Clean Water: How States Allocate Revolving Loan Funds and Measure
Their Benefits (05-JUN-06, GAO-06-579).
Communities will need hundreds of billions of dollars in coming
years to construct and upgrade wastewater treatment facilities,
sewer systems, and other water infrastructure. To finance these
efforts, they will rely heavily on low-interest loans from the
Environmental Protection Agency's (EPA) Clean Water State
Revolving Fund (CWSRF) program to supplement their own funds.
Through fiscal year 2005, states have used their CWSRFs to
provide communities over $52 billion for a variety of water
quality projects. The Clean Water Act allows states to use their
CWSRFs to (1) construct or improve conventional wastewater
infrastructure, (2) control diffuse (nonpoint) sources of
pollution such as agricultural runoff and leaking septic systems,
and (3) protect federally-designated estuaries. Given the states'
flexibility in determining how to spend CWSRF dollars, GAO was
asked to examine (1) the extent to which states use their CWSRF
dollars to support conventional wastewater treatment
infrastructure versus other qualifying expenses, (2) the
strategies states use to allocate their CWSRF dollars among
qualifying expenses, and (3) the measures states use to ensure
that their allocation strategies result in the most efficient and
effective use of CWSRF dollars. EPA reviewed a report draft,
providing technical comments that were incorporated.
-------------------------Indexing Terms-------------------------
REPORTNUM: GAO-06-579
ACCNO: A55104
TITLE: Clean Water: How States Allocate Revolving Loan Funds and
Measure Their Benefits
DATE: 06/05/2006
SUBJECT: Allocation (Government accounting)
Environmental protection
Federal aid to localities
Federal aid to states
Federal funds
Funds management
Nonpoint source pollution
Performance measures
Program evaluation
Revolving funds
Wastewater management
Wastewater treatment
Water pollution
Water pollution control
Water quality
Water quality management
Clean Water State Revolving Fund
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GAO-06-579
United States Government Accountability Office
Report to the Subcommittee on
GAO
Interior, Environment, and Related Agencies, Committee on Appropriations, House
of Representatives
June 2006
CLEAN WATER
How States Allocate Revolving Loan Funds and Measure Their Benefits
GAO-06-579
CLEAN WATER
How States Allocate Revolving Loan Funds and Measure Their Benefits
What GAO Found
Since 1987, states have used 96 percent (about $50 billion) of their CWSRF
dollars to build, upgrade, or enlarge conventional wastewater treatment
facilities and conveyances. Projects to build or improve wastewater
treatment plants alone account for over 60 percent of this amount, with
the remainder supporting the construction or rehabilitation of sewer and
storm water collection systems. CWSRF assistance for nonpoint source
activities represents only 4 percent (about $2 billion) of CWSRF dollars,
although it accounts for over a quarter of all CWSRF projects financed. To
date, 37 states report using some portion of their CWSRF funds to directly
support nonpoint source activities. Nationwide, 23 percent of CWSRF funds
(64 percent of all CWSRF loan agreements) were devoted to water quality
projects in communities with populations of less than 10,000 people.
The 50 states (and Puerto Rico) have used a variety of strategies to
allocate CWSRF funds to meet their individual needs. For example, the
state of Washington sets aside 20 percent of its CWSRF dollars to support
nonpoint source projects, while Alabama state law defines only traditional
public wastewater treatment facilities as appropriate projects under its
CWSRF program. Other states have designed their programs to target
selected types of borrowers. Pennsylvania, for example, has targeted
borrowers in small or rural communities during the allocation process.
According to EPA and state officials, states' allocation strategies may
change as certain states' priorities and clean water needs shift. Among
the reasons are (1) aging wastewater infrastructure in need of
rehabilitation or replacement; (2) population growth and redistribution;
(3) changes in EPA enforcement priorities; and (4) stricter EPA and state
water quality standards for temperature, nutrients, and sediments.
EPA and the states use a uniform set of financial and environmental
measures to help determine efficient and effective use of CWSRF resources.
Financial measures include, among others, return on federal investment,
the pace at which available funds are loaned, and the sustainability of
the fund. EPA regional officials conduct annual reviews of each state
program to help ensure the fiscal integrity of the state programs. All
programs are also subject annually to independent financial audits. To
measure environmental outcomes of CWSRF-funded projects, in fiscal year
2005, EPA developed an electronic benefits reporting system that all 51
programs have agreed to use. Currently, the system collects data only on
anticipated environmental benefits associated with CWSRF-funded projects.
However, to varying degrees, some states such as Oklahoma and Washington
are attempting to gather data on actual environmental benefits from their
CWSRF-funded projects, including nonpoint source projects.
United States Government Accountability Office
Contents
Letter Results in Brief Background States Have Loaned 96 Percent 1 3
of Their CWSRF Funds for Wastewater Infrastructure, with 4 8
23 Percent Supporting Projects in Small Communities 20
States' Allocation Strategies Reflect Diverse Clean Water 28
Needs and CWSRF Program Goals EPA and the States Use 32
Specific Financial and Environmental Measures to Evaluate
Efficient and Effective Use of CWSRF Resources Agency
Comments and Our Evaluation
Appendix I Scope and Methodology 34
Appendix II Selected Clean Water State Revolving Fund Financial Data 37
Appendix III GAO Contact and Staff Acknowledgments 48
Tables Table 1: States Voluntarily Reporting Use of CWSRFs to
Address Nonpoint Sources of Water Pollution with a
Wastewater Treatment System, Fiscal Years 1987 through
2005 Table 2: Clean Water State Revolving Fund for
Wastewater Treatment, Nonpoint Source, and Estuary
Projects, by State, Fiscal Years 1987 through 2005 Table
3: Clean Water State Revolving Fund Assistance by
Community Size, Fiscal Years 1987 through 2005 Table 4: 17
Clean Water State Revolving Fund National Financial 37
Indicators, Fiscal Years 1987 through 2005 Table 5: Clean 39
Water State Revolving Funds Available for Projects, 41
Fiscal Years 1987 through 2005 43
Table 6: Assistance Provided Through the Clean Water State Revolving Fund
Program and Other State Funded Clean Water and Loan Grant Programs, Fiscal
Years 1987 through 2005
Figures
Figure 1: Flow of Funds through the CWSRF Program 7
Figure 2: CWSRF Support and Type of CWSRF-Supported Projects,
Fiscal Years 1987 through 2005 9
Figure 3: CWSRF Financial Assistance by Subcategory of
Wastewater Infrastructure Projects, Fiscal Years 1987
through 2005 11
Figure 4: CWSRF Support for Wastewater Infrastructure and
Nonpoint Source Pollution Control Projects, Fiscal Years
1987 through 2005 12
Figure 5: CWSRF Support for Nonpoint Source Projects as a
Percentage of Total CWSRF Support, Fiscal Years 1987
through 2005 13
Figure 6: CWSRF Support by Subcategory of Nonpoint Source
Projects, Fiscal Years 1987 through 2005 16
Figure 7: CWSRF Support by Community Size as a Percentage of
Total CWSRF Support, Fiscal Years 1987 through 2005 18
Figure 8: CWSRF Support to Small Communities as a Percentage of
Total CWSRF Support, Fiscal Years 1987 through 2005 19
Figure 9: Annual Average Interest Rates for the Clean Water
State
Revolving Fund Compared with Annual Average Market
Interest Rates 45
Abbreviations
CBO Congressional Budget Office
CSO Combined Sewer Overflows
CWSRF Clean Water State Revolving Fund
EPA Environmental Protection Agency
GAAP Generally Accepted Accounting Principles
IPPS Integrated Project Priority Setting
NIMS National Information Management System
OMB Office of Management and Budget
PART Program Assessment Rating Tool
PER Program Evaluation Report
SSO Sanitary Sewer Overflows
TMDL Total Maximum Daily Load
This is a work of the U.S. government and is not subject to copyright
protection in the United States. It may be reproduced and distributed in
its entirety without further permission from GAO. However, because this
work may contain copyrighted images or other material, permission from the
copyright holder may be necessary if you wish to reproduce this material
separately.
United States Government Accountability Office Washington, DC 20548
June 5, 2006
The Honorable Charles H. Taylor Chairman The Honorable Norm Dicks Ranking
Minority Member Subcommittee on Interior, Environment, and Related
Agencies Committee on Appropriations House of Representatives
Recent estimates by the Environmental Protection Agency (EPA) and the
Congressional Budget Office suggest that, over the next 15 years, local
communities will need hundreds of billions of dollars to construct and
upgrade aging wastewater treatment facilities, sewer systems, and other
projects that improve water quality and help safeguard public health and
the environment. These communities will rely on EPA's Clean Water State
Revolving Fund (CWSRF) to supplement the funds they obtain from their
ratepayers to finance these efforts. The Water Quality Act of 1987 amended
the Clean Water Act1 and created the CWSRF program to provide an
independent, permanent, low-cost source of financing for a wide range of
efforts to protect or improve water quality. Through the CWSRF, EPA
provides annual grants to the states to capitalize state-level CWSRFs.
States must match these EPA grants with a minimum of 20 percent of their
own contributions. States loan their CWSRF dollars to local governments
and other entities for various water quality projects, and loan repayments
are cycled back into the state-level programs to fund additional projects.
According to the EPA, all 50 states and Puerto Rico currently maintain
revolving loan funds that have provided an average of over $4 billion in
total annual assistance since 2000.2 From fiscal years 1987 through 2005,
state CWSRFs have provided over $52 billion and made over 16,000 loans for
a variety of water quality projects.
The CWSRF provides states with significant flexibility to design programs
to meet their water quality needs. States may use their CWSRF resources
1
The Federal Water Pollution Control Act Amendments of 1972 are commonly
referred to as the Clean Water Act.
2
The District of Columbia does not participate in the Clean Water State
Revolving Fund program.
Page 1 GAO-06-579 Wastewater Infrastructure
to (1) construct or improve conventional wastewater infrastructure, such
as treatment plants and sewer systems; (2) control diffuse, or "nonpoint"
sources of pollution, such as runoff from agricultural activities and
leaking septic systems; and (3) develop or implement management plans in
federally-designated estuaries. Although the CWSRF is primarily a
lowinterest loan program, states can also use it to refinance, purchase,
or guarantee local debt and purchase bond insurance. States may customize
their loan terms, including interest rates (from 0 percent to market
rates) and repayment periods (up to 20 years), depending on the financial
and environmental needs of potential borrowers. EPA provides a range of
financial and programmatic training and direct technical support to the
states through its regional offices.
Citing the states' flexibility in determining how to use their CWSRFs, you
asked that we examine (1) the extent to which states are currently using
their CWSRF dollars to support conventional wastewater treatment
infrastructure versus other qualifying expenses, (2) the strategies states
use to allocate their CWSRFs among qualifying expenses, and (3) the
measures states use to ensure that their allocation strategies result in
the most efficient and effective use of their CWSRFs.
To determine the extent to which states are currently using their CWSRFs
to support conventional wastewater infrastructure versus other qualifying
expenses, we reviewed EPA's National Information Management System, the
database EPA uses to track expenditures for all 51 CWSRF programs. To
examine the strategies states use to allocate their CWSRFs among
qualifying expenses, we interviewed EPA and state-level agency officials
and reviewed annual reports and other official documents. We conducted
field visits to a diverse group of states-including Delaware, Minnesota,
Montana, North Carolina, Ohio, Texas, and Washington-to obtain detailed
illustrative information about CWSRF allocation strategies from
state-level CWSRF program officials and selected recipients of CWSRF
funds. To gather information on additional states, we conducted structured
phone interviews with EPA officials from all 10 regional offices and
followed up with selected state-level CWSRF program officials to discuss
allocation strategies and other aspects of their programs. We also
reviewed each state's most recent CWSRF Program Evaluation Report (PER),
which EPA conducts annually. To examine how states ensure that their
allocation strategies result in the most efficient and effective use of
CWSRF dollars, we interviewed EPA and state officials about the financial
and environmental measures they use to assess CWSRF performance. In
addition, we reviewed EPA's online CWSRF Environmental Benefits Reporting
System. We conducted our work between July 2005 and April
Page 2 GAO-06-579 Wastewater Infrastructure
Results in Brief
2006 in accordance with generally accepted government auditing standards.
See appendix I for a more detailed discussion of our scope and
methodology.
Since the inception of the CWSRF program in 1987, states have allocated
about 96 percent, or about $50 billion, of their CWSRF dollars to
building, upgrading, or enlarging conventional wastewater treatment
facilities and their associated conveyances. Projects to build or improve
wastewater treatment plants alone account for over 60 percent of this
amount, with the remainder supporting the construction or rehabilitation
of sewer and storm water collection systems. In addition to these more
conventional expenditures, 37 states report using some portion of their
CWSRFs to address nonpoint source pollution, which sometimes account for
serious pollution problems. Nonpoint source projects account for only 4
percent of CWSRF expenditures (about $2 billion) but represent more than
25 percent of all CWSRF projects financed. Among all categories of
CWSRFeligible nonpoint source projects, states provided the greatest level
of support-about 39 percent of all nonpoint source dollars-to activities
related to sanitary landfills. Nationwide, 23 percent of CWSRF funds, or
64 percent of all CWSRF loan agreements, were targeted for water quality
projects in communities of less than 10,000 people. A number of states,
such as North Carolina, Pennsylvania, and West Virginia, have developed
special initiatives or customized their loan terms to help small or
economically disadvantaged communities develop needed wastewater
infrastructure.
As allowed by the Clean Water Act, states have used considerable
flexibility in designing their CWSRF programs to meet their individual
clean water needs. In particular, states choose the extent to which they
will use CWSRF funds to support point source control projects (e.g.,
wastewater treatment plant construction) and nonpoint source projects
(e.g., implementing agricultural best management practices or replacing
failing septic systems). The state of Washington, for example, uses up to
20 percent of its CWSRF dollars for a set-aside to support nonpoint source
projects and estuary conservation and management projects, while Alabama
state law defines only traditional public wastewater treatment facilities
as appropriate projects under its CWSRF program. Just as some states
allocate CWSRF resources based upon identified water quality needs, other
states have designed their programs to target selected types of borrowers.
For example, Pennsylvania has targeted borrowers in small or rural
communities during the allocation process, with 90 percent of all CWSRF
loan agreements and almost 75 percent of total funding is directed
Page 3 GAO-06-579 Wastewater Infrastructure
Background
to projects in small communities. Similarly, Ohio offers CWSRF loans with
(1) a 0 percent interest rate to communities with populations of less than
2,500 and a median household income of less than $45,000 and (2) a 1
percent interest rate to those with populations between 2,500 and 10,000
and a median household income of less than $38,000. According to EPA and
state officials, states' allocation rationales may change as certain
states' priorities and clean water needs shift. Specifically, states may
alter their allocation strategies in response to (1) aging wastewater
infrastructure needing rehabilitation or replacement; (2) population
growth and redistribution; (3) changes in EPA enforcement priorities,
particularly with regard to limiting sewage discharges during wet weather
conditions; (4) pressure to implement EPA's Total Maximum Daily Load
(TMDL) program; and (5) stricter EPA and state water quality standards for
temperature, nutrients, and sediments.
States use a specific set of financial and environmental measures to help
determine efficient and effective use of CWSRF resources. Financial
measures include a set of national financial indicators, such as return on
federal investment, the pace at which available funds are loaned, and
sustainability of the CWSRF. EPA regional officials conduct annual reviews
of each state program to help ensure the fiscal integrity of the state
programs. CWSRFs are also subject to annual independent financial audits.
To measure environmental outcomes of CWSRF-supported projects, in fiscal
year 2005, EPA developed an electronic benefits reporting system, which
all states have agreed to use. Currently, the system collects data on
anticipated environmental benefits associated with all types of CWSRF
projects. It does not require any environmental monitoring, since the
information input focuses on anticipated environmental benefits. However,
some states are attempting to gather data on actual environmental benefits
from their CWSRF-supported projects, including nonpoint source projects.
Washington State, for example, recently required applicants to monitor the
environmental impact of its CWSRF projects 3 to 5 years after project
completion.
Local governments have primary responsibility for wastewater treatment,
owning and operating more than 17,000 treatment plants and 24,000
collection systems nationwide. Local ratepayers have long been relied upon
to fund both construction costs and operating and maintenance costs
associated with facilities serving their communities. However, the federal
government has provided financial assistance for these wastewater
treatment facilities since the enactment of the Water Pollution Control
Act Amendments of 1956, which established the federal Construction Grants
program. Through this program, the federal government provided grants
directly to local governments for constructing treatment facilities but
limited the federal contribution to the lesser of 30 percent of eligible
construction costs or $250,000. The Federal Water Pollution Control Act
Amendments of 1972, commonly known as 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
tenfold during the 1970s, reaching a high of $8.4 billion in 1980.
Subsequent amendments in 1981 and 1987 reduced and then phased out the
construction grant program, replacing it with the CWSRF. Instead of
providing grants directly to localities, the CWSRF provides federal grants
to the states, which in turn provide loans to communities and other
entities to finance wastewater treatment and other water quality
projects.3 The 1987 law established a system in which the states would use
the loan repayments to finance future CWSRF loans, thereby allowing the
state revolving funds to operate without sustained federal support.
Congress authorized appropriations through 1994 but has continued to
appropriate funds to the CWSRF each year since.
The transfer of federal funds to state-level CWSRFs begins when Congress
appropriates funds annually to the EPA. EPA then allots capitalization
grants to the individual states. The Clean Water Act also requires states
to provide state funds to match 20 percent of the total federal CWSRF
capitalization grants. To receive its allotment, a state must provide an
Intended Use Plan that lists potential projects to solve water quality
problems and solicit public comments on that list. After completing the
plan and receiving its capitalization grant, a state has up to 1 year to
enter binding commitments (later converted into loan agreements) with
potential borrowers to fund specific water quality projects. The majority
of CWSRF borrowers are municipalities and other local units of government,
although in some states nonprofit organizations, businesses, farmers,
The CWSRF is one source among many federal and state programs that local
governments can turn to for financial assistance with their water quality
projects. Federal agencies- such as the U.S. Department of Agriculture's
Rural Utility Service, the Department of Housing and Urban Development,
and the Department of Commerce's Economic Development Administration-also
provide grants and loans for the construction of wastewater and sewer
systems. According to EPA, 40 states also have separate grant or loan
programs that provide financial assistance for clean water projects.
homeowners, and watershed groups are eligible to seek nonpoint source
funding through the CWSRF.4
According to an EPA headquarters official, a single CWSRF loan may support
multiple clean water projects.5 State CWSRF administrators set loan terms,
interest rates, and repayment periods. Loan repayments are cycled back
into the state-level fund and used for additional water quality projects.
States also have the option of using CWSRF funds as collateral to borrow
in the public bond market to increase the pool of available funds, a
process referred to as "leveraging." Figure 1 illustrates the flow of
funds through the CWSRF program.
4
EPA also provides grants for nonpoint source projects through its National
Nonpoint Source program.
5
EPA reports that since July 1, 1987, states have provided over 16,752
CWSRF loans to support 22,674 projects.
Page 6 GAO-06-579 Wastewater Infrastructure
Figure 1: Flow of Funds through the CWSRF Program
Federal capitalization Matching funds grants provided by the provided by
each state (minimum of 20 percent EPA
of federal grant)
$ $
Loan repayments
Low-interest loans
Source: EPA.
a
To date, 27 states have "leveraged" their federal capitalization grants
and state matching funds to borrow additional money in the public bond
market. Nationally, leveraged bonds comprise about 27 percent of total
CWSRF funds, while loan repayments comprise about 10 percent.
States can use their CWSRF resources to construct or upgrade wastewater
infrastructure, address nonpoint sources of pollution,6 or develop or
implement management plans in federally-designated estuaries. States use a
state-developed, EPA-approved, ranking system to direct funds to the
highest priority projects. The ranking system considers applicant
communities' current regulatory compliance status, imminent public and
environmental health threats, and the relative importance of the affected
Nonpoint source pollution, unlike pollution from industrial and sewage
treatment plants, flows into waterways from many diffuse sources. Nonpoint
source pollution is caused by rainfall or snowmelt moving over and through
the ground and transporting natural and human-made pollutants, finally
depositing them into surface bodies of water and groundwater.
Page 7 GAO-06-579 Wastewater Infrastructure
bodies of water. States are not required to fund these projects in
priority order; decisions on which projects to fund first are often based
on a project's readiness to proceed. However, states must first use their
CWSRFs to ensure that existing wastewater treatment facilities are in
compliance with, or are making progress toward, deadlines, goals, and
requirements of the Clean Water Act.7 After meeting this "first use"
requirement, states may use their CWSRFs to construct other wastewater
infrastructure or for nonpoint source pollution and estuary management
projects.8
Taken together, states have loaned the majority of their CWSRF dollars -
96 percent or about $50 billion since 1987-to build, upgrade, or enlarge
conventional wastewater treatment facilities and conveyances. Direct CWSRF
support for nonpoint source activities represents only 4 percent of CWSRF
dollars (about $2 billion), although it accounts for over a quarter of all
CWSRF projects financed. Nationwide, 23 percent of CWSRF funds (64 percent
of all CWSRF loan agreements) were devoted to water quality projects in
communities with populations of less than 10,000 people.
States Have Loaned 96 Percent of Their CWSRF Funds for Wastewater
Infrastructure, with 23 Percent Supporting Projects in Small Communities
States Have Used about 96 Percent of Their CWSRFs to Support Conventional
Wastewater Infrastructure Projects
All 51 CWSRF programs use the large majority of their CWSRF resources for
conventional wastewater infrastructure projects. From fiscal year 1987
through June 2005, the Clean Water State Revolving Fund program has
provided over $52 billion dollars in financial assistance to local
governments and others for a variety of water quality improvement projects
across the nation. States provided about 96 percent of this amount-or $50
billion-to municipalities to build, upgrade, or enlarge conventional
wastewater treatment facilities and conveyances. EPA reports that
conventional wastewater infrastructure projects account for about 73
percent of all CWSRF-funded projects. By their nature,
7
According to EPA headquarters officials, all 51 CWSRF programs met this
"first use" requirement in the early 1990s. As such, these officials
indicate that this requirement no longer affects states' funding
decisions.
8
According to EPA, as of June 30, 2005, no state has reported using the
estuary management category of qualifying expenses, but a few states have
reported that a portion of their wastewater treatment and nonpoint source
assistance also supports activities to develop or implement management
plans in federally designated estuaries.
wastewater infrastructure projects are typically much more expensive to
complete than nonpoint source projects. Figure 2 illustrates the relative
funding for the types of projects receiving CWSRF assistance.
Figure 2: CWSRF Support and Type of CWSRF-Supported Projects, Fiscal Years
1987 through 2005
Percentage of total CWSRF dollar supporta Percentage of projects receiving
CWSRFb
4%
Nonpoint source projects
Wastewater treatment projects
Source: EPA.
Note: According to EPA, as of June 30, 2005, no state has reported using
CWSRF resources to directly support projects that are exclusively fundable
under the estuary management category of qualifying expense (such as fish
restocking).
a
Total CWSRF funding equals $52.7 billion. According to EPA, $600 million
of available CWSRF resources support short-term planning and design
activities and, as such, have not yet been allocated by the states among
the qualifying categories of expense. However, EPA expects that these
funds will be allocated (most likely to wastewater infrastructure
projects) when rolled into longer-term construction projects.
b
According to EPA, states have reported that their CWSRF loans have
supported a minimum of 22,674 projects, but because states do not use
common standards to report the numbers of projects supported by loan
agreements, the percentage of projects that are point source versus the
percentage that are nonpoint source are imprecise, and the actual
percentages might be either higher or lower than reported above. However,
we were unable to quantify the extent of this imprecision.
Within the conventional wastewater treatment category, states may allocate
their CWSRF resources among the following seven major categories of
projects:
o Secondary Treatment includes infrastructure designed to ensure that
wastewater treatment plant effluent meets EPA's secondary treatment
standards, a requirement of all new and existing wastewater treatment
facilities.
Page 9 GAO-06-579 Wastewater Infrastructure
o Advanced Treatment includes infrastructure designed to further remove
nutrients and other matter from wastewater treatment plant effluent
beyond secondary treatment standards.
o New Sewers includes the construction of new wastewater conveyances-
such as collector and interceptor sewers-to carry household and
industrial wastewater to treatment facilities.9
o Sanitary Sewer Overflow correction includes efforts to prevent the
occasional or incidental discharge of untreated sewage from municipal
sanitary sewer systems that can occur due to inclement weather and
improper maintenance or operation of sewer systems.10
o Combined Sewer Overflow correction includes efforts to prevent or
mitigate discharges of untreated wastewater from combined sewer
systems, which are designed to collect rainwater runoff, domestic
sewage, and industrial wastewater in the same pipe. Combined sewer
systems were designed in many cities to occasionally discharge excess
wastewater directly to nearby water bodies. However such overflows
often pose significant public health and pollution problems and have
become a national enforcement priority for EPA.
o Storm Water Sewers includes both storm water infrastructure and
efforts to plan and implement municipal storm water management
programs.
o Recycled Water Distribution includes projects to convey recycled water
(i.e., treated wastewater) from treatment facilities to end users such
as golf courses and municipal gray water systems.
9
In order to estimate the amount of CWSRF support for the New Sewers
category, EPA collects data on CWSRF support in two additional CWSRF
expenditure categories- Collector Sewers and Interceptor Sewers. Collector
Sewers use pipes to consolidate and transfer wastewater from sanitary or
industrial wastewater sources to an interceptor sewer, which then carries
the wastewater to a treatment facility. Interceptor Sewer projects include
major sewer lines that receive wastewater from collection sewers and carry
the wastewater to a treatment facility or another interceptor sewer.
10
In order to estimate the amount of CWSRF support for Sanitary Sewer
Overflow correction, EPA collects data on CWSRF support in two additional
CWSRF expenditure categories-Infiltration/Inflow correction and
Replacement/Rehabilitation of Sewers. Infiltration/Inflow correction
includes projects to control water penetration into sewer systems through
defective pipes, manholes, drains, and storm sewers.
Replacement/Rehabilitation of Sewers includes projects to reinforce or
rebuild structurally deteriorating sewers.
As shown in figure 3, nationwide, states have allocated about 60 percent
of their CWSRF wastewater infrastructure dollars for secondary and
advanced treatment projects at wastewater treatment facilities. The
remainder supports sewers and other conveyances.
Figure 3: CWSRF Financial Assistance by Subcategory of Wastewater
Infrastructure Projects, Fiscal Years 1987 through 2005
Secondary Treatment
<1%
Othera
Combined Sewer Overflow
Sanitary Sewer Overflow
Advanced Treatment
New Sewers
Source: EPA's National Information Management System.
Note: Percentages may not add to 100 due to rounding.
a
Storm Water Sewers and Recycled Water Distribution together add to less
than one-half of 1 percent of CWSRF assistance for wastewater
infrastructure.
Since the CWSRF's inception, the total dollar amounts that states annually
provide for wastewater infrastructure and nonpoint source projects has
increased. However, CWSRF support for wastewater infrastructure has
increased at a greater pace than the amount for nonpoint source projects.
Figure 4 shows that states have used their CWSRFs to finance wastewater
Nonpoint Source Projects Represent 4 Percent of CWSRFs but Account for
Over 25 Percent of All CWSRF-Supported Projects
infrastructure projects since 1987 but only began to use them to support
nonpoint source projects in 1990. The annual percentage of the CWSRFs
states allocated to nonpoint source projects peaked in 1996 at about 10
percent.
Figure 4: CWSRF Support for Wastewater Infrastructure and Nonpoint Source
Pollution Control Projects, Fiscal Years 1987 through 2005
Dollars in billions 5
4
3
2
1
0 1988 1989 1990 1991 1992 1993 1994 1997 1996 1995 2005 2004 2003 2002
2001 2000 1999 1998
Year
Source: EPA's National Information Management System.
Direct CWSRF support for nonpoint source pollution control activities
represents only 4 percent (about $2 billion) of CWSRFs allocated by the
states but accounts for over 25 percent of all CWSRF-supported projects
because nonpoint source projects are typically less expensive than
wastewater infrastructure projects. The extent to which states have used
their CWSRFs to support nonpoint source projects varies. To date, 37
states have reported using some portion of their CWSRF funds to directly
support nonpoint source projects. Among them, Wyoming has allocated the
greatest percentage of funds to nonpoint source projects (44 percent),
while New York has allocated the greatest dollar amount (over $700
million). Figure 5 illustrates the percentage of funding that all 51
programs have allocated to nonpoint source projects since the CWSRF's
inception. Detailed state by state figures are provided in appendix II.
Figure 5: CWSRF Support for Nonpoint Source Projects as a Percentage of Total
CWSRF Support, Fiscal Years 1987 through
Source: EPA.
To be eligible for CWSRF support, a nonpoint source pollution control
project must help implement a state's EPA-approved Nonpoint Source
Pollution Management Plan.11 Each state determines which nonpoint source
pollution control activities are eligible for funding. Nationally, there
are 11 major categories of nonpoint source pollution control projects that
have received CWSRF support:
o Agricultural Best Management Practices include projects to reduce
water pollution resulting from activities related to the production of
animals and food crops.12 Projects can include nutrient management
practices for the storage and disposal of animal waste; techniques to
minimize pollution related to agricultural activities such as grazing,
composting, pesticide spraying, planting, harvesting, fertilizing, and
tillage; and irrigation water management.
o Individual/Decentralized Sewage Treatment encompasses the
rehabilitation or replacement of individual septic tanks or community
sewage disposal systems. This category also includes the construction
of collector sewers to transport waste from individual septic systems
to a cluster septic tank or other decentralized facility.
o Groundwater-Unknown Source relates to the protection of groundwater
and includes projects to protect wellheads and prevent contamination
in areas where groundwater is replenished.
o Storage Tanks include tanks above or below ground designed to hold
petroleum products or chemicals. Projects may include spill
containment systems; the upgrade, rehabilitation, or removal of
leaking tanks; and the treatment of contaminated soils and
groundwater.
o Sanitary Landfills manages water pollution emanating from landfills
and includes activities such as collection of leachate or on-site
treatment, capping, and closure.
11
Under the Clean Water Act, states are required to develop a Nonpoint
Source Pollution Management Plan that serves as a comprehensive guide to
each state's nonpoint source problems, pollution control programs, and
future steps for nonpoint source pollution control and prevention.
12
EPA tracks CWSRF expenditure data separately for nonpoint source projects
related to animal production and agricultural cropland but has reported
these data together as Agricultural Best Management Practices.
o Silviculture includes best management practices related to forestry
activities such as timber harvesting, removal of streamside
vegetation, road construction, and mechanical preparation for the
planting of trees. Eligible activities include preharvest planning,
streamside buffers, road management, and re-vegetation of disturbed
areas.
o Marina includes water pollution control activities related to boating
and freshwater marinas. Pump-out systems, oil containment booms, and
efforts to minimize discharge of sewage from boats are included in
this category.
o Resource Extraction includes pollution control activities related to
mining and quarrying. Projects supported can include the construction
of detention berms and the revegetation of areas affected by mining
activities.
o Brownfields include abandoned, idle, and underused industrial sites.
Eligible projects include groundwater monitoring wells, treatment of
contaminated soils and groundwater, capping of contaminated areas to
prevent storm water infiltration, and removal of storage tanks at
brownfields.
o Hydromodification relates to the water channel modification, dam
construction, stream bank and shoreline erosion, and wetland or
riparian area protection or restoration. Examples of eligible
activities include conservation easements; shore erosion control;
wetland development and restoration; installation of open, vegetated
drainage channels designed to detain and/or treat storm water; and
bank and channel stabilization.
o Urban includes activities related to erosion, sedimentation, and
discharge of pollutants (e.g., oil, grease, road salt, toxic
chemicals) from construction sites, roads, bridges, and parking lots.
As shown in figure 6, states have provided the greatest level of nonpoint
source support-almost 40 percent of all CWSRF nonpoint source dollars-to
mitigate contaminated runoff from sanitary landfills.
Figure 6: CWSRF Support by Subcategory of Nonpoint Source Projects, Fiscal
Years 1987 through 2005
Sanitary Landfills
2%
Othera
4%
Individual/Decentralized Sewage Treatment
Urban
Storage Tanks
Hydromodification
Agricultural Best Management Practices
Groundwater-Unknown Source
Source: EPA's National Information Management System.
Note: Percentages may not add to 100 due to rounding.
a
Taken together, the Silviculture, Marina, Resource Extraction, and
Brownfields categories account for about 2 percent of CWSRF nonpoint
source dollars.
Although sanitary landfill projects received the largest share of CWSRF
nonpoint source dollars, EPA reports that agricultural best management
practices account for over 55 percent of all CWSRF-supported nonpoint
source projects receiving CWSRF support. Agricultural best management
practices-such as constructing a manure retention pond to control
pollution created by contaminated storm water runoff-are typically less
expensive than other types of nonpoint source projects. EPA also reports
that the construction or repair of decentralized or individualized
wastewater treatment systems (i.e., septic systems) accounted for about
another one-third of all CWSRF-supported nonpoint source projects.
Twelve states have reported to EPA that they have indirectly addressed
nonpoint sources of pollution with projects categorized under wastewater
treatment infrastructure. This may occur, for example, when a state
provides a loan to build a centralized collection system or wastewater
treatment plant to replace failing individual septic systems, which EPA
and the states define as a nonpoint source of water pollution. Because the
solution to the nonpoint source pollution problem is technically a
wastewater treatment facility, EPA considers the expenditure to be in the
wastewater infrastructure category. As detailed in table 1, these 12
states have devoted at least $650 million of their collective financing
for wastewater infrastructure projects to address nonpoint sources of
pollution.
Table 1: States Voluntarily Reporting Use of CWSRFs to Address Nonpoint Sources
of Water Pollution with a Wastewater Treatment System, Fiscal Years 1987 through
Dollars in millions
Amount of wastewater assistance used toState address nonpoint sources of
pollution
Arizona $140.6
Delaware 59.3
Indiana 39.6
Kansas 4.9
Massachusetts 12.2
Minnesota 104.9
New Mexico 0.6
New York 81.3
North Carolina 18.0
Oregon 35.5
Rhode Island 150.8
South Carolina
Total $654.7
Source: EPA's National Information Management System.
Note: Numbers may not add to total due to rounding.
Smaller Communities Account for 23 Percent of CWSRF Dollars Loaned, but
Over 60 Percent of All CWSRF-Supported Projects
Figure 7 shows that since the inception of the CWSRF program, small
communities-defined by EPA as having less than 10,000 inhabitants- have
received about 23 percent of total CWSRF dollars.13 In contrast, over 60
percent of all CWSRF loan agreements supported projects within these
smaller communities.
Figure 7: CWSRF Support by Community Size as a Percentage of Total CWSRF
Support, Fiscal Years 1987 through 2005
Percentage of total CWSRF support Percentage of CWSRF loan agreements
100,000 and above
10,000 to 99,999
100,000 and above Less than 3,500
3,500 to 9,999
Less than 3,500
10,000 to 99,999
3,500 to 9,999
Source: EPA's National Information Management System.
Note: Percentages may not add to 100 due to rounding. EPA reports that, as
of June 30, 2005, total CWSRF financial assistance equals $52.7 billion
and that the total number of CWSRF loan agreements equals 16,752. EPA does
not collect data on the types of individual projects (e.g., wastewater
infrastructure or nonpoint source) or type of loan agreement that each
community receives.
Figure 8 shows the considerable degree to which the states vary in the
extent to which their CWSRFs support small communities. It illustrates,
for example, that just over half of the CWSRF programs have provided 30
percent or more of their CWSRF funds for projects in small communities.
Pennsylvania has provided the greatest dollar amount ($914 million), as
13
This compares with U.S. Census figures showing that 41 percent of the U.S.
population lives in areas with fewer than 10,000 people.
Page 18 GAO-06-579 Wastewater Infrastructure
well as a high percentage of loans (90 percent) to projects in small
communities. At the other end of the spectrum, California has provided the
lowest CWSRF dollar amount (4 percent) and loans (15 percent) for projects
in small communities.
Figure 8: CWSRF Support to Small Communities as a Percentage of Total CWSRF
Support, Fiscal Years 1987 through 2005
Source: EPA.
States' Allocation Strategies Reflect Diverse Clean Water Needs and CWSRF
Program Goals
Our interviews with state and EPA officials suggest that the diversity
states exhibit in their CWSRF spending reflects the variation in what they
see as their most pressing water quality infrastructure needs, their most
pressing water quality problems, and the degree to which they rely on
CWSRF funds to protect smaller communities. EPA and state officials
predict that, in future years, states are likely to alter their current
CWSRF allocation strategies in response to growing demand and shifting
clean water needs and priorities.
Some States Focus on Conventional Wastewater Problems
Some states have focused their CWSRFs on supporting the construction of
wastewater treatment plants and conveyance systems. According to EPA
officials, these states consider wastewater infrastructure needs their
highest CWSRF priority and seek other sources of funding to support
nonpoint source pollution problems and estuary management activities. In
some cases, state legislation restricts the use of CWSRFs for nonpoint
source projects. For example, the legislation that created Alabama's CWSRF
limits the scope of the program by defining projects that receive CWSRF
funds as traditional public wastewater facilities. Other states have
passed legislation restricting the types of entities that can receive
CWSRF loans. Nevada and Colorado, for example, have limited their CWSRF
borrowers to local municipalities or similar government entities, thereby
excluding private or nongovernmental entities from receiving CWSRF funds.
Even where state law allows CWSRF funds to be used for nonpoint source
projects, some state CWSRF administrators have told EPA officials that
they are not comfortable with using CWSRF funds for this purpose,
especially when demand for funding for wastewater infrastructure projects
in their states is high. For example, according to officials in EPA's New
York Regional Office, large parts of Puerto Rico lack basic sewers and
wastewater treatment facilities. Consequently, Puerto Rico's CWSRF has
focused on these needs. Similarly, according to officials in EPA's Kansas
City Regional Office, Kansas has focused on wastewater treatment projects
due to high levels of borrower demand for support for these types of
projects.
Some states that are willing and legally able to fund both wastewater
infrastructure and nonpoint source projects have not done so because of
low borrower demand for nonpoint source projects. Officials in EPA's
Dallas and Atlanta Regional Offices told us that Louisiana, Kentucky, and
New Mexico are willing to fund nonpoint source projects but have not done
so because of a lack of borrower demand. Similarly, North Carolina
Page 20 GAO-06-579 Wastewater Infrastructure
Most States Report Using Some of Their CWSRFs to Support Nonpoint Source
Projects
and Texas CWSRF officials explained that groups that typically implement
nonpoint source projects often pursue grant money for their projects from
federal, state, or private sources rather than CWSRF loans. CWSRF
officials in states we visited indicated that nonpoint source borrowers
are often reluctant to accept a CWSRF loan because they lack a dedicated
source of revenue to repay it. While wastewater treatment plants can
depend on user rates for loan repayments, nonpoint source borrowers may
not have a readily available or dedicated source of revenue to repay a
loan. As such, these officials suggest that the availability of grants
through other federal- or state-funded programs may affect the level of
demand for CWSRF loans for nonpoint source projects.
As of June 2005, 37 states reported using some portion of their CWSRF
funds to support nonpoint source projects, up from only 2 states in 1990.
The considerable progress in restoring the nation's waterways since the
passage of the Clean Water Act is largely attributable to significant
efforts to reduce pollutant levels from point sources of pollution, which
are those that contribute pollutants directly to a body of water from a
pipe or other conveyance. However, EPA reports that one-third of the
nation's assessed waters still do not meet water quality standards.
Recognizing the considerable role of nonpoint source pollution in these
standards violations, the majority of states have decided to focus at
least some attention on addressing these problems with their CWSRF
resources.
EPA has encouraged all states to use a watershed management approach to
solving water quality problems, which according to state and EPA
officials, has increased the number of states addressing nonpoint source
pollution with their CWSRFs.14 While traditional water quality programs
have focused on specific sources of pollution, such as sewage discharges,
or on specific water resources, such as a river segment or a wetland, a
watershed management approach addresses water quality problems at the
watershed level. According to officials at EPA headquarters and several
regional offices, this approach to water quality management often
highlights the role of nonpoint source pollution in noncompliance issues.
These officials suggested that states using a watershed management
approach are more likely to fund nonpoint source projects with CWSRF
resources. Additionally, CWSRF officials in Ohio and Minnesota told us
that developments in water quality monitoring technologies and expansion
14
A watershed is the land area that drains water into a river system or other body
of water.
Page 21 GAO-06-579 Wastewater Infrastructure
of monitoring efforts have helped their states better identify nonpoint
sources of pollution. According to these officials, the role of nonpoint
source pollution in noncompliance has been "uncovered" over the years as
they have improved monitoring efforts and as point sources of pollution-
such as wastewater treatment facilities-are brought into compliance.
Some states have been highly proactive in encouraging use of CWSRF funds
to support nonpoint source projects. For example, in an effort to ensure
that CWSRFs address nonpoint source problems, some states have passed
legislation setting aside a portion of their CWSRFs to be used exclusively
for nonpoint source projects. For example, Washington state regulations
require that CWSRF administrators reserve up to 20 percent of available
funds for nonpoint source pollution control and comprehensive estuary
conservation and management projects.
Other states have developed innovative lending approaches to overcome some
of the barriers to funding nonpoint source projects with CWSRF resources.
To increase the number of nonpoint source borrowers while minimizing loan
transaction costs, some states pass CWSRF loan risks and loan servicing
responsibilities onto third parties. These states have established
pass-through lending or linked-deposit programs, whereby loans are passed
through state agencies, municipalities, or local banks before reaching the
borrower. Minnesota's CWSRF program, for example, works with the Minnesota
Department of Agriculture to allocate a portion of its funds to counties,
soil and water conservation districts, and others to help establish
minirevolving loan accounts. These local units of government work with
local financial institutions to provide low interest loans for projects
proposed by farmers, rural landowners, and agriculture supply businesses
for projects to implement, among other things, agricultural best
management practices. The local units of government approve eligible
projects and refer borrowers to the local financial institutions. Using
CWSRF funds from the minirevolving loan account, the bank provides
low-interest loans to qualified borrowers. The lending institution assumes
the risk and management responsibility for the loan. Other states-such as
Massachusetts and Missouri-have set up similar pass-through loan programs
to address nonpoint sources of pollution with CWSRF funds.
To overcome the challenge of finding a dedicated source of repayment for
nonpoint source projects, Ohio's Water Resource Restoration Sponsor
Program integrates CWSRF support for nonpoint source projects into loans
for wastewater treatment plants. According to Ohio CWSRF officials,
communities seeking a CWSRF loan for a wastewater treatment
Page 22 GAO-06-579 Wastewater Infrastructure
Some States Target Borrowers in Small or Economically Disadvantaged
Communities
facility can receive a discount to the interest payments that would
otherwise be due on their wastewater project loans. After the wastewater
facility loan has been awarded, the amount of the interest discount is
advanced to the community, which then assumes responsibility for financing
the implementation of the associated nonpoint source project. In return,
the community receives a reduction to its wastewater facility loan's
interest rate of up to 0.2 percent. A community that participates in this
program does not typically implement the nonpoint source project itself.
Rather, it enters into an agreement with an implementing partner, such as
a land trust or a park district. Using the interest discount funds, this
partner develops and implements a nonpoint source project (such as a plan
to restore and permanently protect a waterbody's aquatic habitat
resources) but does not repay the CWSRF. Instead, the sponsoring community
covers the cost as part if its repayment of its wastewater facility loan.
According to Ohio officials, the benefit of the state's program is that
water restoration projects that may not normally receive CWSRF funding are
completed with the help of the wastewater treatment plants. Based in part
on the program's success, Ohio officials have decided to set aside $15
million of CWSRF resources each year for their Water Resource Restoration
Sponsor Program. A few other states are in the process of establishing
similar sponsorship programs.
Just as states vary in the way they allocate CWSRF resources according to
water quality needs, they also vary in the extent to which they target
borrowers in small or economically disadvantaged communities. Smaller
communities may struggle more to raise capital for water quality
infrastructure than larger communities with broader tax and rate bases. In
1992, Congress directed EPA to establish a Small Town Environmental
Planning Task Force to, among other things, advise EPA on how to work
better with small communities. The task force found that technical and
administrative capacity is often severely limited in small towns, which
often lack full-time officials and professional staff. Moreover, the task
force found that small communities tend to have severely limited tax bases
and budgets and, therefore, may not have the necessary credit ratings to
attract capital to finance their wastewater infrastructure. In addition,
infrastructure costs fall disproportionately on small towns because
entrylevel costs must be distributed over a smaller base.
Recognizing these challenges, some states-such as Montana, Pennsylvania,
and West Virginia-use their CWSRFs to help rural, low-
Page 23 GAO-06-579 Wastewater Infrastructure
income communities meet required sewage and water quality standards. In
Pennsylvania, almost 90 percent of all CWSRF loan agreements and 75
percent of total funding is directed to projects in small communities.
Several states have set aside a portion of their funds for CWSRF-funded
projects in small or economically disadvantaged communities. For example,
Oregon reserves up to 15 percent of its CWSRF to support projects in
communities with populations of 5,000 or less that are facing severe water
quality problems. According to EPA and state officials, some CWSRF
programs have rules to protect the ability of small communities to access
CWSRF funds. For example, some states such as New York and Minnesota have
placed limits on the amount of CWSRF support any one borrower-such as a
major metropolitan area-can receive in a given year.
A number of states offer small or economically disadvantaged communities
special assistance when applying for CWSRF loans. For example, Ohio offers
CWSRF loans with (1) a zero percent interest rate to communities with
populations of less than 2,500 and a median household income of less than
$45,000 and (2) a 1 percent interest rate to those with populations
between 2,500 and 10,000 and a median household income of less than
$38,000. West Virginia CWSRF administrators are able to extend repayment
terms up to 40 years to qualified disadvantaged communities to help make
projects more affordable. Kentucky offers special state-funded, short-term
loans to small communities to help them cover expenses related to
obtaining a CWSRF loan. Montana has developed special outreach and
technical assistance programs to help small communities take advantage of
the CWSRF program. Montana officials explained that many small communities
lack the necessary administrative structures to receive a CWSRF loan or
lack the technical expertise to develop competitive applications for CWSRF
loans. The state has contracted with the Rural Community Assistance
Partnership, a nonprofit organization, to provide technical assistance to
rural and small communities to guide them through the process of
developing a competitive application and set up the necessary
administrative structures to receive a CWSRF loan. Officials in several
small Montana communities told us that, without this technical assistance,
they would not have been able to receive the CWSRF loans that were
critical to the financing of their wastewater infrastructure.
Future State Allocation According to the EPA and state officials we
interviewed, demand for Strategies Will Likely CWSRF support for both
point and nonpoint source projects will grow Reflect Shifting Priorities
considerably in the future, and states will likely alter their CWSRF
allocation strategies in response to shifting clean water needs and
Page 24 GAO-06-579 Wastewater Infrastructure
priorities. Among the factors these officials cite in predicting changes
in states' allocation strategies are (1) aging wastewater infrastructure
needing rehabilitation or replacement; (2) population growth and
redistribution; (3) changes in EPA enforcement priorities, particularly
with regard to limiting sewage discharges during wet weather conditions;
(4) pressure to implement EPA's TMDL program; and (5) stricter EPA and
state water quality standards for temperature, nutrients, and sediments.
Officials in all 10 EPA regional offices and a number of state officials
told us that the need to repair or replace aging wastewater infrastructure
will be a major driver of future demand for CWSRF resources. These
officials point out that many of the wastewater treatment plants and
conveyances built with federal support in the early 1970s in response to
the passage of the Clean Water Act are now reaching the end of their
useful lives. EPA data indicate that wastewater treatment plants typically
have an expected useful life of 20 to 50 years before they require
expansion or rehabilitation. Wastewater conveyances such as pipes and
sewers have life cycles that can range from 15 to over 100 years. In
addition, some wastewater systems on the East Coast still rely on pipes
that are almost 200 years old. Taking into account the need to repair or
replace these aging systems, a 2002 Congressional Budget Office analysis
estimated that between 2000 and 2019, $260 to $418 billion will be needed
for wastewater infrastructure, while current spending is approximately $10
billion per year.15 CBO's analysis suggests that the gap between current
and needed spending could be as high as $11 billion per year.
In addition to repairing or replacing existing infrastructure, EPA
officials predict that some states will face increased demand for new
wastewater treatment systems in response to population growth. In addition
to overall population growth, EPA also indicates that the existing U.S.
population is shifting geographically, requiring rapid increases in
wastewater treatment capacity in certain areas. EPA officials indicated
that some states in the West-such as Utah and Nevada-and the South-such as
Georgia and Florida-are already experiencing rapid population growth and
considerable pressure to expand existing treatment capacity. In addition,
EPA officials point out that in the near-term, some states along the Gulf
Coast will have to balance the need for new growth with demand to
Congressional Budget Office, Future Investment in Drinking Water and
Wastewater Infrastructure (Washington, D.C.: May 2002).
Page 25 GAO-06-579 Wastewater Infrastructure
replace or repair wastewater infrastructure that was damaged by recent
hurricanes.
In response to recent EPA wet weather policies and enforcement actions,
some state and EPA officials predict that a number of states will
experience increased demand for CWSRF assistance to address combined sewer
overflows (CSO), which are discharges of untreated wastewater from a
combined sewer system. Combined sewer systems collect and transport both
sanitary sewage and storm water runoff in a single-pipe system to a
wastewater treatment facility. Constructed prior to the 1950s, combined
sewer systems exist in primarily older, urban communities in the
Northeast, Middle Atlantic, Midwest, and Northwest. An overflow typically
occurs when the total wastewater and storm water flow exceeds the capacity
of the system and, by design, discharges directly into a receiving water
body. Pollutants in CSOs have been shown to be a major contributor to
nonattainment of water quality standards and may pose significant public
health and pollution threats. As such, EPA has selected these problems as
national enforcement priorities. Sixty percent of the more than 9,000
combined sewer systems nationwide serve communities of fewer than 10,000
people--the very communities that face some of the most difficulty in
raising capital to address environmental infrastructure. States have
already used almost $5 billion of CWSRF funds to correct CSOs, and EPA
recently reported to Congress that an additional $50 billion is required
nationwide. Officials in some Midwestern states-such as Michigan and
Minnesota-predict that addressing CSOs will be one of the biggest drivers
of demand and that funding these projects will become a higher priority in
the future. According to officials in EPA's Chicago and Atlanta Regional
Offices, some states facing major CSO problems-such as Indiana and
Kentucky-have indicated that the CWSRF will be a primary source of funding
for their long-term CSO management plans.
State and EPA officials also point out that demand for CWSRF support for
nonpoint source pollution control projects is likely to grow as states
begin projects to bring impaired waters into compliance with EPA's TMDL
program. A TMDL is a calculation of the total maximum amount of a
pollutant that a body of water can receive each day and still meet water
quality standards.16 Water quality standards are set by states,
territories, and tribes and identify the uses for each body of water such
as drinking water supply, contact recreation (swimming), and aquatic life
support (fishing). States generally determine if a body of water is
meeting standards by comparing monitoring data with applicable state water
quality criteria. If the body of water fails to meet applicable federal,
state, or local water quality, then the state is required to list that
water as impaired. EPA guidance provides that the state should then
develop a TMDL implementation plan that specifies reductions necessary to
achieve the standard and then eventually implement a cleanup plan.
According to EPA guidance, the state implementation plan should specify
which pollution sources will be restricted to meet water quality
standards. State and EPA officials indicate that a majority of standards
violations relate to nonpoint sources of pollution and, subsequently, a
number of TMDL projects address nonpoint sources of water pollution. For
example, Minnesota CWSRF officials told us that they believe 86 percent of
the pollution in their impaired waters emanates from nonpoint sources of
pollution. According to some state and EPA officials, many states are
considering the CWSRF as a major source of funding, given the amount of
resources and the overall costs of implementing the plans.
In a similar vein, EPA and state officials also pointed out that stricter
federal, state, and local water quality standards will continue to drive
up demand for CWSRF loans for both point and nonpoint source projects. For
example, according to officials in EPA's Philadelphia Regional Office,
stricter biological and nutrient standards in the recent Chesapeake Bay
Agreement will drive demand for CWSRF loans in Mid-Atlantic states.
Officials in Minnesota told us they are experiencing a surge in demand for
CWSRF loans to repair or replace individual failing septic systems due to
greater attention and more stringent enforcement by state and county
regulators. EPA officials in EPA's Seattle Regional Office point out that
efforts to protect the region's endangered salmon and bull head trout
through the Endangered Species Act may force wastewater treatment
Water quality standards comprise two key components-designated uses and
water quality criteria. Designated uses are uses assigned to water bodies
such as drinking water, contact recreation (e.g., swimming), and aquatic
life support (e.g., fish populations). Water quality criteria specify
pollutant limits that are intended to protect the designated uses of a
water body, such as the maximum allowable concentration of a pollutant
(e.g., iron) or an important physical or biological characteristic that
must be met (e.g., an allowable temperature range). Water quality criteria
can be quantitative ("numeric") or qualitative ("narrative"), and they can
include components such as the frequency and duration of monitoring needed
to determine whether the criteria are being met.
EPA and the States Use Specific Financial and Environmental Measures to
Evaluate Efficient and Effective Use of CWSRF Resources
plants to upgrade their treatment efforts and local municipalities to
address nonpoint sources of pollution. These officials predict that
tougher temperature and sediment standards in waters receiving effluent
will drive demand, especially for nonpoint source projects, in states such
as Washington, Idaho, and Oregon.
EPA and the states use a uniform set of financial and environmental
measures to help determine efficient and effective use of CWSRF resources.
EPA and state-level officials rely on three measures to assess financial
performance, including a set of national financial indicators, an annual
Program Evaluation Report conducted by the cognizant EPA regional office
for each state CWSRF program, and an annual independent financial audit of
the state program. Efforts to measure the environmental benefits of
states' CWSRFs are relatively new and generally center on EPA's recently
developed electronic Environmental Benefits Reporting System.
EPA Uses Three Measures Since the CWSRF program's inception, all states
have used similar measures to evaluate CWSRF financial performance. The
first measure,
of States' CWSRF
Financial Performance to EPA's National Financial Indicators, consists of
five individual national Ensure Efficient and financial indicators.
According to an EPA headquarters official responsible for these
indicators, the agency developed these indicators in conjunction
Effective Use with the states to provide a balanced approach to
understanding the different objectives of CWSRF financial performance.
According to a senior EPA headquarters official, CWSRF project-summary
information, reported by the states in the National Information Management
System, is used to calculate the indicators on a state by state and
national level. The indicators include the following:
o Return on Federal Investment estimates how many dollars in
environmental investment have been generated for every federal dollar
spent through the program.
o Ratio of Executed Loans to Funds Available for Loans (often referred
to as the "pace" at which loans are made) measures the cumulative
dollar amount of executed loan agreements relative to the cumulative
dollar amount of funds available for loans. It is one indicator of how
quickly funds are made available to finance CWSRF eligible projects.
o Ratio of CWSRF Loan Disbursement to Executed Loans measures the speed
at which projects are proceeding toward completion by comparing
Page 28 GAO-06-579 Wastewater Infrastructure
the cumulative dollar amount of CWSRF loan disbursements with the
cumulative dollar amount of executed loan agreements and expressing this
as a percentage.
o Estimated Additional CWSRF Loans Made Due to Leveraging estimates the
dollar amount of additional projects that have been funded, that
otherwise might not have been, had leveraged bonds not been issued.
This is done by comparing the cumulative amount of CWSRF executed
loans with the cumulative amount of funds available after subtracting
the net funds provided by issuing bonds.
o Sustainability of the Fund gauges how well the CWSRFs are maintaining
their invested or contributed capital, without making adjustments for
loss of purchasing power due to inflation.
EPA's second measure to evaluate effective and efficient use of CWSRF
dollars is its annual review and accompanying written PERs conducted by
EPA's regional offices of each state program. According to the EPA's
annual review guidance, the review is intended to, among other things (1)
evaluate the success of the state's performance in achieving goals and
objectives identified in its Intended Use Plan (which identifies the
intended uses of the amounts available to its CWSRF) and the state's
Annual Report (which describes how the state has met the goals and
objectives of the previous fiscal year as identified by the Intended Use
Plan), (2) determine how the CWSRF is achieving the intent of the Clean
Water Act, (3) assess the financial status and performance of the fund,
and
(4) evaluate progress in identifying the environmental and public health
benefits of the program. The review, based on the information collection
and evaluation process, ends with the issuance of the PER.
EPA's third measure is the annual financial audit. The Clean Water Act
requires the 51 state-level CWSRF programs to undergo these audits to
determine whether the CWSRF financial statements are presented fairly in
all material respects in conformity with Generally Accepted Accounting
Principles (GAAP) and whether the state has complied with the laws,
regulations, and the provisions of CWSRF capitalization grants.17 The
More specifically, the product of the audit is expected to include (1)
financial statements with an opinion (or disclaimer of opinion) as to
whether the CWSRF financial statements are presented fairly in all
material respects in conformity with GAAP; (2) a report on internal
controls related to the CWSRF financial statements that describes the
scope of testing of internal controls and the results of tests; and (3) a
report on compliance that includes an opinion as to whether the state has
complied in all material respects with laws, regulations, and the
provisions of the CWSRF capitalization grants.
Page 29 GAO-06-579 Wastewater Infrastructure
EPA and the States Have Recently Started Reporting Environmental Benefits
of CWSRF-Funded Projects as a Measure of Efficient and Effective Use of
Program Resources
audit, conducted under the Single Audit Act, focuses on the state's
overall CWSRF program, rather than individual capitalization grants
awarded to states by EPA. In addition, independent audits are conducted in
43 states by auditors contracted by the state; EPA's Office of Inspector
General currently conducts audits for the remaining eight programs.18
Quantifying an environmental program's financial transactions is an
inherently more straightforward exercise than quantifying its
environmental benefits. Nonetheless, the EPA Office of Water's
Environmental Indicator Task Force has been developing environmental
indicators for the CWSRF since at least 1991. This task force, comprised
of federal and state officials, identified obstacles to measuring benefits
and shared ideas for solutions. It attempted to develop key environmental
indicators, such as the number of pounds of pollutants removed from
wastewater treatment plant effluent. However, a number of obstacles
prevented collection of comprehensive environmental benefits
measurements-most notably (1) a lack of baseline environmental data and
(2) technical difficulties in attributing benefits specifically to the
CWSRF. EPA headquarters officials also explained that environmental
monitoring activities are not an allowable use of CWSRF funds, even as an
administrative expense.19
Despite these complications, the requirements of the Government
Performance and Results Act and EPA's own Strategic Plan have long
recognized the need for outcome-based measures for the agency's programs.
Moreover, according to EPA headquarters officials, recent reviews by the
Office of Management and Budget (OMB) and EPA's Office of Inspector
General provided further impetus to quantify environmental outcomes of the
CWSRF. In particular, a 2004 EPA Office of Inspector General report
criticized the program for not developing a comprehensive plan for
measuring results and recommended that such a plan be developed. In a
similar vein, OMB's Program Assessment Rating Tool
18
According to EPA headquarters officials, starting in fiscal year 2006, the
EPA Inspector General will no longer perform audits for these eight CWSRF
programs. Instead, EPA headquarters officials will likely conduct these
audits using a mission contractor.
19
According to EPA headquarters officials, environmental monitoring
equipment associated with a CWSRF-funded project is an allowable CWSRF
expense.
Page 30 GAO-06-579 Wastewater Infrastructure
(PART)20 review of the CWSRF cited its inability to link dollar
expenditures with environmental improvements.
In response, representatives of a state-EPA work group and of the
Association of State and Interstate Water Pollution Control Administrators
(assisted by an EPA contractor) developed the Environmental Benefits
Reporting System in July 2005. This system strives to capture anticipated
environmental benefits that are expected to result from CWSRF-funded
projects. The system does not require any environmental monitoring,
focusing instead on anticipated environmental benefits. According to EPA
headquarters officials, all 51 programs have agreed to use the system to
report the environmental benefits of their CWSRF-funded projects and must
report on all loans made from capitalization grants received after January
1, 2005.
By July 2005, states were able to enter data about anticipated
environmental improvements to bodies of water resulting from CWSRFfunded
projects. Unlike the National Information Management System data, which is
submitted by the states each year in the aggregate, the environmental
benefits data is submitted on a per-project basis, at the time of loan
execution. As of February 2006, 42 states have begun using it to report
CWSRF-supported projects, including nonpoint source projects.
Some states are attempting to go beyond EPA's requirements by gathering
data on actual environmental benefits from their CWSRF-funded projects,
including nonpoint source projects. Washington State, for example,
recently required applicants to monitor the environmental impact of all of
its CWSRF projects 3 to 5 years after project completion. Between 2001 and
2003, Oklahoma conducted water quality monitoring on 19 receiving streams,
both upstream and downstream of CWSRF-funded improvements to remove
pollutants and increase dissolved oxygen in effluent entering the streams.
However, the study could not determine the extent to which these
particular projects improved overall water quality in the streams, largely
because baseline environmental data were unavailable.
Other states are going beyond the minimal requirements of the EPA system
by estimating the degree to which pollution is prevented by
According to OMB, the PART was developed to assess and improve program
performance so that the federal government can achieve better results. A
PART review helps identify a program's strengths and weaknesses to inform
funding and management decisions aimed at making the program more
effective.
Page 31 GAO-06-579 Wastewater Infrastructure
specific CWSRF-funded projects. Delaware CWSRF officials, for example,
explained that since 2000, they have used estimates of the amount of
pollutants a proposed CWSRF project would remove from the waste stream to
develop the state's Project Priority List. As another example, according
to EPA's Seattle regional officials, Oregon has begun to award additional
points to CWSRF project applicants (thus increasing the priority of the
project) if they agree to conduct their own environmental monitoring and
evaluation.
As EPA and the states have long known, quantifying environmental programs'
benefits with any degree of precision is a challenging exercise.
Nonetheless, their efforts to do so regarding the CWSRF are particularly
important, given the sizable investment of both federal and state dollars
in the program.
EPA reviewed a draft of this report and provided technical comments, which
have been fully incorporated. and Our Evaluation
As agreed with your offices, unless you publicly announce the contents of
this report earlier, we plan no further distribution of this report until
30 days from the report date. At that time, we will send copies of this
report to appropriate congressional committees; interested Members of
Congress; the Administrator, Environmental Protection Agency; and other
interested parties. We also will make copies available to others upon
request. In addition, the report will be available at no charge on the GAO
Web site at http://www.gao.gov.
Should you or your staff need further information, please contact me at
(202) 512-3841 or [email protected]. Contact points for our Offices of
Congressional Relations and Public Affairs may be found on the last page
of this report. GAO staff who made major contributions to this report are
listed in appendix III.
John B. Stephenson Director, Natural Resources and Environment
Appendix I: Scope and Methodology
GAO's review focused on the following questions:
o To what extent are states currently using their Clean Water State
Revolving Funds (CWSRF) to support conventional wastewater treatment
plant construction versus other qualifying expenses?
o What strategies do states use to allocate their CWSRF dollars among
qualifying expenses?
o What measures do states use to ensure that their allocation strategies
are resulting in the most efficient and effective use of their CWSRFs?
To determine the extent to which states are currently using their CWSRFs
to support conventional wastewater infrastructure versus other qualifying
expenses, we summarized data from the Environmental Protection Agency's
(EPA) National Information Management System (NIMS), the database EPA uses
to track expenditures for all 51 CWSRF programs. To assess the reliability
of the NIMS data, we interviewed knowledgeable EPA officials regarding
EPA's procedures for collecting NIMS data from states and monitoring the
quality of data submitted by states. We also reviewed EPA-issued guidance
for states inputting data to the NIMS database. Based on these interviews
and guidance we determined that the data about the usage of CWSRF dollars
were sufficiently reliable for the purposes of this report. Moreover,
CWSRF programs must comply with the Single Audit Act and Generally
Accepted Accounting Principles (GAAP) and undergo independent financial
audits. However, we determined that data about the number of CWSRF loan
agreements were of less certain reliability to identify the exact
percentage of loan agreements between qualifying expenses, given that
states vary in the way that they account for the number of loan
agreements. For example, states do not use common standards to report the
numbers of projects supported by a loan agreement, such as the number of
projects that are point source versus nonpoint source in nature.
Therefore, in figure 2, we reported data about the number of loan
agreements with appropriate caveats.
To examine the strategies states use to allocate their CWSRF dollars among
qualifying expenses, we interviewed EPA and state-level agency officials
and reviewed annual reports and other official EPA and statelevel
documents. These interviews included officials at EPA headquarters, in all
10 EPA regional offices, and select state-level agency officials. We
conducted field visits to Delaware, Minnesota, Montana, North Carolina,
Ohio, Texas, and Washington to obtain detailed information about CWSRF
Appendix I: Scope and Methodology
allocation strategies. We selected the states using a number of factors,
including the following:
o geographic diversity, to accommodate variation in water quality
issues;
o diversity of total amount of CWSRF support;
o diversity in CWSRF-supported projects to include states that do and do
not support nonpoint source projects with CWSRF dollars and states
that support varying or unique types of wastewater or nonpoint source
projects; and
* a balance of states with and without an Integrated Project
Priority Setting System.
* Balancing these criteria, our selected states allowed us to make
the following field visits:
o seven states in 6 of the 10 EPA regions;
o the second largest program (Texas) and the second smallest (Delaware);
o five states that supported nonpoint source projects, to varying
degrees; and
o four states with an Integrated Project Priority Setting System and
three states with a traditional project prioritization system.
These field visits and the documents provided by state-level officials
allowed us to include information on a broad range of criteria states use
to prioritize projects and determine funding. During these field visits,
we conducted interviews with state-level CWSRF program officials and
selected recipients of CWSRF loans. To gather information on additional
states, we conducted semistructured phone interviews with EPA officials
from all 10 regional offices, and we followed up with selected state-level
CWSRF officials to discuss allocation strategies and other aspects of
their programs. We used these interviews to identify the role the EPA
regional offices may have in shaping the state-level CWSRF programs and to
gather information on regional trends and EPA initiatives regarding the
CWSRF. We also reviewed each state's most recent EPA-conducted annual
CWSRF Program Evaluation Review.
Page 35 GAO-06-579 Wastewater Infrastructure Appendix I: Scope and
Methodology
To examine how states ensure that their allocation strategies result in
the most efficient and effective use of their CWSRFs, we interviewed EPA
and state officials about the financial and environmental measures they
use to assess CWSRF performance. The examination of the most recent
Program Evaluation Review also provided information on the financial and
program performance of each state's CWSRF. In addition, we reviewed EPA's
electronic CWSRF Environmental Benefits Reporting System by interviewing
the contractor that designed it and other knowledgeable EPA and
state-level officials regarding the process and mechanisms that states use
to input data.
We conducted our work between July 2005 and April 2006 in accordance with
generally accepted government auditing standards.
Appendix II: Selected Clean Water State Revolving Fund Financial Data
The following tables (tables 2-6) and figure (fig. 9) present selected
Clean Water State Revolving Fund (CWSRF) financial data.
Table 2: Clean Water State Revolving Fund for Wastewater Treatment,
Nonpoint Source, and Estuary Projects, by State, Fiscal Years 1987 through
2005
Dollars in millions
TotalWastewater Nonpoint State assistance treatment source Estuaries
U.S. total$52,703.7 $4,9951.1 $2,060.8 $0
Alabama $772.8 $772.8 $0 $0
Alaska 198.3 152.2 46 0
Arizona 580.4 580.4 0 0
Arkansas 345.5 327.9 17.5 0
California 3,044.2 2,184.1 230.2
Colorado 616.7 611.4 5.3 0
Connecticut 956.6 956.6 0 0
Delaware 157.5 146.3 11.2 0
Florida 2,035.3 2,018.8 16.5 0
Georgia 647.2 639.3 7.9 0
Hawaii 183 179.1 3.9 0
Idaho 225.8 223.1 2.7 0
Illinois 1,732.6 1,732.6 0 0
Indiana 1,374.6 1,373.5 1.1 0
Iowa 439.9 437.3 2.6 0
Kansas 724.7 724.7 0 0
Kentucky 463.2 463.2 0 0
Louisiana 407.9 407.9 0 0
Maine 376.4 369.6 6.8 0
Maryland 949.3 853.2 96.1 0
Massachusetts 3,131.8 3,079.6 52.2 0
Michigan 2,149.9 2,149.9 0 0
Minnesota 1,586.9 1,479.5 107.4
Mississippi 420 420 0 0
Missouri 1,429.3 1,418.2 11.1 0
Montana 189.6 159.6 30 0
Nebraska 223.3 210.4 12.8 0
Nevada 251.9 239.9 12 0
New Hampshire 382.8 284 98.8 0
Appendix II: Selected Clean Water State Revolving Fund Financial Data
Dollars in millions
Total Wastewater Nonpoint
State assistance treatment source Estuaries
New Jersey 1,969.7 1,855.7 113.9 0
New Mexico 142.2 142.1 0.1 0
New York 7,942.7 6,512.2 738.7 0
North Carolina 772.5 772.5 0 0
North Dakota 150 142 7.9 0
Ohio 3,233.9 3,067.5 166.4 0
Oklahoma 449.2 449.2 0 0
Oregon 528 514.4 13.6 0
Pennsylvania 1,228.7 1,217.9 10.8 0
Puerto Rico 298.6 298.6 0 0
Rhode Island 634.7 623.9 10.8 0
South Carolina 520.1 512 8.1 0
South Dakota 203.8 192 11.8 0
Tennessee 685 685 0 0
Texas 3,700.1 3,698.2 1.9 0
Utah 233.6 232.2 1.3 0
Vermont 122.1 122.1 0 0
Virginia 1,234.7 1,213.1 21.7 0
Washington 741.9 683.9 58 0
West Virginia 478.9 473.3 5.6 0
Wisconsin 1,196 1,184.3 11.7 0
Wyoming $240 $133.8 $106.2 $0
Source: EPA's National Information Management System.
Note: Total amounts may not add to the sum of wastewater treatment,
nonpoint source, and estuaries assistance categories due to amounts not
allocated between categories.
Appendix II: Selected Clean Water State Revolving Fund Financial Data
Table 3: Clean Water State Revolving Fund Assistance by Community Size,
Fiscal Years 1987 through 2005
Dollars in millions
Total Population Population Population Population CWSRF less than 3,500 to
10,000 to 100,000 and Stateassistance 3,500 9,999 99,999 above
U.S. total$52,703.7 $5,539.5 $6,564.2 $17,608.8 $22,919.2
Alabama $772.8 $30.8 $81.2 $413.7 $247.1
Alaska 198.3 14.4 75.1 24 84.8
Arizona 580.4 62.1 135.3 258.4 124.6
Arkansas 345.5 47.3 76.1 153.7
California 3,044.2 72.2 72.2 952.6 1,947.2
Colorado 616.7 106.4 99.6 291.6
Connecticut 956.6 45.7 162.4 542.7 205.9
Delaware 157.5 45.1 50.1 62.4
Florida 2,035.3 91.4 252.2 785.5 906.1
Georgia 647.2 62.3 153.5 304.1 127.3
Hawaii 183 67 14.6 97.5
Idaho 225.8 54.6 48.3 87.9
Illinois 1,732.6 120.6 208.8 688.5 714.7
Indiana 1,374.6 238.9 209.9 452.3 473.5
Iowa 439.9 137 153 95.9
Kansas 724.7 189.3 124 273.9 137.5
Kentucky 463.2 78.2 128.1 226.3
Louisiana 407.9 10.2 49.5 217.2
Maine 376.4 54.7 156.3 165.3
Maryland 949.3 65.5 89.1 208.9 585.8
Massachusetts 3,131.8 71.6 257.6 1,567.8 1,234.9
Michigan 2,149.9 112.4 155.9 786.9 1,094.8
Minnesota 1,586.9 302.7 189.9 220.8 873.6
Mississippi 420 48.5 49.5 292.2
Missouri 1,429.3 128 215.8 299.5 785.9
Montana 189.6 84.5 23.4 81.7
Nebraska 223.3 80.2 51.3 40.7 51.1
Nevada 251.9 13.3 23.8 62.9 151.8
New Hampshire 382.8 21.3 49 213.1 99.4
New Jersey 1,969.7 123 199.7 921.4 725.6
New Mexico 142.2 5 28 65.2 44.1
Appendix II: Selected Clean Water State Revolving Fund Financial Data
Dollars in millions
Total Population Population Population Population
CWSRF less than 3,500 to 10,000 to 100,000 and
State assistance 3,500 9,999 99,999 above
New York 7,942.7 405.4 255.5 1,092 6,189.7
North Carolina 772.5 91.9 142.7 463.1 74.8
North Dakota 150 37.9 2.1 109.9 0.1
Ohio 3,233.9 484.1 358.1 987.1 1,404.7
Oklahoma 449.2 49.9 52.2 219.3 127.7
Oregon 528 71.3 190 203 63.7
Pennsylvania 1,228.7 566.7 346.8 304 10.5
Puerto Rico 298.6 96.3 41 81.4 79.9
Rhode Island 634.7 51 52.8 161.4 369.5
South Carolina 520.1 21 93.6 351.8 53.7
South Dakota 203.8 40 14.1 82.1 67.6
Tennessee 685 40.3 118.3 276.8 249.6
Texas 3,700.1 234.1 539.1 975 1,951.8
Utah 233.6 42.1 47.4 81.1 63
Vermont 122.1 30.5 51.6 40 0
Virginia 1,234.7 180.4 187.6 464.6 402.1
Washington 741.9 149.7 132.6 272.9 186.8
West Virginia 478.9 158.6 173.7 146.6 0
Wisconsin 1,196 166.2 126.9 381.3 521.7
Wyoming $240 $37.8 $54.9 $132.3 $15.1
Source: EPA's National Information Management System.
Note: Numbers may not add to total due to rounding.
Appendix II: Selected Clean Water State Revolving Fund Financial Data
Table 4: Clean Water State Revolving Fund National Financial Indicators,
Fiscal Years 1987 through 2005
Dollars in millions
Project disbursements Project Assistance as a
disbursements provided as a percentage of Sustainability/ as a percentage
percentage of assistance retained State of cash draws funds available
provided earnings
U.S. total212% 95% 85% $4,314.0
States that have leveraged
Alabama 305% 95% 88% $35.3
Arizona 277 112 72 4.6
Arkansas 187 91 81 27.4
California 178 94 91 396.0
Colorado 313 93 85 14.0
Connecticut 276 98 89 28.9
Florida 195 107 72 276.5
Illinois 156 92 93 196.0
Indiana 187 81 77 41.2
Iowa 151 80 91 41.4
Kansas 315 104 85 -11.3
Maine 210 93 92 32.1
Maryland 163 92 83 136.0
Massachusetts 309 116 83 292.0
Michigan 195 103 86 -140.6
Minnesota 373 98 97 100.6
Missouri 233 83 94 75.2
Nevada 221 91 73 13.7
New Jersey 206 71 79 418.7
New York 323 103 100 219.6
North Dakota 139 64 98 19.5
Ohio 193 102 67 91.8
Oklahoma 229 84 86 30.7
Rhode Island 299 129 69 7.9
South Dakota 159 98 71 23.4
Texas 294 94 86 237.2
Virginia 209 85 86 208.6
Appendix II: Selected Clean Water State Revolving Fund Financial Data
Dollars in millions
Project
disbursements
Project Assistance as a
disbursements provided as a percentage of Sustainability/
as a percentage percentage of assistance retained
State of cash draws funds provided earnings
available
States that have not
leveraged
Alaska 116 81 80 31.2
Delaware 118 98 68 9.7
Georgia 115 79 78 147.8
Hawaii 142 54 99 52.3
Idaho 143 90 69 45.2
Kentucky 130 86 74 79.5
Louisiana 142 89 83 42.9
Mississippi 149 100 76 75.9
Montana 167 98 97 6.9
Nebraska 161 91 82 18.8
New
Hampshire 166 100 72 33.0
New Mexico 123 70 89 33.7
North Carolina 148 97 76 122.5
Oregon 159 108 75 61.1
Pennsylvania 140 88 89 129.6
Puerto Rico 126 78 56 21.4
South Carolina 166 93 84 123.4
Tennessee 152 90 74 150.7
Utah 185 100 96 20.1
Vermont 123 88 94 2.1
Washington 171 100 77 102.4
West Virginia 129 93 91 29.9
Wisconsin 171 109 85 147.8
Wyoming 170% 91% 68% $36.7
Source: EPA's National Information Management System.
Note: Numbers may not add to totals due to rounding.
Appendix II: Selected Clean Water State Revolving Fund Financial Data
Table 5: Clean Water State Revolving Funds Available for Projects, Fiscal Years
1987 through 2005
capitalization contributions bonds repayments payments earnings projects
State Leveraged Gross loan Gross Gross SRF funds
principal loan investment available
interest for
U.S. total $23,251.5 $4,806 $23,424.4 $13,187.9 $7,459.6 $4,955.7 $55,266.2
Dollars in Federal
millions
Alabama $249 $107.3 $587.1 $224.2 $176.4 $165.5 $812.3
Alaska 137.7 27.8 0 54 17.5 21.7 245.2
Arizona 158.6 40.5 276 115.8 49.1 50.4 518.6
Arkansas 162.8 31 116.9 97.6 59.6 36.5 378.7
California 1,709.8 309.4 298.9 649.3 306.1 95.6 3,229.5
Colorado 169.3 39.3 557 145.7 76.7 111.1 660.6
Connecticut 327.2 103.9 800.4 291.2 110.8 263.8 980.5
Delaware 107.2 21.4 0 26.3 5.6 4.1 160.3
Florida 844.1 174.3 150.7 528.6 209.4 81.6 1911
Georgia 450.1 88.8 0 161.1 93.1 54.6 821.3
Hawaii 169.8 662.9 0 61.6 28.6 23.7 339.8
Idaho 109 21.8 0 79.2 30.9 14.3 250.8
Illinois 1,028.4 188.8 189.5 418.6 142.5 69.7 1,881.9
Indiana 557.6 115.5 1,301.2 168.2 108.4 263.1 1,688
Iowa 283.3 53.1 186.5 139.3 82.9 115.1 547.4
Kansas 211.4 43.1 403.5 137.3 78.8 54.4 695.4
Kentucky 304.8 63 0 103.4 51.6 27.9 538.5
Louisiana 249.5 50.3 0 127.8 50.3 16.6 460.4
Maine 177.3 37.8 97.3 117.6 58.5 23 404.7
Maryland 544.2 102.4 160.9 234.1 134.8 104.8 1,027.7
Massachusetts 831.1 171 2,747.9 490.9 616.7 421 2,705
Michigan 1,023.1 205 1967 387.5 187.5 314.9 2,079.7
Minnesota 434.1 93.5 999 479.5 255.2 189.3 1,625.6
Mississippi 225.1 45.7 0 84 56.9 19 421.7
Missouri 625.7 121.9 1,400.5 489.2 338 65.3 1,713.8
Montana 114 33.7 0 46.9 14.1 6.9 194.2
Nebraska 119.7 24.5 0 87.6 27.6 15.7 245.8
Nevada 108.7 20.8 104.7 42.5 34.2 11.3 278.3
New Hampshire 226.3 47.4 0 83.6 25.4 7.5 381.2
New Jersey 1,048.8 220.6 950.1 605.1 358.7 282.6 2,762.2
New Mexico 113 27 0 34 20.3 13.3 203.1
New York 2,574.7 515 6,318.1 2,374.1 1,355.5 1,106.8 7,694.8
Appendix II: Selected Clean Water State Revolving Fund Financial Data
Dollars in millions
Gross loan Gross Gross SRF funds
loan
Federal State Leveraged principal interest investment available
for
capitalization contributions bonds repayments payments earnings projects
North 424.6 88.8 0 177.1 81.9 40.5 796
Carolina
North Dakota 102.4 24.8 75.3 41.2 19.9 45.2 233.2
Ohio 1,300.2 270.4 1,173.3 524.8 391.9 181.7 3,164.3
Oklahoma 178.4 41.3 146 219.9 22.6 31.7 536.1
Oregon 263.5 54.6 0 121.1 57.8 21.4 489.8
Pennsylvania 894 181 0 292.2 76.8 52.8 1,403.6
Puerto Rico 287.9 57.6 0 37.1 16.4 5 381.5
Rhode Island 149.7 29.9 416.3 67 41 52.8 493.1
South 265.9 53.2 0 123.8 81.9 41.5 562.3
Carolina
South Dakota 114 22.7 4.5 64.4 21.6 24.4 207.3
Tennessee 375.3 78.7 0 174.7 110 40.7 764.4
Texas 1,220.9 248.3 1,615.1 1,236 942.7 137.6 3,936.1
Utah 135.4 24.5 0 58.8 10.1 10 233.4
Vermont 103.6 20.7 0 15.9 0 2.1 138.1
Virginia 552.9 110.8 380.7 315.6 169.7 102.7 1,451.1
Washington 388.1 77.6 0 189 77.7 24.7 741.7
West 347.1 69.4 0 81.5 13.4 16.5 514.1
Virginia
Wisconsin 605.5 119.3 0 275.2 154.2 44.9 1,100
Wyoming $119.8 $24 $0 $86.7 $8.1 $28.6 $262.4
Source: EPA's National Information Management System.
Note: Numbers may not add to totals due to rounding.
Appendix II: Selected Clean Water State Revolving Fund Financial Data
Figure 9: Annual Average Interest Rates for the Clean Water State
Revolving Fund Compared with Annual Average Market Interest Rates
Percentage rate
1
0 1988 1989 1990 1992 1991 1994 1993 2005 2004 2003 2002 2001 2000 1999 1998
1997 1996 1995 Year
Source: EPA's National Information Management System.
Note: The market rate based on the Bond Buyer index for 20-year general
obligation (GO) bonds with a rating equivalent to Moody's Aa and Standard
and Poor's AA-minus. Data is the average of the reported weekly Bond Buyer
20-bond GO index for each fiscal year ending June 30.
Appendix II: Selected Clean Water State Revolving Fund Financial Data
Table 6: Assistance Provided Through the Clean Water State Revolving Fund
Program and Other State Funded Clean Water and Loan Grant Programs, Fiscal
Years 1987 through 2005
Dollars in millions
CWSRF program State-funded loans State-funded grants
U.S. total$52,703.7
Reported total $3,865.3 $4,041.5
Alabama $772.8 $0 $0
Alaska 198.3 0 129.9
Arizona 580.4 NA
Arkansas 345.5 51.4
California 3,044.2 67.6 116.8
Colorado 616.7 48.7
Connecticut 956.6 88.7 350.9
Delaware 157.5 4.5 35.4
Florida 2,035.3 0 148.3
Georgia 647.2 68.2
Hawaii 183 44.8
Idaho 225.8 3.5 26.3
Illinois 1,732.6 0 489.5
Indiana 1,374.6 23.8
Iowa 439.9 0
Kansas 724.7 0
Kentucky 463.2 94 36.9
Louisiana 407.9 0
Maine 376.4 196.5
Maryland 949.3 0 303.6
Massachusetts 3,131.8 42.1
Michigan 2,149.9 2
Minnesota 1,586.9 0 194
Mississippi 420 1.5
Missouri 1,429.3 2.3 97.1
Montana 189.6 0
Nebraska 223.3 0
Nevada 251.9 0
New Hampshire 382.8 0 173.5
New Jersey 1,969.7 369.3
New Mexico 142.2 27.6
Appendix II: Selected Clean Water State Revolving Fund Financial Data
Dollars in millions
CWSRF program State-funded loans State-funded grants
New York 7,942.7 NA NA
North Carolina 772.5 62.9 228.9
North Dakota 150 0 0
Ohio 3,233.9 625.8 319
Oklahoma 449.2 112 19.2
Oregon 528 NA NA
Pennsylvania 1,228.7 426.9 48.6
Puerto Rico 298.6 0 0
Rhode Island 634.7 58.1 37.4
South Carolina 520.1 NA NA
South Dakota 203.8 0 NA
Tennessee 685 0 0
Texas 3,700.1 225 0
Utah 233.6 54.2 22.2
Vermont 122.1 0.7 NA
Virginia 1,234.7 0 112
Washington 741.9 3.1 591.2
West Virginia 478.9 248.1 52.2
Wisconsin 1,196 912 247.5
Wyoming $240 $0 $0
Legend
NA=data not available Source: EPA's National Information Management
System. Note: Numbers may not add to totals due to rounding.
Appendix III: GAO Contact and Staff Acknowledgments
John Stephenson (202) 512-3842
GAO Contact
In addition to the individual named above; Steven Elstein, Assistant
Staff
Director; Mark Braza; Greg Marchand; Tim Minelli; Justin L.
Monroe;Acknowledgments Jonathan G. Nash; Alison O'Neill; and Amber Simco
made key contributions to this report.
(360607)
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