February 4, 2005

Today, Department of Environmental Quality Director Steven E. Chester responded to House Speaker Craig DeRoche’s assertion that there has been a delay in releasing funding under the State Revolving Fund Loan and Proposal 2.

“The recent assertions that the State Revolving Fund Loan is somehow being held up by the Granholm Administration is simply inaccurate,” said Director Steven E. Chester.  “Not one qualified municipality has been denied loan assistance under this program and in fact, we have lowered the interest rate two times in the past three years to encourage local governmental units to take advantage of this program”

The State Revolving Fund Loan Program currently carries a balance of $413 million, with approximately $250 million of that already committed to local government units for the construction of needed sewer upgrades, as well as non-point source projects.

Since the inception of the State Revolving Fund Loan in 1989 approximately $2.1 billion in loans have been issued to communities to assist them in upgrading their aging sewer systems.  This financing is in the form of low interest loans.  The current interest rate for these loans stands at 1 5/8 percent. 

Proposal 2, approved by the voters in 2002, authorizes the state to sell up to one billion dollars in bonds to finance loans to local governmental units for sewage treatment works, non-point source, and stormwater projects.  To date, bonds have been issued totaling $100 million.  Contrary to recent statements, there is no matching fund obligation on behalf of the local governmental units for these funds.  The loan program funds 100 percent of eligible project costs.

Chester said local governments are experiencing the same budget constraints that state government is experiencing, which has resulted in a significant reduction in State Revolving Fund Loan demand.  However, he expects that the demand for loans under this program will increase in FY 2006 and beyond.

“Simply put, the DEQ is actively providing assistance to communities, increasing program pace, and stimulating economic activity through the State Revolving Fund Loan Program.”  Chester said.  ”To assert otherwise demonstrates a clear lack of understanding of the program and how it works.”

Editor’s note: DEQ news releases are available on the department’s Internet home page at www.michigan.gov/deq.

Revised February 4, 2005 by Alice Stimpson