The Clean Water State Revolving Fund (CWSRF) is a self-perpetuating loan assistance authority for water quality improvement projects in the United States. The fund is administered by the Environmental Protection Agency and state agencies. The CWSRF, which replaced the Clean Water Act Construction Grants program, provides loans for the construction of municipal wastewater facilities and implementation of nonpoint source pollution control and estuary protection projects. Congress established the fund in the Water Quality Act of 1987. Since inception, cumulative assistance has surpassed 153.6 billion dollars as of 2021, and is continuing to grow through interest earnings, principal repayments, and leveraging.
Revolving structure
All 50 states, plus Puerto Rico operate a CWSRF. The 51 CWSRF programs function like environmental infrastructure banks by distributing low interest rate loans for water quality projects. Loan repayments are recycled back into individual CWSRF programs. States can only use the funds to make loans, purchase local debt, or issue financial guarantees. They cannot make grants or otherwise dissipate the capital in their funds. Principal repayments plus interest earnings become available to finance new projects, allowing the funds to "revolve" over time. States can also increase their CWSRF financing capacity by issuing CWSRF-backed revenue or general obligation bonds. As of 2007, 27 states have leveraged their programs in this way, raising an additional $20.6 billion for important water quality projects.
The 51 funds are capitalized in part by federal and state contributions. For every dollar contributed by the federal government, states contribute 20 cents. As of 2017, the cumulative federal appropriation to the 51 CWSRF programs had reached over $42 billion, with corresponding state contributions of $84 billion. Financial leveraging techniques conducted by state funds had snowballed federal and state contributions into $153 billion in 2021.
States are responsible for the operation of their CWSRF program. Under the CWSRF, states may provide various types of assistance, including loans, refinancing, purchasing, or guaranteeing local debt and purchasing bond insurance. States may also set specific loan terms, including interest rates from zero percent to market rate and repayment periods of up to 30 years. States have the flexibility to target financial resources to their specific community and environmental needs.
States may customize loan terms to meet the needs of small and disadvantaged communities, or to provide incentives for certain types of projects. Beginning in 2009, Congress authorized the CWSRFs to provide further financial assistance through additional subsidization, such as grants, principal forgiveness, and negative interest rate loans. Through the Green Project Reserve, the CWSRFs target critical green infrastructure, water and energy efficiency improvements, and other environmentally innovative activities.
Highlights
Since the inaugural CWSRF project was funded in 1988, the 51 state-run CWSRF programs have provided over $145 billion in assistance for water quality projects through 38,441 loans. In 2017, the programs provided over $7.4 billion in assistance to loan recipients of all sizes, including farmers, homeowners, small businesses, nonprofit organizations, and major municipalities. In 2017 the average loan interest rate was 1.4%, compared to the prevailing market rate of 3.5%.
While wastewater treatment projects have comprised 96 percent of all CWSRF funding to date, over $4.6 billion has gone to nonpoint source and estuary projects. The number of assistance agreements for nonpoint source projects has grown significantly over the years, from only two projects in 1990 to 1,305 in 2007. The low cost and flexibility of CWSRF financing has helped the programs serve communities of all sizes. In 2007, two-thirds of all loans went to communities with populations below 3,500. In addition, over $1.1 billion in assistance targeted communities with fewer than 10,000 people (see Figure 3).
The programs are projected to continue to grow over time, as interest earnings and repayments of loans increase (see Figure 4). Nationally, the CWSRF program provides a remarkable return on federal investment: as of 2017, the program has financed $3 in projects for every dollar the federal government has invested.