Summary: By amending the Clean Water Act in 1987, Congress dramatically changed the federal role in financing wastewater treatment. Responsibility for financing more than $83.5 billion in wastewater treatment needs was shifted to the states and, in exchange, the federal government was authorized to provide $8.4 billion in capitalization grants for state revolving funds over 6 years. GAO concludes that although the state revolving fund program is structurally sound, several provisions of the 1987 amendments as well as administrative problems may impede the efficiency and effectiveness of its implementation. These include (1) statutory restrictions on using the funds to buy land on which to build wastewater treatment plants; (2) a shortage of Environmental Protection Agency staff with enough financial expertise to assist and oversee state programs effectively; and (3) a maximum loan term that, in many cases, can be shorter than the design life of the plant and equipment financed through the funds. GAO is concerned that the program will not generate enough funds to close the tremendous gap between wastewater treatment plant needs and available resources. States estimate that the funds will meet only a small percentage of their needs and will pose particular problems for small communities. Many small communities cannot repay loan assistance at any interest rate and cannot compete with larger communities for loans.
