The State Water Resources Control Board on Tuesday unanimously adopted a fiscal‑year 2025–26 Drinking Water State Revolving Fund (DWSRF) Intended Use Plan, directing federal capitalization grants and setting priorities for more than $1 billion in planned assistance.

The 5‑0 vote followed a multihour staff presentation and a wide-ranging discussion among board members and public commenters about how the agency should prioritize limited grant and loan dollars for small, disadvantaged and tribal water systems. Board member Nicole Morgan moved adoption with a change sheet that increases certain grant caps and gives the DFA deputy director additional delegation; the motion was adopted by roll call (Firestone: Aye; Maguire: Aye; Morgan: Aye; Vice Chair D'Adamo: Aye; Chair Joaquin Esquivel: Aye).

Board staff said the IUP sets funding priorities to draw down the U.S. Environmental Protection Agency capitalization grants the state has been awarded and to target projects that reduce immediate public‑health risks and support consolidation of failing systems. "No recommended changes to eligibilities and limits in regards to drinking water SRF repayable loans," Mike Downey, head of the loans and grants branch, told the board during the presentation.

Why it matters: The adopted IUP is the formal plan that allows the board to accept federal DWSRF capitalization grants and to allocate those federal and state funds toward projects. Staff told the board the plan is designed to direct funding toward systems identified as "failing" or "at risk" under the SAFER (Safe and Affordable Funding for Equity and Resilience) program and to expand eligibility where project readiness and community need justify it. The board also approved a staff direction to work with stakeholders to review SAFER criteria and to propose adjustments for next year's IUP.

Key elements adopted

- Prioritization: Staff recommended (and the board adopted) an approach that centers funding on SAFER‑identified failing systems, consolidation projects and, where capacity and funding permit, at‑risk systems. Staff called this "Option 1" during briefings; it replaced broader category‑based eligibility used in prior IUPs.

- Grant caps and deputy‑director authority: The board approved increased maximum grant/principal‑forgiveness limits for projects serving 200 connections or fewer and authorized the DFA deputy director to approve requests that exceed those limits for good cause (for example, consolidation projects or projects benefitting domestic wells or state smalls).

- Emerging contaminants, lead service lines, ASADRA funds: The plan keeps emerging contaminant (EC) and lead service line supplemental IUPs intact. Staff said they will not apply for an additional lead service line allotment this year because demand for those specific federal funds remains lower than the allocation already on hand; staff also described a technical change giving the deputy director authority to transfer Clean Water SRF EC funds to the Drinking Water SRF EC pot if needed.

- Procedural change (footnotes): Staff and counsel proposed edits to two IUP footnotes (footnotes 23 and 29 in the draft IUP) to make explicit that DFA has discretion to fund projects that appear to address a risk of failure. The edited language removes a phrase that could be read as requiring a sequential, mandatory concurrence from the Division of Drinking Water (DDW) before DFA may proceed and instead emphasizes DFA’s authority (with routine consultation) to act expeditiously on failing‑equivalent projects.

Public comment and stakeholder input

Several stakeholders spoke in support of the staff recommendation while urging continued flexibility and stronger outreach:
- Willis Hahn, attorney for the City of Los Banos, described a compliance path for hexavalent chromium (Cr(VI)) treatment and said the city expects to seek construction grant/principal forgiveness when the design and environmental review are completed. He estimated total construction costs could reach roughly $65 million and said the city is budgeting about $2.2 million for near‑term planning and pilot testing in 2025–26.
- Nick Blair of the Association of California Water Agencies urged the board to adopt Option 1 now and to use the DWSRF advisory process to refine scoring and eligibility next year rather than reopen the IUP in midyear.
- Jennifer Capitillo of the California Water Association and representatives of Community Water Center supported prioritizing failing and at‑risk systems while urging more flexibility for projects that might otherwise be miscategorized or have a temporary solution that shouldn't disqualify longer‑term aid.
- Community Water Center, in particular, supported the increase in project caps and urged continued attention to environmental justice, racial equity and communities with very high per‑connection costs.

Board discussion and direction

Board members debated two staff options: the staff‑recommended "Option 1" that centers SAFER failing and at‑risk status, and a more flexible approach sometimes described in the meeting as "Option 2," which would preserve broader historical project categories and add DFA discretion. After extended questions from board members about projects that have fallen through prior lists (examples discussed: Lanier and Allensworth), the board added a directive and a new resolved clause requiring DFA to work with the DWSRF advisory group, the SAFER program, TA providers, tribal and environmental justice groups and affected communities to evaluate the appropriateness of the SAFER criteria and propose any necessary adjustments before the next IUP.

Formal actions recorded (roll call results match transcript)

- Motion: Adopt board minutes (motion to adopt the minutes earlier in the meeting). Mover: not specified in transcript. Second: not specified. Vote: Firestone: Aye; Maguire: Aye; Morgan: Aye; Vice Chair D'Adamo: Aye; Chair Esquivel: Aye. Outcome: adopted.

- Motion: Adopt the FY 2025–26 Drinking Water SRF Intended Use Plan as amended by change sheet 2 (includes increased grant caps for small systems, deputy director delegation and the new resolved clause directing stakeholder review). Mover: Nicole Morgan. Second: not specified. Vote: Firestone: Aye; Maguire: Aye; Morgan: Aye; Vice Chair D'Adamo: Aye; Chair Esquivel: Aye. Outcome: approved (unanimous).

What staff told the board

- Funding scale and workload: Joe Karkovsky, DFA deputy director, said DFA executed roughly 99 new funding agreements last fiscal year totaling just over $700 million and that the division currently manages more than 300 ongoing projects with an estimated $1.5 billion remaining to be disbursed. He also said DFA committed to more than $2 billion in funding overall during the fiscal year.

- Loan program and Chrome‑6/PFAS prioritization: Mike Downey reiterated no recommend changes to loan eligibility and noted a $50 million per‑loan maximum based on demand; he described the new loan scoring process to take effect next year. DFA staff confirmed that Chromium‑6 and PFAS projects are eligible for principal forgiveness where communities are small, disadvantaged, or otherwise qualify.

Next steps and implementation

Board direction includes: finalize the IUP text to reflect the adopted edits, produce a short memo from the DFA deputy director clarifying how staff should implement the new discretion to fund failing‑equivalent and at‑risk projects (the memo should make clear consultation with DDW remains routine but is not a gating, sequential requirement), and continue stakeholder engagement through the DWSRF advisory group and SAFER program ahead of next year’s IUP.

Ending

The board chair and staff said the plan will allow the state to submit the IUP to EPA and begin drawing down federal capitalization grants, subject to the conditions noted in the IUP. The board postponed the companion Fund Expenditure Plan for a later meeting.