Public Water Supply Loan Program Factsheet

Fact Sheet - January 2006

BACKGROUND

The federal Safe Drinking Water Act Reauthorization was signed into law in early August 1996. Section 130 of this legislation authorizes federal grants to states for establishment of loan programs, with the condition that each state provide a 20 percent match to each federal dollar appropriated for the program.

PROGRAM FUNDING

Since the inception of the PWSLP program, about $400 Million in federal capitalization, state matching funds and loan repayments have been committed to fund eligible projects. To provide additional funding, the Agency has decided to convert from a direct loan program to a leveraged loan program through the sale of revenue bonds.

ELIGIBILITY

Local government units (cities, villages and water districts) and certain classes of privately-owned community water supplies with the following types of projects are eligible to receive a drinking water loan: (1) upgrade or replacement of existing facilities to bring them into compliance with the requirements of the Safe Drinking Water Act and the State Environmental Protection Act; (2) construction of a new distribution and/or treatment system to replace individual wells; and (3) renovation of treatment and/or distribution facilities that have reached the end of their useful life, or have inadequate capacity to meet service area needs. Under the loan priority scoring system, projects necessary for compliance with the Safe Drinking Water Act and/or the Environmental Protection Act will receive the highest priorities for funding. Federal program requirements specifically prohibit funding for construction or rehabilitation of reservoirs and for projects primarily for future growth or fire protection.

TERMS OF LOAN

All drinking water loans will carry a loan rate that is established at one-half the market interest rate. The simple interest rate for loans has averaged approximately 3 percent. The maximum term of a PWSLP loan will be 20 years, with funding for a project in any one fiscal year limited to 25 percent of available funds.

LOAN APPLICATION REQUIREMENTS

Loan applicants for financial assistance, during any federal fiscal year commencing October 1, must file a new pre-application annually on or before the preceding March 31. Once the Illinois EPA has determined priorities for awarding loan funding assistance to projects, a loan applicant must complete a loan application before the Agency can offer a loan. Some of the key elements of a loan application that must be submitted by the applicant and approved by the Illinois EPA include: (1) project plan; (2) design plans and specifications; (3) an OM&R revenue system; 4) demonstration of technical, managerial and financial capacity; 5) adequate source of revenue and security for repayment of the loan; and (6) a summary of the bids received on the project, along with a recommendation to award a contract to the low responsive, responsible bidder. Additional application requirements can be determined by contacting the Illinois EPA as indicated below.

CONTACT

For further information on the PWSLP, please contact the Infrastructure Financial Assistance Section, Bureau of Water at 217/782-2027, TDD 217/782-9143.