How States Define Disadvantaged Communities for the DWSRF
For state-level policies governing the Drinking Water State Revolving Funds (DWSRF), how Disadvantaged Communities (DACs) are defined impacts how favorable assistance, especially limited principal forgiveness dollars, is distributed to communities. The DWSRF program was established by the federal Safe Drinking Water Act, which requires that a portion of federal DWSRF appropriations allotted to states be distributed as additional subsidies such as principal forgiveness to “disadvantaged communities.” Each state has broad discretion over how to define disadvantaged communities, however. With billions of dollars at stake—particularly following the Infrastructure Investment and Jobs Act (IIJA)—how states craft DAC definitions impacts whether subsidies reach communities with the greatest need.
This blog unpacks three key policy decisions states make in defining DACs and highlights the diverse approaches states have taken. See our brief on DAC definitions for a fuller discussion of these issues and the results of a comprehensive survey of state policy choices.
Three Key Policy Decisions in DAC Definitions
1. Selecting DAC Eligibility Factors
States must choose factors and thresholds that determine DAC eligibility, which often include metrics such as median household income, poverty indicators, unemployment rates, and the percentage of average household income needed to pay household water bills. Some states, like Nevada, employ comprehensive definitions incorporating multiple socioeconomic and environmental metrics, while others rely on single factors, such as median household income. The challenge lies in balancing broad and narrow criteria. Incorporating multiple metrics may capture nuanced community needs but also can complicate eligibility assessments. Additionally, transparency is crucial—DAC definitions that incorporate multiple metrics should use publicly accessible data and tools to make it easier for applicants to determine if they qualify as a DAC. To achieve this, states are encouraged to adopt a mix of financial, socioeconomic, and social and environmental vulnerability factors while maintaining clarity and accessibility for applicants.
2. Structuring Definitions: In/Out vs. Scaled Approaches
States must determine not only which factors and thresholds to use in their definitions but also whether to classify DACs using a binary "in/out" approach or a scaled system that reflects varying degrees of disadvantage. The in/out approach sets fixed criteria that communities must meet to qualify, offering simplicity and straightforward implementation. However, this method does not account for varying levels of disadvantage, and thus may fail to direct resources where they are needed most. In contrast, a scaled approach assesses communities based on multiple weighted factors, and reflects varying levels of disadvantage. This method provides a more nuanced evaluation, recognizing that disadvantage exists on a spectrum influenced by the severity and combination of different factors. Adopting scaled definitions thus offers the potential to better align resource allocations with community needs.
3. Determining Geographic Scope
The last major policy determination states must consider when developing a DAC definition is the geographic scope at which it applies DAC definition factors and thresholds. This scope could be based on the project applicant’s entire service area, the specific area served by the project, or a combination of both. Applying DAC factors to the applicant service area may overlook disparities within larger jurisdictions with a range of income levels and may fail to address affordability issues that strain some segments of the service area more than others. Alternatively, focusing on the project service area may allow for more targeted support to reach those smaller portions of a utility system that meet the state’s disadvantaged criteria.
Tailoring DAC definitions is essential to meeting the needs of small and historically under-resourced communities. By using multiple eligibility factors, scaled definitions, and targeted geographic scopes, states can improve access to funding for communities that need it most.