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III. Bonds and Loans

Revenue Bonds

Revenue bonds are bonds that are secured by a pledge of the revenues of the utility. The utility issuing bond pledges to generate sufficient revenues annually to cover the systems operating costs, plus meets the annual debt service requirements (principal and interest payment) times a factor, termed the coverage factor, which is designed to provide additional protection to the bondholders. The coverage factor generally ranges from 110 to 150% of the utility’s annual or maximum annual debt service requirement in the present or any future year.

General Obligation Bonds

Cities, counties, and special districts generally are able to issue general obligation (GO) bonds that are secured by the full faith and credit of entity. In this case, the local government issuing the bonds pledges to raise its property taxes or use any other source of revenue, to generate sufficient revenues to make the debt service payments on the bonds. A general obligation pledge is stronger pledges than a revenue pledge, and thus must carry a lower interest rate than a revenue bond. Frequently, when local government issue GO bonds for utility improvements, the utility will make the debt service payments on the GO bonds with revenues generated though the utility’s rates and charges. However, if those rate revenues are insufficient to make the debt payment, the local government is obligated to raise taxes or use other sources of revenue to make the payments.

Local Improvements District Bonds

LID bonds are secured by a lien on the property in the LID. Debt services payments on these bonds are funded through annual assessments to the property owners in the LID, as discussed previously.

State Revolving Fund Loans

The State of Florida, like most states, operates a state revolving fund (SRF) loan program that offers qualified local governments/utilities below-market-rate loans for wastewater projects. The State Revolving Loan Fund in Florida is administered by FDEP through the Water Facilities Funding Program. It makes low-interest loans available for construction, rehabilitation, and replacement of facilities needed to collect, treat, dispose of, or reuse municipal wastewater. It is a revolving fund because loan repayments are used to make additional loans. Loans are made for a 20-year term, with interest rates set at about 60% of the present market interest rate. SRF loans are generally limited to $10 million per entity per year

State Bond Loan Program

The FDEP and the Division of Bond Finance of the Department of General services jointly administer the State Bond Loan Program. The program generally issues bonds that are sized to provide sufficient funds to meet the capital financing needs of several communities or entities participating in the program. The state will then loan the bond proceeds to these entities at an interest rate slightly higher than the interest rate that the state is paying on bonds. Frequently, the entities participating in the program are smaller communities or entities without the credit history or capability to enter the bond market on their own. These entities get the benefit of being able to gain lower interest rate than they would be able to obtain on their own.

Commercial Loans

Banks and other financial institutions may make commercial loans to local governments to fund capital projects. For utilities, these loans are typically secured by a pledge of a utility’s revenues, but may also carry a general obligation pledge.

IV. Grants and Contribution

A number of state and federal grant programs are available to provide funding support for local governments and/or utilities to implement specific aspects of their wastewater management program. Grant monies may also be available to qualified homeowners.

At the time of the release of the draft PEA, the Village of Islamorada and the FKAA have applied for various federal and state grants for wastewater projects. The program, funding agency, and estimated value of these grants are listed in Table H-1. Additional information about the types of grant programs is described below.

Table H-1: Potential Federal and State Assistance Programs Identified by Project Applicants for Wastewater Projects


Funding Agency

Local Recipient

Estimated Value

Unmet Needs Grant Program


Village of Islamorada

$2,300,000 requires local match of $329,000

Water Advisory Panel Funding Program


Village of Islamorada

$900,000 requires local match of $225,000

Wastewater Project Assistance Program


Village of Islamorada


Unmet Needs Grant Program




Source: FEMA Region IV, Village of Islamorada, FKAA

Cesspool Identification and Elimination Grant Program

Monroe County has implemented a grant program to assist homeowners with replacing cesspools. This program provides a grant for at least 62% of the capital cost of an OWNRS. Homeowners whose homes have an assessed value of between $100,000 and $200,000 receive an additional grant of $1,000 over the 62-percent grant amount, or 69% of the total capital costs of these systems. This program is funded through revenues generated from grants from the Florida Department of Environmental Protection and the Florida Department of Community Affairs, as well as from funds from Monroe County’s infrastructure sales tax (Monroe County, 2001a).

Water Advisory Panel Grants

The State of Florida created a water advisory panel in Fiscal Year 1999, which administers a grant program that provides funds for projects that: reduce recurring violations of state water quality standards; resolve a public health threat; reduce discharges of pollutants into an impaired water bod; and reduce discharges into groundwater supplies. Each project must be sponsored by a local governmental entity, including, but not limited to, a city, county, water and sewer district, or a water management district. The project must be identified in an approved local, water management district, or Department of Environmental Protection water management plans as part of a surface water restoration effort. Priority is given to projects that address an area to be served with a population of less than 7,500 and a median household income of less than the statewide median household income. The project sponsor or grant recipient must provide for at least a 50-percent match of the total project cost. Matches may include funds from other local, state, and federal sources and in-kind contributions. Reductions in the match requirement may be considered, based on a demonstration by the project sponsor of inability to provide the match, to the satisfaction of the panel.

Federal Agencies

A number of federal agencies, in addition to FEMA, have programs that can provide funding to assist in improvements to wastewater management in the Keys. Potential grant funding sources include the Environmental Protection Agency, Department of Interior, Department of Housing and Urban Development, Department of Transportation, and Department of Agriculture. Potential federal grant funding programs are identified in the following table.

Table H-2: Potential Federal and State Assistance Programs Related to Wastewater


Funding Agency

Program Objective

Range and Type of Financial Assistance

Water Quality Cooperative Agreements

(Clean Water Act, Section 104(b)(3), Public Law 92-500, as amended; 33 U.S.C. 1254(b)(3))


To assist in developing, implementing, and demonstrating innovative approaches relating to the causes, effects, extent, prevention, reduction, and elimination of water pollution.

Project Grants

$5,000 to $500,000

Wastewater Operator Training Grant Program

(Federal Water Pollution Control Act as amended, Section 104(g)(1); 33 U.S.C. 1251 et seq.)


To substantially enhance the proficiency of personnel engaged in the operations and maintenance of treatment works and related activities by financing pilot programs

Project Grants

$35,000 for State-wide assistance

Capitalization Grants for State Revolving Funds

(Clean Water Act, Public Law 95-217, as amended; Water Quality Act of 1987, Sections 601 through 607, 205(m), Public Law 100-4.)


To create State Revolving Funds (SRFs) through a program of capitalization grants to States which will provide a long term source of State financing for construction of wastewater treatment facilities and implementation of other water quality management activities (see 66.418).

Formula Grants

$10,000,000 to $216,000,000; average $30,000,000

Construction Grants for Wastewater Treatment Works

Clean Water Act, Public Law 92-500, as amended; Public Laws 97-117 and 95-217; Water Quality Act of 1987, Public Law 100-4; Public Law 96-483; and Public Law 101-144


To assist and serve as an incentive in construction of municipal wastewater treatment works which are required to meet State and/or Federal water quality standards and improve the water quality in the waters of the United States.

Project Grants

$10,000 to $10,000,000;

average $3,000,000.

Water Pollution Control State and Interstate Program Support

(Clean Water Act, Section 106, as amended, Public Law 95-217, 33 U.S.C. 1251 et seq)


To assist in establishing and maintaining adequate measures for prevention and control of surface and ground water pollution.

Formula Grants

$60,000 to $9,000,000

Water Reclamation and Reuse Program

Reclamation Wastewater and Groundwater Study and Facilities Act, Title XVI, Public Law 102-575, as amended

Department of the Interior

This Title gives Reclamation general authority to conduct appraisal and feasibility studies on water reclamation and reuse projects. It also provides general authority for research and demonstration programs to test water reclamation and reuse technologies.

Formula Grants

Construction funding is limited to 25% of the construction cost or $20 million per project.

Community Development Block Grants/State's Program

Housing and Community Development Act of 1974, Title I, as amended, Public Law 93-383, 88 Stat. 633, 42 U.S.C. 53


The primary objective of this program is the development of viable urban communities by providing decent housing, a suitable living environment, and expanding economic opportunities, principally for persons of low and moderate income.

Formula Grants

Community Services Block Grant – Discretionary Awards

Community Opportunities, Accountability, Training, and Educational Services Act of 1998, Title II, Section 680, Public Law 105-285.


To support program activities of national or regional significance to alleviate the causes of poverty in distressed communities which promote:

(among other things) a better standard of living for rural low-income individuals in terms of water and waste water treatment

Project Grants

$75,000 to $500,000

Direct Federal Funding

For projects with national significance, Congress can appropriate federal funds for certain uses. The Florida Keys Water Quality Improvement Act (FKWQIA) was authorized by U.S. Congress to fund water quality improvements in the Keys through the Water Resources Development Act of 2000. This bill authorized $100 million to be administered through USACE; however, the funding has not yet been appropriated and its future availability remains uncertain.

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