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Worksheet Grade 11 Social Studies & Civics

Grant or Loan: Financing Millbank's Sewage Plant in 1978 and 2026

Students compare what a fictional city paid for a treatment plant under a federal grant with what the same city would pay today under a state loan.

Objectives

  1. Students will calculate federal, state, and local shares of a capital project from stated percentages.
  2. Students will compute principal, interest, and total repayment on a level-principal loan.
  3. Students will explain how a change in the form of federal aid shifted cost onto local ratepayers.

Vocabulary

Debt service
The money a utility must pay back each year on loans it took out to build big projects, much like a family paying its mortgage. These payments come out of customers' water bills.
Ratepayer
A person or business that pays a utility bill. Ratepayers provide most of the money that keeps a water system running.

Also: construction grant, revolving loan fund, principal, interest, matching share, capital project

Teacher overview

For fifteen years after 1972, the federal government paid the largest share of the cost of building municipal sewage treatment plants outright, and thousands of cities built with money they never had to repay. Congress replaced that program in 1987 with revolving funds that lend instead of give. This worksheet holds the plant constant and changes only the financing, using a fictional city that built once under the grant program and must now build again under a loan. The arithmetic makes visible a policy change that is otherwise easy to miss.

Grant or Loan: Financing Millbank's Sewage Plant in 1978 and 2026 — Grade 11 Social Studies & Civics
Name: ____________________________ Date: ______________

Student Worksheet

The city of Millbank is fictional, and every figure below was invented for this worksheet.

Millbank has 8,000 households. It built its first wastewater treatment plant in 1978 with help from a federal construction grant. That plant has reached the end of its service life, and the city must build a replacement in 2026. The grant program no longer exists. The replacement will be financed entirely by a loan from the state revolving fund.

Project Total cost Financing
1978 plant $12,000,000 Federal grant 75 percent, state grant 15 percent, city pays the rest
2026 plant $30,000,000 State revolving fund loan, 20 years, 2 percent interest, no grant

The 2026 loan repays principal in 20 equal annual amounts. Interest each year is charged at 2 percent of the balance still owed at the start of that year.

  1. The 1978 plant cost $12,000,000, and the federal grant covered 75 percent. Calculate the federal share in dollars.
  2. The state grant covered 15 percent of the same $12,000,000. Calculate the state share in dollars.
  3. Subtract the $9,000,000 federal share and the $1,800,000 state share from the $12,000,000 total to find the amount Millbank itself paid in 1978.
  4. Millbank has 8,000 households. Divide the city's 1978 share of $1,200,000 by that number to find the cost per household.
  5. The 2026 loan is $30,000,000, repaid in 20 equal annual principal amounts. Calculate the annual principal payment.
  6. In the first year the full $30,000,000 is still owed. Calculate the interest charged that year at 2 percent.
  7. Add the $1,500,000 principal payment to the $600,000 first-year interest to find the total first-year payment.
  8. Across the 20 years, the balances owed at the start of each year add to $315,000,000. Calculate the total interest at 2 percent.
  9. Add the $30,000,000 principal to the $6,300,000 in total interest to find what Millbank repays altogether.
  10. Divide the total repayment of $36,300,000 by 8,000 households to find the total cost per household across the 20 years.
  11. In three or four sentences, compare the 1978 cost per household of $150 with your answer to item 10. Explain what changed in federal policy between the two projects and who now carries the cost.
  12. In two or three sentences, give one argument a member of Congress could make for lending rather than granting.

From Water for Schools (waterforschools.org). This material is in the public domain (CC0) and may be copied, edited, and shared freely.

Answer Key
  1. Answer: $9,000,000. Multiply $12,000,000 by 0.75.
  2. Answer: $1,800,000. Multiply $12,000,000 by 0.15.
  3. Answer: $1,200,000. Subtract $9,000,000 and $1,800,000 from $12,000,000, which leaves 10 percent of the total.
  4. Answer: $150 per household. Divide $1,200,000 by 8,000 households.
  5. Answer: $1,500,000 per year. Divide $30,000,000 by 20 years.
  6. Answer: $600,000. Multiply $30,000,000 by 0.02.
  7. Answer: $2,100,000. Add $1,500,000 in principal to $600,000 in interest.
  8. Answer: $6,300,000. Multiply $315,000,000 by 0.02.
  9. Answer: $36,300,000. Add $30,000,000 in principal to $6,300,000 in interest.
  10. Answer: $4,537.50 per household. Divide $36,300,000 by 8,000 households.
  11. Answer: The 1978 cost per household was $150, while the 2026 total is $4,537.50, which is more than thirty times as much, although part of that gap reflects construction-cost inflation since 1978. The federal government stopped paying most of the construction cost and began lending instead, so the money now returns to the fund with interest. The cost lands on Millbank ratepayers through their sewer bills rather than on federal taxpayers. Accept any answer that names the shift from grant to loan and identifies local ratepayers as the group now paying.
  12. Answer: Repaid loans recycle through the fund and finance the next city's project, so one federal appropriation can build many plants over time. Accept any answer naming revolving capacity, a limit on federal spending, or the argument that a city that borrows will size its project more carefully.

Differentiation

Support

Give these students the fictional table with the federal and state shares already computed, so items 1 and 2 become a check of the reading. Provide the level-principal loan structure as a filled first row of a three-year amortization chart before item 5, and reduce items 11 and 12 to two sentences each.

Extension

Ask these students to compute what the 2026 project would have cost Millbank households if the old grant terms had still applied, then to write a paragraph on why Congress might have judged the change worthwhile even knowing this result.

ELL supports

Pre-teach grant, loan, principal, interest, and ratepayer using a two-column chart with the headings Money You Keep and Money You Return. Provide sentence frames for items 11 and 12: "In 1978 each household paid ___, and in 2026 each household pays ___," and "One reason to lend instead of give is ___." Allow calculations to be shown as labeled arithmetic without written explanation.

Extensions

Have students find their own state's clean water revolving fund project list, which most state environmental agencies publish each year, identify one community that received a loan, and write a paragraph on what the project was for and how long the community has to repay.