State Revolving Fund two

Types of projects typically funded

State Revolving Fund loans can be made for:

• Sewage treatment: construction, expansion or rehabilitation of “publicly owned treatment works” (including municipal sewage collection, treatment, recycling, land application and disposal facilities).

• Nonpoint source pollution control: implementing a management program under Section 319 of the Act.

• Estuary protection: developing and implementing a conservation and management plan under Section 320 of the Act (the National Estuary Program).

• Stormwater treatment and management: improving stormwater management within municipal separated storm sewer systems (MS4s) through structural and non-structural means, such as installation of bioinfiltration swales.

Most SRF loans to date have paid for “brick, mortar and big pipe” projects to collect, treat and dispose of sewage in traditional ways. However, more states are funding innovative projects to manage and treat sewage and stormwater in less conventional ways and to improve watershed health apart from those systems, such as through stream restoration efforts. The EPA reports that over $100 million is spent annually on nonpoint source pollution control and estuary protection. This is still a small percentage of the total $4 billion available in SRFs.

Possible downsides to traditional SRF projects

In many situations, traditional sewer projects are neither the best nor the most cost-effective way to address community wastewater needs. Traditional sewer projects can increase pollution at the point of discharge to receiving waters and can physically degrade tributaries where collector sewer lines are typically placed. Traditional projects may also encourage and subsidize sprawl by extending or expanding wastewater infrastructure without regard for growth planning. The long-term, indirect adverse water quality effects of sprawl can easily outweigh the positive direct water quality benefits these projects bring.

Because traditional wastewater projects tend to be expensive, a heavy emphasis on such projects in a state’s SRF portfolio can quickly consume most or all of the available loan money for pollution control. This approach leaves little or no funds for a host of smaller-scale, less expensive, non-structural projects for point and nonpoint source pollution control, such as reduction of stormwater runoff and improvement of infiltration to reduce sewer overflows.

Expanding the vision of the SRF

The EPA and some environmental groups are promoting a more balanced use of SRF loans to address the highest priority problems in a given watershed. They are also promoting much more careful evaluation of SRF projects — especially expensive ones — to ensure that they are cost-effective and do not have adverse ecological effects. Public interest groups can play an important role in directing these funds to the places they are most needed. Innovative applications of SRF monies have included assigning a lower loan interest rate to a traditional project when non-structural stormwater pollution control is included.