Local governments nationwide are facing mounting pressure to repair aging water and wastewater systems, comply with stricter environmental standards and protect residents from rising utility costs. For many cities, counties and utility districts, the challenge is not identifying infrastructure needs, but finding the right mix of federal, state and local funding to pay for them.
The problem has made water infrastructure financing one of the most significant issues facing public officials nationwide. Billions of dollars are available through long-standing state revolving fund (SRF) programs, expanded federal investments under the Infrastructure Investment and Jobs Act and direct federal loan programs designed to support larger capital projects.
One state, Nebraska recently announced a historic milestone for water and wastewater infrastructure investments statewide. The Nebraska SRF program’s statewide commitments are expected to surpass $2 billion following the approval of the Fiscal Year 2027 Clean Water and Drinking Water Intended Use Plan (IUP), representing a model state-led system to assist local municipalities and water controlling districts upgrade infrastructure.
The recent funding milestone reflects the growing role of federal-state partnerships in helping communities upgrade drinking water systems, modernize wastewater treatment facilities, replace aging pipes and address emerging contaminants in water.
The SRF program has played a major role in the financing of Nebraska’s water infrastructure for nearly 40 years, split between a Clean Water State Revolving Fund (CWSRF) and a Drinking Water State Revolving Fund (DWSRF). Together, these programs provide Nebraska local governments with low interest loans and grants to finance critical water and wastewater projects.
Nebraska’s State Revolving Fund program is part of the U.S. Environmental Protection Agency’s (EPA) Drinking Water State Revolving Fund (DWSRF), a federal-state partnership designed to help communities finance drinking water infrastructure.
Established through amendments to the 1996 Safe Drinking Water Act, the federal DWSRF provides capitalization grants from the federal government to states, which then contribute matching funds and administer revolving loan programs required for local infrastructure needs. Because the program operates as a revolving fund, repayments from previous borrowers are reinvested into new projects, creating a sustainable source of long-term infrastructure funding.
Nearly 160 Nebraska communities have benefited from SRF funding. In the last two years, 55 infrastructure projects received $287 million in financial assistance. These investments have strengthened drinking water systems, modernized wastewater treatment facilities, and helped communities repair and replace aging infrastructure while limiting the financial burden on residents.
Beyond Nebraska, recent federal investments through the IIJA have significantly expanded the capacity of the DWSRF by providing additional funding for emerging infrastructure priorities.
California serves as an example of how SRF programs can serve as a key tool for state water infrastructure financing strategy. The California State Water Resources Control Board administers both a Clean Water State Revolving Fund (CWSRF) and a DWSRF alongside a broad range of grants, technical assistance and affordability programs that help communities address water quality challenges while minimizing costs to locals.
Through the state’s DWSRF, California finances projects that modernize aging water systems, improve public health, and ensure compliance with federal drinking water standards.
Recent California DWSRF-funded projects have included the replacement of lead and aging water mains, construction of new groundwater wells, installation of advanced treatment technologies to remove contaminants such as arsenic and PFAS, expansion of drinking water storage capacity, and consolidation of failing small water systems into larger, more reliable regional utilities. Many of these investments prioritize disadvantaged and rural communities that often lack the financial resources to undertake major infrastructure improvements without state and federal assistance.
Texas provides another strong example of how states can leverage federal water infrastructure programs through a coordinated financing strategy. Similar to that of the other states, the Texas Water Development Board (TWDB) administers both a DWSRF program and a CWSRF program, using federal grants, state matching funds, and revolving loan repayments to help communities finance essential water infrastructure projects.
The programs are integrated with other TWDB financing initiatives, allowing Texas to support projects ranging from small rural water system improvements to major regional infrastructure investments.
Through the Texas DWSRF, the TWDB has financed projects that improve the safety, reliability, and capacity of public water systems across the state. Recent DWSRF supported projects have included replacing aging water distribution lines, constructing new groundwater wells, expanding water treatment plants, rehabilitating elevated storage tanks, installing advanced treatment technologies to remove contaminants, and replacing lead service lines where needed.
The program has also helped fast-growing communities expand drinking water infrastructure to accommodate population growth while ensuring compliance with federal drinking water regulations.
The EPA also provides additional forms of funding for state and local-led projects that seek to enhance water and wastewater infrastructure. In addition to the SRF programs, the EPA’s Water Infrastructure Finance and Innovation Act (WIFIA) program has become an important federal tool for financing the nation’s large and complex water infrastructure projects.
Established in 2014, WIFIA provides long-term, low interest loans to public agencies, local governments, utility systems, and some private entities undertaking significant drinking water, wastewater, stormwater, and water reuse projects.
WIFIA loans come directly from the EPA, making them different from the revolving funds that are administered by the states. WIFIA loans cover up to 49% of eligible project costs and often feature repayment terms up to 35 years after project completion.
Because the federal government borrows lower interest rates than most local governments, these loans frequently reduce financing costs and generate substantial savings for utilities and taxpayers over the life of a project.
As communities across the country navigate aging infrastructure, strict regulations and increasing demand on water systems, the importance of reliable financing so communities can deliver their constituents is essential. Public officials at all levels can utilize previous examples and options to consider funding a water project.
With billions of dollars still available through these federal and state-led initiatives, local governments that proactively identify infrastructure needs, develop eligible projects and pursue available financing will be better positioned to replace aging systems, address emerging contaminants, improve system reliability and accommodate future growth.
Photo by Wijs (Wise) from Pexels
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