State Revolving Fund one

The Clean Water Act authorizes federal block grants to states to provide low-interest loans for communities, individuals, citizens’ groups, non-profits and others to improve the quality of water through a wide range of water-quality related projects. These loans are administered through “State Revolving Funds” (SRFs).

Each state and five U.S. territories operate their own Clean Water State Revolving Fund. These funds are established with sizable EPA grants and additional funding from state bonds and interest on repaid loans. The SRFs operate like banks, providing low-interest loans (average 2.2%) for water quality improvement projects.

States are given considerable latitude for administration and use of these funds. There are, however, several important federal rules that states must follow. Citizens who know the rules can help make sure states follow them properly and spend the funds effectively.

SRF assets

In total, the assets of all Clean Water State Revolving Funds exceed $50 billion. Annual Congressional appropriations to help states build up their SRFs have dropped dramatically from $1.35 billion in fiscal year 2004. The fiscal year 2006 appropriation is likely to be $850 million. Fiscal year 2003 allotments to states ranged from $0.2 million for Pennsylvania to $146.2 million for New York.

State requirements

Amendments to the Clean Water Act established the federal SRF program in 1987. Before initially receiving these grants, states had to demonstrate to the EPA that they had:

• set up financial management procedures necessary to ensure the long-term health of the fund;
• established a system for setting annual priorities for use of the funds;
• put procedures into place for regular, substantive public involvement; and
• established a “NEPA-like process” that loan applicants and state agencies would have to follow (40CFR35.3140(b)).

Defining a NEPA-like process

NEPA stands for National Environmental Policy Act. Passed in 1970, NEPA ensures that federal actions are evaluated for environmental impacts. Under NEPA, a proposed federal action with the potential for significant environmental impact is subject to an Environmental Assessment (EA).

If the action is deemed likely to have a significant impact, an Environmental Impact Statement (EIS) is required. An EIS is a detailed study of the need for, alternatives to and impacts of the action. Public involvement is integral to a NEPA process. The public can:

• help determine whether an EIS is required for a project;
• provide environmental, economic and social information that is important to the decision-making process; and
• express opinions about the crucial judgment calls that public officials must often make after all this information is gathered and evaluated.

A state’s “NEPA-like process” need not be identical to the federal process, but it must rest on the same basic principles. Without a sound environmental review process, Clean Water SRF money may be wasted on poorly-conceived or unnecessarily expensive projects. Many states have included a checklist of specific environmental requirements in their SRF regulations (e.g., no adverse cumulative impact to receiving waters) that projects must meet before they can be funded. Citizens can help to ensure that their state enforces requirements on this checklist thoroughly.