Using State Revolving Funds to Build Climate-Resilient Communities

Issue Paper
June 18, 2014

Record numbers of extreme weather events including floods, heat waves, droughts, fires, and snowstorms have affected communities across the United States in recent years. These events as well as warmer temperatures, changing precipitation patterns, and rising sea levels are expected to intensify as climate change continues. These impacts threaten public health, water availability and quality, and homes and infrastructure. Communities must proactively plan for climate change-related risks and implement flexible and sustainable solutions to protect public health, the economy, and the environment.

Financing Clean Water Systems, and Climate Preparedness, Through State Revolving Funds

There are several existing funding programs that can be used to make communities more resilient to a changing climate. State Revolving Funds (SRFs) are clear examples. They provide critical support for a variety of water and wastewater projects, including drinking water and wastewater treatment facilities and stormwater pollution management. SRFs involve federal, state, and local partnerships, thereby helping to support local economies. Every dollar invested in water infrastructure generates roughly $2.62 in the private economy, and every new job added in the water sector adds 3.68 jobs to the national economy due to the benefits of clean water.

The Clean Water State Revolving Fund (CWSRF) was created in 1987 and its success spurred the subsequent creation of the Drinking Water State Revolving Fund (DWSRF) in 1996. The CWSRF supports a wide variety of water quality protection projects, including those that address nonpoint source pollution, watershed protection, and municipal wastewater treatment. The DWSRF supports drinking water systems to finance infrastructure that improves drinking water quality and better protects public health. Together, these programs have enabled states to provide more than $125 billion in low-interest loans and grants to protect public health and improve the quality of our nation's water resources. Both were identified by President Obama in his 2013 Climate Action Plan as a key tool for climate change preparedness.

These programs provide much-needed funds to meet communities' existing water infrastructure needs and, increasingly, to address challenges from natural disasters. For example, during Hurricane Sandy in 2012, power outages and flooding interrupted water and sewer service to tens of millions of people and caused the release of billions of gallons of untreated sewage across the Northeast. To help New York and New Jersey rebuild after Hurricane Sandy, the U.S. Environmental Protection Agency (EPA) provided additional SRF capitalization grants to help repair and fortify water and wastewater infrastructure.

Both the CWSRF and the DWSRF are administered by the states, but they are subject to oversight and programmatic regulations and guidance issued by the EPA. Each state is provided with a proportionate share of the annual Congressional appropriation (which is augmented by a required state match amount) to capitalize these revolving loan funds. States provide loans to communities from these funds, and the loan repayments are returned to the funds. Federal statutes give states complete authority to place additional conditions on eligibility for CWSRF and DWSRF support, so long as they are not inconsistent with the minimum requirements imposed by federal law or EPA grant agreements.