SRFs to Remain Primary Source of Federal Funds

By James Laughlin

When it comes to federal funding for water infrastructure, there's good news and bad news. Congress appears committed to continued funding for the State Revolving Loan funds for both clean water and drinking water. At the same time, the chance of any significant increase in federal funding for water infrastructure seems to be fading away.

I had the pleasure of attending the recent Washington Forum hosted by the Water & Wastewater Equipment Manufacturers Association. WWEMA has long been active in the push for increased funding for water and wastewater through the SRF program and other mechanisms based on sustainability and need.

A series of Forum speakers discussed various aspects of the water market, with funding being one topic of interest. The consensus opinion was that Congress is unlikely to approve grant or trust programs for water infrastructure financing and the various measures introduced this year stand little chance of passage.

The only exception might be the Wastewater Treatment Works Security Act of 2003, H.R. 866, which would provide funding for vulnerability assessments. That measure has been approved by the House and stands a reasonable chance of passage — but it's not an infrastructure bill.

The FY '03 budget was signed in March authorizing funding of $1.35 billion for the Clean Water SRF and $850 million for the Drinking Water SRF. Although the Bush administration's FY '04 preliminary budget proposal calls for $850 million for each of the SRFs next year, many on the Hill believe that next year's funding for the CWSRF will remain close to this year's level.

The Senate approved a budget resolution that would have provide $3 billion for the CWSRF and $2.2 billion for the DWSRF, but it was axed by a House-Senate conference committee.

According to speakers at the Forum, Congress is comfortable with the current funding levels for the SRF program and is likely to continue them at the same levels for the foreseeable future.

Kit Farber, Program Analyst for EPA's State Revolving Fund Branch, said the SRF programs are healthy, growing and doing the job they were designed to do. He noted that the cumulative assistance provide by the CWSRF has reached $38.7 billion. On average, the program makes 1,300 loans a year, and the cumulative number of loans exceeds 12,500.

One key to the success of the program, Farber said, is its "revolving" nature. As the program matures, a significant portion of the available funding will be based on the loan principal repayments and interest earned on the loans.

The SRF programs are viewed as a sustainable source of funding for the water industry. That sustainability is key. According to EPA, federal subsidies are not sustainable over time and should be avoided.

Given the state of the US economy, the lack of federal funding will make life difficult for water utilities. The key to continued health, as always, is good management practices and charging customers for the full cost of service. Of course, that's easier said than done. But, given the alternative of a failing system and no money for repairs, there really isn't any other choice.

James Laughlin, Editor