01-12579. Allocation of Drinking Water State Revolving Fund Monies

AGENCY:

Environmental Protection Agency.

ACTION:

Notice.

SUMMARY:

The 1996 Safe Drinking Water Act (SDWA) Amendments established a Drinking Water State Revolving Fund (DWSRF) program and authorized $9.6 billion to be appropriated for the program through fiscal year 2003. Congress directed that allotments for fiscal year 1998 and subsequent years be distributed among States based on the results of the most recent Drinking Water Infrastructure Needs Survey.

In this notice, the Environmental Protection Agency (EPA) is releasing a revised allocation for DWSRF monies among States in accordance with the results from the most recent Drinking Water Infrastructure Needs Survey (i.e., the 1999 Drinking Water Infrastructure Survey) which was released on February 28, 2001. This revised allocation affects DWSRF program appropriations for fiscal years 2002 through 2005.

Beginning in fiscal year 1998, EPA established a formula which allocates funds to the States based directly on each State's proportional share of the total State need, provided that each State receives a minimum share of one percent of the funds available to the States, as required by the SDWA. EPA has made the determination that it will continue to use this method for allocating DWSRF funds. The findings from the 1999 Needs Survey will change the percentage of the DWSRF monies received by some States relative to their current allotments. This change reflects an increase or decrease in these States' share of the total State need.

DATES:

This notice is effective May 18, 2001.

FOR FURTHER INFORMATION CONTACT:

For technical inquiries, contact Veronica Blette, Drinking Water Protection Division, Office of Ground Water and Drinking Water (4606), 1200 Pennsylvania Avenue NW., Washington, DC 20460. The telephone number is [phone] and email address is [e-mail]. Copies of this document and information on the Drinking Water Needs Survey and the DWSRF program can be found on EPA's Office of Ground Water and Drinking Water website at http://www.epa.gov/​safewater.

SUPPLEMENTARY INFORMATION:

Background

The 1996 Safe Drinking Water Act (SDWA) Amendments established a Drinking Water State Revolving Fund (DWSRF) program and authorized to be appropriated $9.6 billion for the program through fiscal year 2003. Since 1996, Congress has appropriated $4.4 billion for the DWSRF program. Congress directed that allotments for fiscal year 1998 and subsequent years be distributed among States based on the results of the most recent Drinking Water Infrastructure Needs Survey (SDWA section 1452(a)(1)(D)(ii)), which must be conducted every four years. The first survey, which reflected 1995 data, was released in February 1997.

The 1999 Drinking Water Infrastructure Needs Survey was conducted over the last two years with the cooperation of the States. States participated in the development of the survey methods, documentation requirements, and the Report to Congress, which was released on February 28, 2001 (EPA 816-R-01-004). The survey examined the needs of approximately 4,300 water systems and used these data to extrapolate needs to each State. The survey included all of the nation's 1,111 largest systems (those serving over 40,000 people) and a statistical sample of systems serving fewer than 40,000 people. EPA conducted site visits to approximately 600 small community water systems and 100 not-for-profit noncommunity water systems. The sample design produces a statistically valid State-by-State estimate of need.

The 1999 Needs Survey presents State-by-State needs in several ways. For each State, the Needs Survey provides a bottom-line estimate of the total need, which reflects the capital costs for all drinking water infrastructure projects allowed for inclusion in the Survey. The Needs Survey also presents capital needs for each State by system size, by category of need (i.e., treatment, distribution and transmission, storage, source, and “other”), by existing SDWA regulation, and by current and future need. A current need is a project needed now to protect public health, while a future need is a project that will be needed over the next 20 years.

The 1999 Needs Survey found that the total national need is $150.9 billion (Table 1). This estimate represents the needs of the approximately 55,000 community water systems (CWS) and 21,400 not-for-profit non-community water systems (NCWS) that are eligible to receive DWSRF assistance. These systems are found in all 50 States, the District of Columbia, Puerto Rico, on American Indian lands and in Alaska Native Villages, and the Virgin Island and Pacific Island territories.

Table 1.—1999 Drinking Water Infrastructure Needs Survey 20-Year Needs

Type of need	Need (billions)
States	$139.0
Territories	0.4
American Indian and Alaska Native Villages	2.2
Costs for Proposed and Recent Regulations	9.3
Total National Need	150.9

The total national need also includes $9.3 billion in capital needs associated with recently promulgated and future regulations, as identified in EPA Economic Analyses accompanying the rules. Although these needs are included in the total national need, they were not apportioned to the States based upon the unanimous recommendation of the State representatives who participated in the survey design. The States expressed concern that the methods available for allocating the costs of these regulations would not represent the true costs of compliance on a State level.

The total State need, which is the figure that EPA will use to calculate the allotment formula, includes only the needs of the 50 States, the District of Columbia, and Puerto Rico. The 1999 Needs Survey estimates that the total State need is $139.0 billion.

Allocation Method

On October 31, 1996, EPA solicited public comment on six options for using the results of the first Drinking Water Infrastructure Needs Survey to allocate DWSRF monies to the States (61 FR 56231). On March 18, 1997, EPA announced its decision to allocate DWSRF monies for fiscal years 1998 through 2001 appropriations based on each State's proportional share of the total eligible needs for the States as derived from the 1995 Needs Survey (62 FR 12900). EPA has made the determination that it will continue to use this method for allocating DWSRF funds for fiscal years 2002 through 2005 appropriations utilizing the results of the 1999 Needs Survey.

The funds available to the States will be the level of funds appropriated by Congress, less the national set-asides, which includes an allocation for American Indian and Alaska Native Village water systems. Of the funds available to States, the SDWA includes specific allocations for the Pacific Islands, the Virgin Islands, and the District of Columbia.

Each State will receive an allotment of DWSRF funds based on each State's proportional share of the total State need ($139.0 billion), provided that each State receives a minimum allocation of one percent of the funds available to States, as required by the SDWA. The total need calculated for each State is the survey's bottom-line and the simplest way of allocating DWSRF grant funds among States.

The total State need includes all documented projects collected by the Needs Survey. In general, a project was included in the Needs Survey if project documentation demonstrated that meeting the need would address the public health objectives of the SDWA. The total State need includes projects needed now and over the next 20 years in four general categories: treatment, source, storage, and transmission and distribution. The total State need excludes capital projects that are ineligible for DWSRF assistance, such as projects solely for growth and dams, and the capital costs associated with recently promulgated and future regulations.

The formula based on the total need makes no distinction between the four categories—that is, it assigns an equal weight to all categories of need. Also, projects to correct imminent public health threats (e.g., replacing a deteriorated filter plant) are given the same weight as less critical needs (e.g., replacing a storage tank that is expected to reach the end of its useful life in five years).

Consideration of Alternative Allocation Methods

The method that EPA uses to allocate funds to States is based on each State's share of the total State need. Several States have explicit restrictions against providing funding to privately-owned enterprises. Such restrictions may be the result of statutory or constitutional provisions at the State level or may be due to policy decisions made by the State program. The constitution or statutes of 17 States prohibit the provision of DWSRF monies to privately owned systems.

EPA had been asked by some stakeholders to consider changes to the allotment method to account for restrictions in some States that limit the provision of DWSRF assistance to publicly owned water systems. These stakeholders expressed the opinion that the allocation for these States should only consider the total need associated with publicly owned water systems that are eligible to receive DWSRF monies. They proposed that capital needs associated with privately owned water systems (determined thorough inventory information) be deducted from these States's total need estimates, although, as required by the SDWA, each State (even those States restricting privately-owned water systems from funding) would receive at least one percent of the funds available to States. Stakeholders felt that basing the allotment formula on whether States restrict DWSRF funding would ensure that States receive an allotment directly in proportion to their total needs eligible for assistance from the State.

EPA has reviewed the statutory language authorizing the program and determined that State DWSRF allotments should be based on the needs reported in the most recent needs survey which must assess “capital improvement needs of all eligible public water systems”. The total State need collected through the survey represents the needs associated with publicly and privately-owned community water systems and non-profit noncommunity water systems, therefore these needs must be included in determining the allotment of funds.

It is important to note that in reviewing the issue, EPA found that some States with explicit restrictions are working to make changes to legislation or are working to identify alternative methods of assisting privately-owned systems. Some States are working to develop funding mechanisms which would enable them to provide DWSRF assistance to these water systems. Other States are using set-aside funds to provide technical assistance or are helping privately-owned systems obtain assistance from other State or Federal sources. EPA also found that some States that had the authority to provide assistance to privately-owned utilities had not done so. It is likely that any attempt to remedy inequities through the allotment method would itself be inequitable.

Although we are not making changes to the allotment formula, the Agency will continue to monitor States with respect to their decisions to fund privately-owned systems to ensure that the program maximizes benefits to public health. The Agency will also continue to work to assist States in working with privately-owned systems by providing financial management training on the mechanics of applicant credit evaluation and facilitating the dissemination of information between States.

Allocation of Monies

Table 2 contains each State's expected DWSRF allotment based on an appropriation of $823,185,000 and national set-aside assumptions. The appropriation amount is based on the President's budget request of $823,185,000 for fiscal year 2002. The national set-asides for fiscal year 2002 include funds for American Indian and Alaska Native Village water systems at the level of 1.5 percent of the total appropriation. (SDWA Section 1452(i)). This comes to $12,374,700 for Indian Tribes and Alaska Native Villages. Additional national set-asides for fiscal year 2002 include $2,000,000 for monitoring for unregulated contaminants and $30,000,000 for operator certification expense reimbursement grants. If funds are appropriated for the DWSRF at the level of $823,185,000 million and if the anticipated national set-asides do not change, the total funds available to the States, the District of Columbia and Territories would equal $778,837,300. Because the percentages are based on the total funds available for allotment to the States, they can be used for general planning purposes for future years. Once the appropriated amount and national set-asides are known, a State's allotment can be estimated by subtracting the national set-asides from the total funds available for allotment and then applying the appropriate percentage shown below. EPA will annually notify each State of their allotment from a specific fiscal year's appropriation after the final budget has been passed.

The findings from the 1999 Needs Survey will change the percentage of the DWSRF monies received by some States when compared to their current percentages. This change reflects an increase or decrease in these States' share of the total State need. The variation in these States' needs occurred principally as a result of the data submitted by individual water systems, but also in part due to refinements in the survey methods. With the collection of data from nearly 4,300 water systems and over 80,000 projects submitted, a change in some States' allotments represents an inevitable consequence of conducting a survey of this scale.

Table 2.—Distribution of Drinking Water State Revolving Fund Allotments

State	Percent	Amount allotted
Alabama	1.00	$7,788,400
Alaska	1.00	7,788,400
Arizona	1.13	8,826,900
Arkansas	1.08	8,431,800
California	10.24	79,756,000
Colorado	1.65	12,886,000
Connecticut	1.00	7,788,400
Delaware	1.00	7,788,400
Florida	2.34	18,223,300
Georgia	1.58	12,331,600
Hawaii	1.00	7,788,400
Idaho	1.00	7,788,400
Illinois	3.73	29,064,700
Indiana	1.17	9,144,900
Iowa	1.84	14,299,600
Kansas	1.15	8,931,800
Kentucky	1.22	9,483,500
Louisiana	1.00	7,788,400
Maine	1.00	7,788,400
Maryland	1.16	9,044,200
Massachusetts	3.58	27,843,600
Michigan	4.10	31,920,400
Minnesota	1.98	15,429,600
Mississippi	1.00	7,788,400
Missouri	1.45	11,318,800
Montana	1.00	7,788,400
Nebraska	1.00	7,788,400
Nevada	1.00	7,788,400
New Hampshire	1.00	7,788,400
New Jersey	2.30	17,930,500
New Mexico	1.00	7,788,400
New York	7.75	60,382,900
North Carolina	1.76	13,676,100
North Dakota	1.00	7,788,400
Ohio	3.05	23,742,400
Oklahoma	1.55	12,038,200
Oregon	1.76	13,684,800
Pennsylvania	3.22	25,080,100
Puerto Rico	1.33	10,388,900
Rhode Island	1.00	7,788,400
South Carolina	1.00	7,788,400
South Dakota	1.00	7,788,400
Tennessee	1.01	7,877,800
Texas	7.70	59,989,300
Utah	1.00	7,788,400
Vermont	1.00	7,788,400
Virginia	1.38	10,762,600
Washington	2.47	19,220,200
West Virginia	1.00	7,788,400
Wisconsin	1.98	15,423,400
Wyoming	1.00	7,788,400
District of Columbia	1.00	7,788,400
Territories	0.33	2,570,200
Total	100.00	778,837,200

Dated: May 4, 2001.

Diane C. Regas,

Acting Assistant Administrator, Office of Water