Intended Use Plan for the NYS Drinking Water State Revolving Fund

1.0  Introduction

The Drinking Water State Revolving Fund (DWSRF) was created in 1996 as a result of New York State’s enactment of Chapter 413 of the Laws of 1996 (Clean Water/Clean Air Bond Act, "Bond Act") and passage of the 1996 Amendments to the Safe Drinking Water Act (Public Law 104-182) by the U.S. Congress. The DWSRF provides a financial incentive for municipally and privately owned public water systems to undertake needed drinking water infrastructure improvements (e.g., treatment plants, distribution mains, storage facilities). This program provides below market rate loans for the construction of certain eligible public water system projects. As loans are repaid, money is made available for new loans - a true revolving fund. For communities with demonstrated financial hardship, interest rates can be reduced to zero percent. In this federal fiscal year, the State expects to receive additional federal grants to capitalize the DWSRF. Monies from the Bond Act will be used to provide federally mandated state matching funds of at least 20%. The program is administered jointly by the New York State Department of Health (DOH) and the New York State Environmental Facilities Corporation (EFC).

This Intended Use Plan (IUP) includes:

  1. an anticipated financing schedule which covers the period from October 1, 2002 to September 30, 2003;
  2. a description of the goals of the DWSRF program;
  3. specifics on how New York State proposes to use available DWSRF funds during federal fiscal year (FFY) 2003;
  4. criteria for selecting projects to receive financial assistance;
  5. criteria for determining which communities qualify as disadvantaged communities;
  6. an estimate of anticipated funds available for financial assistance;
  7. a procedure to amend this IUP;
  8. a description of capacity assessment;
  9. a description of the project selection process;
  10. criteria for determining equivalency projects;
  11. a Project Readiness List which includes eligible projects expected to be ready for long-term financing during this IUP period;
  12. a Category A List which includes eligible projects of systems serving less than 10,000 people;
  13. a Multi-Year List of projects eligible to receive DWSRF financing;
  14. a Category C (hardship) List of projects which have received written confirmation that they qualify for financial hardship;
  15. the project scoring and ranking system;
  16. a description of the fees associated with DWSRF loans; and
  17. a copy of the DWSRF pre-application form and application checklist.

This IUP is based on the use of FFY 2003 federal Capitalization Grant monies, anticipated State fiscal year 2003-2004 State contributions, and unobligated funds carried forward from the previous IUP. The following is an anticipated financing schedule for this IUP period:

October 15, 2002Complete Applications Due for Winter Pool Financing
December 2, 2002Submittal Date for Drinking Water Hardship Applications
December 6, 2002Complete Applications Due for Non-Hardship Projects that have been on the Project Readiness List, above the Funding Line for two or more consecutive IUP periods
March 2003Winter Pool Closing
March 3, 2003Complete Applications Due for Summer Pool Financing
April 1, 2003Complete Applications Due for Long-term, Non-Hardship Direct Loans
May 1, 2003Complete Applications Due for Short-term Loans
July 2003Summer Pool Closing
September 30, 2003End of Financing Period

Under the anticipated financing schedule, bond financed (leveraged) loans will be originated twice with scheduled loan closings targeted for March and July. Direct loans, which include short-term loans, will be originated throughout the year.

2.0  Program Changes

The DOH and the EFC are changing the short-term financing program by allowing this financing to be made available to projects that have not completed construction (section 4.6). Short-term financing was previously limited to projects that had not started construction.

This year’s State Budget amended the Public Authorities Law to increase the State Bond Issuance Charge that EFC is required to assess on all State Revolving Fund leveraged financings. A description of loan fees is presented in Attachment III.

3.0  Short- and Long-Term Goals

The SDWA Amendments of 1996 authorize a DWSRF to assist public water systems with financing the costs of infrastructure needed to achieve or maintain compliance with SDWA requirements and to protect public health. The DWSRF program will help ensure that New York State’s drinking water supplies remain safe and affordable, and that drinking water systems that receive funding will be properly operated and maintained.

    3.1  Short-Term Goals

    1. Continue to implement the DWSRF program for the State of New York.
    2. Receive project pre-applications, score and rank projects based on human health risk and compliance with the SDWA.
    3. Make available short-term financing to help accelerate project development.
    4. Make available long-term financing for projects in priority order, taking into account project affordability.
    5. Make available loans and/or financial assistance payments (grants) to help small public water systems and disadvantaged communities finance needed projects.
    6. Make available emergency financing to allow for emergency repairs when no other funding source is available to the eligible public water system.

    3.2  Long-Term Goals

    1. Help public water supplies achieve and maintain compliance with federal and state drinking water standards and enforceable requirements of the SDWA and the New York State Sanitary Code.
    2. Protect and enhance New York’s public drinking water supplies.
    3. Administer the DWSRF in a manner that will ensure its revolving nature in perpetuity.
    4. Assist public water supplies to improve drinking water quality, quantity and dependability by providing reduced interest rate long-term loans and/or Additional Loan Subsidies (Grants).

4.0  Financial Status

    4.1  Total DWSRF Monies

    Capitalization for the New York DWSRF program during this IUP funding period will be provided from the FFY 2003 federal Capitalization Grant, anticipated State fiscal year 2003-2004 State contributions, and unobligated funds carried forward from the previous IUP (October 1, 2001 - September 30, 2002). New York State has not yet received a FFY 2003 DWSRF Capitalization Grant. Funds are dependent upon passage by Congress of an appropriation at least equal to the President’s proposed budget. An appropriation in such amount is currently moving through both the House and the Senate and is expected to be available for grant awards in the fall of 2002. The minimum state match requirement is 20% of each federal award. Bond Act funds will provide capitalization in excess of the minimum amount required under the federal SDWA as overmatch for the 2003 federal grant award. Any Bond Act funds above the minimum amount required for match may be credited (banked) against future state match. The State’s fiscal plan projects $30 million will be made available for the DWSRF program in State Fiscal Year 2003-2004. These monies should be available after April 1, 2003. The State plans to use up to 30% of the FFY 2003 federal capitalization grant to provide grants beyond the interest free loan rate to eligible disadvantaged communities. The 100% state match requirement for the state program management set-aside will be met with in-kind services. The proposed sources and uses of the DWSRF for this IUP are presented in Table 1. Total available DWSRF program resources to finance drinking water projects are $737,844,664 for this IUP period.

Table 1
Proposed Sources and Uses
And Estimated Amount of DWSRF Funds for FFY 2003
SourcesAmount
FFY 2003 Capitalization Grant $62,430,7001
State Matching Requirement $12,486,140
Additional State Contribution $17,513,860
Carry-over monies from FFY 2002 $280,375,200
Repayments and Interest Earnings $18,135,800
Total Sources $390,941,700
Uses Amount
Administrative Set-Aside $2,497,228
Technical Assistance Set-Aside $1,248,614
State Program Management Set-Aside $2,497,2282
Total Set-Asides $6,243,070
Direct Loans $136,839,458
Grants $25,376,834
Grant Funds Reserved $30,606,214
Corpus Allocation for Leveraged Loans $191,876,1243
Total Uses $390,941,700

1 This amount is based on the administration’s request to Congress for $850 million for DWSRF funding for this fiscal year; however, this amount has not yet been appropriated.

2 Refer to Section 6.0 for a detailed description of each set-aside.

3 Leveraged three times, these funds will finance $575,628,372 worth of loans and with Direct Loans and Grants the total financing capacity for this IUP period is approximately $737,844,664.

    4.2  Fees

    Up to 4% of the total amount of federal Capitalization Grants (as provided by Section 1452(g)(2) of the SDWA) can be set-aside to support the cost of administering the DWSRF program. Costs of DWSRF program administration not covered by the 4% administrative set-aside must be paid from fees charged to DWSRF recipients. A loan origination charge of 1.1% of the project costs plus an annual fee of 0.11% of the outstanding principal balance of the loan will be assessed to support the administration of the DWSRF program. The 1.1% loan origination fee may be financed as part of the loan. For non-hardship projects that receive short-term financing, an administrative fee equal to 0.6% will be charged and may be included as part of the short-term financing. A description of the loan fees is presented in Attachment III. Fees collected by the DWSRF are held in an account outside of the DWSRF. For the state fiscal year 2002 (4/1/01 to 3/31/02), the DWSRF has recognized and expects to collect $1,032,819 in loan origination fees and $963,420 in annual fees. It is anticipated that in FFY 2003 similar fees will be recognized.

    4.3  Transfer of Funds

    The SDWA Amendments of 1996 offered states the flexibility to meet the funding needs for drinking water and wastewater facilities by transferring funds from one SRF program to the other (Section 302 of Public Law 104-182). An amount equal to up to 33 percent of the DWSRF Capitalization Grant could be transferred from the DWSRF to the CWSRF program, or an equivalent amount from the CWSRF to the DWSRF program. Funds could be transferred after one year had elapsed from the first DWSRF Capitalization Grant award (March 9, 1998). The EPA issued guidance that would allow banking of transfer credits, and transfer of funds on a net basis (i.e., funds could be moved in both directions), provided that the final transferred amount did not exceed the authorized ceiling. On September 30, 2001, the SDWA provision that allowed the transfer of funds from one SRF program to the other expired. However, Congress extended this provision within EPA’s FFY 2002 budget, making the transfer of funds an available option. A decision whether to transfer FFY 2002 funds is pending and those funds are not included in Table 1. It is anticipated that Congress will again extend this provision within EPA’s FFY 2003 budget. Such action is included in the proposed Appropriations Bills. Depending on Congress’ action, the transfer of funds may continue in future IUPs.

    The amount that has been transferred from the CWSRF to the DWSRF is presented in Table 2.

Table 2
Transfer of Funds from CWSRF to DWSRF
FFY DWSRF Grant Amount 33% Status
1997 $59,167,700 $19,525,341 Awarded & transferred
1998 $45,061,600 $14,870,328 Awarded & transferred
1999 $47,228,900 $15,585,537 Awarded & transferred
2000 $49,084,500 $16,197,885 Awarded & transferred
2001 $49,287,400 $16,264,842 Awarded & transferred
2002 $62,430,700 $20,602,131 Available
Totals: $312,260,800 $103,046,064  

    4.4  Eligible Systems and Types of Projects to be Funded

    Drinking water systems that are eligible for project funding are community water systems, both public and privately owned, and non-profit, non-community water systems.

    "Drinking water infrastructure project" or "water supply project" means the planning, design, construction, improvement, or acquisition of facilities, equipment, sites, or buildings for the supply, control, treatment, distribution, and transport of drinking water and the testing and monitoring to ensure the integrity and quality of such water intended to improve drinking water facilities including achievement of compliance with the federal SDWA or other applicable federal law and state drinking water quality goals and standards.

    Projects eligible for DWSRF financing include investments to upgrade or replace infrastructure, address exceedances of federal or state health standards, prevent future violations of such standards, and provide the public with safe drinking water. Examples of such projects include but are not limited to:

    • rehabilitation or development of new drinking water sources to replace contaminated supplies;
    • installation or upgrading of facilities if the project will improve the quality of drinking water to comply with primary or secondary standards or treatment/performance criteria;
    • installation or upgrading of storage facilities, including finished water reservoirs, to prevent microbiological contamination or to provide adequate delivery pressures;
    • installation or replacement of transmission and distribution mains to prevent contamination caused by leaks or breaks;
    • funding and/or construction to promote the consolidation of water supply services, particularly in circumstances where individual homes or water systems generally have an inadequate quantity of water, the water supply is contaminated, or the system is unable to maintain adequate compliance for financial or managerial reasons;
    • the purchase of a portion of another system's capacity, if the purchase is part of a consolidation plan to bring the system(s) into compliance;
    • capital investments made to improve the security of drinking water systems; and
    • any of the above listed project types which are publicly owned and which were previously financed subsequent to July 1, 1993, may be eligible for refinancing. Planning, design and other pre-construction costs incurred prior to July 1, 1993, may be allowed if related to an otherwise eligible project.

    Projects submitted by systems that lack technical, managerial or financial capacity or that are significant non-compliers are not eligible for funding unless the proposed project will improve capacity or compliance. Also, projects whose primary purpose is fire protection or growth/development, dams and reservoirs, or acquisition of land not integral to an eligible project are not eligible.

    The EPA issued a notice in the Federal Register (63FR 59299, November 3, 1998) which allows States to provide DWSRF assistance to projects that solve public health problems for residents currently served by contaminated sources. This policy allows for the creation of a community water system (publicly or privately owned) to address an existing public health problem caused by unsafe drinking water provided by individual wells or surface water sources. This policy also extends to a situation where a new regional public water system is created by consolidating several existing PWSs that have technical, financial or managerial difficulties. Under this policy, a proposed project may only receive DWSRF assistance if the following conditions are met:

    1. upon completion of the project, the entity responsible for the DWSRF financing meets the definition of a Federal community public water system;
    2. the project is on the Project Readiness List and addresses an actual public health problem with serious risks;
    3. the project is limited in scope to the specific geographic area affected by contamination;
    4. the project is only sized to accommodate a reasonable amount of growth expected over the life of the facility (growth cannot be a substantial portion of the project);
    5. the applicant demonstrates that sufficient public notice to potentially affected parties was provided and alternative solutions to addressing the problem were considered; and
    6. the project is a cost-effective solution to solving the public health problem.

    4.5  Financial Planning Process

    Projects submitted for financing will be screened for eligibility, scored, ranked and listed. Projects can be submitted to the DOH for listing at any time. All eligible projects for which pre-application forms were submitted on or before August 16, 2002 were included in this IUP. Eligible projects for which pre-application forms were submitted after August 16, 2002 will be included in the next IUP (October 1, 2003– September 30, 2004). Projects for which an engineering report or plans and specifications were submitted to the DOH or which have completed construction by August 16, 2002 were listed on the Project Readiness List. It is anticipated that bond financed loans will be originated twice during this IUP period with scheduled loan closings targeted for March and July. Direct Loans, which include short-term loans, will be originated throughout the year.

    4.6  Types of Assistance and Terms

    Capitalization will be used to provide the following types of financial assistance:

    1. Short-Term Financing - The short-term financing program (STFP) provides short-term interest free financing, of up to three years in duration, to recipients that are developing projects eligible for long-term DWSRF financing. Short-term financing is limited to projects that are eligible to be funded from the current Project Readiness List, thus there would be no effect on the funding line. This financing is limited to projects that have not completed construction and is further limited to an amount not to exceed one-third of the estimated total project costs as set forth in the Project Readiness List. However, recipients that qualify for hardship assistance will not be subject to the one-third project cost limitation. Before these short-term loans can be made, a recipient must receive approval of an engineering report for the project, complete the State Environmental Review Process (SERP), and obtain approval from the Office of the State Comptroller for any necessary district formation.
    2. Leveraged Loans - Leveraged Loans are DWSRF loans financed from bond proceeds. Bonds issued to finance DWSRF loans will be secured by federal and state match dollars (Corpus Allocation) deposited to recipient reserve accounts. Loans financed from bond proceeds will receive corpus allocation equal to one-third of the loan amount. Certain hardship communities may receive a corpus allocation of more than one-third. Investment earnings from the corpus allocation will provide an interest subsidy to the recipients, thereby reducing the net interest rate on the loan. In instances where the project qualifies for a hardship loan, the interest subsidy may reduce the net interest rate to as low as zero percent.
    3. Regular Reduced Rate Direct Loans - Regular Reduced Rate Direct Loans will be made available to recipients not eligible for Leveraged Loans. Recipients determined by EFC to be non-investment grade or which have submitted small loan requests may receive Direct Loans.
    4. Financial Hardship Loans - Hardship Loans will be made available to qualified recipients at rates below the regular reduced interest rate. Certain hardship loans may also be leveraged loans. If qualified, Hardship Loans may also be issued for 30 years. A description of the DWSRF Disadvantaged Community Program is provided in Section 7.0.
    5. Additional Loan Subsidies (Grants) - Grants may be made available to eligible recipients if an interest free loan does not provide sufficient funding to lower the Projected Service Charge to the Target Service Charge (TSC). A description of the DWSRF Disadvantaged Community Program is provided in Section 7.0.
    6. Emergency Financing - The emergency financing program allows for the immediate financing of emergency situations as defined in Attachment I of this IUP, at eligible public water systems. This funding is only available to water supply systems for emergency repairs when no other funding source is available to the system. The determination of when an emergency exists would be made by the DOH. Imminent threats to public health would include situations that result in the unavailability of a source of potable water for an extended period of time. Projects that are designed to address such emergency situations will receive the highest priority ranking and will be added to the Project Readiness List. These projects would receive the first priority for any funds that are by-passed in accordance with by-pass procedures authorized in Section 10.2 of this IUP.

    4.7  Financial Terms of Loans

    1. Short-Term Financing - Communities will borrow through the STFP by issuing municipal Bond Anticipation Notes ("BANs") to the EFC. The EFC will provide funding in the amount of the BANS on an interest-free basis. Upon maturity, the BANs may be retired with long term DWSRF loans, the issuance of long term debt obligations by the community, or other funding (e.g., RD grants and/or loans). Applicants other than municipalities will borrow through the STFP by issuing a promissory note to EFC secured by a letter of credit.
    2. Leveraged Loans - The financial terms, including the payment of principal and interest, are based on the terms of the EFC’s bonds, proceeds of which fund the Leveraged Loan. Principal amortization will be required to commence the earlier of a) within one year of the project completion or b) no later than two years after loan closing (which is consistent with New York State Local Finance Law). Principal amortization cannot exceed 20 years from the project completion date or the Period of Probable Usefulness, whichever is sooner. The interest subsidy is provided from interest earnings on the investment of the corpus allocation. Investments will be limited to U.S. Treasury securities, U.S. Government guaranteed securities, investment agreements collateralized by U.S. Treasury securities or U.S. Government guaranteed securities and entered into with banks, broker dealers or insurance companies rated in one of the two highest rating categories by each nationally recognized rating service that rates their obligations, and tax-exempt bonds rated in one of the two highest rating categories by each nationally recognized rating service that rates the bonds. For example, the Net Interest Cost (NIC) or Market Rate for leveraged loans made from New York’s DWSRF in 2002 G/H Bond Pool financing was 4.85%. The Effective Interest Cost (EIC) for loans in this pool was approximately 3.13% (1/3 subsidy).
    3. Regular Reduced Rate Direct Loans – Terms governing principal amortization are the same as those applicable to Leveraged Loans. Interest payable on the loan will be set at two-thirds of the interest rate, as determined by the most recent issuance of DWSRF bonds issued to finance loans to eligible recipients.
    4. Financial Hardship Loans - For eligible projects the terms governing principal amortization shall be as long as 30 years from the project completion date or the Period of Probable Usefulness, whichever is sooner. Any interest payable on Hardship Loans will be set at less than two-thirds of the interest rate, as determined by the most recent DWSRF financing; rates may be as low as zero. The actual rate will be determined based on the affordability criteria (refer to Section 7.0).
    5. Additional Loan Subsidies (Grants) - Grants will be provided to qualified recipients to lower the Projected Service Charge to the Target Service Charge. If determined to be eligible, projects will be ranked according to project priority ranking system score. Projects with the highest scores will receive confirmation letters for hardship assistance until the available funding is fully committed (see Section 7.0). To be considered for hardship assistance, eligible projects must have had a total numerical score greater than (or equal to) that of the project with the lowest score (excluding bonus points) eligible to be funded from the Project Readiness List for the October 1, 2002 to September 30, 2003 funding period.
    6. Emergency Financing - Emergency loans would be issued as regular reduced rate direct loans. Interest payable on the loan would be set at two-thirds of the interest rate, as determined by the most recent issuance of DWSRF bonds issued to finance loans to eligible recipients. However, before an emergency loan can be issued the recipient must demonstrate credit worthiness and fiscal viability in accordance with EFC criteria. Privately owned water systems regulated by the Public Service Commission would be permitted to apply for funding only if the Public Service Commission has issued an order allowing the water system to surcharge its customers to repay the loan.

    4.8  Fund Management and Long-Term Effects of Funding Decisions - Leveraging

    A tremendous need exists for financial assistance for eligible drinking water projects in New York State. The EPA's "Drinking Water Infrastructure Survey - Second Report to Congress" dated February 2001 estimated that more than $13 billion will be needed in New York State over the next twenty years to ensure continued delivery of safe public drinking water. Pre-applications received by the DOH indicate an aggregate need of approximately $4.3 billion over the next several years. Anticipated project financing needs for this IUP, ending September 30, 2003, is over $1 billion. Based on a comparison of available resources and anticipated financing needs, New York State plans to leverage the available DWSRF capital by a factor of three to one. Therefore, with $191,876,124 of capital available for Leveraged Loans, the total Leveraged Loan capacity for the period of this IUP is $575,628,372. When combined with Direct Loans and Grants, the total DWSRF program assistance available during this IUP period is approximately $737,844,664.

    The long-term effect of leveraging the DWSRF three to one will be to extend the reach of financial assistance benefits to more New York State water systems than could be served if leveraging were set at a lower level.

5.0  Amending the IUP

This IUP may be amended to reflect changes in specific areas (e.g., increased project costs). Draft amendment notices will be published in the Environmental Notice Bulletin (ENB) and a letter will be sent to all applicants. At the end of the comment period, responses to all significant comments will be made available and the final amendment notice will be published in the ENB.

6.0  Set-Aside Activities

Section 1452 of the SDWA authorizes states to use a portion of the federal Capitalization Grant (set-asides) to support various drinking water programs. Section 1452 allows as much as 31% of a state’s federal Capitalization Grant to be used for administrative activities, technical assistance activities, state program management activities, and special activities. New York State proposes to use 10% ($6,243,070) of the $62,430,700 FFY 2003 Capitalization Grant for set-aside purposes. Table 3 specifies set-aside allocations and is presented at the end of this section. The State intends to maximize the use of Capitalization Grant monies for water supply projects. Therefore, only those funds considered essential for DWSRF and water supply program support have been allocated to set-aside activities. Also, any unused set-aside monies can be transferred to the project fund after receiving an approved amendment to the Capitalization Grant. The intended use of funds and expected accomplishments for each set-aside are described below.

Descriptions of how the FFY 2003 set-aside monies will be budgeted will be included in the federal Capitalization Grant Application Set-Aside Work Plans. The State plans to bank some set-aside funds for use in future IUP funding periods.

    6.1  Administrative

    The SDWA authorizes states to use up to 4% of the total annual federal Capitalization Grant (as provided in Section 130 of the SDWA Amendments of 1996) to support the cost of administering the DWSRF program. The State plans to use 4% of the total annual federal Capitalization Grant for administrative activities.

    Administrative tasks include, but are not limited to: developing and finalizing the Capitalization Grant application package to secure federal funds; implementing the Operating Agreement (OA) between the DOH and the EPA; performing technical project reviews and ranking project proposals in priority order; preparing an IUP which identifies available funding resources and expenditures and establishes current year and multi-year project priority lists; implementing a State Environmental Review Process; reviewing and approving engineering reports, construction plans and specifications; conducting project inspections; evaluating and determining specific project affordability (hardship); conducting public participation efforts; conducting database management activities; establishing DWSRF accounts; directing the investment of DWSRF funds; preparing project financing and loan agreements (including cost summaries and project financing schedules); preparing necessary financial documents; issuing Corporation Bonds and originating loans; establishing annual corpus allocations; establishing disbursement schedules; processing disbursement requests and conducting associated document reviews; collecting and managing loan repayments; establishing and collecting DWSRF fees; insuring program and fiscal audits are conducted; and preparing technical and financial reports to meet federal and state mandates.

    6.2  Technical Assistance

    Section 1452(g)(2)(D) of the SDWA authorizes states to use up to 2% of the total annual federal Capitalization Grant to provide technical assistance to small water systems (those with populations of 10,000 or fewer). This technical assistance may include assistance to potential DWSRF applicants complying with federal and state drinking water regulations. The State plans to use 2% of the total annual federal Capitalization Grant to continue to fund the enhancement of the State’s existing Small Water Systems and Comprehensive Performance Evaluation Programs and provide for direct technical assistance to small water systems.

      6.2.1  Small Water Systems

      The DOH has an existing technical assistance program for small water systems. This program has helped numerous communities improve their drinking water systems while saving money using self-help techniques. The DOH’s Small Systems Program provides guidance to communities in considering project alternatives, calculating alternative project costs, preparing budgets for selected projects and reviewing existing operation and maintenance practices. Additionally, the program assists communities to develop criteria for consultant selection, determine project priorities, and select the most sensible project, use inexpensive labor and materials, improve purchasing practices, use volunteers, avoid duplication of services and conduct technical assessments to determine the overall needs of the community. These assessments will be useful to the small water systems in helping them improve their overall capacity. This program provides statewide coverage and the DOH will:

      • participate in meetings with the public and individual systems to explain the Small Systems Program and its advantages to local communities;
      • encourage small water systems to consider collaborative or regional approaches to water supply services, such as consolidating, forming partnerships, and initiating contract operation and maintenance agreements;
      • implement a number of small system projects, focusing primarily on communities applying for DWSRF financing; and
      • oversee the regional capacity for providing direct assistance to DWSRF communities and to provide for training and support of local health unit staff.

      In addition, the Department intends to issue during the year, a Request for Proposals for a contract to provide on-site "circuit rider" training, and other direct technical assistance to mobile home parks and other small community and nontransient noncommunity public water systems not currently served by such a program. Once selected, the contractor will submit progress reports on a regular basis in order to receive funding.

      6.2.2      Comprehensive Performance Evaluation Program

      The Comprehensive Performance Evaluation (CPE) Program has resulted in detailed assessments of 120 water filtration plants since November 1994. Although most of these plants are able to meet the current Filtration Performance Criteria and Maximum Contaminant Levels (MCLs), the structural, operational and administrative deficiencies noted in the evaluations will make it difficult for many of these systems to comply with future regulations without considerable capital improvements. There are approximately 270 filtration plants in New York State.

      The primary CPE program goal is to review and evaluate the capabilities of existing treatment facilities to determine if they are meeting current standards and performance goals. A secondary, but equally important goal is to develop a program, based upon the evaluation, for the optimization of each facility to assure compliance with current and future standards and regulations.

      The CPE program initiative includes:

      • conducting a minimum of 10 CPEs per year;
      • continuing to develop and issue comments and recommendations for initial remedial actions to the community within 14 days after completion of field work, followed by the submission of the completed evaluation within an average of 90 days after the completion of field work; and
      • improving training of field staff responsible for follow-up, making equipment available where needed and holding at least one workshop per year on troubleshooting techniques.

    6.3    State Program Management

    The SDWA authorizes states to take up to 10% of the total annual federal Capitalization Grant to support state program management, including development and implementation of an operator certification program and a capacity development strategy. The State plans to use 4% of the total annual federal Capitalization Grant to implement new operator certification requirements, continue implementation of the capacity development strategy, and increase the State’s project assistance delivery. States are required to match these set-asides on a one-for-one basis above and beyond the 20% match required of all capitalization funds. This amount will be matched with in-kind services associated with the State's existing Public Water Supply Supervision Program.

      6.3.1      Operator Certification and Training

      The State of New York has conducted a water system Operator Certification Program since the 1930's. Today, approximately 6,150 operators are actively certified and must meet four basic requirements to gain certification. Those requirements include: having the appropriate education; successfully completing an appropriate training course; having sufficient experience to operate his/her plant; and demonstrating the ability to perform necessary laboratory tests. In addition, the State requires that an operator renew certification every three years.

      On February 14, 2001 the State promulgated new operator certification regulations that meet or exceed the requirements of the new federal initiative for operator certification. The new regulations require that certified operators be employed at community water systems that do not provide treatment of their water and at nontransient noncommunity water systems. In addition, distribution operators in community systems of less than 1000 population require certification. In all, the new regulations will require the certification of approximately 1,700 additional operators.

      Several of the DOH’s goals in association with this program have been met including maintaining the existing operator certification and renewal program and completing the review of the adequacy of existing regulatory requirements and recommending necessary changes. DOH staff will continue to review the adequacy of existing training programs as to geographic distribution and quality of the training provided; continue to address the training needs of the approximately 1,700 operators requiring certification within the next few years; continue to develop a training module to upgrade/renew the skills of operators already certified; and continue to develop criteria for and carry out a program for reviewing and issuing operator certifications.

      Tasks planned for the operator certification initiative during FFY 2003 will include:

      • reviewing the adequacy of existing training programs as to geographic distribution and quality of the training provided;
      • addressing the training needs of the approximately 1,700 operators requiring certification within the next few years;
      • developing a training module to upgrade/renew the skills of operators already certified; and
      • developing a plan for the distribution of training funds, including the criteria for the distribution of funds.

      6.3.2      Capacity Development

      The federal capacity development strategy as outlined in Section 1420 of the SDWA, contains seven specific deadlines which the State must meet to remain eligible to receive this set-aside, as well as not endanger the base DWSRF grant. In August 1997, the State submitted, as required, a list of Significant Non-Complying Systems (SNCS). The SNCS list is updated and provided annually to EPA. In February 1999, the EPA determined that the State has the legal authority to ensure that all new community water systems and new non-transient, non-community water systems demonstrate adequate capacity. On September 29, 2000 the EPA determined that New York’s Capacity Development Program Strategy Report: Improving the Technical, Managerial, and Financial Capabilities of Public Water Systems in New York State met their guidance and statutory requirements. The Strategy Report establishes how the State and its partners can bring assistance to public water systems needing to improve their technical, managerial, and financial capabilities, as well as identifying those factors that encourage or impair capacity development. In August 2002, the DOH prepared a report for submittal to the Governor that reviews the efficacy of the strategy and progress made towards improving the capacity of public water systems. Updates to this report are required every three years thereafter.

      For states that do not comply with the SDWA requirements for implementing a capacity development strategy, the EPA may withhold 15% of the Capitalization Grant funds to which a state is normally entitled in FFY 2003 and 20% in each federal fiscal year thereafter.

      The goals of the capacity development strategy are to discourage the formation of new, non-viable public water systems through a rational process of criteria and regulations, to assist marginal systems gain the capacity to continue to meet the SDWA requirements and to encourage consolidation, collaboration, regionalization, and contract operation and maintenance cooperatives where feasible and cost effective. As part of the capacity development initiative, existing regulations are being reviewed and evaluated to determine their applicability to the large community water systems, the small community water systems including mobile home parks and apartment houses, and non-transient non-community water systems.

      In order to meet the federal capacity development requirements, the DOH plans to implement the following objectives during FFY 2003:

      • continue to update annually a list of community water systems in current or previous Significant Non-Complier status;
      • continue to implement the new system capacity program and comply with annual reporting requirements;
      • improve the tracking and reporting capabilities within the State’s District Offices by providing and training staff to implement the SDWIS and EHIPs data reporting systems within the District Offices;
      • conduct an annual inventory of the institutional, regulatory, financial, tax and legal factors that encourage capacity development at the state, federal, and local levels;
      • continue to identify those agencies and institutions that would have an interest and be involved in the implementation of a capacity development strategy;
      • continue to hold workshops for local health departments to explain capacity development principles and to support such efforts; and
      • implement the capacity development strategy and comply with annual reporting requirements.

        6.3.2.1  Project Assistance

        There is a tremendous need to help public water systems in New York State to improve their technical, managerial, and financial capabilities by providing them with the assistance required to undertake eligible drinking water infrastructure improvement projects. As mentioned in Section 4.8, EPA estimates that more than $13 billion will be needed in New York State over the next twenty years to ensure that consumers receive safe public drinking water. However, a large number of the needed infrastructure improvement projects may not take place because many communities lack the technical knowledge, managerial skills, financial resources, or other essential qualities to bring the projects to fruition. Therefore, DOH is creating a Project Assistance Unit to increase the State’s ability to deliver the technical, managerial, and financial assistance needed by communities for the construction of their drinking water projects.

        The objectives of the Project Assistance Unit during FFY 2003 include:

        • enhancing the assistance and oversight to local health departments to deliver project assistance by providing additional staff resources;
        • creating a referral system to coordinate the delivery of project assistance through one central location;
        • conducting training for local health departments to explain the delivery of project assistance and to support such efforts;
        • assisting local health departments in the identification and prioritization of project assistance at the local level;
        • coordinating the delivery of project assistance with those drinking water projects that have qualified for DWSRF hardship assistance; and
        • participating in the formal coordination of activities among funding agencies, including assisting communities to access available funds and streamlining the application process.

    6.4    Special Activities

    Section 1452(k) of the SDWA authorizes states to take up to 15% of the annual federal Capitalization Grant for land acquisition, capacity development projects, wellhead protection, source water petitions and source water assessments and delineations. No more than 10% of the federal Capitalization Grant can be allotted to any one of these special activities.

      6.4.1      Source Water Assessment

      The 1996 Amendments to the SDWA authorized States to take up to 10% of the annual federal Capitalization Grant for FFY 1997 to complete source water assessments of the sources of water serving New York’s public drinking water systems and to make that information available to the public. Funding for this set-aside was only available for FFY 1997, but the monies can be obligated over four federal fiscal years. The State set aside the maximum amount of 10% of the total annual federal Capitalization Grant for FFY 1997 ($5,916,770) to develop and implement a Source Water Assessment Program (SWAP).

      EPA approved New York’s SWAP plan on November 1, 1999 and the DOH has formally requested the optional 18 month extension for completing assessments to provide the additional time needed for review of the assessments, coordination with local source water protection programs and reporting the assessment findings to the public. There are more than 15,000 raw water sources serving the State’s public water systems. Each source water assessment will delineate the boundaries of the assessment area(s), identify significant potential sources of contamination within the assessment area, and assess the susceptibility of the public water system(s) to contamination within the assessment area. Once the source water assessments are complete, information from the assessments will be made available to the public.

      To date, the DOH has focused staff efforts and resources on: (1) developing a sound program approach and assessment methodology that meets or exceeds the requirements of the 1996 SDWA; (2) establishing a Y2K-compliant computer database for the storage and retrieval of information related to public water systems; and (3) working with the New York State Department of Environmental Conservation (DEC) to update and improve many existing statewide databases that will be used for completing the contaminant inventory portion of source water assessments. In addition, the DOH has initiated several activities to implement the SWAP plan that is nearing completion, including:

      • verifying locations of public water system intakes and wells; and
      • working with local health departments to compile and update water quality data and other information about public water systems that will be evaluated as part of the source water assessment process.

      The DOH has developed and executed a contract to complete the required source water assessment elements of delineation, contaminant inventory and susceptibility determinations for public water systems in Nassau and Suffolk Counties on Long Island, as well as a second contract to complete the required source water assessment elements for public water systems using groundwater in all other areas of the State. The DOH will complete the source water assessments for public water systems using surface water.

      6.4.2      Other Special Activities

      New York State is not proposing to take or use any of the allotted set-aside funds from the FFY 2003 DWSRF Capitalization Grant for the following programs.

      1. Land Acquisition

        Funds in the DWSRF can be used to purchase land integral to the construction of facilities, but not for other purposes such as watershed protection. A separate set-aside of 10%, however, may be used to establish a separate low-interest loan fund for land acquisition, particularly for watershed protection. New York State is not proposing to create such a loan fund at this time. There are a number of existing programs that can be used to purchase sensitive watershed lands. These include the State’s 1986 Environmental Bond Act, the 1996 Clean Water/Clean Air Bond Act, the New York City Watershed Agreement, the Clean Water State Revolving Fund, as well as local, regional and private sources. The State will review the need to create additional capacity for land acquisition as part of its source water assessments and delineation efforts.

      2. Capacity Development Projects

        The State has proposed to use a portion of the allotted Public Water System Supervision Program set-aside to implement the statewide capacity development strategy. The DOH with input from the EFC, the New York State Public Service Commission, the Office of State Comptroller, and other state agencies will use the capacity development strategy to address non-viable public water supplies in the State. Since implementation of the strategy is in its early stages, it is premature to identify specific capacity development projects.

      3. Wellhead Protection

        The DEC developed New York’s Wellhead Protection Program (WHPP), which was approved by the U.S. Environmental Protection Agency in 1990. The goal of the WHPP is to protect the ground water sources and wellhead areas that supply public drinking water systems from contamination. New York’s approach to wellhead protection recognizes and includes the existing federal, state and county programs that protect groundwater, and compliments these programs through a combination of activities and efforts using existing public and private agencies and organizations at all levels. In New York, the WHPP has focused on assisting municipal community water systems with an interest in developing protection plans for their ground water supplies.

        In October 1998, New York’s Governor Pataki transferred administration of New York’s WHPP from the DEC to the DOH. The basis for the transfer of this program responsibility was due to the creation of the SWAP under the 1996 SDWA Amendments and the need to ensure efficiency and compatibility in the administration of these key water supply management programs. The WHPP and the SWAP share several similar program elements (e.g., delineation and contaminant inventory) for identifying areas of source water vulnerability to contamination, and both programs provide a foundation for focusing source water protection efforts at the local level.

        The DOH submitted a Biennial Wellhead Protection Report to the EPA on November 15, 1999 for the October 1997 through September 1999 reporting period. This biennial report was prepared in accordance with the reporting requirements and criteria outlined in the EPA guidance provided to states and is consistent with previous New York State submittals on progress reporting for the WHPP. The DOH submitted a Biennial Wellhead Protection Report, using the 2001 Source Water Assessment and Protection Reporting Matrix, to the EPA on November 9, 2001 for the October 1999 through September 2001 reporting period. Future wellhead protection reporting will be prepared in accordance and be consistent with revised EPA reporting requirements that are under development.

      4. Source Water Petitions

        As part of the SWAP, the State will assess a variety of options for improving source water protection throughout the State. The source water petition program outlined in the SDWA is one such option. It would be premature to develop a loan program to fund source water petition partnerships before this assessment is completed.

TABLE 3
DISTRIBUTION OF FFY 2003 SET-ASIDE FUNDS
Drinking Water State Revolving Fund
Set-Aside SDWA FFY 2003
Maximum Allocation1
NYS FFY 2003
Administration
  DOH
  EFC
4% $2,497,228 4% $2,497,228
($624,307)
($1,876,921)
Technical Assistance
  DOH
2% $1,248,614 2% $1,248,614
State Program Management
  Capacity Development (DOH)
  Operator Certification (DOH)
10% $6,243,070 4% $2,497,228
Special Activity Set-Asides2
  Land Acquisition
  Capacity Development
  Wellhead Protection
  SW Petition Programs
15%
(10%)
(10%)
(10%)
(10%)
$9,364,605
($6,243,070)
($6,243,070)
($6,243,070)
($6,243,070)
   
Total Set-Aside 31% $19,353,517 10% $6,243,070

1 Based on receiving Federal Capitalization Grant of $62,430,700.

2 No more than 10% for any individual component and a total of 15% under Special Activity Set-Asides.

7.0  Disadvantaged Community Program and Hardship

    7.1  Introduction

    Chapter 413 of the Laws of 1996 (Clean Water/Clean Air Bond Act) provided $355,000,000 to finance drinking water infrastructure projects in New York State. Of these monies, $90,000,000 was allocated to provide direct financial hardship assistance payments for projects in disadvantaged communities. As of December 1998, the $90 million available for State Assistance Payments (Grants) from the Bond Act was fully committed. Therefore, DOH and EFC are exercising the federal SDWA Hardship Provision which allows states to utilize up to 30% of their annual DWSRF Federal Capitalization Grant to provide Additional Financing Subsidies (Grants) beyond the interest free loan rate to eligible disadvantaged communities. Table 4 reflects the amount of federal grant funds available for each federal Capitalization Grant. Up to $18,729,210 will be available to provide Grants to eligible disadvantaged communities from the FFY 2003 Capitalization Grant.

Table 4
Available Federal Hardship Grant Funds
Federal Fiscal Year Capitalization Grant 30% Allotment
1998 (Cap Grant received 9/15/98) $45,061,600 $13,518,480
1999 (Cap Grant received 7/13/99) $47,228,900 $14,168,670
2000 (Cap Grant received 4/6/00) $49,084,500 $14,725,350
2001 (Cap Grant received 6/29/01) $49,287,400 $14,786,220
2002 (Cap Grant pending) $62,430,700 $18,729,210
2003 (Cap Grant pending) $62,430,700 $18,729,210

    Hardship applications submitted by December 2, 2002, will be evaluated using the criteria outlined herein and if determined to be eligible will be ranked according to project priority ranking system score. Drinking water projects will be reviewed to determine eligibility for funding and scored based on the established project priority ranking system (see Attachment I). Communities whose drinking water projects are listed on the Project Readiness List or the Multi-Year List with a total numerical IUP score greater than (or equal to) that of the project with the lowest score (excluding bonus points) will be evaluated for financial hardship. Projects with the highest scores will receive confirmation letters for hardship assistance until the available hardship allotment plus any unexpended, previously committed hardship funds are fully committed. Hardship applications submitted after December 2, 2002 will be evaluated during the annual call for projects for the next IUP period (October 1, 2003 - September 30, 2004).

    7.2  Financial Availability

    As defined by § 1452(d)(3) of the SDWA, a disadvantaged community is one in which the public water system service area meets established affordability criteria. Under the Disadvantaged Community Program financial hardship assistance may include:

    1. Reduced Interest Rate Loans - The rate on a loan can be reduced to as low as interest free and/or the loan terms increased to as much as thirty years to bring the Projected Service Charge (PSC) down to the Target Service Charge (TSC) level (see Calculating Hardship); and
    2. Grants Beyond an Interest Free Loan - If an interest free loan does not provide sufficient funding to reach the TSC, Grants (up to $2 million or 75% of the eligible project cost, whichever is less) may be used to make up the difference. An applicant may not be awarded more than $2 million in grants in a particular funding period. Grants will not be made available to systems with a Median Household Income (MHI) greater than the statewide average MHI of $32,965, based on the 1990 U.S. Census data.

    Each IUP will include an annual call for hardship applications from projects in that IUP. For this IUP (October 1, 2002 - September 30, 2003), hardship applications must be submitted to the DOH by December 2, 2002.

    7.3  Eligibility for Financial Hardship Assistance

    The following eligibility requirements apply to hardship applicants:

    • The project must be listed on the Project Readiness List or the Multi-Year List with a total numerical IUP score greater than (or equal to) that of the project with the lowest score (excluding bonus points) eligible to be funded from the current Project Readiness List.
    • Hardship assistance is available only for drinking water projects for which the notice for construction to proceed was issued on or after April 1, 1997. Debt issued between July 1, 1993 and March 31, 1997 is eligible only for refinancing through regular subsidized interest rate loans from the DWSRF program.
    • Only projects that have a total project cost less than $10,000,000, are eligible for hardship assistance. Projects may not be segmented in order to qualify for hardship financial assistance.
    • An applicant may not be awarded more than $2 million in grants in a particular funding period.
    • Grants will not be made available to system service areas with a MHI greater than the statewide average MHI of $32,965, based on the 1990 U.S. Census data. However, projects in such areas will be eligible for reduced interest rate loans (to as low as 0%) or extended up to thirty years to bring the PSC down to the TSC.
    • Only community water systems, systems that provide drinking water to residential populations, such as municipal water systems and privately owned water supply companies, are eligible for hardship assistance.
    • Privately owned community water systems are eligible for hardship assistance only if they are regulated by the Public Service Commission.

    7.4  Calculating Hardship

    A hardship determination is made based on the information provided in a completed financial hardship application and a comparison of PSC and TSC for a typical household. The TSC is based on a percentage of the MHI, as indicated in the following graph. The PSC is the projected annual service charge of the project per Equivalent Dwelling Unit (EDU) including existing debt service, projected debt service, and project operation and maintenance (O&M) costs.

    The EDU concept relates all water system usage proportionately to that equivalent to a typical single family residence. EDU's will be calculated for commercial, industrial and institutional users based upon the water usage from flow data, number of employees, fixture units, or other factors that equate usage to that of an equivalent number of residential users. The percentage of total water use dedicated to institutional/industrial uses is taken into account in calculating the amount of hardship a particular community will qualify for in grant assistance (see below).

    The comparison of PSC to TSC is used to determine which public water systems are eligible for financial assistance beyond the regular subsidized interest rate financing available through the DWSRF. The additional benefits will assist economically disadvantaged water systems in the construction of eligible drinking water projects.

    The TSC is based on a percentage of the service area’s MHI. In calculating the MHI for this IUP period, the 1990 U.S. Census data will be used. Under certain circumstances, an income survey for the service area may also be considered (contact EFC for income survey guidance). The TSC is calculated as follows:

    Median Household Income Target Service Charge
    $0 to $24,725 1% of MHI
    $24,726 to $39,557 $247 + (MHI - $24,725) x 0.03
    $39,558 and above 1.75% of MHI

    The following factors may be considered including, without limitation, the relative number and nature of residential, seasonal, commercial, industrial and institutional users when making the determination regarding hardship assistance.

    Once the initial hardship determination is made, a percentage of the calculated grant amount (if any) equivalent to the percentage of industrial and institutional water use (if that use exceeds 25% of the total water consumption of the applicant service area) will be converted to an interest free loan. Institutional refers to a facility with dormitory or similar accommodations for overnight use.

    The grant portion of hardship packages will not be provided if the difference between the projected service charge, based on hardship assistance, and the projected service charge for the project if financed through a loan only hardship package is calculated to be less than 5%.

    7.5  Hardship Application Process

    To be considered for financial hardship assistance, an applicant must request a Financial Hardship Application from the DOH or the EFC and provide the following information when completing the application:

    • existing population of the project service area;
    • number of EDUs to be served, including commercial, institutional and industrial users, and the basis on which they were calculated;
    • existing annual debt for the system;
    • existing annual O&M costs;
    • estimated annual O&M costs based upon completion of the project;
    • annual financial reports, audited if available, for the last three years;
    • an analysis of project alternatives for cost effectiveness;
    • estimated project costs; and
    • any other funding sources for the project, including detail on whether such funding is a grant or a loan, and if a loan, its interest rate, term, and annual debt payment.

    The hardship application is different than the DWSRF application. It is recommended that applicants, meeting the aforementioned eligibility criteria obtain and submit a hardship application directly to the DOH. Hardship applications submitted after December 2, 2002 will not be evaluated until the next funding round pursuant to the next IUP period.

    7.6  Confirmation of Hardship Availability

    Upon review of all hardship applications received in a funding round, projects eligible for hardship assistance will be ranked in priority order based on their project priority ranking scores. Projects with the highest project priority scores will receive confirmation letters for hardship assistance until the available hardship monies and any unexpended previously committed hardship funds are fully committed. Projects which qualify for financial hardship assistance may be provided with written confirmation from EFC of such qualification and placed on the next IUP Hardship List unless already funded during the current IUP funding period. Written confirmation for financial hardship will remain valid for the term identified in the confirmation letter. The amount and type of hardship assistance offered may change or be withdrawn if:

    • the applicant fails to demonstrate satisfactory progress towards project implementation;
    • the information on which the determination was first made changes prior to financial closing; or
    • the applicant fails to demonstrate that it can repay the loan portion of the assistance package.

    If a project has not received funding by the expiration date identified in the confirmation letter, it will be removed from the Hardship List and will have to reapply for hardship assistance.

    Projects which are deemed eligible for hardship assistance and would otherwise be eligible for a Grant, but are either not reachable due to the limited grant monies available or consist of multiple projects submitted by a single applicant for which the sum of the grant component exceeds $2 million, will have to compete each year for the available hardship monies. However, these projects may be offered a zero interest loan upon determination of hardship eligibility. Projects that accept this loan will still be eligible to compete for Grant money in future years to repay the zero interest loan.

    Projects that receive a financial hardship confirmation letter, that have not closed on their funding package, and whose project costs increase will be able to apply for a reduced interest loan, as low as zero percent, to cover the cost increases as long as direct loan funds are available in the current IUP funding period. As an alternative for projects not yet closed, the project applicant may submit the entire revised project for reconsideration in a subsequent annual call for projects.

    Projects that receive a financial hardship confirmation letter, that have closed on their long-term funding package, and whose project costs increased can apply during the next IUP funding period for a reduced interest loan, as low as zero percent, to cover the cost increases. In this case, the applicant must file a new pre-application to list the project in the next IUP. The project will be awarded additional points for project phasing.

    7.7  Co-funding

    Confirmation that a project qualifies for hardship assistance will help facilitate funding coordination with other State and Federal agencies that finance drinking water projects. A Water and Sewer Co-funding Initiative that brings together representatives from the DOH, EFC, DEC, Department of State, Governor’s Office for Small Cities, and United States Department of Agriculture Rural Development, is underway to ensure optimum funding potential and assistance for New York’s communities. Co-funding is anticipated and encouraged by the provision of additional points to a project's score in the priority system. Coordination of joint funding of projects will be done on a project by project basis.

TARGET ANNUAL WATER SERVICE CHARGE (TSC)
($ per Equivalent Dwelling Unit)

Formulas for MHI < $24,725 $24,725 < MHI < $39,558 MHI > $39,558
Target: TSC = MHI x .01 TSC = 247 + (MHI - 24,725) x .03 TSC = MHI x .0175

Median Household
Income (MHI)
Target Service
Charge ($)
10,000 100
15,000 150
20,000 200
25,000 253
30,000 405
35,000 555
40,000 700
45,000 788
50,000 875
55,000 963
60,000 1,050

8.0  Capacity Assessment

To provide safe and reliable drinking water, the federal and state governments are investing substantial financial resources in the drinking water infrastructure of New York State. To assure the DWSRF is invested wisely, each DWSRF applicant must demonstrate that its water system has adequate technical, financial and managerial capacity.

    8.1  Technical Capacity

    To assure adequate technical capacity, the applicant must demonstrate adequacy of source water, adequacy of infrastructure and technical knowledge. The DOH will review central office and local office records to assure that the system is being properly operated and maintained. The water system must not have outstanding drinking water compliance problems unless the project is aimed at correcting those problems. The engineering report and plans and specifications for the proposed project will be evaluated to insure that the system has a reliable source for its drinking water and that it is adequately protected; that the project will maintain system compliance; and that the education, experience, and technical skills and capabilities of the system operator are appropriate for that system.

    8.2  Financial Capacity

    To assure adequate financial capacity, the applicant must have sufficient rates, charges and revenues to cover necessary costs, demonstrate credit worthiness and fiscal condition in accordance with EFC criteria. The EFC will review the applicant’s financial capacity during the full application process to determine financial viability before the awarding of financial assistance. The EFC's review will include, but not be limited to, the project budget, municipal bond resolution(s), annual financial reports to the Office of the State Comptroller, and other financial information to assure adequate financial capacity of the applicant.

    8.3  Managerial Capacity

    To assure adequate managerial capacity, the water system must have clear ownership identity and be appropriately staffed by personnel with expertise to administer overall water system policies and operations. The DOH will review the applicant’s managerial capacity to assure that management is involved in the day to day supervision of the water system, is aware and responsive to all required regulations, is available to respond to emergencies, is capable of identifying and addressing all necessary capital improvements, is responsive to their customers and is capable of keeping accurate records and assures financial viability. The water system must have a qualified water operator in accordance with the State's existing Operator Certification Program.

    8.4  Systems with Inadequate Capacity

    For all systems that seek funding under the DWSRF, the DOH will review any history of violations, outstanding compliance problems, reported source contamination or inadequacies, treatment failures, needs survey data, operations and maintenance issues, and operator and owner coverage to determine whether a system lacks adequate capacity. A system that requires improvements to obtain adequate capacity can apply to the DWSRF provided the improvements will ensure compliance and render the water system viable. Using the procedures outlined in Sections 8.1, 8.2, and 8.3 to evaluate the system’s technical, financial, and managerial capacity, the DOH will assess whether DWSRF assistance will help to ensure compliance. In addition, the DOH will consult with the local health department, which provides the daily oversight and regulation of the water system, to make this assessment.

    8.5  Long-Term Capacity

    Water systems must maintain adequate capacity. The DOH and EFC will assess whether each water system has a long-term plan to undertake feasible and appropriate changes in operations necessary to develop adequate capacity. The DOH will review Water Resource Management Strategies, Comprehensive Studies, the Needs Survey and other available engineering reports, as well as consult with the local health departments, in making these assessments. The DOH and EFC will encourage restructuring efforts when two or more systems can benefit and other options, such as contract management or partnerships with other communities in their area, in an effort to improve the overall capacity. The priority ranking criteria provides additional points to encourage this objective. In addition, restructuring efforts and other cooperative arrangements among systems will be encouraged as part of the implementation of the statewide capacity development strategy.

    8.6  Annual Reporting Requirements

    The State will submit to the EPA and include in the IUP, documentation that summarizes the results of the capacity assessments conducted on those systems seeking funding under the DWSRF in the preceding year. The summary will include statistics on the numbers, types, and sizes of systems assessed to determine technical, managerial, and financial capacity, including the assessment outcomes; whether DWSRF assistance will ensure compliance for those systems with inadequate capacity; and whether restructuring efforts will result in both developing adequate capacity and achieving long-term capacity for systems. Table 5 summarizes the required capacity assessment information.

Table 5
Capacity Development Review Summary (10/1/01 – 9/30/02)

Statewide
Capacity Reviews

Totals

System Type:

System Size (population served)

CWS

NTNC

<1000

1,000-3,300

>3300

Passed

109

108

1

51

26

32

Failed

0

0

0

0

0

0

(Failed) Requiring Restructuring

0

0

0

0

0

0

Systems in SNC Requesting
DWSRF Assistance

Funded

3

2

1

3

0

0

Being Processed

5

5

0

3

2

0

9.0  State Environmental Review Process/Determination of Equivalency Projects

The State Environmental Review Process (SERP) applies to all projects receiving financial assistance from the DWSRF. The SERP incorporates environmental review requirements of the National Environmental Policy Act (NEPA) and its implementing regulations (40 CFR, Part 6 and 40 CFR, Part 1500), the State Environmental Quality Review (SEQR) Act, Article 8 of the Environmental Conservation Law (ECL) and its implementing regulations under 6 NYCRR, Part 617, as well as the DOH regulations under 10 NYCRR, Part 97. The DWSRF applicant must complete the SERP before receiving DWSRF financing.

All projects that are financed from the DWSRF are classified by the DOH under the SERP as either Tier I or Tier II projects. Tier I projects, also referred to as equivalency projects, refer to those projects that are financed by the DWSRF whose cumulative total is an amount equal to the federal Capitalization Grant to the State. Tier II projects, (non-equivalency projects), refer to all other projects that receive DWSRF financial assistance.

Tier I projects must undergo an environmental review consistent with the NEPA. For the DWSRF program, Tier I projects will include:

  • projects for which an environmental review consistent with NEPA has already been completed; and
  • projects that meet the definition of a NEPA categorical exclusion.

If necessary, additional Tier I projects will include:

  • projects for which applicants have voluntarily undertaken to complete a NEPA equivalent environmental review;
  • projects that have a particular environmental significance, due to the nature and scope of the projects; and
  • projects for which the environmental review can be considered functionally equivalent to a NEPA environmental review, with some minor additional elements.

Tier II projects are subject to the environmental review requirements of SEQR with additional requirements imposed by the SERP for the DWSRF program. Applicants will be notified by the DOH whether their project(s) proposed for financing through the DWSRF program fall under the category Tier I (equivalency) or Tier II.

10.0  Project Priority Lists

    10.1  Project Selection Process

    Both federal and state laws require that New York develop a Project Priority Ranking System. The priority ranking system establishes a list of eligible projects to be funded in a manner consistent with the SDWA such that the most serious risks to public health are given the highest priority. The DOH has given the highest priority to acute public health risks, particularly those related to microbiological organisms. The next priority was given to situations that pose chronic and longer term risks to consumers, such as organic chemical contamination. The scoring criteria also consider issues that are related to infrastructure upgrading or replacement. The project ranking system also considers, as mandated by the SDWA, special allocations and restrictions on the use of DWSRF monies for disadvantaged and small systems. A detailed description of the Project Priority Ranking System and Scoring Criteria are included as Attachment I to this IUP. The Bond Act also requires that in order for projects to be eligible for funding from the DWSRF, they must be identified in a Memorandum of Understanding among the Governor, the Temporary President of the Senate and the Speaker of the Assembly.

    10.2  Description and Use of Project Lists

    Projects must be included in the IUP to receive DWSRF financing. This IUP includes the following prioritized lists of eligible projects being considered for financing from the DWSRF:

    • The Project Readiness List for this IUP includes all projects for which an engineering report or plans and specifications were submitted to the DOH or for which construction was completed by August 16, 2002. A project is deemed "ready" when all technical submittals have been received by the DOH. Projects that have submitted pre-application forms, but have neither submitted an engineering report, plans and specifications nor completed construction have been included on the Multi-Year List.

      The Project Readiness List includes a funding line. Projects listed above this funding line comprise the Funding List, which includes all those projects expected to qualify for long-term loans within the current IUP financing period. Provisions are made in the Project Priority Ranking System to by-pass projects that may not progress as expected (see Attachment I). The DOH will proceed with an accelerated by-pass of those non-hardship projects that have been on the Project Readiness List, above the funding line for two or more consecutive IUP periods and fail to submit a complete application by December 6, 2002. Notification letters will be sent to applicants with such projects informing them that their complete applications will have to be submitted by December 6, 2002, or they will receive a by-pass letter.

      Funds released by project by-passing will first be used for the Emergency Financing Program to finance imminent threats to public health. Funds released by project by-passing will then be used to finance cost increases incurred by projects on the IUP above the funding line. Any remaining funds available will be used to move the funding line to cover additional projects.

      The project cost presented on the Project Readiness List reflects the applicant’s estimated project cost plus a contingency for administrative and unanticipated costs.

      It should be noted that for some larger projects there may not be sufficient funds available in a single IUP financing period for their complete financing. As necessary, New York State will segment and/or phase finance (cash flow basis) larger projects over several IUP financing periods to maintain a statewide program of maximum effectiveness.

      • The Category A List consists of projects for small systems serving less than 10,000 people from the Project Readiness List. This list includes a funding line and a line designating the SDWA minimum funding requirement (15% of the DWSRF) for small public water systems.
      • The Category B List consists of projects for water systems serving greater than or equal to 10,000 people from the Project Readiness List. This list has not been included in the IUP.
      • The Multi-Year List includes all eligible projects for which pre-application forms have been submitted and reviewed, including those projects on the preceding Multi-Year List. The DOH accepts pre-applications on a continuous basis. All eligible projects for which pre-application forms were submitted on or before August 16, 2002 are included on the Multi-Year List in the final IUP.
      • The Category C (Hardship) List includes all eligible projects that have received written confirmation that they qualify for financial hardship assistance.

      Copies of the Project Readiness List, the Category A List, the Multi-Year List, and the Category C (Hardship) List follow at the end of this section.