SADOW: It’s Time To Tweak The Louisiana Drinking Water Revolving Loan Fund

A promising program that could save Louisiana taxpayers money scored its first success, but it needs a heavier foot on the gas pedal.

Almost a quarter of a century ago, Congress established a program that led to creation of Louisiana’s Drinking Water Revolving Loan Fund. Each year, the federal government allocates money for this, matched by the state at a 4:1 ratio. The nearly $20 million combined, as well as monies accumulated from the past loaned and repaid, mainly may go to further low-interest lending to aid in improving the provision of drinking water by both local government and nongovernment agencies, but also can subsidize providers to defined disadvantaged populations, refinancing for government providers, as well as set-asides to secure adherence to regulations to address public health priorities.

Last year, within the program following the creation of a commission to study the issue, the state additionally instituted a mechanism to aid disadvantaged communities, defined as a population that faces an imminent threat to public safety from regulatory noncompliance in its system, has fewer than 10,000 people, and has a median household income below the national figure. It allows these systems to draw upon an interest-free, forgivable loan to consolidate with other systems in better financial and structural shape.

Called the Consolidation Initiative Program, it broke its maiden with special district Sabine Parish Waterworks District #1 lent $2,295,000 to subsume the private Ajax-Beulah Water Association, awarded in August. Another merger expects to draw $1,460,000 next June with Jackson Parish’s Robinson Chapel Water System folded into Ouachita’s Cadeville Water District.

It’s no accident that north Louisiana has a surplus of providers. The state has just over 1,300 total, although over 400 don’t provide to the public. Of the remaining 850 or so, almost three-quarters serve 3,300 or fewer customers, with nearly three-tenths serving 500 or fewer. Not only is this a disproportionate number per capita compared to other states, these also disproportionately operate in north Louisiana.

In a 2017 report, the Louisiana Legislative Auditor because of the large number of small systems recommended consolidation, noting the resulting efficiencies of scale in tackling costs that better could prevent violations and keep rates from spiraling higher. By way of example, Cadeville, with nearly 27 times the number of customers than Robinson Chapel, charged $16 less a month for use of 5,000 gallons in 2017. The state notes, however, that issues related to geography, ownership, and the cost to run connecting lines among other issues doesn’t make consolidation a panacea.

Still, the CIP can reduce these kinds of issues if made more accessible. Legally, the state can devote from six to 35 percent of federal funding to this program, plus its own match. The fiscal year 2021 committed total so far is about half of that maximum. By changing its Intended Use Plan in the future to put heavier emphasis on scoring for consolidation projects and affordability, the greater certainty of funding without inconveniencing its own ratepayers can encourage more stronger systems to incorporate weaker ones.

The state also could dip into another pot of money, capped at two percent of the grant, to encourage small systems to apply for the CIP. The smallest of these often don’t even have full-time employees and can find the process to produce documentation necessary to apply for a fund loan daunting. Prioritizing delivery of technical assistance for loan applications can spur CIP usage by helping the weaker partners in mergers prepare the needed paperwork.

A series of reports over the past decade, with the most recent issued earlier this year, have emphasized that Louisiana will face drinking water provision problems unless it tackles its large backlog of infrastructure needs. The CIP appears a cost-effective means that serves this objective.



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