Drinking Water State Revolving Fund

Leveraged Loans for Construction of Public Drinking Water Systems

This program is made available in cooperation with the Missouri Department of Natural Resources and the Environmental Improvement and Energy Resources Authority (EIERA).

SRF Leveraged Loan program provides financing at approximately one half the market rate and finances 100 percent of eligible planning, design, and construction. Loans with a maximum 20-year repayment term from completion of first contract and subsidized interest rates will be made available to eligible applicants meeting the minimum credit criteria. Every effort will be made to encourage participation in the leveraged loan program due to the limited amount of funds available under other state programs. As construction costs are incurred, state and federal funds are deposited into a reserve account in an amount equal to 50 percent of cost. Interest earned on the reserve is credited to the interest portion of the debt service charge on the bonds thereby providing the interest subsidy to the recipient.

Questions About Funding Public Drinking Water Systems Through the DWSRF Leveraged Loan Program

Q. What is the Missouri Drinking Water State Revolving Fund - leveraged loan program?
Q. How does the Missouri Drinking Water State Revolving Fund leveraged loan program work?
Q. Is this the only reserve providing benefits to the participant?
Q. What will be the cost of SRF financing for a community?
Q. What is a Finding of No Significant Impact (FONSI)?

Q. What is the Missouri Drinking Water State Revolving Fund - leveraged loan program?

A. The Missouri Drinking Water State Revolving Fund Leveraged Loan Program is a revolving loan fund established in accordance with the Safe Drinking Water Act Amendments signed into law on August 6, 1996. It was developed by the Missouri Department of Natural Resources Public Drinking Water Program and provides subsidized low interest rate loans to qualifying applicants.

Q. How does the Missouri Drinking Water State Revolving Fund leveraged loan program work?

A. The Missouri Drinking Water State Revolving Fund leveraged loan program is a subsidized low interest loan program. Communities and public water districts must vote General Obligation and/or Revenue bonds to secure the applicant's debt. Private systems must issue bonds or notes after securing an allocation under the state's private activity cap. These bonds are purchased by EIERA as security for bonds issued by the authority, which are marketed nationally. The authority bonds are presently rated AAA by Fitch IBCA, Inc. and Aaa by Moody's Investors Service. Funds generated from the sale of the bonds are deposited with a trustee for the benefit of the applicant and are used for construction. As construction costs are incurred, state and federal funds are deposited into a reserve account in an amount equal to 50 percent of the construction cost. Interest earned on the reserve is credited to the interest portion of the debt service charge on the bonds thereby providing the interest subsidy to the recipient.

Q. Is this the only reserve providing benefits to the participant?

A. Several interest earning reserves or accounts are established under the program. All deposits are collateralized and all interest earnings are credited to the interest portion of the debt service charge on the bonds.

Q. What will be the cost of SRF financing for a community?

A. Currently, SRF interest rates are approximately 50 percent of the market rate plus a 0.5 percent administrative fee on the outstanding bond balance for a 20 year financing. This structure produced a net cost of borrowing of 2.61 percent in April 2003. Additionally, communities will be responsible for other direct costs to participate such as application fees and local and program costs of issuance, (i.e., financial advisory underwriting and legal expenses). The underwriting costs of issuance will vary depending upon several factors, including the number of participants in the program at the time of the financing. Underwriting as well as local and program costs of issuance may be financed through the program. The administrative fee and a small trustee fee are paid from water system revenues on an annual basis.

Q. What is a Finding of No Significant Impact (FONSI)?

A. A FONSI is an assessment of a project's potential impact on the environment. It states that in the opinion of the Missouri Department of Natural Resources no significant impact to the environment is evident. Department staff will prepare the FONSI and it will be issued by the department's Program Director. Before this can be done, an environmental information document prepared by the applicant in accordance with guidance developed by the department must be submitted. This document contains all the required clearance letters from the appropriate state and federal agencies. Construction of the project cannot begin until a FONSI has been issued if the applicant is going to use federal funds. The FONSI will be published by the department and released to the public for a 30 day public comment period before it is issued.

To receive additional information regarding this program see the Contact Information.