Beginning in 2019, communities that appear on the Drinking Water Intended Use Plan (IUP) for water main replacement or lead service line (LSL) related projects can replace private portions of LSLs at no additional cost to the community and at no cost to the homeowner. This program works by increasing the principal amount of the loan while reducing the interest rate to keep the total cost of the loan the same.
Why does this program exist?
Lead has been a long standing public health issue; especially given the severe health risk lead poses to infants and small children. According to a MassDEP survey there are still more than 22,000 lead service lines (LSL) in water supply systems throughout the Commonwealth. One health risk associated with LSL replacement is the practice of partial replacement. A report by the US EPA Science Advisory Board concluded that partial replacements generally fail to lower the overall lead levels and cause a short-term elevation in levels.
The Trust, with the assistance of MassDEP, found the main deterrent to full LSL replacement was the cost to the homeowner or additional cost to the community. The Trust determined that to maximize participation, any program would need to be cost neutral.
How does this program work?
The Trust will fund the homeowner’s costs associated with a LSL replacement by converting future loan interest into current loan principal. Loans provided by the Trust are at a 2% interest rate. If a community applies for a $1 million loan, then over the life of that loan approximately $224,000 in interest will accrue. The Trust will allow communities to use that interest to replace homeowner’ LSLs. As the Trust increases the loan principal, it will adjust the loan interest accordingly to maintain the same lifetime cost.
If this community were to use $112,000 for replacing homeowners' LSLs, then the loan terms would change from $1 million at 2% interest to $1,112,000 at .93% interest. At the end of the 20-year term, the total cost of both loans (principal and interest combined) would be $1,224,000.
The Trust has been authorized by its board of Trustees to allow communities to buy down their interest to 0%.
- Communities will not be allowed to reduce the loan interest beyond 0%.
- To receive loan approval, communities will need an increased loan authorization amount.
- Material and labor cost are still subject to Drinking Water SRF program requirements.
How to Participate
Intended Use Plan
Projects must appear on the 2019 or subsequent Drinking Water Intended Use Plan to be eligible for the LSL incentive. Each June, the Division of Municipal Services (DMS) launches a solicitation of proposals for SRF financial assistance for the next calendar year. The application, called Project Evaluation Forms (PEF), along with supporting documentation, are due by the August deadline noted in the solicitation. Communities will need to identify their intent to complete full LSL replacements when completing the PEF.
The Trust will monitor the interest used for homeowner LSL replacements and provide periodic notifications of available funds. The purpose of these notifications are to provide a realistic account of used and available funds. The Trust will only be monitoring the project as it relates to LSL replacement funds. Monitoring of other project details and technical elements will still be conducted by MassDEP.