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New Requirements for SRF Wastewater Loan Recipients

Posted By Charity Dudley on November 17, 2015

Are you planning to utilize SRF funding for your next wastewater project? If so, you need to read this!! 

As part of the Water Resources Reform and Development Act (WRRDA) of 2014, State Revolving Loan (SRF) recipients are now required to develop and implement a Fiscal Sustainability Plan (FSP) for the major components of the project(s) that will utilize these funds. This is required for all SRF clean water (wastewater) loans for which a loan recipient has submitted an application on or after October 1, 2014. So if you applied within the last year, this pertains to you too!

So what is a Fiscal Sustainability Plan?

The FSP can also be thought of as an asset management plan. It is a document developed by a utility in an effort to assist with long term management of assets and making cost effective decisions concerning maintenance and repair/replacement without compromising the level of service expected by the customers and stakeholders.

This document will provide a structured framework of the asset information to help the utility and stakeholders determine when it is most appropriate to repair, replace, or rehabilitate particular assets as well as develop a long-term funding strategy to ensure funds will be available to implement the utility’s capital improvements when needed and deliver the desired level of service. The objective is to recognize the lowest long-term cost rather than short-term savings.

FSP’s are intended to ensure the long-term sustainability of the utility and should be treated as “living documents” that are regularly reviewed, revised, expanded, and implemented as an integral part of the operation and management of the system.

What is Included in an FSP?

The FSP must contain the following minimum requirements for the major components (value greater than $5,000) of the funded project:

  • An inventory of critical assets that are part of the treatment works project. Identify and map the assets (GIS can be a very helpful tool here and can be easily expanded upon). Then determine each asset’s criticality based upon its probability of failure and the consequences of its failure.
  • An evaluation of the condition and performance of those assets. Evaluate the remaining useful life of each asset, its value, and the desired level of service.
  • A certification that the loan recipient has evaluated and will be implementing water and energy conservation efforts as part of the plan.
  • A fiscal plan for maintaining, repairing, and replacing the assets and a plan for funding such activities. Working with a rate consultant is recommended to determine the rate methodology that will provide sufficient revenues to cover operation, maintenance, replacement, capital projects, and debt costs. This should also include a replacement fund, and the minimum coverage on a SRF loan to fund equipment replacement is 25% of the project cost.

Good-to-Know Info

The cost of creating an FSP is an eligible SRF project cost and should be indicated in the Preliminary Engineering Report (PER) project cost estimates and sized into the loan.

The FSP is not submitted with the PER. The FSP can be performed during design and construction of the funded project. Prior to request for final disbursement of the loan, the loan recipient must complete and submit an FSP Certification Form. SRF will not review the FSP’s, but the document must be held by the loan recipient for review if requested.

The FSP is intended to be a living document, developed for projects to be expanded upon and updated regularly, including the fiscal planning. It is expected that at some point in the future, wastewater utilities will be required to develop FSP’s for their entire collection and treatment system. So this should be kept in mind when structuring the initial documents. Plus, the FSP really can be a useful tool in ensuring the long term sustainability of the utility and save money in the long run!

Additional Resources

SRF currently has a Fact Sheet on their website [click here to download it] entitled Fiscal Sustainability Plan Requirements and will soon add a Guidance Document that includes more detail on putting the FSP document together as well as an example FSP for an imaginary project.


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