Water Infrastructure Finance Authority

2008 Intended Use Plan

Arizona Drinking Water State Revolving Fund

DWSRF Table of Contents
I. INTROUCTION ................................................................................................................1
A. History and Legislation .........................................................................................1
B. Financial Status of the Arizona DWSRF .............................................................1
C. Arizona’s Request ..................................................................................................1
II. TYPES OF PROJECTS TO BE FUNDED FROM THE VARIOUS DWSRF
ACCOUNTS .......................................................................................................................2
A. The types of projects for which loan funds from the account for the revolving
fund are intended include: ....................................................................................2
B. Activities intended to be funded from the account for set-aside programs
include .....................................................................................................................2
III. DWSRF LOAN PROGRAM DESCRIPTION AND GOALS .......................................3
A. DWSRF Loan Program General Information ....................................................3
B. Long-Term Goals ...................................................................................................4
C. Short-Term Goal....................................................................................................4
IV. DWSRF SET-ASIDE PROGRAM DESCRIPTION ......................................................5
A. Financial Assistance for Loans .............................................................................5
B. Public Water System Supervision ........................................................................5
C. Local Assistance .....................................................................................................6
D. Program Administration .......................................................................................7
V. CRITERIA AND METHOD FOR DISTRIBUTION OF FUNDS................................7
A. Priority List (PL)....................................................................................................7
B. Priority List Updates .............................................................................................7
C. Project Readiness to Proceed................................................................................7
D. Assistance to Small Systems..................................................................................7
E. WIFA Loan & Subsidy Rates ...............................................................................8
F. Emergency Funding...............................................................................................8
G. Binding Commitments...........................................................................................8
VI. ASSISTANCE TO PUBLIC WATER SYSTEMS SERVING DISADVANTAGED
COMMUNITIES................................................................................................................9
VII. U.S. ENVIRONMENTAL PROTECTION AGENCY STRATEGIC PLAN GOALS
AND OBJECTIVES ..........................................................................................................9
VIII. PUBLIC REVIEW AND COMMENT ............................................................................9
Table of Attachments
Attachment A 2008 Priority List
Attachment B Fundable Range for Design
Attachment C Fundable Range for Construction

I. INTROUCTION
A. History and Legislation
In August 1996 the Safe Drinking Water Act Amendments were passed by congress.
This Act authorized the states to establish drinking water revolving funds for
community drinking water infrastructure needs for the first time.
Passage of H.B. 2304 by the Arizona Legislature April 22, 1997, transformed the
Wastewater Management Authority of Arizona into the Water Infrastructure Finance
Authority of Arizona (WIFA). The WIFA was charged with administering the Clean
Water State Revolving Fund (CWSRF) for wastewater projects and the new Drinking
Water State Revolving fund (DWSRF) for drinking water infrastructure needs. The
Board of Directors was expanded from seven to twelve members.
Title 18, Chapter 15 of the Arizona Administrative Code establishes detailed rules for
the Water Infrastructure Finance Authority.
The 2008 Intended Use Plan describes how WIFA intends to use available DWSRF
funds for the year to meet the objectives of the Safe Drinking Water Act and further the
goal of protecting public health.
B. Financial Status of the Arizona DWSRF
Since program inception, Arizona has received eleven DWSRF Capitalization Grants
from EPA for a total of $154,309,950.
The WIFA Board of Directors is pleased to release Arizona’s Drinking Water State
Revolving Fund (DWSRF) Intended Use Plan (IUP) for the 2008 funding cycle. The
DWSRF IUP describes WIFA’s plan to utilize various sources of funds to finance
drinking water infrastructure and support related program activities during the 2008
funding cycle from January 1, 2008 through December 31, 2008.
C. Arizona Request
This Intended Use Plan (IUP) is a required element of the grant application
documentation to obtain the FFY 2008 grant award. Arizona herewith submits its IUP
for the FFY 2008 funds available to Arizona for the purposes of continuing the
development, implementation and administration of the DWSRF program in Arizona.
The total available to Arizona from EPA's FFY 2008 allotment is $23,118,000. This
allotment will be matched by the 20% state match requirement of $6,006,600. Arizona
intends to divert $3,332,720 of this allotment to the account for set-aside programs,
leaving $19,785,280 in federal funds for the revolving loan fund.

1

II. TYPES OF PROJECTS TO BE FUNDED FROM THE VARIOUS
DWSRF ACCOUNTS
A. The types of projects for which loan funds from the account for the revolving
fund are intended include:
1. The construction/upgrading of water treatment facilities;
2. Supplemental water source interconnect;
3. Arsenic treatment to meet public health standards and to protect public health;
4. Consolidation and interconnection of public water systems;
5. Planning and engineering associated with eligible projects;
6. Replacement/rehabilitation of transmission lines and storage facilities;
7. New water wells;
8. Water system expansion;
9. Other projects necessary to address compliance/enforcement or security issues.
B. Activities intended to be funded from the account for set-aside programs
include:
1. Administration of the DWSRF program;
2. Public Water System Supervision (PWSS);
3. Local assistance;
4. Capacity development, wellhead protection, operator certification;
5. Technical assistance grants to small public water systems serving 10,000 or fewer
persons.

2

III. DWSRF LOAN PROGRAM DESCRIPTION & GOALS
A. DWSRF Loan Program General Information
The Arizona DWSRF Loan Program funds publicly- and privately-owned community
water systems and non-profit non-community water systems. Eligible projects include
installation and replacement of failing treatment facilities, eligible storage facilities and
transmission and distribution systems. Projects to consolidate water systems may also
be eligible. Loans made under the program currently have interest rates of less than 4
percent (except in the case of a privately owned facility). Loan repayments to the State
will provide a continuing source of infrastructure financing into the future. The
program also places an emphasis on small and disadvantaged communities and on
programs that emphasize prevention and sustainability as tools for ensuring safe
drinking water.
Financial Terms of Loans for Public Water System Projects:
1. Subject to the limitation in paragraph 2 of this section, all loans for the financing of
projects, will be for a term not to exceed 20 years from loan closing date, except that
under some conditions, loans to disadvantaged communities for financing projects
may be made for a period of up to 30 years from loan closing date;
2. Loan terms are not to exceed the useful life of the project;
3. Terms of financial assistance to public water systems serving disadvantaged
communities are addressed in Section VI;
4. Repayment of loan principal must begin within 12 months of project completion
based on the construction schedule available at the loan closing date or actual
completion date or three years from the date of the initial principal advance,
whichever is earlier;
5. Loans are to be made on a cost reimbursement basis;
6. Leveraging: The decision to leverage will be based on demand on the loan fund for
projects to address health concerns, market conditions and long term impact to the
fund;
7. WIFA has not implemented forgivable principal because WIFA is a leveraged
program;
8. The Controller will allocate income from the Standard Combined Interest and Fee
rate (CIFR) as either fee income or interest income in accordance with the table
located on page 4.

3

Combined Interest and Fee Rate (CIFR)
Financial Structure

CIFA

Portion of CIFR
Allocated as Fees
1.5%
3.0%

Portion of CIFR
Allocated as Interest
Remainder of CIFR
Remainder of CIFR

Governmental Loan
*Set in
accordance
Non-Governmental
with Section 1
Loan
of this
Linked Deposit
Determined on a case Determined on a case by
Procedure
Guarantees
by case basis
case basis
*Government Loan – Tax Exempt AAA Bond Rate (times) Subsidy Rate
*Non-Government Loans – Prevailing Prime Rate (times) Subsidy Rate
DW Fee Income and Uses
Fee Income
Interest
Income
$1,172,095

Technical
Assistance
Grants

$356,852

Set -Asides

Contractors

$477,000

$80,000

B. Long-Term Goals
For purposes of this IUP, long term goal is defined as the life of the program. The
following are the long-term goals of the loan program:
¾ Award WIFA’s resources in accordance with the needs of Arizona’s citizens;
¾ Maintain the fiscal integrity of WIFA’s funds and assure continuous enhancement
for future generations;
¾ Facilitate access to and efficiently deliver financial and technical assistance to
Arizona’s drinking water facilities;
¾ Coordinate with other funding agencies through the Rural Water Infrastructure
Committee (RWIC).
C. Short-Term Goal
For the purposes of this IUP, a short-term goal is an activity intended to be initiated
and, in some cases, completed within a year.
¾ Make drinking water infrastructure loans more accessible and affordable to small
communities by making $48,782,463 in funding available for below market rate
interest loans.

4

IV. DWSRF SET-ASIDE PROGRAM DESCRIPTION
The SDWA § 1452(g) and 1452(k) allow States to set aside up to 31% of the
capitalization grant for the activities described in Section II. B.
The DWSRF account for set-aside programs includes four specific set-aside categories
identified as the 4%, 10%, and 15% set-asides. If all of the set-aside funds within a setaside activity are not expended, those remaining funds may be redirected to another setaside activity as long as the maximum allowed for that activity has not been reached for
the fiscal year from which the funds were derived.
The sources and uses for the 2008 funding cycle shown in Table 1 are based on the FY
2008 federal budget and WIFA’s funding plan as of February 2008. The 2008 DWRF
federal budget allocation is $829,029,000 million, minus the national set-asides the funds
available to states is $814,594,000 million, of which, Arizona received 2.84%.
The following sections describe each of the set-asides individually. Each section contains
a general description of the set-aside and a description of the programs to be funded.
WIFA revenues are derived from fees.
Table 1: Arizona DWRF Sources & Uses for 2008 Funding Cycle
Federal
Contributions

State
Contributions*

WIFA
Revenue

WIFA
Loan Accounts

Total

Funding Sources
Financial Assistance Funds**
2008 Federal Funds
Total Funding Sources

$
$

$
23,118,000
23,118,000 $

6,006,600 $
$
6,006,600 $

477,000 $
- $
477,000 $

24,373,583 $
- $
24,373,583 $

30,857,183
23,118,000
53,975,183

Funding Uses
Financial Assistance Loans
Public Water System Supervision
Capacity Development
Wellhead Protection
Technical Assistance
Administration
Total Funding Uses

$
$
$
$
$
$
$

19,785,280
1,383,000
150,000
375,000
500,000
924,720
23,118,000

$
$
$
$

4,623,600
1,383,000
-

477,000
-

24,373,583
-

$
$

- $
6,006,600 $

48,782,463
3,243,000
150,000
375,000
500,000
924,720
53,975,183

$
$
$
$

$
$
$
$

- $
477,000 $

$
$
$
$
$
- $
24,373,583 $

* State match can beWIFA bonds funds, WIFA fees or state general fund monies.
** During the funding cycle, WIFA may sell water quality revenue bonds of which the proceeds will used increase WIFA's lending capacity

A. Financial Assistance for Loans: $48,782,463
Eligible projects include installation and replacement of failing treatment facilities,
eligible storage facilities and transmission and distribution systems. Projects to
consolidate water systems may also be eligible.
B. Public Water System Supervision (10% set-aside): $1,383,000
State and Federal Statutes allows setting aside up to 10% of the Federal funds for the
Public Water System Supervision (PWSS) activities. The PWSS program will receive
(5.6%) $1,383,000 from the 10% set-aside, $477,000 from DW fees and $1,383,000 for
ADEQ match. 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
5

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. For more information please contact Tony
Bode at (602) 771-4648.
C. Local Assistance: (15% set-aside) $1,025,000
State and Federal Statutes allows setting aside 15% of the Federal funds to provide Local
Assistance to water systems in Arizona. During State Fiscal Year 2008, Arizona will set
aside 4.4% (1,025,000) for local assistance.
$375,000 will be used by ADEQ for Wellhead Protection activities to protect
underground sources of drinking water. For more information contact Drinking Water
Monitoring and Protection Unit: Donna Calderon, Unit Manager Phone: (602) 771-4641.
$650,000 will be used for Technical Assistance. WIFA ($500,000) and ADEQ
($150,000) will share these funds to provide assistance to water systems in two (2)
categories:
ƒ

Project Technical Assistance – WIFA will assist an individual drinking water or
wastewater system to conceive, plan, design, and develop infrastructure.

ƒ

Operational Technical Assistance – The Arizona Department of Environmental
Quality will assist individual drinking water systems to improve day-to-day
operations.

Technical Assistance Intended Use Plan – Two Fundable Ranges
There are two annual fundable ranges for technical assistance awards, referred to in Phase
I and Phase II of the funding cycle. The Board shall approve a Technical Assistance
Intended Use Plan (TA IUP) for the Phase I awards at the June board meeting, at which
time the Board may reserve a portion of the annual Technical Assistance funding for the
Phase II awards. The Board shall approve a revised TA IUP for the Phase II awards at the
December board meeting. The TA IUP shall include:
● A description of the types of technical assistance the Board expects to fund;
● A summary of the sources and uses of funds by type of technical assistance;
● A Drinking Water Project Technical Assistance Priority List for Phase I and Phase II
awards;
● A Wastewater Project Technical Assistance Priority List for Phase I and Phase II
awards.
Technical Assistance Funding – Annual Cycle
Phase
Phase I
Phase II

Applications Due
Mid April
Mid October

TA IUP Approved
June Board Meeting
December Board
Meeting

Grants Awarded
July I
January I

D. Program Administration (4% Set-aside) $924,720
This set-aside will be used to pay salaries and associated expenses of programs personnel
devoting time to the administration of the funds as well as the necessary ancillary
services performed by other agencies. These funds will also be used to procure equipment
and training necessary for the adequate performance of staff. Expenses for DWSRFrelated public meetings, workshops and conferences will also be paid for out of this setaside. Funds not used immediately will be revised for use in future years.

V. CRITERIA AND METHOD FOR DISTRIBUTION OF FUNDS
A. Priority List (PL) Exhibit A – On an annual basis, following a statewide solicitation
for projects, WIFA develops a statewide priority list of water projects. For funding
cycle 2008 WIFA received 23 project priority list applications totaling $48,136,844.
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.
B. Priority List Updates The WIFA Board of Directors may update the DWRF-PL by
adding or deleting projects or adjusting the fundable ranges for design or construction
projects. The decision to update the DWRF-PL may be based on a projects’ readiness
to proceed, refined project cost estimates, availability of other funding sources or
other new information affecting the expansion or contraction of the PL and fundable
ranges. The WIFA Board of Directors will adopt the updated DWRF PL at a public
meeting and the updates will be posted on the WIFA web site as per R18-15-305,
R18-15-306, R18-15-307 and R18-15-308. All projects must meet the applicable
requirements under the Safe Drinking Water Act, 42 U.S.C. § 300f to 300j-25.
C. Project Readiness to Proceed: WIFA considers a project “ready to proceed”
when the following criteria are met:
1. Approved debt authorization has been received by WIFA
2. Plans and specifications are received by WIFA
3. All local and state permits are issued
4. Construction bid/bids awarded
D. Assistance to Small Systems: –WIFA uses $650,000 of the 15% Drinking Water set
aside for Technical Assistance ($500,000) grants to small systems and Operational
Technical Assistance through ADEQ ($150,000). WIFA’s outreach program is also
directed towards small systems. WIFA directs funding to small systems by convening
meetings of the *Rural Water Infrastructure Committee (RWIC) in rural areas of
Arizona. WIFA has developed and maintains a RWIC web site that enables the small
system to submit a summary of their needs and the RWIC committee members
respond to the system if they have a program that will address their need. There are

many times when WIFA along with a RWIC funding partner are both able to help the
system with financial and/or technical assistance.
* Arizona's RWIC (Rural Water Infrastructure Committee) is composed of
representatives from various federal and state agencies with loan, grant and technical
assistance programs.

E. WIFA Loan & Subsidy Rates – The WIFA Board of Directors has established a
target interest rate ranging between 70% and 95% of tax-exempt AAA Bond Rate for
government entities and 70% to 95% of the prevailing prime rate for non-government
entities. The subsidy rate is based on the local fiscal capacity which is measured by
the area’s median household income, user rates and charges, the community’s
outstanding and proposed debt and cost effectiveness of project. Interest
rates/subsidies on individual loans will be set pursuant to the criteria below:
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.
F. Emergency Funding
WIFA can provide up to $250,000 for emergency funding under the criteria set forth
in Policy 1.019 below:
Eligible Applicants
Cities
Towns
Tribes
Counties
Municipal Improvement Districts
Required Conditions
● The term of the loan does not exceed one year.
ٔ● The dollar amount of the loan does not exceed two hundred fifty thousand dollars
($250,000) per borrower, per emergency event.
● The purpose of the loan is to provide assistance for designing, redesigning,
engineering, reengineering, constructing or reconstructing water or wastewater
systems that have failed as the result of a disaster, a natural disaster or a catastrophic
event.
● The disaster, natural disaster or catastrophic event is memorialized in a declaration
of emergency by the governor or the federal emergency management agency.
G. Binding Commitments – If the WIFA Board of Directors approves an applicant’s
financial assistance request, WIFA staff will prepare and circulate financial assistance
(loan) documents to evidence the binding commitment in accordance with applicable
federal and state requirements.

8

VI. ASSISTANCE TO PUBLIC WATER SYSTEMS SERVING
DISADVANTAGED COMMUNITIES
A. Disadvantaged Community WIFA Policy 1.012:
The WIFA Board may designate an entity a “Disadvantaged Community” if the entity
fails to meet the 1.2 debt service coverage, and
• The applicant’s project is above the 50 percentile on the DWRF or the CWRF
Project Priority List, and
• WIFA awarded the applicant 50 or more Local Fiscal Capacity points on the
DWRF or the CWRF Project Priority List, or
• The Community is a designated “Colonia” Community through the federal
government.
• WIFA may reduce the combined interest and fee rate (CIFR) and/or extend the
loan term up to 30 years for a “Disadvantaged Community.”

VII. U.S. ENVIRONMENTAL PROTECTION AGENCY STRATEGIC
PLAN GOALS AND OBJECTIVES
The Arizona DWSRF program supports the National USEPA Strategic Plan Goal 2
(Clean and Safe Water), Objective 1 (Protect Human Health), Sub-objective 1 (Water
safe to Drink). Arizona established and is managing the revolving loan fund to make
low cost loans and other types of assistance to water systems to finance the cost of
infrastructure projects to achieve or maintain compliance with Safe Drinking Water Act
requirements.

VIII. Public Review and Comment
Public review and written comment period will be conducted from November 30, 2007
thru December 13, 2007.
WIFA will solicit public review and comment on the draft 2008 DWSRF IUP and PL
according to the following schedule:
November 30, 2007
December 13, 2007
December 13, 2007
December 19, 2007
January 2, 2008

Distribution and Web posting of the draft DWRF IUP and PL to
all interested parties.
Public Hearing – 1110 West Washington, Room 130, Phoenix,
Arizona 85007 from 1:00 P.M. to 2:00 P.M.
Deadline for public comments on the draft DWSRF IUP and PL is
5:00 P.M.
The WIFA Board of Directors adopts the final DWSRF IUP and
PL.
Final DWSRF IUP and PL become effective. Distribution and
Web posting of final DWSRF IUP and PL.
9

WIFA will solicit public review and comment on the revised draft 2008 DWSRF IUP and PL
according to the following schedule:
February 8, 2008
February 21, 2008
February 21, 2008
March 5, 2008
March 10, 2008

Distribution and Web posting of the draft DWRF IUP and PL to all
interested parties.
Public Hearing – 1110 West Washington, Room 130, Phoenix,
Arizona 85007 from 1:00 P.M. to 2:00 P.M.
Deadline for public comments on the draft DWSRF IUP and PL is
5:00 P.M.
The WIFA Board of Directors adopts the final DWSRF IUP and
PL.
Final DWSRF IUP and PL become effective. Distribution and Web
posting of final DWSRF IUP and PL.

10

Arizona's Drinking Water Revolving Fund
2008 Funding Cycle - Priority List for Drinking Water Revolving Fund
Prepared Date: 11/28/2007

Rank Applicant

Population Project Title
Cave Creek Water Co. Treatment Plant
5,000
Improvements
460
Supplemental Water Source Interconnect
30,000
Mandated Water System Improvements
Transfer Water Service from Alpine Water
600
Systems to Alpine DWID
450
Wilhoit Water Company Acquisition
525
Appaloosa Water Company Acquisition
4,100
Water System Improvements - Phase 2
200
Arsenic Remediation System
320
Storage Tank Replacement
1,100
Upgrade/replace old water meters
Rancho Del Conejo - Arsenic Removal
942
Project - Well #3
Silver Lake Estates & Bourden Ranch
831
Estates Storage & Tie-line
Yavapai-Apache Nation-Tunlii and Clarkdale
2,000
Infrastructure
320
Well Installation for Thunderbird Meadows
6,600
City of Prescott Service in Chino Valley
Water Company System & Municipal System
9,750
Improvements
Chino Meadows II Water Company
2,250
Acquisition

1
2
3

Cave Creek, Town of
SoHi Domestic Water Improvement District
El Mirage, City of

4
5
6
7
8
9
10

Alpine Domestic Water Improvement District
Chino Valley, City of
Chino Valley, City of
Cave Creek, Town of
Wilhoit Water Co. - Blue Hills #3
Wilhoit Water Co. - Thunderbird Meadows
Livco Water Co.

11

Rancho Del Conejo Community Water Co-op

12

WATCO, Inc

13
14
15

Yavapai-Apache Nation
Wilhoit Water Co. - Thunderbird Meadows
Chino Valley, City of

16

Somerton, City of

17

Chino Valley, City of

18
19

Sonoita Valley Water Company
Eagar, Town of

327
4,435

20
21
22
23

Chino Valley, City of
Chino Meadows II Water Company
Flagstaff, City of
Christian Children`s Ranch

2,250
3,800
65,918
0

Total:

Sonoita Valley Water Co. System Expansion
Town of Eagar Water System Expansion
Chino Meadows II Water Company
Acquisition
Chino Meadows Unit III
New Water Wells
Westwood Ranch Water Co.

Project # Amount Requested

Subsidy Rate Index

023 2008
017 2008
018 2008

$5,000,000.00
$650,000.00
$8,000,000.00

70%
70%
70%

004 2008
011 2008
013 2008
021 2008
005 2008
007 2008
022 2008

$1,400,000.00
$250,000.00
$750,000.00
$5,150,000.00
$30,000.00
$131,058.00
$100,000.00

70%
70%
70%
80%
70%
70%
70%

002 2008

$200,000.00

70%

015 2008

$600,000.00

70%

020 2008
006 2008
012 2008

$3,785,386.00
$145,000.00
$3,100,000.00

75%
70%
70%

009 2008

$2,850,000.00

75%

014 2008

$2,500,000.00

75%

003 2008
019 2008

$629,000.00
$1,000,000.00

80%
80%

010 2008
001 2008
008 2008
016 2008

$2,500,000.00
$466,400.00
$8,500,000.00
$400,000.00

80%
80%
75%
80%

$48,136,844.00

Attachment B:
2008 Funding Cycle Priority List
Arizona’s Drinking Water Revolving Fund

Arizona's Drinking Water Revolving Fund
2008 Funding Cycle - Fundable Range for Design Financial Assistance
Prepared Date: 11/28/2007

Fundable Range Rank

MPL Rank

Applicant

Population

Project Title

Project #

Amount Requested

No borrowers requested design assistance for their projects as of the date of this report.

Subsidy Rate Index

Attachment C:
2008 Funding Cycle Priority List
Arizona’s Drinking Water Revolving Fund

Arizona's Drinking Water Revolving Fund
2008 Funding Cycle - Fundable Range for Construction Financial Assistance
Prepared Date: 11/28/2007

Fundable Range Rank
1
2
3
4
Total:

Applicant
El Mirage, City of
Yavapai-Apache Nation
Flagstaff, City of
Eagar, Town of

Population
30,000
2,000
65,918
4,435

Project Title
Mandated Water System Improvements
Tunlii and Clarkdale Infrastructure
New Water Wells
Water System Expansion

Project # Amount Requested Subsidy Rate Index
018 2008
$8,000,000.00
70%
020 2008
$3,785,386.00
75%
008 2008
$8,500,000.00
75%
019 2008
$1,000,000.00
80%
$21,285,386.00