Exploring the Benefits of State Revolving Funds

This month’s theme is State Revolving Funds, an excellent option for small and mid-size utilities when it comes to infrastructure upgrades. Many utilities lack the resources and the capacity to apply for or prepare the materials needed for this opportunity. However, Moonshot Missions (Moonshot) has worked with utilities in various states to bridge this access issue and make long-term infrastructure upgrades possible. Rania Bashar, Senior Program Manager with Moonshot, shares in our March blog why utilities should plan to apply for these funds, and how Moonshot can assist. 

Question 1: What are State Revolving Funds?  

State Revolving Funds are federally supported programs run through each state that provide low interest loans to water and wastewater utilities for infrastructure upgrades. Most states have two different SRF programs—one for drinking water needs, and one for wastewater. Utilities can apply for these funds for construction, expansion and repair of public infrastructure. Many states prioritize utilities that are out of compliance or under resourced communities as they prioritize projects, making it a great option for smaller utilities.  

Question 2: Why should utilities consider State Revolving Funds?  

One of the major benefits of SRF is that they offer below market interest rates on their loans. Part of the fund distribution includes an opportunity for principal forgiveness, meaning that the borrower is not required to repay that portion of the loan amount. This is a huge opportunity that allows underresourced communities to advance project goals they might not be able to afford otherwise, as well as significantly reduce their long-term debt burden.  

Question 3: Why don’t more utilities utilize SRF Funding? 

The State Revolving Fund application process can be complicated and requires quite a bit of effort. A Preliminary Engineering Report (PER) must be prepared, which needs to be done with your engineering consulting firm (meaning it can be expensive). Additionally, a lot of support is needed for project framing, scoping, and overall prioritization. Repaying the loan can also result in communities needing to raise their water and sewer rates, which often results in public backlash. However, applying for and receiving principal forgiveness can often combat this issue. Many states also offer Planning and Design grants to cover the costs of the PER.

Question 4: How can Moonshot help in this process?  

Moonshot has extensive experience securing SRF and grant funding for transformational drinking and clean water projects. Our team provides direct assistance and guidance to utility personnel on each step of the SRF process. These steps include identification of eligible SRF projects on behalf of the utility that will improve environmental outcomes, coordination with state agencies, assistance initiating the application process, procurement of engineering resources, and coordination of the preparation, submission, and approval of documentation and permits.  

Question 5: How has Moonshot helped in this process?  

Environmental Finance Centers like Moonshot were created to reduce the gap in who has access to SRF funding. Recently, we helped a utility in Maryland right on the Chesapeake that had a really strict nutrient limit. The plant is small and hadn’t had a major upgrade in 20 years, so they were struggling to meet their limit. Moonshot Missions was able to get involved, helped them diagnose their system, identify the causes of their challenges, and conduct an asset assessment. From on-site visits to working with staff to identify the age of every asset, process, and equipment, Moonshot identified high priority projects for the utility and then worked to complete the paperwork needed for the SRF application process.  

Moonshot also worked with a Great Lakes utility facing major challenges with extreme weather events and flooding. They were in need of a backup generator and faced significant Inflow and Infiltration problems. Moonshot was able to help them submit SRF applications for both projects. 

Question 6: What next steps should utilities plan to take if they are interested in pursuing this opportunity?  

The SRF process can be a lengthy process, so start early! It takes time to close the loan, so it's recommended that utilities begin working about 2 years in advance.  Additionally, be sure to reach out to your state agencies that administer the grants. They are always there to help and will typically work alongside you if you reach out to them! Each state has different deadlines, so be sure to review your state’s process, as well as their Intended Use Plan (IUP), which most states publish each year.  

If you have any interest in beginning this process, contact Moonshot right away, as we are able to help you with the entire process—diagnostic, project identification, project prioritization, and the application process. Bottom line, Moonshot is here to help!