| DEFINITION: A State Revolving Fund Loan is a loan program administered by a state government designed to help local governments improve their water and sanitation infrastructure. |
In the case of local governments…
State Revolving Fund Loans present a unique opportunity for local governments to access low-interest funds to pay for water infrastructure projects. The money can generally be used for 11 different projects, including the construction of treatment works, decentralized wastewater treatment systems, water conservation, watershed pilot projects, and more.
States have plenty of leeway in how their programs are set up. Many states provide a more narrow focus as to what loan funds can be used for. As a result, each state can provide funding to projects with the greatest need.
They can also set their own parameters for loan repayment, with interest rates as low as 0% and repayment terms as long as 30 years.
| EXAMPLE: The state of South Carolina has a State Revolving Fund (SRF) program to offer low-interest loans to municipalities, counties, and special purpose districts. According to the state’s Department of Health and Environmental Control website, the funds are designed to help local governments build and repair drinking water and wastewater plants and distribution systems. Local governments may also qualify for an incentive loan rate for projects that include “green” practices. The loan program is funded by a yearly capitalization grant from the EPA. |
What’s important here?
State Revolving Loans are funded at least partially by the Clean Water State Revolving Fund (CWSRF), which was created by a 1987 amendment to the Clean Water Act (CWA) and is administered by the Environmental Protection Agency (EPA).
A State Revolving Fund is initially funded from federal grants and state contributions (the state must contribute at least 20% of the amount from the federal grant).
The fund then issues bonds that are guaranteed by this initial capital. The money received from the bonds “revolves” through the loan through the repayment of principal and the payment of interest on outstanding loans.
From the time the program was created until 2021, the program has provided more than $153 billion to communities across the country in the form of more than 44,500 low-interest loans.