Ohio’s Water Resources Restoration Sponsorship Program: A 20-year success
Ohio was the first state to implement a sponsorship program for restoration projects within its Clean Water State Revolving Fund over 20 years ago. Since then, Ohio’s learned a lot about how best to implement the program to promote restoration projects through the revolving loan fund program.
By Stephanie Vo, Senior Water Policy Associate
Many water quality issues communities face today come from nonpoint source pollution (NPS)—which is caused by stormwater runoff. Green infrastructure can help address NPS concerns in both the urban and agricultural contexts so it is important that communities can easily obtain funding to implement these projects.
While there are many different ways to fund or finance green infrastructure, the Clean Water State Revolving Funds (CWSRFs) serve as a large potential source of investments into green infrastructure. But SRFs’ potential to fund green infrastructure has yet to be fully unlocked. There are many reasons why green infrastructure makes up only a marginal amount of SRF investments. One reason is that CWSRF programs are often not well suited to carve out and prioritize money for nontraditional green infrastructure projects. Another is that many areas of the U.S. are not covered by a stormwater utility, so green infrastructure projects often do not have dedicated revenue streams to repay CWSRF loans. Moreover, the CWSRF program has historically been aimed to regulate point source pollution, which is generally easier to identify and control. Although there are other mechanisms under the Clean Water Act (CWA) to address NPS, like Section 319, without a significant addendum to the CWA to regulate NPS, states will need to creatively use the tools they have now, like the CWSRF, to implement NPS pollution controls.
States can use several familiar policy tools to promote green infrastructure investments through the CWSRF. In addition, some states have addressed this issue by adding additional mechanisms or programs to their state SRF program, with conduit lending and sponsorship programs among the best practices.
I sat down with staff from Ohio’s Water Resources Restoration Sponsorship Program (WRRSP)–the first sponsorship program of its kind–to learn more about how sponsorship programs work. Looking back, they credit a few reasons why the WRRSP has been so successful:
A good reason to start
Flexible state legislation
A robust base SRF program
Dedicated staff members
The support of big players
What is a sponsorship program?
Before we dive into the success of Ohio’s sponsorship program, first let’s look at what sponsorship programs are and how they can help promote green infrastructure.
Within the Clean Water SRF, sponsorship programs allow traditional wastewater treatment plant (WWTP) projects to be paired with nontraditional projects, like restoration or green infrastructure. In this structure, the entity with the traditional project, say a municipality upgrading a WWTP, will apply for a CWSRF loan and receive a discounted interest rate on its loan if it chooses to sponsor a nontraditional project, such as a nonprofit restoring a portion of wetlands. The total loan amount for the municipality will be larger now with the wetlands restoration project, but with the discounted interest rate, the loan repayment amount over the loan period will be equivalent to the repayment amount had the municipality not sponsored the wetland project.
This is why sponsorship programs help incentivize nontraditional projects: municipalities and other applicants with traditional projects have the same repayment amount they would without sponsoring nontraditional projects. The larger loan amount upfront allows funds to go toward the nontraditional project, without the sponsored entity needing to undertake any repayment responsibilities. The cost of a larger loan with a lower interest rate—in terms of reduced interest collected—is actually borne by the CWSRF program, which must carve out an amount of money each year to dedicate to the sponsorship program.
For Ohio’s WRRSP, key stakeholders include WRRSP project implementers and Ohio CWSRF loan recipients who serve as sponsors. Both implementers and loan recipients must apply to their respective programs and are connected via a registry run by WRRSP staff.
Figure 1. Sponsorship funding mechanism (image based off EPA, 2017)
Keys to Success
🗝️ A REASON TO START
Before Ohio began its sponsorship program, it was seeing big improvements in water quality from projects implemented to control point source pollution. Yet, there were still areas that weren’t achieving these goals–areas that involved other factors, namely nonpoint source (NPS) pollution. Ohio saw a need for solutions to address NPS pollution and could back it up with data. The biological monitoring in Ohio is robust, and they were able to point to how they needed habitat restoration, specifically in streams and wetlands, to safeguard water quality and counter the loss of biological diversity.
This strong reason to start was key to convincing Ohio SRF managers to invest in creating a sponsorship program, with the confidence that it would be utilized. Examples of other states with good reasons to start their own sponsorship programs include Iowa, a leading state in agricultural production, which saw a huge need to address watershed-level NPS pollution and Vermont’s recognition that it was not meeting its Lake Champlain Total Maximum Daily Loads which were largely due to NPS.
🗝️ FLEXIBLE STATE LEGISLATION
Ohio was able to implement a sponsorship program without changing state SRF legislation because the Ohio EPA had the authority to establish such a program and it decided to use loan repayments to fund the WRRSP program. State SRF legislation lays out rules regarding how funds can be used and managed and also indicates the scope of authority granted to the state agency responsible for the CWSRF program, including the agency’s ability to implement innovative programs that serve the goals of the SRF and which aspects of the program are strictly controlled by state legislation. It is important for states to consider whether they would need to modify legislation in order to establish a sponsorship program.
Iowa and Vermont, both of whom have sponsorship programs, needed to make changes to state statute first in order to use rate payer fees for non-utility uses and to change eligible project types. If state legislation does need to change, it will be important to consider the wider political landscape in the state and that this process can take some time.
🗝️ A ROBUST SRF PROGRAM
Ohio has one of the largest SRF programs in the country. Based on the Clean Water Act statutory formula used to allot states’ federal capitalization grants, Ohio receives the 3rd largest grant from the EPA. Ohio maintains robust SRF program to manage that money. Ohio does well with keeping a low percentage of uncommitted SRF funds, showing that it has sufficient demand for funding and that the SRF program has the capacity to efficiently allocate those funds, even with the large size of the program. It manages an average of 159 assistance agreements each year, [1] totaling to around a yearly average of $590 million. The amount of CWSRF funds available annually for projects has increased over the past ten years–indicating that the fund is stable and growing with less and less reliance on interest repayments. [2]
Having a strong, financially stable SRF program allowed Ohio’s SRF managers to be receptive to dedicating $15 million every year to the sponsorship program in terms of the reduced interest earned on sponsorship loans.
🗝️ DEDICATED STAFF
Ohio has a mighty team of four full-time staff solely dedicated to WRRSP program implementation. The staff manages the program, reviews projects, coordinates sponsors and implementers, and helps advise implementers and sponsors in each step of the process from proactive outreach to post-project implementation. Engagement with implementers and sponsors has been key to the success of the program. Even though the price of application is high (around $10,000), many implementers are now familiar with the process due to outreach and pre-application meetings.
Running an SRF program itself is a lot of work–having dedicated staff for additional sub-programs, like the WRRSP, will be critical to the effectiveness of the program.
🗝️ SUPPORT OF BIG PLAYERS
Well-known and respected organizations, like The Nature Conservancy and the Trust for Public Land, have participated as implementers in the WRRSP, which helped to demonstrate demand for a sponsorship program. Having large national players involved can increase the recognition and importance of restoration, conservation, and other green infrastructure projects in a state.
I’ll note that since there are barriers to entry, like high application fees, it is easier for larger entities to have the financial and managerial resources to apply, whereas smaller land trusts and nonprofits may not have the capacity and resources to access this program. This access issue is something that many technical assistance providers, including EPIC, are hoping to help potential applicants overcome. Ohio can use set-aside funds to provide technical assistance to help these smaller entities or projects in more disadvantaged areas a higher chance of successfully applying.
These keys to success for Ohio’s WRRSP point to crucial considerations that states must make before implementing a sponsorship program for green infrastructure. While a state might not need each of these keys to unlock an SRF program, it might not be the right choice for a state to implement one if it doesn’t have a good reason to start, flexible legislation (or a positive political prospect of changing it), a robust and well-managed base SRF program, dedicated staff, and the support of big players.
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Thank you to Tom Harcarik, Steve Malone, and Mike Kelly for sitting down with me to discuss Ohio’s WRRSP! For more information on the WRRSP, please visit Ohio EPA’s website.
[1] Calculated using NIMS, averaged over 2012-2022. See https://www.epa.gov/sites/default/files/2021-02/documents/oh.pdf
[2] Ibid. NIMS, line 202.