The Drinking Water State Revolving Fund Helps Ground Water Systems Deliver Public Health Protection

Abstract

Sustaining human life and health is among the highest order uses of ground water. In the United States, >100 million people rely on ground water as their source of drinking water. People living in rural areas, or who are served by very small water systems, generally depend entirely on ground water. This article explores how the Drinking Water State Revolvi0ng Fund (DWSRF) program helps ground water dependent systems deliver safe drinking water. Passed by Congress in 1974 and amended in 1986 and 1996, the Safe Drinking Water Act (SDWA) regulates the nation’s public drinking water supply in order to protect public health. SDWA authorizes the Environmental Protection Agency (EPA) to set national health-based standards for the presence of contaminants in drinking water. It also allows the EPA, the states, and drinking water systems to work together to implement these standards. The act originally stressed treatment as the primary means of providing safe drinking water; the 1996 Amendments greatly expanded the law’s purview by recognizing the need for capacity development, source water protection, operator training, public information, and funding for water system improvements as vital to meeting SDWA’s goals. In doing so, the amendments established the DWSRF to capitalize state financing programs for water system improvements to meet drinking water standards. Nationwide, ∼160,000 federally regulated systems provide potable water to the public. These systems are subject to the requirements of the SDWA. An agency in the State Department of Health or the State Environmental Agency usually implements SDWA requirements along with state-specific requirements. In rare cases, the U.S. EPA directly implements the SDWA. SDWA applies to public water systems (PWSs), which are defined as systems providing drinking water to at least 15 service connections or an average of at least 25 people per day for at least 60 d per year. About 54,000 PWSs are community water systems (CWSs) that serve residential developments, towns, and cities. About 20,000 PWSs are nontransient non-CWSs, which serve rural schools, factories, or other establishments not served by a CWS but still providing drinking water to the same people on a regular basis. Finally, ∼97,000 PWSs are transient non-CWSs, which serve roadside rest stops and other establishments providing drinking water to different people each day. CWSs are extremely diverse in terms of size, ownership structure, and dependence on ground water. About two-thirds of all CWSs serve fewer than 500 persons each! About 91% of these systems rely on ground water! Only 6% of CWSs serve >10,000 persons each. Ground water sources are used by about one-third of these larger systems. Ownership structure of CWSs varies significantly as a function of system size. Ancillary systems serve mobile home parks or otherwise provide water service not as a primary business mission but as a sideline in the provision of some other service. About 40% of systems serving fewer than 500 persons are ancillary! About 35% of systems serving fewer than 500 persons are privately owned systems. These include those owned by homeowners associations, private individuals, and investors. The remaining 25% of systems serving fewer than 500 persons are publicly owned. Regardless of ownership, systems serving fewer than 500 persons often lack the technical, financial, and managerial capabilities needed to consistently deliver quality service at an affordable cost. Virtually all nontransient non-CWSs and transient non-CWSs are very small and rely upon ground water. Congress created the DWSRF program in the 1996 SDWA amendments. The goal of Congress was to establish an innovative program that would ensure the continued provision of safe drinking water by helping PWSs fund infrastructure upgrades and by improving the institutional capabilities of PWSs. The DWSRF also helps states undertake activities to support their drinking water programs. Through the DWSRF program, the federal government annually provides money (referred to as capitalization grants) that states can loan at below-market interest rates to pay for qualifying improvements to drinking water system infrastructure. Before a state can receive a capitalization grant, it must match money equal to 20% of the grant to its revolving loan fund. States can set aside up to 31% of each year’s grant allocation to pay for managing the DWSRF program and for providing technical assistance to water systems. Set-aside funds can also be used to pay for local assistance, other state programs to protect drinking water sources, and promoting drinking water system capacity. Furthermore, states may provide additional subsidies, including principal forgiveness, to those systems the state defines as disadvantaged. Operating in all 50 states and Puerto Rico, the DWSRF programs have financed ∼4400 projects with loans totaling almost $9.5 billion through 2005. The programs collectively have made more than $11 billion in funds available to assist PWSs in protecting public health. Since 2000, the DWSRF has averaged more than $1.3 billion in annual assistance to drinking water systems. No DWSRF program has ever experienced a default on a loan, which makes these programs highly regarded by financing institutions. The DWSRF programs are founded upon the singular focus of assisting state drinking water programs and drinking water systems in meeting their responsibility to protect public health. Since 1997, the DWSRF programs have improved public health protection for 100 million people. The DWSRF programs have achieved strong financial performance while ensuring that water systems, especially disadvantaged water systems, have access to the financing they need to meet the drinking water health-based standards from the SDWA or to continue to meet the drinking water health-based standards from SDWA. Since the program’s inception, almost 73% of all DWSRF loans have been made to water systems serving fewer than 10,000 people, most of which are ground water systems. The law allows states to make loans for the eligible projects of publicly owned, privately owned, and nonprofit CWSs and nonprofit non-CWSs. Entities that will create a new CWS to address a public health problem caused by unsafe drinking water sources also can receive assistance. There are five basic categories of eligible projects: Treatment: Projects to continue to meet drinking water health-based standards for contaminants that cause acute and chronic health effects. Transmission and distribution: Projects to install or replace transmission and distribution mains, pumps, and other distribution system infrastructure. Source: Projects to rehabilitate wells or develop new sources to replace contaminated sources. Storage: Projects to install or improve eligible storage facilities. Consolidation: Projects to consolidate water systems are eligible (for instance, if a water system has a contaminated source or if a system is unable to maintain technical, managerial, or financial capacity). Set-asides are an especially innovative feature of the DWSRF program. States, at their discretion, may take none, some, or all the authorized set-aside amounts. The set-asides include the following: Administration and technical assistance (4%): Almost every state sets aside some portion of its annual DWSRF allotment to administer its DWSRF program and to provide technical assistance to PWSs. Small system technical assistance (2%): All but two states have set aside up to 2% of their annual DWSRF allotment to provide technical assistance to water systems that serve 10,000 or fewer people. Activities paid for with these funds have included planning grants to small systems, visits from circuit riders, and special small system training. State program management (10%): This set-aside allows states to use up to 10% of their annual allotment to develop and implement their capacity development and operator certification programs, administer their source water protection program (which includes providing technical assistance to prevent contamination of sources), or fund a portion of their PWSs program. Local assistance and other state programs (15%): States may use up to 15% of their annual allotments to fund a variety of activities and assistance associated with source water protection, wellhead protection, and capacity development. Each state is required to develop an annual intended use plan (IUP) that describes how program funds will be used. The IUP must include a comprehensive list of eligible infrastructure projects and a list of the highest priority projects expected to receive funding in that year. Details of the IUP and priority list depend on how the state has designed its DWSRF program and on the criteria the state uses to rank projects. States must give priority to projects that Address the most serious risks to public health. Are necessary to ensure a system that can meet SDWA’s drinking water health-based standards. Assist systems most in need on a per household basis. States use their capitalization grant allotments, minus set-asides, to finance projects from the IUP. In 2005, DWSRF programs financed 582 projects totaling $1.6 billion (see Exhibit 6). Principal and interest payments from DWSRF loan recipients flow back into the DWSRF, where they become available for new loans. Of the more than $1.4 billion in financial assistance awarded in 2005, approximately 30% will help systems meet drinking water health-based standards 36% will help systems continue to meet drinking water health-based standards 13% will help systems meet new drinking water health-based standards The remaining 21% of the financial assistance will be used to help systems meet state drinking water health-based standards or to otherwise further SDWA’s public health protection objectives. The DWSRF is an innovative, flexible federal-state partnership to assist drinking water systems in financing needed infrastructure investment. The program offers systems a source of low-interest capital and states a source of funding for important programs, like source water protection, which will enhance the long-term strength and sustainability of the nation’s water systems. Small ground water systems account for a significant portion of all water systems in the United States. These systems often lack the technical, managerial, and financial capabilities needed to supply safe drinking water at an affordable cost. The DWSRF program offers states special tools, including set-asides and disadvantaged system assistance, to help these systems to develop the capabilities they need to sustainably deliver safe, affordable drinking water. For additional information, please visit the national DWSRF program Web site at http://www.epa.gov/safewater/ dwsrf/index.html.