Funding/Financial Assistance

For More Information
Fred Armstrong, PE
Several methods for financing public utility services are available to Virginia’s units of local government. In general, funds to facilitate construction need to be budgeted by the locality and are made available through Local Government Bonds, Bond Pools, or through Government Assistance Programs, and/or a combination of these sources.

Local Government
Several forms of bonds are available, such as General Obligation Bonds, Revenue Bonds, or a Combination Bond to facilitate water and/or sewer related construction. Revenue must be sufficient to cover debt service, operation and maintenance cost, and allow for normal and routine repairs and replacement costs, or required upgrades to the local infrastructure.

The type of financing arrangement will vary based on budget needs and also vary specific to the type of unit of local government, i.e., city, town, county, or quasi-local governing body such as a Sanitary District or Public Service Authority. The Code of Virginia and its Acts relevant to local government financing set forth certain legal aspects for public financing by these different government bodies and all applicable statutes should be reviewed by specialized legal counsel prior to establishing the type of bond(s) to be marketed.

General Obligation Bonds
Perhaps the best known method of financing water and sewer projects is the General Obligation Bond. These bonds are based on government credit and are backed by the taxing power of the unit of government issuing the bonds. The loan becomes a general obligation of the locality and must be repaid without regard to any special fund. The amount of bonds which can be sold varies depending on the issuing body. Towns and cities cannot issue bonds or other interest bearing obligations in an amount greater than 10 percent of the assessed valuation of real estate subject to taxation. Counties have no limitation on the amount as long as the issue is approved by a majority of the voters.

Revenue Bonds
Revenue Bonds are used to finance water and sewer facility construction where the utility service operates as a self-supporting enterprise. Revenue Bonds do not constitute a debt against the borrowing limits of the county or municipality. Revenue bonds are viable financing options when projected revenue from connection and service fees are sufficient to meet the total financial obligations of the project. Sanitary Districts may be further limited by restrictions set forth in its articles of incorporation or formation.

Government Assistance Program
Several sources of grant and/or loan funding are available to local government for the implementation of a project(s) are discussed hereafter. Many of the financial aid programs discussed are not considered standalone financial initiatives and are dependent on the project size, projected cost, project scope, and local objectives. Most of Virginia’s financial aid programs are designed to partner with local revenue and other available assistance programs.

Water and Wastewater Facility Improvements

The Virginia Resources Authority manages a Pool Financing Program to issue long-term bonds in the national municipal bond market and lends the proceeds to local government for water and wastewater facility improvements. VRA’s Pool Program combines the locality’s water and/or sewer improvement proposal with other locality requests, resulting in reduced issuance cost, competitive interest rates, and loan structuring flexibility. The benefits are subsequently passed on to the recipients in the Pool package. The loan is secured by the moral obligation of the Commonwealth.

VRA offer a year-round application period and provides access to potential interim financing through a VRA Interim Loan Program.

See the table below for program contact information.

Water and Wastewater Improvements

The Virginia Municipal League and the Virginia Association of Counties also offer Virginia’s local government a Pooled Bond Initiative, providing financing for water and or wastewater improvements. It combines locality financial needs with other projects and issues bonds on a pooled basis, resulting in competitive project interest rates, volume type discounts, shared issuance cost, and an insured AAA rating.

VML/VACo receives applications throughout the year and offers interim financing through its Commercial Paper Program.

See the table below for program contact information.

Wastewater Facility Improvements

The Department of Environmental Quality (DEQ) administers a loan fund to assist local government with the implementation of needed wastewater treatment improvements and the construction of related sewer facilities. This financial assistance program is commonly referred to as Virginia’s Clean Water Revolving Loan Fund. Eligible local initiatives for funding include any needed plant or sewer conveyance expansion, upgrade, extension, replacement, repair, rehabilitation and/or addition/improvements to a publicly-owned wastewater treatment facility.

Money from this Fund is provided in the form of 20-year low interest loans to local governments for wastewater treatment improvement projects. Proceeds from the Fund are loaned to local government at rates below existing bond market. The Fund’s ceiling rate is adjusted at closing to remain at least 1 percent below current market conditions. Lower interest rates, down to a zero percent, or no interest loans, are available to qualifying “financial hardship” recipients and where a major portion of a project is driven by the need to upgrade treatment levels, address a critical, severe, or urgent existing public health hazard or address a wastewater problem which is non-growth related.

This financial aid program operates on a yearly application solicitation cycle. Funding availability is not contingent upon appropriations. A high funding priority is given to projects or proposals that remediate an existing pollution problem, remediate a public health concern, or prevent a future environmental problem.

See the table below for program contact information.

Water Facility Improvements

The Virginia Department of Health (VDH) administers a loan fund to assist local governments with the implementation of water and water supply improvements.

Water and Wastewater Facility Improvements

The U. S. Department of Agriculture, Office of Rural Development Administration offers loans and/or loan/grants to local government for the construction and/or expansion of water treatment facilities, water supply, storage and water distribution systems. Grant and loan funds are also available for new or expanded wastewater treatment facilities, sewer conveyance infrastructure, and sewer line rehabilitation projects. RD loans and/or grants are available to local government where the proposed service area population or the proposed service district population does not exceed 10,000 persons.

The fund operates with a 3-tiered interest rate structure tied to market conditions based on income levels of the proposed service area and can extend the loan repayment period to 40 years. Grant funding is also available in conjunction with a RD loan. Grants, ranging from 25 percent to 75 percent of a project’s eligible cost, are considered where the monthly residential user rates for drinking water and sewer service exceed 1.5 percent of the medium household income (MHI) for the service area and at different thresholds as income levels of the service area are compared to the State Non-Metropolitan Medium Household Income (SNMHI) level. Grant availability is contingent upon appropriation levels.

This financial aid program operates on a yearly appropriation cycle; however, applications are received by RD continuously throughout the year. High funding priority is considered where a local proposal meets the public utility service and rural development objectives.

See the table below for program contact information.

The Virginia Department of Health (VDH) has two funding programs for a waterworks owner. The Financial and Construction Assistance Programs (FCAP) consists of the Virginia Drinking Water State Revolving Fund (DWSRF) Program and the Water Supply Assistance Grant (WSAG) Fund Program.

VDH announces funding availability in January of each year.

Water Facility Improvements

The Virginia Department of Health (VDH) administers a loan fund and offers grant assistance to local governments (waterworks owner) for the implementation of drinking water and water supply improvement projects. Any drinking water project, new and expansion improvements are eligible for assistance through the Department’s revolving loan program. Dam construction and associated reservoir proposals are not eligible components of the Department’s drinking water loan initiative.

Loans carry an interest rate from 3% to program ceiling for a maximum term of 20 years. The programs ceiling rate is generally set at 1% below municipal 20 year bond market rates. Disadvantaged loan/grant funding is considered at lower rates and at longer terms, up to 30 years, based on the department’s disadvantage community criteria. Factors include cost, MHI of the area and service population. Limited grant assistance under another VDH funding initiative may also be available for surface source water development or improvement type projects.

Applications are received on a year round basis, and funding is authorized yearly. Applications are ranked and prioritized considering resolutions of public health problems, regulatory noncompliance issues and project affordability.

See the table below for program contact information.

(This grant program is only available when appropriate funds are available.  For FY2012, it is not funded.)
The Water Supply Assistance Grant Program offers all grant dollars to community waterworks with a successful application.

Construction Assistance
Grants are available for 1) Surface source water development or improvement up to $200,000 and 2) Small construction projects costing no more than $50,000.
In addition, Self-Help Construction projects are allowed and are completed with non-contractor related labor.

Non Construction Assistance
Planning/Design Grants are available up to $60,000 per project to be awarded annually.

WWTP Upgrades and Expansions

The Department of Environmental Quality (DEQ) administers a special purpose grant program available to local government to implement wastewater treatment upgrades to achieve nutrient reduction goals of the Chesapeake Bay “Tributary Strategy Plans” or to achieve other water quality restoration, protection, or enhancement benefits. The fund’s focus is to assist eligible facility owners with compliance with applicable regulatory requirements for reducing nutrient discharges to the Chesapeake Bay Watershed. Grant participation is limited to an eligible portion of the project cost relating to the design and installation cost of nutrient removal technology. The applicable grant is established at four different percentage thresholds, ranging from 35 percent to 75 percent of eligible cost, as the local government’s existing annual sewer charges is compared to guidelines adopted by the State Water Control Board to establish an area’s reasonable and affordable sewer user fee.

A small portion of the funds appropriated to create the WQIF is available to Non-Bay related sewer improvement projects and activities.

This financial aid program operates on a State fiscal year appropriation cycle, and applications are solicited from impacted local governments twice a year. High funding priority is given to proposals that clearly demonstrate the likelihood of achieving measurable and specific water quality improvements.

See the table below for program contact information.

Water and Sewer Facilities

The Virginia Tobacco Indemnification and Community Revitalization Commission administers a grant program aimed at compensating certain localities for the adverse economic effects resulting from the loss of tobacco production opportunities and promotes the revitalization of tobacco dependent communities. Grant funds are available through the Commission primarily to Virginia’s Southwest and Southside local governments and public service authority’s for new and expanded water and/or sewer facility where the water and/or sewer project scope also achieves or supports the area’s economic development or economic revitalization effort.

This program awards grants from the State’s Annual Master Settlement Agreement Endowment and application/proposals are considered throughout the year. High priority is given to a proposal where the improved water and sewer infrastructure also creates new employment opportunities for the region.

See the table below for program contact information.

Water and Sewer Facilities

The Department of Housing and Community Development (DHCD) offers grant funds to local government in a competitive nature to facilitate construction of needed water and/or sewer facilities. The Department’s Community Facility Improvement grant initiative is limited to $1,000,000. The scope of work must benefit a low-to-moderate income (LMI) area or LMI residents of the municipality. The project must serve an area where 51 percent or more of the residents are LMI or where 51 percent or more of the project beneficiaries are LMI residents. Low to moderate income persons are defined as families or individuals whose family income is less than 80 percent of the county or town median family income or 80 percent of the median income of the entire non-metropolitan area of the State, whichever is higher.

This segment of DHCD’s financial grant program is contingent upon appropriations, and applications are solicited annually. Funding considerations are competitive. High priority is given to proposals that focus on community facility service improvements to its existing residents and where proposal exceeds the minimum 51 percent LMI benefit factor.

Beginning in fiscal year 2008, DHCD will administer a Special Purpose grant initiative from funds carved out of DEQ’s WQIF appropriation and stated for Non-Bay entities and projects. Details of this program aid package are not available at this time.

See the table below for program contact information.

Water and Wastewater Facilities

The Environmental Protection Agency (EPA) may provide grant funds to Virginia’s local government to facilitate improvements to water and/or wastewater infrastructure. This funding initiative is commonly referred to as a “Federal or Congressional Earmark Assistance Grant”. Money is made available through Federal appropriations identified in the STAG authorization account and designated or budgeted to a specific locality/project for a specific task or tasks. Funding is made available and authorized through Congressional sponsorship.

Funding availability is contingent upon the Federal appropriation/budget authorization process. An application for assistance is required. It is, however, processed after the jurisdiction has been named, the Congressional intent is clarified and the amount of the grant has been identified and included in the Federal budget. Higher priority is given to those projects that have attempted to obtain funding from other sources and where access has been denied or deferred, and where project implementation remains critical to a public utility service need or objective of the Community.

The community’s contact in this assistance effort is its Congressional representative(s).

Agency Aid Possible
Web Address
Drinking Water & Wastewater
VML/VaCO Loan Drinking Water & Wastewater
VRLF/DEQ Loan Wastewater Facilities
WQIF/DEQ Grant WWTP Upgrades
VDH Loan/Grant Drinking Water Facilities
RD/USA Loan/Grant Drinking Water & Wastewater
DHCD Grants Drinking Water & Wastewater
Tobacco Fund
Grants Drinking Water & Wastewater
EPA Grants Water, Wastewater, & Other Services