Clean Water State Revolving Fund Program: Analysis of Variations in State Practices

Abstract

Each state administers a Clean Water State Revolving Fund (CWSRF) program that utilizes federal grants, along with a state match, to make loans to localities and other eligible entities to finance wastewater and other eligible projects. This paper examines variations in state practices, focusing on provisions that impact

1.	the local affordability of a project, and
2.	the total amount of funds available to meet statewide needs.

The findings indicate that there are significant variations in the level of interest rates charged on CWSRF loans, the use of state leveraged bonds to increase the amount of funds available, and the provision of state grants to complement the CWSRF funds. This article discusses the implications of these variations and the interrelationships among the practices.

Keywords:

• state revolving fund
• infrastructure financing

Notes

3. National Highway System Designation Act of 1995, Public Law 104–59, as amended Through Public Law 107–136, January 24, 2002. www.senate.gov/∼epw/nhs95.pdf (accessed June 2002); State Revolving Funds for Schools Act, 107^th Congress, 1^st Session, H.R. 720, February 27, 2001; www.nabl.org/government/107/house/html/hr729.html (accessed March 2002).

4. United State General Accounting Office; 6. (For an interesting discussion and simulation of the long-run viability of SRFs, see Holcombe & Randall G. (1992). Revolving fund finance: The case of wastewater treatment. Public Budgeting & Finance, 12 (3): 50–65.

5. United State General Accounting Office, 8.

12. Massachusetts Water Pollution Abatement Trust, Personal Correspondence, Nancy Parrillo, Treasurer, May 29, 2002; Michigan Municipal Bond Authority, State Revolving Fund Revenue Bonds, Series Official Statement; 2001.

14. Kansas Development Finance Authority, Official Statement: Kansas Water Pollution Control Revolving Fund Revenue Bonds, 2001 Series I (State Match Bonds) and 2001 Series II (Leveraged Bonds), August 31, 2001: 16.

16. Maryland Department of the Environment, Water Quality Revolving Loan Fund Program Intended Use Plan, Baltimore, June 3, 2002, 1.

18. New Hampshire Department of Environmental Services, The State of New Hampshire Revolving Loan Fund Providing Low-Interest Loans for Sewer and Wastewater Projects, Concord, NY. Brochure-no date.

21. West Virginia Department of Environmental Protection, Intended Use Plan: West Virginia Water Pollution Control Revolving Fund (CWSRF) Fiscal Year 2002, August 31, 2001: 6.

22. Minnesota Pollution Control Agency, Intended Use Plan Water Pollution Control Revolving Fund, January 9, 2002, 2.

23. Texas Water Development Board, State Revolving Fund, Senior Lien Revenue Bonds, Program Series 2000A, Official Statement, August 15, 2000, B-5.

24. The interest rates in Table 1 were estimated based on data from “Market Statistics,” The Bond Buyer, June 14, 2002.

28. Author's calculations based on data from the U.S. Environmental Protection Agency, CWSRF National Information Management System.

29. Minnesota Pollution Control Agency, Intended Use Plan Water Pollution Control Revolving Fund, January 9, 2002, 3.

30. New Hampshire Department of Environmental Services, The State of New Hampshire Revolving Loan Fund Providing Low-Interest Loans for Sewer and Wastewater Projects, Concord, NY. Brochure-no date.

31. Commonwealth of Pennsylvania, Phone Conversation with Paul Marchetti, Executive Director, PENNVEST, May 29, 2002.

32. Maryland Department of the Environment, Water Quality Revolving Loan Fund Program Intended Use Plan, Baltimore, June 3, 2002, 3.

33. For a good discussion of the use of leveraged bonds as a strategy for augmenting revolving funds, see Johnson, Craig L. (1995). Managing financial resources to meet environmental infrastructure needs: The case of state revolving funds. Public Productivity & Management Review, (18): 263–275.

35. Sigo, S. (June 15, 2001). Inaugural Florida SRF deal could be as alluring as state's clean water. Bond Buyer, June 15, 2001, 336 (31161), 3; Shields, Y. (June 7, 2002). Illinois forgoes rating from S&P on triple-A SRF deal. Bond Buyer, 340 (31403), 3.

38. Personal Interview with Douglas Scott, Director, U.S. Water/Sewer Group Co-Coordinator, Fitch Ratings, Austin, TX, August 2, 2002.

39. Iowa Finance Authority. Iowa State Revolving Fund Revenue Bonds, Series 2001, Official Statement, December 7, 2001, 18.

40. Michigan Municipal Bond Authority, State Revolving Fund Revenue Bonds, Series 2001, Official Statement, 24.

41. Personal Interview with Douglas Scott, Director, U.S. Water/Sewer Group Co-Coordinator, Fitch Ratings, Austin, TX, August 2, 2002.

42. New Jersey, Department of Environmental Protection. (February 2002). Clean Water Financing: Proposed Priority System, Intended Use Plan and Project Priority List for Federal Fiscal Year 2003, 15.

44. Virginia Resources Authority. Clean Water State Revolving Fund Revenue Bonds, Series 2000, Official Statement, October 18, 2001, 15; New Jersey Environmental Infrastructure Trust. Environmental Infrastructure Bonds, Series 2001A, 2001B, and 2001C, Official Statement, October 17, 2001, 25; Massachusetts Water Pollution Abatement Trust, Pool Program Bonds, Series 7, June 28, 2001, 2.

45. U.S. Environmental Protection Agency. Financing America's Clean Water Since 1987: A Report of Progress and Innovation. May 2001, EPA-832-R-00–011, 14, http://www.epa.gov/owm/cwfinance/cwsrf/progress.pdf (accessed June 2001); Iowa Finance Authority, Iowa State Revolving Fund Revenue Bonds, Series 2001, Official Statement, December 7, 2001, (7), 14.

47. Ibid.

48. Massachusetts Water Pollution Abatement Trust, Personal Correspondence, Nancy Parrillo, Treasurer, May 29, 2002.

49. Massachusetts Water Pollution Abatement Trust. Pool Program Bonds, Series 7, June 28, 2001.