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N.C. Department of Environment and Natural Resources

NC Department of Environment and Natural Resources
Water Infrastructure - Disadvantaged Communities Program (DCP)

Water Infrastructure

Disadvantaged Communities Program (DCP)

Overview

The Safe Drinking Water Act, as amended, created the Disadvantaged Community Program (DCP) to provide “additional subsidization (including forgiveness of principal)” to “the service area of a public water system that meets affordability criteria established after public review and comment by the State in which the public water system is located” [42 USC 300j-12(d)].  As required by 40 CFR 35.3555(c)(7), the State of North Carolina establishes the program annually and outlines how it is to operate in the annual Intended Use Plan (IUP).  It is, therefore, not a static program, but may change from year to year.  The outline of a given year’s program includes:

(i) The state's definition of what constitutes a disadvantaged community,

(ii) description of affordability criteria used to determine the amount of disadvantaged assistance,

(iii) The amount and type of loan subsidies that may be made available to disadvantaged communities, and

(iv) To the maximum extent practicable, an identification of projects that will receive disadvantaged assistance and the respective amounts.

This means that the subsidy amount and the qualifications required to receive the subsidy are not established until after applications have been submitted.

The latest IUP (for FY 2010) establishes a DCP with two components:

Consolidation of Non-Viable Systems

The Safe Drinking Water Act compels the state to use the Drinking Water State Revolving Fund (DWSRF) to ensure that all public water systems “demonstrate technical, managerial, and financial capacity with respect to each national primary drinking water regulation in effect” [42 USC 300g-9(a)]. For this reason, the first component of the Disadvantaged Community Program (DCP) is the consolidation and elimination of non-viable water systems*. Through this program, a project in which a nearby viable public water system agrees to take over, supply and make all necessary repairs to a non-viable system, as defined above, qualifies for a principal forgiveness loan for the entire project cost. These are “Category 1” projects as described in the Operating Agreement between DENR and EPA [OA S.1.b.(i)] and, therefore, have the highest priority for funding.

*Note that a non-viable water system is one with a continuing history of struggling to meet applicable standards or to maintain the system. Evidence might include a history of Notices of Violation, water outages or other significant failures.

Financially Disadvantaged System Projects

The second component of the Disadvantaged Community Program (DCP) provides subsidized loans for non-consolidation projects (i.e., all other project Categories) to water systems that are financially disadvantaged. The Intended Use Plan (IUP) defines financial disadvantage as the ratio of [the current average annual water bill for 4,500 gallons per month use] to [median household income (MHI)] being greater than or equal to 0.85 percent (or 0.0085 to 1). Such projects are eligible to receive up to 80 percent principal forgiveness of the loan amount (up to a maximum of $1,500,000). These projects will be funded in priority order as established by the Comprehensive Project Priority List (CPPL).

Congressionally-Mandated Principal Forgiveness Reserve

The Division of Water Infrastructure has a contingency plan in case Congress imposes a reserved minimum distribution of principal forgiveness loans, such as the $10,677,900 reserve for FY 2010 and the $7,291,500 reserve for FY 2011. If there are insufficient numbers of DCP-eligible projects that are Ready-To-Proceed (RTP) to distribute the entire reserve, the section will award principal forgiveness loans according to the following procedure:

  1. Any project that is not RTP by the RTP deadline will be ineligible for the DCP.  In the case that one or more of these projects drops out of the original subset of DCP-eligible projects that are in the funding range of the principal forgiveness loan reserve, the subset will be extended.  This extension will occur in increments of one project at a time, each receiving up to the maximum proportion of principal forgiveness (100 percent for Category 1 consolidation projects and 50 percent for financially disadvantaged system projects), until:
    1. The reserve has been exhausted, or
    2. All projects that are DCP-eligible and RTP have been awarded the maximum proportion of principal forgiveness loans.  In this case, the PWS Section will proceed to step 2.
  2. The last project funded under this step would receive sufficient principal forgiveness so as to exhaust the reserve, but would likely not get the full amount for which it would be eligible.

  3. The proportion of principal forgiveness for financially disadvantaged system projects will be increased until either:
    1. The reserve has been exhausted, or
    2. All financially disadvantaged system projects that are RTP have been awarded 80 percent principal forgiveness loans.  In this case, the PWS Section will proceed to step 3.
  4. The financial disadvantage criterion will be lowered to include additional projects, one at a time, until:
    1. The reserve has been exhausted, or
    2. All non-consolidation (Category 2+) projects that are RTP have been awarded 80 percent principal forgiveness loans.  In this case, step 3 is to be repeated as eligible projects become RTP until the reserve has been exhausted.
  5. As in step 1, the last project funded under this step would receive sufficient principal forgiveness so as to exhaust the reserve, but would likely not get the full amount for which it would be eligible.

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For assistance contact us at (919) 707-9160

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N.C. Division of Water Infrastructure

Mailing Address (USPS): 1633 Mail Service Center, Raleigh, North Carolina, 27699-1633

Street Address (FedEx, UPS): 512 N. Salisbury St, Raleigh, North Carolina, 27604

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