2007 Drinking Drinking Water Water Intended Intended Use Use Plan Plan Inside Intended Use Plan Section 1: Lending Capacity 1 Section 2: Funding Sources and Uses 1 Section 3: Goals 2 Section 4: Method and Criteria for Distributing Arizona's DWRF 2 Section 5: Public Review and Comment 4 Section 6: Assurances 4 EXECUTIVE SUMMARY The Water Infrastructure Finance Authority of Arizona (WIFA) Board of Directors is pleased to release Arizona’s Drinking Water Revolving Fund (DWRF) Intended Use Plan (IUP) for the 2007 funding cycle. The DWRF IUP describes WIFA’s plan to utilize various sources of funds to finance drinking water infrastructure and support related program activities during the 2007 funding cycle from January 1, 2007 through December 31, 2007. Included as Exhibit A of the DWRF IUP is the 2007 Funding Cycle Priority List (PL). The PL shows communities and water systems seeking financial assistance from Arizona’s DWRF. At the release of this report, communities and water systems throughout Arizona submitted 27 applications requesting $121,522,714 in financial assistance. From January 1, 2007 through December 31, 2007, the WIFA Board of Directors will use the PL as a guide to allocate financial assistance from Arizona’s DWRF to communities and water systems listed on the PL. Each board meeting, the WIFA Board of Directors may revise the PL and modify the fundable range for construction based on project readiness to proceed and other new information. WIFA staff will post the revised PL on the WIFA Web site ( www.azwifa.gov ). Overall, the financial assistance and related program activities supported by Arizona’s DWRF share the same objectives: protect public health, ensure safe and sustainable drinking water, and guarantee the affordability of basic water infrastructure. Arizona’s DWRF also support the national program goal of Clean and Safe Water and the national program objective to protect public health and assist water systems in providing water safe to drink (EPA IFMS PRC: 201B81E). i SECTION 1: LENDING CAPACITY During the 2007 funding cycle, Arizona’s DWRF lending capacity will depend on the: 1. Amount of state contributions to Arizona’s DWRF; 2. Amount of federal contributions to Arizona’s DWRF; 3. Financing structure needs of water systems; 4. Interest rate on the DWRF financial assistance; and, 5. Availability of other state funds to support financial assistance activity. 6. Amount of leveraged bond capacity. 7. Leveraging capacity of fund. Arizona’s DWRF supports the national program objective to protect public health and assist water systems in providing water safe to drink (EPA IFMS PRC: 201B81E). SECTION 2: FUNDING SOURCES AND USES Arizona’s DWRF is capitalized by state contributions and by contributions appropriated by the United States Congress. Once capitalized, Arizona’s DWRF provides, in perpetuity, financial assistance to drinking water systems throughout Arizona. Through active portfolio and financial management, WIFA’s lending capacity could be increased during the funding cycle by leveraging the revolving fund and by issuing water quality bonds. During the 2007 funding cycle, Arizona’s DWRF will rely on the funding outlined in Table 1 to provide financial assistance to communities, support WIFA’s operations, and support related program activities administered by WIFA and/or the Arizona Department of Environmental Quality (ADEQ). Each of the intended uses of funding is more fully described on the next page. Table 1: Arizona DWRF Sources & Uses for 2007 Funding Cycle Federal Contributions Funding Sources Financial Assistance Funds** 2006 Funds Total Funding Sources $ $ 23,466,400 23,466,400 Funding Uses Financial Assistance Loans Public W ater System Supervision Wellhead Protection Capacity Development Administration Total Funding Uses $ $ $ $ $ $ 20,624,744 1,303,000 375,000 225,000 938,656 23,466,400 State Contributions* WIFA Revenue $ $ $ 4,693,280 4,693,280 $ 477,000 $ $ $ 4,693,280 - $ $ 4,693,280 WIFA Loan Accounts 477,000 $ $ $ 63,000,000 63,000,000 $ $ $ 63,477,000 28,159,680 91,636,680 $ 477,000 $ $ 63,000,000 - $ 477,000 $ $ 63,000,000 $ $ $ $ $ $ 88,318,024 1,780,000 375,000 225,000 938,656 91,636,680 * State match can be either WIFA bonds or state general fund monies. ** During the funding cycle, W IFA may sell water quality revenue bonds of which the proceeds will used increase W IFA's lending capacity 1 Total The sources and uses for the 2007 funding cycle shown in Table 1 are based on the FY 2007 federal budget. The 2007 DWRF federal budget allocation is $841,500,000 million of which Arizona receives 2.84%. Financial Assistance: $115,601,351 WIFA will provide cash funded loans for financial assistance. WIFA will reserve a minimum of 15% for water systems that serve less than 10,000 persons. Forgivable Principal: $450,000 – WIFA may award forgivable principal to disadvantaged communities in accordance with WIFA Policy 1.012 – Hardship Community Drinking Water Systems. Funds not awarded for this will revert to loans effective December 31, 2007. Public Water System Supervision (PWSS): $1,950,505 During state FY 2007, ADEQ will use this funding for the PWSS Program, which encompasses all of the various activities involved in implementing the Safe Drinking Water Act requirements in Arizona. These activities include operator certification, source water assessment and protection, development of regulatory guidance and assistance documents, assisting systems in obtaining the technical, financial, and managerial capability to comply with drinking water regulations, and technical consultations on water system and treatment system design. Additionally, WIFA may use capacity development funds to assist water systems throughout the state. Administration: $928,580 – During state FY 2007, WIFA will use the funding to administer Arizona’s DWRF and assist drinking water systems to conceive, develop, expedite, construct, and finance technically sound and sustainable water infrastructure. Technical and Local Assistance will be addressed in the Technical Assistance (TA) Intended Use Plan (IUP). The TA cycle begins July 1, 2007 and ends June 30, 2008. Please visit WIFA’s Web site (www.azwifa.gov) for more information about WIFA’s technical assistance programs. SECTION 3: GOALS WIFA adopts an annual strategic plan listing goals, ongoing objectives, and annual objectives. The goals listed below are taken directly from the WIFA 2006-2007 Strategic Plan. For additional detail on goals, ongoing objectives, and annual objectives, request a copy of the WIFA 2006-2007 Strategic Plan from WIFA’s Communications Director, (602) 364-1314. Goal 1: Award WIFA’s resources in accordance with the needs of Arizona’s citizens. Goal 2: Maintain the fiscal integrity of WIFA’s funds and assure continuous enhancement for future generations. Goal 3: Facilitate access to and efficiently deliver financial and technical assistance. 2 Goal 4: Coordinate with other funding sources, technical resources, and regulatory authorities, and private sector legal and financial counterparts. Goal 5: Actively pursue leadership in infrastructure finance. Goal 6: Efficiently administer WIFA within a positive work environment. Goal 7: Facilitate and encourage board of directors’ involvement in WIFA. SECTION 4: METHOD AND CRITERIA FOR DISTRIBUTING ARIZONA’S DWRF Lending Capacity for 2007 Funding Cycle – If there are insufficient projects ready to proceed during the 2007 funding cycle, WIFA will apply funds to the fiscal year 2008 funding cycle project priority list. If additional funding becomes available during the fiscal year, WIFA will expand the fundable range of the 2007 funding cycle project priority list. Each board meeting, the WIFA Board of Directors may update the DWRF PL, fundable range for design and fundable range for construction based on project readiness to proceed, refined project cost estimates, availability of other funding sources, and other new information affecting the expansion and contraction of the PL and fundable ranges. The WIFA Board of Directors will adopt the updated DWRF PL and fundable ranges at public meetings and will distribute the updates to all DWRF PL applicants and other interested parties. Priority List, Exhibit A – On Wednesday, Oct. 25, 2006, WIFA staff convened a scoring committee including members from the Arizona Department of Environmental Quality, Arizona Small Utilities Association, Rural Community Assistance Corporation, Arizona Corporation Commission and U.S. Department of Agriculture Rural Development. The committee scored and ranked priority list applications submitted by communities pursuant to WIFA's DWRF award criteria. All eligible applications received appear on the 2007 funding cycle priority list. Fundable Range for Design, Exhibit B – Includes the highest ranking applicants ready to receive design assistance during the funding cycle. Fundable Range for Construction, Exhibit C – Includes the highest ranking applicants ready to receive construction assistance. Market Loan Rate – The WIFA Board of Directors has established a target interest rate ranging between 70% and 95% of tax-exempt interest or prime rates. The WIFA Board of Directors will set interest rates/subsidies on individual loans pursuant to the: 9 Priority of the project; 9 Local fiscal capacity of the area served by the system requesting assistance; and, 9 Lending capacity of Arizona’s DWRF. Local fiscal capacity will be measured by the area’s median household income, user rates and charges, and the community’s outstanding debt. 3 Binding Commitments – The WIFA Board of Directors will allocate financial assistance in accordance with DWRF funds available, the DWRF PL, financial assistance requested, a community’s financial capacity, and project readiness to proceed. Once on the DWRF PL, an applicant will submit a project finance application to request financial assistance. WIFA staff will review the project finance application, analyze the applicant’s legal, technical, managerial, and financial capability, and provide recommendations to the WIFA Board of Directors. The WIFA Board of Directors approves an applicant’s financial assistance request, WIFA staff will prepare and circulate financial assistance documents to evidence the binding commitment in accordance with applicable federal requirements. SECTION 5: PUBLIC REVIEW AND COMMENT WIFA solicited public review and comment on the draft 2007 DWRF IUP and PL according to the following schedule of activities: November 9, 2006 Distribution and Web posting of the draft DWRF IUP and PL to all interested parties. November 20, 2006 Public Hearing – 1110 West Washington, Room #130, Phoenix, Arizona 85007 at 1 p.m. November 20, 2006 Deadline for public comments on the draft DWRF IUP and PPL. December 20, 2006 The WIFA Board of Directors adopts the final DWRF IUP and PPL. January 1, 2007 Final DWRF IUP and PPL become effective. Distribution and Web posting of Final DWRF IUP and PPL. SECTION 6: ASSURANCES Files and Records Retention – WIFA will receive and review project documents from financial assistance applicants. These documents will be filed in official project files maintained by WIFA. The project files and other DWRF records will be made available in accordance with the Arizona public records law. It is expected that EPA will review the files on a sample basis in conjunction with on-site visits scheduled as part of WIFA’s annual review or other monitoring of the state’s management of DWRF funds. WIFA will retain the official project files and other DWRF files in accordance with federal and state requirements. Expeditious and Timely Expenditures – WIFA will expend DWRF funds in a timely and expeditious manner. 4 Environmental Review Requirements – In accordance with applicable federal requirements, WIFA will continue to conduct environmental reviews pursuant to applicable federal and state statutes and rules. 5 Exhibit A: 2007 Funding Cycle Priority List Arizona’s Drinking Water Revolving Fund Arizona's Drinking Water Revolving Fund 2007 Funding Cycle -- Priority List for Drinking Water Revolving Fund February 23, 2007 Rank 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 Applicant Population Project Title Town of Chino Valley 12,500 Chino Valley Water System Expansion Project Antelope Peak DWID 220 Water Infrastructure Improvement Picacho Peak Water Company 30 Nitrate Treatment Maricopa Mountain Water Co. Inc. 600 Maricopa Mountain Arsenic Treatment System Town of Gila Bend 1,980 Water System Improvements Watco, Inc. 790 Silver Lake Estates and Bourdon Ranch Estates Storage and Tie Line Yavapai-Apache Nation 2,000 Tunli and Clarkdale Drinking Water Infrastructure Naco Water Company 1,284 Naco Water Co. - Phase II Livco Water Co. 1,100 Old Concho/Livco Consolidation Town of Chino Valley 12,500 Chino Valley Private Water Company Acquisitions Ashcreek Water Company 260 Close Loop Project Ashcreek Water Company 260 Water Storage Ashcreek Water Company 260 Well Transmission Project Ashcreek Water Company 260 Mohave Project Livco Water Co. 1,100 Upgrade/Replace Old Water Meters Ashcreek Water Company 260 Transmission Improvement Project--Flush Lines Livco Water Co. 1,100 Well #4: Activate Well And Bring Into System Rancho Del Conejo Community Water C 942 Rancho Del Conejo - Arsenic Removal Project - Well #3 Livco Water Co. 1,100 Well #3 - Bring Well Into System Livco Water Co. 1,100 Replace Asbestos Pipeline Livco Water Co. 1,100 Increase Water Storage Capacity Highland Pines DWID 1,000 Turkey Run Replacement Project/Storage Tank City of Safford 16,401 Kempton to Carrsasco 24" Transmission Blend Pipeline City of Safford 16,401 Ten Million Gallon Tank Rehab /Construct 4 MG Water Storage Tanks City of Tucson 700,000 SAVSARP Raw Water Delivery System Livco Water Co. 1,100 Well #1: Upgrade/Replace Well Casings City of Tucson 700,000 So. Avra Valley Storage & Recharge Project (SAVSARP) Basins City of Prescott, AZ 40,770 2007 CIP - Arsenic Treatment Plant Project Town of Chino Valley 12,500 New Hia Water Transmission And Importation System Sonoita Valley Water Company 327 Sonoita Valley Water Company System Expansion Town of Cave Creek 4,000 Acquisition Of Water Company; System Improvements City of Show Low 5,760 Well 12 Redevelopment Community Water Co. Of Green Valley 21,500 Design/Construction Of Arsenic Treatment Facilities City of Prescott, AZ 40,770 2007 CIP Drinking Water System Improvement Projects Town of Cave Creek 5,000 Acquisition of Cave Creek Water Company & Water System Improvements Las Quintas Serenas Water Co. 4,000 Lqs Water Company Supplemental Financing City of Tucson 700,000 New Well Equipping City of Tucson 700,000 Drill Production Wells City of Tucson 700,000 CAVSARP Booster Expansion, W571 Lake Havasu City 10,305 Water Service Line Replacement / Waterline Replacement Improvements City of Peoria, AZ 112,000 Twin Buttes Water Treatment Plant 8,200 Storage Tank Rehab and New Pipelines Green Valley Water Improvement. Distric Note - All loans will be cash funded. Project # 002 2007 025 2007 022 2007 023 2007 028 2007 040 2007 030 2007 004 2007 015 2007 001 2007 034 2007 033 2007 036 2007 035 2007 017 2007 032 2007 019 2007 005 2007 013 2007 016 2007 014 2007 031 2007 039 2007 038 2007 010 2007 018 2007 011 2007 042 2007 003 2007 006 2007 027 2007 020 2007 026 2007 041 2007 037 2007 007 2007 008 2007 009 2007 012 2007 021 2007 024 2007 029 2007 $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ Amount Subsidy Funding Requested Rate Index Cycle 6,750,000 70% 2007 976,000 70% 2007 150,000 75% 2007 528,000 70% 2007 400,000 70% 2007 600,000 70% 2007 3,914,953 70% 2007 2,500,000 70% 2007 300,000 70% 2007 6,000,000 70% 2007 41,990 70% 2007 10,240 70% 2007 21,400 70% 2007 25,450 70% 2007 80,000 70% 2007 5,700 75% 2007 80,000 70% 2007 200,000 70% 2007 40,000 75% 2007 180,000 70% 2007 550,000 70% 2007 600,000 70% 2007 1,200,000 70% 2007 5,000,000 70% 2007 4,500,000 80% 2007 40,000 75% 2007 13,100,000 80% 2007 6,000,000 80% 2007 15,000,000 75% 2007 629,000 80% 2007 6,700,000 85% 2007 300,000 80% 2007 2,100,000 85% 2007 16,167,000 80% 2007 27,000,000 85% 2007 400,714 85% 2007 1,300,000 85% 2007 1,500,000 85% 2007 3,000,000 85% 2007 5,369,000 80% 2007 40,000,000 85% 2007 1,170,000 80% 2007 Exhibit B: 2007 Funding Cycle Fundable Range for Design Arizona’s Drinking Water Revolving Fund Arizona's Drinking Water Revolving Fund 2007 Funding Cycle -- Fundable Range for Design Financial Assistance February 23, 2007 Fundable MPL Range Rank Rank Applicant 1 4 Town of Gila Bend Note - All loans will be cash funded. Project Title Water System Improvements Project # 028 2007 Amount Subsidy Requested Rate Index $400,000 70% Exhibit C: 2007 Funding Cycle Fundable Range for Construction Arizona’s Drinking Water Revolving Fund Arizona's Drinking Water Revolving Fund 2007 Funding Cycle -- Fundable Range for Construction Financial Assistance February 23, 2007 Fundable MPL Range Rank Rank Applicant 1 1 Town of Chino Valley 2 7 Yavapai-Apache Nation 3 6 Watco, Inc. 4 10 Town of Chino Valley 5 11 Ashcreek Water Company 6 12 Ashcreek Water Company 7 13 Ashcreek Water Company 8 14 Ashcreek Water Company 9 16 Ashcreek Water Company 10 25 City of Tucson 11 27 City of Tucson 12 31 Town of Cave Creek 13 33 Community Water Co. Of Green Valley 14 36 Las Quintas Serenas Water Co. 15 35 Town of Cave Creek 16 37 City of Tucson 17 38 City of Tucson 18 39 City of Tucson 19 40 Lake Havasu City 20 41 City of Peoria, AZ Note - All loans will be cash funded. Project Title Chino Valley Water System Expansion Project Tunli and Clarkdale Drinking Water Infrastructure Silver Lake Estates and Bourdon Ranch Estates Storage and Tie Line Chino Valley Private Water Company Acquisitions Close Loop Project Water Storage Well Transmission Project Mohave Project Transmission Improvement Project--Flush Lines SAVSARP Raw Water Delivery System So. Avra Valley Storage & Recharge Project (SAVSARP) Basins Acquisition Of Water Company; System Improvements Design/Construction Of Arsenic Treatment Facilities Lqs Water Company Supplemental Financing Acquisition of Cave Creek Water Company & Water System Improv New Well Equipping Drill Production Wells CAVSARP Booster Expansion, W571 Water Service Line Replacement / Waterline Replacement Improvem Twin Buttes Water Treatment Plant Project # 002 2007 030 2007 040 2007 001 2007 034 2007 033 2007 036 2007 035 2007 032 2007 010 2007 011 2007 027 2007 026 2007 007 2007 037 2007 008 2007 009 2007 012 2007 021 2007 024 2007 Amount Subsidy Requested Rate Index $6,750,000 70% $3,914,953 70% $600,000 70% $6,000,000 70% $41,990 70% $10,240 70% $21,400 70% $25,450 70% $5,700 75% $4,500,000 80% $13,100,000 80% $6,700,000 85% $2,100,000 85% $400,714 85% $27,000,000 85% $1,300,000 85% $1,500,000 85% $3,000,000 85% $5,369,000 80% $40,000,000 85% Exhibit D: Public Review and Comment Summary Arizona’s Drinking Water Revolving Fund Exhibit D 2007 Funding Cycle – Public Review and Comment; Technical Changes January 2, 2007 SECTION 1: SUMMARY OF COMMENTS FROM PUBLIC HEARING AND PUBLIC MEETINGS A public hearing was conducted in Phoenix at 1110 W. Washington Street, Room 130 from 1:00 p.m. to 2:00 p.m. Monday, November 20, 2006. No members of the public were present. Public comment was conducted on November 9, 2006 thru November 20, 2006. The public review and written comment period was advertised on November 16th, 17th, and 18th in Arizona’s three major newspapers. No written comments were submitted during the public comment period. SECTION 2: SUMMARY OF CHANGES TO THE DRAFT DWRF INTENDED USE PLAN No changes were made to the Draft DWRF Intended Use Plan. SECTION 3: SUMMARY OF CHANGES TO THE DRAFT DWRF PRIORITY LIST No changes were made to the Draft DWRF Priority List.