Drinking Water State Revolving Fund

Introduction

A Drinking Water State Revolving Fund (DWSRF) was created in 1996 as a result of State legislation and legislation enacted by the U.S. Congress. The DWSRF provides a significant financial incentive for municipally and privately owned drinking water systems to finance needed drinking water infrastructure improvements (e.g., treatment plants, distribution mains, storage facilities). This program provides subsidized low interest rate financing for construction of eligible water system projects. As financings are repaid, money is made available for new financings - a true revolving fund. For communities with demonstrated financial hardship, interest rates can be reduced to zero percent. In addition, in the event of severe hardship, Additional Financial Assistance (Grants) may be available. The DWSRF is administered jointly by the New York State Department of Health (DOH) and the New York State Environmental Facilities Corporation (EFC).

Eligible Systems and Types of Projects

Drinking water projects will be reviewed to determine eligibility for funding and scored based on the established project priority ranking system (see Attachment I of the DWSRF Intended Use Plan [IUP]). Drinking water systems that are eligible for project funding are community water systems, both municipally and privately owned, and non-profit, non-community water systems.

Projects eligible for DWSRF financing include investments to upgrade or replace infrastructure needed to achieve or maintain compliance with federal or state drinking water standards, meet treatment/performance criteria, prevent contamination, provide adequate delivery pressures, replace contaminated supplies, and provide the public with safe affordable drinking water. Examples of such projects are:

  • construction of new and/or rehabilitation of treatment facilities, transmission and distribution mains, storage facilities including finished water reservoirs, interconnections, pumping stations, and drinking water sources;
  • funding and/or construction to promote the consolidation of water supply services, particularly in circumstances where individual homes or water systems generally have an inadequate quantity of water, the water supply is contaminated, or the system is unable to maintain adequate compliance for financial or managerial reasons;
  • capital investments made to improve the security of drinking water systems;
  • the purchase of a portion of another system if the purchase is part of a consolidation plan to bring the system(s) into compliance; and
  • any of the above listed project types which are municipally owned and which were previously financed after July 1, 1993 may be eligible for refinancing.

Projects submitted by systems lacking technical, managerial or financial capacity or significant non-compliers are not eligible for funding unless the proposed project will improve capacity or compliance. Also, projects whose primary purpose is fire protection or growth/development, dams and reservoirs, or acquisition of land not integral to an eligible project are not eligible.

Types of DWSRF Assistance

  1. Short-Term Financing Program - Short-term financing will be offered interest free and at market rate for terms of up to three (3) – five (5) years. Before any short-term financing is provided, an applicant must, among other conditions, receive approval of an engineering report for the project, complete the State Environmental Review Process (SERP), be evaluated for compliance with the Smart Growth Act, obtain approval from the Office of the State Comptroller for any necessary district formation, and adopt a bond resolution for the project.
  2. Leveraged Financing - Leveraged Financing are DWSRF financings funded from bond proceeds. Certain bond series issued to fund DWSRF financing will be secured by federal and state match dollars deposited to and held in program financing indentures. Leveraged Financing will receive an interest subsidy either from earnings received from a dedicated reserve allocation equal to one-third of the financing amount or from other program assets. Other program assets or investment earnings from the reserve allocation will provide an interest subsidy to the recipients, thereby resulting in a net of subsidy interest rate on the financing.
  3. Regular Reduced Rate Direct Financing - Regular Reduced Rate Direct Financing will be made available to recipients not eligible for Leveraged Financing. Recipients determined by the EFC to be non-investment grade or which have submitted small financing requests may receive Direct Financing.
  4. Hardship Financing - Hardship Financing will be made available to qualified recipients at rates below the regular reduced interest rate. Certain hardship eligible recipients may receive leveraged financing.
  5. Additional Financial Assistance (Grants) - Grants as available, also called additional subsidy, may be made available to eligible qualified recipients.
  6. Emergency Financing - Emergency financing allows for the immediate financing of emergency situations at eligible public water systems and is only available to water supply systems for emergency repairs when no other funding source is available to the system. The determination of when an emergency exists would be made by the DOH.
  7. SRF Bond Market Rate Program - The SRF Bond Market Rate Program provides eligible financing recipients with project scores below the subsidy funding line on the Project Annual List access to the public market at preferred market rates. Projects funded with market rate obligations will be retained on the Project Annual List of the IUP for 5 years. For projects with scores that rise above the subsidy funding line during that 5 year period (including through by-pass), subsidy assistance will become available at the then target rate for the remaining term of the recipient financing.
  8. SRF Bond Guarantee Program - The SRF Bond Guarantee Program provides eligible financing recipients with project scores below the subsidy funding line on the Project Annual List access to the public market at preferred market rates. For projects that quality for subsidy assistance, a bond guarantee will be available to extend repayment terms beyond the previous DWSRF limit of 20 years from project completion.

Disadvantaged Community Program

The DOH is required to obligate at least 20% but no more than 30% of their annual DWSRF Federal Capitalization Grant to provide grants beyond the interest free financing rate to eligible disadvantaged communities.

Qualifying projects that are listed on the Annual List of the of the DWSRF IUP are evaluated at the beginning of each federal fiscal year for hardship assistance. Those applicants that have qualifying projects are notified in writing after the evaluations are completed.

Additional information related to the Disadvantaged Community System is included in Section 7 of the IUP available at http://www.efc.ny.gov/dwiup.

General Requirements for Obtaining a DWSRF Financing

The DWSRF financing process involves two major steps:

  1. submittal of a listing form (formally called a pre-application) to the DOH including a description of the project [which is used to rank and list projects on the IUP]; and
  2. submittal of a complete formal financing application package to the EFC.

The DOH accepts project pre-applications on a continuous basis. Pre-applications are screened for eligibility, scored, ranked, and listed and a new IUP is issued annually. All eligible projects for which pre-application forms along with an engineer’s report have been submitted will be included on the Project Annual List in the IUP at the beginning of each federal fiscal year.

It is likely that the total amount of requests for DWSRF financing during any IUP period will be greater than the amount of program dollars available. An eligible project that is not funded initially will be included in the next IUP unless the applicant has withdrawn the project.

Additional information related to the application process is included in Section 11 of the IUP available at http://www.efc.ny.gov/dwiup.

New York State Department of Health

The DOH regulates the safety and adequacy of drinking water delivered by public water systems in New York. The mission of the DOH's Bureau of Water Supply Protection is to protect the public health of New York State's residents by ensuring that an adequate quality and quantity of drinking water is supplied reliably and dependably to consumers. This involves not only ensuring that drinking water standards are met, but also that all proposed water systems, system components and rehabilitated or upgraded drinking water facilities are properly planned, designed and constructed.

NYS Environmental Facilities Corporation

The EFC administers the financial aspects of the DWSRF. The EFC is a public benefit corporation whose mission is to promote environmental quality by providing low-cost financing and technical assistance to municipalities, businesses, and state agencies for certain eligible environmental projects. The EFC is not a regulatory agency. Its goal is to help governmental entities and businesses comply with environmental requirements in a cost-effective manner.

For More Information on the DWSRF
For general information, please contact:
Bureau of Water Supply Protection
New York State Department of Health
Empire State Plaza Corning Tower Rm. 1135
Albany, New York 12237
(518) 402-7650 or (800) 458-1158 (within NYS)
Fax: (518) 402-7599
For financial information, please contact:
New York State Environmental Facilities Corporation
Finance Division
625 Broadway
Albany, New York 12207-2997
(800) 882-9721 (within NYS) or (518) 402-7085
Fax: (518) 402-7086

Information regarding the DWSRF Program is also available at the New York State Department of Health webpage and the New York State Environmental Facilities Corporation webpage.