National Drinking Water Clearinghouse
West Virginia University
PO Box 6893
Morgantown, WV

Besides SRF and RUS funding, what are some alternatives?

by Jamie Knotts
On Tap Assistant Editor

In most of America’s small water systems, board members, managers, and operators know when they need money to fix a system problem. Knowing how and where to get the money to solve the problem is not as easy. Water professionals know water, but they don’t always know the ins and outs of financing their system’s upgrades, repairs, and extensions.

Many systems looking for funding sources think first of USDA Rural Utility Service loans and grants or state revolving loan funds (SRF) administered through individual states. SRF funds come through the U.S. Environmental Protection Agency (EPA). But a wealth of other funds is available to systems needing capital for projects. Though not always the “free money” that system managers prefer to have, various loan and grant programs offer low-interest options for financing needed infrastructure projects.

SRF is Often the First Stop
The mainstay of many drinking water projects is the drinking water state revolving fund (DWSRF). Created through the 1996 Amendments to the Safe Drinking Water Act, the DWSRF offers low interest rates on loans for projects. Each state runs its own program so eligibility requirements and interest rates vary from state to state. The fund does require applicants to have a source of revenue or adequate security to cover the loan amount, as well as the technical and managerial capacity to run the system over the long term. Depending on the state and the income levels of residents in a particular community seeking an SRF loan, interest rates can vary from as little as zero percent up to current market rate.

DeAnn Ament works as a business manager with the North Dakota Municipal Bond Bank, the state agency overseeing their SRF program. She says that no two SRF programs are run the same across the country. “States are given real flexibility to oversee the loan program,” she says.

“We offer loans for 2.5 percent with a 0.5 percent administrative fee for a total of three percent,” Ament says. “But in Wyoming, they have a state grant program for drinking water projects so they can’t give away their SRF money. People line up for their grant program.”

Ament says that North Dakota will lend $12 million in SRF funds this year on 30 to 40 system projects. “Some of those projects will be 100 percent SRF loans while some will have a combination of SRF loans, community development block grants, Federal Emergency Management Agency grants, and other funding.

“We’ve yet to turn away a system that has applied for funding,” she says. “We work with the systems to find the funding to get their project underway.”

SRF grants and loans don’t always cover the entire cost of a water project, so utilities often look for multiple sources to ensure the project gets completed. A wide variety of grants and loans are available from different sources.

Alternative Funding Is Available
The Community Development Block Grant (CDBG) program administered through the U.S. Department of Housing and Urban Development (HUD) offers grants directly to states, which then provide funds to small cities and non-urban counties. The program requires 70 percent of CDBG funds be used to help low- and moderate-income people. On average, these grants cover 50 percent of project costs.

For more information, contact your state or local HUD office, or you may call HUD headquarters at (202) 708-1112. HUD’s Web site is cpd/cpdcomde.html

The Economic Development Administration (EDA) offers Grants for Public Works and Development Facilities. Aimed at economically distressed areas, these grants are for public works projects such as water and wastewater infrastructure development. Projects must promote economic development, create long-term jobs, and benefit low-income residents. These grants cover up to 50 percent of project costs with as much as 80 percent available for severely distressed communities. For more information, contact your state or regional EDA office or call (202) 482-5081. EDA’s Web site is

The Appalachian Regional Commission (ARC) offers Community Development Supplemental Grants for water projects in the designated Appalachian regions in 13 eastern states. Funding covers up to 50 percent of project costs with as much as 80 percent available for severely distressed communities. For more information, contact your state ARC office or call (202) 884-7700 or visit ARC’s Web site at

A Water and Wastewater Loan Program administered through CoBank offers communities with fewer than 20,000 residents another loan option. Loans can be used for new construction, upgrades to existing systems, system acquisitions, water rights purchases, and refinancing of existing debt. The typical loan is for $1 million with a term not to exceed 20 years at a fixed or variable rate. In addition, CoBank offers a Small Loan Program that provides loans between $50,000 and $500,000 to cover construction-related costs. CoBank may be reached at (800) 542-8072 or at

The Housing Assistance Council (HAC) offers a Small Water/Wastewater Loan Fund aimed at financing predevelopment, land acquisition, site development, and construction phases of a project. Maximum loan amounts vary depending on the project, with the average loan totaling $100,000 to $250,000. Loans have duration of up to three years while interest is generally below market (now 5 percent.) For more information, contact the HAC at (202) 842-8600 or log on to their Web site at

In addition to federal programs, many states also offer their own grant program dedicated to helping communities address their water needs. To learn if your state offers a grant program, contact the drinking water primacy agency in your state or call the National Drinking Water Clearinghouse for contact information. Phone (304) 293-4191. and ask to speak with a technical assistance specialist.

RCAP Network Helps Communities
The Rural Community Assistance Program (RCAP) is a group of six regional organizations that help small and rural communities obtain basic water, wastewater, and housing services. In addition to loan programs, RCAP technical assistance providers work with community leaders to obtain and maintain services across the country. RCAP has more than 200 field-based rural development specialists at the state and local levels in all 50 states, Puerto Rico and the Virgin Islands. The RCAP national office can be reached at (202) 408-1273. Its Web site is located at

For Arkansas, Alabama, Louisiana, Mississippi, Oklahoma, Tennessee, and Texas, the Community Resource Group, Inc., (CRG) offers a Community Loan Fund with loans of up to $100,000. Eligibility requirements suggest that recipients serve a significant number of low-income customers, be unable to get affordable financing from other sources, and be willing to accept free technical assistance to help improve their systems. The typical loan averages $50,000, but small loans of $6,000 to $10,000 are made for emergency repairs. Interest accrues at 5.9 percent, while the term cannot exceed10 years. For more information contact CRG at (479) 443-2700 or visit their Web site at

The Southeast Rural Community Assistance Program (SE/R-CAP) offers a water and wastewater loan fund for small and rural communities in Delaware, Maryland, Virginia, North Carolina, South Carolina, Georgia, and Florida. Local municipal or county governments, public service authorities, non-profits, and user or homeowner associations are eligible to borrow from $1,000 to $250,000 for up to 10 years, with interest rates ranging from 4 to 7 percent. Projects must serve populations of 10,000 or less, with a minimum of 30 percent low-income (at or below 80 percent of area median income). To contact SE/R-CAP, phone (540) 345-1184 or visit their Web site at

The Rural Community Assistance Corporation (RCAC) serves Alaska, Arizona, California, Colorado, Hawaii, Idaho, New Mexico, Nevada, Oregon, Utah, and Washington. RCAC offers a water and wastewater loan fund for projects overseen by public utility districts, special purpose districts, municipalities, counties, nonprofits, and Indian tribes. Loans can be used for predevelopment work and range from $25,000 to $750,000. The current interest rate is 5.5 percent. Call RCAC at (916) 447-2854 or visit their Web site at

The Great Lakes Rural Community Assistance Program maintains a Safe Water Fund revolving loan program that assists water and wastewater infrastructure projects in Illinois, Indiana, Kentucky, Michigan, Ohio, West Virginia, and Wisconsin. Loans range from one to six years, with interest rates in the four to six percent range. Loan amounts range from $5,000 to $250,000. Loans can be used for equipment replacement and repair, land acquisition, and predevelopment costs. For more information, phone (800) 775-9767 or log on to their Web site at

Additional Funding Information Available
While not offering loans or grants, EPA’s 10 Environmental Finance Centers (EFC) offer information and assistance in finding creative ways to fund environmental projects. Centers are located at University of Southern Maine, Syracuse University, the University of Maryland, University of North Carolina at Chapel Hill, University of Louisville, Cleveland State University, New Mexico Institute of Mining and Technology, California State University at Hayward, and Boise State University. The EFC developed A Guidebook of Financial Tools, that gives an overview of various financial tools such as bond, grants, loans, fees, and other consumer charges. The guide is available at EFC’s Web site. For more information, contact the Environmental Financing Information Network at (202) 564-4994. The EFC Web site is

The National Drinking Water Clearinghouse offers several publications to help utilities sort through the various funding alternatives. One of the first things a utility must do is get its in-house financing in order before looking for loans and grants. Making sure a system is solvent means reviewing rates, accounting procedures, and other budgeting issues. These publications address financial planning and can help you better understand the financial complexities of managing a drinking water system:

FDBLFN03 Water and Wastewater Manager’s Guide for Staying Financially Healthy

FDBLFN13 Utility Manager’s Guide to Water and Wastewater Budgeting

FDBLFN15 Road to Financing: Assessing and Improving Your Community’s Creditworthiness

DWBKFN14 Financial Accounting Guide for Small Water Utilities

FDVTFN18 Building Support for Increasing User Fees

Additional alternative funding information is available in the following publications:

DWBLFN07 Innovative Options for Financing Nongovernmental Public Water Supplies’ Needs

DWBLFN12 Action Guide for Source Water Funding: Small Town and Rural County Strategies for Protecting Critical Water Supplies

FDBLFN14 State and Local Government Guide to Environmental Program Funding Alternatives

FDBKFN12 Alternative Financing Mechanisms for Environmental Programs

DWBKFN15 Catalog of Financial Support Sources for U.S.-Mexico Border Water Infrastructure

Publications are free and available by calling (304) 293-4191.. You may also order by sending an e-mail to

About the Author
Assistant Editor Jamie Knotts holds a master’s degree in education and a bachelor’s degree in journalism. If you have a story suggestion or comment, send it to him at jknotts .