Public Facilities Authority urges $39M state match to unlock $215M in federal water funds, proposes new emerging contaminants grants

The Minnesota Public Facilities Authority (MPFA) asked the Senate Committee on Capital Investment on Feb. 25 to approve state match funding that the agency says will unlock federal resources for water infrastructure projects across Minnesota.

MPFA Deputy Director Karen Burkholz and newly appointed Executive Director Steve Walter told the committee the governor’s 2025 capital budget includes a request of a little over $99 million for MPFA programs. MPFA said a $39 million state match would unlock an estimated $215 million in federal capitalization grants and related funds for the Clean Water and Drinking Water State Revolving Funds (SRFs).

Why it matters: MPFA finances municipal water, wastewater and drinking water projects through low‑interest loans and targeted grants, and it manages federal and state resources intended to address aging infrastructure and affordability in smaller communities. Burkholz described three main MPFA programs: the Water Infrastructure Fund (WIF) for affordability grants, the Point Source Implementation Grant (PSIG) program for major treatment upgrades, and a proposed Emerging Contaminants (EC) program to supplement federal IIJA funds addressing manganese and PFAS in drinking water.

Key program details and figures cited by MPFA:

- Governor’s 2025 request: roughly $99,000,000 for MPFA programs, including a $39,000,000 state match to federal capitalization grants.

- Federal leverage: MPFA said $39,000,000 in state match would unlock approximately $215,000,000 in federal funds.

- Emerging contaminants: MPFA expects approximately $120,000,000 in federal IIJA resources for drinking‑water emerging contaminants over five years and asked state funds to extend reach; proposed EC grants would provide up to 80% of eligible costs with a cap near $12,000,000 per project (MPFA proposed supplementing federal caps).

- WIF and PSIG changes: MPFA proposed increasing the maximum WIF grant from $5,000,000 to $10,000,000 and raising the PSIG cap from $7,000,000 to $12,000,000 to reflect higher project costs and complexity.

- Unfunded needs: MPFA estimated unfunded WIF needs of about $64 million for drinking water and $39 million for clean water for identified projects on the 2025 Project Priority Lists (PPLs).

MPFA described its process: projects are ranked on state Project Priority Lists (PPLs) maintained by the Minnesota Pollution Control Agency (MPCA) and the Minnesota Department of Health (MDH) and then incorporated into the MPFA’s annual Intended Use Plans (IUPs). Burkholz said MPFA reserves certain federal principal‑forgiveness funds and matches them with state grants to serve disadvantaged communities and small cities.

MPFA officials told the committee they can continue lending from existing revolving dollars but that state match funding expands the agency’s ability to fund projects farther down the PPLs and to leverage the IIJA (Infrastructure Investment and Jobs Act) federal dollars. Steve Walter said MPFA estimates long‑term lending capacity of about $50 million on the drinking water side and roughly $110 million on the clean water side without additional state matches.

Committee members asked how projects move from the PPL to the IUP, how affordability is calculated, and whether communities can defer loans to wait for grants. MPFA staff described statutory affordability calculations, a 1:1 matching requirement for some grants, and coordination with USDA Rural Development for small cities. Burkholz said some projects on the IUP are carryovers from prior years and that additional appropriations would be needed to fund new WIF‑eligible projects beyond those carryovers.

Ending: MPFA requested legislative support for the state match and statutory adjustments to grant caps; the committee did not take immediate action during the hearing.