Small Systems Help from USDA

Although the FY 14 EPA budget request for the DWSRF has been reduced to $817 million, there is still some funding “good news” for small and rural drinking water systems.  The FY 14 USDA budget for the Rural Utilities Services includes $1.2 billion in water and wastewater loans (up from $731 million in FY 12).  Grants, separately funded under the Rural Utilities Service, are requested at $304 million – a $128 million reduction from FY 12.  Please see below for funding specifics taken from “Water and Waste Disposal Program” portion of the FY 2014 USDA Budget in Brief.

• “The Water and Waste Disposal Program provides financing for rural communities to establish, expand or modernize water treatment and waste disposal facilities. These facilities provide safe drinking water and sanitary waste disposal for residential users, and help communities thrive by attracting new business. Projects are designed to improve the energy efficiency of the water and waste facilities and to improve water conservation efforts.

• Eligibility is limited to communities of 10,000 or less in population that are unable to obtain credit elsewhere. In addition, financing is available only to those communities with low median household income levels. Priority is given to public entities serving areas with less than 5,500 population and applying for loans to restore a deteriorating water system or to improve, enlarge or modify an inadequate waste facility. Grants are limited to a maximum of 75 percent of project costs. Program regulations stipulate that the grant amount should only be as much as necessary to bring the user rates down to a reasonable level for the area. Water and Waste Disposal grant and loan funds are usually combined based on the income levels and user costs.

• Grants are also provided for solid waste disposal and technical assistance and training. The 2014 Budget provides $304 million in budget authority for grants for the water and waste disposal program. As a result of low interest rates and historically low levels of defaults, direct loans can be provided at a negative subsidy rate and do not require a request for budget authority. The 2014 Budget authorizes a $1.2 billion direct loan level for this program. Low interest rates also mean that more communities can afford to service higher levels of debt, reducing the need for grant funds. Accordingly, grant funding is reduced by about $131 million. Collectively, the 2014 Budget provides a total water and waste disposal program level of $1.5 billion.

• In 2012, the agency revised the performance measure to focus solely on the population served rather than customer receiving assistance. The agency is estimating an increase in performance due to the increased loan level that will be able to support a greater volume of loans, impacting a larger number of rural residents.”

ASDWA encourages state drinking water programs to enhance their collaborative funding efforts with their USDA counterparts.