The State Water Resources Control Board on Aug. 19 adopted its Drinking Water State Revolving Fund Intended Use Plan, endorsing a staff proposal to prioritize funding to systems designated as “failing” or “at risk” under the SAFER (SAFER Affordable and Equitable Reforms) framework while adding explicit management discretion to avoid gaps for projects that do not neatly fit the automated lists.

Board Chair Joaquin Esquivel called the vote after more than two hours of staff presentations, board discussion and public comment. "I think sometimes folks don't necessarily realize that the state board is actually an infrastructure agency in many ways," Esquivel said, noting the board and its Division of Financial Assistance have invested "over $12,000,000,000" since 2019.

Why it matters: The IUP governs how federal capitalization grants and related state funds are distributed to public water systems across California. The adopted plan narrows initial prioritization toward systems with documented or assessed risk of failure while creating explicit authority for the Division of Financial Assistance (DFA) to fund additional projects when staff determine a project would address a risk of failure. Board members framed the change as a transition year to align the SRF funding rules to SAFER priorities while avoiding unintended denials of funding to needy communities.

Key decisions and financial details
- Available funding: Staff reported roughly $1.04 billion available for fiscal year 2025–26 for DWSRF uses (planning, construction grants/principal forgiveness, loans and related assistance). The board adopted the plan that uses that funding envelope.
- Loan program: Staff retained a target of $300 million in lending capacity for the year and said that decision added about $370 million of loan projects to the fundable list. The maximum single-loan amount for the year was held at $50 million.
- Grants and principal forgiveness: DFA raised maximum grant/principal-forgiveness thresholds for projects serving 200 connections or fewer and added language allowing the DFA deputy director to approve requests up to 20% above those maximums for good cause (for example, consolidation projects or projects benefiting state smalls and domestic wells that can be unusually costly).
- Cost-per-connection methodology: DFA revised the cost-per-connection calculation to exclude interim administrative assistance, technical assistance and planning assistance; the methodology will now focus on five years of construction spending when computing eligibility thresholds.
- Emerging contaminants (EC): The plan includes separate allocations for federal EC grants (PFAS, hexavalent chromium, 1,4-dioxane, perchlorate and other candidate-list contaminants). Staff said demand from medium and large systems for EC funds is strong, while some small/disadvantaged communities need assistance to complete applications. The deputy director was given limited authority to transfer EC funds between the Clean Water and Drinking Water SRF programs if warranted.
- Lead service line funding: Staff said California did not apply for the current federal allotment because demand remains lower than previously received allotments; existing lead service line funds will continue to be managed until fully dispersed.
- Disaster funds (ASADRA): FEMA/ASADRA funding relates to four systems damaged in 2018 wildfires; staff said three projects qualify and one agreement has been executed.

Staff recommendation and board action
DFA recommended "Option 1," which centers project eligibility on SAFER-defined failing and at-risk systems and continues to prioritize consolidation projects. After extended discussion among board members about cases where the automated SAFER lists may miss projects with clear local need, the board adopted Option 1 with an amendment (see below) that: (a) adds a new resolved clause directing staff to work with stakeholders and the DWSRF advisory group to evaluate and refine the SAFER criteria before the next IUP; and (b) clarifies DFA’s discretion to fund projects that address a risk of failure even when a system is not yet listed as failing or at risk.

Public comment and stakeholder input
Fourteen stakeholders spoke during the item or submitted comments. Key public commenters included:
- Willis Hahn, attorney for the City of Los Banos, who described the city's planning and piloting for hexavalent chromium treatment and said construction costs may reach an estimated $65 million.
- Nick Blair, senior policy advocate for the Association of California Water Agencies, who urged adoption of Option 1 now with a commitment to further stakeholder work to avoid re-scoring administrative burdens.
- Jennifer Capitillo of the California Water Association, who described systems that risk miscategorization (for example, small mutual water companies) and urged flexibility to allow interim improvements without jeopardizing long-term funding.
- Eric Oriana of Community Water Center, who supported Option 1 and praised staff changes that increase grant caps, while urging continued attention to environmental-justice criteria and very high-cost domestic-well projects.

Board debate and safeguards
Board members pressed staff on examples flagged during the workshop—systems (mentioned by name in the meeting) that had fallen in and out of failing status but had long-standing needs—and sought protections so line staff would not deny funding solely because a project lacked a formal designation on the list. To address that concern the board adopted a two-part fix:
1) A new resolved clause directing staff to coordinate with the DWSRF advisory group, SAFER program, water systems, technical-assistance providers, environmental-justice groups and affected communities to assess the SAFER criteria and propose any needed adjustments before the next IUP;
2) A clarification to footnotes in the IUP that gives the DFA deputy director explicit discretion to fund projects when the deputy director determines a project will address a risk of failure; that provision also encourages prompt consultation with Division of Drinking Water (DDW) and local primacy agencies without requiring their concurrence before DFA proceeds.

Motion and vote
Board member Nicole Morgan moved adoption of the IUP (Option 1 with the change sheet), with an amendment directing DFA to issue staff guidance on use of discretion; the motion was seconded (second not specified in the transcript). The board voted unanimously (5–0) on a roll call: Laurel Firestone — Aye; Sean Maguire — Aye; Nicole Morgan — Aye; Vice Chair D'Adamo — Aye; Chair Joaquin Esquivel — Aye. The resolution was adopted.

Background/next steps
DFA must submit the finalized IUP to U.S. EPA to draw down capitalization grants; staff said the Clean Water SRF IUP was already submitted and funds are being drawn. DFA will begin implementation, invite projects into expedited grant tracks and report back as the SAFER alignment is evaluated. The board postponed the related Fund Expenditure Plan to a later meeting and directed staff to continue stakeholder engagement on criteria and implementation.

Ending
Board Chair Joaquin Esquivel thanked staff and commenters and closed the item; staff said they will circulate the final redlined IUP and a DFA memorandum to program staff clarifying how discretion should be applied.