DALLAS — The federal stimulus package known as the American Recovery and Reinvestment Act includes more than $7 billion for drinking water and wastewater projects in the United States.

Drinking water projects can include anything from new water sources to maintenance of pipelines, while wastewater or clean water projects involve purification of sewage, storm drainage, and other forms of pollution control.

The funding nationally breaks down into $6 billion for drinking water state revolving fund programs and $4 billion for clean water SRFs. The U.S. Department of Agriculture’s rural water and waste disposal program will also receive $1.38 billion for loans and grants.

In Texas, the Texas Water Development Board is in charge of the clean water SRF and the drinking water SRF, with responsibility for approving projects by local utilities and serving as a bond bank that offers low-cost financing and grants.

The TWDB’s six-member board of directors will meet today to consider 1,300 applicants for existing state funding and $340 million of federal stimulus funding for local projects. J. Kevin Ward, the agency’s executive director, and his staff will present the proposals, which will be ranked by priority.

In an interview with The Bond Buyer, Ward explained how the stimulus funding would affect the TWDB’s planning and water projects in Texas.

Q: When did you start planning for the stimulus funding?

A: We started planning for this back in October, November and started surveying all the [local] entities in January and got all that information in.  Now, we’re trying to take all that and rank all the projects.

The good news for Texas is that this all goes to existing funds, so we don’t have to start from scratch. We’re getting somewhere around $160 million for the drinking water program and around $180 million for the clean water program. There is money set aside for the Texas Commission for Environmental Quality’s program for watershed management of about $1.8 million.

Q: What kind of demand are you seeing among the local water utilities for the stimulus funds?

A: As evidenced by the more than 1,300 project submittals from interested communities, representing almost $9.6 billion, there is overwhelming interest from water and wastewater utilities in accessing the funding available through ARRA. 

Q: What types of projects are you seeing among the applicants?

A: The clean water program is the older program for wastewater construction.  And the types of programs that are fundable are what the [Environmental Protection Agency] refers to as 212 treatment work, non-point source and main-estuary management strategies. We don’t generally get a lot of non-point source and estuary projects, but it looks like EPA and Congress are starting to focus on retention ponds for storm water in a way that might come to the SRF in the future.

Most of them we expect to be what we call commonly owned treatment works for the clean water SRF, which in the past we funded everything from new wastewater treatment plants to rehabilitating sewer collection lines — pretty much everything under the sun. We’ve also got overland treatment of effluent to a really high standard that creates an artificial wetland. That might be a green project. There definitely are some recycling projects in there.

Q: What do the stimulus funds allow you to do that you might not have been able to do otherwise?

A: I think what you’re going to see now that we’re able to do that we couldn’t before involves a lot of disadvantaged communities on our list. To be considered a disadvantaged community, they have to have an income level of 25% below the state average.  I think we may have as much as $1.8 million worth of disadvantaged requests on the two lists.

Traditionally, they will try to come into the program, and we have a limited amount of money each year for them, and most of our money goes out in the form of a low-interest loan, like a 0% loan. And heretofore, drinking water was the only place where you could get the equivalent of a grant, which is termed loan forgiveness. This time, what we see is that they’re allowing us to do grants, and they’re also allowing us to do grants in the clean water program.

And more importantly, they’ve required all the states to provide at least 50% of this assistance in the form of deeper subsidies than they normally would. And since we’ve already been giving loan forgiveness, zero-interest loans and all that, then they’ve determined for us that a deeper subsidy means grants.  So we’re going to be recommending to our board today that they provide that full 50% in the form of grants and low-interest loans and that they target that toward the disadvantaged communities.

Q: What about the larger water utilities, such as Houston and Dallas?

A: Now on the other side of it, we have the larger communities that are in here for a ton of money on both sides. We’re recommending to our board to stop at just 50% on the grants and have the other 50% go out in the form of zero-interest loans. So, those are firsts. Those are the types of assistance that have never been done before.

Now, we will purchase local bonds with the proceeds of those grants, but they’ll be 0% loans, essentially. We’ve never done that for creditworthy entities. Most of those just get a low-interest loan to our program, anywhere from 0.7% to 1.2% below the current market rates. That will give us a capital infusion in the fund that will eventually be recycled, so we think that it aids us, because the demands we’ve seen are huge.

Q: Does the stimulus give TWDB any added comfort in its own financial planning?

A: We’ve got almost $9.6 billion of demand for both programs, and that’s 1,300 different projects. So, anything we can do for the future is going to help us later on to fund some of these projects we won’t be able to get to with the stimulus or the current-year funding. 

 

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