Drinking Water State Revolving Fund

Program Criteria: How projects are selected
Total Stimulus Appropriation: $2 Billion
New Jersey’s Portion: $43,154,000
Allocation Method: New Jersey received its share based on a Federal Formula.
Relevant NJ Department: Department of Environmental Protection (DEP)
Program Overview
The (DWSRF) program assists publicly owned and privately owned community water systems and nonprofit, non-community water systems to finance the cost of the infrastructure (including water treatment, storage and distribution lines) needed to achieve or maintain compliance with Safe Drinking Water Act requirements and to protect the public health in conformance with the objectives of the Safe Drinking Water Act (SDWA). It is the companion program to the “Clean Water State Revolving Fund” program.

The DWSRF is administered as a component of the New Jersey Environmental Infrastructure Trust (the Trust) Financing Program, which also administers the State’s Clean Water State Revolving Fund. Through leveraging by the Trust, the State is able to provide low interest loans to far more projects than if leveraging was not done. Typically that results in loans packages at a little more than one-half the market rate of interest, however smart growth and disadvantaged communities loan packages are closer to one-quarter market rates. Under the proposed ARRA program, 50% of the project costs (up to $5 million dollars) will be awarded as principal forgiveness loans and will not be required to be repaid; 25% of the project costs will be provided through a Department loan that must be repaid, at 0 interest, and 25% of the project will be funded through the NJ Infrastructure Trust at market rate.

The DWSRF program prepares annual intended use plans (IUP) describing all aspects of the program, including how funding will be spent and updating project priority lists. The priority system is based on compliance with the SDWA and protection of public health. States must file capitalization grant applications each year with the USEPA to secure an allotment of federal funds needed to initialize and to continue the DWSRF at the State level. The IUP is a central component of the State’s application to the USEPA and describes how the State intends to spend the federal grant moneys, including eligible projects and non-project set-aside expenditures.

Federal Requirements and Restrictions

Funds can be redistributed by the U.S. Environmental Protection Agency (EPA) if projects are not under contract or construction within one year.

Priority shall be given to projects on a State project list that are ready to proceed to construction within 12 months of the date of enactment of the American Recovery and Reinvestment Act.

Each State shall use at least 50 percent of the funds to provide additional subsidization in the form of forgiveness of principle, negative interest loans, grants, or any combination thereof.

Not less than 20 percent of the Funds should be available for projects consisting of green infrastructure and water or energy efficiency improvements or other environmentally innovative activities (to the extent that such projects are available for funding).

No funds may be used to purchase land or easements.

Funds may be used to buy, refinance or restructure debt obligations of eligible recipients only where such debt was incurred on or after October, 1 2008.

Program Eligibility
Due to Federal restrictions, projects are eligible only if they can be under contract or construction by February 17, 2010.  Otherwise, the traditional program eligibilities associated with the Drinking Water State Revolving Fund apply.  Program eligibility rules govern publicly owned and privately owned community water systems and nonprofit non community water systems.
Project Prioritization
Initially, projects using federal stimulus dollars were prioritized based on the New Jersey approved priority system for the DWSRF program that ranks projects in accordance with criteria associated with public health, compliance, affordability, approved drinking water plans and state designations.  Examples of other such criteria include compliance with the SDWA and public health criteria, system improvements that are part of water supply plans acceptable to DEP, including the State Water Supply Plan; projects that support the State Development and Redevelopment Plan and NJ Department of Transportation Transit Village Initiative, Brownfields Redevelopment, and Affordability Criteria. These criteria are established each year through a public process. However, the ARRA requires that priority be given based on readiness to proceed to actual construction within 12 months of enactment.  Projects are certified for funding based on list rank, amount of available funds, and compliance with requirements and deadlines for planning, design and application.     
Important Program Dates
December 2008 – The DEP issued a “Call for Projects” in anticipation of the approval of some form of economic recovery package at the federal level. Prior to the issuance of the “Call for Projects”, the DEP was already working with nearly 100 projects following the traditional schedule for 2009 financing that submitted information to us in October 2008. The response to the “Call for Projects” has been overwhelming with more than 200 additional projects seeking to be qualified under a potential economic recovery act.

March 16, 2009 – Projects that wish to be considered for stimulus dollars were asked to submit all planning, design and application information no later than March 16th, 2009 to ensure timely review and submittal of the required project list to EPA.

May 28, 2009 – The Department submitted its grant application for $43,154,000 to USEPA for review and approval.

July 16, 2009 – The Department submitted a Project List and an Amended FFY2009 Final Intended Use Plan for ARRA funds to EPA for approval.

February 17, 2010 – All funds awarded to the State must be committed to projects under contract or construction. Otherwise, the EPA Administrator has the authority re-appropriate the funds.

For more detailed information please visit the New Jersey Department of Environmental Protection’s website at: http://www.nj.gov/dep/watersupply/loanprog.htm

Frequently Asked Questions
Q1. How will the American Recovery and Reinvestment Act (ARRA) help New Jersey?
A1. The American Recovery and Reinvestment Act will provide over $43 million to address New Jersey’s aging drinking water infrastructure including water treatment, storage and distribution lines.

Q2. Who is eligible to receive this funding?
A2. Publicly owned and privately owned community water systems and nonprofit non-community water systems are eligible to receive funding.

Q3. Are there any restrictions on the use of this funding?
A3. The USEPA has provided the following guidance to the States regarding the ARRA funds: Funds can be redistributed by the U.S. Environmental Protection Agency (EPA) if projects are not under contract or construction within one year.

Priority shall be given to projects on a State priority list that are ready to proceed to construction within 12 months of the date of enactment of the American Recovery and Reinvestment Act.

Each State shall use at least 50 percent of the funds to provide additional subsidization in the form of forgiveness of principle, negative interest loans, grants, or any combination thereof.

Not less than 20 percent of the Funds should be available for projects to address green infrastructure; water or energy efficiency improvements or other environmentally innovate activities (to the extent that such projects are available for funding)

No funds may be used to purchase land or easements.

Funds may be used to buy, refinance or restructure debt obligations of eligible recipients only where such debt was incurred on or after October, 1, 2008.


Q4. How will the Department determine which projects will be funded?
A4. A key objective of the American Recovery and Reinvestment Act is to preserve and create jobs and promote economic recovery. Therefore, projects will be prioritized based on a “readiness to proceed”, ability to create jobs and the project ranking system established under the “traditional DWSRF” program. This ranking system considers public health issues as the highest priority.

Q5. How will the funding be administered for drinking water projects?
A5. The Drinking Water State Revolving Fund program within the Department of Environmental Protection coordinates and oversees the Federal Drinking Water State Revolving Fund (DWSRF) to finance the cost of the infrastructure needed to achieve or maintain compliance and protect public health in accordance with the Safe Drinking Water Act. The DWSRF is administered as a component of the New Jersey Environmental Infrastructure Trust (the Trust) Financing Program, which also administers the State’s Clean Water State Revolving Fund. Historically, project sponsors receive a loan for half of the project costs from the Trust at market rate, and half of the project costs from NJDEP at 0% interest.  In an effort to promote Smart Growth Initiatives, the NJDEP has also provided up to 75% of the project costs at 0% interest, while the Trust will provide at least 25% of the project costs at market rate to projects that serve smart growth areas. ARRA funded projects will receive loans that total 50% of the project costs (up to $5 million) as principal forgiveness (do not need to be repaid), 25% at 0% interest from the NJDEP and 25% at market rates from the NJEIT.

Q6. How does the State decide what to fund under the “traditional” DWSRF program?
A6. The DWSRF program prepares annual intended use plans (IUP). The IUP describes how the State intends to spend the federal grant moneys, including eligible projects and non-project set-aside expenditures. The DWSRF program updates project priority system and project priority lists, verifies capacity development for project sponsors, assists in the development of SRF policies and procedures, and coordinates and prepares work plans for non-project set-aside expenditures. A final IUP is a required prior to federal grant award.
The Drinking Water Program intends to issue Proposed Changes to the Federal Fiscal Year (FFY) 2009 IUP to address the ARRA and traditional program revisions and consistent with recently received EPA guidance. The program will also issue a FFY 2010 Proposed Priority System and IUP.
The Drinking Water Program intends to issue Proposed Changes to the Federal Fiscal Year (FFY) 2009 IUP to address the ARRA, consistent with recently received EPA guidance, and any revisions to the traditional program for FFY2009 for July 2009. The Program also intends to issue FFY 2010 Proposed Priority System and IUP in July 2009. 

Q7. What are the terms anticipated for the award of ARRA funds for drinking water projects?
A7. The Department intends to award funds for those projects that meet the criteria in the following manner until the stimulus funds are exhausted:
50% of project costs as grants, principal forgiveness or negative interest loans. Grants or grant-like financial assistance will be available for projects that qualify for ARRA monies.
50% of project costs as loans, half of the remaining project costs from the Trust at market rate, and half of the remaining project costs from NJDEP at 0% interest.
For example, a typical priority project that costs $10 million dollars will receive $5 million dollars as grant or grant- like funding that will not need to be repaid; $2.5 million as a zero interest loan that will require repayment without interest; and the remaining $2.5 million dollars as a market rate interest loan. Both loans must be repaid within 20 years. 

Q8. How many projects are currently under review?
A8. To date, over 430 drinking water projects have been ranked and placed on the Proposed Project Priority List by NJDEP at a total estimated cost of over $1.3 billion dollars. Only a small percentage of the projects submitted will ultimately be able to receive stimulus funding.

Q9. What is the deadline for submission of applications?
A9. Projects that wish to be considered for stimulus dollars are being asked to submit all planning, design, SRF funding application information and relevant permit information no later than March 16, 2009 to ensure timely review and submittal of the required project list to USEPA.

Q10. When can I expect to be notified if my project has qualified for award?
A10. Due to the evolving process and multiple agencies involved with implementation of this large and complex legislation we are not able to give definite dates for actual awards at this time. We are striving to review and award projects as soon as possible.  Please continue to check the living list on (www.nj.gov/dep/arra/docs/arra_dw_2009.pdf ) for updated information regarding project awards.

Q11. What is the deadline for DEP award of the ARRA funds?
A11. Within one year of enactment, all funds must be committed to projects under construction or having awarded contracts for construction. The EPA Administrator has the authority re-appropriate the funds that do not meet this criteria, therefore all funds must be awarded by that date.

Q12. If my project is not selected, can it still be considered for other funding?
A12. Yes. If your project is not selected for award of ARRA funding, you may still be eligible to receive funding under the “traditional” DWSRF program. This year the Department will receive an additional $18 million under the traditional program.

Q13. Where can I get more information about the Drinking Water Program?
A13. For more detailed information please visit the New Jersey Department of Environmental Protection’s website at: http://www.nj.gov/dep/watersupply/loanprog.htm.