial incentive. Often these partner organizations have
few staff and small budgets, particularly in rural areas. They might struggle to successfully
staff these projects on their own. Fortunately, the NPS, CWSRF, and the DWSRF programs can
offer valuable technical assistance to nonprofit organizations, small drinking water systems and
communities, which can improve project success. For example, Oregon CWSRF provides free
technical assistance to public agencies—offering a team approach to help address water quality
challenges. The DWSRF Set-Aside program can be used to deploy technical assistance providers
(e.g., circuit riders, hydrogeologists) to help with funding coordination, project planning,
assessments, administrative and field work associated with source water protection projects.
(See Appendix D for more information on using the DWSRF for source water protection.)

Also, federal agencies, such as IJSDA NRCS, offer technical assistance (e.g., for selecting and
implementing conservation practices) that can support a co-funded NPS project (see Section 3.1
for more about co-funding partnerships).

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CWSRF Best Practices Guide for Financing Nonpoint Source Solutions I Building Successful Project Funding Partnerships

Inform Stakeholders About Financial Incentives

A successful coordinated financing approach emphasizes communication, which can attract
new and returning participants. Developing materials to showcase the creative solutions and
financial incentives the NPS and CWSRF programs can offer is an essential element. Materials
can present various project approaches, financing options, repayment sources and incentives.
For example, the California and Oklahoma CWSRF programs have developed attractive brochures
that concisely capture offerings, terms and incentives in an engaging way. The CWSRF program
in Arizona distributed marketing materials to explain the financial incentives and benefits of its
Forest Thinning and Restoration Program (Figure 3-5). The state developed templates outlining
collateral damage from wildfires, which can be used to generate fact sheets tailored to the
community, watershed or county that communicate environmental and financial benefits of a
project. In addition, to help convey the financial benefits to a wide audience, Arizona developed
an interactive tool that uses a triple-bottom-line approach to quantify the environmental,
financial and socioeconomic benefits of projects for individuals, households and communities.
Arizona found that the tool (Quantification, Implementation and Valuation of Environmental
Restoration, or QUIVER) enabled agencies, nonprofit organizations and communities in the
wildland/urban interface to embrace shared stewardship of critical forest landscape resources,
which built public support for financing high-priority forest restoration projects.

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INTEREST RATES

yj INTEREST RATE SAVING UP TO 30 PERCENT
yf UP TO 20 PERCENT LOAN FORGIVENESS
^ 30-YEAR REPAYMENT TERM

\f FUNDING FOR SMALL AND LARGE PROJECTS
YEAR-ROUND APPLICATIONS

s/ NO APPLICATION FEES OR CLOSING COSTS

/MOST PROJECTS EXEMPT FROM RE
QUIREMENTS (DAVIS-BACON WAGE RATES
AND AMERICAN IRON ANO STEEL]

\f PLANNING GRANTS MAY BE AVAILABLE

PERSONAL SERVICE B DEDICATED PROJECT
MANAGER

FINANCING FOREST RESTORATION PROJECTS
CAN BE CHALLENGING.

WITH W1FA.IT DOESN'T HAVE TO BE.

PUBLIC JURISDICTIONS 8 TRIBAL ENTITIES ARE ELIGIBLE

•	Cities

•	Towns

•	Special districts

¦ County improvement districts

•	Sanitary districts

•	Native American Tribes & Tribal Authorities

WATER
¦¦R INFRASTRUCTURE

w 1 FINANCE AUTHORITY

OF ARIZONA

100 N. 7th Avenue. Suite 1 JO/Wwaenlx. AZ85007

FOREST THINNING 8
RESTORATION PROGRAM

Below-market loans for your forest
restoration projects.

WATER INFRASTRUCTURE

FINANCE AUTHORITY OF ARIZONA

Figure 3-5. WIFA, Arizona's CWSRF lender, developed educational materials that highlight cost savings and
financing opportunities for its forest thinning NPS project.

3. Elements of a Successful Coordinated Financing Approach

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CWSRF Best Practices Guide for Financing Nonpoint Source Solutions I Building Successful Project Funding Partnerships

4. Customizing Your Strategy

After a state's CWSRF and NPS programs have established a working relationship, aligned
their water quality goals and priorities, overcome key obstacles, secured outside stakeholder
participation and support, and considered the most appropriate funding mechanism(s), it's time
to test the new collaborative approach and refine a strategy for the future. Before rolling out a
new NPS program initiative, however, it's important to gauge stakeholders' interest and demand
for the types of projects the partnership seeks to fund. For example, reviewing stakeholders'
input can show if they found certain incentives more appealing, if program requirements
created concern, or if they perceived any activities negatively. These data will indicate the best
opportunities for program success, while also highlighting those areas that could be improved
by adding financial incentives, providing technical assistance or streamlining internal program
processes.

Feedback From Project Participants
Informs Future Plans

Kansas used CWSRF financing to launch
a demonstration pilot project to purchase
specialized equipment that is increasing
adoption of no-till cover crop agriculture. The
equipment offers a low-risk way for farmers
to try the no-till method, and the rental
fees offer a source for repaying the CWSRF
loan. Kansas continues to follow up with the
producers involved in the demonstration, and
the initial feedback has been overwhelmingly
positive. Kansas expects to launch a parallel
educational effort for producers. Due to
the strong history of cover crop adoption,
the availability of incentive programs,
continued outreach efforts, and a successful
demonstration project, Kansas has every
reason to believe that continuing this CWSRF
program over the long term will be successful.

Participants at a cover crop field demonstration
day learn about the effectiveness of the CWSRF-
funded interseeder equipment.

4.1	Test Your Approach

Implementing a pilot project is a great way to
evaluate what elements of your approach work
as expected and where improvements could be
made. By starting with one project or a small
group of projects targeting a specific water
quality goal (e.g., funding agricultural BMPs to
address bacteria pollution), the partnership can
assess the time and workload demands that are
placed on staff—and then modifications can be
made as needed, Pilot projects are also useful in
building relationships with local stakeholders-
relationships that can be expanded as the
partnership between the NPS and CWSRF
programs continues to mature. Finally, pilot
projects are a way to test the success and
viability of various financing mechanisms before
employing them more broadly.

4.2	Refine Operations and
Program Management

As the NPS and CWSRF programs' partnership
continues to evolve, the programs can adjust
their mutual goals and priorities and refine
operations. Practicing adaptive management
wili ensure the goals accurately reflect updated
priorities and needs.

4. Customizing Your Strategy

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CWSRF Best Practices Guide for Financing Nonpoint Source Solutions I Building Successful Project Funding Partnerships

Arizona Forest Thinning and Wildfire Restoration Project

A Successful CWSRF NPS Pilot Project

Multiple wildfires have led to catastrophic flooding, loss of life, neighborhood destruction, water
pollution and extensive damage to forests. These crises have prompted increased collaboration
between the CWSRF and NPS programs, along math universities, private organizations and
government agencies, to work together to reduce the threat of wildfire by thinning forests and
promoting healthy watersheds.

The Arizona Water Infrastructure Finance Authority (WIFA), which administers the state's CWSRF
and DWSRF program, has been working to promote the use of CWSRF financing for projects that
address watershed health, green infrastructure, and NPS water quality challenges. Recently WIFA
began coordinating with the Arizona Department of Environmental Quality's §319 program to
align their priorities, identify critical needs and opportunities for project funding, and establish
partnerships with outside stakeholders. This coordination revealed that Arizona's NPS Management
Plan specifically identifies wildfire as a source of NPS pollution, which meant that CWSRF funds
could readily be used to support NPS projects to reduce the threat of wildfire.

WIFA launched the Arizona Forest Thinning and Wildfire Restoration Pilot project in 2019. It was
financed in part by the CWSRF with a loan for $6 million (of which $1 million was forgiven) along
with the help of a $10 million municipal general obligation bond measure issued by the City of
Flagstaff, which was used to repay the CWSRF loan.

The pilot project built on the success of the Flagstaff Watershed Protection Project, a robust

watershed partnership that was formed in 2010 in response to a catastrophic wildfire that

occurred in the area. This partnership includes the City of Flagstaff, Coconino County, the U.S.

Forest Service's Four Forests Restoration Initiative (4.FRI), Northern Arizona University and

other private partners. A key strategy of the City's plan was to undertake preventive forest

management through forest thinning to mitigate the risk of another wildfire event. This laid

the perfect foundation for WIFA and the City of Flagstaff to collaborate on the pilot project, and

it opened up possibilities for funding that otherwise wouldn't have been available. The success

of this project was predicated on a range of partnerships that are critical to a successful forest

restoration program and involved state and

federal government agencies, the City of

Flagstaff and its drinking water utility, the

local fire department, stakeholder groups,

nonprofit organizations like the National

Forest Foundation, and private commercial

enterprise.'5 The success of this project has

mobilized CWSRF program leaders from

western states to form a workgroup with EPA
The Museum Fire near Flagstaff, AZ, in July 2019.

(Credit: Coconino National Forest)	dedicated to pursuing similar efforts.

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CWSRF Best Practices Guide for Financing Nonpoint Source Solutions I Building Successful Project Funding Partnerships

Explore Opportunities to Streamline Efforts

Although both NPS and CWSRF programs have their own set of requirements for project
application, compliance and reporting, these may be streamlined over time. In states where the
CWSRF and NPS programs function separately, communicating about existing processes and
available capacity could help integrate parallel efforts to save time and resources while making
both programs available to stakeholders and potential assistance recipients. This may include:

•	Developing a universal financial assistance application platform that supports both CWSRF
and §319/NPS projects

•	Providing one-stop technical assistance for applicants to both funding programs

•	Conducting marketing, outreach, education and stakeholder engagement

•	Reporting financial and environmental project benefits

Some states are finding ways to develop more efficient methods of managing and distributing
funding across programs. The Washington Department of Ecology, for example, has developed
an integrated funding program (the "Water Quality Combined Funding Program") that combines
grants and loans from state and federal sources using a single assistance application (see box
for more information). This approach works well because the funding guidelines are agency-
wide, connecting multiple state programmatic efforts and project financing in one place.

When designing and implementing an integrated cross-program approach to address a state's
NPS priorities, program staff are encouraged to clearly understand the financial assistance
processes and timing in both programs so they can take advantage of the strengths of both
programs. This especially applies to how CWSRF and NPS programs finance NPS projects both
independently and jointly. Remember, the nonfederal portion of CWSRF assistance may be used
as a resource for §319 grant match.

4.3 Operationalize Your Strategy

Combining CWSRF and NPS program efforts to provide financial assistance for NPS projects
requires a strategy with a solid foundation. As detailed in sections 2 and 3, building these
foundations requires establishing cross-program collaboration; potentially making changes
to statutes, administrative rules, and internal policies or regulations; harnessing support and
participation from key stakeholders; and exploring alternative financing mechanisms to direct
funding where it's needed most. Your state will find its own approach to success, but keep in
mind that the following three key elements are at the core of a successful strategy:

•	Mutual understanding and water quality goals

•	Stakeholder engagement

•	An operational plan guided by shared goals

4. Customizing Your Strategy

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CWSRF Best Practices Guide for Financing Nonpoint Source Solutions I Building Successful Project Funding Partnerships

Washington's Water Quality Combined Funding Program

Successful Program Collaboration and Coordination

The Washington Department of Ecology's Water Quality Combined (WQC) Funding
Program provides annual funding to a variety of project types that will improve and protect water
quality. This includes anything from traditional wastewater and stormwater infrastructure to NPS
pollution control projects and upgrading onsite septic systems. The program combines state and
federal funding sources (both grants and loans) into a single funding process where applicants
submit just one application that allows them to seek financing.

All these programs are housed within the same agency, and program staff have historically
worked together. Every program is integrated, and all staff are in the same section and
workgroup. Furthermore, the Department of Ecology Funding Guidelines apply agency-wide,
which seamlessly connects programmatic efforts under different funding sources.

Successful collaboration occurs both within and outside of the Department of Ecology. All
marketing and outreach efforts are coordinated with a wide variety of stakeholders that are
invited to training events and workshops. In addition, the Department of Ecology launched a
new NPS sponsorship program in 2019 with the goal of incentivizing collaboration among local
communities and stakeholders on a watershed basis.

Garfield

The WQC Funding

Program includes:

-	Clean Water Act
§319 grants

-	CWSRF loans

-	Centennial Clean
Water Program
grants (state)

-	Stormwater
Financing
Assistance
Program grants
(state)

Washington's CWSRF
program has funded more
than $114.7 million in
NPS projects

Information from Washington State Fiscal Year 2021 Water Quality Funding Offer List and Intended Use Plan.

Requested $398,386,585 Offered $226,976,076
Projects	146 Projects	 100

State Fiscal Year 2021 List: Water Quality Projects

Map Legend

| Nonpoint Source Activity
Onsite Sewage System

•	Funded

*	Unfunded
O Ineligible

2021 Mapbox © OpenStreetMap

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CWSRF Best Practices Guide for Financing Nonpoint Source Solutions I Building Successful Project Funding Partnerships

Customize a Plan to Meet Your Programs' Needs

Together, CWSRF and NPS programs can establish specific project work to address shared water
quality priorities. This will be influenced by the goals of both the CWSRF IUP and the NPS
management plan; the respective amounts of financing available; and potential limitations
on the eligibility of the project, assistance recipient, or both. This information will guide your
programs toward a series of decision points, including:

•	Is there satisfactory demand and/or support for the proposed NPS initiatives? If not, could
enhanced information and outreach generate more demand?

•	Are alternative financing mechanisms required to overcome eligibility hurdles?

•	Are there eligible assistance recipients willing to undertake the NPS project as a direct
loan or through a conduit financing mechanism?

•	Will legislative or administrative rule changes be necessary to achieve mutual goals?

Asking these questions will help determine which stakeholders can assist with planning and
implementing projects. Ideally the programs will work together to develop a plan to engage
with key stakeholders and find potential NPS project sponsors.

Establish Accountability Structures

Clearly articulating roles and responsibilities between partners and personnel is important. A
successful CWSRF-NPS partnership will clarify the roles and responsibilities of key individuals
within each program. This includes developing shared planning timelines informed by the
respective annual cycles and requirements of both programs. When developing the roll-out
of the new initiative, it may be helpful to assign roles by program (CWSRF and NPS) using the
following subcategories to detail responsibilities:

•	Managers

•	Engineering/technical staff

•	Financial staff

•	Administrative staff

•	Marketing and communications staff

•	Assistance recipients

Establishing accountability structures can eliminate confusion about expected responsibilities
and will enable individuals to better plan their workloads. The operational plan can also outline
roles and responsibilities of project partners. Both Iowa and Ohio, for example, have effective
accountability structures—they each require financial assistance recipients to attend a pre-
application meeting, which has been key to the success of their respective sponsorship programs.
By bringing the important stakeholders together, the states foster cooperation and help partners
identify potential obstacles early in the project planning process.

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CWSRF Best Practices Guide for Financing Nonpoint Source Solutions I Building Successful Project Funding Partnerships

Establishing Accountability and Communication

Q&A with Lee Wagner, Iowa Department
of Natural Resources, CWSRF NPS Program
Planner

How did you get the Sponsored Projects program off the ground?

"In 2005-2006 we had heard about Ohio's sponsored
projects program, but in Iowa cities can only use sewer revenues
for the system itself. That was a problem because sponsored
projects are not part of the utility, so we had to change the
state code. We had lots of support so it was not a big fight, but
that process took some time. Our CWSRF coordinator developed
partnerships with groups in Iowa that do stormwater work and
conservation/water quality projects."

What have been the biggest challenges for the program? How did you address them?

"Workload on SRF staff to manage, review and coordinate projects is one. We created an
SRF staff position that manages sponsored projects and NPS work. That's my role, and most
program communication goes through me. We work with Iowa Department of Agriculture
and Land Stewardship (IDALS) on approving and reviewing projects. When we first
started out we didn't have a whole lot of guidance for this process. Urban conservationists
with IDALS put together design checklists to make it easier. Creating a project milestone
checklist has helped out tremendously."

What have been the keys to success for your sponsorship program?

"We partner with IDALS, state 319 staff, and even commodity groups on the program.
Even before we launched, we had an interagency contract with IDALS for our linked-
deposit program and urban stormwater work, which lays out what services each agency
will provide. We now require a pre-application meeting before a community applies, in
which we spell out the requirements and expectations. We include urban conservationists,
state 319 basin coordinators, Iowa Natural Resources Conservation Service staff, and any
local experts that could help us better understand the proposed project. From the beginning
there are always going to be tweaks. We continually provide updated guidance to applicants
through meetings and speaking at conferences to educate the consulting/engineering
community, and we're always looking for ways to improve the program to get better
applications. At our annual workshops we look at what the main problems were, and we
highlight success stories as well. In the beginning we got many bad applications that were
easy to deny, but now all of them are very good."

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CWSRF Best Practices Guide for Financing Nonpoint Source Solutions I Building Successful Project Funding Partnerships

The Ohio CWSRF uses several documents that articulate the responsibilities of project partners,
including the loan agreement between the project sponsor and the CWSRF; a sponsorship
agreement between the NPS project implementer and the sponsor; and an environmental
covenant between the property owner, project implementer and Ohio Environmental Protection
Agency (Ohio EPA). (See the list of resources in Appendix E to access these documents.) All
project partners work together, and each has clearly defined goals. Ohio has created standard
operating procedures and internal guidance that provides a more formal structure for the
program and makes succession planning easier.

Include a List and Schedule of Activities

Developing a planning timeline that identifies critical milestones and activities can increase
transparency, improve communication, and improve collaborative practices between the two
programs. The programs can identify any new processes and procedures to implement (e.g.,
regulatory changes, development of new financial assistance applications, marketing materials)
and have an operational plan to implement these changes. To keep the implementation effort
organized, achievable, and on track, programs can use a traditional project management
approach that breaks out major activities into more detailed subtasks, details accountability
assignments, and assigns target deadlines and milestones. Establishing mutually agreed-upon
planning timelines that lay out important dates across the fiscal year will enable CWSRF and
NPS programs to align their respective programmatic efforts and help work toward specific
goals. Implementation schedules also increase transparency across the programs, which allows
for more effective coordination and communication along the way.

Track Progress and Share Success

As the collaboration matures, state programs would benefit from tracking the progress and
outcomes of NPS projects that have received financial assistance over time. Showcasing
success stories is an excellent way to publicly recognize the innovative efforts of previous
assistance recipients, as well as the NPS and CWSRF programs, and to provide examples to other
communities that wish to replicate these successes.

Continuing to engage stakeholders across the funding cycles will allow states to gather
important feedback that can shape future program efforts. The strategic plan may be viewed as
a living document—as initiatives for greater NPS project assistance grow, priorities may shift as
new challenges emerge; programs are encouraged to be ready to make the adjustments needed
to keep the NPS project effort thriving.

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CWSRF Best Practices Guide for Financing Nonpoint Source Solutions I Building Successful Project Funding Partnerships

Appendix A: Clean Water State Revolving
Fund Program Eligibilities

To be eligible for Clean Water State Revolving Fund (CWSRF) assistance, a project must meet
the criteria of one of 12 CWSRF eligibilities set forth in section 603(c) of the Clean Water Act:

1.	to any municipality, intermunicipal, interstate, or state agency for construction of
publicly owned treatment works (as defined in section 212);

2.	for the implementation of a management program established under section 319;

3.	for the development and implementation of a conservation and management plan under
section 320;

4.	for the construction, repair, or replacement of decentralized wastewater treatment
systems that treat municipal wastewater or domestic sewage;

5.	for measures to manage, reduce, treat, or recapture stormwater or subsurface drainage
water;

6.	to any municipality, intermunicipal, interstate, or state agency for measures to reduce
the demand for publicly owned treatment works capacity through water conservation,
efficiency, or reuse;

7.	for the development and implementation of watershed projects meeting the criteria set
forth in section 122;

8.	to any municipality, intermunicipal, interstate, or state agency for measures to reduce
the energy consumption needs for publicly owned treatment works;

9.	for reusing or recycling wastewater, stormwater, or subsurface drainage water;

10.	for measures to increase the security of publicly owned treatment works

11.	to any qualified nonprofit entity, as determined by the USEPA Administrator, to provide
assistance to owners and operators of small and medium sized publicly owned treatment
works:

a.	to plan, develop, and obtain financing for eligible projects under this subsection,
including planning, design, and associated preconstruction activities; and

b.	to assist such treatment works in achieving compliance with this Act.

12.	to any qualified nonprofit entity, as determined by the Administrator, to provide
assistance to an eligible individual (as defined in subsection (j)):

a. for the repair or replacement of existing individual household decentralized
wastewater treatment systems; or

Appendix A: Clean Water State Revolving Fund Program Eligibilities

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CWSRF Best Practices Guide for Financing Nonpoint Source Solutions I Building Successful Project Funding Partnerships

b. in a case in which an eligible individual resides in a household that could be cost
effectively connected to an available publicly owned treatment works, for the
connection of the applicable household to such treatment works (EPA 2019).

The majority of the 12 eligibilities refer to measures that attain an objective; however, four
eligibilities reference other sections of the Clean Water Act (CWA) (e.g., sections 212, 319,
320, and 122). Those four eligibilities have additional criteria that must be considered when
determining if a project may receive CWSRF assistance. Criteria for those four eligibilities are
summarized in EPA's Overview of Clean Water State Revolving Fund Eligibilities (EPA 2016).

References:

EPA (U.S. Environmental Protection Agency). 2016. Overview of Clean Water State Revolving Fund
Eligibilities. U.S. Environmental Protection Agency. Accessed Dec 23, 2019.
https://www.epa.g0v/sites/pr0ducti0n/files/2016-07/d0cuments/0verview of cwsrf
eligibilities may 2016.pdf.

EPA (U.S. Environmental Protection Agency). 2019. America's Water Infrastructure Act (AWIA)
Questions and Answers. U.S. Environmental Protection Agency. Accessed Dec 23, 2019.
https://www.epa.gov/cwsrf/americas-water-infrastructure-act-awia-questions-and-
answers.

Appendix A: Clean Water State Revolving Fund Program Eligibilities

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CWSRF Best Practices Guide for Financing Nonpoint Source Solutions I Building Successful Project Funding Partnerships

Appendix B: Alternative Repayment Sources

The CWSRF is a loan program that reimburses borrowers on a cost-incurred basis and does not
provide a lump sum of cash up front. Identifying a loan repayment source can sometimes be
challenging for borrowers with limited revenue streams such as small communities or nonprofit
groups that lack the taxing authority or utility fees typically used as the primary source for
repayment of CWSRF loans. The following table describes a variety of creative financing
mechanisms and repayment sources to help nontraditional borrowers successfully navigate
repayment challenges for NPS projects financed with CWSRF.

Revenue Source

State CWSRF Example

Business revenues
(resorts, schools,
factories etc. with
onsite wastewater
treatment)

Many manufacturing facilities have their own localized treatment systems.
For example, Ohio's CWSRF provided a 5-year, $60,000 loan to a business
to conduct a site assessment and cleanup on a brownfield site adjacent to
its dry-cleaning facility. The loan was repaid using a revenue stream from
accounts receivable, with inventory and cash as extra collateral. This approach
could also be used for other types of NPS projects.

Carbon credits

The California CWSRF made an $18.75 million loan at zero percent interest
to the Yurok Tribe for the acquisition of 22,237 acres of forestland to protect
water quality and beneficial uses. Carbon credits generated from sustainable
harvesting practices provide a partial repayment source. The tribe was
required to provide a contract for the sale of carbon reserves as a condition to
receive funding.

Equipment rentals
(e.g., specialized for
direct seed and no-till
agriculture)

Washington's CWSRF provides pass-through funding via the Spokane County
Conservation District for direct seed application fees, equipment purchase
or equipment rental. A conservation district could also use a CWSRF loan to
purchase specialized equipment to rent out to individual farmers and use the
rental income as a repayment source for the loan.

Fees paid by
developers

The Ohio CWSRF has loaned a total of $3 million to a corporation to remediate
a 27.5-acre brownfield on the site of a former industrial park. Repayment
sources for the loan include rental fees from the completed project (to be
redeveloped for light industry), sales revenue from clean soil on the site that
will be used to cap a municipal landfill, and fees from a licensed construction
and demolition debris landfill placed on the site of the excavated soil.

Homeowner
association fees

The CWSRF program can make loans directly to homeowner associations,
which are repaid by HOA fees. The Maryland CWSRF made a $529,000 loan
to the Dennis Point Homeowners Association for an erosion control and
shoreline stabilization project. CWSRF loans could also be made to homeowner
associations for decentralized systems and other eligible projects.

Membership fees

Ohio CWSRF awarded a $110,000 loan to The Nature Conservancy to purchase
a conservation easement to protect and restore a threatened section of Brush
Creek. The nonprofit repaid the loan from their general operating account
(includes membership dues and fundraising assets).

Appendix B: Alternative Repayment Sources
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CWSRF Best Practices Guide for Financing Nonpoint Source Solutions I Building Successful Project Funding Partnerships

Revenue Source

State CWSRF Example

On-bill financing

On-bill financing is a method typically used to secure repayment for
improvements for individual homeowners or businesses, such as water or
energy efficiency improvements or septic repair and replacement. Funds for
the improvements are passed through the local utility, and repayment occurs
via a charge added to the customer's regular utility bill. The New York CWSRF
program provided a guarantee for a bond issuance by the New York State
Energy Research and Development Authority to provide funds for an on-
bill financing program for residential energy efficiency improvements. This
approach may also be applied to other types of NPS projects.

Permit fees

The Nebraska CWSRF provided a $10.7 million dollar loan to the Petroleum
Release Remedial Action Fund to remediate leaking petroleum storage tanks.
The loan was repaid from permit fees on tank owners and fees on purchase
of petroleum products. These revenues may be directed to repayment of both
point and NPS projects alike.

Property taxes

The Massachusetts CWSRF Community Septic Management Program uses
a "betterment agreement" that channels loans through a municipality to
individuals for septic system improvements and allows the municipality to
ensure that the loan is repaid as part of a property tax bill. The municipality can
place a municipal lien on the property if the homeowner defaults on the loan.

Recreational or license
fees

Recreational fees such as boating permits, fishing licenses or park entrance
fees could provide a repayment source for CWSRF-funded projects that
protect water quality in recreational areas. Cape Henlopen —Delaware's most
visited state park—used park fees as a repayment source for a 2015 CWSRF
loan to fix more than 6,200 feet of cracked sewer pipes.

Resort taxes/fees

Many areas use resort taxes or fees to fund water quality efforts. Big Sky,
Montana, uses resort tax dollars to fund water and sewer improvement
projects. The Montana CWSRF program has loaned $19.4M to the Big
Sky County Water and Sewer District for wastewater treatment plant
improvements; resort tax dollars could equally be used as a repayment source
for NPS projects.

Sale of excess
energy/energy
savings performance
contracting

Oregon's loan to the Farmers Irrigation District (FID) to convert unlined
irrigation canals to a piped, pressurized system also provided an opportunity
for FID to install micro-hydroelectric equipment within the new pipes. This
technology saved FID over 2 million kWh per year—equivalent to one month's
electrical supply cost. The sale of the excess energy is helping FID pay off their
CWSRF loan ahead of schedule.

Sale of treatment
process residuals

Residuals from both wastewater treatment and drinking water treatment
process have been shown to have value in several markets, including land
application (agriculture, landscaping, nurseries and homeowner markets),
cement manufacturing, brick-making, turf farming, composting, commercial
topsoil, road subgrade, landfill cover and land reclamation.

Appendix B: Alternative Repayment Sources
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CWSRF Best Practices Guide for Financing Nonpoint Source Solutions I Building Successful Project Funding Partnerships

Revenue Source

State CWSRF Example

Sale of water rights

The Oregon CWSRF provided funding to Farmers Irrigation District (FID) to
convert unlined irrigation canals to a piped, pressurized system. The project
saved so much water that FID was able to sell excess water rights to create
permanent, in-stream habitat for endangered fish species.

Sales tax

Wyoming assesses a small gas ad valorem tax on every gallon of gas (as well
as special fuels) sold or distributed in the state. In the past, this tax revenue
provided a repayment source for a $57 million CWSRF loan to the Wyoming
Department of Environmental Quality to contract for site investigations and
cleanup work at leaking underground gasoline storage tank sites throughout
the state.

Stormwater fees

The Maryland CWSRF provided a $14 million dollar loan to the city of Rockville
to fund planning, design and restoration of the Watts Branch tributary of the
Potomac River. Funds to repay the loan will be generated from Rockville's
stormwater fee, which is assessed on all property owners and is based on the
amount of impervious surface on each property.

Tax revenues from
contaminated site
redevelopment

An EPA analysis of 48 brownfield sites showed that an estimated $29 million
to $97 million in additional tax revenue was generated for local governments
in a single year after cleanup. Municipalities could use this revenue source to
repay a CWSRF loan for contaminated site remediation.

Traditional municipal
repayment sources
(tax and utility
revenues)

An increasing number of municipalities and utilities are incorporating
elements such as green infrastructure and water reuse into their wastewater
and stormwater capital improvement projects. When this occurs, the
traditional revenue sources (e.g., tax revenues, user rates) function as a
repayment source for all aspects of the project.

Watershed

improvement districts
(WIDs)

WIDs are local government entities formed pursuant to state statute,
which provides them with taxing authority. These entities are controlled by
landowners/farmers within the WID; the structure allows them to collaborate
on NPS projects, generate revenues needed for projects and secure additional
financing. Many WIDs around the country have used the CWSRF program for
various NPS watershed projects. In Maine, the Cumberland County Soil and
Water Conservation District repaid their $2.1 million CWSRF loan through
revenues generated by Restoration Program Participation Fees assessed to
participating landowners.

Watershed protection
fees/taxes

A number of utilities across the country (including Central Arkansas Water in
the city of Austin and Maryland's Howard County) use an on-bill watershed
protection fee to pay for various watershed protection projects. For example,
in Raleigh, North Carolina, water customers pay 10 cents per thousand gallons
of water used (approximately 45 cents per month per customer). This fee
typically generates about $1.8 million per year that is used to conserve critical
land in the watershed to provide protection for drinking water sources and
reduce treatment costs.

Appendix B: Alternative Repayment Sources
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CWSRF Best Practices Guide for Financing Nonpoint Source Solutions I Building Successful Project Funding Partnerships

Appendix C: Demonstrating Success

The following examples demonstrate ways that CWSRF and NPS programs can collaborate for
mutual benefit in as they address NPS pollution at the state level.

1.Arkansas:	Managing Agriculture and Nutrients

2.	Georgia: Land Conservation

3.	Iowa: Traditional Utilities Sponsor Water Resource Restoration

4.	Maine: Direct Link Program for Forestry

5.	Minnesota: Building Partnerships Creates Change

6.	Ohio: Incentives for NPS Sponsorship

7.	Oregon: Innovations in Agricultural BMPs

8.	Vermont: Legislative Changes Support NPS Financing

9.	Washington: Solutions to Septic Systems

Appendix C: Demonstrating Success
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CWSRF Best Practices Guide for Financing Nonpoint Source Solutions I Building Successful Project Funding Partnerships

1. Arkansas: Managing Agriculture and Nutrients

Arkansas' Agriculture Water Quality Loan Program (AgWQLP) functions as a linked deposit loan
mechanism to fund NPS agricultural conservation and nutrient management projects in the
state. It is a partnership between the Arkansas Natural Resources Commission (ANRC), USDA
Natural Resources Conservation Service (NRCS), state conservation districts and local financial
institutions. ANRC has set these loans at 3% interest, 20-years-maximum repayment terms (or
the useful life of the project) and a maximum loan of $250,000 per borrower. The AgWQLP is
funded by the Arkansas Clean Water Revolving Loan Fund, which makes $25 million available
for linked deposit loans through the program each year.

Practices eligible for AgWQLP funding include riparian buffers, streambank stabilization,
terracing, animal waste management and storage, drainage systems and outlets, ponds and
livestock watering facilities, among others.

In this arrangement, the NRCS and conservation districts are responsible for developing
projects with potential applicants and bringing them to the program. Conservation districts
and the ANRC evaluate and approve funding applications in addition to handling technical
assistance and inspections. Conservation districts and financial institutions deal with details
of loan initiation and financial review and payments, whereas overall program oversight and
administration duties fall to the ANRC.

Cattle gather at an animal watering facility in Arkansas,

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CWSRF Best Practices Guide for Financing Nonpoint Source Solutions I Building Successful Project Funding Partnerships

2. Georgia: Land Conservation

The Georgia Environmental Finance Authority (GEFA) offers financing through the CWSRF
for water conservation and energy production/conservation projects. Through the close of FY

2019,	GEFA also financed land conservation projects through the Georgia Land Conservation
Program (GLCP); these protected water quality, reduced flooding risks, and protected habitat
for native animals or plants. Approved land conservation projects needed to be permanently
protected through deed-restriction or conservation easements and must have provided a water
quality benefit that was consistent with Georgia's Nonpoint Source Management Plan. Loan
underwriting approval from GEFA's board of directors was also required. (Note: Beginning in FY

2020,	GLCP was replaced by the Georgia Outdoors Stewardship Program, which is managed by
the Georgia Department of Natural Resources.)

In January 2014 GEFA launched a new conservation initiative, offering borrowers an interest
rate 1% below the standard program rate on land, energy and water conservation projects.
Since then, more than $104 million in CWSRF loans have protected over 42,000 acres in
Georgia. In FY 2018 alone, GEFA loaned over $52 million to communities and nonprofits for
land conservation projects.

The Cabin Bluff property supports longleaf pine forest.

In 2018 GEFA signed a
$35 million assistance
agreement with The Nature
Conservancy for the purchase
of the 11,000+ acre Cabin Bluff
property on the southern
coast of Georgia. Cabin Bluff
includes softwood forests and
intracoastal marshes and is the
largest remaining undeveloped
coastal property in the state.
The land is home to many
important threatened plant and
animal species, including the
longleaf pine, gopher tortoise,
eastern indigo snake, tri-
color bat and manatee. This
agreement will protect the
land in perpetuity. The Nature
Conservancy is developing
plans to fully restore its
longleaf pine ecosystem and
intends to open parts of the
land to the public.

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CWSRF Best Practices Guide for Financing Nonpoint Source Solutions I Building Successful Project Funding Partnerships

3. Iowa: Traditional Utilities Sponsor
Water Resource Restoration

Iowa instituted its Sponsored Projects program in 2009, which allows traditional utilities to
sponsor "water resource restoration" projects that implement BMPs for NPS pollution control.
The utility selects a project within the watershed of the POTW that will improve water quality
and then borrows for both a traditional project as well as the NPS project. In return, the utility
receives an interest rate reduction on the overall loan that is equal to the principal amount
for the sponsored project. The Iowa CWSRF allows funding of sponsored projects at a level of
approximately 10% of the traditional project loan amount. Sponsored projects are intended to
help restore the natural hydrology of the watershed (e.g., installing permeable pavement and
rain gardens, restoring native vegetation, stabilizing streambanks). The Sponsored Project
program is administered by the Iowa CWSRF, which partners with state NPS program staff,
watershed coordinators, the Department of Agriculture, and others to review applications twice
annually and select projects for addition to the IUP (see box, below).

Iowa uses cash flow management to identify the amount of CWSRF funds globally available
(including federal capitalization grants, state match, and loan repayments) to understand
current and future cash flows. This practice allows them to make loan commitments to more
projects than the program has available. Understanding future cash flows using long-term
projections and a built-in capital buffer of 1.5 times the average monthly disbursement demand
enables Iowa to plan for and make financing decisions confidently and comfortably. These
practices maximize the strength and reach of their program to treatment works and NPS
project needs alike.

Project Support

Iowa's CWSRF program
sets aside ~ $10 million
annually for NPS sponsored
projects and had funded 110
projects ($79 million total)
by the end of State Fiscal
Year (SFY) 2020. Heavy
demand for these funds
indicates the program's
success. In SFY 2019-2020,
30 sponsored projects
were accepted for a total
of over $24. million in
recommended financing.

A stormwater management sponsored project in Dubuque, IA,
installed permeable pavers in 74 alleys.

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CWSRF Best Practices Guide for Financing Nonpoint Source Solutions I Building Successful Project Funding Partnerships

4. Maine: Direct Link Program for Forestry

The Direct Link Program is a linked-deposit mechanism, initiated by a memorandum of
understanding (MOU) in 2007 and launched in 2008 as a partnership between the Maine
Department of Environmental Protection (DEP), the Maine Forest Service (MFS), the Maine
Municipal Bond Bank and six local participating banks. This program promotes adoption of
BMPs by Maine-based logging operations by giving them access to CWSRF loan funding for the
purchase of environmentally friendly logging equipment.

Under the program, a borrower signs an agreement with MFS and receives a Certificate of
Qualification for the eligible equipment. A local participating bank then must approve the
loan agreement, at which point DEP and the Bond Bank issue a Certificate of Deposit to the
bank for the discounted loan. District foresters from MFS conduct site visits and ensure that
the borrower properly implements BMPs, maintains a clean enforcement record, and keeps
the equipment in Maine for the duration of the loan. If any of these terms are violated, the
agreement is canceled and the discounted interest rate reverts to the standard rate.

Here's how it works:



Individual applies for a loan
with Maine Forest Service
(MFS)

Must be a certified logging
professional whose primary
siness is logging in Maine

P"

bu;



participating in the program

Bank evaluates the applicant's
credit-worthiness using its normal
loan criteria, then enters into a
loan agreement with the logger

MFS enters into an agreement
with the applicant prescribing
conditions of the program

MFS provides applicant with a
Certificate of Qualification
identifying the equipment that
is eligible for funding

€ $

Clean Watc

Upon approval, the Maine SRF
purchases a reduced-rate CD from
the bank in an amount equal to the
loan

The terms of the deposit arc equal
to the terms of the bank loan with
the logger (no more than 5 years)

The interest rate on the bank's loan
to the logger is reduced 10 reflect
the reduced rate that the CWSRF
accepted on the CD

Maine's Direct Link
Program by the Numbers:

-	$9 million in funding
committed for Direct Link

projects in FY 2020

- Over 127 loans issued for
a total of more than $45
million since inception

-	Loans at a 2% interest

rate subsidy from
prevailing rates,
5-year term

-Maximum loan amount

$800,000

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CWSRF Best Practices Guide for Financing Nonpoint Source Solutions I Building Successful Project Funding Partnerships

5. Minnesota: Building Partnerships Creates Change

The Clean Water Partnership (CWP) loan program makes CWSRF loans to local government
entities (counties, cities, watershed districts, etc.), and incentivizes participation with interest
rates of 0-2% on projects to implement a variety of RMPs. The Bald Eagle Lake Restoration
Project in the City of Hugo received a CWP loan of $400,000, in addition to funding from
several other sources, to restore Bald Eagle Lake to state water quality standards and reduce
harmful algal blooms. Thanks to the successful partnership between state agencies, the city,
private landowners and a local golf course, the project has resulted in drastic reductions
of nutrients and algae and improvements in water clarity in the lake, which serves as an
important local recreational resource. The project involved a full-lake alum treatment to reduce
the nutrients available for algae growth, stormwater capture and reuse on the golf course,
residential rain garden installations and shoreline restoration.

The Minnesota Department of Agriculture (DOA) also administers an Agricultural Best
Management Practices (AgBMP) loan program that helps farmers implement BMP projects
aligning with the state's §319 and §320 management plans. These projects focus on animal
waste, conservation, failing septic systems, abandoned wells, and erosion and sediment
control. The AgBMP program uses a pass-through mechanism, in which CWSRF funds
are allocated by DOA at 0% interest to counties, conservation districts, or joint powers
organizations to capitalize revolving loan accounts with local lenders. The local government
unit then approves projects from the agricultural community, which receives loans at up to
a 3% interest rate. Since launching the OTP and AgBMP programs in 1995, Minnesota has
allocated $90.6 million in CWRF funds to the programs, generating $312 million in loans.
Repayments from the two programs total around $10 million annually.

Since launching the CWP and
AgBMP programs in 1995,

Minnesota has allocated $90.6
million in CWSRF funds to the
programs and generated $291.8
million in CWP and AgBMP
loans.

In FY 2020 alone, the two
programs made 75 CWRF loans
(at 0% interest) for a total of
$21.8 million in assistance to
private landowners and local
governments.

A worker treats Bald Eagle Lake in Minnesota with alum to

reduce nutrients.

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CWSRF Best Practices Guide for Financing Nonpoint Source Solutions I Building Successful Project Funding Partnerships

6. Ohio: Incentives for NPS Sponsorship

The Ohio Water Pollution Control Loan Fund (WPCLF) allows traditional wastewater project
applicants to sponsor permanent stream or wetland restoration or protection projects through
its Water Resource Restoration Sponsor Program (WRRSP). This program, launched in 2000,
seeks to safeguard Ohio's water quality by countering ecological damage and loss of biological
diversity in aquatic habitats. As of March 2021, Ohio EPA had generated over $205 million to
fund NPS projects through this program, including 500,000 linear feet of stream and 16,800
total acres of riparian lands and wetlands. The WPCLF incentivizes these sponsorship projects
by advancing part of the interest on a traditional borrower's SRF loan.

Projects are nominated, scored and ranked on the CWSRF Fundable list based on the
importance of the resource, potential for restoration, and the effectiveness of the project/
action, and then paired with an appropriate sponsor. Sponsors work directly with project
implementers, which may include political subdivisions (e.g., municipalities, park districts,
land trusts) and other qualifying entities such as nonprofit organizations. Project implementers
are responsible for finding their own project sponsor (or multiple sponsors for larger projects)
and they undertake the planning, design, construction and monitoring of individual NPS
projects. After the loan is awarded, the Ohio EPA Division of Environmental and Financial
Assistance oversees project implementation and post-construction monitoring. The
implementers are expected to operate and maintain the projects in perpetuity, using their own
funds and resources where necessary, which is viewed as a type of informal match.

Ohio has modified the

WRRSP for more effective

implementation by:

-	Requiring pre -
nomination site
visits with potential
implementers to properly
evaluate and prioritize
projects

-	Focusing more on
readiness to proceed
during project selection

-	Conducting regional
outreach

-	Publishing a WRRSP
Guide for project
implementers

The Ohio WPCLF makes
$15 million available to
the WRRSP every year!

Protection of the Glen Helen Nature Preserve in Yellow Springs,
OH, was sponsored by a project to upgrade Warren County's
wastewater treatment plant.

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CWSRF Best Practices Guide for Financing Nonpoint Source Solutions I Building Successful Project Funding Partnerships

7. Oregon: Innovations in Agricultural BMPs

Oregon provides a great example of CWSRF and NPS interests working together to
achieve common goals. Farmers Irrigation District (FID) in the Hood River Valley used an
inefficient, open-canal irrigation system that lost water to leakage through the volcanic
soil and evaporation. In addition, these canals were vulnerable to erosion, required constant
maintenance to prevent failure, and contributed to local NPS pollution from agricultural and
residential runoff. Severe rain-on-snow flooding events in 1996 and 2006 caused critical
damage to FID's infrastructure, leaving this roughly $260 million agricultural region without
irrigation for its crops. In the wake of this disaster, the Oregon Department of Environmental
Quality (DEQ) worked with FID and the Oregon CWSRF to secure $30.9 million in CWSRF loans.
Paired with additional funding from the Energy Trust of Oregon, Oregon Water Resources
Department, Oregon Watershed Enhancement Board, and District funds, FID embarked on a
multiyear project to convert FID to a pressurized, piped system.

Revenue from improved hydrogeneration and efficiency gains (see below) is allowing FID
to repay its CWSRF loans without heavily impacting the rates charged to irrigation district
members. The new pressurized delivery system has also allowed farmers in the district to
install more efficient sprinkler systems, often using 25%-50% less water per acre. The benefits
FID and the community have reaped in environmental quality, water security, efficiency,
conservation, and the bottom line demonstrate that NPS water infrastructure projects can be
sound investments as well as a solution to short- and long-term problems. The FID initiative is
ongoing, as is DEQ's interest in providing assistance to similar projects in the future.

Oregon DEQ has funded
14 separate irrigation
district projects from
2012 to 2018, totaling
more than $57 million in
CWSRF assistance

This project has yielded multiple benefits

for FID and the region, including:

-	Conserving 6 billion gallons of water
annually

-	Leaving an additional 2,000 acre
feet of water in the Hood River to
protect endangered fish

-	Increasing total electricity generation of
the FID system to -26 million kilowatt
hours through improved efficiency
(removal of extraneous pumps), addition
of in-line microhydroelectric turbines
to pipes, and rehabilitation of two pre-
existing hydroelectric plants

-	Returning $200,000 additional annual revenue
from efficiency and electrical sales back to the
grid

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CWSRF Best Practices Guide for Financing Nonpoint Source Solutions I Building Successful Project Funding Partnerships

8. Vermont: Legislative Changes Support NPS Financing

Restrictions on NPS funding by state statute
had hampered Vermont's ability to address
growing impairments from nutrient loading to
Lake Champlain, a top water quality priority
in the state. The Vermont Department of
Environmental Conservation (DEC) worked
with state lawmakers and other stakeholders
to make more NPS work possible in Vermont,
which included an examination of the triple
bottom line economic benefits associated with
funding such projects; the direct link between
degraded watersheds, vegetation loss and
urbanization on treatment costs; the cost-
effectiveness of pollution prevention; and
overall water quality.

Act 185 was passed in May 2018, and expanded
CWSRF eligibility to include projects designed
"to protect, conserve, or restore natural
resources...for the purpose of providing
water quality benefits," including wetland/
floodplain/stream restoration, conservation
easements and land acquisition for water
quality improvement, tree plantings,
lakeshore retrofits, erosion repair and dam
removal. These projects can be funded on their
own or sponsored under the same agreement
as a loan to a municipality or nonprofit for
a "traditional" project, in which case the
interest rate is adjusted to forgive some or all
the NPS portion. Eligibility for CWSRF loans
to private borrowers for projects to improve
water quality was also temporarily authorized
(through June 2023) by the legislation.

WISPr at a Glance

-	Solicits applications from natural
resource projects in the planning stages

-	Serves as a match-making service
between sponsors and potential NPS
projects

-	Publishes online lists of traditional point
source and natural resource projects to
find potential partners

-	Partnered projects are ranked together on
the CWSRF Intended Use Plan

-	Planning and construction are
coordinated so that the sponsored NPS
project is completed within 1 year of the
sponsoring municipal project

-	Municipalities and nonprofit
organizations are eligible to apply

-	Sponsoring projects include:

•	Wastewater treatment facilities

•	Decentralized systems

•	Combine sewer overflow downspout
disconnection

•	Stormwater infrastructure

-	Sponsored projects include

•	Wetland restoration

•	Floodplain/stream restoration

•	Woody buffer plantings

•	Dam removal

•	Lake shore retrofit

The culmination of this legislative and engagement work is the DEC's Water Infrastructure
Sponsorship Program (WISPr).

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CWSRF Best Practices Guide for Financing Nonpoint Source Solutions I Building Successful Project Funding Partnerships

9.Washington: Solutions to Septic Systems

In 2016, Washington State's CWSRF program continued its long history of facilitating septic
system repairs with the launch of a new Regional On-Site Sewage System Loan Program
(RLP). The RLP consolidated multiple county-level septic loan programs into a single public-
private partnership between the Washington Department of Ecology, Washington Department
of Health, multiple counties and local health jurisdictions, and a competitively selected local
nonprofit Community Development Financial Institution called Craft3. The public-private
partnership (P3) allows homeowners in participating counties to access financing through
CraftB for the repair, upgrade or replacement of failing septic systems to protect public health
and water quality. The RLP is capitalized by CWSRF loans, state of Washington grants, and
private funds. With oversight from the member counties and state, Crafts manages loan
approvals and portfolio administration, assumes the financial risk from the loans made to
private homeowners, and is obligated to repay the CWSRF funds.

Because the RLP benefits from Craft3's lending expertise and infrastructure, more money is
available for loans, outreach and education, and less is needed for program administration.
Local governments reap the benefits of a CWSRF-funded program without the headaches of
a local loan program, resulting in more assistance to households with the greatest amount of
need. Low-income borrowers account for nearly 40 percent of the projects. Many of these
borrowers do not qualify for traditional bank financing. Loans cover the full cost of system
design, permitting and installation, and are offered at more-affordable interest rates for
borrowers with lower household incomes. There is no upfront cost to the borrower, and
interest-only and deferred-payment options are made available to the lowest-income groups.

The consolidated program also streamlines and standardizes the process for contractors,
making it easier for them to work across jurisdictions, and paying them immediately when
each septic system passes inspection. RLP funds are also available for nonprofits and small
businesses that need financing.

Between mid-2016 and December
2020, the RLP has deployed over
$26 million in loans through Craft3
to repair or replace more than 1,100
septic systems that treat around
149 million gallons of domestic
wastewater annually.

This effort was recognized with a
USEPA Performance and Innovation
in the SRF Creating Environmental
Success (PISCES) Award in 2017 for its
innovative nature and water quality/
public health benefits.

Septic replacement in Washington state.

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CWSRF Best Practices Guide for Financing Nonpoint Source Solutions I Building Successful Project Funding Partnerships

Appendix D: EPA Fact Sheets on DWSRF
Set-Asides for Source Water Protection

Appendix D: EPA Fact Sheets on DWSRF Set-Asides for Source Water Protection

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CWSRF Best Practices Guide for Financing Nonpoint Source Solutions I Building Successful Project Funding Partnerships

Protecting Source Water with the
Drinking Water State Revolving Fund Set-Asides

States and communities may use the Drinking Water State Revolving Fund (DWSRF) set-asides
to safeguard sources of drinking water.

BACKGROUND

Protecting sources of drinking water can proactively
safeguard the water we drink and improve our public
health. Taking steps to manage potential sources of
contamination and to prevent pollutants from
reaching sources of drinking water can often be more
efficient and cost-effective than treating drinking
water downstream.

The Safe Drinking Water Act (SDWA) Amendments of
1996 required each state to develop a comprehensive
Source Water Assessment Program and to complete
source water assessments for each public water
system. These assessments, which states made
available to the public, include a delineation of the
areas needed to protect the drinking water source, an
inventory of potential contaminant sources, and a
determination of the water system's susceptibility to
contamination. While there is no requirement in the
SDWA to update these assessments, the America's
Water Infrastructure Act (AWIA) explicitly re-
authorized the use of Drinking Water State Revolving
Fund (DWSRF) set-aside funds for this purpose. The
AWIA also expanded the eligibilities for set-aside
expenditures on source water protection (SWP)
activities and re-authorized states to establish source
water petition programs that can investigate the

origins of pollution to reduce levels of contamination,
establish partnerships for SWP, and develop
recommendations for long-term SWP strategies.

DWSRF ASSISTANCE

The DWSRF can provide financial assistance to
publicly-owned and privately-owned community water
systems, as well as 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 SDWA.

Each of the 50 states and Puerto Rico operates its own
DWSRF program. They receive annual capitalization
grants from the EPA, which in turn provide low-
interest loans and other types of assistance to water
systems.

Additional Source Water Protection Resources:

EPA's Source Water Protection page:
eDa.gov/sourcewaterDrotection

The Clean Water SRF Program: eoa.gov/cwsrf

The Source Water Collaborative: sourrewaterrnllaborative.nm

OFFICE OF GROUND WATER
AND DRINKING WATER

Appendix D: EPA Fact Sheets on DWSRF Set-Asides for Source Water Protection

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EPA OGWDW | Protecting Source Water with the DWSRF Set-Asides

EPA 816-F-19-003 October 2019

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 communities.

Additionally, states may use a portion of their
capitalization grant from the EPA as "set-asides" to help
communities build the technical, managerial, and
financial capacities of their systems. States may use the
set-asides to fund several types of SWP activities. They
may administer the SWP program, provide technical
assistance, and fund implementation activities.
SET-ASIDES USE FOR SWP

The State Program Management (i.e., 10 percent) and
Local Assistance and Other State Programs (i.e., 15
percent) set-asides are commonly used to support SWP
programs and initiatives. States submit set-aside
workplans to the EPA each year describing activities for
which they intend to use their set-asides and how funds
will be spent.

The State Program Management set-aside is most
commonly used to support staff in the state's SWP
program (e.g., a SWP coordinator) or other technical
assistance providers (e.g., circuit riders or
hydrogeologists). The Local Assistance and Other State
Programs set-aside has broader eligibilities and allows
states to provide assistance through loans or grants,
depending on the activity and recipient of the funds.

In brief, for SWP, the Local Assistance Set-Aside may

be used to:

•	Make loans to public water systems for
purchasing land or conservation easements for
the purpose of SWP;

•	Make loans to community water systems for
implementing source water protection petition
programs or voluntary, incentive-based SWP
measures;

•	Make expenditures to delineate, assess, and/or
update SWP areas; and

•	Make expenditures to establish and implement
wellhead protection programs, and to implement
efforts to protect source water.

Examples of activities that can be supported by the
Local Assistance set-aside include:

Updating source water assessments,

Developing and implementing SWP plans,

Land acquisition and conservation easements,
Well abandonment,

Cover crops and other best management
practices,

Building fences to protect water sources,

Septic system surveys and replacement,

Outreach and education, and
Development of local ordinances to protect
source waters.

States may provide support through various
mechanisms such as loans to public water systems,
grants to local communities, funding of technical
service providers, or grants to nonprofit
organizations. More information on eligibilities can be
found in the DWSRF Eligibility Handbook:
httDs://www.eDa.aov/dwsrf/dwsrf-eliaibilities.
LEVERAGING SET-ASIDES TO ADVANCE SWP
Even small investments can play an important role in
advancing SWP. Set-aside funds can help not only
through direct action, but also coordination with other
programs charged with protecting and improving
freshwater resources and public health. For example,
several states have used DWSRF set-aside funds to
develop assessments, appraisals, and plans to meet
application requirements for Clean Water State
Revolving Funds and Clean Water Act section 319
Nonpoint Source Management grants. Some states
have used set-aside funds to support staff who
research and prepare applications for funding
opportunities or who coordinate with other
organizations to identify priority areas for
conservation investment (e.g., United States
Department of Agriculture conservation programs).

LEARN MORE ABOUT FUNDING

DWSRF assistance is distributed directly from state
agencies. Each state has its own funding procedure.
Contact information for each state is posted at
httDs://www.eDa.aov/drinkinawatersrf/state-dwsrf-
website-and-contacts.

For more information, visit: epa.gov/dwsrf

Appendix D: EPA Fact Sheets on DWSRF Set-Asides for Source Water Protection

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DWSRF Set-Asides Case Studies: Source Water Protection

How states and communities are using the Drinking Water State Revolving Fund (DWSRF)
set-asides to safeguard sources of drinking water.

NEBRASKA: DRINKING WATER PROTECTION
MANAGEMENT PLANS

The Nebraska Department of Environment and Energy
(NDEE) uses their DWSRF set-asides to support the
development of groundwater-focused planning
documents which help Community Water Systems
access funding to address nonpoint sources of
pollution. Plans are developed by communities using
source water protection grants funded by the DWSRF
15 percent Local Assistance set-aside. These plans are
written to meet the requirements of an Alternative to
an EPA 9-Element Watershed Management Plan.
Once accepted, the plans will be eligible for EPA Clean
Water Act section 319 grant funds. If awarded, these
grant funds may be used to implement the actions
outlined in the plans, including on-the-ground best
management practices and public outreach to address
nitrate contamination in the aquifer. Currently, two of
these groundwater-focused plans are also being used
to access targeted funding for financial and technical
assistance from the National Water Quality Initiative
(NWQI) of the USDA Natural Resources Conservation
Service (NRCS) and have resulted in over $500,000
for implementation of voluntary conservation
practices to landowners.

In addition, NDEE is collaborating with USDA NRCS to
prioritize wellhead protection areas for source water
protection funding included in the 2018 Farm Bill.
The 2018 Farm Bill makes $2-3 million available
annually for source water protection in Nebraska to
be invested in delineated source water protection or
wellhead protection areas. The DWSRF 15 percent
set-aside funds will be used by NDEE to update the
delineations of wellhead protection areas from 20-
year time-of-travel to 50-year time-of-travel,
expanding the areas eligible for USDA NRCS
investment in source water protection
activities. Funding for source water planning has
been limited in the past and this collaboration
between planning and implementation funding
sources opens new opportunities for source water
protection.

Additional Source Water Protection Resources:

EPA's Source Water Protection page:
ena.nov/sourcewaternrotection

The Clean Water SRF Program: epa.aov/cwsrf
The Source Water Collaborative: sourcewatercollaborative.org

I OFFICE OF GROUND WATER
® | AND DRINKING WATER

Appendix D: EPA Fact Sheets on DWSRF Set-Asides for Source Water Protection

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EPA OGWDW | DWSRF Set-Asides Case Studies: Source Water Protection

DELAWARE: COVER CROPS FOR PROTECTION
The Delaware DWSRF program partnered with the
Sussex County Conservation District (SCCD) and the
Delaware Rural Water Association (DRWA) to conduct a
source water protection pilot. The objective was to work
with both the agriculture and water utility communities
to ensure all agricultural land surrounding high-risk
public wells participated in a cover crop program. The
state's DWSRF program worked with the SCCD to
complete GIS mapping of high-risk public wells and
financially supplement the cover crop program. The
state also worked with the DRWA to identify high-risk
public wells throughout Sussex County. This pilot,
funded with $250,000 from the DWSRF 15 percent
Local Assistance set-aside, implemented 5,555 acres of
cover crops. Based on the success of the pilot, the goal
is to expand this program to the two other Delaware
counties in the future and further promote drinking
water protection through cover crops.

WASHINGTON: LEVERAGING FOR LAND

The Skagit Public Utility District (PUD) provides drinking
water to more than 65,000 people in Skagit County,
serving three cities as well as suburban and rural areas.
The Gilligan Creek area of the Cultus Mountain
Watershed provides 45 percent of the PUD's source
water for its Judy Reservoir Water System. Until
recently, timber companies owned all property around
Gilligan Creek. Using a grant and a loan from two state
agencies, Skagit PUD purchased and protected 250
acres of critical watershed area in perpetuity for its
customers. The grant, funded with the DWSRF 15
percent Local Assistance Source Water Protection set-
aside through the Washington Department of Health,
was used by the PUD for appraisal and survey of the
property early in the process.

EPA 816-F-19-004 October 2019

Knowing the approximate value and exact portion of
the property helped the utility negotiate with the
property owner and clearly identify a cost to rate
payers for the PUD board of commissioners to
consider. The PUD subsequently purchased the land
in 2019 with a $1.53 million Clean Water State
Revolving Fund loan through the Washington
Department of Ecology. The loan included 25 percent
principal forgiveness, which reduced the amount
owed on the loan. The PUD will pay back the loan
through customer revenues and proceeds from
selective timber harvests. This collaboration between
multiple state agencies and funding sources resulted
in a successful priority drinking water protection
project.

MAINE; LAND CONSERVATION
The Portland Water District (the District) is Maine's
largest water utility. Its source, Sebago Lake, is a
multi-use lake with excellent water quality. The
greatest challenge to the long-term protection of lake
water quality is potential development pressure in the
mostly privately-owned watershed. In response, the
District developed a Watershed Land Conservation
Program, which provides funding toward forest
conservation. In 2019, the District approved the
purchase of a $345,000 conservation easement on a
1,417 acre property known as the Tiger Hill
Community Forest. The property is located within two
miles of the drinking water source and its
conservation will ensure that it remains forested in
perpetuity. The District is using the Maine DWSRF's
land acquisition loan program under the 15 percent
set-aside, which offers a low interest rate and up to
$50,000 principal forgiveness, reducing the amount
owed on the loan. This source water protection
project, scheduled for completion in fall 2019,
benefits the District and its rate payers by protecting
their drinking water source.

LEARN MORE ABOUT FUNDING
DWSRF assistance is distributed directly from state
agencies. Each state has its own procedure. Contact
information for each state is posted at

https://www.epa.aov/drinkinawatersrf/state-dwsrf-
website-and-contacts.

For more information, visit: epa.gov/dwsrf

Appendix D: EPA Fact Sheets on DWSRF Set-Asides for Source Water Protection

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CWSRF Best Practices Guide for Financing Nonpoint Source Solutions I Building Successful Project Funding Partnerships

Using the Drinking Water State Revolving Fund Set-
Asides for Source Water Protection Loans

States may offer loans to community water systems to finance source water protection activities
through the Local Assistance and Other State Programs set-aside.

WHAT IS SOURCE WATER PROTECTION?

Source water is the water from rivers, streams, lakes,
springs and ground water aquifers that provides water
to public drinking water supplies and private wells.
Source water protection aims to safeguard, maintain,
or improve the quality of those drinking water sources
and their contributing land-areas. There is growing
recognition that protecting a source from
contamination is often more efficient and cost-
effective than treating the drinking water to remove
the contamination. Types of source water protection
measures that a community can implement include
local land use controls through land acquisition and
conservation easements, best management practices
for agricultural and forestry activities, and public
education initiatives.

Source water protection is integral to providing safe
and reliable drinking water to the nearly 300 million
people served by community water systems in the
United States. The Safe Drinking Water Act (SDWA)
Amendments of 1996 established the Drinking Water
State Revolving Fund (DWSRF) program, which
awards capitalization grants from the U.S.
Environmental Protection Agency (EPA) to each of the
50 states and Puerto Rico. A portion of the

capitalization grants can be used as "set-asides" to
support non-infrastructure activities, including source
water protection. DWSRF programs can use set-
asides to develop and implement Source Water
Protection Programs, delineate and assess source
water protection areas, and finance a variety of local
land use controls and other management tools for
source water protection. The full range of source
water protection activities eligible for DWSRF set-
aside funding is described in a separate EPA fact sheet
identified in the additional resources box below.

DWSRF ASSISTANCE

The Drinking Water State Revolving Fund (DWSRF)
can provide financial assistance to publicly-owned and
privately-owned community water systems, as well as
non-profit non-community water systems, for drinking

Additional Source Water Protection Resources:

EPA's Source Water Protection page:
eDa.aov/sourcewaterprotection

EPA's Fact Sheet on Source Water Protection Using Set-Asides:
epa.aov/dwsrf/Drotectina-source-water-dwsrf-set-asides

The Clean Water SRF Program: epa.gov/cwsrf
The Source Water Collaborative: sourcewatercollaborative.org

USDA Natural Resources Conservation Services:
htlns://www, nrcs.usda.gov/wns/nortal/nrcs/site/national/home/

*1 OFFICE OF GROUND WATER
| AND DRINKING WATER

Appendix D: EPA Fact Sheets on DWSRF Set-Asides for Source Water Protection

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EPA OGWDW | Protecting Source Water with the DWSRF Set-Aside Loans	EPA 816-F-20-006 December 2020

water infrastructure projects including cybersecurity
measures. 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.

Each of the 50 states and Puerto Rico operates
its own DWSRF program. They receive
annual capitalization grants from the EPA,
which in turn provide low-interest loans and
other types of assistance to water systems.
Repayments of DWSRF loans begin 18 months
after project completion, with loan terms up to 30
years for most communities, or up to 40 years for
disadvantaged communities.

Additionally, states may use a portion of their
capitalization grant from the 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.

LOCAL ASSISTANCE SET-ASIDE LOANS FOR
SOURCE WATER PROTECTION

The Local Assistance and Other State Programs
set-aside (i.e., 15%) can be used to provide
loans to water systems for source water
protection. Specifically, these loans can be used
to acquire land or conservation easements needed to
protect drinking water sources and for local
planning and implementation of voluntary,
incentive-based source water protection measures.
Repaid loans may be recycled back into the set-
aside account to fund other source water protection
loans or to the state's infrastructure loan fund.
States can provide principal forgiveness or negative
interest rates for these loans using the
Congressional additional subsidy authority. Any
principal forgiveness or negative interest
provided through source water protection loans
counts toward the state's maximum allowable
additional subsidy under the DWSRF.

ACQUISITION OF LAND OR CONSERVATION
EASEMENTS

For some communities, an effective way to protect
the quality of drinking water sources is through land
ownership or restricted land uses. These efforts focus
on watersheds or ground water recharge areas where
development or other activities could impair the
quality of the source water. States can use DWSRF
set-aside funds to provide loans to water systems for
the following land use controls:

•	Land Acquisition: Purchase of land at or below
the fair market value to control the types of
activities that can take place.

•	Conservation Easement: A Legal agreement
with a landowner that permanently protects the
land by limiting the amount and type of
development that can take place but continues to
leave the land in private ownership. Landowners
typically sell conservation easements to a land
conservation organization or government entity.
Landowners who instead donate an easement
may benefit from reduced income/estate taxes.

Land acquisition and conservation easements can
prevent activities that may degrade water quality
from occurring in critical areas. They can also provide
additional community benefits such as preserving
open space, enhancing recreational opportunities,
and reducing flood damage.

SOURCE WATER PROTECTION MEASURES

Some communities are focusing their protection
efforts on local, voluntary, and incentive-based source
water protection measures. States can use the Local
Assistance and Other State Programs set-aside to
provide loans to water systems to implement these
measures. This approach emphasizes a local
stakeholder process to produce a plan for
implementing a wide range of local land use controls
and management tools, including:

•	Fencing: Building fences that keep cattle away
from the water's edge can reduce contamination
in sources of drinking water and prevent bank
erosion.

•	Capping Wells: Sealing abandoned ground
water wells and underground injection wells can
keep contaminants out of ground water aquifers

A I OFFICE OFCROUND WATER
• AND DRINKING WATER

Appendix D: EPA Fact Sheets on DWSRF Set-Asides for Source Water Protection

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EPA OGWDW | Protecting Source Water with the DWSRF Set-Aside Loans

EPA 816-F-20-006 December 2020

•	Riparian Buffers: Strips of vegetation along
streams and around reservoirs can significantly
reduce the amount of sediment and
contamination entering the source water. The
vegetation serves as natural filters, and the tree
and shrub roots hold stream banks in place to
prevent soil erosion.

PARTNERSHIPS OPPORTUNITIES

DWSRF set-aside loans for land acquisition,
conservation easements, and other source water
protection measures can only be made to public water
systems. An organization such as a watershed
association or land conservancy can become a co-
signatory to the loan agreement with the water
system. In this arrangement, the organization could
help implement the land use control measures around
the water sources and take over the responsibility for
loan repayment. The loan agreement would describe
the specific responsibilities of the organization and the
water system with respect to the financial assistance
provided by the state. Such partnerships may
complement ongoing work of the organization to
preserve parts of a watershed or aquifer recharge
area for other purposes.

Additionally, these source water protection loans can
leverage other sources of funding. These include the
2018 Farm Bill, EPA's 319 program, and private
lending. There are often partnership opportunities
available with land trusts, nonprofit organizations,
and others with expertise in land protection issues
that could work closely with the water systems.

The following are some examples of the types of
activities that land trusts and other organizations can
do to facilitate source water protection (eligible
activities under other parts of the 15% set-aside):

•	provide technical assistance to water systems in
identifying properties that qualify for funding;

•	offer expertise in negotiating land acquisitions or
conservation easements with willing sellers;

•	manage land trusts or conservation easements
once they are acquired from a willing seller; and

• assist with public outreach efforts to demonstrate
the benefits of protecting water supplies within a
community.

SOURCES OF LOAN REPAYMENT

Each state must include approval of a source of loan
repayment as part of the application review and
approval process. Although finding a source of
repayment can prove challenging, it is possible. The
source of repayment need not come from the project
itself. Loan recipients can be creative in developing
sources of repayment.

Some potential repayment sources include:

Drinking water user fees.

Dedicated portions of local, county, or state taxes
or fees.

State or local government grants.

Fees paid by developers.

Recreational use fees.

Revenue from sustainable timber harvest or other
forest products.

Nutrient credits.

Donations made to nonprofit groups (in cases
when a nonprofit is a co-signatory on a loan).

ESTABLISHING A PRIORITY SYSTEM FOR
LOANS FOR SOURCE WATER PROTECTION

Each state that establishes a loan program for land
acquisition or conservation easements and source
water protection measures must develop a
priority-setting process to determine which
projects to fund. An important consideration for
the priority-setting process would be an evaluation
of how the land, easement, or measure to be
funded will protect the water supply from
contamination and help ensure compliance with
national drinking water regulations.

Each state that has established a loan program has
developed a unique priority system for ranking
projects. Many of these priority systems include
the requirement that the land be within a
delineated source water or wellhead protection
area.

For more information, visit: epa.gov/dwsrf

Appendix D: EPA Fact Sheets on DWSRF Set-Asides for Source Water Protection

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CWSRF Best Practices Guide for Financing Nonpoint Source Solutions I Building Successful Project Funding Partnerships

DWSRF Case Studies: Source Water Protection Loans
Under the DWSRF Set-Asides

How states and communities are using the DWSRF Local Assistance and Other State Programs
set-aside loans to safeguard sources of drinking water.

MAINE: PROTECTING LAKE AUBURN AND THE
CHASE POND WATERSHED
The Auburn Water Department received a loan for
$570,000 to acquire 434 acres of land in the
watershed of the "Basin," a small pond which drains
directly into Lake Auburn. Lake Auburn serves as a
source for two water systems. The systems
collaborated with the Lewiston-Auburn Watershed
Commission and the Androscoggin Land Trust (ALT)
and negotiated a joint easement. Under this
easement, the Commission reviews the landowner's
forest management plan to ensure that best
management practices for water quality are used and
ALT shares overall easement monitoring
responsibilities. By protecting land around Lake
Auburn, the water systems have been able to
maintain their source water quality.

The York Water District in Maine has used the loan
program four times since 2007 to achieve its long-
term goal of protecting the Chase's Pond watershed.
Chase's Pond is a long, narrow, and shallow pond that
has served as the sole drinking water source for the
Town of York since 1896. The District determined that
ownership of this 2,090-acre watershed is critical to
protecting its water quality. In 2014, the District was
awarded a loan through the state's land acquisition

loan program for $249,000 to acquire 2.23 acres of
land. The loan term is 10 years and has a 0% interest
rate. The acquired land is adjacent to parcels
previously acquired in 2007 and 2010, increasing the
extent of protected land in the watershed.
Additionally, the property acquired in 2014 included a
single-family residence, which has been repurposed
for the Town of York Natural Resource Protection
Patrolling Program office. This program partners the
York Water District and its police department with two
bordering areas, the Kittery Water District and the
Mount Agamenticus Conservation Region. The land
acquisition resulted in lasting improvements to both
water quality and local land management
partnerships.

VERMONT: PROTECTING LAND USE IN SOURCE
WATER PROTECTION AREAS
The Town of Bradford received a $140,000 loan to
purchase a tract of farmland within Zone I of the
system's source protection area. The purchase was a
high priority because the Town's source protection
plan identified high-risk land use activity on the
property.

OFFICE OF GROUND WATER
AND DRINKING WATER

Appendix D: EPA Fact Sheets on DWSRF Set-Asides for Source Water Protection

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EPA OGWDW | DWSRF Case Studies: Source Water Protection Loans Under Set-Asides	EPA 816-F-20-006 December 2020

CALIFORNIA: PROTECTING CONTRA LOMA
RESERVOIR

The Contra Costa Water District relies on the Contra
Lorna Reservoir to supply drinking water to its
community. The community has historically enjoyed
the reservoir for swimming and recreation, but the
human contact was associated with increased
coliform levels in the reservoir. To improve water
quality for the drinking water supply and to preserve
the enjoyment of the reservoir for swimming, the
Contra Costa Water District received a loan through
the Local Assistance and Other State Programs set-
aside for $2 million to build the Contra Loma Reservoir
Swim Lagoon. A concrete-covered earthen berm was
built to separate the water supply from all human
contact. The project was completed as one of many
projects to address the challenges facing the Bay-
Delta in California. The loan term was 20 years and
had an interest rate of 2.39%. The project will protect
both the water quality and the community's
enjoyment of the Contra Loma Reservoir for years to
come.

NEBRASKA: SUPPORTING ACQUISITION OF
WATERSHED LAND

The Nebraska DWSRF made a $1 million loan to the
City of Syracuse for a land purchase of 637 acres from
a group of private owners. This land will protect the
City's wells (built in the 1950s) from nitrate
contamination. The loan was paired with the
development of a Drinking Water Management
Protection Plan for the City. The plan will develop a
groundwater model to delineate the 50-year well
head protection area and establish a robust Nebraska
Department of Environmental Quality and EPA
approved Drinking Water Protection Management
Plan that includes all elements of a Well Head
Protection Plan. This project identifies water quality
issues and opportunities for improving water quality,
and it and engages the community in planning and
implementation.

The Nebraska DWSRF makes protection plans a
requirement of any land loan agreements, under the
15% set-aside, and it will serve as the guide for the
City to protect its well field source, and will make
them eligible for CWA Section 319 assistance in the
future.

LEARN MORE ABOUT FUNDING
DWSRF assistance is distributed directly from state
agencies. Each state has its own funding procedure.
Contact information for each state is posted at

https://www.epa.aov/drinkinawatersrf/state-dwsrf-
website-and-contacts.

Appendix D: EPA Fact Sheets on DWSRF Set-Asides for Source Water Protection

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Appendix E: Resources

National Program Resources

EPA §319 Grant Program

Homepage: www.epa.gov/nps/319

2016 National Nonpoint Source Program - A Catalyst for Water Quality Improvements:
www.epa.gov/sites/production/files/2016-10/documents/nps program highlights
report~so8.pdf

EPA Clean Water State Revolving Fund Program

Homepage: www.epa.gov/cwsrf

2018 CWSRF Annual Report: www.epa.gov/sites/production/files/2019-04/documents/2018
cwsrf annual report.pdf

Overview of Clean Water State Revolving Fund Eligibilities: www.epa.gov/sites/production/
files/2016-07/documents/overview of cwsrf eligibilities may 2016.pdf

Financing Options for Nontraditional Eligibilities in the CWSRF: www.epa.gov/sites/production/
files/2Qi7-Q5/documents/financing options for nontraditional eligibilities final.pdf

Sponsorship Lending and the CWSRF: www.epa.gov/sites/production/files/2017-10/documents/
sponsorship style newest final.pdf

CWSRF Webinars - Decentralized Wastewater Treatment Systems, Urban Trees and Land
Conservation, NPS Sponsorship: www, e pa. go v/cws rf/cws rf - we b i n a rs

State CWSRF/NPS Programs

Arkansas

Agriculture Water Quality Loan Program (AgWQLP): www.anrc.arkansas.gov/divisions/
conservation/agricultural-water-quality-loan-program/

California

NPS Grants and Funding: www.waterboards.ca.gov/water issues/programs/nps/319grants.html
Association of Bay Area Governments: https://abag.ca.gov/planning/proiects.html

Iowa

NPS Water Quality Programs: www.iowasrf.com/program/other water quality programs

Onsite Waste Water Assistance Program: www.iowasrf.com/program/other water quality
programs/onsite waste water assistance program.cfm

Local Water Protection Program: www.iowasrf.com/program/other water quality programs/
local water protection.cfm

Appendix E: Resources
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CWSRF Best Practices Guide for Financing Nonpoint Source Solutions I Building Successful Project Funding Partnerships

Livestock Water Quality Program:

www.iowasrf.com/program/other water quality programs/livestock water quality.cfm
Iowa's Nonpoint Source Program:

www.iowasrf.com/program/other water quality programs/general nonpoint source.cfm
Maine

Department of Environmental Protection - Watershed Management:
www.maine.gov/dep/land/watershed/index.html

Minnesota

Onsite/Decentralized Program:

www.pca.state.mn.us/featured/cwp-ssts-and-bmp-spel I-less-pollution
Agricultural BMP Program: www.mda.state.mn.us/agbmploan
Clean Water Partnership Program:

www.pca.state.mn.us/water/clean-water-partnership-program

Section 319 Funding: www.pca.state.mn.us/water/financial-assistance-nonpoint-source-water-
poll ution-projects-clean-water-partnership-and

Tourism Loan Program:

https://mn.gov/deed/business/financing-business/deed-programs/septic-tourism/

Ohio

NPS Sponsorship (WRRSP):

https://epa.0hi0.g0v/static/P0rtals/29/d0cuments/0fa/WRRSPfactsheetN0v2017.pdf
Linked Deposit for Private Borrowers:

https://epa.ohio.gov/static/Portals/29/documents/WPCLFLinkedDepositPrograms.pdf
Household Sewage Program:

https://epa.ohio.gov/static/Portals/29/documents/HSTSLinkedDeposit.pdf
Oregon

Farmers Irrigation District project: www.epa.gov/cwsrf/innovations-agriculture-oregon-
farmers-irrigation-district-improves-water-quality-maximizes

Vermont

NPS Sponsorship (WISPr): dec.vermont.gov/facilities-engineering/water-financing/cwsrf/WISPr
Act 185: legislature.vermont.gov/bill/status/2018/H.777

Washington

Water Quality Combined Funding Program:

https://ecologv.wa.gov/About-us/How-we-operate/Grants-loans/Find-a-grant-or-loan/
Water-Quality-Combined-Funding-Program/WQC-funding-cycle

On-site Sewage System Projects: https://ecology.wa.gov/About-us/How-we-operate/Grants-
loans/Find-a-grant-or-loan/Water-Quality-grants-and-loans/On-site-sewage-projects

Appendix E: Resources
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Endnotes

1	CWSRF data from 1988-2020, National Information Management System Database.
U.S. Environmental Protection Agency, 2020.

2	A National Evaluation of the Clean Water Act Section Program. U.S. Environmental Protection
Agency, 2011.

https://www.epa.gov/sites/default/files/2015-09/documents/319evaluation.pdf.

3	CWSRF data from 1988-2020.

4	National Nonpoint Source Program - a Catalyst for Water Quality Improvements.

U.S. Environmental Protection Agency, 2016. https://www.epa.gov/sites/default/
files/20i6-io/documents/nps program highlights report-508.pdf.

5	Ibid.

6	Nonpoint Source Program and Grants Guidelines for States and Territories. U.S. Environmental
Protection Agency, 2013. https://www.epa.gov/sites/production/files/2015-09/
documents/319-guidelines-fyi4.pdf.

7	Overview of Clean Water State Revolving Fund Eligibilities. U.S. Environmental Protection Agency,
2016. https://www.epa.gov/cwsrf/overview-clean-water-state-revolving-fund-eligibilities.

8	California State Water Resources Control Board CWSRF Clean Water Benefits Reporting
System Data for loans provided to Association of Bay Area Governments in 2009.

9	Collaborative Watershed Restoration Plan: Maine's Project to Improve Casco Bay.

U.S. Environmental Protection Agency, 2015. https://www.epa.gov/cwsrf/collaborative-
watershed-restoration-plan-maines-project-improve-casco-bay.

10	Financing Options for Nontraditional Eligibilities in the Clean Water State Revolving Fund Programs.
U.S. Environmental Protection Agency, 2017. https://www.epa.gov/sites/production/
files/2Qi7-Q5/documents/financing options for nontraditional eligibilities final.pdf.

11	Data from 2020 National Information Management System Reporting and the Ohio EPA
WRRSP Progress Report dated June 2020.

12	Funding Nonpoint Source Activities with the Clean Water State Revolving Fund. U.S. Environmental
Protection Agency, 2003. https://www.aswm.org/states/nps.pdf.

13	Governor Hickenlooper signs SB18-066. Coyote Gulch. May 5, 2018.
https://c0v0tegulch.bl0g/2018/05/04/2018-c0leg-g0vern0r-hickenl00per-signs-sb18-
066-extend-operation-of-state-lottery-division/.

14	"About GOCO." Great Outdoors Colorado, 2020. http://www.goco.org/about-us.

15	Interview with the Flagstaff Watershed Protection Program Staff on May 8, 2020.

Endnotes
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oEPA

United States
Environmental Protection
Agency

December 2021
EPA 841B21012


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