When the Entranosa Water Cooperative decided to buy its own wells and water rights, the small East Mountain system sought U.S. Department of Agriculture loans to make the purchase.
The cooperative obtained USDA loans totalling $6 million from 2003 to 2010 to buy about 1,600 acre-feet, giving it control of the wells it needs to serve clients and plan for growth, said John Jones, the system’s manager.
The purchase allows Entranosa “to control our own destiny,” said Jones, who oversees a system that provides drinking water for about 8,500 people across 280 square miles of Bernalillo and Santa Fe counties.
But a proposed cut in President Donald Trump’s 2018 budget plan squarely takes aim at the USDA water and wastewater loan and grant program.
Since 2012, the USDA has provided about $81 million in grants and loans for dozens of projects at small water and wastewater systems in 17 New Mexico counties.
The proposed cut would save $498 million in the federal budget, the plan estimates.
An advocate for rural water systems in New Mexico said Trump’s proposal would cut off a vital source of financing for small water and wastewater systems.
“In New Mexico, something like 85 percent of our water systems serve a population of 500 or less,” said Bill Conner, executive director of the New Mexico Rural Water Association, which represents about 480 largely small water systems.
“I believe that it would be very hard for some of our small water systems to operate – to get funding to replace infrastructure” if Congress enacts the proposed cut, Conner said.
Trump’s budget plan proposes that rural communities instead obtain private-sector financing or seek funds from the U.S. Environmental Protection Agency, which itself faces a 31 percent funding cut under Trump’s proposed budget.
“Rural communities can be served by private sector financing or other federal investments in rural water infrastructure, such as the Environmental Protection Agency’s State Revolving Funds,” the plan said.
Trump’s budget proposes $2.3 billion funding in state revolving funds nationally in 2018, a $4 million increase from 2017.
Conner said most of New Mexico’s tiny water systems don’t have access to private funding or state-managed EPA funding.
“To a large extent, the small systems could not go out and get financing from banks or commercial companies,” Conner said. “There are many, many systems in New Mexico that receive their funding through USDA.”
Dozens of projects funded
From 2012 to 2016, U.S. Department of Agriculture Rural Development obligated a total of $81.6 million in grants and loans for New Mexico water and wastewater projects, according to USDA data. That figure included $63.5 million in grants and $18 million in loans.
In 2016 alone, USDA provided $6.6 million in grants and loans for New Mexico water projects.
USDA financed projects that range from an $11.3 million water system improvement in Jal to dozens of smaller projects in 17 counties, according to a list provided by USDA.
They include projects on tribal lands and in colonias – unregulated settlements typically found near the Mexican border.
Jones said USDA loans were the best option available to Entranosa for purchasing wells and water rights to serve its 3,280 metered connections.
The chief alternative to USDA loans is the EPA state revolving fund, managed by the New Mexico Environment Department, which typically funds projects for larger water systems, he said.
“Some of the larger counties with water systems typically have better access to that money,” Jones said. “USDA (funding) is dedicated to the small systems.”
Small systems seeking EPA state revolving fund loans must compete with large water systems and privately owned utilities, which have a competitive advantage over small systems, he said.
Another key advantage of USDA loans is their 40-year payback period, Jones said. EPA state revolving fund loans must be paid back in 20 years, making monthly payments higher and more onerous for small systems, he said.
A New Mexico report on the state revolving fund submitted to the EPA in June estimated that the fund would have about $14.8 million available to lend for New Mexico water projects this year. That total include a federal contribution of $8.3 million and state matching funds of about $1.7 million.
EPA rules require states to provide at least 15 percent of loans to small systems, defined as those serving 10,000 people or fewer, the report said.
The National Rural Water Association estimates that 75 percent of EPA state revolving fund loans nationwide are made to systems that serve a population of 10,000 or greater. Of the 52,000 community water supplies in the U.S., 92 percent serve a population of 10,000 or less, the association said.