Somach Simmons & Dunn - Federal Water Quality Economic Stimulus Funding

Disadvantaged Communities and “Frozen” Grant Projects Get Priority for Federal Water Quality Economic Stimulus Funding

by Cassie N. Aw-yang

On March 17, 2009, the State Water Resources Control Board (State Water Board or Board) unanimously adopted Resolution No. 2009-0027 (Resolution). The purpose of the Resolution is to implement the federal economic stimulus legislation known as the American Recovery and Reinvestment Act (ARRA) of 2009. The ARRA provides approximately $270 million to the Clean Water State Revolving Fund (CWSRF). The State Water Board’s Division of Financial Assistance (Division) administers the CWSRF program. The program serves to finance publicly owned treatment facilities, non-point source projects and programs, and estuary comprehensive conservation and management plans.

The ARRA qualifies how the State Water Board may spend the economic recovery funds under the CWSRF program. First, the Board must commit the funds to projects that will be under contract for construction by February 17, 2010. Otherwise, the United States Environmental Protection Agency (USEPA) will reallocate the funds to other states. The projects must use American made steel, iron and other manufactured goods unless USEPA makes exceptions. Additionally, the Board must use a minimum of 50 percent of the ARRA funds for principal forgiveness, negative interest rates or grants (i.e., subsidy funds).

The Resolution establishes the State Water Board’s priorities to fund the CWSRF program under the ARRA. Dozens of speakers addressed the Board at the March 17, 2009 hearing on the Resolution. Some supported the proposed priority allocations to disadvantaged communities. Others sought changes in the priorities. For example, some expressed concern that there may not be enough “shovel-ready” projects within the Board’s top priority categories. As a result, the Board may be unable to commit the federal funds on projects within the timeframe required by the ARRA. Some speakers urged the Board to spend all of the funds in the form of grants, principle forgiveness or other full subsidies rather than loans.

The Resolution adopted by the Board specifies that it will allocate the ARRA funds as follows:

Grants:

Twenty five percent to disadvantaged communities with a preference to small (less than 20,000 population) disadvantaged communities, not to exceed $2 million in subsidy funds per project. “Disadvantaged” means less than 80% of statewide median household income or a community that pays at least four percent of median household income toward wastewater infrastructure. The Division must receive the complete application and the applicant must have an executed or executable financing agreement before September 1, 2009.
Twenty-five percent to “Restart Projects.” Restart Projects lost previously committed grant funding from the Board under voter-approved propositions since the state has yet to sell bonds. Restart Projects can receive up to $5 million or the amount needed to replace lost grant funds plus reasonable costs to restart the project.
The Board’s Executive Director may consult with the Board Chair and Vice Chair to allocate an additional 15% of the ARRA funds to the above two categories for a maximum of 65% of the ARRA funds provided in the form of grants.

Loans:

Up to a total of $60 million in cumulative financing for innovation and efficiency projects (including recycled water) in the form of zero-interest loans. A “green” project may also fall into one of the grant-eligible categories—for example, a disadvantaged community recycled water project. The Division must receive the complete application and the applicant must have an executed or executable financing agreement before July 18, 2009.
The remainder of the ARRA funds, plus additional CWSRF funds up to a total of $300 million, to be given out as one percent interest loans. The Division must receive the complete application and the applicant must have an executed or executable financing agreement before September 1, 2009.