Navigating the Federal Funding Waters

White Paper

BY Alex Ferrara and Tracy Streeter
Funding water and wastewater infrastructure projects is an ongoing challenge, and states and municipalities are feeling the pressure. When state and local funding isn’t an option, federal funding could be a viable solution for a wide range of projects.

In the United States, so much rests on a complex and aging system of pipes, roads and grids — the economy, public safety and quality of life. Considering the threat of crumbling infrastructure, the list of what needs fixing seems endless, but there’s rarely enough money in the budget to cover it all. Funding challenges dominate the thoughts of water professionals. Aging infrastructure, the financing of renewal and/or replacement (R&R), and access to funding for R&R are the top three industry concerns, as stated in the 2019 State of the Water Industry Report from the American Water Works Association.

To a degree, every city or municipality is capable of generating funding through taxes, bonds and public-private partnerships. In fact, according to the Congressional Budget Office, state and local funding accounted for more than 75% of spending on water and transportation infrastructure in 2017.

But sometimes, those types of funding avenues aren’t an option, or supplementary funding is needed from additional sources. This is where federal grants and loans can be solution. The federal government is an active partner in building and maintaining water and wastewater infrastructure — and almost every type and size of project can qualify.

Federal funds support a wide range of projects, from replacing unlined canals to research projects for smart irrigation. And while some assume only large projects are eligible, funding is available for both smaller projects (below $200,000 in project construction costs) and for smaller communities (population of less than 10,000). Some of the most significant opportunities are listed below.

A LOOK INTO FEDERAL FUNDING OPTIONS

Collins Balcombe, manager of planning and project development for the Oklahoma-Texas area office of the U.S. Bureau of Reclamation, has seen the positive impact of these federal grants.

“These grant programs have provided a lot of benefit to entities in Kansas and Oklahoma, as demonstrated by the diverse projects that have recently been funded to better improve water management,” he says. “Our local office is always willing to lend a helping hand if folks have an interest trying to match local needs with the wide array of Reclamation grant opportunities.”

Some of the federal funding options from the U.S. Environmental Protection Agency (EPA), U.S. Department of Agriculture (USDA) and Bureau of Reclamation are listed below.

EPA WATER INFRASTRUCTURE FINANCE AND INNOVATION ACT (WIFIA)

In 2018, the U.S. Environmental Protection Agency (EPA) funded $55 million in loans through the WIFIA program, which will provide 49% of the project cost. The remainder may be covered by other funding mechanisms.

Eligibility Requirements

Cities with a population of less than 25,000: minimum project cost of $5 million.
All other cities: minimum project cost of $20 million.

Project Requirements

Must meet the American Iron and Steel provision.
Must meet Davis-Bacon Act mandates.

Application Process and Fees

Applicants must first submit a Letter of Interest; no fee is required.
If invited to apply, applicants must then submit a full application including a nonrefundable fee of $100,000 (or $25,000 for cities with a population of less than 25,000).

USDA WASTE AND WATER DISPOSAL DIRECT LOANS AND GRANTS

The USDA provides loans for rural areas and towns with a population of less than 10,000 for drinking water systems, sanitary sewage disposal, sanitary solid waste disposal and stormwater drainage. If funds are available, a grant may be combined with loans if required to keep user costs reasonable.

WATERSMART GRANTS

Through the Bureau of Reclamation, WaterSMART (Sustain and Manage America’s Resources for Tomorrow) grants address serious water challenges in the American West. Applicants must be states, Indian tribes, irrigation districts, water districts or other organizations with water or power delivery authority located in the Western U.S. or U.S. territories as identified in the Reclamation Act of June 17, 1902.

WATER AND ENERGY EFFICIENCY GRANTS

These grants provide 50/50 cost share funding for projects that conserve and use water more efficiently, increase the production of hydropower, and mitigate risk in areas with a high probability of future water conflict to then contribute to water supply reliability.

In 2019, $29.1 million in funding was awarded, including:

Up to $300,000 per project for Funding Group I — smaller, on-the-ground projects that should be completed within two years.
Up to $1 million per project for Funding Group II — larger, phased, on-the-ground projects that should be completed within three years.

Applicant must provide at least 50% of the project cost from nonfederal sources.

SMALL-SCALE WATER EFFICIENCY PROJECTS

These grants provide 50/50 cost share funding for small water efficiency improvements identified through previous planning efforts, such as flow measurement and canal section lining to address seepage or other similar projects.

In 2019, $3.7 million was awarded, including up to $75,000 per project for projects with construction costs under $200,000.

Applicants must provide at least 50% of the project cost.

WATER MARKETING STRATEGY

Funding aids applicants in planning activities to develop water marketing strategies that establish or expand water markets or water-marketing activities between willing participants.

Up to $3 million was available in 2019, including up to $200,000 for projects that can be completed in two years and up to $400,000 for projects that can be completed in three years.
Applicants must provide at least 50% of the project cost.

TITLE XVI WATER RECLAMATION AND REUSE RESEARCH

This funding mechanism focuses on research and studies that address water supply challenges by establishing or expanding the use of water reclamation and reuse, improving existing water reuse facilities and/ or streamlining the implementation of technology for new facilities.

Up to $3 million was available in 2019, including:

Up to $150,000 per project for Funding Group I — desktop research studies to develop science and support tools that assist communities in decision-making.
Up to $300,000 per project for Funding Group II — research studies that focus on improvements to existing facilities. The facility must be at a location owned by the research study sponsor but also may include broad industry benefits.
Up to $750,000 per project for Funding Group III — research studies that focus on state-of-the-art technology verification at a new proposed location or community that could result in broader benefits for the industry.

Applicants must provide at least 75% of the project cost.

TITLE XVI CONGRESSIONALLY AUTHORIZED WATER RECLAMATION AND REUSE PROJECTS

Funding is only available to sponsors of the 53 congressionally authorized Title XVI Water Reclamation and Reuse projects. A total of up to $35 million was available in 2019 for projects that improve efficiency and flexibility during water shortages and help communities diversify their water supply.

FUNDING CASE STUDY — THE CITY OF WICHITA, KANSAS

When Wichita, Kansas, first pursued a federal loan through the EPA’s Water Infrastructure Finance and Innovation Act (WIFIA), Wichita was unsuccessful. But the city’s leaders knew the construction of a new $524 million water treatment facility was vital to the community’s future, so they didn’t give up — and sought out help to refine the project approach.

In 2018, the new water treatment facility was one of 62 projects to quality for a WIFIA loan for up to 49% of the total expected costs of a new water treatment facility. With low interest rates and a delayed repayment schedule, the loan could save the city more than $70 million.

“The fact that Wichita was selected to apply by the EPA is a testament to the importance and scope of the project as well as its faith in our ability to get the job done,” says Mayor Jeff Longwell. “I would like to thank the Burns & McDonnell-led team of engineers who got us through Phase I, and especially the city council members who traveled with me to Washington, D.C.”

TITLE XVI WATER RECLAMATION AND REUSE PROJECTS UNDER THE WIIN ACT

This funding is for projects eligible under section 4009(c) of the WIIN Act, which states a project must reclaim or reuse municipal, industrial, domestic or agricultural wastewater; or impaired ground or surface waters.

Up to $20 million was available in 2019 for four to eight projects.

Sponsors must have completed a Title XVI Feasibility Study that has been found to meet all requirements of Reclamation Manual Release WTR 11-01.

Applicants must provide at least 75% of the project cost.

DESALINATION CONSTRUCTION PROJECTS UNDER THE WIIN ACT

These grants are for projects involving desalination of ocean and brackish water.

Up to $12 million was available in 2019 for two to six projects.
Sponsors must have completed a feasibility study and submitted it to the Department of Reclamation for review.
Applicants must provide at least 75% of the project cost.

DROUGHT RESPONSE PROGRAM — DROUGHT RESILIENCY PROJECTS

This funding mechanism supports projects that provide more flexibility and reliability for communities while reducing the need for emergency actions during a drought.

Up to $9 million was available in 2019, up to $750,000 per project.
Applicants must provide at least 50% of the project cost.

DROUGHT RESPONSE PROGRAM — DROUGHT CONTINGENCY PROJECTS

This funding supports the development of contingency plans that prepare for and respond to drought.

Available in 2019: $260,000.
Applicants must provide at least 50% of the project cost.

BEST PRACTICES FOR GRANT PROPOSALS

Successful grant proposals are hard work but well worth the investment. While the most important element is a well-planned and boots-ready idea, these additional tips can help enhance any submission:

Start early. Research what projects earned funding in previous years, reviewing successful proposals if possible. Schedule ample time for every step in the proposal preparation process.
Tell a compelling story. Reviewers often read a huge number of applications, so readability can make a big difference. Use accessible, straightforward language to clearly articulate the project — both the need and the benefits it would provide to the community.
Look ahead. Show how a project would help the community grow and thrive for decades to come. With 30-year (or more) loans, it’s important to demonstrate a long-term solution.
Cover all the bases. Use the proposal criteria as an outline so it’s easier for reviewers to fill out their checklist. Cover every element thoroughly, from economic growth to public safety. The designated reviewer might favor some elements over others.
Spotlight innovation. Don’t be afraid of exploring new solutions — for example, an academic approach not yet utilized in practice — as long as the proposal demonstrates how it can work.
Take advantage of offered resources. Many organizations welcome questions pre-submittal and offer feedback post-submittal.
If at first you don’t succeed, try again. If a proposal isn’t successful the first time around, use feedback as a guide to refocus the effort. Consultants can help shape a stronger project idea, while grant writers can put a shine on the proposal itself.

PUT YOUR BEST FOOT FORWARD FOR FUNDING

Many presume the chances for securing federal funding is minimal, but the money is out there for the right projects. In 2018, the WIFIA loan program received 51 letters of interest, compared to 62 the previous year. And while the total amount requested still exceeded the $6 billion available, these statistics demonstrate the feasibility of qualifying for a loan.

Consultants familiar with these grants and the types of projects they support can guide cities and municipalities to the right funding opportunity — often based on successful outcomes for other clients — and help shape a project idea that demonstrates a significant need, an innovative approach and a beneficial conclusion.

Every federal loan and grant submission has requirements, but once those baseline standards are met, anything is possible. Federal money can go unclaimed when no one asks for it — so put your best foot forward with a submission that paints a strong picture of how a project would positively impact the community.