USDA Loans and Grant Funding for Small Community Wastewater Projects

Rural Utilities Service

In the United States Department of Agriculture, Rural Development administers financial and technical assistance programs to help rural communities develop safe and affordable sewage treatment and waste disposal systems. The programs that target wastewater treatment needs are run by the Water Programs Division of the Rural Utilities Service (RUS). The Water and Waste Disposal Loans and Grants Program provides loans, guaranteed loans, and grants for water, sewer, storm water, and solid waste disposal facilities. 

Public bodies (e.g., municipalities, counties, Indian Tribes, nonprofit organizations) serving rural areas may be eligible for loans or grants from the water and waste disposal program. The program makes assistance available only to rural areas with 10,000 or fewer people. 

Rural Development maintains records on small communities that are seeking assistance, or that have already received assistance, from the Agency for wastewater treatment or disposal needs. Rural Development may use information from pre-applications/applications, loans, grants, guarantees and borrowers' records to aid in program management decisions. The information is also available for Congressional activities.  

The following pages provide general information about the RUS's Water and Waste Disposal Loans and Grants Program. Grant and loan information for 1992 through 1998 were extracted from RUS' database and are presented in Table 1. 

Water and Waste Disposal Loans and Grants

Small communities with wastewater treatment or disposal needs can apply for loans and grants to construct, repair or modify waste collection and waste disposal facilities. To receive loans small communities must show that they (1) can't get funds at reasonable rates from commercial sources, (2) have the capacity to borrow and repay loans, and pledge security, and (3) can operate and maintain the affected facilities. Depending on the economic status of the service area, borrowers may receive one of three interest rates: the poverty rate (median household income is below poverty or below 80 percent of the statewide metropolitan median and the project is necessary to meet applicable health or sanitary standards), market rate (where median household income exceeds the statewide non-metropolitan household income), or the intermediate rate.

Total RUS program funding available through direct loans was over $691 million in fiscal year 1998 compared to approximately $739.5 million in fiscal year 1997. Funding for guaranteed loans amounted to $75 million in fiscal years 1997 and 1998. Funding for grants increased from $500.2 million in fiscal year 1997 to nearly $509.8 million in fiscal year 1998.  

Between 1992 and 1998, nearly 1 million (958,221) sewer users were served by grant- and/or loan-funded wastewater projects. Over the same time period small communities used a total of 2,197 RUS loans and grants for wastewater projects. Small community projects have been funded though loans, grants, or a combination of loans and grants. Figure 1 shows the relationship between the use of loans and grants to fund community wastewater projects. Over half of the projects funded by the Water and Waste Disposal Loans and Grants Program between 1992 and 1998 were funded by a combination of loans and grants. More than a third of the projects were funded by loans only. Only 11 percent of the projects were funded by grants only. It should be noted that the authorizing statute limits RUS grant funds to a maximum of 75 percent of eligible project cost.  

Figure 2 shows the nationwide distribution of the $2.8 billion in USDA loans and grants for wastewater projects. Pennsylvania got the highest number of USDA wastewater loans and grants between 1992 and 1998 with 133 total loans and grants. Most states obtained significantly fewer. The median number of loans and grants combined per state is 42.

How Does RUS Funding Compare to Joint Funding Sources?  

For the period from 1992 to 1998, RUS provided 75 percent of the funds used by small communities for wastewater projects. The other 25 percent was made up of joint funding. The $3.7 billion in joint funding included money borrowed from municipalities, states/counties, EPA State Revolving Fund (SRF), Regional Water Authorities, funding from private and commercial institutions, and other miscellaneous sources. Figure 3 indicates that 10 percent of small community wastewater funding came from states and counties. These account for nearly half of all non-RUS funding. Small communities received the fewest dollars for joint funded wastewater projects from private or commercial institutions (0.3 percent). Some small communities do not have the access to private credit markets that large communities do, so funding from these sources may be disproportionately small in this area compared to other funding sources.

How does RUS Funding Compare to EPA Total Need?

According to the EPA 1996 Clean Water Needs Survey (CWNS), small communities will need $13.8 billion to meet documented wastewater collection and treatment needs by the year 2016. RUS has provided approximately $2.8 billion for small community wastewater projects in the past six years. It is important to note that this description of RUS funding includes data from a relatively brief time period from 1992 to 1998 while the CWNS provides a 20-year projection of need, so a direct comparison cannot be provided. But, it's clear that at current funding levels RUS alone will not be able to meet all small community wastewater needs by 2016. It's also clear that the RUS contribution thus far has been important and its continued support of small communities is vital, as is that of other agencies.

Small Community USDA Loans and Grand Funding Data Tables:

Table Name	On-line View	Text Download*	Excel Spreadsheet Download
Table 1. United States Department of Agriculture (USDA) Rural Utilities Service (RUS) -- Wastewater Treatment Assistance from 1992-1998 for Small Communities (population <10,000)

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