Nearly $1B In Low-Interest State Revolving Fund Loans Help Michigan Communities Upgrade Water Infrastructure, Protect Health, Environment

Critical water system upgrades are in the works in dozens of Michigan communities thanks to $933M in low-interest loans from the State Revolving Fund (SRF). The Michigan Department of Environment, Great Lakes, and Energy (EGLE) issued SRF funding to 71 projects across the state in fiscal year 2023 for water system upgrades.

These projects reduce the risk of contaminants entering drinking water, surface water and ground water resources across the state and reduce pressure on local governments to raise water rates. Funds for these low interest financing programs come from the Drinking Water State Revolving Fund and the Clean Water State Revolving Fund – mixes of federal and state dollars dedicated to financing community water projects.

Requests for the loan dollars was overwhelming, as cities, villages and towns across Michigan struggle to maintain deteriorating infrastructure operating well beyond its intended lifespan. Properly functioning water systems are crucial to Michiganders’ quality of life – from the water flowing from taps to the numerous lakes and streams that provide amazing recreational opportunities and flood control. Effective infrastructure is often taken for granted until it fails, impacting the well-being of people and the environment.

The SRF loans assess interest rates well below market rate and provide the opportunity for communities to secure principal forgiveness – a portion of the loan that does not have to be repaid. In fiscal year 2023, $133M in loan awards were forgiven for communities with financial hardships.

Demand has outpaced available funding however, with community requests for project financing totaling nearly three times available funding.

“Subsidized interest rates, the ability to offer extended loan terms, and process improvements to remove application barriers have resulted in historic demand on the SRF,” said Paul McDonald, EGLE’s chief financial officer. “These long-term, low interest loans help communities reduce pressure to raise funds quickly for critical upgrades.”

“The State Revolving Funds have provided financing opportunities for communities undertaking water infrastructure improvements over the past 30 plus years,” said Kelly Green, administrator of EGLE’s SRF programs. “Long term financing options at very low interest rates help communities and infrastructure users invest in their system’s capital improvement needs. EGLE’s unique understanding of water infrastructure systems and challenges sets up communities utilizing SRF for long term success.”

“Local governments are eager to do right by their constituents – in this case securing financing can protect their health and natural resources without big rate increases,” said Phil Roos, EGLE director. We are constantly looking for opportunities to leverage state and federal dollars to provide assistance to our local partners.”

Detailed information on the low-interest loans issued to communities this year can be found by accessing the SRF visual dashboard. The dashboard also contains information on every loan issued under the SRF programs.

Those interested in hearing more about EGLE grants and loans may subscribe to “EGLE grant and loan opportunities” communications and others at this link.

Descriptions of funding sources
Drinking Water State Revolving Fund (DWSRF): Low-interest loan program to help public water systems finance the costs of replacement and repair of drinking water infrastructure to protect public health and achieve or maintain compliance with federal Safe Drinking Water Act requirements. As water systems repay their loans, the repayments and interest flow back into the DWSRF to support new loans.

Clean Water State Revolving Fund (CWSRF): Used by local municipalities to finance construction of water pollution control projects. These projects include wastewater treatment plant upgrades and expansions, combined or sanitary sewer overflow abatement, new sewers designed to reduce existing sources of pollution, and other publicly owned wastewater treatment efforts that improve water quality. The CWSRF can also finance stormwater infrastructure projects to reduce nonpoint sources of water pollution caused by runoff to lakes, streams, and wetlands.