State Revolving Fund (SRF) offers long-term, low-interest rate loans for a variety of public drinking water and waste water facilities. Fixed rate financing for up to 100% of eligible project costs is available at below-market rates. Interest rates and loan policies are updated and published annually by RIA in October.
The loan term may extend up to 30 years, not to exceed the useful life of a project. A blended amortization schedule may be provided when the useful life of component parts of a project differ. The term for most Drinking Water loans is generally 20 years unless the borrower qualifies as a disadvantaged system (defined as having median household income less than the state’s.)
Each applicant must establish a dedicated repayment source with sufficient revenues to operate and maintain the system and pay debt service over the life of the loan. Primary sources are user charges, special assessments and general taxes.
Some loans that are secured by system revenues may be required to establish a debt service reserve fund which cannot be funded as part of the SRF loan. The standard debt service reserve fund is equal to one year of debt service. Borrowers with a current underlying revenue rating of at least the “A” category from S&P or Moody’s are not required to maintain a reserve fund.
A financial advisor is not required for an SRF loan even though the Securities and Exchange Commission requires one for market financing. Although not required for an SRF loan, a financial advisor may help a borrower to develop a sound financial plan.
A small loan closing fee is assessed on each loan to support SRF operating costs. The fee is calculated as a percent of the amount borrowed. This closing fee, which is not eligible for inclusion in the loan, is much less than the total costs involved in issuing revenue bonds.
“The SRF Loan program gives us financial opportunities to construct critical capital projects while providing affordable, sustainable water service to our customers.”