Do Business in a New Way: The Role of State Drinking Water Revolving Funds (DWRFs) in Financing Local Water Infrastructure Investment
*Names in bold indicate Presenter
State DWSRFs offer a flexible and sustained financial tool for supplementing traditional state and local drinking water infrastructure investment. Since their inception in 1997, the DWSRF program has entered into over 6,000 assistance agreements and offered over $16 billion in low-interest loans to public water systems (US EPA, 2010). Given such popularity and innovation in state capital finance and the widely expressed concern about the declining quality of American public water infrastructure systems, an empirical evaluation of the effectiveness and financial performance of the DWSRF program is both necessary and timely. However, despite decades of use, state DWSRFs are not well understood and under-researched. There is no study to empirically examine the role of the DWSRF program in financing local drinking water infrastructure investment. To fill this void, the primary purpose of this paper is to examine the extent to which the state DWSRF program increases local drinking water infrastructure investment and reduces local drinking water infrastructure financing needs. Using panel data consisting of the DWSRF program loans made by all 50 states from 1998-2012, the authors will build an econometric model to estimate the fiscal effects of state DWSRF loans on leveraging local drinking water infrastructure investment while controlling for a series of variables regarding the political, organizational, financial, and managerial factors in the setting and operation of state DWSRFs.
This research will contribute to the field of innovative infrastructure finance in several key ways: to expand our understanding of the role of DWSRFs in financing local drinking water infrastructure investment, to explore how institutional factors of state DWSRFs matter, and to offer policy suggestions for the design and administration of financially sound state DWSRFs.