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Environmental Blog

  • 22
  • January
  • 2015

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Despite Reluctance in Some Regions, EPA Eager to Use State Revolving Loan Funds for Nonpoint Sources of Water Pollution

Since 1988, only $4.3 billion, or just over 4 percent, of total Clean Water State Revolving Loan Funds (CWSRF) has been used to address nonpoint sources of water pollution, such as stormwater runoff from urban areas. The U.S. Environmental Protection Agency (EPA) is eager for states and municipalities to take advantage of these funds for such projects. EPA’s CWSRF program provides federal grants to help fund state revolving loan funds (SRFs) to provide low‑cost financing for a variety of water quality projects, including watershed protection and restoration, estuary management, and traditional wastewater infrastructure projects. As long as a state identifies a nonpoint source problem in its SRF intended use plan, the state may use CWSRF funds for such projects.

Despite this option, some EPA regional offices have denied the use of CWSRF funds for certain nonpoint source projects, establishing a significant obstacle for many states. For example, in New York (EPA Region 2), the state decided to use CWSRF loans to fund over $500 million in repairs to the Tappan Zee Bridge over the Hudson River. According to state officials, the bridge plan qualifies for CWSRF funds because it is “water quality‑based” – it will serve estuary projects, restore marshland and remove structures around the bridge that cause river currents to scour bottom sediments. EPA Region 2, however, rejected most of the plan, asserting that seven of the twelve projects in the plan, totaling $482 million of the $511 million plan, are ineligible for CWSRF funds. New York’s Environmental Facilities Corporation appealed the decision, but three environmental groups sued the State of New York, alleging that the plan is an illegal attempt to use federal wastewater funds to help construct a new bridge.

In the future, loans may be available under the Water Infrastructure Finance and Innovation Act (WIFIA), a water infrastructure finance program signed into law by President Obama that authorizes EPA and the U.S. Army Corps of Engineers to provide direct, low-interest loans to eligible entities for water infrastructure projects. Although the spending legislation for the 2015 fiscal year does not include funding for project loans, it does provide the full $2.2 million Congress authorized for the EPA to set up the WIFIA program. The spending bill also included $906.9 million and $1.449 billion, respectively, for the Drinking Water and Clean Water SRFs, each equal to their 2014 fiscal year funding levels.

Some are concerned that funding for the new Water Finance Center and municipal bonds (discussed here) and for WIFIA may drain money from the drinking water and clean water SRFs, particularly with the new Republican-backed Congress and because the Obama Administration has proposed SRF cuts in the past. Others expect that President Obama’s fiscal year 2016 budget proposal, which is expected to be released February 2, 2015, will increase the overall 2016 budget by 7 percent, however, which would likely not include cuts to EPA programs.

Posted at 01/22/2015 2:54 PM

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