Interest Rates

The Clean Water Fund Program (CWFP) and Safe Drinking Water Loan Program (SDWLP) provide subsidy to municipalities to buy down the market rate on program loans to the reduced interest rates described in the table shown below. The fixed interest rate applied to the program loan is based on the market rate in effect on the day the municipal governing body signs the financial assistance agreement (FAA), also known as a loan.

• Interest rate determination
• Market rates
• Subsidy
• Loan terms
• Bonds
• Median household income and population
• Contact information

Interest rate determination

The Bipartisan Infrastructure Law-funded Lead Service Line Replacement Program interest rate is not tied to the current market rate and is instead set at 0.25%. All loan funding from the BIL LSL capitalization grant will be made available at 0.25% interest for all eligible project costs.

Non-traditional pilot projects (e.g., water quality trading) are subject to different requirements than typical CWFP projects. Municipal borrowers will secure pilot project loans by issuing taxable bonds to the CWFP and exemptions to this will be dealt with on a case-by-case basis. Pilot projects are eligible for loans with an interest rate as low as 0%.

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Market rates

On a quarterly basis, the Wisconsin Department of Administration (DOA) assesses the market rates on which the program subsidies are based. Note that DOA reserves the right to make an increase, if needed, to market rates at any time.

There is no change in the market rate for financial assistance agreements approved by a municipality’s governing body on or after Jan. 1, 2025:

• The market rate for tax-exempt loans with loan terms of 20 years or less will remain at 4.000%, and with loan terms of 21-30 years will remain at 4.200%.
• The market rate for taxable loans with loan terms of 20 years or less will remain at 4.494%, and with loan terms of 21-30 years will remain at 4.719%.

The market rate for loans issued on a taxable basis will be slightly higher than the market rate for loans issued on a tax-exempt basis. The market rate for loans issued on a taxable basis is determined by dividing the market rate for 20-year or 30-year loans issued on a tax-exempt basis by the prior calendar year's average taxable/tax-exempt ratio. Calendar year 2023’s average taxable/tax-exempt ratio is 89%.

In addition, the market rate for loans with terms longer than 20 years will be slightly higher than the market rate for 20-year loans.

Subsidy

Interest rate subsidy

Program subsidy buys down the market rate on loans (reduced interest rate loans). Most eligible project costs are funded at a percentage of the market rate, in accordance with ss. 281.58(12) and 281.61(11), Wis. Stats., and ss. NR 162.10 and 166.13, Wis. Adm. Code. Some costs, projects or portions of projects are ineligible for interest rate subsidy and thus receive market rate funding. In the CWFP, a portion of a project may be at the market rate, depending on the project’s parallel cost percentage.

Principal forgiveness

Some municipalities may also be eligible for additional subsidy in the form of principal forgiveness (PF). The PF is comparable to a grant because it reduces the size of the loan, thus reducing annual principal and interest payments. Note: In other states, principal forgiveness may be referred to as partial loan forgiveness.

To be clear, the criteria described on this page only determine the interest rate a municipality qualifies for and is not connected to any additional subsidy a municipality may be eligible for. A separate set of criteria are used to determine principal forgiveness eligibility and are available on the Principal Forgiveness webpage and in the corresponding program’s annual intended use plan.

Loan terms

Loan terms are typically 20 years. Loan terms exceeding 20 years and of up to 30 years are available. The loan term cannot be greater than the useful life of the project.

Beginning with state fiscal year 2025 financing, the Design Life Calculation Worksheet must be uploaded with the financial assistance application for all projects (even 20-year loan terms) unless the project consists solely of installation or replacement of pipeline and associated appurtenances. The CWFP and SDWLP worksheets are available on the Loan Terms webpage.

Bonds

Beginning with state fiscal year 2025 financing, the DOA and DNR have added a market rate for taxable bonds to the CWFP and SDWLP annual intended use plans. Municipal borrowers typically secure a CWFP or SDWLP loan by issuing a tax-exempt revenue or general obligation (G.O.) bond to the program.

Please note that under the state constitution, loans secured with a general obligation note cannot exceed 20 years.

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Median household income and population

The Environmental Loans programs use a municipality’s median household income (MHI) and population size to determine the amount of interest rate subsidy. The MHI and population data can be accessed from the Environmental Loans Data Sources web page.

For State Fiscal Year (SFY) 2025 Projects:

• Wisconsin State MHI = $72,458
• 80% of State MHI for determinations = $57,966
  • Municipality's MHI must be $57,966 or less to meet the 80% of MHI criterion for program determinations.
• 65% of State MHI for determinations = $47,098
  • Municipality’s MHI must be $47,098 or less to meet the 65% of MHI criterion for program determinations.

For SFY 2024 Projects:

• Wisconsin State MHI = $67,080
• 80% of State MHI for determinations = $53,664
  • Municipality's MHI must be $53,664 or less to meet the 80% of MHI criterion for program determinations.
• 65% of State MHI for determinations = $43,602
  • Municipality’s MHI must be $43,602 or less to meet the 65% of MHI criterion for program determinations.

MHI cutoff clarification

All MHI calculations used to determine the subsidized interest rate will be rounded to the third place after the decimal. This policy is truer to language in sections of the CWFP and SDWLP statutes that read XX% or less. (e.g., 80.0001% would be equal to 80.000%; 80.0005% would be equal to 80.001% and considered greater than 80.000%.)

Contact information

Please direct any market and interest rate questions to DOA Capital Finance Office staff at DOAEIF@wisconsin.gov.

Please direct any MHI or population questions to the appropriate coordinator:

Lisa Bushby, Clean Water Fund Program coordinator

Noah Balgooyen, Safe Drinking Water Loan Program coordinator

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