Virginia Clean Water Revolving Loan Fund Storm Water Loan Program Guidelines

VCWRLF Storm Water Loan Program - Enabling Legislation

During the 2010 session, the Virginia General Assembly amended Chapter 22 of the Code of Virginia by adding §62.1-229.4. The new code section further expanded the activities of the Virginia Water Facilities Revolving Fund (the Fund) by allowing the State Water Control Board to authorize low interest loans from the Fund for construction of facilities or structures or implementation of best management practices that reduce or prevent pollution of state waters caused by stormwater runoff from impervious surfaces. According to the enabling legislation, VCWRLF financing for stormwater projects can only be available in fiscal years when loan requests for eligible wastewater treatment facilities designed to meet the state’s water quality standards have first been satisfied, unless otherwise required by law.

The following is the text of the amendment to the Code of Virginia which enables the State Water Control Board to authorize stormwater loans when available in the Virginia Water Facilities Revolving Fund.

§ 62.1-229.4. Loans for stormwater runoff control best management practices. Loans may be made from the Fund, in the Board's discretion, to a local government for the purpose of constructing facilities or structures or implementing other best management practices that reduce or prevent pollution of state waters caused by stormwater runoff from impervious surfaces. The Board, in consultation with the Department of Conservation and Recreation, shall develop guidelines for the administration of such loans and shall determine the terms and conditions of any loan from the Fund. Unless otherwise required by law, loans for such facilities, structures, and other best management practices may be made only when loan requests for eligible wastewater treatment facilities designed to meet the water quality standards established pursuant to § 62.1-44.15 have first been satisfied. The Board shall give priority (i) first to local governments that have adopted a stormwater control program in accordance with § 15.2-2114, (ii) second to projects designed to reduce or prevent a pollutant in a water body where the water body is in violation of water quality standards established pursuant to § 62.1-44.15, (iii) third to local governments subject to an MS4 discharge permit in accordance with § 10.1-603.2:2, (iv) fourth to local governments that have adopted a stormwater management program in accordance with Article 1.1 (§ 10.1-603.1 et seq.) of Chapter 6 of Title 10.1, and (v) fifth to all others.

The Department of Environmental Quality, Clean Water Financing and Assistance Program, on behalf of the State Water Control Board, has developed these guidelines and will administer the VCWRLF Stormwater Loan Program.

Background and Purpose

Since 1987, the Virginia Clean Water Revolving Loan Fund (Fund) has been providing low interest loan funding for water quality improvement projects throughout the Commonwealth. Funds are currently provided to local governments, public service authorities, agricultural producers, partnerships, and corporations for a variety of project types. Loan repayments are circulated back into the Fund to create a dedicated source of revenue available for future clean water projects.
The State Water Control Board (Board) has the authority to administer the policy aspects of the Fund, determining who receives funds, at what interest rates, and under what terms. The Board has delegated responsibility for management of the day-to-day operations of the Fund to its staff in the Department of Environmental Quality (DEQ). The Virginia Resources Authority (VRA) serves as the financial manager of the Fund.
The purpose of the Virginia Stormwater Loan Program is to provide a long term source of low interest financing for constructing facilities or structures or implementing best management practices that reduce stormwater runoff in order to improve and/or protect the water resources of the Commonwealth.

Funding Availability

No special appropriation has been budgeted to begin this funding initiative. Therefore, DEQ will be making funding available from existing revenue through the Virginia Clean Water Revolving Loan Fund Program (VCWRLF). As required by law, the Board (SWCB) will authorize stormwater loans only in those fiscal years when loan requests for eligible wastewater treatment facilities designed to meet the state’s water quality standards have first been satisfied, unless otherwise required by law. However it is important to note that, starting in federal fiscal year 2010, EPA began requiring that a certain portion of the annual funding for the VCWRLF go to green reserve projects. Since most eligible stormwater projects meet the Green Project Reserve (GPR) criteria, it may be necessary to fund stormwater projects in fiscal years when all the wastewater facilities’ projects have not been satisfied (under the “unless otherwise required by law” provision), in order to meet the GPR requirement.

Application Submittal Timeframe

Applications for VCWRLF Stormwater Loans will be accepted once each year, concurrent with the program’s wastewater facility improvement loan applications, which normally occurs in July.
The completed application form and all necessary support documentation should be mailed to: 
 
Mr. Walter A. Gills
Clean Water Financing & Assistance Program
Department of Environmental Quality
629 East Main Street
P.O. Box 1105
Richmond, Virginia 23218

Eligible Applicants

The following governmental bodies and holders may apply for VCWRLF Stormwater Loans.
  • Virginia county, city and town governments
  • Virginia municipal public service authorities

Loan Interest Rate and Terms

Virginia's Revolving Loan Program allows for loans to be made to communities at rates below current market interest rates. DEQ, following consultation with VRA, establishes the interest rate for each individual loan.  
All applicants are initially considered for an interest rate at the program’s ceiling rate for that year. The VCWRLF ceiling rate is adjusted to be 1% below municipal bond market rates. Interest rates below the ceiling, and down to a no-interest loan, are considered where a financial hardship situation exists and where the project is necessary to resolve documented water quality problems. Since few Virginia localities have established stormwater control programs (including means of establishing dedicated revenue sources) DEQ’s initial evaluation of hardship will be based on the applicant’s existing monthly residential sewer charges in relation to their affordable cost per household. Guidelines for determining affordable cost per household are shown below. The loan recipient will be entitled to an additional interest rate reduction of 1% below its established rate from the above determination if the local government has adopted a dedicated source of revenue to implement a stormwater control program in accordance with 15.2-2114 of the Code of Virginia. The loan must be fully amortized not later than twenty years after project completion.

DEQ's Guidelines for Establishing Reasonable Sewer Costs

Starting in federal fiscal year 2010, EPA began allowing a portion of the VCWRLF funding to be provided in the form of principal forgiveness (PF), which is similar to a grant. Currently, this PF allowance is determined through the annual federal appropriation bill. To the extent that principal forgiveness is allowed and available in any fiscal year, stormwater loans will be considered for principal forgiveness up to a maximum of 50% of each loan amount. Preference in this regard will be given to localities that have adopted a dedicated source of revenue to implement a stormwater control program in accordance with 15.2-2114 of the Code of Virginia.

Guidelines for Establishing Reasonable Sewer Costs 

The above chart image displays the following information in graphical form.
 
For a median household income in the service area of $0 to $32,219, the percentage of median household income devoted to the sewer bill is 0.75%.
For a median household income in the service area of $32,220 to $39,799, the percentage of median household income devoted to the sewer bill is 1.00%.
For a median household income in the service area of $39,800 to $53,199, the percentage of median household income devoted to the sewer bill is 1.25%.
For a median household income in the service area of $53,200 and above, the percentage of median household income devoted to the sewer bill is 1.50%

The authorized interest rate and the loan terms will remain in effect for a 12 month period following loan approval by the SWCB. At the sole discretion of the DEQ, the authorization period can be extended after receipt of a written request from the loan recipient. However, the interest rate would be subject to recalculation based on banking and market conditions that exist at the time.

Allowable Loan Amount

The minimum Stormwater Loan amount is $50,000 and there is no maximum loan amount established. Loans may be made for 100% of the eligible costs of the project.

Loan Eligible Expenses

Virginia's program allows for any reasonable and necessary costs associated with the stormwater management project, including all associated planning and design costs. Loan proposals must be supported by a need which addresses an existing stormwater pollution problem or prevents a future environmental problem from stormwater. Loan requests received which are solely supported by the economic development needs of an area or an entity may be excluded from funding participation. DEQ may reduce loan eligibility, and/or the scope and size of a project to ensure the greatest financial and environmental benefit to as many communities as possible. Expenses incurred on an approved project prior to the execution of a loan agreement are also eligible costs provided they are necessary and attributable to the project.

Ineligible Loan Costs

The following expenses cannot be included when determining the allowable amount of a VCWRLF Stormwater Loan.
  • 'In Kind Services'
  • Costs for which any federal, state, local or other grant funds will be provided, unless those funds will all be paid back to the VCWRLF immediately upon receipt.
  • Administrative costs such as salaries, rent, equipment, and/or travel
  • Costs to operate or maintain the project.

Loan Funding Priority Ranking

In years when funds are available for Stormwater loans, DEQ will prioritize applications for loan assistance on a statewide basis. Applications for stormwater projects which are expected to provide the greatest water quality benefit will be given the highest funding priority. The funding priority of applications for stormwater projects is determined by demonstration of recognizable reduction in NPS pollution of Virginia waters.

LOAN FUNDING PRIORITY RANKING Total of 600 Points Possible
I. TARGETED RECIPIENT/PROJECT TYPES (Maximum 450 Pts.)
Note: These categories are additive.
   1. Local governments that have adopted a dedicated source of revenue to
       implement a stormwater control program in accordance with § 15.2-2114.
175 points         
   2. Projects designed to reduce or prevent pollution in a water body where the
       water body is in violation of water quality standards established pursuant to
       § 62.1-44.15  (choose one).
               Dominant/Exclusive Source 125 points         
               One of Several Sources 100 points         
               Minor Source 75 points         
               No Net Pollutant Reduction 0 points         
   3. Local governments subject to an MS4 discharge permit in accordance with
       § 10.1-603.2:2.
100 points         
   4. Local governments that have adopted a stormwater management program in
       accordance with Article 1.1 (§ 10.1-603.1 et seq.) of Chapter 6 of Title 10.1.
50 points         
   [Note: The regulations associated with Number 4 are expected to be effective later
   in 2011 with Soil and Water Conservation Board approval of local government
   programs by July 1, 2014. Until such time as the Board begins approval of local
   government programs, points associated with number 4 should be assigned to
   local governments under Number 1.]
II. FISCAL STRESS-(COLG Composite Stress Index) (Maximum 100 Pts.)
   Points for county and city applicants will be taken directly from the latest available
   Commission on Local Government composite fiscal stress index. Town applicants
   will be assigned the points of the surrounding county. Any applicant with a project
   serving more than one jurisdiction (such as public service authorities or towns
   located in two counties) will be assigned a weighted average from the component
   scores.
III. IMPLEMENTATION OF EFFECTIVE STORMWATER CONTROLS (Maximum 50 Pts.)
               Stormwater control reduces stormwater volume and pollutant loading 50 points         
               Stormwater control reduces pollutant loading 25 points         
               Stormwater control reduces stormwater volume 25 points         
               Stormwater control delays the release rate (detention) 10 points         
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Virginia Department of
Environmental Quality
P.O. Box 1105
Richmond, VA 23218
(804) 698-4000


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