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Unlocking USDA Rural Development and State Revolving Funds

USDA Rural Development funding and State Revolving Funds are two sources that may help your community finance projects for protecting water supplies, safely disposing of wastewater, and managing stormwater.

Here’s what you need to know about both programs.

By Peter Valinski, PE and David Partridge, PE

If your municipality is looking for support in managing water supplies, safely disposing of wastewater and managing stormwater, it should become familiar with the following two funding sources that may be able to help make those benefits available.

USDA Rural Development Funds

What is it?

Rural Development is a federal government program under the US Department of Agriculture (USDA), administered by individual states, intended for smaller communities. It provides both grants and low-interest long-term loans. Such loans are tied to the lifespan of the project – so if an installation has a 30-year lifespan, the repayment schedule will be over 30 years, with terms up to 40 years possible. This is particularly attractive to smaller communities where there might be financial hardship if the project had to be paid for immediately.

According to USDA:

Funds may be used to finance the acquisition, construction or improvement of:

  • Drinking water sourcing, treatment, storage and distribution
  • Sewer collection, transmission, treatment and disposal
  • Solid waste collection, disposal and closure
  • Storm water collection, transmission and disposal

In some cases, funding may also be available for related activities such as:

  • Legal and engineering fees
  • Land acquisition, water and land rights, permits and equipment
  • Start-up operations and maintenance
  • Interest incurred during construction
  • Purchase of existing facilities to improve service or prevent loss of service*

Who’s it for?

To be eligible, municipalities must be under 10,000 in population. Loan programs may be available to such communities, provided they meet eligibility criteria.

To be eligible for grants as well, the community must be able to demonstrate financial need, which is determined based on median household income. Granting agencies analyze whether the project could be funded through raising municipal rates to a degree that will not pose undue hardship on the community.

There is no “window of opportunity” based on the time of year – USDA will consider applications made any time; however, actual funding is dependent on funds availability.

What do funding agencies look for?

The USDA is particularly interested in health and safety benefits. USDA will first look at your situation to see if there are any orders from state or federal agencies requiring the work to be done for health or safety reasons.

Priority is given to public entities to restore a deteriorating water supply or to improve, enlarge, or modify a water facility or an inadequate waste facility. Preference is given to requests that involve the merging of small facilities and those serving low-income communities.

USDA funding decisions can tend to be “cut and dry” – the project either meets the criteria and is eligible for loans and possibly grants, or it does not.

Working with USDA

Some programs within the USDA offer “pre-development” grants to help communities do the legwork required to prepare a successful application and to complete preliminary design efforts. This funding can be used for hiring staff perhaps on a temporary basis to conduct necessary research, including external professional counsel.

For eligible communities with a population less than 10,000 and a median household income either below the poverty line or below 80% of the statewide non-metropolitan median household income, a pre-development planning grant can be up to $30,000 or 75% of the project costs, whichever is less. For communities with a population less than 2,500, pre-development planning grants under the “SEARCH” program offer 100% grants (up to $40,000).  Communities can start their project through a grant program and then finish it, including construction, through USDA’s Water and Waste grant and loan program.

Typical USDA funding for projects ranges from several hundred thousand to several million dollars.

The USDA will require three components to the application: (1) financial data from the community, (2) a “preliminary” engineering report that presents the purpose of the project and its cost, and (3) an environmental report.

* USDA Rural Development , Water & Waste Disposal Loan & Grant Program, 2015

State Revolving Funds

What is it?

There are two programs under the State Revolving Fund (SRF) umbrella, both provided by the US Environmental Protection Agency, and managed by individual States:

  • Clean Water State Revolving Fund (CWSRF) – covering storm and sanitary sewers
  • Drinking Water State Revolving Fund (DWSRF) – covering drinking water supplies

They are called “revolving” funds because each year the federal government releases some money to fund these programs, and as those loans are repaid by local municipalities, the returning funds are made available for new projects.

These are “competitive” programs in that applicants seek more funds than are likely available. Applications receive a numerical score to help determine which ones get accepted.

Most state programs have a deadline for applications each year, which varies by the state.

Who’s it for?

All sizes of communities are eligible for SRF programs.

What do funding agencies look for?

The questions used to determine funding decisions under the DWSRF tend to focus on whether the proposed project will help increase security of safe drinking water supplies. A “high priority” under a DWSRF program would be supporting a project to solve an immediate and pressing threat to the drinking water supplies of a large number of people.

CWSRF applications tend to be more complex than those involving drinking water. For CWSRF, funders tend to also consider the magnitude of the expected benefits. Does it clean up a watershed that may be used for a public water supply or a river that is used for public swimming, fishing and boating? Does the proposed project impact a small stream or the entire river basin? A project that will have a direct impact on water quality and safety will rank high with SRFs, such as correcting a wastewater treatment plant that will then meet its discharge requirements, greatly improving quality and safety of the water body that it discharges into.

Working with SRF?

As with the USDA program, one of the first steps that SRF program representatives will ask a community to bring an engineer on board, which could be someone from the community. It may be a good investment to involve a firm with experience in the funding requirements, as well as the actual work involved.

As with all successful funding initiatives, preparation and planning is key. Make sure to carefully determine the community need and benefit; meet with stakeholders; gain support, and carefully identify the right program based on your project’s goals, benefits and cost/funding needs. Several articles available within Tighe & Bond’s Water Insights blog offer helpful advice for embarking on successful funding initiatives.

Typical SRF funding ranges from $100,000 to $2 million for project planning, and $1 million to $100 million for project construction. However, the current applicant cap is $65 million for any given project.

Peter Valinski, PE, is a principal and one of Tighe & Bond’s client service leaders responsible for developing and executing the growth strategy for government sector clients in Western/Central Massachusetts, and New York. He also serves as principal and project manager on a wide variety of projects, with a primary focus on water and wastewater improvements. For more about Peter’s background, click here.

Dave Partridge, PE, is a senior project manager who has 30 years of experience in the management, design and construction of infrastructure projects. This includes wastewater collection systems, water transmission and distribution systems, stormwater management and drainage facilities, and roadways. For more about Dave’s background, click here.

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