This is part nine of a ten-part series.

By Brett Walton, Circle of Blue – May 11, 2022

In a 15-year career, Kelly Green has worked at the junction of finance and infrastructure, helping to convert state and federal dollars to provide clean drinking water and keep sewage out of waterways.

Central to that work at the Michigan Department of Environment, Great Lakes, and Energy and its predecessor agency is a state-federal partnership to finance water infrastructure at affordable rates. Called the state revolving funds, the SRFs are now taking a starring role in renewing the nation’s water systems. They are the primary channel through which billions of dollars from the federal infrastructure bill will be directed to states and then to communities. 

As the administrator since 2018 of EGLE’s water infrastructure financing section, the unit that oversees the SRFs in Michigan, Green is in a position to guide decisions that will influence the quality of the state’s water systems as communities look to reverse the decades-long decline in fundamental public works. 

Green calls the momentous increase in capital spending for water “a very big opportunity” that also required equally significant changes in how the agency considers and approves applications for grants. The deteriorated condition of the state’s water infrastructure was not helped at all by decades of administrative and legal impediments that constrained SRF grant approvals and hindered the ability of smaller, low-income communities to access the funds. 

In a series of conversations with community members, engineers, utility staff, and legislative aides, Green and her colleagues learned that EGLE and its predecessor agency had been marketing the SRFs to communities as a “program of last resort,” she said. EGLE made it clear that community water system managers should look elsewhere for financing. They were directed to approach the state for SRF loans if other options fell through. 

It became clear that Michigan’s management of the vital funding program required a makeover. 

“The biggest change that we made internally was basically a culture change,” Green said. “So instead of trying to find ways to say ‘No,’ we changed our culture and tried to find ways to say ‘Yes’ to communities and try to help them get into the program.”

The culture change came just in time. The Infrastructure Investment and Jobs Act, approved by Congress and signed by President Biden last November, provides roughly $50 billion over five years for water and sewer systems, the largest federal infusion in the sector in a half century. More than $43 billion of that total will flow through the SRFs, a move that propels the water account into the spotlight in every state. 

Michigan is set to receive more than $1 billion over the next five years, significantly boosting the state’s lending capacity. The federal funds are an opportunity to reinvest in essential public works without saddling residents with all of the costs.

All told, it is a make-or-break moment for the SRFs. The next few years are a chance to accelerate work on removing lead service lines, stanching sewage overflows into rivers and lakes, and fixing some of Michigan’s most entrenched water problems. The relative windfall will assist with capital improvements even as utilities and state agencies must contend with rising project costs and staffing limitations due to inflation and labor shortages.