Now that you have done some necessary capital improvement preparation at your system by completing your financial audits and general financial health check, doing a rate analysis and rate adjustment, developing or updating your Asset Management Plan, identifying your funding needs, and sketching out a shovel-worthy project, it is finally time to see what funding is available for your project. You are probably asking…
What are the funding sources for water/wastewater projects, and where do I find information on them?
Finding funding for your water or wastewater improvement project can feel like a complex and confusing process. Luckily, the EFCN hosts the Funding Tables, a free database of water/wastewater funding sources by state and territory that we update regularly. Whether you are finding funding for the first time or are a seasoned applicant, the Funding Tables are a great place to begin searching for the ideal funding source for your project. Read on to learn what information you will need as you launch your funding search.
Types of funding: Grant, loan, or a mix of both
You will need to determine whether you will apply for loans, grants, or a mix of both types of funds for your project.
Grants are money given to systems by a funder to fund a particular project or set of projects. Grants often favor or require “disadvantaged” applicants, which the funder may describe as rural towns, systems with low-income customers, or other demographics. Many systems favor the “free money” offered by grants, but this type of funding has its drawbacks. Often, grants are more competitive simply because more systems want them, and the funding for the grant at the state and federal levels can be volatile and subject to change with every funding cycle. Grants will also often come with more strings attached, such as more rigorous application processes and more stringent reporting requirements than loans. Grants also often come with a requirement that the system “matches” the grant amount by some percentage, which can be a hardship for some systems. Investigate whether your state (or the funder) also offers funding for grant matches.
Loans are money lent to systems by a funder, with an agreement that the system will pay back the funder in a set number of years. The funder will usually collect interest on that loan during the years that the system is paying it back. Finding out the payback period and interest rate on a loan will help you determine whether your system can afford it and will help you plan how you will pay it back. Some loan programs (such as the Drinking Water and Clean Water State Revolving Funds in some states) offer full or partial principal forgiveness, where the system does not have to pay back all or part of the funds.
Mixing grant and loan funding may sound complex, but many systems do it, especially for larger projects. A good way to inquire into combining loans and grants is through your state’s Water/Wastewater Infrastructure Funding Committee, if one exists. Funding committees (see this example from New York State) are a group of multiple funders across agencies for a particular state. Funding Committee members can often work together to fund a particular project and coordinate funding to match system needs and fund availability.
Types of Funders
Federal funding comes from federally run agencies. Common in the water/wastewater funding world are US Environmental Protection Agency (US EPA), US Department of Agriculture (USDA), and the Bureau of Reclamation (USBR, mostly for stormwater-related projects). Our Funding Tables list a few more. Try searching these federal websites for information directly, using keywords such as “water infrastructure funding”.
State funding programs for water and wastewater infrastructure are often run by the state’s environmental quality and public health agencies. Often, drinking water projects fall under public health and wastewater projects fall under environmental quality. Start searching under the state agency that you report to for compliance.
Funding offered by nonprofit organizations is usually of the “revolving loan fund” type, where interest gathered on loans and other systems’ payments fund the program.
Funding offered by private organizations is often focused on a particular region, and may exist depending on where your system is located.
Determining the Best Options for Your System
When it comes to whittling down your funding options, there are a few key points to keep in mind. Consider:
- Your project type. Is it water, wastewater, or stormwater? How much will it cost (roughly)? What parts of your system will it address? What is the “end goal” – water quality improvement, public health protection, flood management, drought resilience?
- Application requirements. What are the base requirements for systems to apply for the funding program? Some programs have a short and easy “pre-application”, whereas others want a lot of planning already in place.
- Application deadlines. How urgent is your project? If you can, give yourself plenty of time to work on funding applications, especially if this is your first time applying to a given program. We recommend that systems track application deadlines in their calendar, set reminders, and start preparing early.
Closing Thoughts
Once you have laid the financial and managerial groundwork at your system, and you know what your project is and what type of funding will suit your system and project best, finding funding becomes much less daunting. Whichever funding route you decide to take, make sure to reach out directly to the potential funders. Making contact ahead of your funding application will help ensure a successful application and funding process. Stay tuned for future blogs in our Funding Pipeline series for information on applying for water and wastewater infrastructure funding and engaging your community in the planning process.