EPA Stimulus Sewer/Water Infrastructure Funds Flow Slowly

By Stephen Barlas, Washington Editor | December 2009 Vol. 64 No. 12

Members of Congress are raising concerns about the prospective failure of cities and counties to spend appropriated stimulus funds for wastewater and drinking water projects, a concern top Environmental Protection Agency (EPA) officials say is justified.

The clock is ticking with a deadline of Feb. 17, 2010, for localities to sign contracts for construction that involves the $4 billion and $2 billion in one time federal grants approved for the Clean Water and Drinking Water State Revolving Funds (SRFs) by the American Recovery and Reinvestment Act (ARRA), which Congress passed to much fanfare last February. The ARRA stimulus bill allocated the water funds to states based on a formula. The states then sent priority lists of potential projects to the EPA for approval.

At hearings on Nov. 4, Rep. Eddie Bernice Johnson (D TX), chairman of a key subcommittee, said the EPA "needed to take a greater role in Recovery Act expenditures." The hearings focused only on the Clean Water SRF, over which the committee has jurisdiction. Statistics prepared for the hearing showed work has begun on 394 sewer stimulus projects in 36 States, totaling $872 million, representing 23 percent of the total available formula funds.

The ARRA funding is especially useful because it is in the form of grants to states that do not have to be repaid. The regular, annual SRF appropriations from Congress, on the other hand, are dispensed to the states as loans which must be repaid. Moreover, the ARRA specifies that the states must use at least 50 percent of the amount of its grants to subsidize eligible recipients in the form of forgiveness of principal, negative interest loans, or grants, or any combination of these. Just to take one example, when Illinois Governor Pat Quinn announced that state's ARRA water projects on Oct. 29, many of them were financed by 20 year loans at no interest, with 25 percent of the principal forgiven. In Georgia, projects in areas with less than 50,000 people and a poverty rate of 10 percent or higher, get 20 year loans at 3 percent interest with 70 percent of the principal forgiven. Projects that don't meet those criteria qualify for 40 percent loan forgiveness.