Explainer: Pooling State and Federal Funds to Keep NJ’s Water Clean

The New Jersey Environmental Infrastructure Trust leverages available money to make low-interest loans to finance clean-water projects

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More than 90 percent of the waters in New Jersey fail to meet one or more federal water-quality standards, decades after Congress enacted the Clean Water Act. Unlike the past, most of the pollution is not tied to direct discharges into waterways from industrial facilities or municipal wastewater systems. The culprit these days is typically stormwater runoff, which washes fertilizer, oil, grease, and other pollutants into streams, rivers, and bays every time it rains.

In 1986, the administration of former Gov. Thomas Kean, in collaboration with the Legislature, established the New Jersey Environmental Infrastructure Trust, a financing vehicle to stretch limited state and federal dollars to fund clean-water projects. Some lawmakers view it as one of the state’s most successful environmental programs.

What it does: The program combines federal allocations of clean-water money with state resources to issue low-interest loans to public authorities treating sewage or public systems delivering drinking water to residents. The money is repaid over the life of the loan and deposited into a revolving fund from which future loans can be awarded.

Why it is important: Just take a look at the latest needs assessment by the U.S. Environmental Agency, detailing what the state should expend over the next five years on clean water projects — $17 billion. In the nation’s most densely populated state, the importance of adequate treatment of sewage is especially critical given that much wastewater ends up discharged into rivers used for drinking water. The EPA projections do not include the needs confronting New Jersey’s drinking-water systems, which could total $8 billion, according to some estimates.

What it has accomplished: In its three decades, the EIT has handed out more than $6.5 billion to municipalities and authorities in a loan package that features zero interest for a portion of the project and very-low market interest rates for the rest of the project. By the agency’s estimate, it has saved borrowers $23 billion by not having to go to the private sector for financing.

What the trust is doing in the next fiscal year: The agency traditionally awards its loans at the end of the current budget year, which ends June 30. Next year, it is proposing to award more than $411 million in financing to Hurricane Sandy projects and other environmental undertakings. In a package of bills moving through the Legislature, $295.1 million will be available for clean-water projects and $116 million for drinking-water loans. Of the clean-water total, $170 million will go to Sandy; $30 million of the drinking-water projects are tied to the storm.

The agency also plans to fund $3 million of combined sewer overflow projects, which involve systems where runoff from storms combines with sanitary sewer systems to pollute waterways. The projects will focus on green technology, such as green roofs, rain gardens, and other initiatives to prevent storm runoff.

New priorities emerging: There are questions whether the trust can play a more prominent role in dealing with lead contamination in drinking water. Long recognized as a concern, the issue has become more of a focus with the discovery of unsafe lead levels in drinking water in more than two dozen Newark public schools and other school systems around the state.

The problem is that the trust is limited to funding public projects, but the contamination problems in drinking water from lead arise often in private lines from the street to a building. Lawmakers want to work with the agency to determine what changes can be made to help deal with this situation, which is projected to be expensive to resolve.

What else is happening: The agency is working to make its program easier and cheaper to navigate for authorities and the government. It is eliminating deadlines for submitting applications, accepting them when they are completed. The program also has launched an interim loan program to respond to emerging problems.