The provision of water and sewer service is a critical piece for any economic development strategy. However, the ability of communities to fund local water and sewer service without outside support has come into question lately. A recent state of Ohio water and sewer infrastructure program had over one billion dollars in requests for funding that far exceeded the availability of state funding for the program. Local governments are struggling to keep up with the demand for water and sewer projects. Fortunately, the state of Ohio, offers a wide range of water and sewer programs for local governments. The Ohio Environmental Protection Agency (Ohio EPA) and the Ohio Water Development Authority (OWDA) are major sources for local government water and sewer infrastructure funding.
The OWDA and Ohio EPA also created the Water Pollution Control Loan Fund (WPCLF) to provide financial assistance for planning/design and/or construction of projects such as wastewater treatment facilities, sewers, combined sewer overflow control systems and storm water management facilities. Eligible borrowers include cities, villages, counties, and sewer districts that have a place on the WPCLF priority list, fundable status according to the current WPCLF Program Management Plan, and permit‐to‐install obtained from Ohio EPA. The application process started in August and requires the planning and design of the project that includes not just the technical requirements but the overall funding strategy for the project. Below-market interest rate loans are available for planning, design, and construction of wastewater treatment facilities and sewer systems, with planning and design loans currently offered at 0 percent interest. The standard below-market interest rate is established monthly. The program also offers a small community interest rate and hardship interest rates of 0% and 1% for qualifying borrowers. Limited grant-like funding called principal forgiveness is available for borrowers that meet affordability criteria (i.e., small system, below state average MHI). Principal forgiveness funding is very competitive, based on project scoring and readiness-to-proceed. There are currently no minimum or maximum loan amounts. The WPCLF finances approximately $500 million for projects each year, which is awarded in January.
The OWDA created the Local Economic Development Program to provide financial assistance for water and sewer projects for industries making a significant investment in the state and creating new jobs. Eligible borrowers include departments, divisions, or other units of state government, watershed districts, soil and water conservation districts, municipal corporations, counties, and other political subdivisions, special water districts, including county and regional sewer and water districts, conservancy districts, sanitary districts, sewer districts, or any other public corporation or agency having the authority to acquire, construct, or operate waste water or water management facilities. Eligible costs include planning, engineering, construction, land and easement acquisition, legal and inspection fees, with the maximum loan amount of $7,500,000 per project, dependent upon available funds. The OWDA application requirements include employment information for the project including current jobs, jobs created, and jobs retained, certified engineer’s itemized cost estimate to determine eligibility, financial documents to evaluate loan repayment and security, proposed project schedule, pass legislation authorizing signing of the loan agreement, completed necessary assessment, tap-in and/or rate legislation, and prepared projection of revenues and expenses that shows user revenues, debt service obligations, and operation and maintenance costs over the contract term of the years of loan repayment to OWDA.
The Water Supply Revolving Loan Account/Drinking Water Assistance Fund supports Community water systems, both privately and publicly owned, and nonprofit non-community water systems are eligible for drinking water infrastructure loan funding through the Water Supply Revolving Loan Account (WRSLA). Below-market interest rate loans are available for planning, design, and construction of water treatment facilities, storage facilities and distributions system improvements, with planning and design loans currently offered at 0 percent interest. The standard below-market interest rate is established monthly. The program also offers a small community interest rate, as well as a disadvantaged community rate for qualifying borrowers. Limited principal forgiveness is available for borrowers that meet the disadvantaged community benchmarks and regionalization projects. Principal forgiveness funding is very competitive, based on project scoring and readiness-to-proceed. There are currently no minimum or maximum loan amounts. The WSRLA finances approximately $150 million for projects each year. Project nominations are accepted each March for the upcoming program year, which begins July 1. Planning and design projects may be nominated throughout the program year. Placement of a water and sewer project on the state’s Priority List is critical for being considered for funding and applications for this process begin early in the calendar year. Also, to allow eligible WPCLF Borrowers to take advantage of the credits offered to tax‐exempt entities through the Inflation Reduction Act (IRA), the OWDA is establishing a taxable lending program.
Congressional Directed Spending (more commonly known as federal budget earmarks) offer another route to water and sewer funding. Recently, the U.S. House of Representatives and U.S. Senate awarded locally driven water and sewer funding request for specific federal budget allocations. Federal budget earmarks need to be introduced by members of Congress, from the district of the member of Congress, not intended for a for-profit entity, and need to be publicly disclosed during the budget process. Most importantly, for water and sewer infrastructure is the project needs to be included in the Ohio EPA Priority Project list for water and sewer projects—which means lobbying for federal water and sewer earmarks begins in Columbus and not Washington D.C.
State and federal funding for water and sewer infrastructure is not a search for free money. Communities need to develop plans from a technical and business perspective up front to even apply for funding and work with state and federal government officials collectively to ensure their best chances of success.
Contact Tim Biggam, Director of Government Relations of the Montrose Group, at [email protected] if you need assistance in gaining water and sewer infrastructure and/or federal budget earmark funding.
