Department of Environmental Protection Clean Water and Drinking Water State Revolving Fund Criteria for the American Recovery and Reinvestment Act
New Jersey will receive $204 million for environmental infrastructure projects -- $161 million for clean water projects and $43 million for drinking water projects -- from the American Recovery and Reinvestment Act (ARRA).  These funds will be processed through the existing State Revolving Fund (SRF) programs, which will be modified to accelerate the construction of environmental infrastructure projects.

Projects that meet specified criteria and can be under contract or construction by the federal deadline of February 17, 2010, will be eligible to receive ARRA funding in the form of 50% principal forgiveness and 50% very low interest loan.

To increase the number of funded projects, and thus promote more economic development and jobs, individual ARRA projects will be limited to $10 million in ARRA funding.  Where projects need additional funds, such funds will be provided through the traditional SRF program, but with more favorable terms as described below.

To ensure all projects had an early opportunity to be considered for ARRA funds, the Department of Environmental Protection (DEP) publicly issued a Call for Projects in December 2008. Furthermore, all projects that had already been submitted for traditional funding were included for consideration for ARRA funding.  When the application period ended on March 19, 2009, over 400 proposed projects totaling more than $2 billion had been received, far in excess of expected ARRA funding. 

All projects were reviewed to determine eligibility for ARRA funds.  Initially, projects were prioritized based on readiness to proceed.  The criteria for readiness were: (1) the submission of completed and bid-ready designs and specifications, and (2) the status of permitting requirements. Any projects not ready for contract or construction by the federal statutory deadline were removed from further consideration.

Projects that met the readiness criteria were than ranked in accordance with DEP’s current Priority System ranking methodology.

For clean water projects, DEP uses a point system that ranks projects based on three key criteria:

1.  Discharge – The state’s highest priority needs include combined sewer overflows (CSOs) and major pipe rehabilitation to stop discharges of raw sewage.  These types of problems are frequently found in older urban areas, where pollution impacts streams and rivers near large population centers and where the cost to correct these problems is a serious concern. Priority is also placed on projects in coastal areas, where pollution impacts from outdated sewage treatment and conveyance systems can harm the shore environment and the tourism industry.

2.  Water Use -- Projects discharging to surface waters receive points that reflect the existing uses of the waterway. These uses include drinking water supplies, boating, fishing, swimming, and water used for industrial or agricultural purposes. The point values reflect the relative priority of the water uses, with drinking water and recreational uses being the highest priorities. Points are also given to projects that would eliminate failing septic systems, a public health threat.

3.  Water Quality -- Projects receive points that correlate with an area’s existing water quality when compared with DEP’s water quality standards. The more polluted an area is, the higher the ranking points it receives.

After a project’s discharge, water use, and water quality points have been compiled, it is placed on a priority list in rank order. In the case of a tie, areas designated for growth by the State Planning Commission receive highest priority and, if still tied, the higher priority is given to the project that serves the greater number of people.

The full methodology for clean water projects can be found beginning on page 4 of the “Clean Water Financing” document (www.nj.gov/dep/dwq/pdf/cwf_2009P_cwpl.pdf)

For drinking water projects, there are four key criteria:

1.  Compliance and Public Health -- Priority is given to drinking water systems that are in non-compliance with water treatment requirements or have serious (acute) violations and have been issued enforcement actions to address an immediate health threat.  Fewer points are assigned to projects that address issues such as water meter installation or replacement.

2.  Approved Drinking Water Infrastructure Plan – Projects receive extra points if they  are part of a capital or master plan or similar comprehensive water supply planning effort.

3.  State Planning Designation – Points are assigned to projects in areas that have been designated for growth by the State Planning Commission and in Transit Villages and Brownfield Development Areas.

4.  Affordability – A project is eligible for additional points based on the degree of need of the area served by the water system.  The need is based upon a comparison of the New Jersey median household income to the municipal median household income of the area served by the project sponsor.

As a tiebreaker, projects are assigned points based on the permanent population of the water system service area.

The full methodology for the drinking water projects can be found beginning on page 5 of the “Drinking Water State Revolving Fund” document www.nj.gov/dep/watersupply/iup2009.pdf  

The ARRA requires that states must provide at least 20% of the funds for green projects, including green infrastructure, energy or water efficiency, and environmentally innovative activities.   Examples include:

            Green infrastructure --
Implementation of green streets (combinations of green infrastructure practices in transportation rights-of-ways), for either new development, redevelopment or retrofits; downspout disconnection to remove stormwater from combined sewers and storm sewers.

            Energy or water efficiency -- Efficient landscape or irrigation equipment; systems to recycle gray water; energy efficient retrofits and upgrades to pumps and treatment processes, alternative power, clean and line water mains and  installation of water meters.

            Environmentally innovative activities -- Wetland restoration and constructed wetlands; water reuse projects that reduce energy consumption, recharge aquifers or reduce water withdrawals and treatment costs.

Projects that meet the green criteria specified in EPA guidance will be given priority for ARRA funding. The criteria are described in full at: http://www.epa.gov/water/eparecovery/docs/STIMULUS_Guidance_Green_Reserve.pdf).

To receive the ARRA funds from the Environmental Protection Agency (EPA), each state must develop and submit to EPA an “Intended Use Plan” that must describe the funding plan, the process for determining which projects will be funded, and a ranked list of projects.  The ranked project list must include all projects submitted, not just those that qualify for ARRA funding. A draft “Intended Use Plan” will be published by the DEP in early May 2009.  That publication will be followed by a public hearing on the plan and the ranked list of projects. 

This ranked list will undoubtedly change over time as new information is received regarding particular projects, such as delays or other changed circumstances that would impact the ability to meet the February 17, 2010 deadline.

Under the ARRA, any funds not allocated by the deadline must be returned to the EPA and will be reallocated to other states.  To avoid any loss of funds, projects that may no longer qualify to receive ARRA funds due to delays or other changed circumstances will be considered for the traditional SRF program, and projects that initially ranked high but not high enough to be on the initial ARRA funding list would be considered for inclusion on that list.

Given the large volume of project proposals submitted and the finite amount of ARRA funds allocated to New Jersey, ARRA funds will not be available for all submitted projects. Most of the projects not selected for ARRA funding will be funded through the traditional SRF program, which this year will offer a better loan rate than previously offered.   Historically, the traditional program offered loans with 50% issued by DEP at 0% interest, and 50% issued by the Environmental Infrastructure Trust (EIT) at the market rate.  For this year, these traditional loans will be composed of 75% DEP 0% interest loans and 25% EIT market rate loans (which in 2008 was 1.2%).