Water Infrastructure Finance Authority 2009 Intended Use Plan Arizona Clean Water State Revolving Fund CWSRF Table of Contents I. INTRODUCTION..............................................................................................................1 A. History and Legislation .........................................................................................1 B. Financial Status of the Arizona CWSRF .............................................................1 C. Arizona 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 III. CWSRF LOAN PROGRAM DESCRIPTION AND GOALS .......................................2 A. CWSRF Loan Program General Information ....................................................2 B. Long-Term Goals ...................................................................................................3 C. Short-Term Goal....................................................................................................3 IV. CWSRF SOURCES & USES............................................................................................4 A. Financial Assistance for Loans .............................................................................4 B. Assistance to Small Systems..................................................................................4 C. Surface Water Regulation.....................................................................................4 D. Program Administration .......................................................................................5 E. Expeditious and Timely Expenditures .................................................................5 F. First Use of Funds ..................................................................................................5 G. Environmental Review Requirements .................................................................5 V. LENDING CAPACITY.....................................................................................................5 VI. CRITERIA AND METHOD FOR DISTRIBUTION OF FUNDS................................5 A. Priority List (PL)....................................................................................................5 B. Priority List Updates .............................................................................................5 C. Project Readiness to Proceed................................................................................6 D. WIFA Loan & Subsidy Rates ...............................................................................6 E. Emergency Funding...............................................................................................6 F. Binding Commitments...........................................................................................6 VII. ASSISTANCE TO PUBLIC WATER SYSTEMS SERVING DISADVANTAGED COMMUNITIES ...........................................................................7 VIII. PUBLIC REVIEW AND COMMENT ............................................................................7 Table of Attachments Attachment A 2009 Priority List Attachment B Fundable Range for Design Attachment C Fundable Range for Construction I. INTRODUCTION A. History and Legislation Before 1987 the federal government funded wastewater infrastructure needs through a construction grants program. By 1987 it became obvious that the need for facilities was growing faster than the grants could be funded. The Water Quality Act of 1987 (Clean Water Act) attempted to address this construction facility issue by authorizing clean water revolving funds (then called state revolving funds) to be established in each state. EPA oversight under the construction grants program was replaced by state management In 1989, the Arizona Legislator created the Wastewater Management Authority (WMA) to administer wastewater facilities dollars provided by the Clean Water Act Amendments through the State Revolving Fund (SRF). The program was established in Title 49, Chapter 2, Article 11, Wastewater Facilities Financing. Passage of H.B. 2304 by the Arizona Legislature April 22, 1997, transformed the Wastewater Management Authority into the Water Infrastructure Finance Authority of Arizona (WIFA). The WIFA was charged with administering the Clean Water Revolving Fund (CWRF) [formerly the State Revolving Fund] for wastewater projects and the new Drinking Water Revolving Fund (DWRF) for drinking water infrastructure needs. The Board of Directors was expanded from seven to twelve members, including representatives from the Arizona Corporation Commission, Arizona Department of Water Resources and Tribes. B. Financial Status of the Arizona CWSRF Since program inception, Arizona has received eighteen (18) CWSRF Capitalization Grants from EPA for a total of $176,275,173. The Water Infrastructure Finance Authority of Arizona (WIFA) Board of Directors is pleased to release Arizona’s Clean Water State Revolving Fund (CWSRF) Intended Use Plan (IUP) for the 2009 funding cycle. The CWSRF IUP describes WIFA’s plan to utilize various sources of funds to finance clean water infrastructure and support related activities during the 2009 funding cycle from July 1, 2008 through June 30, 2009. 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 CWSRF program in Arizona. The total available to Arizona from EPA’s FFY 2008 allotment is $4,542,997. This allotment will be matched by the 20% state match requirement of $908,599. Arizona intends to use $181,719 for program administration, leaving $4,361,278 in federal funds for the revolving loan fund. 1 II. TYPES OF PROJECTS TO BE FUNDED FROM THE CWSRF A. The types of projects for which loan funds from the Clean Water State Revolving Fund are intended: 1. 2. 3. 4. 5. Expansions of wastewater systems; Construction of wastewater treatment plants; Design of a sewer collection system; Water reclamation facility expansion; Construct district sewer collection systems. III. CWSRF LOAN PROGRAM DESCRIPTION AND GOAL A. CWSRF Loan Program General Information: The Arizona CWSRF Loan Program funds publicly owned community wastewater systems. Eligible projects include expansions of wastewater systems, construction of wastewater treatment plants, design of sewer collection systems and water reclamation facilities and expansions. Loans made under the program currently have interest rates of less than four (4) percent. 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 projects that emphasize prevention and sustainability. 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 VII. 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; 2 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 below. Combined Interest and Fee Rate (CIFR) Financial Structure CIFA Governmental Loan Portion of CIFR Allocated as Fees 1.5% Portion of CIFR Allocated as Interest Remainder of CIFR *Set in accordance with Section 1 of this Linked Deposit Determined on a case Determined on a case Procedure Guarantees by case basis by case basis *Government Loan – Tax Exempt AAA Bond Rate (times) Subsidy Rate CW Fee Income and Uses Fee Income Interest Income $5,542,909 $974,562 Technical Assistance Grants $350,000 ADEQ Contractors $3,255,976 $75,000 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 clean 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 wastewater infrastructure loans more accessible and affordable to small communities by making $36,582,256 in funding available for below market rate interest loans. 3 IV. CWRF SOURCES & USES Federal Contributions Funding Sources Financial Assistance Funds** 2009 Funds Total Funding Sources Funding Uses Financial Assistance Loans Technical Assistance Grants Clean Water Programs Administration Total Funding Uses State Contributions* WIFA Revenues $ $ $ - $ 4,542,997 $ 4,542,997 $ - $ 908,599 908,599 $ $ 4,361,277 $ 908,599 $ $ $ $ 181,720 $ 4,542,997 $ 908,599 $ WIFA Loan Accounts Total 350,000 $ $ 350,000 $ 31,312,380 $ - $ 31,312,380 $ 31,662,380 5,451,596 37,113,976 $ 31,312,380 $ $ $ - $ 31,312,380 $ 36,582,256 350,000 3,180,976 181,720 40,294,952 350,000 3,180,976 $ 3,530,976 $ * State match can be either WIFA bonds or state general fund monies. ** During the funding cycle, WIFA may sell water quality revenue bonds of which the proceeds will be used to increase WIFA's lending capacity A. Financial Assistance for Loans: $36,582,256 Eligible projects include construction and/or replacement of wastewater facilities, system expansions, design of sewer collection systems, reclamation and recharge systems. B. Technical Assistance Grants: $350,000 WIFA uses $350,000 of revenue from fees for Technical Assistance grants to small systems. 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 C. Clean Water Programs: $3,180,976 The Clean Water Program is composed of activities that protect both surface water and underground water in Arizona. Surface water quality is protected by controlling point source discharges from wastewater treatment plants, concentrated animal feeding operations, stormwater, industrial, commercial and other facilities. Surface water is also protected from discharges of non-point source pollution by irrigated agriculture, livestock grazing, silviculture, urban runoff, construction, mining, and recreation activities. Arizona’s Aquifer Protection Permit Program protects the state’s aquifers through the issuance of permits to discharging facilities, registration of dry wells and issuance of reclaimed water permits. ADEQ accomplishes its clean water goals by administering all relevant statutory and regulatory program activities, including: (1) Arizona Pollutant discharge Elimination 4 System (AZPDES) program, (2) Aquifer Protection Permit (APP) program, (3) engineering review, (4) compliance inspections, (5) outreach and education, (6) enforcement, (7) statewide watershed management, (8) grants to eliminate or mitigate nonpoint source pollution, (9) water quality standards, and (10) water quality monitoring and assessment. D. Program Administration: $181,720 Four percent of the grant will be used to pay salaries and associated expenses of programs personnel devoting time to the administration of the funds. E. Expeditious and Timely Expenditures – In accordance with 40 CFR 35-3135 (d), WIFA will expend CWRF funds in a timely and expeditious manner. F. First Use of Funds – In accordance with 40 CFR 35-3135 WIFA will continue to conduct environmental reviews pursuant to applicable federal and state statutes and rules. G. Environmental Review Requirements – In accordance with 40 CFR 35-3135, WIFA will continue to conduct environmental reviews pursuant to applicable federal and state statutes and rules. V. LENDING CAPACITY During the 2009 funding cycle, the lending capacity of Arizona’s CWSRF will depend on the: 1. 2. 3. 4. 5. 6. Amount of state contributions to Arizona’s CWSRF; Amount of federal contributions to Arizona’s CWSRF; Financing structure needs of communities; Interest rate on the CWSRF financial assistance; WIFA’s ability to partner with other funding sources to jointly-finance projects; Leveraging capability of fund. VI. 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 2009 WIFA received 14 project priority list applications totaling $209,529,227. 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 CWSRF-PL by adding or deleting projects or adjusting the fundable ranges for design or construction projects. The decision to update the CWSRF-PL may be based on a 5 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 CWSRF PL at public meetings and the updates will be posted on the WIFA web site. 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. 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. 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 CWSRF. E. 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. 6 F. 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. VII. 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.” VIII. Public Review and Comment Public review and written comment period will be conducted from September 22, 2008 thru October 6, 2008. WIFA will solicit public review and comment on the draft 2009 CWSRF IUP and PL according to the following schedule: September 22, 2008 Distribution and Web posting of the draft CWSRF IUP and PL to all interested parties. October 6, 2008 October 6, 2008 October 15, 2008 October 16, 2008 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 CWSRF IUP and PL. The WIFA Board of Directors adopts the final CWSRF IUP and PL. Final CWSRF IUP and PL become effective. Distribution and Web posting of final CWSRF IUP and PL. 7 Exhibit A: 2009 Fund Cycle Priority List Arizona’s Clean Water Revolving Fund Arizona's Clean Water Revolving Fund 2009 Funding Cycle - Priority List for Clean Water Revolving Fund Prepared Date: 6/18/2008 Rank Applicant Population Project Title 1 Taylor, Town of 4,100 2 Lake Havasu City 22,500 3 Hayden, Town of 892 4 1,140 5 Buckskin Sanitary District Fawnbrook Domestic Wastewater Improvement District 6 Kingman, City of 14,000 7 Ash Fork Sanitary District 8 Yuma County Improvement District #07-09 5,000 9 Camp Verde Sanitary District 10 Project # Amount Requested Subsidy Rate Index Taylor Wastewater Treatment Expansion Lake Havasu City Wastewater System Expansion 020 2009 $3,000,000 70% 005 2009 $73,831,525 75% Wastewater Treatment Plant Loan 014 2009 $500,000 75% ADOT-Holiday Harbour 016 2009 $1,181,490 70% District Sewer Collection System Project Hilltop Wastewater Treatment Plant Upgrades 002 2009 $2,500,000 70% 013 2009 $30,800,000 80% Ash Fork Sanitary District 004 2009 $2,533,697 80% 009 2009 $1,000,000 70% 3,000 Avenue B&C Colonia Sewer Project District Collection System Additions and WWTP Upgrade 022 2009 $13,263,293 75% Eloy, City of 11,500 Interim Biosolids Handling 021 2009 $3,512,000 75% 11 Kingman, City of 2,750 011 2009 $9,800,000 85% 12 Tucson, City of 710,000 Downtown WWTP upgrade Roger Road Reclaimed Plant Booster Expansion 019 2009 $1,000,000 80% 13 Casa Grande, City of 38,445 006 2009 $65,000,000 85% 14 Peoria, City of 153,592 017 2009 $7,541,555 85% 15 Peoria, City of 153,592 Water Reclamation Facility Expansion Beardsley Water reclamation Facility Upgrades Northern and 95th Avenues Trunk Sewer Repairs 018 2009 $7,058,960 85% Total: 350 650 $222,522,520 Exhibit B: 2009 Fund Cycle Fundable Range for Design Arizona’s Clean Water Revolving Fund Arizona's Clean Water Revolving Fund 2009 Funding Cycle - Fundable Range for Design Financial Assistance Prepared Date: 5/28/2008 Fundable Range Rank 1 Total: MPL Rank Applicant 6 Yuma County Improvement District #07-09 Population Project Title 5,000 Avenue B&C Colonia Sewer Project Project # Amount Requested 009 2009 $1,000,000.00 $1,000,000.00 Subsidy Rate Index 70% Exhibit C: 2004 Fund Cycle Fundable Range for Construction Arizona’s Clean Water Revolving Fund Arizona's Clean Water Revolving Fund 2009 Funding Cycle - Fundable Range for Construction Financial Assistance Prepared Date: 5/28/2008 Fundable Range Rank Total: MPL Rank Applicant Population Project Title 1 1 Taylor, Town of 4,100 2 2 Lake Havasu City 22,500 3 5 Kingman, City of 14,000 4 11 Tucson, City of 710,000 5 13 Peoria, City of 153,592 6 14 Peoria, City of 153,592 Taylor Wastewater Treatment Expansion Lake Havasu City Wastewater System Expansion Hilltop Wastewater Treatment Plant Upgrades Roger Road Reclaimed Plant Booster Expansion Beardsley Water reclamation Facility Upgrades Northern and 95th Avenues Trunk Sewer Repairs Project # Amount Requested Subsidy Rate Index 020 2009 $3,000,000.00 70% 005 2009 $73,831,525.00 75% 013 2009 $30,800,000.00 80% 019 2009 $1,000,000.00 80% 017 2009 $7,541,555.00 85% 018 2009 $7,058,960.00 85% $123,232,040.00