State water funds: DEC outlines SRF pipeline, matching needs and municipal pollution grant request

Department of Environmental Conservation (DEC) staff told the South Corrections and Strategic Committee on Feb. 25 that Vermont’s drinking‑water and clean‑water state revolving funds (SRFs) remain active but that timing, federal allotments and contractor capacity shape how much state match will be needed and when projects can proceed.

Eric Flatt, director of engineering with the Water Investment Division at the Vermont Agency of Natural Resources, and Patrick Muntz, water infrastructure finance program manager, outlined how state capital appropriations serve as the required match to federal SRF grants, summarized recent projects and asked the committee to include targeted appropriations as the committee prepares the capital bill.

Why it matters: DEC testimony affects whether the state can draw federal Infrastructure Investment and Jobs Act (IIJA) and base SRF funds, and how quickly municipalities and special districts can move projects from planning into construction. DEC staff said state match dollars in the capital bill unlock a substantially larger federal grant pool (staff described a 5:1 federal‑to‑state leverage on some federal funds).

Key points from testimony and committee discussion: - Match request for drinking water: DEC staff said the FY27 drinking‑water match request in the governor’s recommendation is $590,000; staff told the committee there is roughly $390,000 left from prior appropriations that can be applied to the FY26/FY27 cycle. - Municipal pollution control grants: DEC staff reviewed the municipal pollution control grants line (the testimony referenced roughly $3.3–$4.0 million in recent appropriation lines) and said the Clean Water SRF program and pollution grants are separate line items; municipal pollution grants are state dollars and do not require federal match. - Lump sum for section 10 (FY27): DEC noted that one FY27 line item is a $10,000,000 lump sum in section 10; staff said specific suballocations will be managed through the Clean Water Board process next year. - Applications and pipeline: staff reported about 883 drinking‑water priority list applications and roughly 100 clean‑water applications have been submitted and are in the ranking and vetting process; many projects remain at preliminary design or bond planning stages. - Examples of ongoing or large anticipated projects: Waterbury wastewater phosphorus removal; a Milton manufactured‑home park upgrade (about a $5 million project covering a roughly 100‑unit park); major anticipated projects in Burlington (roughly $124 million estimated), South Burlington (roughly $26 million), Shelburne (multi‑contract work within a larger bond) and Colchester (phased sewer main projects) were discussed as large items that could appear on future priority lists. - Program details: DEC described the SRF “revolving” process, set‑aside categories (technical assistance, operator training, source protection) and said the federal IIJA/Bipartisan Infrastructure Law money created several new grant categories for drinking water, including lead service line replacement and emerging contaminants (PFAS) funding; staff said some IIJA grants do not require a state match. - Delivery constraints: DEC staff and committee members discussed contractor and material shortages, and limited local consulting capacity; DEC said delays have slowed some projects and that funding availability does not always translate into immediate shovel‑ready capacity.

What DEC asked the committee to include in the capital bill: staff and committee chair summarized that, for the immediate capital cycle, the DEC is asking for the state match amounts in the governor’s recommendation (including $590,000 for the FY27 drinking‑water match) and for $3.3–4.0 million in municipal pollution control grants for the fiscal year noted in the packet; staff emphasized that the FY27 consolidated line item will be specified via the Clean Water Board process before suballocations are finalized.

No formal committee vote on these appropriations was recorded during the presentation. DEC staff said they will circulate the draft priority lists and intended use plans (IUPs) in March–April and hold public hearings; the committee said it wants a copy of draft lists once available so members can track which large projects may require multi‑year appropriations.

Quotes (selected): “On the drinking water side, their current estimate is about $400,000,000 in terms of what we need to do.” — Richard Cate (context: discussing university deferred maintenance; UVM testimony preceded DEC presentation)

“We’re revolving in the order of $818,000,000 a year [on the clean water side], and on the drinking water side we’re revolving $10,000,000 a year.” — Eric Flatt, Director of Engineering, Water Investment Division

“The projects can take a year to two years before they actually go to construction. Now they’re into active construction; it’ll be another two years before they start repaying.” — Eric Flatt, describing the approximate four‑year lag between grant award and loan repayments.

The committee and DEC staff agreed to follow up: DEC will provide the draft priority lists and the unspent capital funds report for committee review; the committee intends to consider the testimony and the draft IUPs as it prepares capital‑bill recommendations.