Jeff Hughes is a Director of the School of Government’s Environmental Finance Center and a School of Government Faculty Member
The Infrastructure Finance Section (IFS) of the North Carolina Department of the Environment and Natural Resources announced the release of their draft Intended Use Plan for the state’s Clean Water State Revolving Fund Program (CWSRF) last week. The CWSRF is one of two revolving loan programs that that the state manages in partnership with the United States Environmental Protection Agency (USEPA).
The USEPA provides capitalization funds to the states and as a condition of receiving the federal funds states much contribute a cost share of 20%. Funds are lent out to utilities and the stream of loan repayments are used to serve as capital for future loans. This revolving structure has resulted in a robust infrastructure assistance program that is thriving even as many other government infrastructure programs suffer severe budget reductions.
The IUP influences basic components of the program such as interest rate and eligibility criteria. Potential borrowers and other stakeholders are given an opportunity to help shape the IUP by providing written comments or by attending a public hearing.
While not pure grants, the funds continue to have historic low loan rates — depending on the type of project and financial capability of the borrowing community – rates range from zero percent to half of the market rate which itself is at historic lows.
In case it’s not readily clear, a twenty-year loan at zero percent interest rate is good deal – maybe not as great a deal as a grant, but borrowers should not lose sight of the significant public subsidy that is embedded in this type of assistance. A calculator prepared by the Environmental Finance Center allows communities to quickly estimate the benefit of below market rate loans to better understand the assistance they are receiving from the state and federal government.
Communities that are counting on addressing their infrastructure needs solely with federal or state grants may have a long wait ahead of them given the state of the federal and state budget.