New Water Bill Mandates 20% of State Water Funds Go to Loan Forgiveness for Affordable Wastewater Projects

The newly proposed “Affordable Clean Water Infrastructure Act” is designed to make necessary wastewater upgrades cheaper for communities that are struggling to afford them. Basically, this bill tweaks the rules for the federal Water Pollution Control Revolving Loan Funds—the money states use to finance water projects—to push states to offer more financial breaks, like loan forgiveness or zero-interest loans, rather than just standard loans.

The Upgrade Discount: Who Gets the Break?

This isn't a blanket discount for everyone. The bill specifies that states can only offer this extra financial help, officially called “additional subsidization,” to projects that address genuine affordability concerns. This means the project must either serve a community that the state has identified as having affordability issues, or the project itself must be located in an area where the recipient is seeking this help to lower costs for local ratepayers. The goal is simple: if the project is going to hike up water bills past what people can pay, the state is encouraged to step in with loan forgiveness to keep costs manageable.

Crucially, the bill requires states to use a minimum of 20 percent of the total federal capitalization grant they receive each year for this additional subsidization, provided they have enough qualifying applications. This is a big deal because it mandates that a significant chunk of infrastructure funding must be dedicated to reducing ratepayer burden. For context, a standard loan from the revolving fund, even one at 0% interest, doesn't count toward this 20% minimum. It has to be actual principal forgiveness or a similar subsidy.

A Special Focus on Smaller Systems

The legislation also includes a specific lifeline for smaller utilities. It allows states to set aside an extra 10 percent of their annual capitalization grant specifically to provide this additional subsidization to rural, small, and tribal publicly owned treatment works. If you live in a small town or a remote area, your local water system often faces massive costs for necessary repairs with a tiny ratepayer base to cover it. This dedicated 10% aims to ease that financial pressure, making essential compliance and safety upgrades possible without bankrupting the community.

The Fine Print: Where the State Gets the Say

While the intent is clearly positive—improving water quality while keeping rates down—there is one area where the bill gives states a lot of wiggle room. The eligibility for these subsidies hinges on whether a community meets the “state’s affordability criteria.” The bill doesn't define what those criteria are, leaving it entirely up to each state to decide what counts as an “affordability concern.”

For residents, this means the impact of the bill will heavily depend on how their state government defines “affordable.” If a state sets the bar too high, fewer communities will qualify for the loan forgiveness. If they set it too low, they might risk using up the mandated 20% on projects that could have managed a standard loan, potentially diverting funds from other critical water quality projects. The good news is that the mandatory minimum use of funds for subsidization (the 20%) ensures that some relief will be deployed, but how effectively that relief is targeted remains a state-level decision.