Water Infrastructure: Information on Federal and State Financial 
Assistance (30-NOV-01, GAO-02-134).				 
								 
U.S. drinking water and wastewater systems encompass thousands of
treatment and collection facilities and more than a million miles
of pipes and conduits. The estimated cost to repair, replace, or 
upgrade aging facilities, accommodate the nation's growing	 
population, and meet new water quality standards ranges from $300
billion to $1 trillion over the next 20 years. Although user	 
rates are the major source of facilities' financing, federal and 
state government agencies offer financial support as well. From  
fiscal years 1991 through 2000, nine federal agencies provided	 
$44 billion for drinking water and wastewater capital		 
improvements. Four agencies--the Environmental Protection Agency 
and the Departments of Agriculture, Housing and Urban		 
Development, and Commerce--accounted for about 98 percent of that
account. State governments made $25 billion available for water  
infrastructure programs during the past 10 years.		 
-------------------------Indexing Terms------------------------- 
REPORTNUM:   GAO-02-134 					        
    ACCNO:   A02528						        
  TITLE:     Water Infrastructure: Information on Federal and State   
Financial Assistance						 
     DATE:   11/30/2001 
  SUBJECT:   Block grants					 
	     Facility maintenance				 
	     Facility repairs					 
	     Federal grants					 
	     State aid						 
	     State-administered programs			 
	     Wastewater management				 
	     Wastewater treatment				 
	     Water quality					 
	     Water treatment					 
	     Bureau of Reclamation Water Reclamation		 
             and Reuse Program                                                                                                  
	     Clean Water State Revolving Fund			 
	     Dept. of Commerce Public Works and 		 
	     Development Facilities Program			                                                                 
	     Drinking Water State Revolving Fund		 
	     FEMA Hazard Mitigation Grant Program		 
	     HUD Community Development Block Grant		 
	     Program						                                                         
	     SBA Small Business Loan Program			 
	     USDA Rural Community Advancement Program		 

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GAO-02-134
     
Report to Congressional Requesters

United States General Accounting Office

GAO

November 2001 WATER INFRASTRUCTURE Information on Federal and State
Financial Assistance

GAO- 02- 134

Page i GAO- 02- 134 Financial Assistance for Water Infrastructure Letter 1

Results in Brief 2 Background 3 Federal Agencies Made $44 Billion Available
for Drinking Water

and Wastewater Infrastructure in Fiscal Years 1991 Through 2000 7 States
Made $25 Billion Available for Drinking Water and

Wastewater Infrastructure in Fiscal Years 1991 Through 2000 18 Agency
Comments 22 Scope and Methodology 22

Appendix I Detailed Information on Federal Investment in Water
Infrastructure 25

Appendix II Detailed Information on State- Sponsored Programs for Drinking
Water and Wastewater Infrastructure 27

Appendix III State Survey Instrument 36

Appendix IV GAO Contacts and Staff Acknowledgments 42 GAO Contacts 42 Staff
Acknowledgments 42

Figures

Figure 1: Decaying Drinking Water Pipeline in Philadelphia 5 Figure 2:
Financial Assistance for Drinking Water and Wastewater

Infrastructure Provided by EPA, Fiscal Year 1991 Through Fiscal Year 2000 9
Figure 3: Financial Assistance for Drinking Water and Wastewater

Infrastructure Provided by USDA?s Rural Utilities Service, Fiscal Year 1991
Through Fiscal Year 2000 11 Figure 4: Financial Assistance for Drinking
Water and Wastewater

Infrastructure Provided by HUD, Fiscal Year 1991 Through Fiscal Year 2000 13
Contents

Page ii GAO- 02- 134 Financial Assistance for Water Infrastructure

Figure 5: Financial Assistance for Drinking Water and Wastewater
Infrastructure Provided by Commerce?s Economic Development Administration,
Fiscal Year 1991 Through Fiscal Year 2000 14 Figure 6: Financial Assistance
for Water and Wastewater

Infrastructure Provided by Other Agencies, Fiscal Year 1991 Through Fiscal
Year 2000 17 Figure 7: Primary Sources of Financial Assistance Provided by

States 19 Figure 8: State- Sponsored Grant and Loan Programs 20

Page 1 GAO- 02- 134 Financial Assistance for Water Infrastructure

November 30, 2001 The Honorable Robert C. Smith Ranking Minority Member
Committee on Environment

and Public Works United States Senate

The Honorable Michael D. Crapo Ranking Minority Member Subcommittee on
Fisheries,

Wildlife, and Water Committee on Environment

and Public Works United States Senate

U. S. drinking water and wastewater systems encompass thousands of treatment
facilities, collection facilities, and related works, and well over a
million miles of pipes and conduits. While the investment, made over
decades, in these facilities is enormous, even more funds will be needed in
the future to support efforts to maintain clean and safe water. The
estimated cost of the investments needed to repair, replace, or upgrade
aging facilities, accommodate the nation?s growing population, and meet new
water quality standards ranges from $300 billion to $1 trillion over the
next 20 years, according to various estimates.

While user rates serve as the major source of facilities? financing, federal
and state government agencies offer financial support as well. As the agency
that regulates drinking water and surface water quality, the U. S.
Environmental Protection Agency (EPA) provides a significant amount of
financial assistance for facilities that supply drinking water and treat
wastewater. This assistance is primarily in the form of grants to the states
to capitalize revolving loan funds. The states, which are required to
contribute matching funds equal to 20 percent of the EPA grants, make loans
to local communities or utilities; as loans are repaid, the states?
revolving loan funds are replenished. In addition, other federal agencies
provide financial assistance for drinking water and wastewater facilities
through a variety of grant and loan programs, some of which also require
matching funds. Some of this assistance goes directly to local communities
or utilities; the rest goes to states that then distribute it to the local
level. In addition, states sponsor their own financial assistance programs
for local drinking water and wastewater facilities. Given the magnitude of
the

United States General Accounting Office Washington, DC 20548

Page 2 GAO- 02- 134 Financial Assistance for Water Infrastructure

estimated infrastructure needs, some industry groups are seeking increased
federal funding, and the Congress is considering a variety of legislative
options.

In this context, you asked us to develop information on the financial
support that federal agencies and states have historically provided for
water infrastructure improvements. Accordingly, as agreed with your offices,
this report provides information on financial assistance that (1) federal
agencies and (2) states made available for capital improvements at public
and privately owned drinking water and wastewater facilities during fiscal
years 1991 through 2000. We collected data from the nine federal agencies
responsible for the majority of the federal assistance and, using a detailed
questionnaire, surveyed all states to collect information on state-
sponsored programs. Forty- six states responded to our survey; the
nonrespondents were Arizona, Arkansas, Georgia, and Illinois. (A copy of the
survey questions is included in app. III.) We converted the annual amounts
reported by the federal agencies and the states to constant year 2000
dollars. We are also collecting data from publicly and privately owned water
utilities about their capital investment programs, which we will include in
a subsequent report to you.

From fiscal year 1991 through fiscal year 2000, nine federal agencies made
available about $44 billion, in a variety of forms, for drinking water and
wastewater capital improvements. Four agencies- EPA and the Departments of
Agriculture (USDA), Housing and Urban Development (HUD), and Commerce-
accounted for about 98 percent of the total. Specifically, over the 10- year
period:

 EPA provided over $20 billion in grants to states to capitalize their
revolving loan funds, and $4. 5 billion in grants for water and wastewater
projects specifically designated in the appropriations process.  USDA
provided local communities $4. 5 billion in grants, $7. 1 billion in

loans, and $550 million in loan guarantees. USDA also provided $376 million
in grants for water and wastewater projects specifically designated in the
appropriations process.  HUD provided $4.4 billion in block grants- some
directly to large

communities and others to states for distribution to smaller communities- to
be used for water and wastewater projects. HUD provided another $39.9
million for specific projects designated in the appropriations process.
Results in Brief

Page 3 GAO- 02- 134 Financial Assistance for Water Infrastructure

 Commerce?s Economic Development Administration provided $1.1 billion in
grants to local communities for water and wastewater infrastructure.

The remaining federal assistance, which totaled about $1.1 billion over the
10 years, was provided by the Appalachian Regional Commission, the Federal
Emergency Management Agency, the Department of the Interior?s Bureau of
Reclamation, the Small Business Administration, and the U. S. Army Corps of
Engineers.

According to our survey responses, state governments made a total of about
$25 billion in state funds available for water infrastructure programs over
the past 10 years. Specifically, the states reported that they collectively:

 Contributed about $10.1 billion to match EPA?s capitalization grants for
the Drinking Water and Clean Water State Revolving Funds. This amount
consisted of about $3. 3 billion from state appropriations or other state
sources, and about $6. 8 billion that the states leveraged- that is, raised
through the sale of state- issued bonds backed by the funds.  Made about
$9. 1 billion in grants and loan commitments under

state- sponsored programs, including $3. 4 billion through a variety of
grant programs and $5.7 billion in loans. The states reported a total of 56
state- sponsored grant programs, 29 state- sponsored loan programs, and 35
state- sponsored programs that include grants and/ or loans.  Made another
$4. 4 billion available for loans by selling general

obligation and revenue bonds (15 states). In addition, the states reported
that they contributed about $1. 4 billion from state appropriations,
interest earnings, and other state sources for purposes, such as matching
non- EPA federal funds and financing statedesignated specific drinking water
or wastewater projects.

Drinking water infrastructure includes treatment and storage facilities and
distribution systems (pipes and conduits), while wastewater infrastructure
includes sewage collection systems and treatment works. According to EPA
officials, there are some 2 million miles of pipe in drinking water systems
alone. While estimates vary, the amount needed for future capital
investments in water and wastewater infrastructure appears large. According
to EPA?s most recent survey of drinking water systems, conducted in 1999,
the needs are $150. 9 billion over 20 years. A 1996 Background

Page 4 GAO- 02- 134 Financial Assistance for Water Infrastructure

report on a similar EPA survey of wastewater systems identified needs of
$128 billion over 20 years, and a subsequent analysis by EPA estimated an
additional $56 billion to $87 billion to correct existing sanitary sewer
overflow problems. The Water Infrastructure Network, a consortium of
industry, municipal, and nonprofit associations, recently estimated needs of
up to $1 trillion over the next 20 years for drinking water and wastewater
systems combined, when both the capital investment needs and the cost of
financing are considered. The actual future needs will likely be met by some
combination of local, state, and federal funding sources.

This report is intended to provide information on the amount of federal
financial assistance available for drinking water and wastewater facilities
in local communities. We use the term ?made available? to encompass several
forms of federal funding. Because of differences in the programs and in the
ways that federal agencies account for their financial assistance, the
information that best reflected the amounts made available for drinking
water and wastewater facilities was appropriations, obligations, or
expenditures, depending on the agency and the specific program in question.
For example, the data for EPA include appropriated amounts for the revolving
loan fund capitalization grants to the states for each year; the states may
not have loaned the funds (i. e., actually made them available) to local
water systems until after the end of the fiscal year in which they were
appropriated. In contrast, the data for HUD and Commerce consist of
obligated amounts- that is, the amounts of funds allocated by the agencies
to drinking water and wastewater infrastructure projects during the fiscal
year. For these agencies, we report obligations rather than appropriated
amounts because their appropriations are for broader purposes than drinking
water and wastewater. In other cases, the data consist of expenditures- that
is, funds actually expended during the fiscal year regardless of when they
were appropriated or obligated. For the loan programs of the Small Business
Administration and USDA?s Rural Utilities Service, the amounts reported are
the face value of the loans or loan guarantees that were available to be
made for the fiscal year. Because most of these loans are repaid, the
ultimate cost to the federal government is significantly less than the face
value. Further details on the costs of the loan programs- and the nature and
amount of other financial assistance provided by each agency- are included
in the following sections of this report.

Page 5 GAO- 02- 134 Financial Assistance for Water Infrastructure

Figure 1: Decaying Drinking Water Pipeline in Philadelphia

Source: Drinking Water Infrastructure Needs Survey Second Report to
Congress, U. S. Environmental Protection Agency (EPA 816- R- 01- 004, Feb.
2001), p. 40 (Philadelphia Water Department).

Page 6 GAO- 02- 134 Financial Assistance for Water Infrastructure

The federal government has been providing financial assistance for
wastewater treatment facilities since the enactment of the Federal Water
Pollution Control Act Amendments of 1956, which provided grants to local
governments for constructing treatment facilities, but limited the federal
contribution to 30 percent of eligible construction costs. The Federal Water
Pollution Control Act Amendments of 1972, later designated the Clean Water
Act, increased the federal share of costs to 75 percent. According to the
Congressional Budget Office, federal outlays for wastewater treatment grants
rose 10- fold during the 1970s, reaching a high $8.4 billion in 1980. 1
Subsequent amendments in 1981 and 1987, respectively, reduced and then
phased out the construction grant program, replacing it with grants to the
states to capitalize state revolving funds. As a condition of receiving the
federal funds, states are required to contribute to the revolving funds as
well. Under the Clean Water State Revolving Fund program, states provide
loans to communities to finance wastewater treatment works projects as well
as other water quality projects. The 1987 law envisioned that loan
repayments, by financing future loans, would allow the state revolving funds
to operate without sustained federal support, and authorized appropriations
only through 1994. However, the Congress has continued to appropriate funds
each year since. For each of the most recent fiscal years- 1999, 2000, and
2001- the Congress has appropriated about $1. 3 billion for the revolving
loan fund program.

The first major federal legislation on drinking water, enacted in 1974, was
the Safe Drinking Water Act, which required EPA to set standards or
treatment techniques for contaminants that could adversely affect human
health. The Congress amended the act in 1986 to establish deadlines intended
to accelerate EPA?s efforts to set standards for more contaminants and added
a number of other significant requirements to be met by EPA and public water
systems. In part to help local water systems with the costs of meeting
federal standards, the Safe Drinking Water Act Amendments of 1996
established a Drinking Water State Revolving Fund, similar to that under the
Clean Water Act, which also requires state contributions. The law authorized
appropriations of $9. 6 billion through 2003; actual appropriations through
fiscal year 2001 have totaled $4.4 billion.

1 In constant 1997 dollars. See Budget Options, Congressional Budget Office,
February 2001.

Page 7 GAO- 02- 134 Financial Assistance for Water Infrastructure

From fiscal years 1991 through 2000, nine federal agencies made about $44
billion available for drinking water and wastewater capital improvements.
Four agencies- EPA, USDA, HUD, and Commerce- account for about 98 percent of
the total. The remaining federal assistance, which totaled about $1.1
billion over the 10 years, was provided by the Appalachian Regional
Commission, the Federal Emergency Management Agency, the Department of the
Interior?s Bureau of Reclamation, the Small Business Administration, and the
U. S. Army Corps of Engineers.

Of the nine federal agencies that provided financial assistance for drinking
water and wastewater infrastructure from fiscal years 1991 through 2000,
four of them- EPA, USDA?s Rural Utilities Service, HUD, and Commerce?s
Economic Development Administration- accounted for about 98 percent of the
total. EPA and USDA alone accounted for over 85 percent of the assistance.
Over 82 percent of the total assistance was provided in the form of grants;
the remainder consisted of loans and loan guarantees. Although the programs
differed in terms of eligibility criteria, allowable uses, and funding
priorities, for the most part, the financial assistance was available to a
broad range of entities.

EPA?s financial assistance came primarily in the form of grants to the
states to capitalize the Drinking Water and Clean Water State Revolving
Funds, which are used to finance improvements at local drinking water and
wastewater treatment facilities, respectively. 2 The states lend money from
the funds to local communities or facilities for improvements needed to
comply with the Safe Drinking Water Act or Clean Water Act and to protect
public health or water quality. According to EPA, money invested in the
funds provides about four times the purchasing power over 20 years compared
with what would occur if the money were distributed as grants because the
revolving fund money gets recycled when loans are repaid and funds then
become available for new loans. (See fig. 2 for a breakdown of EPA?s
financial assistance for infrastructure projects during the period that we
reviewed.)

2 The Clean Water State Revolving Fund may also be used for other water
quality improvement projects, such as nonpoint source pollution control and
estuary management, in addition to wastewater treatment facilities. Federal
Agencies

Made $44 Billion Available for Drinking Water and Wastewater Infrastructure
in Fiscal Years 1991 Through 2000

Four Agencies Account for About 98 Percent of the Federal Assistance

EPA Made Available About $25 Billion in Financial Assistance

Page 8 GAO- 02- 134 Financial Assistance for Water Infrastructure

To obtain the capitalization grants, states are required to match 20 percent
of the federal grant money. Under the Drinking Water State Revolving Fund,
EPA regularly updates the allotments to the states based on their
proportional share of the needs identified in EPA?s periodic surveys.
Allotments from the Clean Water State Revolving Fund derive from the
percentages specified in the 1987 amendments to the Clean Water Act. The
percentages were based on several factors, including the states? respective
wastewater treatment needs, as reflected in EPA?s 1976 and 1980 needs
surveys. Drinking water projects designated as priorities for financial
assistance are those that (1) address the most serious risk to human health,
(2) are necessary to ensure compliance with Safe Drinking Water Act
requirements, and (3) will assist systems most in need on a per household
basis, according to state ?affordability? criteria. Under the Clean Water
Act, states have greater flexibility. While the states must similarly
establish a priority ranking system for their projects, they are not bound
to fund these projects in priority order. Decisions on which projects
receive what assistance are based on considerations of the severity of local
water pollution problems and other factors.

Page 9 GAO- 02- 134 Financial Assistance for Water Infrastructure

Figure 2: Financial Assistance for Drinking Water and Wastewater
Infrastructure Provided by EPA, Fiscal Year 1991 Through Fiscal Year 2000

Legend: SRF = State Revolving Fund N/ A = Not applicable Notes: The amounts
presented in this figure are the appropriated amounts; they have not been
adjusted to account for amounts that states can reserve or ?set aside? for
other purposes. Under the Drinking Water State Revolving Fund program,
states, at their option, may set aside up to 31 percent of their annual
allotment to implement their drinking water programs and perform related
activities, such as training water system operators. Under the Clean Water
State Revolving Fund program, states may set aside 4 percent of their
allotments to administer the program. In addition, in each of the funds,
states may make loans to local communities for non- infrastructure- related
projects, such as land acquisition for source water protection, projects to
control nonpoint source pollution, estuary management, etc. We did not
attempt to adjust the appropriated amounts to account for such uses.

Earmarks are grants for water and wastewater projects specifically
designated in the appropriations process.

Source: GAO?s analysis of data provided by EPA (measured in constant year
2000 dollars).

USDA?s Rural Utilities Service 3 provides direct loans, loan guarantees, and
grants to construct or improve drinking water, sanitary sewer, solid waste,
and storm drainage facilities in rural communities, as part of the Rural

3 The Rural Utilities Service was created in 1994 to administer the loan and
grant program that was previously administered by the Rural Development
Administration and the Farmers Home Administration. Both of these offices
were abolished when the Rural Utilities Service was created. USDA Made
Available About

$12.5 Billion in Financial Assistance

Page 10 GAO- 02- 134 Financial Assistance for Water Infrastructure

Community Advancement Program. Among other things, the program is designed
to provide basic human amenities, alleviate health hazards, and promote the
orderly growth of rural areas by financing new and improved rural drinking
water and waste disposal facilities. From fiscal year 1991 through fiscal
year 2000, USDA provided about $12.5 billion under this program. (See fig. 3
for a breakdown of USDA?s financial assistance during the period that we
reviewed.)

In general, to be eligible for USDA assistance, a facility must serve a
rural area with a population of 10, 000 or less and must be unable to
finance its needs from its own resources or obtain other credit at
reasonable rates and terms. Priority for USDA assistance is given to public
entities in areas with populations of less than 5,500 and requests that
involve the consolidation of small facilities or utilities serving low-
income communities. Grants and loans (or loan guarantees) are made directly
to local entities, including municipalities, counties, or other political
subdivisions of states, nonprofit corporations, such as cooperatives, or
Indian tribes. To obtain grant assistance, the median household income of
the applicant?s service area must fall below the statewide nonmetropolitan
median household income. Grants are limited to amounts required by
applicants to establish reasonable user rates and cannot exceed 75 percent
of eligible project costs. Thus, local grantees must provide matching funds.
For loans and loan guarantees, the allowable loan term is limited to 40
years, the useful life of the facilities, or the maximum allowable term
under state law, whichever is shorter.

Page 11 GAO- 02- 134 Financial Assistance for Water Infrastructure

Figure 3: Financial Assistance for Drinking Water and Wastewater
Infrastructure Provided by USDA?s Rural Utilities Service, Fiscal Year 1991
Through Fiscal Year 2000

Notes: The amounts presented in this figure are the appropriated amounts,
except that we are reporting the amounts available for loans and loan
guarantees in terms of their face values. The actual cost to the federal
government for loans and loan guarantees is significantly lower than the
face value because most loans are repaid. For example, according to the
Office of Management and Budget, the average default rate for the Rural
Utilities Service?s direct loans for water and wastewater disposal over
fiscal years 1992 to 2000 was about 16 percent.

Earmarks are grants for water and wastewater projects specifically
designated in the appropriations process.

Source: GAO?s analysis of data provided by USDA (measured in constant year
2000 dollars).

HUD?s Community Development Block Grant program is intended to aid in the
development of viable urban communities. Generally, the program focuses on
community development, and drinking water and wastewater facility investment
is often an integral part of that effort. From fiscal year 1991 through
fiscal year 2000, HUD provided over $4 billion in block grants HUD Made
Available More

Than $4 Billion in Financial Assistance

Page 12 GAO- 02- 134 Financial Assistance for Water Infrastructure

that were used for drinking water and wastewater projects. In addition to
the block grants, HUD provided $39. 9 million in assistance for water and
wastewater projects specifically designated in the appropriations process.
(See fig. 4 for a breakdown of the assistance available from HUD during the
period that we reviewed.)

HUD?s community development block grant program funds are distributed
directly to larger communities, called entitlement communities, 4 as well as
to states for distribution to smaller communities. To determine the amount
of its grants to communities and states, HUD uses formulas that combine
several objective measures of community needs, such as population, the
extent of poverty, the age of the housing stock, and the extent of
overcrowding. To be eligible for funding under the block grant program, all
activities or projects must meet at least one of the program?s designated
national objectives: benefiting low- and moderate- income persons,
preventing or eliminating slums or blight, and addressing particularly
urgent community development needs caused by conditions that pose a serious
and immediate threat to the community?s health or welfare.

4 HUD defines entitlement communities as central cities of Metropolitan
Statistical Areas, other metropolitan cities with populations of at least
50, 000, and qualified urban counties with populations of at least 200,000
(excluding the population of entitled cities).

Page 13 GAO- 02- 134 Financial Assistance for Water Infrastructure

Figure 4: Financial Assistance for Drinking Water and Wastewater
Infrastructure Provided by HUD, Fiscal Year 1991 Through Fiscal Year 2000

Notes: Our ability to determine how much financial assistance was provided
(or used) specifically for drinking water and wastewater infrastructure
varied depending on the recipient. Consequently, the amounts presented in
this figure represent a combination of appropriated amounts (earmarks),
obligated amounts (state), and expended amounts (entitlement).

Earmarks are grants for water and wastewater projects specifically
designated in the appropriations process.

Source: GAO?s analysis of data provided by HUD (measured in constant year
2000 dollars).

Under its Public Works Program, Commerce?s Economic Development
Administration provides grants to communities in economic decline to
revitalize, expand, and upgrade their physical infrastructure- including
water and sewer facilities. Proposed projects must be located within an
economically distressed area, as defined by the Administration, and must
contribute to the long- term development of the area by creating or
retaining jobs and raising income levels. From fiscal year 1991 through
fiscal year 2000, Commerce provided $1. 1 billion in grants to local
communities for drinking water and wastewater projects. (See fig. 5 for a
Commerce Made Available

$1.1 Billion in Financial Assistance

Page 14 GAO- 02- 134 Financial Assistance for Water Infrastructure

breakdown of the financial assistance that the Economic Development
Administration provided during the period we reviewed.)

Depending on the recipient, matching funds may be required for Public Works
Program grants. A basic grant covers up to 50 percent of a project?s total
cost. However, projects in severely depressed areas may receive grants of up
to 80 percent of the costs and projects for recognized Indian tribes may be
granted up to 100 percent of the costs. Priority is given to the projects
that assist the nation?s most economically distressed areas, such as areas
with persistently high rates of poverty, previously unserved distressed
areas and applicants, and areas undergoing significant economic downturns
and dislocations.

Figure 5: Financial Assistance for Drinking Water and Wastewater
Infrastructure Provided by Commerce?s Economic Development Administration,
Fiscal Year 1991 Through Fiscal Year 2000

Note: The amounts included in this figure are the amounts obligated for
drinking water and wastewater infrastructure projects. The amounts
appropriated for the Public Works Program, which provides financial
assistance for a variety of physical infrastructure projects, did not
include a specific amount for water infrastructure.

Source: GAO?s analysis of data provided by Commerce (measured in constant
year 2000 dollars).

Page 15 GAO- 02- 134 Financial Assistance for Water Infrastructure

Programs or activities within the Appalachian Regional Commission, the
Federal Emergency Management Agency, the Department of the Interior?s Bureau
of Reclamation, the Small Business Administration, and U. S. Army Corps of
Engineers provided about $1 billion in financial assistance for drinking
water and wastewater infrastructure over the period we reviewed. With the
exception of the Federal Emergency Management Agency, these agencies
targeted their assistance to specific projects, geographic areas, or some
combination of the two. The specifics of each program follow:

 The Appalachian Regional Commission provided $271. 5 million in grants for
projects under state Appalachian development plans. The Commission makes
grants to states or private nonprofit agencies within the Appalachian
Region. In general, grants are limited to 50 percent of project costs, but
can be increased to 80 percent in designated distressed counties or limited
to 30 percent in designated competitive counties.

 The Federal Emergency Management Agency provided $45.5 million 5 for
drinking water and wastewater infrastructure under its Hazard Mitigation
Grants program to implement measures that permanently reduce or eliminate
future damages and losses from natural hazards through safer building
practices and improving existing structures. Eligible recipients include
state agencies, local governments, other public entities, and private
nonprofit organizations.

 Interior?s Bureau of Reclamation provided a total of $737.4 million for
water infrastructure projects in 17 Western states. Among the recipients of
these grants were water supply agencies and wastewater collection and
treatment agencies. Under its Water Reclamation and Reuse Program, the
Bureau provides grants to investigate and identify opportunities for
reclamation and reuse of municipal, industrial, domestic, and agricultural
wastewater and for the design and construction of demonstration and
permanent facilities to reclaim and reuse wastewater. Financial assistance
for construction projects may not exceed 25 percent of project costs up to a
maximum of $20 million

5 During the 10- year period we reviewed, the Federal Emergency Management
Agency also provided $15. 8 billion to public entities and certain private
nonprofit organizations under its Public Assistance Grants Program, which is
intended to alleviate suffering and hardship resulting from major disasters
or emergencies declared by the President. Over $2 billion of these grants
were used for the permanent restoration of eligible utilities, including gas
and electric utilities as well as drinking water and wastewater systems.
Because the agency could not provide information on how much assistance was
used specifically for drinking water and wastewater utilities, we did not
include this program in our report. Five Other Federal

Agencies Provided Over $1 Billion in Combined Federal Assistance

Page 16 GAO- 02- 134 Financial Assistance for Water Infrastructure

per project. Grants are also available to conduct research on related
topics, such as desalination of wastewater, naturally impaired groundwater,
and surface water reclamation. Funding for studies, demonstration projects,
and research is limited to 50 percent of the total cost.

 The Small Business Administration guaranteed $27.6 million in loans under
its Small Business Loans Program. 6 In this program, guaranteed loans are
made to small businesses that cannot obtain financing in the private
marketplace, but can demonstrate the ability to repay the guaranteed loans.
Loans can be used to construct, expand, or convert facilities, including
water and wastewater infrastructure.

 The U. S. Army Corps of Engineers provided $23.7 million for drinking
water and wastewater infrastructure during the 10- year period. The Corps
does not have a program that provides financial assistance for water
infrastructure, but its annual appropriations identified and funded certain
project- specific assistance. In general, the Corps requires a 25- percent
matching contribution from recipients.

Figure 6 shows the financial assistance that these five federal agencies
provided over the period that we reviewed.

6 As noted previously, the face value of loans guaranteed by a federal
agency does not represent the actual cost to the federal government because
most loans are repaid. According to the Office of Management and Budget, the
average default rate for the Small Business Administration?s loan guarantees
was less than 1 percent over fiscal years 1992 to 2000.

Page 17 GAO- 02- 134 Financial Assistance for Water Infrastructure

Figure 6: Financial Assistance for Water and Wastewater Infrastructure
Provided by Other Agencies, Fiscal Year 1991 Through Fiscal Year 2000

Note: Depending on the level at which we were able to identify the amounts
provided (or used) specifically for drinking water and wastewater
infrastructure, the amounts presented in this figure generally represent
appropriated, obligated, and expended amounts as follows:

 Appalachian Regional Commission - obligated amounts

 Federal Emergency Management Agency - obligated amounts

 Interior?s Bureau of Reclamation - appropriated amounts

 Small Business Administration - face value of loans guaranteed

 U. S. Army Corps of Engineers - expended amounts Source: GAO?s analysis of
data provided by the five federal agencies (measured in constant year 2000
dollars).

Page 18 GAO- 02- 134 Financial Assistance for Water Infrastructure

The 46 states that responded to our survey cumulatively made about $25
billion in state funds available to local communities and utilities for
drinking water and wastewater improvements during the period that we
reviewed. Specifically, the states reported that they:

 contributed about $10. 1 billion to match EPA?s capitalization grants for
the Drinking Water and Clean Water State Revolving Funds. This amount
consisted of about $3. 3 billion from state appropriations or other state
sources, and about $6. 8 billion that the states leveraged- that is, raised
through the sale of state- issued bonds backed by the Funds.

 made about $9. 1 billion in grants and loan commitments under
statesponsored programs.

 made another $4. 4 billion available for loans by selling general
obligation and revenue bonds.

In addition, the states reported that they contributed about $1. 4 billion
from state appropriations, interest earnings, and other state sources for
purposes, such as matching non- EPA federal funds and financing
statedesignated specific drinking water or wastewater projects.

Figure 7 depicts the financing made available by the states during the
period. States Made

$25 Billion Available for Drinking Water and Wastewater Infrastructure in
Fiscal Years 1991 Through 2000

Page 19 GAO- 02- 134 Financial Assistance for Water Infrastructure

Figure 7: Primary Sources of Financial Assistance Provided by States

Source: Survey data reported to GAO by 46 states (measured in constant year
2000 dollars).

As noted previously, states are required to match 20 percent of the
revolving loan fund capitalization grants they receive from EPA. States, at
their option, may contribute more than the required minimum. According to
the responses to our survey, the 46 states collectively provided about $10.1
billion in matching funds for the two revolving loan fund programs. Forty-
two of the states reported amounts that exceeded the 20 percent minimum
matching amount for one or both of the programs.

The states reported that about $3.3 billion of their contributions came from
state appropriations or other sources. In addition, 19 states reported that
they had generated about $6. 8 billion to be used for drinking water and
wastewater infrastructure, in bond revenues backed by the state revolving
loan funds. In total, states? contributions to the Drinking Water and Clean
Water State Revolving Funds accounted for about $10.1 billion of the total
$25 billion that the states reported making available. States Contributed
About

$10.1 Billion to the Revolving Loan Funds

Page 20 GAO- 02- 134 Financial Assistance for Water Infrastructure

Unlike federal agencies, which provided assistance mostly in the form of
grants, states provided more financial assistance for water infrastructure
in the form of loans-$ 5. 7 billion versus $3. 4 billion for grants. The
states reported a total of 56 state- sponsored grant programs, 29 state-
sponsored loan programs, and 35 state- sponsored programs that include loans
and/ or grants. (Detailed information that the states provided on their
programs can be found in app. II.) Figure 8 shows the amount of state grant
and loan programs over the 10- year period.

Figure 8: State- Sponsored Grant and Loan Programs

Source: Survey data reported to GAO by 46 states (measured in constant year
2000 dollars).

States provided funds through a variety of grant programs. Drinking water
facilities received $767 million, wastewater facilities received $2.0
billion, and grant programs that funded both drinking water and wastewater
projects received $585 million. There were 56 state- sponsored grant
programs for drinking water and/ or wastewater infrastructure. For example:
States Made $9.1 Billion in

Grants and Loan Commitments Under State- Sponsored Programs

State- Sponsored Grant Programs

Page 21 GAO- 02- 134 Financial Assistance for Water Infrastructure

 Alaska offered municipal construction grants that provided engineering
assistance for water and sewer projects.

 Connecticut offered grants of 20 to 50 percent of the costs for nitrogen
removal through its Clean Water Fund.

 Maine offered grants to help financially stressed communities replace and
upgrade wastewater treatment facilities.

 Minnesota offered special infrastructure grants to construct phosphorus
removal facilities.

 Missouri provided special infrastructure grants for water and sewer
improvements in its state parks.

States responding to our survey indicated that, apart from the state
revolving loan program, they made loan commitments of about $5. 7 billion
under state- sponsored loan programs to help meet drinking water and
wastewater facility needs. The states committed $3.9 billion under programs
specifically targeted at wastewater or drinking water facilities. In
addition, states committed $1. 8 billion under other state- sponsored
programs in which drinking water or wastewater infrastructure was among the
types of projects eligible for funding.

Twenty- nine states reported having state loan programs that covered a
variety of specific purposes. For example:

 Delaware offered low- interest loans to wastewater and water utilities to
expand and upgrade wastewater and drinking water infrastructure.

 Mississippi offered emergency loans for making necessary repairs to
existing water pollution control systems, or drinking water systems, and
offered loans to finance capital improvements such as water, sewer, and
access roads; to fund improvements needed to implement projects by private
companies; and to promote economic growth.

 Ohio offered loans for emergency remediation threats for drinking water
and preliminary engineering plans and other costs associated with wastewater
and publicly owned drinking water facilities. The state also provided
interest- free loans to pay a portion of sewer or drinking water line
extension project costs, which would otherwise have been paid by assessments
on agricultural land.

 Tennessee offered loans to cities and utility districts that must relocate
utilities because of road projects. State- Sponsored Loan

Programs

Page 22 GAO- 02- 134 Financial Assistance for Water Infrastructure

The states reported making available about $4. 4 billion for loans from
revenues stemming from general obligation and state revenue bonds. Fifteen
of the 46 states reported using bond issues, including $3. 3 billion in
state revenue bonds and $1. 1 billion in general obligation bonds. There
were nine wastewater bond programs, eight drinking water bond programs, and
seven bond programs that covered both wastewater and drinking water
projects. For example:

 Virginia?s Resource Authority program issues bonds to provide financing to
local government for wastewater and drinking water projects.

 Texas? Water Development Fund funds a variety of regional water supply,
wastewater, and flood control projects through general obligation funds.

We provided a draft of this report to EPA for its review and comment. We
received comments from several senior officials within EPA?s Office of
Water, including the Director, Drinking Water Protection Division, Office of
Ground Water and Drinking Water; and the Director, Municipal Support
Division, Office of Wastewater Management. They generally agreed with the
report?s findings, but suggested that we present the 10- year summary of
federal and state financial assistance in constant dollars, rather than
current dollars. We originally presented the data in current dollars because
(1) the data include a mixture of appropriations, obligations, and
expenditures and (2) our primary purpose is to present aggregate data, not
trends. However, for greater comparability among the annual figures, we
adjusted the financial assistance data to constant dollars. EPA also
provided us with technical corrections and clarifications, which we
incorporated in the report as appropriate.

To identify the federal departments and agencies that provide financial
assistance for water and wastewater infrastructure, we reviewed the
literature, documents, program information, and past reports that address
infrastructure assistance. We identified nine departments and agencies that
provide financial assistance for water and wastewater infrastructure,
including EPA, USDA, HUD, Commerce, the Appalachian Regional Commission, the
Federal Emergency Management Agency, the Department of Interior, the Small
Business Administration, and the U. S. Army Corps of Engineers. We asked
officials at these departments and agencies for data on the amount of
financial assistance provided for drinking water and wastewater
infrastructure for fiscal years 1991 through 2000. We contacted officials to
clarify any questions about the data and to States Made Another

$4.4 Billion Available for Loans Through State Bond Issues

Agency Comments Scope and Methodology

Page 23 GAO- 02- 134 Financial Assistance for Water Infrastructure

obtain additional information as needed. Where possible, we verified the
information we obtained with data from other, independent sources.

To identify the amounts and sources of state funds, we mailed a survey to
all 50 states asking for information on their financial contributions to
drinking water and wastewater capital improvements and on their state-
sponsored programs. Prior to designing the survey, we spoke to officials
from industry associations, EPA, as well as the U. S. Bureau of the Census
to determine the data available from other sources. In developing the survey
we talked with officials from EPA, and pre- tested the survey in several
states. We directed this survey to officials from state offices responsible
for the Clean Water State Revolving Fund, and asked them to coordinate with
other state officials to complete the survey. We received responses from 46
states.

To check the reliability of the state data, we called states to clarify any
data items that appeared to be questionable or inconsistent. In addition, we
compared the annual amounts that the states reported as contributions to
their Clean Water and Drinking Water State Revolving Funds with similar data
available from EPA?s National Information Management System database. While
we did not independently verify the accuracy or reliability of EPA?s data,
we noted that some of the annual amounts differed between the two sources.
In total, the states reported to us contributions totaling about 20 percent
less to the Clean Water State Revolving Fund and about 20 percent more to
the Drinking Water State Revolving Fund than indicated by the data in EPA?s
information system. Because GAO?s survey data stemmed from only 46 states
while EPA?s data included all 50 states as well as Puerto Rico, some
differences in the data were expected.

We sorted our data by the state fiscal year, and report annual figures and
cumulative totals in that manner. Finally, we present 10- year summary data
on federal and state financial assistance in constant year 2000 dollars. We
used the GDP chain type price index to adjust for inflation. A copy of our
survey is included in appendix III of this report.

We conducted this review from January 2001 through November 2001 in
accordance with generally accepted government auditing standards.

As we agreed with your office, unless you announce its contents earlier, we
plan no further distribution of it until 30 days from the date of this
letter. We will then send copies to the Administrator, EPA, and make copies
available to others who request them. If you or your staff have

Page 24 GAO- 02- 134 Financial Assistance for Water Infrastructure

questions about this report, please call me on (202) 512- 3168. Key
contributors to this report are listed in appendix IV.

David G. Wood Director, Natural Resources

and Environment

Appendix I: Detailed Information on Federal Investment in Water
Infrastructure

Page 25 GAO- 02- 134 Financial Assistance for Water Infrastructure

Dollars in millions (in constant year 2000 dollars)

Type of assistance 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 Total
Environmental Protection Agency

Clean Water SRF Grant 2,047. 8 1, 948. 5 1,927. 5 1, 218. 0 1,235. 2 2, 073.
5 625.0 1, 350. 0 1,350. 0 1, 350. 0 15, 125. 5

Drinking Water SRF

Grant 0 00 0 0 01, 275. 0725. 0775. 0820. 03,595 Earmarks Grant 15.7 435. 0
556.0 558. 0 834.3 306. 5 301.0 393. 1 381.8 411. 7 4, 193.0

Total 2, 063.5 2, 383. 5 2, 483.5 1, 776. 0 2, 069.5 2, 380. 0 2, 201.0 2,
468. 1 2, 506.8 2, 581. 7 22, 913. 5 USDA - Rural Utilities Service

Water and Wastewater Loans

Loan 500.0 635. 5 825.0 675. 5 827.9 471. 5 664.5 616. 0 631.1 704. 8 6,
551.8

Water and Wastewater Loan Guarantees

Loan Guarantee

35.0 35.0 35.0 35.2 0 75.0 75.0 75.0 75.0 75.0 515.2

Water and Wastewater Grants

Grant 300.0 375. 6 420.8 500. 0 462.6 364. 9 459.2 435. 9 422.9 366. 4 4,
108.2

Earmarks Grant 0 0 25.0 40.0 37.4 34.7 35.8 53.7 43.9 86.7 357.3 Total 835.
0 1, 046. 1 1, 305.8 1, 250. 7 1, 327.9 946. 1 1, 234.5 1, 180. 6 1, 172.9
1, 232. 9 11, 532. 5 Department of Housing and Urban Development

Water & Sewer Activities -

Entitlement Grant 71.0 59.0 69.0 53.8 55.9 39.6 60.9 53.1 43.3 45.4 550.9

Water & Sewer Activities - State

Grant 309.8 325. 1 371.2 415. 0 429.2 409. 1 309.6 225. 3 331.2 368. 0 3,
493.6

Earmarks Grant 0 6. 1 8.4 0 4.7 0 0 1.6 4. 6 11.8 37.2 Total 380.8 390. 2
448.6 468. 8 489.8 448. 7 370.5 280. 0 379.2 425. 2 4,081. 7 Commerce -
Economic Development Administration

Water Grant 19.8 25.5 24.7 28.3 41.8 30.1 25.6 41.7 33.9 33.7 305.1

Sewer Grant 52.7 50.6 45.1 89.8 74.8 74.3 57.0 84.8 78.2 72.8 679.9 Total
72.5 76.0 69.8 118. 1 116.6 104. 3 82.6 126. 4 112.1 106. 5 985.0 Interior -
Bureau of Reclamation

Reclamation Wastewater and Groundwater Studies

Grant 0 0 0.2 9. 5 15.6 22.8 38.1 46.0 34.8 33.2 200.1

Rural & Indian Water Systems

Grant 0 0 35.1 36.3 51.5 33.0 66.1 58.7 68.3 64.9 413.9

Earmarks Grant 0 0 0 10.0 3. 0 30.9 1. 5 19.3 11.3 11.2 87.2 Total 0 0 35.3
55.8 70.1 86.7 105. 7 123.9 114. 4 109.2 701. 1 Appalachian Regional
Commission

Sewer Systems Grant 5.6 7. 3 9.1 10.2 10.9 8. 0 6.9 12.0 9. 5 9.1 88.5

Water Systems Grant 10.5 9. 8 11.7 19.8 15.0 11.6 17.6 15.1 14.3 11.1 136.5

Water and Sewer Systems

Grant 1.1 1. 6 0.4 7. 1 4.8 0. 9 1.9 2. 0 3.1 2. 5 25.6 Total 17.2 18.7 21.2
37.2 30.6 20.5 26.5 29.2 26.9 22.8 250. 6 Federal Emergency Management
Agency

Mitigation and Planning

Grant 0 0. 3 0.5 3. 3 2.0 1. 2 4.9 11.6 16.6 3. 1 43.6

Appendix I: Detailed Information on Federal Investment in Water
Infrastructure

Appendix I: Detailed Information on Federal Investment in Water
Infrastructure

Page 26 GAO- 02- 134 Financial Assistance for Water Infrastructure

Dollars in millions (in constant year 2000 dollars)

Type of assistance 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 Total
Small Business Administration

Sewerage Systems Loan Guarantee

0.8 0. 3 0.4 0. 5 0.6 0. 2 1.6 0. 2 0.4 1. 0 5.8

Water Supply Loan Guarantee

1.4 1. 6 1.9 2. 2 1.0 2. 2 2.1 3. 1 2.8 1. 6 19.8 Total 2.1 1. 9 2.3 2. 7
1.6 2. 4 3.7 3. 3 3.1 2. 5 25.6 U. S. Army Corps of Engineers

Environmental Infrastructure

Grant 0 00 0 0 0 0 09. 713. 823.5

Total federal assistance $3,371.1 $3,916.7 $4,366.9 $3,712.6 $4,108.1
$3,990.0 $4,029.3 $4,223.1 $4,341.7 $4,497.6 $40,557.2

Legend: SRF = State Revolving Fund Notes: This table is intended to provide
information on the amount of federal financial assistance available for
drinking water and wastewater facilities in local communities. The term
?made available? encompasses several measures of federal funding. Because of
differences in the programs and in the ways that federal agencies account
for their financial assistance, it was not possible to obtain consistent
information. For example, the data for EPA are appropriated amounts. In
contrast, the data for Commerce are obligated amounts because their
appropriations are for broader purposes than drinking water and wastewater.
In other cases, the data consist of expenditures. For the loan programs of
the Small Business Administration and the USDA?s Rural Utilities Service,
the amounts reported are the face value of the loans and loan guarantees
available for the fiscal year.

Earmarks are grants for water and wastewater projects specifically
designated in the appropriations process.

Depending on the level at which we were able to identify the amounts
provided (or used) specifically for drinking water and wastewater
infrastructure, the amounts presented in this figure generally represent
appropriated, obligated, and expended amounts as follows:

EPA - appropriated amounts USDA?s Rural Utilities Service - appropriated
amounts except that the amounts for loans and loan guarantees represent the
face value. (Because most of the loans are repaid, the actual federal outlay
is significantly less than the face value.)

HUD - obligated amounts for grants to entitlement communities and expended
amounts for grants to states and designated projects

Commerce?s Economic Development Administration - obligated amounts
Appalachian Regional Commission - obligated amounts Federal Emergency
Management Agency - obligated amounts Interior?s Bureau of Reclamation -
appropriated amounts Small Business Administration - face value of the
guaranteed loans U. S. Army Corps of Engineers - expended amounts

Appendix II: Detailed Information on State- Sponsored Programs for Drinking
Water and Wastewater Infrastructure

Page 27 GAO- 02- 134 Financial Assistance for Water Infrastructure

State Form( s) of assistance Targeted

system( s) Program name Purpose

AK Grants DW, WW Municipal Construction Grants To provide partial grants and
engineering assistance to larger

communities for water and sewer projects. AK Grants DW, WW Village Safe
Water To improve sanitation conditions in rural and native Alaska

villages through planning and construction grants and engineering/ technical
assistance. Alaska's Village Safe Water Program, in existence since the
early 1970s, offers assistance to community systems that provide piped or
hall services. AK Grants DW, WW Supplemental Housing

Development Grant Program

To assist regional housing authorities in supplementing housing projects
that have been approved for development with HUD Indian Housing Development
Funds. Grants are limited to 20 percent of HUD's total development cost per
project and can only be used for (1) the cost of on- site water and sewer
facilities; (2) the construction of roads to project sites; (3) electrical
distribution facilities; and (4) energy- efficient housing design features.
Supplements are needed to offset the higher costs for materials in Alaska.
CA Loans DW Water Conservation,

Groundwater Recharge & New Local Water Supply Program

Provide assistance to local agencies in the acquisition and construction of
water conservation and groundwater recharge projects, development of new
local water supplies, and infrastructure, and reliability projects. CA Bonds
DW Safe Drinking Water Bond

Law Program To correct domestic water system deficiencies to enable systems
to meet drinking water standards mandated under the California Safe Drinking
Water Act. CA Grants DW Drinking Water Treatment &

Research Fund Provide funding to public water systems facing financial
hardship due to the cost of treatment or source replacements of their water
sources. CA Loans WW State Water Quality Control

Fund To provide construction loans for wastewater construction to assist
agencies in financial hardship. CA Grants/ loans WW Water Recycling

Construction Program To provide grant and loan funding to municipalities for
design and construction of projects to recycle water. CA Grants WW Small
Communities Grant

Program To provide grants for planning redesigning and constructing
wastewater facilities in small communities. CO Loans DW/ WW Small Water
Resources

Projects Program The financing program for the small water resources
projects (SWRP) provides an economical source of capital for expansion and
rehabilitation of existing public water systems in Colorado. Under this
program the authority provides loans that appreciably lower the costs of
borrowing for those municipal governments and special districts having a
population greater than 1, 000 or a customer base of at lease 650 taps. Loan
amounts can range from $300, 000 to $25,000,000. Individual construction
loans up to $25,000,000 do not require approval from the general assembly
(as do other authority water supply loans greater than $25,000, 000). These
loans are fully insured by a private bond insurance company and are issued
without using the moral obligation of the state. The SWRP is funded solely
by the authority. CO Loans DW Colorado Water

Conservation Board Construction Fund Loan Program

To provide loans to construct or rehabilitate raw water infrastructure such
as dams, diversion structures, wells, raw water pipelines, ditches, and
canals. The purchase of water rights and land can be financed as part of the
project.

Appendix II: Detailed Information on State- Sponsored Programs for Drinking
Water and Wastewater Infrastructure

Appendix II: Detailed Information on State- Sponsored Programs for Drinking
Water and Wastewater Infrastructure

Page 28 GAO- 02- 134 Financial Assistance for Water Infrastructure

State Form( s) of assistance Targeted

system( s) Program name Purpose

CO Grants/ loans DW/ WW Energy Impact Assistance Fund To assist political
subdivisions of the state of Colorado that are

socially or economically impacted by the development processing and energy
conversion of minerals and mineral fuels. CO Grants DW Drinking Water Grant

Program (Administered By Colorado Department of Public Health and
Environment

To provide assistance for planning design and construction of eligible
drinking water treatment and distribution system projects. Serving 5, 000 or
less population

CO Grants WW Domestic Wastewater Treatment Grant Program Provide financial
assistance to governmental agencies for

planning design and construction of eligible wastewater projects. Serving
5,000 or less population CO Loans DW Drinking Water State Direct

Loan Program To provide loans to small domestic drinking water systems
before the federal law was finalized; served as an interim program. CT
Grants DW Potable Water Program To correct water supply problems in wells
contaminated by

industrial wastes program. The program no longer requires matching funds. CT
Grants DW, WW Special Acts Of The

Legislature To provide infrastructure grants. CT Grants/ loans WW Clean
Water Fund To provide grants for the removal of nitrogen from wastewater.

Grants of 20, 30, and 50 percent for all, nitrogen removal and CSO,
respectively. DE Grants/ loans DW, WW Delaware 21st Century

Infra- Structure Investment Fund

To provide low- interest loans and/ or grants to wastewater and water
utilities for infrastructure expansion and upgrades.

FL Grants DW Water Supply Restoration To restore or replace contaminated
private drinking water wells often by installing a connection to a public
water system. Transmission and distribution lines needed to bring public
water system to areas not previously served are also covered. Approximately
half of the annual $4 million budget is used to install transmission and
distribution lines. ID Grants/ loans DW Idaho Water Resource

Board- Water Resource Funding Program

To construct and financially assist the water projects, including the
rehabilitation, improvement or extension of existing systems or facilities.
ID Grants WW Wastewater Treatment

Facility Grant Program- Idaho Dept. Of Environmental Quality

To provide financial assistance to qualifying entities for the construction
of wastewater treatment facilities.

KY Grants DW, WW Surplus Expenditure Plan To assist community development
projects ranging from park projects to water and sewer projects. KY Grants
DW, WW State Surplus And 502

Grant Program - To assist community development projects for water and
wastewater. KY Grants Legislature

Directs Community Development Projects To address legislative directives.

Appendix II: Detailed Information on State- Sponsored Programs for Drinking
Water and Wastewater Infrastructure

Page 29 GAO- 02- 134 Financial Assistance for Water Infrastructure

State Form( s) of assistance Targeted

system( s) Program name Purpose

LA Loans (from bond pool) DW, WW La Community

Development Authority To provide economic development infrastructure and
environmental facilities to political subdivisions. MA Grants DW
Grandfathered Drinking

Water Treatment Plants To provide debt service reimbursement to communities
that constructed drinking water treatment plants before the creation of the
drinking water SRF program. State provides 50 percent reimbursement of
principal portion of debt service payment for a 10- year period. MD Grants
WW Biological Nutrient Removal

(BNR) Program To help local governments upgrade wastewater treatment plants
with BNR- advanced treatment. Funds are provided under a 50/ 50 cost- share
agreement as part of the Chesapeake Bay nutrient reduction strategy. MD
Grants WW Supplemental Assistance

(Sewerage) Program To help local governments upgrade wastewater
infrastructure. Funds are provided for priority sewerage projects needed to
address public health/ water quality problems in financially disadvantaged
communities. MD Grants DW Water Supply Program To provide state grant funds
to assist local governments in

upgrading their drinking water infrastructure. Funds are provided for
priority drinking water projects that address the public health problems in
financially disadvantaged communities. ME Grants WW State Grant Program To
help financially stressed communities replace and upgrade

wastewater treatment facilities. ME Grants WW Small Community Grant

Program To help towns replace the malfunctioning subsurface disposed systems
that pollute water bodies or create a public nuisance. MI Grants WW Hardship
Grants Program To help unsewered communities to construct wastewater

collection and treatment systems. MN Grants WW State Independent Grants

Program To fund municipal wastewater treatment facilities. This program is
no longer in effect. MN Grants WW Combined Sewer Overflow

Grants Program To provide grants to metro area municipalities for sewer
separation program. Program is no longer in effect. MN Grants WW Wastewater
Infrastructure

Fund To provide supplemental grant assistance to hardship communities
augmenting available CWSRF loans and USDA rural development funds. MO
Grants/ loans WW 15 percent

State Grant/ Loan To make funds available to wastewater SRF loan recipients
at 15 percent of eligible costs. MO Grants/ loans WW 37( H) Storm Water
Grants

and Loans No description given. MO Grants WW Storm Water Grants 37 (E) No
description given. MO Grants WW Special Infrastructure

Grant- Phosphorus To build phosphorus removal facilities and appurtenances
in the Table Rock Lake watershed. MO Grants/ loans DW, WW 37( G) New Rural
Water-

Sewer Grants and Loans No description given. MO Grants DW, WW Special
Infrastructure

Grant- State Parks To provide water and sewer improvements at Missouri's
state parks. MO Grants WW 40 percent

Construction Grant To assist municipalities, counties, public water and
sewer districts, political subdivisions or instrumentalities of the state in
the planning, design, and construction of wastewater systems. MO Loans WW
Direct Loans To assist municipalities, counties, public water and sewer

districts, political subdivisions or instrumentalities of the state in the
planning, design, and construction of wastewater systems.

Appendix II: Detailed Information on State- Sponsored Programs for Drinking
Water and Wastewater Infrastructure

Page 30 GAO- 02- 134 Financial Assistance for Water Infrastructure

State Form( s) of assistance Targeted

system( s) Program name Purpose

MO Grants DW, WW 37 (E) Old Rural Water and Sewer Grants To enhance the
state's water quality. MO Grants WW Federal Hardship State

Match To assist disadvantaged communities with planning, designing, and
building wastewater systems. MO Grants WW State Hardship To assist
disadvantaged communities with planning, designing,

and building wastewater systems. MO Grants WW Industrial Development

Grant No description given. MS Loans DW Drinking Water Systems

Emergency Loan Fund (DWSELF)

To make emergency loans to eligible applicants: (1) to make necessary
repairs to existing drinking water systems to meet the emergency; (2) to
complete construction needed to provide a permanent correction to the
problems that caused the emergency; (3) to cover reasonable administration
costs of the DWSRF program and/ or the federal DWSRF program, and conducting
activities under the local governments and rural water systems improvements
revolving loan program act; and (4) to earn interest on fund accounts. MS
Grants/ loans WW Development Infrastructure

Program To help counties or cities finance small infrastructure projects to
promote economic growth. MS Loans DW, WW Capital Improvements

Revolving Loan Program (Cap)

To provide low- interest loans to counties and municipalities for capital
improvements, such as water, sewer, and access roads.

MS Loans WW Water Pollution Control Emergency Loan Fund To make loans to
eligible applicants for emergency projects for

the purpose of making necessary repairs to existing water pollution control
systems to meet the emergency. MS Loans DW, WW Mississippi Business

Investment Act Program To offer low- interest loans to counties or
incorporated cities to finance improvements necessary to implement private
company investments. MT Grants/ loans DW, WW Renewable Resource Grant

and Loan Program To provide funding for the planning, design, and
construction of renewable resource projects. MT Grants/ loans DW, WW
Treasure State Endowment

Program To help solve serious health and safety problems and to assist
communities with the financing of public facilities projects, including the
construction or repair of drinking water systems, wastewater treatment
facilities, sanitary or storm sewer systems, solid waste disposal and
separation systems, and bridges. Loans, though available, have never been
used. MT Grants DW, WW Community Development

Block Grant (CDBG) Program- Housing and Public Facilities

To help communities with a population less than 50,000 meet their greatest
community development needs. All projects must principally benefit low and
moderate income persons. The basic categories of local community development
projects are: (a) economic development, (b) housing, (c) public facilities,
(d) planning grants. MDOC administers the program. Public facilities
projects can include conventional community facilities such as water, sewer,
and solid waste. Projects can also include those designed to principally
serve low and moderate income persons (i. e., head start centers, mental
health centers). The program is a federally funded competitive grant
program.

Appendix II: Detailed Information on State- Sponsored Programs for Drinking
Water and Wastewater Infrastructure

Page 31 GAO- 02- 134 Financial Assistance for Water Infrastructure

State Form( s) of assistance Targeted

system( s) Program name Purpose

NE Grants WW Small Town Matching Grants To provide small towns with
populations of 800 or less with a

grant up to 50 percent of the project cost in conjunction with a CWSRF loan.
NC Grants WW Unsewered Communities

Grant Program To assist units of local government with no wastewater
collection or treatment systems. Applicant must demonstrate a critical
public health or environmental threat. Additional eligibility criteria
apply. Funding covers 90 percent of project cost up to $3 million. NC
Grants/ loans DW, WW N. C. Revolving Loan and

Grant Program To provide low- interest loans and grants to qualifying
applicants to address water and wastewater infrastructure needs. NC Grants
DW, WW Supplemental Grants

Program To provide up to $400, 000 for units of local government for the
construction of water or wastewater projects. Applicant must demonstrate a
critical public health, environmental, or economic development need. Funding
can be used as the local match to other state/ federal programs. NC Grants
DW, WW Capacity Building Grant

Program To provide up to $40, 000 for units of local government for the
preliminary planning of water and/ or wastewater systems. Projects might
include preliminary engineering reports, capital improvement plans,
feasibility studies, sewer/ water rate studies. Applicant must demonstrate a
critical environmental, public health, or economic development need. ND
Grants/ loans DW Water Supply Development To assist water supply systems in
addressing water quantity and

quality problems. NH Grants WW Wastewater State Aid Grant

Program To provide 20 percent to 30 percent grants in the form of loan
subsidies for wastewater infrastructure projects. NH Grants DW State
Drinking Water

Filtration Grant Program To help public water systems comply with the
surface water treatment rules of the federal safe drinking water act of
1986. NJ Grants WW CSO Program To fund planning and design of project to
eliminate combined

sewer overflow problems NJ Grants/ loans DW, WW Pinelands Program To
accomodate existing and future needs in the 23 designated

Pinelands Regional Growth Areas. NJ Loans DW Safe Drinking Water

Program (Water Supply Bond Loan Program)

To fund drinking water projects. The SRF program has replaced this program.
Loans made through 2000 are the final loans from the state program. NM
Grants DW, WW Special Appropriations

Program To administer and provide construction. Oversight for projects
funded by legislative special appropriations. NM Grants WW Colonias Waste
Water

Construction Program To provide funding for projects intended to construct
or improve wastewater treatment and disposal in the Colonias communities of
New Mexico. NM Grants/ loans DW, WW Rural Infrastructure

Program To provide low- interest loans and limited grant funds to build
water supply and wastewater systems for communities with populations less
than 10,000. NM Grants DW, WW Water/

Wastewater Grant Fund To assist local entities with construction or
rehabilitation water

projects within a particular service area. Projects must receive legislative
authorization within 3 years of NMFA board approval.

Appendix II: Detailed Information on State- Sponsored Programs for Drinking
Water and Wastewater Infrastructure

Page 32 GAO- 02- 134 Financial Assistance for Water Infrastructure

State Form( s) of assistance Targeted

system( s) Program name Purpose

NM Loans None specified Public Project Revolving

Fund To provide low- cost, low- interest rate loans to local government
entities for infrastructure and capital equipment purchases. NV Grants DW
AB198 Grant Program To provide grants to public purveyors of water to pay
for the

costs of capital improvements to publicly owned community water systems and
publicly owned nontransient water systems, as required or made necessary by
the state health board, or made necessary by the Safe Drinking Water Act.
Funds are available only to communities of less than 6,000 residents. OH
Loans DW, WW Village Capital Improvement

Fund (VCIF) To help villages finance preliminary engineering plans, detailed
engineering plans, feasibility studies, and legal costs incurred for
planning phases of wastewater and/ or public drinking water facilities. VCIF
is a partially interest- free loan program. OH Loans DW, WW Ohio Water and
Sewer

Rotary Commission To provide no- interest loans to pay that portion of the
cost of a sewer or drinking water line extension project, which otherwise
would have been paid by assessments on agricultural land. OH Loans DW, WW
Ohio Water Development

Authority To provide loans to local government agencies to build the
wastewater systems, drinking water systems, and solid waste disposal
facilities needed to comply with water pollution control standards. OH
Grants/ loans/

debt service subsidies

DW, WW Ohio Public Works Commission To help municipal corporations,
counties, townships, and

regional sewer/ water districts maintain operations and adequate wastewater,
drinking water, and solid waste disposal facilities. OH Loans DW Drinking
Water Emergency

Loan Fund (DWELF) To provide emergency loans to owners or operators of
public drinking water systems for emergency remediation of a "threat of
contamination"- anything that prevents a public water system from supplying
adequate quantities of safe, potable water to existing users. OK Grants DW,
WW Emergency Grant Program To provide financial assistance for a wastewater
or drinking

water emergency, which is defined as a life, health, or propertythreatening
situation. There is a maximum of $100, 000 per project per applicant during
any fiscal year. Each appliciant is subjected to a "grant priority
evaluation policy" that considers the following: nature of the emergency,
water and sewer rates, monthly debt payment, local contribution, median
household income, and benefit to other systems, among others. OK Grants DW,
WW Contract Financial

Assistance To fund special drinking water and wastewater infrastructure
projects that are approved by the legislature. OK Grants DW, WW Rural
Economic Action Plan

"REAP" To assist communities of 7, 000 or less with their wastewater or
drinking water systems. Maximum amount is $150,000. Applicants are subjected
to a specific ?REAP grant priority evaluation policy.? Criteria considered
include: population, water and sewer rates, indebtedness per customer,
median household income, applicant's ability to finance the project, amount
of grant requested, previous grant assistance, and enforcement orders.

Appendix II: Detailed Information on State- Sponsored Programs for Drinking
Water and Wastewater Infrastructure

Page 33 GAO- 02- 134 Financial Assistance for Water Infrastructure

State Form( s) of assistance Targeted

system( s) Program name Purpose

OK Loans (from bonds) DW, WW Financial Assistance Loan

Program To assist communities with drinking water and wastewater
infrastructure. Funds provided for this program come from bonds. OR Loans WW
Sewer Assessment Deferral

Loan Program (SADLP) To provide financial assistance to property owners who
would experience financial hardship as a result of the mandatory connection
to the public sewer system. Property owners acquire loans through local
communities. OR Grants/ loans/

bonds DW/ WW Water Fund To provide financing to construct and improve public
drinking water systems and public wastewater collection systems. OR Grants/
loans/

bonds DW/ WW

(and other projects)

Special Public Works Fund To provide financial assistance to municipalities
for constructing, improving, and repairing those facilities that are
essential for supporting economic activity which stimulates and promotes
employment opportunities in Oregon. PA Loans DW, WW DCED Infrastructure

Development Program To fund drinking, waste, and stormwater system
construction. PA Loans DW, WW DCED Local Government

Capital Projects Loan Program

To fund drinking, waste, and storm water system construction. PA Loans DW,
WW DCED PA Economic

Development Financing Authority

To fund drinking, waste, and stormwater system construction. PA Grants WW
DEP Act 339 Sewage

Treatment Plant Operation Subsidy Grants

To fund wastewater system construction. PA Grants/ loans DW, WW Pennvest
Construction

Loan Program To fund drinking, waste, and stormwater system construction. PA
Grants/ Loans DW, WW Pennvest Advance Funding

Program To fund drinking, waste, and stormwater system construction. RI
Loans WW Rhode Island Water

Pollution Control Revolving Fund

To finance projects not meeting the requirements of federal programs.

SC Loans DW, WW South Carolina Infrastructure Revolving Fund (SIRF)

To construct publicly owned water and sewer facilities. SC Grants DW, WW
South Carolina Budget &

Control Board Grant Program

To provide assistance for water and sewer related purposes. SC Grants DW, WW

(and other needs)

Environmental Emergency Fund To provide assistance during environmental
emergencies that

require immediate and comprehensive response from the state to deter
pollution and protect public health. SD Grants/ loans/

technical DW, WW State Water Resources

Management System To provide state financial and technical assistance to
large, costly water- related projects that need significant state cost share
participation and most likely require significant federal financing and
federal authorization. Projects are designated for this program through a
legislative process. SD Grants/ loans DW, WW Consolidated Water

Facilities Construction Program

To assist a wide variety of drinking water, wastewater, storm water,
groundwater protection, and watershed restoration projects. Most of the
assistance is in the form of grants. TN Loans DW, WW Tennesee Local

Development Authority (TLDA) Loan Program

To assist local governments with their water, wastewater, and solid waste
projects.

Appendix II: Detailed Information on State- Sponsored Programs for Drinking
Water and Wastewater Infrastructure

Page 34 GAO- 02- 134 Financial Assistance for Water Infrastructure

State Form( s) of assistance Targeted

system( s) Program name Purpose

TN Loans DW, WW Utility Relocation Loan Program (URLP) To assist cities and
utility districts that must relocate utilities due

to Tennessee Department of Transportation (TDOT) road projects. TN Grants/
loans DW, WW Tennessee Industrial

Infrastructure Program (TIIP)

To assist local governments and businesses with infrastructure improvements
and job- specific training.

TX Grants/ loans DW, WW Economically Distressed Areas Program To develop
adequate water supply and wastewater facilities in

certain areas without such facilities or where the financial resources of
the residents were inadequate to meet those needs. The program can fund the
construction, acquisition, or improvements to water supply and wastewater
collection and treatment works, including all necessary engineering work.
The program will not fund ongoing operation and maintenance expenses, and
applies only to areas of the state meeting the definition of an
"economically distressed area," primarily in counties along the Texas/
Mexico border. TX Loans (funds

come from bonds; state partial owner)

DW, WW State Participation Program To encourage the optional development of
major regional water supply, wastewater, or flood control projects where
local interests could not afford such projects at the time the assistance is
provided. The state provides the assistance by financing and owning up to 50
percent of the regional facilities until such time as sufficient growth
occurs for the state's interest to be bought out by the regional
participants. Funds for the program come from the sale of general obligation
bonds for which the legislature has pledged to pay all or part through draws
on general revenue funds while the state retains partial ownership of the
facilities. Recipients of assistance are required to purchase the state's
interest when they begin using any portion of the project capacity owned by
the state. TX Loans/ bonds DW, WW Water Development Fund To help communities
develop water supplies. The program has

evolved over the years, adding additional authority to fund wastewater and
flood control projects. Current development fund loans are made to political
subdivisions for water supply, water pollution control, and flood control
projects. Recent assistance for these programs has averaged approximately
$70 million per year. In addition, approximately $25 million per year of
these general obligation bond funds is used to supply the state match for
the CWSRF and DWSRF programs. UT Loans DW Board of Water Resources To
provide low- cost financing to develop Utah's water

resources. UT Grants/ loans/

interest rate buydown agreements

WW Water Quality Project Assistance Program To help political subdivisions
of the state fund water quality

projects. UT Grants/ loans DW/ WW

and other governmen tal needs

Permanent Community Impact Fund To assist state agencies or subdivisions
that are or may be

socially or economically affected, directly or indirectly, by mineral lease
development on federal lands.

Appendix II: Detailed Information on State- Sponsored Programs for Drinking
Water and Wastewater Infrastructure

Page 35 GAO- 02- 134 Financial Assistance for Water Infrastructure

State Form( s) of assistance Targeted

system( s) Program name Purpose

UT Grants/ loans DW Drinking Water Financial Assistance To provide low- cost
financing for public drinking water system

infrastructure projects. VA Grants WW State Combined Sewer

Overflow (CSO) Grants To help Virginia localities meet the local share
requirement of federal earmark grants. VA Loans/ bonds DW, WW Virginia
Resource

Authority- Bond Program To help local governments fund wastewater and
drinking water projects VA Grants WW Water Quality Improvement

Fund- Point- Source Pollution Control

To provide technical and financial assistance to local governments and
individuals to help them control point- source pollution, primarily nitrogen
and phosphorus. VT Grants DW Vermont Water Supply

Grant Program To provide financial assistance for needed improvements to
publicly owned water systems. 35percent of the grants were provided for new
or improved source, storage, treatment, or transmission main facilities. VT
Grants WW Vermont Pollution

Abatement/ Control Grant Program

To abate (1) direct discharges of untreated or improperly treated domestic
wastes (35 percent state grant; 65 percent SRF); (2) combined server/ wet
weather overflow (25 percent state grant; 50 percent SRF loan; 25 percent
other); (3) phosphorus removal; and (4) sludge and septage (50 percent state
grant; 50 percent SRF). WA Loans DW, WW Public Works Trust Fund

Construction Loan Program To provide low- interest loans to local
governments for the repair, replacement, and rehabilitation of
infrastructure. WA Grants DW Referendum 38 To assist public water system
utilities in upgrading existing

systems and keeping pace with the increasing demands placed upon them.
Program is now being phased out. WA Grants/ loans WW Referendum 26 To
provide financial assistance for the acquisition, construction,

and improvement of public waste facilities. Program is now being phased out.
WA Grants/ loans WW Centennial Clean Water

Fund To assist local governments and tribes with the planning, design,
acquisition, construction, and improvement of water pollution control
facilities and related activities. Program will continue until 2021. WA
Grants/ loans WW Referendum 39 To provide for the planning, design,
acquisition, construction,

and improvement of public waste disposal and management facilities. Program
is now being phased out. WI Grants/ loans WW Clean Water Fund Program To
construct wastewater infrastructure. WI Grants DW Municipal Clean Drinking

Water Grant Program To correct violations of the drinking water standards.
WV Grants/ loans DW, WW Loan and Grant Program To construct wastewater and
water facilities for public utilities. WY Grants/ loans DW, WW Federal
Royalty Capital

Construction Account Grants and Joint Powers Act Loans

To fund public service facility owned by the applicant and available for use
by the general public, including water and sewer projects, storm drainage
projects, street and road projects, solid waste disposal projects,
acquisition of emergency vehicles public administration buildings, health
care facilities, senior citizens? centers, jail and detention facilities,
and facilities needed to provide services to the disabled and similar
facilities as authorized by the Board.

Appendix III: Questions in State Survey Instrument

Page 36 GAO- 02- 134 Financial Assistance for Water Infrastructure

Appendix III: Questions in State Survey Instrument

Note: This appendix includes the material provided to survey participants
including the questions and instructions for answering them.

Appendix III: Questions in State Survey Instrument

Page 37 GAO- 02- 134 Financial Assistance for Water Infrastructure

Appendix III: Questions in State Survey Instrument

Page 38 GAO- 02- 134 Financial Assistance for Water Infrastructure

Appendix III: Questions in State Survey Instrument

Page 39 GAO- 02- 134 Financial Assistance for Water Infrastructure

Appendix III: Questions in State Survey Instrument

Page 40 GAO- 02- 134 Financial Assistance for Water Infrastructure

Appendix III: Questions in State Survey Instrument

Page 41 GAO- 02- 134 Financial Assistance for Water Infrastructure

Appendix IV: GAO Contact and Staff Acknowledgments

Page 42 GAO- 02- 134 Financial Assistance for Water Infrastructure

Ellen Crocker (617) 565- 7469 Key contributors to this report include Terri
Dee, Les Mahagan, Diane Raynes, Laura Shumway, and Lisa Turner. Also making
significant contributions were Christine Bonham, June Foster, Karen Keegan,
and Jonathan McMurray. Appendix IV: GAO Contact and Staff

Acknowledgments GAO Contact Staff Acknowledgments

(360029)

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