FREQUENTLY ASKED QUESTIONS (FAQs)

Learn about the Clean Water and Drinking Water State Revolving Funds (SRFs).

 

What are the Clean Water and Drinking Water State Revolving Funds?

The Clean Water and Drinking Water State Revolving Funds are state-federal partnerships that provide low-cost subsidized loans to communities to build water infrastructure that protects human health and the environment.

How are SRFs funded?

SRFs receive federal and state funding. Some states also issue bonds to increase revenue. Since the programs were established, the SRFs have received an annual capitalization grant from the federal government. States are required to match 20% of each grant with state funds.

Why is annual federal funding called a "capitalization" grant?

Federal funding for the SRFs is called a capitalization grant because it is designed to build the capital or "corpus" of the loan programs (the funding that will revolve in perpetuity).

How can states provide their 20% match?

States can appropriate funding in their state budget, use local funding, issue bonds, or generate other income outside the program.

What is a bond?

Bonds are loans with a fixed interest rate and repayment schedule that are issued to governments or companies, usually for investment in capital improvement projects.

How are SRF loans subsidized?

All SRF loans are given at or below the interest rate available on the open market. SRF loans are considered subsidized because federal and state funding allow the SRF interest rates to be offered at these "discounted" rates.   

How do SRFs help keep utility rates affordable?

Below market interest rates reduce the amount of interest that must be repaid on the loan, which reduces the cost of infrastructure improvements paid by utility ratepayers.

What is additional subsidization?

Additional subsidization, also referred to as "add sub," is funding beyond the savings provided by the basic SRF subsidized loans. Additional subsidization includes grants, principal forgiveness and negative interest loans.

What is principal forgiveness?

Principal forgiveness is when all or part of a loan doesn't have to be repaid.