Final Intended Use Plan for the New York State 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 market rate and below market rate financing for the construction of certain eligible public water system projects. As financings are repaid, money is made available for new financings - 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, 2011 to September 30, 2012;
  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) 2012;
  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 financing; and
  17. a copy of the DWSRF pre-application form and application checklist.

This IUP is based on the use of FFY 2012 federal Capitalization Grant monies and unobligated funds carried forward from the previous IUP. The anticipated financing schedule for this IUP period is found in Attachment II.

Under the anticipated financing schedule, leveraged pool financing funded from bond issues will be determined. Direct long-term and short-term financings will be originated throughout the year.

Program Initiatives and Changes

Ongoing Initiative: The DOH and the EFC encourage communities that apply for financing in this and future IUP periods to prepare and submit an asset management plan to accompany the engineering report and/or plans and specifications for their project. An asset management plan would support communities by encouraging the building of sustainable infrastructure. The DOH reserves the right to require an asset management plan for any project that has shown deficiencies with respect to Managerial, Technical, and Financial capacity.

Ongoing Initiative: New York State encourages the efficient use of energy in all drinking water projects. In addition, the US EPA requires that for FFY 2012 a minimum of 20% of the federal capitalization grant be used for "green" projects. Therefore, the DOH and the EFC are requiring that all engineering reports and/or plans and specifications submitted to the DOH identify project components that incorporate green infrastructure, energy efficiency, water efficiency, and/or other environmentally innovative activity.

Program Change: State Smart Growth Public Infrastructure Policy Act- On August 30, 2010 the New York State Environmental Conservation Law was amended to add the State Smart Growth Public Infrastructure Policy Act. This law requires that starting September 27th, 2010, any new or expanded public infrastructure project receiving financing from a state infrastructure agency must be consistent with the relevant smart growth public infrastructure criteria as they are defined in the law to the extent practicable. DOH will now require, as a part of the engineers report and/or through other DWSRF application materials that may be developed, an analysis of each project with respect to its compliance with the criteria of the smart growth law. Projects that received short term financing or other phased financing prior to the enactment of the law are exempt.

The Smart Growth Public Infrastructure Policy Act can be viewed at: http://public.leginfo.state.ny.us/MENUGETF.cgi?COMMONQUERY=LAWS+&TARGET=VIEW. Once there, click on ENV and then click on Article 6

Program Change: Interconnections - Under provisions of the 1996 Amendments to the Federal Safe Drinking Water Act, DOH is required to ensure that all systems receiving DWSRF assistance have adequate managerial, technical, and financial capabilities to provide safe drinking water. The failure to meet this requirement could result in a significant reduction of the DWSRF federal capitalization grant. Therefore, systems that lack adequate managerial, technical, and financial capacity may be determined as ineligible by DOH to receive DWSRF assistance unless the project to be financed corrects the managerial, technical, and financial deficiencies.

DOH will continue to promote the regionalization and interconnections for public water systems in an effort to enhance managerial, technical, and financial capacity for those systems. Therefore, when the possibility to interconnect to another public water system exists for project seeking assistance, and if that interconnection will address the scope of the project with respect to its priority health ranking, the interconnection must be a carefully considered alternative as a part of the State Environmental Quality Review Act process and also be discussed in detail in the engineering report. If the system applying for DWSRF assistance decides not to pursue a possible interconnection alternative when it exists and would address the scope of the project with respect to its priority health ranking, then detailed justification satisfactory to DOH must be provided demonstrating that the interconnection is a technically, financially, or managerially disadvantageous option. See Section 8 of this IUP for additional information regarding capacity requirements.

Program Change: Short-Term Market Rate Financing - In Section 4.6, the conditions under which Short-Term Market Rate Financing (SMRF) is available is more fully described.

Program Change: Phased Points- DOH will no longer typically assign phased points for any pre-application received if the prior related portion of the project closed on long term financing more than five years earlier and the improvements already funded are operational. However, DOH reserves the right to assign phased points for projects that require additional financing, regardless of time frames, to address the more serious original public health priorities for which the project received score.

Program Change: Minority and Women Business Enterprise/Equal Employment Opportunity (MWBE/EEO) - DOH will be working with EFC in making significant revisions to the MWBE/EEO program to reflect statutory changes and to streamline current procedures. EFC will be strengthening the Disadvantaged Business Enterprise (DBE) requirements in the revised MWBE/EEO program to offer a seamless solution for our clients to meet both the state MWBE and Federal DBE requirements. The proposed MWBE/EEO Program changes are expected to be implemented commencing in FFY 2012. Some of the more significant Program changes include:

  • Professionals services, such as engineering, legal, and financial advisory services, are now subject to MWBE participation requirements;
  • There are new recordkeeping and reporting requirements;
  • Information concerning the makeup of the project workforce will be required to be submitted quarterly; and
  • All contracts and agreements that are paid for with DWSRF funds will be required to contain certain contractual provisions.

Program Change: Davis-Bacon Compliance - As part of the FFY 2011 budget appropriation for the DWSRF, Congress mandated that federal labor laws regarding prevailing wages, hours of work, and rates of pay shall apply to construction carried out in whole or in part with assistance from the DWSRF. These requirements are collectively known as the Davis-Bacon laws. These requirements are in addition to the requirements of NYS prevailing wage laws.

EPA guidance requires that any DWSRF financings comply with the Davis-Bacon laws and incorporate these provisions into any project work that has been or will be contracted. Work done by a municipal applicant's employees, generally known as "force account" or "work force", is not generally subject to Davis-Bacon requirements. For more information on Davis-Bacon laws, please visit EFC's website.

The President's budget request for FFY 2012 includes compliance with Davis-Bacon requirements as part of the DWSRF appropriation. Compliance with Davis-Bacon requirements for FFY 2012 will not be known until the final budget for FFY 2012 has been enacted.

3.0 Short- and Long-Term Goals

The Safe Drinking Water Act (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 financing 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 using the financial incentives provided by the DWSRF and the programs that the DWSRF supports.
  3. Administer the DWSRF in a fiscally responsible 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 financing and/or Additional Financing 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 2012 federal Capitalization Grant and unobligated funds carried forward from the previous IUP (October 1, 2010 - September 30, 2011). New York State has not yet received a FFY 2012 DWSRF Capitalization Grant and the Final IUP, due to be released October 1, 2011, may reflect a different amount depending on negotiations and finalization of the federal budget. The minimum state match requirement is 20% of each federal award. The minimum state match requirement is made from Bond Act funds that were provided in excess of the 20% minimum amount required under the federal SDWA and that have been credited (banked) against future state match. 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 $435,924,679 for this IUP period.

Table 1
Proposed Sources and Uses And Estimated Amount of DWSRF Funds for FFY 2011
Sources Amount
FFY 2012 Capitalization Grant $52,564,9371
Carry-over monies from FFY 2011 $129,000,000
Repayments and Interest Earnings $49,000,000
Total Sources $230,564,937
Uses Amount
Administrative Set-Aside $2,102,597
Technical Assistance Set-Aside $1,051,299
State Program Management Set-Aside $5,256,494
Total Set-Asides $8,410,3902
Direct Financing $74,000,000
Grants Expected to Close $12,000,000
Grant Funds Reserved $9,000,000
Grant Funds Available $15,769,481
Reserve Allocation for Leveraged Financing $111,385,0663
Total Uses $230,564,937

1This amount is based on an estimated national DWSRF allocation of $829 million for federal fiscal year 2012; however, this amount has not yet been appropriated.

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

3Leveraged three times, these funds will provide financing of $334,155,198 worth of eligible projects. Combined with Direct Financing, Grants Expected to Close, and Grants the total subsidized financing capacity for this IUP period is approximately $435,924,679.

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 program administration fee of 1.1% of the project costs plus an annual fee of 0.11% of the outstanding principal balance of the financing will be assessed to support the administration of the DWSRF program. The 1.1% program administration fee may be included as part of the financing. 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 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 (SFY) 2011 (4/1/10 to 3/31/11), the DWSRF has recognized and expects to collect $362,607 in program administration fees and $1,404,042 in annual fees. It is anticipated that in SFY 2012 a similar amount of fees will be recognized and collected.

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. While the authority expired on September 30, 2001, Congress extended this provision within EPA's annual budgets. Transfers from the CWSRF to the DWSRF were made for FFY 1997 through 2001, totaling $82,443,933. Pending Congressional approval of an extension within EPA's proposed budget, transfers between the CWSRF and the DWSRF programs during current and future IUP periods may be made. Any funds transferred during this IUP period will be returned using program funds within this IUP period. Therefore, there will be no effect on the funding line of either the DWSRF program or the CWSRF program.

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 (when funding is provided, a "recipient").

"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 ensure 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 public water systems 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 are submitted on or before September 3, 2011 will be included in the final IUP. Eligible projects for which pre-application forms are submitted after September 3, 2011 will be included in the next IUP (October 1, 2011 - September 30, 2012). Projects for which an engineering report or plans and specifications are submitted to the DOH or which complete construction by September 3, 2011 will be listed on the Project Readiness List. Scheduled closings for leveraged financing during this IUP period will be determined. Direct long-term and short-term financings will be originated throughout the year.

4.6 Types of Assistance and Terms

The DWSRF program will offer the following types of financial assistance:

  1. Short-Term Financing Program (STFP) –Short-term financing will be offered interest free and at market rate for terms of up to three (3) years. Before any short-term financing is provided, an applicant must, among other conditions, receive approval of an engineering report for the project, complete the State Environmental Review Process (SERP), obtain approval from the Office of the State Comptroller for any necessary district formation, and adopt a bond resolution for the project.
    • Short-Term Interest Free Financing (STIFF) - The STIFF program provides short-term financing of up to three years in duration to recipients that are developing projects eligible for long-term DWSRF financing. STIFF will be offered for projects that are eligible to be funded from the current Project Readiness List, thus there would be no effect on the subsidized 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. STIFF will not be available to pre-finance any awarded grants. Before STIFF can be made, a recipient must receive approval of an engineering report for the project, complete the State Environmental Review Process (SERP), obtain approval from the Office of the State Comptroller for any necessary district formation, and adopt a bond resolution for the project.
    • Short-Term Market Rate Financing (SMRF) –For projects with scores too low to be eligible for long-term DWSRF financing or projects eligible for STIFF but with financing needs in excess of the one-third project cost limitation referenced above, short-term financing may be made available at EFC's short-term cost of funds (market rate). SMRF may be used to pre-finance third party grants. EFC and DOH encourage applicants to inquire about SMRF availability as we believe this financial assistance is generally less expensive and more convenient than traditional bond anticipation note financing.
  2. Funds for SMRF are derived internally, from EFC's short-term financing sources or externally, through the issuance by EFC of long-term bonds or short-term notes (commercial paper). EFC expects that its commercial paper program will obtain high short-term credit ratings and pass through low borrowing costs. EFC tracks the availability of its internal short-term financing sources by projecting its cash flow month to month over the course of the FFY. For FFY 2012, EFC and DOH project $75 million to be available for DWSRF SMRF from these internal sources. Upon reaching this threshold amount of SMRF transactions, DOH and EFC will, if prudent, revise the threshold or EFC will pursue external funding sources as described above. In the event EFC determines to pursue external funding sources, applicants may experience delays in SMRF funding until proceeds of external funding are received by EFC. DOH and EFC intend to make SMRF available to as many applicants as possible. However, DOH and EFC have determined that additional considerations may need to be given to the process of SMRF allocation. Therefore, depending on the number of applications received and the total dollar amounts associated with them, the following priorities which are in order of public health benefit may be applied, if necessary, to DWSRF SMRF availability:
    • 1. Projects on the Readiness List with scores above the subsidy funding line requiring short-term financing in excess of the amount available under the Short Term Interest Free Financing (STIFF) Program. This can include financings beyond the STIFF for readiness list projects and pre-financing of third-party grants.
    • 2. Projects on the Readiness List that require "interim" financing prior to the next scheduled pooled financing. These financings typically occur for projects with STIFF that matured prior to the leveraged financing pool or projects that require additional funds prior to the leveraged financing pool.
    • 3. Projects on the Readiness List below the Subsidy Line and not reachable for subsidy via bypass between the Subsidy Line down through 45 points. DOH and EFC, may elect not process applications for SMRF for projects with priority health ranking scores of 40 points or lower.
  3. Leveraged Financing - Leveraged Financings are DWSRF financings funded from bond proceeds. Certain bond series issued to fund DWSRF financing will be secured by federal and state match dollars deposited to and held in program financing indentures. Leveraged Financings will be at market rate or receive an interest subsidy either from earnings received from a dedicated reserve allocation equal to one-third of the financing amount or from other program assets. Certain hardship communities may receive an interest subsidy of more than one-third of the financing amount. Other program assets or investment earnings from the reserve allocation will provide a 33 1/3% interest subsidy, based on the market rate of the related EFC bonds, to certain recipients, thereby resulting in a subsidized interest rate on the financing. In instances where the project qualifies for a hardship financing, the interest subsidy may reduce the net interest rate to zero percent. The performance of investments held in the financing indenture or the general accounts of the program will not impact the net interest rate on leveraged recipient financings.
  4. Regular Reduced Rate Direct Financing - Regular Reduced Rate Direct Financing will be made available to recipients not eligible for Leveraged Financing. Direct Financing recipients are determined by EFC and may include non-investment grade borrowers or small financing requests.
  5. Hardship Financing – Direct or Hardship Financing will be made available to qualified recipients at rates below the regular reduced interest rate. Certain hardship eligible recipients may receive leveraged financing. If qualified, Hardship Financing may also be issued for 30 years. A description of the DWSRF Disadvantaged Community Program is provided in Section 7.0.
  6. Additional Financial Assistance (Grants) - Grants may be made available to eligible recipients if a Direct or Hardship interest free financing 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.
  7. 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.
  8. SRF Bond Market Rate Program - The SRF Bond Market Rate Program provides eligible financing recipients with project scores below the subsidy funding line on the Project Readiness List access to the public market at preferred market rates. Projects funded with market rate obligations will be retained, in subsequent years, on the Project Readiness List of the IUP until such time that they may qualify for subsidy assistance in future years. For projects with scores that later rise above the subsidy funding line (including through bypass), subsidy assistance will become available at the then target rate for the remaining term of the recipient financing. For projects that qualify for subsidy assistance, a bond guarantee may be available to extend repayment terms beyond the previous DWSRF limit of 20 years from project completion. For recipients opting for longer repayment terms, subsidy assistance will be limited to that which would have been available had the financing been structured with such 20 year repayment terms. Subsidy assistance will be made available, at the target level, on the total financed amount of the project. Consistent with project useful life, bond with maturities that exceed 20 years from the project completion date will be supported solely by SRF guarantee and will carry no subsidy.
  9. SRF Bond Guarantee Program - The SRF will provide a bond guarantee for bonds issued by eligible recipients. The Bond Guarantee Program is available to support eligible projects for which DWSRF subsidized financing is not available. Bonds issued by recipients and guaranteed by the DWSRF may be issued for terms of up to thirty years.

4.7 Program Financial Terms

  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 or EFC market rate basis. Upon maturity, the BANs may be retired with long term DWSRF financing, the issuance of long term debt obligations by the community, or other funding. Applicants other than municipalities will borrow through the STFP by issuing a promissory note to EFC secured by a letter of credit if not PSC regulated. Only DWSRF market rate short-term funds will be available to pre-finance any awarded grants.
  2. Leveraged Financing -The financing terms, including the payment of principal and interest, are based on the terms of the EFC's bonds, proceeds of which fund the Leveraged Financing. 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 closing the financing (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 either from other program assets or interest earnings on the investment of the reserve allocation. Reserve investments will be limited to U.S. Treasury securities, U.S. Government guaranteed securities, securities of Government Service Enterprises (GSE) such as the Federal National Mortgage Association and the Federal Home Loan Mortgage Corporation, GSE guaranteed securities, investment agreements collateralized by U.S. Treasury securities, U.S. Government guaranteed securities, GSE securities, and GSE 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 state obligations, state guaranteed securities or other qualified obligations rated in one of the two highest rating categories by each nationally recognized rating service that rates the bonds. The Effective Market Rate for leveraged financing made from New York's DWSRF in 2011 C financing is 4.09%. The Effective Interest Cost (EIC) for recipient financings based on this transaction is approximately 2.73% (1/3 subsidy).
  3. Regular Reduced Rate Direct Financing – Terms governing principal amortization are the same as those applicable to Leveraged Financing. Interest payable on the financing will be set at two-thirds of the interest rate, as determined by the most recent issuance of DWSRF bonds issued to provide financing to eligible recipients.
  4. Hardship Financing - 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 Financing 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 Financial Assistance (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, 2011 to September 30, 2012 funding period.
  6. Emergency Financing - Emergency financing would be issued as regular reduced rate direct financing. Interest payable on the financing would be set at two-thirds of the interest rate, as determined by the most recent issuance of DWSRF bonds for eligible recipient projects. However, before an emergency financing 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 financing.
  7. SRF Bond Market Rate Program - Bonds issued by eligible recipients and guaranteed by the EFC will be purchased by the EFC from proceeds of DWSRF bonds publicly issued by the EFC to investors. All avenues of recourse currently available to the EFC will apply with respect to recipient bonds guaranteed by the EFC, including its statutory right to intercept any state aid annually appropriated by the state to the recipient.
  8. SRF Bond Guarantee Program - The SRF will provide a bond guarantee for bonds issued by eligible recipients. The Bond Guarantee Program is available to support eligible projects for which DWSRF subsidized financing is not available. Bonds issued by recipients and guaranteed by the DWSRF may be issued for terms of up to thirty years.

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 Needs Survey and Assessment - Fourth Report to Congress dated February 2009 estimated that more than $27.1 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 $6.4 billion over the next several years. Anticipated project financing needs for this IUP, ending September 30, 2012, is about $3.8 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 $111,385,066 of capital available for Leveraged Financing, the total Leveraged Financing capacity for the period of this IUP is $334,155,198. When combined with Direct Financing, Grants, and Grants expected to close, the total DWSRF program assistance available during this IUP period is approximately $435,924,679.

All DWSRF financings are made in a fiscally responsible manner that will ensure the revolving nature of the program in perpetuity. In addition, the fiscal aspects of the program are regularly evaluated to ensure optimum use of DWSRF resources. Further, 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 16% ($8,470,059) of the $52,564,937 FFY 2012 Capitalization Grant for set-aside purposes. Table 2 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 2012 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 agreements (including cost summaries and project financing schedules); preparing necessary financial documents; issuing Corporation Bonds and originating financing; establishing annual reserve allocations; establishing disbursement schedules; processing disbursement requests and conducting associated document reviews; collecting and managing 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;
  • oversee the 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;
  • 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.

6.2.2 Comprehensive Performance Evaluation Program

The Comprehensive Performance Evaluation (CPE) Program has resulted in detailed assessments of 142 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 2 – 3 CPEs per year, complete with a detailed evaluation report with prioritized recommendations and follow-up meetings with the community to discuss the report, as needed;
  • 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;
  • improving training of field staff responsible for follow-up by including them at CPEs, making equipment available where needed and holding at least one workshop per year on troubleshooting and plant evaluation techniques; and
  • conducting 3 – 5 mini performance evaluations per year, with follow-up letter reports, at communities who had a full CPE and are implementing recommendations or experiencing new difficulties, or to support communities who are having a specific critical problem.

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 activities. The State plans to use 1% of the total annual federal Capitalization Grant to administer the Public Water System Supervision (PWSS) program. 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 PWSS and Drinking Water Enhancement Programs.

6.3.1 Administer the PWSS Program

The PWSS program enables the DOH to continue administration and oversight of the drinking water program, ensuring consistency in the implementation of and compliance with the requirements of the New York State Sanitary Code on a statewide basis. Additionally, the PWSS program assures that public water systems are operated in a manner that ensures adequate protection of their source water(s) and delivery of potable, aesthetically pleasing drinking water.

To achieve these objectives during FFY 2012, the DOH will:

  • assure compliance with Part 5 of the State Sanitary Code;
  • coordinate with Wadsworth Center for Laboratories and Research (WCL&R) to assure that State Laboratory capabilities are maintained;
  • provide technical assistance to public water systems in achieving compliance;
  • assure public health protection at public water systems using surface water sources;
  • assure public health protection by developing, adopting and implementing mandatory federal drinking water regulations into the State Sanitary Code, including development and submittal of primacy packages;
  • ensure that local health department water supply programs properly implement the program;
  • assure that water supply facilities are built in accordance with proper design criteria by providing conceptual review and design approval of new construction and major modifications to water supply systems;
  • continue to assess whether community groundwater systems may be under the influence of surface water;
  • continue to implement the State's Capacity Development Program including submitting the Annual Capacity Development Report to the U.S. EPA by December 31st of each year;
  • continue to implement the Source Water Assessment and Protection Programs and Well Head Protection Program;
  • continue to perform security inspections of public water systems;
  • assure potable water is provided during water supply emergencies;
  • assure staff are properly trained;
  • assure that water systems are operated by competent operators;
  • continue participation in Child Health Initiative by assisting EPA with collection and analysis of lead samples from school drinking water outlets in cities around the state;
  • continue to track NYC avoidance compliance; and
  • ensure that all EPA reporting requirements under the grant are met and that EPA proposals for regulations and policies are promptly commented upon as requested.

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, and source water petitions. No more than 10% of the federal Capitalization Grant can be allotted to any one of these special activities.

New York State is not proposing to take or use any of the allotted set-aside funds from the FFY 2012 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 fund for land acquisition, particularly for watershed protection. New York State is not proposing to create such a 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 Program Management 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.

  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, administration of New York's WHPP was transferred from the DEC to the DOH. The basis for the transfer of this program responsibility was due to the creation of the Source Water Assessment Program (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 remains premature to develop a financing program to fund source water petition partnerships at this time.

Table 2
Distribution of FFY 2012 Set-Aside Funds
Drinking Water State Revolving Fund
Set-Aside SDWA FFY 2012 Maximum Allocation1 NYS FFY 2012
Administration
EFC (0.689740%)
DOH (3.310260%)
4% $2,102,597 4% $2,102,597
($362,561)
($1,740,036)
Technical Assistance
DOH
2% $1,051,299 2% $1,051,299
($1,051,299)
State Program Management
Administer PWSS Program
10% $5,256,494 10% $5,256,494
($5,256,494)
Special Activity Set-Asides2
Land Acquisition
Capacity Development
Wellhead Protection
SW Petition Programs
15%
(10%)
(10%)
(10%)
(10%)
$7,884,741
($5,256,494)
($5,256,494)
($5,256,494)
($5,256,494)
0%  
Total Set-Asides3 31% $16,295,131 16% $8,410,390

1 Based on receiving Federal Capitalization Grant of $52,564,937 .

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

3The USEPA Safe Drinking Water Act allows for States to use up to 31% of the federal grant for set- asides, NYS intends on using a total of 16%.

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. Prior to FFY 2010, the DOH and the EFC exercised the federal SDWA Hardship Provision that allowed states to utilize up to 30% of their annual DWSRF Federal Capitalization Grant to provide Additional Financing Subsidies (Grants) beyond the interest free financing rate to eligible disadvantaged communities. In FFY 2010, it became a requirement to provide 30 percent of the Capitalization Grant in Additional Financing Subsidies and that requirement is carried forward through FFY 2012. Table 3 reflects the cumulative amount of federal grant funds that were provided from the cumulative federal Capitalization Grants received to date. $15,769,481 will be available to provide Grants to eligible disadvantaged communities from the FFY 2012 Capitalization Grant.

Table 3
Available Federal Hardship Grant Funds
Federal Fiscal Years Capitalization Grant Amounts Grants Provided
1998 - 2011 $650,629,6001 $186,392,367
2012 (Cap Grant pending) $52,564,937 $15,769,4812

1Cumulative totals for FFYs 1998-2011 (not including ARRA).

2Required to be provided for FFY 2012

Hardship applications, submitted by December 1, 2011, 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) eligible to be funded will be evaluated for financial hardship. Projects with the highest scores (excluding bonus points) will receive confirmation letters for hardship assistance until the available hardship allotment plus any unexpended, previously committed hardship funds are fully committed.

Hardship applications may be submitted after December 1, 2011 for evaluation of a financing only (no grant) hardship assistance package during the current IUP period (October 1, 2011 - September 30, 2012). Applicants that seek additional financial assistance (grants) as part of their hardship assistance package and submit their hardship application after December 1, 2011 will have to re-apply during the annual call for projects for the next IUP period (October 1, 2011 -September 30, 2012) to be re-evaluated.

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 Financing - The rate on a financing can be reduced to as low as interest free and/or the financing 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 Financing - If an interest free financing 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 MHI of $43,393.

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 financing from the DWSRF program.
  • Only projects that have a total project cost less than $14,000,000 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 MHI of $43,393. However, projects in such areas with a MHI up to 150% of the current statewide MHI, or $65,090 will be eligible for reduced interest rate financing (to as low as 0%) and/or extended up to thirty years to bring the PSC down to the TSC. Systems with a service area MHI greater than $65,090 will not be eligible for hardship financing.
  • Only community water systems, systems that provide drinking water to residential populations, such as municipal water systems and privately owned water supply companies that are regulated by the Public Service Commission, are eligible for hardship assistance.

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 formula that establishes the TSC is based on the applicant's MHI, as indicated in the example and graph that follow. 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. EDUs 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 the service area's MHI. In calculating the MHI for this IUP period, the 2000 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 calculation and example follow:

TSC=(MHI/10,000)2x36-(MHI/10,000)x52+155

EXAMPLE:

Median Household Income ($) Target Service Charge ($)
15,000 158
20,000 195
25,000 250
30,000 323
35,000 414
40,000 523
45,000 650
50,000 795
55,000 958
60,000 1,139
65,000 1,338

graph

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 limited to an interest free financing. 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 financing 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;
  • other revenue of the system (including charges to outside users),
  • 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 1, 2011 will be evaluated for a financial hardship assistance package (no grant) during the current IUP period. Applicants that seek grants as part of their financial hardship package will have to re-apply during the next IUP funding period to be re-evaluated.

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 financing portion of the assistance package.

If a project has not closed on 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, unless re-qualified for the Hardship List.

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 rate financing upon determination of hardship eligibility. Projects that accept this financing will still be eligible to compete for Grant money in future years up to the time of long-term financing.

Projects that receive a financial hardship confirmation letter, that have not closed on their long-term funding package, and whose project costs increase will be able to apply for a reduced interest rate financing, as low as zero percent, to cover the cost increases as long as direct financing dollars 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 rate financing, 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. The New York State Water and Sewer Infrastructure Co-funding Initiative brings together representatives from the DOH, EFC, DEC, Department of State, Office of Community Renewal, United States Department of Agriculture Rural Development, Office of the State Comptroller, and New York State Energy Research and Development Authority to ensure optimum funding potential and assistance for New York's communities. For more information about co-funding, visit the co-funding web site at www.nycofunding.org.

Co-funding is anticipated and encouraged by the provision of additional points to a project's score in the priority system. A project must receive co-funding assistance of either $25,000 or 5% of the project costs, whichever is less, to qualify for project co-funding points. Coordination of joint funding of projects will be done on a project by project basis.

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 4 summarizes the required capacity assessment information.

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 4 summarizes the required capacity assessment information.

Table 4
Capacity Development Review Summary (10/1/10 – 9/30/11)
Statewide
Capacity Reviews
Totals System Type System Size (population served)
CWS NTNC <1000 1,000-3,300 >3300
Passed 29 29 0 7 11 11
Failed 0 0 0 0 0 0
(Failed) Requiring Restructuring 0 0 0 0 0 0
Systems in SNC
Requesting DWSRF Assistance
Funded 1 1 0 1 0 0
Being Processed 8 8 0 3 1 4

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.

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 are submitted to the DOH or for which construction is completed by September 3, 2011. 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 subsidized funding line. Projects listed above this subsidy funding line comprise the Funding List, which includes all those projects expected to qualify for long-term financing 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 subsidy funding line for two or more consecutive IUP periods and fail to submit a complete application by December 1, 2011. Notification letters will be sent to applicants with such projects informing them that their complete applications will have to be submitted by December 1, 2011, 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 subsidy funding line. Any remaining funds available will be used to move the subsidy funding line to cover additional projects.
  • The project cost presented on the Project Readiness List reflects the applicant's estimated project cost.
  • 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 are submitted on or before September 3, 2010 will be 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.