It’s Raining Money

Sept. 1, 2009

“Shovel-ready” water projects, numbering in the hundreds, are getting underway all at once, thanks to Congress and a newly arrived Obama administration eager to shovel fiat money their way.

Upon being signed into law last February, the American Recovery and Reinvestment Act (ARRA) began pumping billions into clean and drinking water infrastructure improvements: $4 billion via the longstanding Clean Water State Revolving Fund (CWSRF) program, and $2 billion for the Drinking Water State Revolving Fund (DWSRF) complement. Together, they pay for water, wastewater treatment, watershed estuary, and nonpoint source pollution cleanup control, and now–besides serving these worthy purposes—they’ve been ramped up and prioritized to help get people back to work and jumpstart a sagging economy.

To put this year’s $6 billion in perspective: In 2008, the CWSRF programs funded more than $5.8 billion in loans; and, over for the previous 20 years, C/D WSRF totaled $68 billion. Comparing ARRA to the multi-trillion-plus that was funneled into financial bailouts, $6 billion is a trickle—but it’s still a lot of money to spend on water, and in a hurry.

Within weeks of the ARRA’s passage, EPA was already calculating the magnitude of money to be made available state-by-state; as of late May, a total of 30 states had submitted applications, and EPA had obligated itself to over $1.4 billion of the total, a statement from EPA Administrator Lisa Jackson reported.

A few examples—and these are just the first wave: Vermont, $194,000; Delaware $19.5 million; Nevada, $38.9 million; Arizona, $82 million; Kansas City, MO, $28.7 million; Massachusetts, $1.34 million; New Hampshire, $395,000; Indiana $120 million; Kansas, $19.5 million; and Iowa, $53 million.

Not to be left out, several other federal agencies also opened the money spigots for water this year:

  • In March, the Army Corps of Engineers began publishing lists of new lake, dam, river, channel, creek, and flood control projects to be funded. Corps engineers maintain that “Recovery Act projects will create or maintain approximately 26,000 direct and indirect jobs per billion spent,” notes a prepared statement.
  • In late May, the US Department of the Interior announced the availability of a $1-billion fund.
  • EPA announced $39 million for Water Quality Management Planning (WQMP) grants to support standard-setting, water quality monitoring, river pollution cleanup plans, and clean water protection plans.
  • In late spring, the US Department of Agriculture Rural Development Water and Waste Disposal loan and grant program earmarked $3.7 billion for rural water and wastewater infrastructure for communities of 10,000 or less.
  • In April, the Bureau of Reclamation issued a new funding opportunity for cost-shared water projects in the western states.

Besides the scale and urgency, what’s unprecedented in this funding wave, notes EPA’s Eric Byous, of the Region Nine office in San Francisco, CA, is that much of this money is free. In prior years, State Revolving Funds (SRFs) came as repayable loans, “but the big change with the Recovery Act,” he says, “is that 50% is being given in the form of a subsidy of some sort—[essentially] a grant that does not require repayment,” called a “forgivable loan”—and the balance is typically repaid at zero or very low interest.

Byous–manager of the regional infrastructure office in the water division–is involved in reviewing applications that will be chasing $600 million—about one-tenth of the EPA C/D SRF total—allocated to four western states. Although the sums and terms are extraordinary, is there ever really enough?

At his office, “Definitely, many more applications are being received than could be funded,” he says.

What’s in It for “WE”?
Besides being free or low-interest, another major difference gives a tantalizing hint at what may be a paradigm-shift in federal funding earmarked specifically for water efficiency.

As a key criterion for selecting projects, comes the stipulation that 20% (i.e. $1.2 billion) should not simply go to the usual water pipes or treatment plants, but rather, must be invested in what the Act calls high-priority “green infrastructure improvements” for water and/or energy efficiency, “and other environmental innovations and wet weather management,” says Byous.

EPA Administrator Jackson called this “one of the most exciting aspects” of the Recovery Act’s funding, noting that the set-aside will promote desirable practices like water harvesting, water reuse, riparian restoration, floodplains, and wetlands, with “long-term benefits” beyond those of traditional infrastructure projects, a prepared statement notes.

Moreover, certain specific kinds of projects, listed as “Green Project Reserve,” are deemed so desirable that funding requests are pre-approved for rubber-stamping, without the requirement of detailed review. In a guidance issued by EPA, dozens of examples are listed under three headings, but the agency, pointedly, “…anticipates that “˜water or energy efficiency’ projects will likely be the principal focus of the Green Project Reserve under the DWSRF” (emphasis added). EPA defines water efficiency as “the use of improved technologies and practices to deliver equal or better services with less water.”

At the head of the list of these examples is the installation of water meters, followed by retrofit or replacement of water using fixtures, fittings, equipment, or appliances; efficient landscape or irrigation equipment; systems to recycle graywater; reclamation, recycling, and reuse of existing rainwater, condensate, degraded water, stormwater, and/or wastewater streams; and collection-system leak detection equipment.

A second fund-worthy category, “green infrastructure” refers to “stormwater management…to maintain and restore natural hydrology by infiltrating, evapotranspiring, and capturing and using stormwater.” Examples envisioned include landscaping, forestation, floodplains, wetlands, bioretention, planting trees, green roofs, porous pavements, and cisterns.

A third category—”environmentally innovative projects”—refers to sustainable water resource management and pollution control; low-impact development stormwater systems; wetlands construction/restoration; decentralized wastewater treatment; water reuse that reduces energy consumption, recharges aquifers, or reduces withdrawals and costs; and water balance approaches (a.k.a. water budgets).

Photo: George Kunkel
Although 20% of any ARRA-funded project must have a “green” focus, basic infrastructure improvements will also benefit from additional funding.

Other technologies and methods “that don’t quite fit, may also be considered,” adds Byous. But in these cases, the applicant must “make a business case” for them. For example, a leaky water line “may be worthy,” he says, “but it doesn’t meet the intent” of this provision as something categorically pre-approved; thus, it needs to be reviewed by EPA to determine if it meets the green standard.

In the event that a state cannot find enough green projects to fill this 20% quota, the state can still get all its allocated money anyway—if it certifies that it tried hard to meet the target.

Scrambling for Handouts
As things are turning out so far though, “making a business case” is proving to be rather academic, as states are reportedly experiencing virtually no problems coming up with pre-qualified green projects. All four of the Region Nine states in the Far West, for example, are exceeding 20% by a healthy margin, Byous says.

Elsewhere, an informal survey shows that the situation’s much the same. “We’re getting all kinds of calls,” reports Mike Brod, finance director of the Colorado Water Resources and Power Development Authority. “The stimulus funding has created the sense that there’s free money out there. You’ve got everybody running around with their hand out.”

Brod’s office had its hands full all spring, he adds, deciding who gets money and who doesn’t.

Pressure on all parties is being added by an extremely tight 180-day time clock (which began ticking on the

Photo: Aclara
EPA anticipates that technologies such as AMR and AMI will be the principal focus of the Green Projects Reserve.

date of the ARRA signing, February 17). It compels fund applicants in all 50 states to meet several critical deadlines, especially August 17, 2009. Meeting that timeline entails a compressed funding cycle: first, announcing and soliciting proposals, then educating and helping applicants to prepare and submit requests, then evaluating, prioritizing, and finally, selecting recipients.

Driving this urgency is of course the desire to rescue jobs. After EPA commits its funding, and the states submit their Intended Use Plans, groundbreaking (or finalized contracts) must be in progress by February 17, 2010–again, an extremely short time, for capital projects.

Jenny Hoffner is director of the Water Supply Program at American Rivers, an advocacy group that is monitoring water efficiency project proposals at its 12 regional sites nationwide. She observes that “Everyone’s having to ramp-up and come up with programs they never dreamed of,” also noting that water efficiency has never really been funded with the SRF mechanism; hence, states have needed to quickly devise criteria for project vetting and prioritizing.

Further complicating decision-making is the fact that SRF managers tend to be finance-minded rather than water efficiency technology experts. “It’s that learning curve that we’re working on right now,” she says.

Also in the Recovery Act (section 1605) is an unusual “buy American” provision, the formulating of which was long delayed by EPA, according to one state agency Web site which was explaining why, as of Memorial Day, the state hadn’t made progress in any ARRA funds distribution.

Brod notes, too, that EPA reversed itself on the question of whether repairing a leaky distribution line would or wouldn’t qualify as a “green reserve” categorically approved water efficiency project. (It no longer does, categorically.) And the provision that contractors must adhere to Davis-Bacon wage rates and the Disadvantaged Business Enterprise program meant that his office had to spend much of their springtime educating and hand-holding hundreds of applicants, grant recipients, and contractors.

The result has been, he says, “a bit of chaos…. And, of course, people don’t like how they get prioritized,” he adds.

Byous also acknowledges that the mad dash has put some stress on managers, who “have a huge workload thrown on top of an already huge workload with SRF…but they seem generally to be doing a great job in handling a flood of applications from utilities and municipalities,” he says.

Photo: Black & Veatch
The hope is that the green “set-aside” in the ARRA will help promote improvements outside of basic infrastructure, like wetlands protection and riparian restoration.

And on the whole, the process has resulted in “a nice array of projects, and [managers] have put together their intended use plans. So things are flowing nicely from that aspect.”

He’s personally examined nearly 200 water efficiency ideas, a number of which could be called cutting-edge.

California, he adds, was unique among the states in that its intended use of funding is not aimed at new projects, but is being spent instead to restart ones that had broken ground last year, but were halted due to state budget woes. This benefit, though, is actually at the heart of ARRA law: “Recovering jobs that were lost fits in perfectly with intent of the Act,” he says. “People are able to get their jobs back.”

A “Water Metering Investment Act?”
As the above informal sampling shows, clearly the 20% “green project reserve” rules, as they were structured by the EPA, virtually assured that states would opt overwhelming to fund water-metering projects, despite the above-noted lists of dozens of other possible options.

Indeed, enabling communities to buy high-end, automated meters may have been a prime objective of the “green reserve” rules, which were of course written into the Recovery Act from the outset. Such meters are often pricey–costing, per unit, in the neighborhood of a new HDTV set. Under current budgetary crunches and numberless competing community needs, outlays of such magnitude would otherwise be close to impossible to cost-justify.

Hoffner, of American River, notes that her organization “was very involved in the development of, specifically, the SRF 20% set aside for water efficiency, green infrastructure, energy efficiency, and innovative projects.”

She explains that this provision’s purpose “was to target a category of projects that has not been funded in the past.”

There’s a bit of the chicken-or-the-egg prioritizing issue here, too. “Fixing leaks can save huge amounts of water—and we absolutely want to encourage those projects to rank highly on the IUPs and to be eligible for the funding, as they are the types of projects that do pay back in time,” she concedes. “But the purchasing of the equipment to detect the leaks—that qualifies as “˜green project reserve’ project”—therefore received the mandatory set-aside.

“The thinking behind it was that the leak detection equipment and technology needed in order to…maintain the system with a low leakage rate would be something that the green project reserve could fund. I think the metering companies did a really good job of getting that word out,” she adds.

The state of Georgia, where the American River organization is headquartered, “targeted metering projects primarily, mostly AMR [automatic meter reading],” she notes.

Repairing old mains could be called “gray,” while investing in leak-detection is “green,” she says, and when it comes to making funding requests, “In many states they’ll give you more points for your ‘gray’ project if you’ve got a ‘green’ project associated with it.”

A Funding Wave to Continue?
Looking ahead, the Obama Administration’s F.Y. 2010 budget for EPA extends the concept of 20% “green infrastructure” set-asides, introduced by the Recovery Act.

“That’s a very hopeful sign that it will continue a great first step,” says Hoffner. “And, hopefully, we can move that forward so that water efficiency can start getting more funding targeted towards it in the SRF.”

From a state-level perspective, Arizona’s Corcutt–facing perennial water and funding challenges in that desert–shares in the enthusiasm for federal help to pay for extensive water infrastructure funding–whether green, gray, blue, or otherwise. “In the Southwest region,” she says, “especially for a state where we have special water supply needs, we’re excited about the fact that the Recovery Act put so much emphasis on green projects, conservation, renewable energy, and environmentally innovative projects, because that’s something that our program has been stressing already, especially in this past year.

“So, the Act has really been a boon for our programs and for getting that [message] pushed out into the public,” she adds. “And we’re getting a very positive response from communities and from private system owners.”

Hoffner speaks for many agencies across the nation as she sums up, saying, “We hope to see that continuing into the future.”

State-by-State, a Few Cases

Turning now to a sampling of state water funding agencies, here’s how a few are planning on spending the money, and how the ARRA experience has been going, to date.

Arizona appropriation: $55,000,000 DWSRF/$28 million CWSRF
Number of projects applications received: over 300
Number to be funded: about 50
“Green reserve” water efficiency project highlights:

  • Water reclamation facility for the City of Peoria water will get solar panels.
  • The Santa Cruz Water Company will get $2 million to cover 80% of the cost for a 500-kW solar array for a 3-mm-gpd water reclamation facility, to save about 25% on current energy costs.
  • According to Tahne P. Corcutt, environmental programs specialist for the Water Infrastructure Finance Authority of Arizona, “A lot of full meter replacement, and AMR and variable speed pump upgrades.”
  • For a stormwater control project at the Pine Creek Canyon Domestic Water Improvement District, “Stormwater will be collected and used for infiltration and recharge of the aquifer,” says Corcutt. Total loan about $90,000, with $54,000 forgivable.
  • The City of Mesa will use reservoir surface water to augment the city’s potable supply, relieving groundwater overdraft, “which is a big problem in their area,” she says. Funds will also equip a gravity flow conduit for hydroelectric generation; still other funds will restore riparian zone habitat.

Award selection process and criteria: A preexisting point system was applied, scoring projects based on local fiscal capacity, project benefits, technical, managerial, and financial capabilities.

Colorado appropriation: $30 DWSRF/$30 million CWSRF
Number of projects applications received: 142 engineering reports, “valued at eight to 10 times the amount available,” says Mike Brod, finance director of the Colorado Water Resources and Power Development Authority.

Number to be funded: not yet finalized. “Those prioritized highest—if the project requested amount is $2 million or less—will be all principle-forgiveness [i.e., grants] with the surplus given at 0%-interest loan,” he says

Selection and criteria. “It’s being a winnowing-out process since late February,” he says, based on a prioritization system, “and a challenge to make sure that … you’re comparing apples to apples in terms of usage and equivalent taps.”

Water efficiency project highlights:

  • Colorado—taking advantage of the state’s terrain and wind vectors—will install hydro electric generators to some water conduits; a wind turbine is being sought to help power a wastewater plant. Brod suggests that multiple water districts may someday sprout mini hydro plants—if the cumbersome federal approval process can be eased.

Louisiana CWSRF Allocation: $43 million
Number of clean water projects applications received: “over 250 totaling $1.8 billion; around 200 shovel-ready,” notes Vijan Sharafkhani, manager for business and community outreach, and Jonathan McFarland, engineer supervisor in clean water for the SRF at Louisiana DEQ.

The number to be funded is not yet determined as of this writing, but will wind up being only a handful, compared to the number of requests, they note.

Selection criteria: “We had our hands full, prioritizing.”

Water efficiency project highlights:

  • New water meters
  • In West Monroe, tentatively, a $6-million project for wastewater treatment for reuse in local pulp and paper processing (treated to drinking water standards) will eliminate future use of the aquifer, saving 5–10 million gpd of groundwater.

Idaho’s Allocation: $38.7 Million DWSRF/CWSRF
Number of green projects applications received to date: well in excess of $8 million worth.

Number to be funded: probably four

Prioritizing: Annual selection has been ongoing, says Tim Wendland, loan program manager, Idaho Department of Environmental Quality. “The main drivers for getting high placement on our priority list are public health and regulatory compliance,” he says. Changing the rules is time-consuming, “and there was no time.”

Water efficiency project highlights:

  • The towns of Bliss and Reubens will get cluster systems to replace individual septic tanks, helping to protect groundwater supply ($5 million).
  • Kingstone and Shoshone Counties will install water metering for the first time ($7 million).

South Dakota’s Allocation: $19.5 million DWSRF/CWSRF
Number of projects applications received: four for drinking water, and 10 or 12 for clean.

Selection and criteria: “We are meeting with applicants and still deciding,” says Mike Perkovich, P.E., natural resources engineering director, Department of Environment and Natural Resources.

Number to be funded: two or three

Water efficiency highlights:

  • Replacing variable frequency pump drives
  • Conducting energy audits of small water/wastewater systems
  • Well water development. “Several wells were not producing … Instead of rehabbing or drilling a whole bunch of individual wells, they are proposing to put in one big horizontal collector well, for an energy saving. But we need to get an EPA ruling on whether it counts as ‘green,’” he says.

California Allocation: $280 million DWSRF/CWSRF
Number of applications received: over 300
Number to be funded: 86

Selection and criteria: As noted above, regarding the state budget crisis, State Water Resources Control Board official Christopher Stevens says, “Basically we took … about $70 million [to restart] stopped grant projects.”

Water efficiency project highlights:

  • Water meters (again). About 21 of the state’s 86 projects will cover purchase, upgrading, and installation, consuming 40% of the entire EPA-funded water budget.

Iowa Allocation: $53,040,000 CWSRF/$24,293,000 DWSRF
Number of qualified applications received: 120, valued at $123 million
Number of “green reserve” to be funded: 19 ($14 million)

Selection and criteria: A “call for green projects” was issued February 25, 2009 to relevant associations and groups, says Patti Cale-Finnegan, of the water quality bureau, Iowa Department of Natural Resources.

Water efficiency project highlights:

  • Replacing pumps and motors.
  • Water metering (again); of 19 “green reserve” projects approved in Iowa, 14 involve buying, upgrading, and installing.

She notes that, although water mains probably needed replacing, “We did not score those highly in our ranking because … EPA is requiring some kind of business case, [with] studies and data collection to justify those…and a complete environmental review. So, timing-wise, because of the very fast timelines on the ARRA funding, we felt that the water meter projects were much more doable within those timeframes.”

 

About the Author

David Engle

David Engle specializes in construction-related topics.

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