Clean Water SRF Financing for Decentralized Septic Projects
If you ever had to have your septic tank pumped or shelled out money to replace a cracked septic lateral, you are among the roughly 20 percent of Americans that rely on onsite septic systems. Septic systems are typically decentralized, with the homeowners responsible for costly repairs. When households cannot afford to install, repair, or replace a septic system, this can result in improper treatment, raw sewage discharge, and adverse impacts on public health. In many cases, homeowners must address these failures individually by repairing or replacing individual systems or implementing small cluster systems. Luckily, the federal government provides state funds for water infrastructure projects through State Revolving Funds (SRFs) and allows states to provide assistance for decentralized septic installation, repair, replacement, and conversion projects. States, however, often require that these funds go to public entities, instead of homeowners, and most states do not provide Clean Water State Revolving Fund (CWSRF) assistance directly to individual homeowners for septic projects.
Access to CWSRF assistance is essential for decentralized septic projects because a confluence of factors make these projects prohibitively expensive. Unlike sewer utility projects, which distribute costs among many customers, septic project costs are typically borne by either a single or handful of households. In addition, these projects often fall on households least able to afford them, because households with septics are more likely to be low-income. Moreover, maintenance needs are growing, in part due to a climate change-fueled rise in groundwater levels which has led to an increase in septic failures.
The interplay of federal and state regulations can create challenges for communities, advocates, and administrators trying to help septic owners access sorely needed SRF assistance. This blog explores two key questions: Does federal law allow funding for decentralized septic projects? And, if state law limits effective access to these funds, what can be done about it?
Federal Eligibility for SRF Assistance to Homeowners for Decentralized Septic Projects
Under federal law, state CWSRF programs are allowed to provide financial assistance for decentralized septic projects. The federal Clean Water Act, which governs the Clean Water SRF program, defines eligible projects to include “the construction, repair, or replacement of decentralized wastewater treatment systems.”¹ These wastewater treatment systems are further defined in EPA regulations to include septic tanks.² Moreover, unlike assistance for other projects under the CWSRF, assistance for decentralized septic projects is not limited to municipal or public applicants. Instead, Congress clearly expanded eligibility to homeowners, allowing state CWSRFs to assist “domestic”—that is household—septic projects.³
Importantly, since decentralized septic projects are considered eligible projects under the CWSRF, and homeowners are considered eligible applicants, homeowners are therefore eligible for financing (e.g., loans) and funding (e.g., principal forgiveness or grants)⁴ for septic projects.⁵
EPA Guidance on SRF Assistance for Decentralized Septic Projects
In addition to the statutes and regulations discussed above, the EPA, which oversees the SRF program, has issued guidance confirming that states can provide SRF support for decentralized septic projects directly to individual homeowners. According to the EPA, state CWSRFs can finance: planning and design and construction costs for new septic installations; repair and replacement; converting cesspools to septics; cluster systems; and set-up fees for special districts or Responsible Management Entities.⁶ However, routine operation and maintenance costs are not eligible.⁷
In addition to individual homeowners and political subdivisions, EPA guidance states that citizen groups and nonprofit organizations are also eligible for assistance for septic projects.⁸
State Limitations on CWSRF Funding of Septics
While federal statutes, regulation and guidance is clear, many states place additional restrictions on how their CWSRF can provide financial assistance and restrict financial assistance to “public entities.”⁹ Currently, only Delaware provides CWSRF assistance directly to homeowners.¹⁰ However, 15 states provide funding indirectly to individual septic projects through sponsorship, loans, or deposits to intermediaries like utilities, municipalities, or financial institutions that then finance the projects.¹¹
Addressing State Limitations on SRF Assistance
Whether your state provides indirect assistance for septic projects and you want to see eligibility expand to individual homeowners, or your state has never provided assistance for septic projects, it is important to identify the source of these limitations.
An initial step is to determine whether your state’s limitations are a matter of statute, CWSRF agency regulations, or policies outlined in the annual CWSRF Intended Use Plans (IUPs). If state statute requires that SRF assistance can only go to public entities, then new legislation is likely necessary to expand eligibility. If, on the other hand, the statutes allow CWSRF assistance to be used for all federally permitted uses, your CWSRF administering agency may be able to adjust policies or update IUPs without legislative action.
Conclusion
To address failing decentralized septic systems, homeowners and communities need more resources to finance maintenance and infrastructure improvements. Federal law allows states to use SRF money to help address this resource gap. EPA guidance and Delaware’s program demonstrate that direct assistance to homeowners is possible. Advocates and stakeholders can work with state legislatures and SRF administrators to remove barriers to funding and expand access to critical financial support for septic projects.
2 While the statute does not define these terms, EPA water program NPDES regulations make clear that “treatment systems…for domestic sewage” include septic tanks— “[s]eptage means the liquid and solid material pumped from a septic tank, cesspool, or similar domestic sewage treatment system…(emphasis added).” 40 C.F.R. § 122.2 (defining the term for the NPDES permit program). Moreover, EPA uses a different term—“treatment works”—to refer to methods of domestic sewage treatment that do not include septic tanks. Id.
3 In specifying the eligibility of septic projects, Congress specifically expands eligibility beyond municipal systems by specifying that “municipal wastewater or domestic sewage (emphasis added)” treatment systems are eligible.33 U.S.C.A. § 1383(c)(4).
4 33 U.S.C.A. § 1383(d)(1)(A).
6 EPA, Financing Decentralized Wastewater Treatment Systems, Jan. 2022, 8.
7 EPA, Financing Decentralized Wastewater Treatment Systems, Jan. 2022, 7.
8 EPA, Financing Decentralized Wastewater Treatment Systems, Jan. 2022, 8. See also EPA, Funding Decentralized Wastewater Treatment Systems with the CWSRF, June 2016, 1 (“The CWSRF may provide assistance to any public, private or non-profit entity for decentralized projects. Eligible loan recipients include community groups, farmers, homeowners, small businesses, conservation districts, and nonprofit organizations.”).
9 EPA, Financing Decentralized Wastewater Treatment Systems, Jan. 2022, 8.
10 For details on the Delaware program, see EPA, Financing Decentralized Wastewater Treatment Systems, Jan. 2022, 13–15.
11 For descriptions of indirect funding mechanisms see, Financing Decentralized Wastewater Treatment Systems, Jan. 2022, 13–26.