WATER POLLUTION CONTROL
REVOLVING LOAN FUND

By ALBERT E. GARVER, Grant Administration Section, Illinois Environmental Protection Agency

BACKGROUND

The Environmental Protection Agency has been providing low interest loans for wastewater facilities from the Water Pollution Control Revolving Fund (WPCRF) since 1989. The Fund is capitalized with federal funds authorized under the Clean Water Act plus a mandatory 20% state match. This program has proven to be a popular successor to the various grant programs administered by the Agency and although the levels of assistance are obviously less, they are still significant. Over $540M has been loaned for construction of 188 wastewater facilities. By providing these funds at a relatively low interest rate, the rebuilding of part of the State's wastewater infrastructure to maintain compliance and provide for economic growth has been achieved at a reduced cost to people within these communities. This fund not only leverages five dollars of federal funds for every dollar of state funds but also provides a funding mechanism in perpetuity. As loans are repaid, the funds are reloaned to other communities. Revolving the fund over a twenty-year period actually provides in excess of four dollars in loans for construction for every state and federal dollar deposited into the loan program.

ISSUE

In March 1995, the Illinois EPA received $55 million in federal capitalization funds for the WPCRF contingent upon the state providing the required 20% match. To date, the General Assembly has failed to appropriate the necessary $11 million in state matching funds. This failure has left many communities anxious about the potential for low interest loans. Far more serious is the possibility that Illinois may lose the $55 million in federal funds already awarded to the state if the $ 11 million state match is not provided. Under the terms of the capitalization grant, all funds must be committed by December 1996. If funds are not obligated by this date, the Agency loses this grant money under the provisions of the Clean Water Act. The funds will be re-directed to other states.

FUTURE

The President's budget for FY96 and proposals for reauthorization of the Clean Water Act (CWA) include additional capitalization of the low interest wastewater loan program. Authorizing legislation for a new loan program for drinking water is also being seriously considered. Additional state match beyond the current request of $ 11 million will be needed.

The governor has proposed $29 million in the FY1997 budget (the $11 million match for the existing $55 million grant plus $18 million for an anticipated FY1996 federal capitalization grant of $90 million) for state matching funds. This budgeted amount has been introduced as HBS'713. Proposed authorization/appropriation of state funds for match to the WPCRF has impacts beyond those communities that are applying for loans this year, because these funds will be repaid and subsequently reloaned in perpetuity. Additionally the subsequent loss of jobs and state income associated with these construction projects will be significant.The table below reflects the projected funding which may be provided to further capitalize the Wastewater Loan Fund.

BACKLOG SITUATION AND RAMIFICATIONS OF NO MATCH

There are over 40 projects in various stages of completing their loan applications in anticipation of receiving a loan using WPCRF monies in FY1996 and FY1997. Only eight of these projects will be funded with repayment monies if the State fails to provide match for the new capitalization grant funds available from the federal government. Until the match problems arose last year, there were sufficient loan funds available for all eligible projects that were ready to proceed with construction. If we are able to take advantage of federal capitalization funds that are anticipated over the next several years, the revolving nature of the fund should provide adequate resources to address the vast majority of the long term wastewater infrastrucutre needs of Illinois communities. However, without additional capitalization funding repayments generated from existing loans are expected to meet only 20% to 30% of total project needs.

	FY'95	FY'96	FY'97	FY'98	FY'99	FY'00	TOTAL
Fed ($M)	55	90	100	100	100	100	545
State ($M)	11	18	20	20	20	20	109
Total ($M)	66	108	120	120	120	120	654

Page 26 / Illinois Municipal Review / July 1996