Public Notice - Drinking Water State Revolving Fund

Final Amendment No. 4 to the Drinking Water State Revolving Fund FFY 2009 Intended Use Plan

June 17, 2009

Additional Funding Availability, Fund Adjustments, Application Deadlines, Amended Project Readiness List, and Other Revisions

Overview of ARRA

The New York State Department of Health (DOH) and the New York State Environmental Facilities Corporation (EFC) have issued a Supplemental Drinking Water State Revolving Fund (DWSRF) Intended Use Plan (IUP) to the DWSRF Final IUP dated September 30, 2008. The Supplemental IUP reflects adjustments to available DWSRF funds, project financing schedules, and other IUP revisions for the remaining Federal Fiscal Year (FFY) 2009 IUP financing period. In addition, the DOH and the EFC amended the FFY 2009 Project Readiness List.

Additional monies are available to the DWSRF program through the American Recovery and Reinvestment Act (ARRA) of 2009. The primary purpose of the ARRA is to stimulate the economy and create jobs through tax relief and infrastructure investment. The national DWSRF program received an additional FFY 2009 appropriation of $2,000,000,000. For New York State (NYS), the DWSRF received an additional appropriation of $86,811,000.

The ARRA requires, in part, that:

  • ARRA funds shall be given to projects that are ready to start construction by February 17, 2010, if not sooner. Funds appropriated under the ARRA may not be used to provide assistance for the purpose of purchasing or refinancing municipal debt or restructuring outstanding DWSRF financings unless the initial debt was incurred on or after October 1, 2008;
  • not less than 50% of the ARRA funds ($43.4 million) be provided in additional subsidization in the form of grants, principal forgiveness, or negative interest loans. To the extent available, 50% additional subsidization for project costs eligible for ARRA funding will be available to both hardship and non-hardship projects;
  • not less than 20% of the ARRA funds ($17.36 million) will be provided for projects to address green infrastructure, energy efficiency, water efficiency, or other environmentally innovative activities;
  • preference will be given to projects that can be started expeditiously with the goal of 50% of the ARRA funds for projects that can be initiated within 120 days;
  • if the projects funded with ARRA funds are not under construction or contract by February 17, 2010, EPA will withdraw the funds from NYS and reallocate them to other states;
  • priority will be given to projects that are ready to proceed to construction regardless of their ranking on the Project Readiness List established for FFY 2009; and
  • certain new program requirements apply to all projects, including Buy American Iron, Steel and Manufactured Goods, Disadvantaged Business Enterprises (DBE) and Minority and Women's Business Enterprises (MWBE), various reporting requirements and Davis-Bacon prevailing wage requirements.

Implementation of ARRA

The DWSRF FFY 2009 Final IUP is amended to identify the programmatic changes to the NYS DWSRF program to reflect use of ARRA funds. This IUP amendment presents the criteria for selection of projects to receive ARRA funds, as well as the conditions that recipients of ARRA funds are required to meet.

Projects selected for receiving ARRA funds will be announced shortly after the publication of this IUP amendment.

With the exception of the projects funded through the Green Innovation Grants Program (see page 6), ARRA funds will be used to finance projects on the final amended DWSRF 2009 IUP Project Readiness List that meet the criteria established for use of both ARRA and 2009 program funds. The DOH and the EFC are giving priority to projects that are determined to be ready to proceed to construction in accordance with the timeframes established by the ARRA. Applicants are required to demonstrate compliance with this objective by having all construction contracts executed by January 1, 2010. The DOH and the EFC are giving the greatest priority to projects listed on the Project Readiness List that are able to initiate construction within 120 days.

EFC offers ongoing updates of ARRA implementation at www.nysefc.org/recovery. Those who are interested in being informed of the latest ARRA news are encouraged to subscribe at this web site to receive email alerts, which are sent as new information is available.

This IUP amendment is part of the NYS application for the ARRA DWSRF capitalization grant.

Recipient Responsibilities Under ARRA

The ARRA imposes new requirements for projects that receive ARRA funds. The Project Financing Agreement will require compliance with the following items as conditions of the DWSRF financing:

  • American Iron, Steel, and Manufactured Goods – Plans and specifications must require iron, steel, and manufactured goods be produced in the United States unless a waiver is granted by EPA or such compliance is inconsistent with international trade agreements.
  • Davis-Bacon Act – Prevailing wage rates
  • Fixed price Contracts – To the maximum extent possible, contracts funded under ARRA shall be awarded as fixed price contracts through the use of competitive procedures
  • Federal Crosscutter Compliance – All applicants must comply with all applicable requirements of "cross-cutting" federal authorities for funds authorized under ARRA.
  • The DOH and the EFC require that all recipients of ARRA funds:
    • Commit to a pre-construction project schedule as a condition of their financing agreement for ARRA funds;
    • Provide weekly reports of the status of their project schedule; and
    • Certify to the DOH and the EFC by January 1, 2010 that all construction contracts have been executed.
  • Various reporting requirements:
    • The percent of construction completion at the end of each calendar quarter, reported within 5 business days of the end of the quarter.
    • Jobs created or retained
    • Notice of award of contract for each contract.
  • Federal Single Audit Act– Each non-Federal entity that expends a total amount of Federal financial assistance equal to or in excess of $500,000 in any fiscal year of such non-Federal entity shall have either a single audit or a program specific audit made for such fiscal year in accordance with the requirements of the Federal Single Audit Act and its Amendments.

Recipients who do not meet these conditions may face several remedies as set forth in the financing agreement including, without limitation, a change in the interest rate of funds (from interest-free to short-term market rate), loss of any additional subsidization (forgiveness of principal or grant), and the recoupment of all funds advanced.

Application Deadlines

To be qualified to receive ARRA funds, a project must be listed on the amended DWSRF Project Readiness List (attachment 1) for DWSRF financing and have submitted an application for financing to the EFC. The deadline for submitting an application for DWSRF subsidized financing for projects on the amended Project Readiness List who had not already submitted an application was May 1, 2009. Financing applications received after May 1, 2009 for projects on the amended Project Readiness List will be considered for subsidized funds, if sufficient funds are available. There are no application deadlines for projects seeking unsubsidized Short-Term Market Rate Financing or Bond Guarantee Financing only.

Revised Application Forms

In February 2009, the DWSRF financing application package was revised and is available for applicants to use who have not yet submitted an application. The streamlined application should be easier to complete. The streamlined application is available by calling EFC at 800-882-9721 or on the EFC web site at www.nysefc.org (click on "Programs", then "Drinking Water State Revolving Fund", then "Application Process"). Applications submitted utilizing the earlier forms will still be accepted by EFC.

DWSRF Program Changes for ARRA

Rationale for Project Selection for ARRA Funds

To be qualified to receive ARRA funds, a project must be listed on the amended DWSRF Project Readiness List (attachment 1) for DWSRF financing and have submitted an application for financing to the EFC by May 1, 2009. The DOH and the EFC are giving priority for ARRA funds to projects that are ready to proceed to construction regardless of their ranking on the amended Project Readiness List. Preference is given to projects that can meet the end goal of executing all construction contracts by January 1, 2010.

With the exception of the projects funded through the Green Innovation Grants Program (as noted below), all projects financed with ARRA funds are selected according to the following criteria:

  • The ability to execute all construction contracts as expeditiously as possible, but in no event later than January 1, 2010; and
  • The ability to meet all applicable program requirements.

EFC will post projects financed with ARRA funds on the EFC web site (www.nysefc.org) as each financing agreement is executed.

The DOH and the EFC require that all recipients of ARRA funds:

  • Commit to a pre-construction project schedule as a condition of their financing agreement for ARRA funds;
  • Provide weekly reports of the status of their pre-construction schedule; and
  • Certify to the DOH and the EFC by January 1, 2010 that all construction contracts have been executed.

If the contracts execution certification required by January 1, 2010 is not received, the DOH and the EFC will consider reallocating the ARRA funds to another project that can meet the February 17, 2010 requirement. This may result in the loss of subsidized financing as well as principal forgiveness or grant as set forth in the financing agreement. The DOH and the EFC will maintain a list of projects that qualify for ARRA funds for such reallocations.

Short-Term and Long-Term Goals for ARRA

The DOH and the EFC are committed to utilizing the ARRA funds to help stimulate the economy and to create or retain jobs in NYS. In the short term, the DOH and the EFC have identified projects that can help achieve the ARRA goal of commencing construction activity within 120 days of enactment. The long-term goal is to commit all ARRA funds to projects that are under contract for construction by February 17, 2010. Achieving both of these goals will promote economic stimulation envisioned by ARRA.

Additional Subsidization Through the ARRA

The ARRA requires that no less than 50% of the appropriated funds be provided as additional subsidization in the form of grants, principal forgiveness, or negative interest loans. For projects not subject to the DWSRF Hardship Policy, the DOH and the EFC intend to forgive a minimum of 50% of the principal amount of debt for each selected project, or the portion thereof, that qualifies for ARRA funds.

Projects which are determined to be qualified for ARRA funds and for which ARRA funds are available will have access to up to 50% of the total estimated project financial needs for up to 3 years on an interest-free basis. Projects may receive a combination of base DWSRF funds and ARRA funds subject to eligibility requirements and availability. The combination will be determined by EFC in consultation with the applicant. Within 3 years of the closing on the short term financing, the recipient will need to repay or convert their financing to an EFC long term financing. The 50% additional subsidization through the ARRA in the form of forgiveness of principal will be set forth in the financing agreement. Each recipient of ARRA funds will be subject to strict reporting and construction requirements. Recipients who do not meet these requirements may face several remedies as set forth in the financing agreement including, without limitation, a change in the interest rate of funds (from interest free to short-term market rate), and loss of any additional subsidization (forgiveness of principal or grant), and the recoupment of all funds advanced.

ARRA Hardship Policy

Applicants who qualify for financial assistance according to the DWSRF Hardship Policy as well as ARRA funds are eligible to receive a minimum of 50% principal forgiveness. If an applicant received a confirmed financial assistance package through the DWSRF hardship program and that package provides a grant greater than 50% principal forgiveness, then the applicant will continue to receive the confirmed financial assistance package. The determination of the level of principal forgiveness provided will be based on the availability of funds with the goal of bringing the estimated first year drinking water service charge down to the Target Service Charge. Projects may receive a combination of base DWSRF funds and ARRA funds subject to eligibility requirements and availability. The combination will be determined by EFC in consultation with the applicant.

Hardship applications are not being accepted during this IUP period. However, the DOH and the EFC expect to exercise the DWSRF Hardship Provision for FFY 2010 and resume the hardship program at that time. Acceptance of ARRA funding does not preclude an applicant from being considered for future hardship consideration.

Green Project Reserve

The ARRA requires 20% of funds, or approximately $17.36 million, be utilized for projects that incorporate green infrastructure, energy efficiency, water efficiency, or other environmentally innovative activity. The DOH and the EFC will distribute these funds in two ways. Green Project Reserve funds will be provided to projects on the amended Project Readiness List with qualifying components that meet the ARRA requirements, based upon EPA guidance and to projects that participate in the Green Innovation Grant Program (GIGP). Eligibility requirements, application deadlines, and other program criteria and information for the GIGP can be found on the EFC web site at www.nysefc.org/GreenGrants. The actual amount of ARRA funds allocated to each method will be dependent upon the demand, however at least $3 million will be made available through the GIGP. The DOH and the EFC expect that there will be sufficient demand from these two methods to utilize the entire Green Project Reserve for green projects or green portions of projects.

Smart Growth

The DOH and the EFC promote the use of smart growth principles in all DWSRF projects. Funding drinking water projects that repair, maintain, or upgrade existing infrastructure support a smart growth policy and should have higher priority. The DOH is reviewing engineering reports and project listing information to identify those instances where applicants are proposing to either increase capacity or extend service without adequate planning or justification. DWSRF applicants will be required to demonstrate that adequate planning has been performed and adopted by the appropriate governmental body. Adequate planning for such projects should be documented by Comprehensive Plans, regional plans, infrastructure plans, or other planning documents and should be included in the engineering report as justification for the project scope of work.

Refinancing of Prior Debt

Congress has stated as a goal that ARRA funds should be used in a manner that maximizes job creation and economic benefit. To the extent permitted under ARRA, the DOH and the EFC have considered segmenting or phasing projects for purposes of ARRA funding with respect to costs incurred after October 1, 2008.

Reallotment

If NYS is eligible for realloted DWSRF ARRA funds, the DOH and the EFC will provide certification through an IUP amendment that all funds received will be committed to ARRA qualified projects that will be under contract for construction within 120 days of reallotment. The DOH and the EFC will maintain a list of projects that are qualified for ARRA funds for submittal to EPA in the event of a reallotment of deobligated ARRA funds.

Sources and Uses

"Table 1A: Proposed Source and Uses for ARRA Funds for FFY 2009" has been added to show the addition and distribution of available funds for the DWSRF program from the ARRA appropriation.

Table 1A: Proposed Source and Uses For ARRA Funds for FFY 2009
Source Amount
ARRA (Stimulus) Funds $86,811,000
Total Sources $86,811,000
Uses Amount
ARRA-Administrative Set-Aside $3,472,440
ARRA-Technical Assistance Set-Aside $1,736,220
Total Set-Asides $5,208,660
ARRA Additional Subsidization, including Green Projects and the Green Innovation Grant Program2 $59,301,1701
ARRA Direct Financing, including Green Projects $7,301,170
ARRA Allocation for Leveraged Financing, including Green Projects $15,000,0003
Total Uses $86,811,000
  1. Not less than $43,405,500 of the $86,811,000 DWSRF capitalization grant shall be provided to applicants for DWSRF funding as grant, principal forgiveness or negative interest loans.
  2. At least $3,000,000 and not more than $7,000,000 of ARRA additional subsidization will be made available through the Green Innovation Grant Program.
  3. Leveraged three times, these funds will provide financing of $45,000,000 worth of eligible projects. Combined with Direct Financing and Additional Subsidization, the total financing capacity from ARRA funds is approximately $111,602,340.

Project Readiness List

Attachment 1 to this amendment contains the amended list of projects on the Project Readiness List that may be financed with available DWSRF and ARRA funds by September 30, 2009. Minor changes in project financing amounts that reflect documented increases in project cost estimates and adjustments to several project scores that had no impact to other projects on the Project Readiness List have also been made.

Financing Programs

EFC will continue to determine interest rates and loan terms as described in the 2009 Final IUP issued on September 30, 2008. The fees and costs of DWSRF financing are presented in the 2009 IUP.

The DOH and the EFC will provide ARRA funds to projects that meet the requirements of the ARRA and the DWSRF program, to the extent that funds are available. Projects may receive a combination of 2009 program DWSRF funds and ARRA funds subject to eligibility requirements and availability. The combination will be determined by EFC in consultation with the applicant. Other projects will be provided with 2009 DWSRF program funds, to the extent that funds are available. The EFC will work with communities to close financings as quickly as possible to adhere to the intent and requirements of the ARRA.

Statement of Authority to Provide Principal Forgiveness

Public Authorities Law, section 1285-m.4 provides authority for EFC to provide additional subsidization in the form of forgiveness of principal or grant.

Administrative and Technical Assistance Costs

The ARRA allows for and NYS plans to use up to 4% ($3,472,440) of the allocation for administrative costs and up to 2% ($1,736,220) of the allocation for technical assistance costs.

Emergency Regulations

The DOH and the EFC are implementing emergency regulations to address the implementation of ARRA. Specifically, the regulations address additional subsidization in the forms permitted by the ARRA, green infrastructure, and allow for implementation of the various provisions of the ARRA.

Fixed Price Contracts

To the maximum extent possible, contracts funded under ARRA shall be awarded as fixed price contracts through the use of competitive procedures.

Disadvantaged Business Enterprises (DBE)

EPA adopted a rule (40 CFR 33) to encourage the DBE participation in DWSRF financed projects, effective 5/25/08. The ARRA appropriation requires that the requirements of this rule be addressed. EFC has modified the MWBE Programs to incorporate the requirements of this rule.

Public Review and Comment on Draft Amendment No. 4

A public notice on the availability of draft Amendment No. 4 and request for comments was published in the State Register and the Environmental Notice Bulletin. The public comment period ran from March 18, 2009 through April 3, 2009. A response to public comments on the draft Supplemental IUP has been prepared and is included as Attachment 2.

Attachment 1 - Amended Project Readiness List

Attachment 2 - Response to Comments on the Draft Supplemental Intended Use Plan

The following response to comments was prepared to address the public's comments on the Drinking Water State Revolving Fund's draft Supplemental Intended Use Plan that was issued on March 18, 2009. The public comment period began on March 18, 2009 and ended on April 3, 2009. In addition to the comments addressed herein, a number of project specific comments were received and addressed on an individual basis.

Comment:

Regarding the Davis Bacon Act, who will provide the required rates to be included in specifications?

Response:

We are waiting for clarification from EPA regarding whether the United States Department of Labor wage rate requirements will be applicable in addition to New York State prevailing wage rate requirements.

Comment:

Why are fixed priced contracts preferred?

Response:

Fixed price contracts tend to make a project more affordable because costs will be predetermined.

Comment:

Please explain the term cross cutter compliance.

Response:

A project is considered to be cross cutter compliant when it meets the requirements of all applicable federal authorities as they apply to projects and activities receiving federal financial assistance.

Comment:

Please explain why ARRA projects must be started by February 17, 2010, yet DOH/EFC have set a date of January 1, 2010?

Response:

In order to meet the requirements and deadlines of ARRA for the expeditious and timely commitment and expenditure of funds and to avoid deobligation of ARRA funds, the DOH and the EFC have set a January 1, 2010 date as the goal for executing all construction contracts.

Comment:

Is the single audit cost an eligible cost?

Response:

Yes.

Comment:

When will specific projects be notified of their funding and terms?

Response:

Once the ARRA capitalization grant award is made by EPA, the specific projects that are selected to receive the ARRA funding will be notified of the terms and conditions of their financing agreement.

Comment:

Regarding the Additional Subsidization and the Hardship Policy, is there a maximum grant percent or amount that is being considered?

Response:

For projects not subject to the DWSRF Hardship Policy, the DOH and the EFC intend to forgive a minimum of 50% of the principal amount of debt for each selected project, or portion thereof, that qualifies for ARRA funds. It is our intent to provide a confirmed hardship project that is also an ARRA eligible project with the best possible financing package in order to reach their Target Service Charge.

Comment:

We understand the Smart Growth concept, but in many of the rural areas of New York State there is no growth or negative growth; therefore, any growth is smart.

Response:

Smart growth refers to appropriate and planned growth along with the efficient use of resources.