Using the Texas Drinking Water State Revolving Fund (DWSRF) for Your Rural Water System

What does the Drinking Water State Revolving Fund pay for?

Projects that bring a water system into compliance or keep it there. The federal Safe Drinking Water Act authorizes the fund, per TWDB's DWSRF program page. TWDB's SFY 2027 DWSRF Intended Use Plan, effective October 1, 2026, lists eligible work:

• Correcting deficiencies in water quality, capacity, pressure and water loss
• Upgrading or replacing water systems
• Consolidation, where one system serves another
• Buying capacity in a system, or buying a whole system
• Green projects and source water protection

The plan also lists what it will not fund. That includes projects mainly meant to serve growth, reservoirs and dams, water rights (unless bought with a system in a consolidation), routine lab fees and operating costs, and fire protection unless it is incidental to the main scope.

Every project must be consistent with the most recently adopted state water plan. TWDB adopted the 2027 State Water Plan on July 23, 2026.

Who can borrow from the Texas DWSRF?

Almost any community water system, public or private. The SFY 2027 plan lists:

• Existing or proposed community public water systems, including political subdivisions, nonprofit water supply corporations and privately owned community systems
• Nonprofit, non-community public water systems
• State agencies

That private-system eligibility is the big difference from the clean water fund, where a private entity can only borrow for nonpoint source or estuary work.

Systems in significant noncompliance, or without the financial, managerial and technical capacity to run the system, qualify only if the funding will bring them into compliance.

How much of a DWSRF loan can be forgiven?

Up to 70 percent for disadvantaged communities, and up to all of it for some very small or urgent projects.

The disadvantaged test is the same one the clean water fund uses: service area income at or below 75 percent of the state's, plus a household cost factor. The main SFY 2027 options are:

• Disadvantaged communities get 70 percent of DWSRF-funded costs forgiven.
• Disadvantaged systems that serve 10,000 or fewer people, or are rural, can add up to $1.5 million in forgiveness and $3 million at 0 percent.
• Very small systems serving 1,000 or fewer people, with income no higher than 150 percent of the state's, can get up to 100 percent forgiven, capped at $500,000, for health, compliance or water quantity problems.
• Urgent need projects can get up to 100 percent forgiven, capped at $500,000, or $800,000 for a disadvantaged community.
• First-time service projects can add up to $200,000.

Urgent need covers a drought that will cut off service within 180 days, a catastrophe affecting over 20 percent of connections, imminent health issues such as contamination above standards, and flood damage in a declared disaster. It does not cover a facility that failed from age or poor maintenance.

For SFY 2027, TWDB set aside $1.6 million of urgent need forgiveness for contaminants such as lead, radionuclides and arsenic.

No project can receive more than $10 million in forgiveness from all options. The rest is a loan at 35 percent below the market rate for equivalency projects, or 30 percent below for others, for up to 30 years.

How does the DWSRF lead service line money work?

It runs through separate lead service line Intended Use Plans, funded by the federal Infrastructure Investment and Jobs Act. TWDB's lead service line replacement page lists eligible work:

• Building or updating a service line inventory, including locating and mapping lead lines
• Removing lead lines completely, public and private portions, and replacing them
• Non-routine lead sampling as part of the project
• Reimbursement for initial inventory work done to DWSRF rules for the federal Lead and Copper Rule Revisions

Every project must meet the lead program's disadvantaged criteria. For the SFY 2024 through 2026 lead plans, that meant income no more than 150 percent of the state's.

Financing is 51 percent forgiveness and 49 percent loan, and the loan portion for inventory work is at 0 percent. All lead projects follow full federal rules. The SFY 2027 lead solicitation closed August 14, 2026.

How do you apply for the Texas DWSRF?

File a Project Information Form (PIF) by TWDB's March deadline, then wait for an invitation. The SFY 2027 deadline was March 6, 2026. The cycle and paperwork match the clean water fund, which our guide to the Clean Water State Revolving Fund walks through step by step.

The ranking differs. TCEQ rates drinking water projects, mainly on health and compliance, such as violations of federal maximum contaminant levels, then on secondary standards and physical deficiencies. TWDB adds points for effective management and disadvantaged status. Ties go to the smaller population.

If invited, expect these requirements, drawn from the plan, TWDB's program page and the DWSRF program sheet (December 2025):

• A NEPA-type environmental review
• Davis-Bacon wage rates and American Iron and Steel rules
• Build America, Buy America for equivalency projects
• Water conservation and drought contingency plans for assistance over $500,000
• Current financial audits and three years of Water Use Survey responses
• A financial, managerial and technical capacity assessment

What extra rules catch small water systems?

Three show up often: water loss, well alternatives and asset management.

If your real or apparent water loss meets or exceeds its threshold under TWDB's water loss rules, 31 TAC §358.13, part of the money must go to reducing it, unless TWDB waives that because you are already addressing it. A detailed water loss analysis tells you where that money should go.

Systems serving 500 or fewer people must self-certify that they considered publicly owned wells as a water source, unless they already use one and the project adds no new source.

Asset management pays twice. Any eligible entity can borrow up to $100,000 at 0 percent to prepare the tools TWDB's small systems program requires. A small system that has implemented them can get up to $500,000 of a project in its plan at 0 percent.

Is your water system ready for the next DWSRF round?

A no on item 1 or 2 means the DWSRF is not your fund; any other no is work to finish before the PIF deadline.

1. Are you a community water system, or a nonprofit non-community system?
2. Does the project fix compliance, quality, capacity, pressure or water loss, rather than mainly serve growth?
3. Is it consistent with the 2027 State Water Plan?
4. Do you have an engineer-certified cost estimate and a milestone schedule?
5. Do you have current income data if you want disadvantaged status?
6. Do you know where your latest water loss audit puts you against TWDB's threshold?
7. Are three years of Water Use Survey responses on file?

Then ask your engineer and TWDB's regional team whether urgent need, very small system or lead money fits, and whether the project is likely to be equivalency.

A note on limits: this is general education from TWDB's public documents, current as of October 2026. The amounts and rates above are from the SFY 2027 plans and change yearly, so confirm with TWDB.

Frequently asked questions

Can a privately owned water system get DWSRF money?

Yes. Privately owned community water systems are eligible applicants, along with political subdivisions and nonprofit water supply corporations.

Does the DWSRF pay for a new well to serve growth?

Not if growth is the main purpose. The plan bars projects primarily meant to serve growth. A well that fixes a capacity or quality deficiency for the system is a different case.

I manage a nonprofit water supply corporation serving about 800 people, and our well has an arsenic violation. Which DWSRF options should we ask TWDB about?

Ask about the very small systems option, for systems of 1,000 or fewer people, and urgent need, which requires current noncompliance with TCEQ and a project designed to fix it. The SFY 2027 urgent need set-aside names arsenic among its target contaminants.

I'm the public works director for a small Texas city with lead service lines in our inventory. Can DWSRF lead money replace the private side of the line too?

Yes. The lead program funds complete removal of lead lines, public and private portions. The project must meet the lead program's disadvantaged criteria, and financing has been 51 percent forgiveness and 49 percent loan.

Related resources

• Making the Most of the Economically Distressed Areas Program (EDAP) for Your Rural Water and Sewer System
• The State Water Implementation Fund for Texas (SWIFT) for Rural Water and Sewer Communities
• Rural Water Assistance Fund (RWAF): Eligibility and Status
• The USDA Water and Waste Disposal Loan and Grant Program in Texas: Who Qualifies and How It Works

Need drinking water upgrades your rates cannot carry alone?

Send us your latest compliance letters, your system map and the project you have in mind. We will help you work out which DWSRF options fit and what the PIF and cost estimate need to show.

We specialize in:

• Funding applications and engineering reports
• Water distribution system design
• Water and sewer utility design
• Water loss and condition studies
• Capital improvement planning for small utilities
• Construction administration

Modern Engineering Solutions, McKinney, Texas. Contact: (214) 833-6748 or mod-eng.com