The “Ask Me Anything” (AMA) series, a joint effort between Quantified Ventures (QV) and the Environmental Finance Center Network (EFCN), has completed its first year of sessions. AMA sessions are a mix of themed session and office hours where each session delves into a topic or concept unique to the State Revolving Funds, exploring the foundations of the program weaving in real-world insights. This is a comprehensive summary of the key themes, insights, and practical takeaways from the first year of the series
The pressures are omnipresent: shrinking federal appropriations, increasing compliance burdens, and the ever-present challenge of ensuring equitable access to resources. The AMA series is designed to address these challenges head-on, providing English-to-English translation of federal requirements, highlighting state and personal examples to tackling situations, and fostering a collaborative environment for knowledge sharing. This recap provides a broad overview of the AMA series that can be used as a quick reference and as an encouragement to attend more sessions.
Core Themes & Key Topics Explored
1. SRF Program Fundamentals:
- Understanting the Landscape: Explored the structure of SRFs, including the flow of funds from the EPA to state programs, state matching requirements, and the revolving nature of the funds.
- Funding Mechanisms: Outlined the various funding mechanisms available, including low-interest loans, grants, principal forgiveness, and negative interest (though the latter is not currently used). It highlighted the sustainability of the funds due to continual money inflow from loan payments, which exceeds federal and state funding contributions (BIL notwithstanding).
- State-Specific Variations: Underscored the importance of understanding state-specific regulations, eligibility criteria, and program priorities, as these can vary significantly.
2. Navigating Federal Compliance:
- American Iron and Steel (AIS) and Build America, Buy America (BABA): Provided in-depth explanations of these key requirements, emphasizing the importance of proper certification letters from manufacturers and state inspector verification of authenticity.
- Federal Crosscutters: Introduced the concept of equivalency, detailed the application of cross-cutting federal regulations, including environmental protection, fair wage rates, and socioeconomic considerations.
- Environmental Review: Emphasized the mandatory nature of environmental review, regardless of funding source, and outlined the key elements of the review process, including public notice, consultation with federally recognized tribes, and consideration of direct and indirect project impacts.
- Single Audits: Clarified the requirements for Single Audits, including the new threshold of $1 million in federally reimbursable costs, and discussed strategies for communities to manage project schedules to stay under this threshold.
3. Financial Management & Sustainability:
- Projecting Budgets & Setting User Rates: Explored best practices for budget projections, including accounting for routine and irregular expenses, incorporating asset management planning, and considering certain financial health ratios such as debt service coverage ratio and days of cash on hand. Also covered rate setting strategies and transparent communication with the public regarding rate increases.
- Asset Management and Capital Improvement Planning: Highlighted the critical role of asset management planning in ensuring long-term financial sustainability, including inventory creation, condition assessment, level of service goals, and criticality evaluation.
- Debt Financing & Intergenerational Equity: Addressed the benefits and challenges of debt financing, including comparisons with alternative funding methods and considerations for intergenerational equity in infrastructure investment.
4. Program Implementation & Community Support:
- Eligibility Criteria: Reviewed eligibility criteria for both Clean Water and Drinking Water SRFs, emphasizing the importance of understanding state-specific requirements and potential ineligibilities.
- Readiness to Proceed: Underscored the importance of “readiness to proceed” as a key factor in securing funding, and discussed strategies for helping communities meet readiness requirements.
- Innovative Uses of SRFs: Discussed creative approaches to SRF funding, including linked deposits, sponsorship programs, and pass-through lending mechanisms.
5. Adapting to a Changing Landscape:
- Declining Federal Grants: Discussed the anticipated impact of declining federal capitalization grants and offered strategies for states to plan for reduced funding and communicate these realities to the borrowing public.
Key Insights & Recommendations for State Program Managers:
Embrace State-Specific Program Design:
Each state has unique infrastructure needs and each State Revolving Fund program is therefore different. Emphasize State-specific programs and designs to fit communities with community level problems to make their SRF program more versatile.
Prioritize Pre-Development Funding:
Recognize that the lack of upfront funding is a major barrier for many small and disadvantaged communities. Consider implementing or expanding pre-development funding programs to help these communities overcome this hurdle.
Foster Collaboration & Knowledge Sharing:
Actively participate in knowledge-sharing initiatives, such as the AMA series, and encourage collaboration among state agencies, technical assistance providers, and community stakeholders. Use your state’s resources to connect with other agencies, including local, federal, or other entities for assistance.
Promote Transparency & Public Engagement:
Communicate openly and transparently with the public about infrastructure needs, funding challenges, and proposed rate increases. Use public meetings, interactive budget exercises, and educational resources to foster understanding and build support for necessary investments.
Embrace Innovative Funding Approaches:
Explore innovative funding mechanisms, such as linked deposits, sponsorship programs, and pass-through lending, to expand access to capital and support a wider range of projects. Remember to think outside of the box and that the SRFs come with a lot of flexibility; embrace the idea of making regular programmatic changes to meet the needs of the borrowing public.
Focus on Long-Term Sustainability:
Prioritize asset management planning, capacity building, and financial sustainability to ensure the long-term viability of water infrastructure systems.
Facilitate Compliance with Emerging Federal Priorities:
Stay abreast of emerging federal priorities, such as removing lead and addressing emerging contaminants, and tailoring the program to align with these priorities. Make it a habit to stay in contact with borrowers as well as the media, as those may be effective in communicating necessary changes.
Moving Forward:
The “Ask Me Anything” SRF series provides a wealth of valuable information and practical guidance for state program managers, technical assistance providers and potential borrowers. By embracing the insights and recommendations shared in the trainings, attendees can optimize SRF programs, strengthen community resilience, and ensure a sustainable water future.
The Environmental Finance Center Network remains committed to supporting SRF managers in their critical work. Please explore the website for additional resources, training opportunities, and technical assistance. Together, we can build a more resilient and equitable water future for all.