For more than a quarter century prior to the 1987 amendments to the federal Clean Water Act, Congress offered generous grants to encourage units of local government to construct needed improvements to municipal wastewater collection and treatment facilities. The federal construction grants program was enormously effective in accelerating municipal compliance with the point source provisions of the Clean Water Act, but it was a program whose narrow purpose was outlived as the majority of municipal wastewater treatment works came into compliance with the mandated requirements.

While the 1987 amendments did not significantly alter national policy protecting the nation's waterways, they did radically change government's role in financing implementation of those policies by abandoning grants in favor of a much more flexible loan concept known as the State Revolving Fund (SRF).

Created as successor to the earlier grant program, the SRF was the milestone achievement of the 1987 Amendments. In Illinois, it uses state and federal funds supplemented with repayments from earlier loans to provide low-interest loans to help communities meet sewer and sewage treatment needs. Loan recipients pay approximately half the rate of bonds sold by the state in the previous year, with a minimum rate of 2.5 percent. The FY '97 SRF loan rate is 2.89 percent, with the interest portion and principal repayments going directly back into the fund to finance future loans.

Loans from the Illinois Water Pollution Control Revolving Fund have helped very large to very small wastewater treatment facilities meet Clean Water Act goals. Photos of some of the projects are displayed in the Bureau of Water headquarters. Ron Drainer, manager of the grants section, stops to check out a recent addition to the collection.

Illinois was geared to make the program transition smoothly

While many states were faced with the need to create a complex financial assistance organization from scratch to meet the goals of the new federal program, Illinois found the transition from grant to loan program relatively easy. Earlier state grant programs meant Illinois had an efficient financial assistance administrative system already in place, backed by a history of support from the governor and the General Assembly.

From its inception, the program has been especially popular among smaller communities, where municipal officials have indicated that even with the unavoidable necessity of some "red tape," costs are usually significantly less than the cost of preparing and selling bonds on the open market.

Application for SRF loans requires a two page pre-application form, which secures the project a place on the loan priority list; a preliminary report or facilities plan describing the wastewater need, the rationale for selecting the proposed project, environmental impacts of the program, and outlining the financial plan for retiring the loan; plans and bid specifications, required permits and bidding documents; an instrument of debt and ordinances assuring adequate resources for repayment, and an approvable user charge system.

The application process between initial conception and actual start of construction under a loan agreement typically takes about a year, though in some cases it is done in much less time.

An SRF loan in Illinois can be obtained for virtually any reasonable municipal sewer or sewage treatment project for which a community has a need. The program gives a high priority to projects that are preventative in nature. Loans are still awarded for traditional compliance projects where those needs still exist, but the majority of loan applications are aimed at maintaining compliance by rehabilitating and replacing aging wastewater infrastructure or expanding facilities to meet increased wasteload demands before a marked degradation in treatment plant performance actually occurs.

Initial authorization only ran through FY '94

In authorizing state SRF loan programs, Congress authorized capitalization only through FY '94, with Illinois' share of total funding expected to be $350 million, backed by $70 million in state matching funds. The program's enormous popularity and success, however, has led Congress to continue annual appropriations and capitalization funds, with total grants to Illinois through FY '97 totaling $580 million with state match requirements of $116 million. Continued federal capitalization is now anticipated at least through the end of the century.

Recognizing the success of the SRF in rapidly funding a great deal of needed construction with a relatively limited joint federal and state investment, Congress recently expanded the concept to establish a virtually identical SRF program for drinking water supply projects. If the Illinois legislature authorizes and funds such a program in the current session of the General Assembly, the Illinois EPA anticipates having the new water supply SRF program operational mid-way into FY '98.