Environmental Quality, Drinking Water

Section R309-700-5

Loan, Credit Enhancement, Interest Buy-Down, and Hardship Grant Consideration Policy

Notice of Proposed Rule

(Amendment)

DAR File No.: 34552
Filed: 04/04/2011 03:19:19 PM

RULE ANALYSIS

Purpose of the rule or reason for the change:

The purpose of this change is to revise the point system in Table 2 at Section R309-700-5, which is used to calculate interest rates for loans under the state revolving loan program administered by the Division of Drinking Water, to be more compatible with the goals of the Drinking Water Board.

Summary of the rule or change:

This rule defines the State's Drinking Water Revolving Loan Program; including definitions, eligible applicants, eligible projects, funding options, interest rate calculations, project priority calculations, etc.

State statutory or constitutional authorization for this rule:

• Title 73, Chapter 10c

Anticipated cost or savings to:

the state budget:

Information used to calculate interest rates is already included in the funding application. The amended rule simply reallocates the points to be more compatible with the objectives of the drinking Water Board. No additional staff time and no costs or savings are anticipated.

local governments:

None anticipated, data collection is already part of the application process.

small businesses:

None anticipated, data collection is already part of the application process.

persons other than small businesses, businesses, or local governmental entities:

None anticipated, data collection is already part of the application process.

Compliance costs for affected persons:

None anticipated, data collection is already part of the application process.

Comments by the department head on the fiscal impact the rule may have on businesses:

The Department of Environmental Quality agrees with the comments in the cost and compliance summaries above.

Amanda Smith, Executive Director

The full text of this rule may be inspected, during regular business hours, at the Division of Administrative Rules, or at:

Environmental Quality
Drinking Water
195 N 1950 W
SALT LAKE CITY, UT 84116-3085

Direct questions regarding this rule to:

• Kenneth Wilde at the above address, by phone at 801-536-0048, by FAX at 801-536-4211, or by Internet E-mail at kwilde@utah.gov

Interested persons may present their views on this rule by submitting written comments to the address above no later than 5:00 p.m. on:

05/31/2011

This rule may become effective on:

07/01/2011

Authorized by:

Ken Bousfield, Director

R309. Environmental Quality, Drinking Water.

R309-700. Financial Assistance: State Drinking Water State Revolving Fund (SRF) Loan Program.

R309-700-5. Loan, Credit Enhancement, Interest Buy-Down, and Hardship Grant Consideration Policy.

(1) Board Priority Determination. In determining the priority for financial assistance the Board shall consider:

(a) The ability of the applicant to obtain funds for the drinking water project from other sources or to finance such project from its own resources;

(b) The ability of the applicant to repay the loan or other project obligations;

(c) Whether a good faith effort to secure all or part of the services needed from the private sector through privatization has been made; and

(d) Whether the drinking water project:

(i) meets a critical local or state need;

(ii) is cost effective;

(iii) will protect against present or potential hazards;

(iv) is needed to comply with the minimum standards of the Federal Safe Drinking Water Act, 42 USC, 300f, et. seq. or similar or successor statute;

(v) is needed to comply with the minimum standards of the Utah Safe Drinking Water Act, Title 19, Chapter 4 or similar or successor statute.

(vi) is needed as a result of an Emergency.

(e) The overall financial impact of the proposed project on the citizens of the community, including direct and overlapping indebtedness, tax levies, user charges, impact or connection fees, special assessments, etc., resulting from the proposed project, and anticipated operation and maintenance costs versus the median income of the community;

(f) Consistency with other funding source commitments which may have been obtained for the project;

(g) The point total from an evaluation of the criteria listed in Table 1;

 

TABLE 1

NEED FOR PROJECT

                                                  POINTS

1. PUBLIC HEALTH AND WELFARE (SELECT ONE)



A. There is evidence that waterborne

   illnesses have occurred                          15

B. There are reports of illnesses which

   may be waterborne                                10

C. No reports of waterborne illness, but

   high potential for such exists                    5

D. No reports of possible waterborne

   illness and low potential for such exists         0



2. WATER QUALITY RECORD (SELECT ONE)



A. Primary Maximum Contaminant Level (MCL)

   violation more than 6 times in preceding

   12 months                                        15

B. In the past 12 months violated a primary

   MCL 4 to 6 times                                 12

C. In the past 12 months violated a primary

   MCL 2 to 3 times or exceeded the Secondary

   Drinking Water Standards by double                9

D. In the past 12 months violated MCL 1 time         6

E. Violation of the Secondary Drinking Water

   Standards                                         5

F. Does not meet all applicable MCL goals            3

G. Meets all MCLs and MCL goals                      0



3. VERIFICATION OF POTENTIAL SHORTCOMINGS (SELECT ONE)



A. Has had sanitary survey within the last

   year                                              5

B. Has had sanitary survey within the last

   five years                                        3

C. Has not had sanitary survey within last

   five years                                        0

4. GENERAL CONDITIONS OF EXISTING FACILITIES (SELECT ALL

   THOSE WHICH ARE TRUE AND PROJECT WILL REMEDY)



A. The necessary water treatment facilities do

   not exist, not functioning, functioning but

   do not meet the requirements of the Utah

   Public Drinking Water Rules (UPDWR)              10

B. Sources are not developed or protected

   according to UPDWR                               10

C. Source capacity is not adequate to meet

   current demands and system occasionally

   goes dry or suffers from low pressures           10

D. Significant areas within distribution

   system have inadequate fire protection            8

E. Existing storage tanks leak excessively

   or are structurally flawed                        5

F. Pipe leak repair rate is greater than

   4 leaks per 100 connections per year              2

G. Existing facilities are generally sound

   and meeting existing needs                        0



5. ABILITY TO MEET FUTURE DEMANDS (Select One)



A. Facilities have inadequate capacity and

   cannot reliably meet current demands             10

B. Facilities will become inadequate within

   the next three years                              5

C. Facilities will become inadequate within

   the next five to ten years                        3



6. OVERALL URGENCY  (Select One)



A. System is generally out of water.  There

   is no fire protection or water for

   flushing toilets                                 10

B. System delivers water which cannot be

   rendered safe by boiling                         10

C. System delivers water which can be

   rendered safe by boiling                          8

D. System is occasionally out of water               5

E. Situation should be corrected, but is

   not urgent                                        0



TOTAL POSSIBLE POINTS FOR NEED FOR

PROJECT                                            100

 

(h) Other criteria that the Board may deem appropriate.

(2) Drinking Water Board Financial Assistance Determination. The amount and type of financial assistance offered will be based on the following considerations:

(a) An evaluation based upon the criteria in Table 2 of the applicant's financial condition, the project's impact on the community, and the applicant's commitment to operating a responsible water system.

The interest rate to be charged by the Board for its financial assistance will be computed using the number of points assigned to the project from Table 2 to reduce, in a manner determined by Board resolution from time to time, the most recent Revenue Bond Buyer Index (RBBI) as published by the Bond Buyer's Guide. The interest rate so calculated will be assigned to the financial assistance. To encourage rapid repayment of a loan the Board will increase the interest rate 0.02 per cent (0.02%) for each year the repayment period exceeds five (5.0) years.

For hardship grant consideration, exclusive of planning and design grants or loans described in Sections R309-700-6, 7 and 8, the estimated annual cost of drinking water service for the average residential user should exceed 1.75% of the median adjusted gross household income from the most recent available State Tax Commission records or the local median adjusted gross income (MAGI) is less than or equal to eighty-percent (80.0%) of the State's median adjusted gross income. When considering funding for planning and design grants and loans described in Sections R309-700-6, 7 and 8, the Board will consider whether or not the applicant's local MAGI meets the above criteria for hardship grant funding. If, in the judgment of the Board, the State Tax Commission data is insufficient, the Board may accept other measurements of the water users' income (i.e. local income survey or questionnaire when there is a significant difference between the number of service connections for a system and the number of tax filings for a given zip code or city). The Board will also consider the applicant's level of contribution to the project.

 

TABLE 2

FINANCIAL CONSIDERATIONS

                                                  POINTS

1. COST EFFECTIVENESS RATIO (SELECT ONE)

A. Project cost $0 to $500 per benefitting

   connection                                      [13]16

B. $501 to $1,500                                  [11]14

C. $1,501 to $2,000                                 [9]11

D. $2,001 to $3,000                                 [6]8

E. $3,001 to $5,000                                 [3]4

F. $5,001 to $10,000                                 1

G. Over $10,000                                      0





2. CURRENT LOCAL MEDIAN ADJUSTED GROSS INCOME (AGI) (SELECT ONE)



A. Less than 70% of State Median AGI                [16]19

B. 71 to 80% of State Median AGI                    [14]16

C. 81 to 95% of State Median AGI                    [12]13

D. 96 to 110% of State Median AGI                    9

E. 111 to 130% of State Median AGI                   6

F. 131 to 150% of State Median AGI                   3

G. Greater than 150% of State Median AGI             0



3. APPLICANT'S COMMITMENT TO PROJECT

PROJECT FUNDING CONTRIBUTED BY APPLICANT (SELECT ONE)



A. Greater than 25% of project funds                [15]17

B. 15 to 25% of project funds                       [12]14

C. 10 to 15% of project funds                        [9]11

D. 5 to [9]10% of project funds                    [6]8

E. 2 to [4]5% of project funds                     [3]4

F. Less than 2% of project funds                     0



4[ and 5]. ABILITY TO REPAY LOAN:



4. WATER BILL (INCLUDING TAXES) AFTER PROJECT IS

    BUILT RELATIVE TO LOCAL MEDIAN ADJUSTED GROSS

    INCOME (SELECT ONE)



A. Greater than 2.50% of local median AGI           [15]16

B. 2.01 to 2.50% of local median AGI                [11]12

C. 1.51 to 2.00% of local median AGI                 [7]8

D. 1.01 to 1.50% of local median AGI                 3

E. 0 to 1.00% of local median AGI                    0



[5. TOTAL DEBT LOAD (PRINCIPAL ONLY) OF APPLICANT AFTER

PROJECT IS CONSTRUCTED (INCLUDING WATER AND SEWER DEBT,

LIGHTING DEBT, SCHOOL DEBT, ETC.) (SELECT ONE)




A. Greater than 12% of fair market value            15

B. 8.1 to 12% of fair market value                  12

C. 4.1 to 8.0% of fair market value                  9

D. 2.1 to 4.0% of fair market value                  6

E. 1.0 to 2.0% of fair market value                  3

F. Less than 1% of fair market value                 0



6]5.  SPECIAL INCENTIVES:  Applicant
 (SELECT ALL THAT APPLY.)

A. [h]Has a replacement fund receiving annual deposits

   of about 5% of the system's annual drinking water

   (DW) budget[,] and fund has already accumulated a

   minimum of 10[25]% of said annual DW budget in 


   this reserve fund.                                       5

B. Has, in addition to item 5.A., accumulated an

   amount equal to at least 20% of its annual DW

   budget in its replacement fund.                          5

[B.]C. [i]Is creating or enhancing a regionalization [P]plan    16

[C.]D. [h]Has a rate structure encouraging conservation   [5]6



TOTAL POSSIBLE POINTS FOR FINANCIAL NEED   100

 

(b) Optimizing return on the security account while still allowing the project to proceed.

(c) Local political and economic conditions.

(d) Cost effectiveness evaluation of financing alternatives.

(e) Availability of funds in the security account.

(f) Environmental need.

(g) Other criteria the Board may deem appropriate.

 

KEY: loans, interest buy-downs, credit enhancements, hardship grants

Date of Enactment or Last Substantive Amendment: [January 28, 2009]2011

Notice of Continuation: March 23, 2010

Authorizing, and Implemented or Interpreted Law: 19-4-104; 73-10c