BIL-Funded Lead Service Line Replacement Program

The following is a change from the previous Private Lead Service Line Replacement Program, funded by the Water Infrastructure Fund Transfer Act (WIFTA), which provided funding to municipalities to assist in their efforts of replacing lead service lines under the control of private property owners. The current Lead Service Line (LSL) Replacement Program, which is a subprogram of the Safe Drinking Water Loan Program (SDWLP) and is funded by the Bipartisan Infrastructure Law (BIL), provides funding to municipalities for both public and private lead service line replacements and related lead service line inventory work to protect public health.

• Health Risks
• Service Line Definition
• No Funding for Partial LSL Replacements
• Filtration Requirements
• LSL Replacement Program Description
• Private Side Replacement Costs
• Available LSL Funding
• Eligible Applicants
• How to Apply
• Deadlines
• Requests for Disbursement
• Eligible Projects and Costs
• PSC Approval for Customer-Side LSL Replacement Financial Assistance Programs
• Setting Up a Municipally Operated Private Side LSL Replacement Funding Program
• Federal Requirements
• Federal Income Tax Implications
• LSL Priority Scoring
• Allocation of Funds
• Loan Funding
• Pledge Options for LSL Loan Repayment
• Sample Ordinances
• Contact Information
• PDF Help

For additional LSL Replacement Program details, see the corresponding state fiscal year Safe Drinking Water Loan Program intended use plan (SFY SDWLP IUP), which is available on the Project Lists and Intended Use Plans webpage.

HEALTH RISKS

Lead is known to be harmful to human health if ingested. The DNR Bureau of Drinking Water and Groundwater provides information and resources regarding the concerns of lead in drinking water, including how to test for and reduce lead in your home's drinking water, on the Drinking Water and Lead webpage.

Lead can enter drinking water through the corrosion of a property's plumbing materials and water service line(s) connecting the property to the water main(s). Removing water service lines made of lead is one way to minimize the potential for lead to get into drinking water. It is critical for municipalities to replace both publicly and privately owned portions of a lead service line because partially replacing a service line can increase lead levels in the home's drinking water.

Attention: The DNR is advising that municipalities replace lead service lines in their entirety because partially replacing lead service lines can increase lead levels in homes.

SERVICE LINE DEFINITION

The LSL Replacement Program defines "service line" as a pipe located in the public right–of–way or on private property that connects a residential, commercial, institutional, or industrial user to a publicly or privately owned water system, under s. NR 166.03(55), Wis. Adm. Code.

Service lines that are confirmed to be made of galvanized iron or galvanized steel and are currently or have previously been downstream of lead components, brass service lines, lead goosenecks and/or lead pigtails are also considered lead service lines for the purposes of the LSL Replacement Program.

Note: The Department of Safety and Professional Services (DSPS) licenses plumbers and enforces the state plumbing codes. The DSPS defines "water service" as that portion of a water supply system from the water main or private water supply up to and including the building control valve, under s. SPS 381.01(282), Wis. Adm. Code. "Plumbing" has the meaning specified under s. 145.01(10), Wis. Stats.

PRIVATE AND PUBLIC OWNERSHIP

In most Wisconsin municipalities, the private property owner is responsible for the portion of the water service line between the curb stop and the normal connection point inside the building (excluding the water meter inside the property). The municipality is responsible for the portion of the service line from the water main to the curb stop. In a few Wisconsin municipalities, the property owner owns the entire service line. The SDWLP, and therefore the LSL Replacement Program, defines "private service line" and "public service line" in ss. NR 166.03(43) and NR 166.03(48), Wis. Adm. Code.

PSC DEFINITIONS

The definition of public water system as regulated by ch. NR 166, Wis. Adm. Code for the SDWLP, is broader and includes more water systems than those governed by the Public Service Commission of Wisconsin (PSC) under its definition of a public utility in ch. 196, Wis. Stats. The PSC also defines "customer-side water service line" and "utility-side water service line" in ch. 196, Wis. Stats.

Note: Municipalities and water public utilities need approval from the PSC for customer-side LSL replacement financial assistance programs. For more information, refer to the PSC Approval for Customer-Side LSL Replacement Financial Assistance Programs section below.

NO FUNDING FOR PARTIAL LSL REPLACEMENTS

Partial lead service line replacements, or watermain replacements where the entire or a portion of the lead service line is left intact, can result in elevated lead levels at the tap for extended periods of time, creating a public health hazard. For details, see the Health Risks section above.

The SDWLP and the LSL Replacement Program will not provide funding for individual service line replacements that do not result in complete removal of all lead components of water service lines from the watermain to the water meter or other connection point inside each property.

If a lead service line is discovered during construction of a watermain replacement project, and the complete lead service line is not replaced from the watermain to the meter inside the building, the SDWLP/LSL Replacement Program will not provide funding for the public side of the service line.

When lead service lines are discovered during a watermain replacement project funded by the SDWLP, or an LSL replacement project consists of both public and private side lead service line replacements, and the private side of the lead service line is not able to be replaced at the same time as the public side, it is recommended that the private side replacement occur within 45 days of the public side replacement but there should be no more than 90 days between replacements unless unique circumstances make this impossible.

Note: Funding disbursements should not be requested until the entire line has been replaced.

FILTRATION REQUIREMENTS

Given the potential for elevated lead levels, the municipality/water utility is required to provide the customer with point-of-use filtration during the time period between the public and private side replacements, and enough filters for six (6) months of use following the full lead service line replacement.

Filters should be models that have been tested and certified to NSF/ANSI 53 for the reduction of lead. Pitcher filters with the proper certification qualify as point-of-use filtration, see EPA's A Consumer Tool for Identifying Point of Use (POU) Drinking Water Filters Certified to Reduce Lead.

Back to Top

LSL REPLACEMENT PROGRAM DESCRIPTION

The BIL-funded Lead Service Line (LSL) Replacement Program provides affordable financial assistance to municipalities to help in their efforts to inventory and replace both public and private lead service lines.

• LSL principal forgiveness (PF)
• 0.25% interest rate loans for all eligible project costs

The application process for the LSL funding has been integrated with the regular SDWLP. In a change from SFY 2024, LSL projects will not be competing for general SDWLP principal forgiveness but will only be eligible for LSL principal forgiveness. Completion of the regular SDWLP Priority Evaluation and Ranking Form (PERF) is not required for LSL projects; instead, an LSL-specific PERF (Form 8700-383) must be submitted with the application. If the LSL-specific PERF is not submitted with the application, the project will receive a priority score of zero.

No debt is incurred on behalf of the municipality for funds awarded as principal forgiveness. The BIL requires that the LSL PF can only be awarded to municipalities that qualify as disadvantaged according to the state's criteria, or to applicants submitting a project targeting replacements within a disadvantaged census tract or tracts. All other applicants will be eligible for loan funds only and all loan funding from the BIL LSL capitalization grant will be made available at 0.25% interest for all eligible project costs.

For details on the disadvantaged community criteria and methodology for allocating BIL LSL funding, refer to the LSL Priority Scoring section below and the corresponding state fiscal year SDWLP intended use plan, which is available on the Project Lists and Intended Use Plans webpage.

PRIVATE SIDE REPLACEMENT COSTS

The private side LSL PF will only be allocated on private side construction and filtration costs (i.e. pitcher filters, point-of-use devices). The principal forgiveness allocated for remaining costs, if any, can also be used for eligible private side costs, but PF allocated for private side costs can only be used for private side costs. For details, see the Eligible Projects and Costs section below.

Unlike previous versions of the LSL Replacement Program, few applicants will receive 100% PF for their private side replacements. This means applicants should be prepared to cover some portion of private side replacement costs with loan funding. For details, see the Loan Funding section below.

The only instance in which a 100% PF award will be made is if a project consists entirely of private side replacements and 100% PF has been allocated for those replacements. For details, refer to the Allocation of Funds section below.

To be eligible for LSL PF or the 0.25% interest rate that is available only for LSL projects, all lead service line replacement work, even replacements that will occur as part of a watermain replacement project, must be submitted as a separate project. The DNR will not work with municipalities like we did in SFY 2024 to separate LSL costs from watermain replacement projects. The LSL funding will also be awarded in a separate financial assistance agreement (FAA, AKA loan) from any other SDWLP projects.

AVAILABLE LSL FUNDING

The Bipartisan Infrastructure Law (BIL) includes $50 billion for the U.S. Environmental Protection Agency (EPA) to strengthen and rebuild the nation's water infrastructure. This historic investment provides $15 billion to the EPA's Drinking Water State Revolving Fund (SRF) for lead service line identification and replacement nation-wide.

The EPA estimates the Wisconsin DNR can apply for a Lead Service Line Replacement capitalization grant of $48–$84 million for each federal fiscal year from 2022 through 2026. In addition, reallocated funds will be available from states that did not use all, or any, of their LSL capitalization grant. Funds are reallocated two years after the initial appropriation and should continue for two years beyond federal fiscal year 2026.

The fiscal year is designated by the calendar year in which it ends.

• Federal Fiscal Year (FFY) 2025 runs from Oct. 1, 2024, through Sept. 30, 2025.
• State Fiscal Year (SFY) 2025 runs from July 1, 2024, through June 30, 2025.

The total amount of each awarded BIL LSL Replacement capitalization grant will be broken out into principal forgiveness and loan/set-aside amounts on the BIL Funding webpage.

SET-ASIDES FOR TECHNICAL ASSISTANCE AND OUTREACH FUNDING

• LSL Inventory Technical Assistance - The DNR is offering free lead service line inventory technical assistance to small, municipal community public water systems that have reported having one or more lead, galvanized or unknown possibly lead service line(s) in their distribution system.
• LSL Replacement Outreach Funding – This DNR program provides financial assistance for outreach to property owners for municipal community public water systems carrying out lead service line replacements. This grant program focuses on community outreach efforts in support of an ongoing or upcoming lead service line replacement project.

Back to Top

ELIGIBLE APPLICANTS

The funding is not limited to disadvantaged municipalities; any municipality that has confirmed lead or galvanized service lines is eligible to apply.

Wisconsin cities, villages, towns, counties, town sanitary districts, public inland lake protection and rehabilitation districts, joint local water authorities created under s. 66.0823, Wis. Stats., and municipal water districts are eligible to apply for the SDWLP and BIL LSL funding.

The LSL Replacement Program is open to any municipality that is the owner of their community water system, but due to restrictions in the BIL, the LSL principal forgiveness can only be awarded to municipalities that qualify as disadvantaged according to the state's criteria, or to applicants submitting a project targeting replacements within a disadvantaged census tract or tracts. All other applicants will be eligible for loan funds only and all loan funding from the BIL LSL capitalization grant will be made available at 0.25% interest for all eligible project costs. For details on the disadvantaged community criteria scoring, refer to the corresponding state fiscal year SDWLP intended use plan, which is available on the Project Lists and Intended Use Plans webpage.

HOW TO APPLY

The application process for the BIL LSL funding has been integrated with the regular Safe Drinking Water Loan Program (SDWLP).

If not submitted as a separate project, the lead service line replacement work will not be eligible for LSL principal forgiveness or for the 0.25% interest rate available only for LSL projects.

Reminders from the Private Side Replacement Costs section above: To be eligible for the BIL LSL funding, all lead service line replacement work, even replacements that will occur as part of a watermain replacement project, must be submitted as a separate project. Note that the DNR will not work with municipalities like we did in SFY 2024 to separate LSL costs from watermain replacement projects. The LSL funding will also be awarded in a separate financial assistance agreement (loan) from any other SDWLP projects.

Note: The regular SDWLP Priority Evaluation and Ranking Form was submitted for LSL projects as part of the SFY 2025 notice of Intent to Apply process and these LSL projects were incorporated into the regular SDWLP SFY 2025 project priority list. Since that time the decision was made to not integrate the LSL projects into the regular SDWLP funding list and not allow these projects to compete for general SDWLP principal forgiveness. The SFY 2025 BIL-Funded LSL Replacement Program has a separate funding list. This is a change from SFY 2024.

DEADLINES

The applicable deadlines are set in the SDWLP's annual intended use plan for the upcoming fiscal years. The state fiscal year (SFY) runs from July 1 of one calendar year through June 30 of the next and is designated by the calendar year in which it ends.

• Oct. 31 — Notice of intent to apply (ITA) submittal deadline for the following SFY funding cycle.
• June 30 — Application submittal deadline if competing for principal forgiveness for the upcoming SFY funding cycle. Note that supplemental LSL loan funding is not expected to be available.
• September — Loan closing deadline for prior year's allocations.

The fourth Wednesday of September of the year following the application deadline is the last available loan closing date for LSL projects.

Note: If a deadline falls on a weekend or legal holiday, that deadline is extended to the next business day, per s. 990.001(4), Wis. Stats.

INTENT TO APPLY (ITA)

A separate notice of Intent to Apply (ITA) for lead service line work should be submitted for all LSL projects, even replacements that will occur as part of a watermain replacement project. Municipalities must submit an ITA through the online system by the Oct. 31 deadline in order to be eligible to apply. The regular SDWLP Priority Evaluation and Ranking Formula (PERF) does not need to be completed in the online system but a separate LSL-specific PERF (Form 8700-383) must be submitted with the application.

PROJECT PRIORITY LIST

The project priority list (PPL) identifies all projects with a valid ITA submittal that are eligible to submit a financial assistance application. Typically, the DNR anticipates that the PPL will be posted on the Project Lists and Intended Use Plans webpage in the spring of the year following the ITA deadline. The LSL projects with an ITA submittal will be published without priority scores on a list that is separate from the regular SDWLP PPL.

APPLICATION

All applications for LSL funding should be submitted through the online system by the June 30 deadline. Applications submitted or made complete after the application submittal deadline for principal forgiveness are considered supplemental applications. Limited funding is available, and it is possible that supplemental applications may not receive funding.

The LSL Priority Evaluation and Ranking Formula (Form 8700-383) must be submitted with the application in order for the application to be scored and ranked. If the LSL-specific PERF is not submitted, the project will receive a priority score of zero. The municipality will indicate on the LSL-specific PERF whether the project should be scored for the entire municipality or for a designated census tract(s). When applying for a census tract project, all principal forgiveness and loan dollars will be expected to remain within the census tract throughout the project.

Note the following reminders:

• The Environmental Review (ER) module in the online system must be completed as part of the application submittal. Read the SDWLP Environmental Review Guide (PUB-CF-060).
• Submit plans and specifications to the DNR Bureau of Drinking Water and Groundwater and with the application, when applicable, see the Public Water System Plan Review webpage.
  • If a contract will exclusively consist of service line replacements, submittal of plans and specifications should not be needed. If in doubt, please confirm with the Bureau of Drinking Water and Groundwater
• All LSL loans, when private lead service line replacements are included, will be secured by taxable bonds, this means:
  • an initial disbursement is not required at loan closing,
  • reimbursement resolutions are not needed, and
  • the 18-month rule for reimbursements does not apply.

Additional application guidance and considerations will be available in the corresponding state fiscal year SDWLP intended use plan, which is available on the Project Lists and Intended Use Plans webpage, and under the 'How to Apply' tab on the Environmental Loans webpage.

FUNDING LIST

The funding list identifies all projects with a complete application submittal and the funds allocated to each project. Typically, the DNR anticipates that the draft funding list will be posted on the Project Lists and Intended Use Plans webpage in September and the final funding list in November of the same year as the application deadline. The LSL projects with an application submittal will be published to a list that is separate from the regular SDWLP funding list.

LOAN CLOSING

The loan closing date is normally scheduled for the second or fourth Wednesday of the month. The LSL loans must close by the end of September of the year following the application deadline. Learn about the loan closing process on the Financial Assistance Agreement (FAA) and Loan Closing Process webpage.

REQUESTS FOR DISBURSEMENT

Funding disbursements should not be requested until the entire water service line containing lead has been replaced. For a municipality to receive a disbursement from the LSL Replacement Program it must complete and submit a Request for Disbursement for LSL Financial Assistance Program (Form 8700-366) with supporting invoices and documentation. This is a different form than the one used for regular Safe Drinking Water Loan Program and Clean Water Fund Program projects. Additional information is requested on this form, including the number and characteristics of replacements included in the request. Learn about the disbursement process on the Requests for Disbursement webpage.

Back to Top

ELIGIBLE PROJECTS AND COSTS

The BIL-funded LSL Replacement Program funds are for reasonable and necessary costs directly related to eligible projects. All costs are subject to review for eligibility. Both public and private side lead service line replacements are eligible for funding as well as related lead service line inventory work. Inventory work cannot be funded as a stand-alone project without capital costs included. For details, see the Inventory Work section below.

COST AND PROJECT ELIGIBILITY

The SDWLP and therefore the LSL Replacement Program will not provide funding for individual service line replacements that do not result in complete removal of all lead components of water service lines from the watermain to the water meter or other connection point inside each property. For details, see the No Funding for Partial LSL Replacements section above.

Unlike the previous WIFTA-funded Private LSL Replacement Program, all project costs can be included for funding; this includes, but is not limited to:

• associated engineering and administration costs,
• the filters (certified NSF/ANSI 53) required to be provided during LSL replacements and for six months following LSL replacements,
• reasonable and necessary outreach costs,
• the cost of developing a mandatory replacement ordinance,
• costs for Cultural Resources Management (CRM) services,
• bond counsel costs, and
• other costs directly related to and necessary for the project.

The private side LSL principal forgiveness will only be allocated on private side construction and filtration costs (i.e. pitcher filters, point-of-use devices). The private side LSL PF may be allocated on private side Cultural Resources Management service costs when required as an environmental review condition. For additional information, see the Private Side Replacement Costs section above.

All other project costs will be covered with loan dollars or be eligible for the principal forgiveness allocated towards remaining costs, if any. The principal forgiveness allocated for remaining costs can also be used for eligible private side costs, but principal forgiveness allocated for private side costs can only be used for private side costs. For details, see the Allocation of Funds section below.

INVENTORY WORK

Projects that include inventory work must have a capital component – either lead service line replacements or the purchase of an eligible major piece of equipment.

Additional assistance for inventory work is being provided through the set-asides. The DNR is offering free LSL inventory technical assistance to small, municipal community public water systems that have reported having one or more lead, galvanized or unknown possibly lead service line(s) in their distribution system. For details, refer to the Information for Community Water Systems Receiving LSL Inventory Technical Assistance webpage.

CUSTOMER OUTREACH

In the SFY 2024 funding cycle, customer outreach costs were allowed to be included in the private side principal forgiveness calculation. Since the DNR is now offering grants for community-based outreach from set-aside funds, these costs will no longer be included in the principal forgiveness calculation but will be eligible for loan funding. In addition, the DNR is offering grants, through a separate application process, for LSL replacement outreach. For details, refer to the LSL Replacement Outreach Funding webpage.

ELIGIBLE PROPERTIES

All lead service lines (both public and private) are eligible for removal. This is a change from the pre-BIL versions of the LSL Replacement Program. The LSL funds may be used for costs associated with replacing lead service lines at the following properties:

• Business-owned properties
• Commercial properties
• Licensed/certified daycare centers
• Pre-K–12 schools
• Residential properties (which include single family homes as well as multi-family buildings and buildings that contain both business and residential occupants)

In municipalities where the entire lead service line is owned by the customer, private side funding will be available for the entire lead service line, not just the portion between the curb stop and the building as in pre-BIL versions of the LSL Replacement Program.

If the municipality indicates on the LSL-specific PERF (Form 8700-383) that the project should be scored for a designated census tract(s), all principal forgiveness and loan dollars will be expected to remain within that census tract throughout the project.

The LSL funds cannot be used to replace interior plumbing and/or fixtures containing lead, however, the following programs may be helpful:

• Community Development Block Grant (CDBG) - Revolving Loan Fund Program (RLF) provides funding to low-to-moderate income (LMI) households and landlords who rent to LMI households for housing rehabilitation and repairs; eligible activities include plumbing.
• Single Family Housing Repair Loans and Grants Program, also known as the Section 504 Home Repair program, provides loans to very-low-income homeowners to repair, improve or modernize their homes or remove health and safety hazards, or provides grants to elderly very-low-income homeowners to remove health and safety hazards such as lead plumbing.

The general LSL Replacements webpage and Water and Wastewater Funding Sources webpage include resources to assist municipalities, individuals, and other entities in locating other sources of funding and technical assistance.

Back to Top

PSC APPROVAL FOR CUSTOMER-SIDE LSL REPLACEMENT FINANCIAL ASSISTANCE PROGRAMS

Municipalities need approval from the Public Service Commission of Wisconsin (PSC) for customer-side LSL replacement financial assistance programs that utilize water utility ratepayer funds. The PSC's approval is also needed if a program will be managed by water utility staff and that staff time will be covered by ratepayer funds. Any questions regarding this should be directed to the PSC. Learn more about this application and review on the PSC's LSL Replacement webpage.

Recent PSC decisions have made it clear that a water revenue pledge, in most cases, is not a viable option for a financial assistance agreement (FAA, AKA loan) that includes private side (customer-side) LSL replacements. If a municipality is considering a water revenue pledge, the DNR strongly encourages the municipality to work with the PSC and obtain approval at or before submitting a financial assistance application to the DNR. This approval must be based on a clear understanding that water utility ratepayer revenues would be pledged as security for the SDWLP loan. Any municipality that received PSC approval prior to BIL funding being available is responsible for reaching out to the PSC to obtain an updated approval. The DNR will not assume that approvals prior to BIL funding are applicable to the repayments of loan dollars. See the Pledge Options for LSL Loan Repayment section below.

AUTHORITY AND LAWS

Statutes require that the PSC review an application from a water public utility to determine if the proposed financing program administered by the water public utility is unjust, unreasonable, or unfairly discriminatory, see ss. 196.37, 196.372, and 196.20, Wis. Stats.

Section 196.372, Wis. Stats., authorizes water public utilities to provide financial assistance to the owner of property to which water utility service is provided for the purpose of assisting the owner in replacing customer-side lead service lines if all of the requirements in s. 196.372, Wis. Stats., are satisfied.

Section 66.0627(8)(ag), Wis. Stats., allows a municipality to establish a loan program for property owners to replace private lead service lines and also requires enactment of a mandatory LSL replacement ordinance. This section of the statute is the basis for the alternative revenue pledge. See the Pledge Options for LSL Loan Repayment section below.

The LSL Replacement Program loan funds for exclusively public-side replacements, inventory work, and related project costs such as engineering can be repaid with water utility ratepayer funds without being subject to PSC approval and the restrictions of s. 196.372, Wis. Stats. This means a water revenue pledge can be used to secure the LSL Replacement Program loan in the same way this option is available for a normal SDWLP loan. Any questions regarding this should be directed to the PSC.

Back to Top

SETTING UP A MUNICIPALLY OPERATED PRIVATE SIDE LSL REPLACEMENT FUNDING PROGRAM

Municipalities have options for how they establish their private-side LSL replacement financial assistance program. Funding will only be available for projects that result in full replacement of the lead service line for that property. There are a number of things that need to be considered when deciding how to set up a private side LSL replacement funding program. For more information read:

• Considerations for Setting Up a Private Side Lead Service Line Replacement Financial Assistance Program (PUB-CF-054)
• The general LSL Replacements webpage provides information about and resources for various aspects of the replacement process.

CONTRACTING OPTIONS FOR PRIVATE SIDE LSL REPLACEMENTS

For private lead service line replacements, municipalities will still be free to choose whether to bid a municipal contract for the work, to develop a list of prequalified licensed plumbers and/or utility contractors for property owners to contract with directly, or both. Note: The Department of Safety and Professional Services (DSPS) licenses plumbers and enforces the state plumbing codes.

The following table compares the prequalified list (PQL) and municipally bid contract options.

TWO YEARS OF FUNDING

In pre-BIL versions of the LSL Replacement Program, construction had to be completed in one calendar year. This restriction no longer applies, though for any project utilizing a prequalified list, we will not provide more than two years of funding at a time. Project substantial completion will be considered to be Dec. 31 following the second construction season. In subsequent years, when utilizing a PQL for private lead service line replacements, a new award will not be made unless at least 75% of any previous award has been expended.

Attention: The two-year restriction does not apply to municipal contracts.

FEDERAL REQUIREMENTS

As with any federal funding, the LSL funding involves federal requirements. All applicants receiving funds from the BIL LSL capitalization grant will be treated as federal equivalency projects and will have to comply with the federal equivalency requirements detailed on the Federal Equivalency webpage, as applicable, including compliance with the federal Single Audit Act (see 2 CFR 200 Subpart F - Audit Requirements).

In addition to the federal equivalency requirements, all lead service line projects will be required to comply with the standard federal requirements including, but not limited to:

• Comply with one of the options for Enhancing Public Awareness of State Revolving Fund Assistance
• Complete an environmental review
• Solicit for Disadvantaged Business Enterprises
• Comply with Build America, Buy America Act/American Iron and Steel domestic procurement requirements
• Comply with Davis-Bacon and Related Acts wage rate requirements

ENVIRONMENTAL REVIEW (ER)

The LSL Replacement Program must document the potential environmental impacts of projects and activities receiving financial assistance. A National Environmental Policy Act (NEPA)-like environmental review must be completed for the property prior to the LSL replacement to ensure eligibility (this review is not done by the contractor). The Environmental Review module in the online system must be completed as part of the application submittal. For more information about the ER requirement and guidance on completing the ER module, read:

• SDWLP Environmental Review Guide (PUB-CF-060)

DISADVANTAGED BUSINESS ENTERPRISE (DBE) SOLICITATION

When financing a project through the LSL Replacement Program, all municipalities and their prime contractors must make good faith efforts to solicit for Disadvantaged Business Enterprises (DBEs) at all levels of bidding and contracting, and/or during the Request for Qualifications (RFQ) process, including advertising, when developing a prequalified list of licensed plumbers/utility contractors. DBEs include, but are not limited to, Minority Business Enterprises (MBEs) and Women's Business Enterprises (WBEs).

The DNR suggests the following language for the bid advertisement or plumber/utility contractor RFQ solicitation: "We encourage DBEs, including MBEs and WBEs, to submit bid proposals/apply for the purpose of being included on the municipality's list of prequalified licensed plumbers/utility contractors for the LSL replacement program to replace the private side of a lead service line." For more information about the DBE requirement and guidance on how to comply, read:

• DBE Solicitation for Private Side LSL Replacements (PUB-CF-075)
• DBE Requirements webpage

BUILD AMERICA, BUY AMERICA (BABA)

The BABA Act applies to all lead service line replacement projects unless the financial assistance agreement (loan) for the project totals less than $250,000. In this instance, the project will be exempt under the Small Project General Applicability Waiver. For more information about the BABA requirement and guidance on how to comply, read:

• Build America, Buy America webpage
• Build America, Buy America Act Implementation Procedures for EPA Office of Water Federal Financial Assistance Programs memorandum, dated Nov. 3, 2022.

AMERICAN IRON AND STEEL (AIS)

Note that the American Iron and Steel (AIS) requirements in the Safe Drinking Water Act continue to apply to all SDWLP and lead service line projects, including non-federal equivalency projects and projects covered by a BABA waiver. If you are unsure which applies, contact the DNR to confirm. For more information about the AIS requirement and guidance on how to comply, read:

• American Iron and Steel webpage

DAVIS-BACON AND RELATED ACTS (DBRA)

The Davis-Bacon and Related Acts (federal wage rates) apply to all lead service line replacement projects that will receive funding from the SDWLP, LSL Replacement Program, or both, and regardless of whether a municipality chooses to bid a municipal contract for the work or to develop a list of prequalified plumbers and contractors for private property owners to contract with directly.

Ultimately, Davis-Bacon compliance is up to the municipality, but the DNR wants to be certain that all applicants are aware that our guidance, and the EPA's, has changed. In October 2024, the DNR was informed by the EPA that Davis-Bacon now applies to all lead service line replacements, regardless of whether the property is owned by a business or an individual, done using a prequalified list of plumbers/contractors if the project will receive funding from the federal Drinking Water State Revolving Fund. This change comes from an update to the Davis-Bacon Act (DBA) regulations made by the U.S. Department of Labor in August 2023.

• For municipal contracts - Davis-Bacon federal wage rates are required when the municipality directly contracts for the work.
• For municipal programs - Davis-Bacon federal wage rates are required when the property owner contracts directly with a prequalified plumber/utility contractor, even if the municipality does not pay the plumber/utility contractor directly. The Davis-Bacon federal wage rates apply to all private lead service line replacements done utilizing a prequalified list, regardless of property ownership. Note that Davis-Bacon federal wage rates are not required on contracts for $2,000 or less.

WAGE DETERMINATION REQUESTS

Prior to issuing a request for bids or proposals, the municipality must obtain the wage determination (WD) for the project area by accessing Wage Determinations at SAM.gov/content/wage-determinations, then selecting the DBA option, the state and county where the work will be performed, and the DBA construction type.

"HEAVY" DBA CONSTRUCTION TYPE

In spring 2024, the DNR was informed by the U.S. Department of Labor (DOL) that for lead service line replacement projects, even when all the work is on the private side of the water service line, that the "heavy" construction type applies rather than "residential." If a municipality bid a project that includes private side lead service line replacements using only the "residential" construction type, the municipality should execute a change order to incorporate the "heavy" wage rates, even if construction has started.

OBTAIN WAGE CLASSIFICATION FOR PLUMBER

Since the "heavy" wage determinations normally do not include a plumber rate and a plumber is required under Wisconsin law to make the water service connection, a Request for Authorization of Additional Classification and Rate (Standard Form 1444) needs to be completed and submitted to the DOL in order to obtain a wage classification for a plumber. The municipality should incorporate the final conformance rate into the bid specifications and construction contracts, and copies of the conformance letter should be kept on file.

For more information about the Davis-Bacon requirement and guidance on how to comply, read:

• "Davis-Bacon Applicability Changes for LSL Replacement Projects Using a Prequalified List" article in the Environmental Loans November 2024 Newsletter.
• Complying with Davis-Bacon Requirements (PUB-CF-074)
• Prevailing Wage Resource Book
• Davis-Bacon Wage Determination Conformance Request Guide
• Conformance Process Memorandum No. 213, dated Mar. 22, 2023, Subject: Application of the Davis-Bacon and Related Acts requirement that wage rates for additional classifications, when "conformed" to an existing wage determination, bear a "reasonable relationship" to the wage rates in that wage determination.

Return to federal requirements list

FEDERAL INCOME TAX IMPLICATIONS

Pursuant to the Internal Revenue Service's Announcement 2024-10, Replacement of Lead Service Lines Under Certain Governmental Programs, when a state Drinking Water State Revolving Fund (DWSRF) program subsidizes replacement of the customer-owned portion of a lead service line, it does not result in income to the residential property owner. Accordingly, municipalities receiving LSL funding for private side lead service line replacements are not required to file information returns or furnish payee statements. In other words, residential customer-owned lead service line replacement funded by the LSL Replacement Program is exempt from income taxation. This also implies that there are potential income tax implications for non-residential properties.

Back to Top

LSL PRIORITY SCORING

The lead service line projects are subject to two types of scoring:

• LSL-specific scoring (LSL Priority Evaluation and Ranking Formula (Form 8700-383) submitted as part of the SDWLP application).
• Modified disadvantaged criteria scoring.

DISADVANTAGED CRITERIA SCORING

A modified version of the disadvantaged methodology, that removes the population and population trends criteria, will be utilized for allocating private side LSL principal forgiveness. For projects requesting that the DNR consider data from disadvantaged census tract(s), all scoring criteria will be derived at the census tract level except for county unemployment rate. This option is not available in instances where the census tract is larger than the municipal boundaries. For details about the disadvantaged community criteria used to allocate LSL PF, refer to the corresponding state fiscal year SDWLP intended use plan, which is available on the Project Lists and Intended Use Plans webpage.

ALLOCATION OF FUNDS

The LSL capitalization grant requires exactly 49% of the funding to be awarded as principal forgiveness (PF) with the remaining 51% of the funds to be utilized for set-asides and loans. Due to this need to balance the PF and loan/set-aside funding, we cannot guarantee an exact percentage of PF that will be awarded until the funding list is published. Typically, the DNR anticipates that the SDWLP and LSL Replacement Program draft funding lists will be posted on the Project Lists and Intended Use Plans webpage in September and the final funding lists in November of the same year as the application deadline.

The private side principal forgiveness is allocated first, in LSL priority score order, then the PF for remaining costs is allocated, also in LSL priority score order. Once all the LSL PF is allocated, the LSL loan funds will be allocated for costs not covered by principal forgiveness. If loan funds beyond what is available from the LSL capitalization grants are needed, these loan funds will come from the regular SDWLP, if available. The methodology for allocating BIL LSL funding is specified in the corresponding state fiscal year SDWLP intended use plan, which is available on the Project Lists and Intended Use Plans webpage.

Reminder: The LSL projects are not eligible for general SDWLP principal forgiveness. This is a change from SFY 2024. The LSL PF is not subject to, or included in, the general SDWLP PF cap.

LOAN FUNDING

Unlike previous versions of the LSL Replacement Program, not everyone will receive 100% principal forgiveness for their private side replacements. This means applicants should be prepared to cover some portion of private side replacement costs with loan funding. The only instance in which a 100% PF award will be made is if a project consists entirely of private side replacements and 100% PF has been allocated for those replacements.

The LSL funding will be awarded in a separate financial assistance agreement (FAA, AKA loan) from any other SDWLP projects.

The LSL loans can be prepaid, but any prepayments will only be accepted by the Wisconsin Department of Administration (DOA) on the normal payment dates of May 1 and Nov. 1; refer to the Loan Repayment webpage.

All loan funding from the BIL LSL capitalization grant will be made available at 0.25% interest for all eligible project costs. If loan funds beyond what is available from the LSL capitalization grants are needed, these funds will come from the regular SDWLP, if available, and the interest rate on those funds will be the normal SDWLP subsidized interest rate (either 55% or 33% of the market rate), see the Interest Rates webpage.

Back to Top

PLEDGE OPTIONS FOR LSL LOAN REPAYMENT

Municipalities receiving LSL awards have three pledge options for repayment of the loan portion: a water revenue pledge; a general obligation (GO) note pledge; or an alternative revenue pledge. Projects that are awarded 100% PF (private side only) do not need a loan repayment pledge. Under all these scenarios, when private lead service line replacements are included, the bonds are considered taxable due to the private activity.

Advantages of this are:

• an initial disbursement is not required at loan closing,
• reimbursement resolutions are not needed, and
• the 18-month rule for reimbursements does not apply.

WATER REVENUE PLEDGE

A water revenue pledge is primarily an option for financial assistance agreements (FAAs, AKA loans) that are solely covering public side LSL replacements. In this situation, a tax-exempt bond can be issued and approval under the Public Service Commission’s LSL program is not required.

Due to recent PSC decisions related to mixing water utility funding and the SDWLP’s private LSL replacement funding, it appears that the restrictions in s. 196.372, Wis. Stats., make the two programs incompatible under most circumstances. There is some possibility that in a situation where 50% principal forgiveness or less is awarded, getting PSC approval to repay the loan portion with ratepayer funds might be feasible. These situations would need to be explored with PSC on an individual basis. Information on PSC’s LSL program can be found on their LSL Replacement webpage.

We encourage applicants to instead consider a general obligation note pledge or the alternative revenue pledge, both described below.

The PSC's approval is also needed when a customer-side LSL replacement financial assistance program will be managed by water utility staff.

GENERAL OBLIGATION NOTE PLEDGE

• *Mandatory LSL replacement ordinance might be required.
• These LSL Replacement Program loans are normally for up to 10 years but can be amortized over 20 years if requested.

A mandatory replacement ordinance usually is not required when utilizing a general obligation (GO) note pledge if the loan is being repaid utilizing general tax revenues.

*If repayments to the LSL Replacement Program will come from property owner loans, please consult with your municipal attorney as to whether a mandatory LSL replacement ordinance is required (see s. 66.0627(8)(ag)., Wis. Stats.).

ALTERNATIVE REVENUE PLEDGE

• The following are required and will need to be submitted to the DNR:
  • Mandatory LSL replacement ordinance,
  • Ordinance establishing the property owner loan program, and
  • Property owner loan agreement.
• These LSL Replacement Program loans can be amortized over a maximum of 12 years with an interest rate of 0.25%.

The alternative revenue pledge option can only be used to cover private side replacement costs. Section 66.0627(8)(ag), Wis. Stats., permits a municipality to establish a loan program for property owners to replace private lead service lines.

• Private LSL Replacement Funding Alternative for Securing SDWLP Loan

The property owner loan program must be established and administered by the municipality, not the water utility, unless the utility receives PSC approval to operate the program. Repayments of property owner loans are secured by placing a special charge on the property owner's tax bill. Revenues from this property owner loan program are then pledged as security for the LSL Replacement Program loan.

• Property owner loans – The loan agreements between the municipality and the property owners can be for a maximum of 10 years with an interest rate of up to 4%.

SAMPLE ORDINANCES

The DNR strongly encourages municipalities to review the following sample ordinances and draft any of their own with a municipal attorney, bond counsel, or both:

• Sample Mandatory LSL Replacement Ordinance
• Sample Ordinance for Special Charges - Private LSL Replacement Financing

CONTACT INFORMATION

Direct questions about the Lead Service Line (LSL) Replacement Program to:

Kate Leja-Brennan, Safe Drinking Water Loan Program (SDWLP) LSL Replacement Program specialist

Back to Top