Learn how a nontraditional loan program funds septic system repair and replacement in a sensitive waterfront environment – and how it might work in your service area
Like any other body of water near a large settlement of people, Puget Sound suffers from wastewater systems that are leaking, failing or not up to modern standards. In partnership with local wastewater
professionals and a nonprofit lender, the Tacoma-Pierce County Health Department created a loan program that allows homeowners to install new systems while delaying repayment for many years. Although it is just beginning, the Clean Water Loan Program has been met with an enthusiastic reception from the local wastewater industry and its customers.
Gary Porter is onsite sewage program manager for the health department and talked to Pumper about the program.
Pumper: What damage was caused by the lack of proper treatment?
Porter: In Pierce County we have a Marine Recovery Area located in Puget Sound. These are designated near-shore waters with poor water quality, and our work focuses on improving water quality within the recovery areas. In Puget Sound there are a lot of shellfish beds — oysters, clams, geoducks and mussels — and these are very important to recreational shellfish harvesting and to the local economy. Many jobs are directly or indirectly related to the shellfish industry. When landowners correct a wastewater problem we see the result in improved water quality and that can increase the areas for shellfish. The challenge was to have the improvements made on a large scale.
Pumper: What types of onsite systems are installed in your area?
Porter: For new permits we have only about 15 percent gravity systems. Some septic systems have pressure distribution of effluent because the useable soils are shallow or the drainfield is uphill from the treatment tank. We also have a mix of other technologies. There are ATUs, and many properties with a Glendon system. That’s like a mound system, but the tank is open on top and above grade. Wastewater is pumped in from the bottom, and as it is pushed up, it flows through an up-flow filter. Treated water is pulled out through the overlying sand cap by capillary action, flows over the sides of the tank and disperses into the soil. We’re also starting to see more drip irrigation systems. As is the case in many areas, most of the lots that can accept traditional septic systems are already in use. Most people building a new home must look to alternative technologies.
Pumper: How does the loan program work?
Porter: We started with a pool of about $500,000. This came from a U.S. Environmental Protection Agency grant, from the health department’s own reserves, and from a dollar-matching program through our financial partner Craft3. They’re a local nonprofit, non-bank lender that specializes in community development. I could say landowners are eligible for repair loans, but in truth most of the repair estimates hit $15,000 or $20,000, so it makes more sense to replace the whole system. We’re still talking about the cost of a car, and many people are not able to find that kind of money. People who get these loans get a good deal. For people with an annual income up to $35,000, the APR is 2.08 percent. They have no monthly payments, but when the house is sold the loan must be repaid from the proceeds of the sale. If there is no sale in 15 years, the loan comes due, but there can be a five-year extension. For people in the income range of $35,000 to $55,000 the APR is 4.42 percent. They have to pay interest, but there are no payments on the principal until the home is sold or 15 years have elapsed, and they can get the same five-year extension. People with an income of more than $55,000 pay an APR of 5.7 percent, and they must pay back interest and principal over 15 years. It’s still a good deal. On a $15,000 loan the monthly payment works out to $124.
Pumper: What motivated you to offer the loans?
Porter: It started with inspection requirements. Pierce County is one of 12 counties along Puget Sound, and there is a great deal of focus on protecting the water in the sound. There’s an emphasis on this from the state Department of Health, and a part of that emphasis is on making septic inspections routine. Each county formulated its own inspection code. In Pierce County we say gravity systems must be inspected every three years, pressurized systems every three years, any kind of ATU annually, mound systems and Glendon systems annually, sand filters every three years and offsite drainfields every three years. When we implemented the inspection program in 1997, we immediately began hearing objections from people who feared the inspections would reveal problems too expensive for them.
We realized we had to help people with those costs if we were going to make any progress on water quality. When we asked lenders to give us proposals, Craft3 was the only one to apply. In February 2014 we signed a contract with them that runs through 2016.
Pumper: Was this the first loan program you had?
Porter: No. When the inspection requirements went into effect, we looked for a way to help people who had trouble paying for inspections. We received an EPA grant administered by the state, about $170,000. Homeowners can get a discount for about half the cost of an inspection, and if a system needs pumping they can get a discount to also cover about half the cost of that. But we struggled to give the money away because of that fear of what the inspections would find.
Pumper: How did wastewater professionals help?
Porter: They were really excited about the program and helped a great deal. We have an industry advisory group we meet with about four times a year, and there were other meetings as we spread word about the loan program through the community. Professionals liked it because it put money back into the industry. They also took on a big part of the community education just by talking to their customers. A lot of our referrals come from people who were told about the program by wastewater industry professionals.
Pumper: How can people in other areas do what you have done?
Porter: The first thing I would suggest is finding a financial partner. If Craft3 wasn’t around I don’t know what we would have done. We’re focused on improving the health of our community. We didn’t want to be in the loan business. One advantage of Craft3 is that it’s not a bank, so it is not constrained by strict state and federal regulations and can work with people to make repairs happen. Even with that flexibility Craft3 denied six applicants. Three hadn’t paid their property taxes, and the others had no equity to secure the loan and no income. Another advantage of Craft3 is their people understand the process of putting in an onsite system. For example, that you have to allow money for a designer. Not all banks understand these points. It helped that we had some seed money to put into the program. We considered that $500,000 pool a minimum. We want the program to run on its own for a couple of years and provide a significant number of loans. This will give Craft3 time to seek more money from foundations and other donors, and we will apply for more EPA money when the time comes for the next round of grants. As of mid-2014 we had five loans fully funded and another four in various stages of approval. We’re still in the infancy of this program and we’re thinking hard about how to keep the program going and how to spread the word, but we’re very excited about what we’ve been able to do and where we’re going.