State revolving fund can absorb projects after federal cuts, DEQ official says

The North Dakota Department of Environmental Quality told the Appropriations — Human Resources Division that the state's Clean Water State Revolving Fund (SRF) can make loans available to communities whose federal wastewater grant funding was reduced or eliminated.

The discussion came during a committee conversation about a pending bill that would create state grant funding for wastewater projects. Senator Magram asked whether the state could instead place $25 million into a loan fund so the money could be recycled and help more communities over time. David Rupeshwein, director of the Division of Municipal Facilities at the North Dakota Department of Environmental Quality, responded that the Clean Water SRF is a long-standing revolving loan program that can be leveraged in years of higher demand by selling municipal bonds.

Rupeshwein said the SRF can fund projects that are “ready to proceed” even if they are not at the top of the existing priority list. He told the committee that the Lincoln and Fessenden projects already appear on the department’s priority list and that Washburn’s drinking-water intake could be re-added to an intended-use plan when the list is amended, usually in May–June. “We have funded any project on that priority list, whether they’re number 1 or number 300, if they were ready to proceed,” Rupeshwein said.

Committee members asked how such loans would affect local residents. Rupeshwein and other speakers explained that projects paid back by user rates or special assessments would likely increase monthly utility bills for local customers. He also noted that while the SRF can accept state funds, attaching state money to the federal program can impose federal requirements that add administrative burdens to projects.

Rupeshwein gave an example: the Lincoln project is roughly a $14 million project with about $7 million in grant funding; converting those funds to loans would likely make repayment difficult without additional subsidies. Committee members discussed whether a state loan program at low interest might be preferable to one-time grants. Rupeshwein confirmed the SRF presently offers loans at about 2% interest and that loan terms, eligibility and ranking would be determined through the department’s established process rather than by naming projects in legislation.

The committee did not take a formal vote on a change to the bill during this discussion; members set aside the specific draft (referred to as “15.77” in the hearing) for further consideration and conference-committee negotiation.

Details on next steps: staff said the department can amend its priority lists midyear and that communities already tracked by the department may apply for loans. Committee members signaled they would consider whether to craft a state loan alternative or proceed with grant language when they reconvene in conference.

The committee’s discussion underscores the tradeoffs between one-time grants and revolving loans: grants reduce immediate local costs but are exhausted once spent; loans recycle capital but shift repayment burdens to local ratepayers and can carry additional federal administrative requirements if federal match or program rules apply.