Summary

In 2023, the Federal Emergency Management Agency (FEMA) began offering a new form of Hazard Mitigation Assistance (HMA) through a new program known as the Safeguarding Tomorrow Revolving Loan Fund Program (STRLF). The STRLF program was established by the STORM Act, which amended the Stafford Act to authorize FEMA to provide capitalization grants to eligible entities to establish revolving loan funds (RLFs). These RLFs are to provide low-interest loans to local governments to mitigate the impacts of natural hazards such as drought, prolonged periods of intense heat, severe storms, wildfires, floods, erosion, earthquakes, and other natural hazards. STRLF funds may also be used for building code adoption and enforcement, and zoning and land use planning changes. STRLF loans complement FEMA’s other HMA grant programs. An RLF is a self-replenishing financial mechanism that starts with a base level of capital, often consisting of grants from the federal government or a state, or private investment. Generally, RLFs can target specific types of borrowers or specific types of activities. Loan repayments recapitalize the original fund and enable the RLF to make additional loans. This may create an ongoing source of funding and potentially reduce the need for annual appropriations. RLFs for states have been operating for many years through the Clean Water State Revolving Fund (CWSRF, established in 1987), and the Drinking Water State Revolving Fund (DWSRF, established in 1996). The STRLF represents the first time that an RLF has been set up to fund hazard mitigation. Eligibility and Requirements Entities eligible for the STRLF include (1) states, (2) territories, (3) the District of Columbia, and (4) federally recognized tribes that have received a major disaster declaration pursuant to Section 401 of the Stafford Act. Tribes are the only entities for which receipt of a major disaster declaration is an eligibility requirement. FEMA has determined that 20 tribal nations currently have a qualifying major disaster declaration. Eligible entities must also have a FEMA-approved Hazard Mitigation Plan and an STRLF Intended Use Plan, which must be provided to the public for review and comment before application. FEMA does not require eligible entities to submit a benefit-cost analysis and intends to develop a more simplified grant application process. Figure 1 shows the phases of the STRLF program. Figure 1. Phases of Safeguarding Tomorrow Revolving Loan Fund Program / Source: Adapted by CRS from FEMA, Safeguarding Tomorrow Revolving Loan Fund Program, https://www.fema.gov/sites/default/files/graphics/fema_storm-program-phases-process-flow.jpg. In other HMA grant programs, states, territories, and tribes (STTs) are used as pass-through entities, and send subapplicant (e.g., local government) requests to FEMA for review. Under STRLF, however, FEMA empowers the eligible entities to make funding decisions and award loans directly. Communities cannot apply directly to FEMA for capitalization grants, but can apply to participating entities for loans. To be awarded a loan, a local government must have an approved local hazard mitigation plan. Use of Funds The primary priority of the STRLF program is to capitalize STT-established RLFs that will provide direct low-interest loans to local governments most in need of assistance, including low-income geographic areas and underserved communities. Projects can assist homeowners, businesses, certain nonprofit organizations, and communities in reducing their disaster risk, thereby decreasing future loss of life and property, costs of insurance, and federal disaster payments. In awarding capitalization grants, the STORM Act directs FEMA to give priority to projects that increase resilience and reduce the risk of harm to natural and built infrastructure; involve a partnership between two or more eligible entities; take into account regional impacts of hazards; and increase resilience of major economic sectors or critical national infrastructure. Entity RLFs can be used differently than other FEMA HMA programs, to meet needs such as upfront project design costs; smaller projects that may not qualify for other HMA grant programs; projects that do not meet the cost-effectiveness guidelines applicable for other HMA programs; or the nonfederal cost share of other HMA grants. Loan Terms All entities are required to provide matching funds from nonfederal sources to their loan fund in an amount equal to at least 10% of the capitalization grant. Interest rates on the loans cannot exceed 1%. Annual principal and interest payments must start no later than one year after the completion of projects for which the loan was made and must be fully paid within 20 years, except for loans provided to projects in low-income geographic areas, which must be paid off not later than 30 years after the date on which the project is completed. A participating entity may not provide a loan greater than $5 million to fund a single hazard mitigation project. Available Funding The STORM Act authorized the appropriation of $100 million annually for FY2022 and FY2023 to make grants to capitalize new revolving funds. The Infrastructure Investment and Jobs Act (IIJA) appropriated $500 million for the STRLF, with $100 million for each of FY2022 to FY2026. The funding appropriated by the IIJA to the STRLF is less than the amounts that established other revolving loan funds. For example, when the DWSRF was established, Congress authorized appropriations at a level of $599 million for FY1994 and $1 billion annually for each of FY1995 through FY2003. Between 1997 and 2018, Congress appropriated $22.16 billion to the DWSRF. For each of the first two years of the CWSRF, Congress appropriated $1 billion, with $2 billion for the following year. Building on an investment of $49.6 billion, state CWSRF funds have provided $163 billion to communities through 2022. FEMA released the first Notice of Funding Opportunity (NOFO) for the STRLF program on December 20, 2022, with $50 million available for FY2023. FEMA amended the NOFO on January 27, 2023, to reflect changes to the STORM Act, including expanded eligibility to territories and certain federally recognized tribes. FEMA received applications for FY2023 that exceeded the $50 million available; however, the majority of states and territories did not apply for STRLF funding, nor did any tribes. FEMA suggested that this may indicate that eligible entities are not prepared to administer an RLF.

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