Continuing Planning Process
Element 8 - Strategic Planning for Future Development
Long-Term Ability to Address Treatment Project Construction Needs
The department's Financial Assistance Center provides funding for construction projects under the Clean Water State Revolving Fund Loan Program. The low-interest loans are repaid and money is loaned again. Federal funding through EPA has provided the incremental capitalization of the program. The state provides matching funds.
Missouri’s construction projects funding needs greatly exceed the available funds. The program is making progress towards meeting the massive needs, but will need to be significantly accelerated if the needs are going to be addressed in a timely manner. Each year, requests for funding far exceed the amounts available.
The department continues to work with the State Revolving Fund finance team to refine the program structure, and will continue to evaluate possible future program structures to ensure the program provides a stable source of funding for clean water infrastructure projects well into the future.
A recent example of an enhancement of the current program structure is the department’s decision to use the ability of the Environmental Improvement and Energy Resources Authority (EIERA) to sell bonds, the proceeds of which would supplement projected annual funding levels. Size of the sales would be based on current Clean Water SRF loan repayment schedules and projected new loans. A bond sale of $130 million is anticipated in the near future.
An additional enhancement is the department’s decision to allocate a certain percentage of available funding for certain size communities or for high priority project types, such as combined sewer overflows. Funds set aside for this reserve are based on a percentage of the anticipated available funds, the number of applicants ready to proceed, as well as federal and departmental issues.
Funding for new projects is allocated as shown below. Any remaining funds from a specific group would be distributed as necessary to fund other projects that are ready to proceed.
- 40 percent allocated to outstate Missouri
- 30 percent allocated to large metropolitan areas and districts
- 15 percent allocated to address combined sewer overflow projects
- 15 percent allocated to Green Project Reserve incentives and department initiatives
Large metropolitan areas and districts have service area populations of 75,000 or more. Outstate Missouri areas have service area populations of less than 75,000. The department's annual Intended Use Plan (IUP) contains additional information on these enhancements. Concurrent to these implemented enhancements, economics, increasing costs and regulatory issues exist, above and beyond the current funding levels.
The Clean Water SRF program strongly encourages facilities to use full-cost pricing and asset management. This results in stronger, more financially viable water and wastewater systems. At the same time, state, local and the system users’ current economic difficulties limit the ability to repay loans, and thus limit the number of construction projects.
At the program level, the interest earnings on clean water SRF funds are not retained, but are used to reduce the interest rate on loans made to wastewater systems. Because interest earnings are not retained, the SRF corpus (total program funding) doesn’t grow to keep pace with inflation or increases in construction costs. While the SRF is funded in perpetuity, the buying power is continually eroding.
Without regular influxes of funding at least equal to inflation or the increases in construction costs, the buying power and thus the number of projects funded will decrease in the long term.
Regulatory issues also impact the ability of the SRF to fund the needed construction projects. Any increase in Clean Water Act initiatives, enforcement or regulatory requirements, significantly increase the needs in Missouri. This results in widening the chasm between total needs and total available funding.
Incentives that divert federal capitalization funding away from revolving loans can be important tools, but also have a negative long-term impact on the effectiveness of the SRF in meeting the construction project needs.
SRF projects have and will continue to produce significant water quality improvements. Continued and increased federal funding along with the states maintaining the ability to set funding priorities based on water quality and public health protection will ensure the success of the program in perpetuity.