February 10, 2016 EFC Water & Wastewater Finance Workshop Water Infrastructure
Overview Update on Division of Water Infrastructure Programs Working with State Water Infrastructure Authority Coordinating programs Clean Water State Revolving Fund Drinking Water State Revolving Fund Community Development Block Grants Infrastructure State Programs Projects Asset Inventory and Assessment Merger / Regionalization 2
State Water Infrastructure Authority Recommended changes to funding statutes Affordability Asset Inventory and Assessment Grants Regionalization / Merger Grants Master plan Under development Focus is utility viability Synchronization of funding programs Apply for funding or to a specific program Priority systems now similar 3
Funding Across Programs Fall 2014 and Spring 2015 Application Rounds $300 $250 Million $ $200 $150 $100 Requested Funded $50 $0 CWSRF DWSRF CDBG-I State WW Grants State DW Grants 4
Funding Program Information Meet to discuss projects / applications Training for all programs Clean Water State Revolving Fund (CWSRF) Drinking Water State Revolving Fund (DWSRF) Community Development Block Grants Infrastructure (CDBG-I) State Reserve Programs Affordability Project loans and grants Asset Inventory and Assessment grants Merger / Regionalization grants 5
State Revolving Fund Programs Low-interest loans Stable source of funding ½ market rate or 0% loans for qualified applicants No interest accrued during construction Drinking Water $50 million / year Up to $20 million / project Clean Water $140 million / year Up to $30 million / project 6
State Revolving Fund The program is good for these types of projects Rehabilitations Large Expansions New Green (Clean Water only) Two years to enter construction contract 7
Clean Water State Revolving Fund To assist in complying with the Clean Water Act 8
CWSRF Eligibility Applicants Local government unit city, county, districts, authorities Nonprofit water corporation Projects: Collection and treatment of wastewater Stormwater Stream restoration Reclaimed water Operation and maintenance not eligible 9
CWSRF Federal Requirements Davis Bacon requirements American Iron and Steel provisions Applies to construction materials only Does not apply to manufactured goods Brooks Act Fiscal sustainability plans for the project 10
CWSRF Priority Revised priority system to consolidate and synchronize all the funding programs into one system New priority criteria prioritizes Replacement or rehabilitation of existing infrastructure over new infrastructure Provision of environmental benefits Utilization of good system management practices Low income and high rate systems 11
CWSRF Applications Receive applications twice per year April 29th next application period Approximately $70 million available Approximately $2 million in principal forgiveness Great time to apply! Training Week of March 14th, Mooresville and Valdese Week of March 28th, Washington and Fayetteville March 31, at the NC Rural Center (Raleigh) Available to meet with you, and we will step you through the process, discuss your application, etc. 12
Drinking Water State Revolving Fund To further the health protection objectives of the Safe Drinking Water Act 13
DWSRF Eligibility Applicants Local government unit city, county, districts, authorities Nonprofit water corporation Investor Owned drinking water corporation Projects: Capital projects for public water supply systems Source, Treatment, Transmission & Distribution, Storage 14
DWSRF Restrictions Operation and maintenance not allowed Dams or impoundments (some exceptions) Necessary for treatment Co-located on treatment plant grounds Projects driven by Future population growth Fire protection Note that eligible projects can accommodate future population growth and provide fire protection 15
DWSRF Priority System Specific priorities in SDWA: Address the most serious risk to human health; Are necessary to ensure compliance with the requirements of the SDWA; and Assist systems most in need on a per household basis according to State affordability criteria. Project purpose Project must support and be necessary for the purpose Project benefit System management Financial situation 16
DWSRF Address financial need / small or disadvantaged systems 15% small system reserve Principal forgiveness eligibility based on affordability Allocation based on needs survey results Synchronize fall round and priority categories with CWSRF & CDBG programs 17
DWSRF Applications Receive applications once per year Next application deadline is September 30, 2016 (anticipated) Great time to apply! Training Summer Available to meet with you, and we will step you through the process, discuss your application, etc. 18
Community Development Block Grant To improve the living environment and economic opportunities for persons of low and moderate income 19
CDBG Program The federal funds are split between direct appropriations to metropolitan areas, called entitlement communities, and In NC, the cities of Asheville, Burlington, Cary, Chapel Hill, Charlotte, Concord, Durham, Fayetteville, Gastonia, Goldsboro, Greensboro, Greenville, Hickory, High Point, Jacksonville, Kannapolis, Lenoir, Morganton, New Bern, Raleigh, Rocky Mount, Salisbury, Wilmington, and Winston-Salem receive these funds directly, as do Wake, Mecklenburg and Cumberland Counties Nationally, $2.3 billion goes directly to metropolitan cities and urban counties Funds appropriated to the states for distribution into less populated areas, non-entitlement communities In NC, CDBG-Infrastructure administered by DEQ 20
NC CDBG Program Today North Carolina Funding Categories FY 2014 FY 2015 Infrastructure $26,186,235 $26,865,079 Economic Development $15,952,630 $15,822,641 Administration $1,375,000 $1,037,500 HUD Grant to State TOTAL $43,513,865 $43,725,220 21
CDBG-Infrastructure Units of General Local Government (non-entitlement) Cities with populations of less than 50,000 Counties with populations of less than 200,000 Does not include districts, authorities, etc. Must serve an area of Low to Moderate Income 51% or greater Service area may be entire town or part of town 22
CDBG-Infrastructure Drinking water facilities Treatment Lines Extensions to new service areas (e.g., remove contaminated wells from service) Wastewater facilities Treatment Lines Extensions to new service areas (e.g., remove failing septic tanks from service) Can pay for private laterals (for LMI residences) Treatment may be difficult to qualify if larger service area Grant amount limited to $2 million 23
Program Demand Vs. Funded Projects 60 Applications 2015 50 40 30 20 10 0 EAST PIEDMONT WEST 24
Program Demand Vs. Funded Projects CDBG-I Funded Projects $35,000,000 $30,000,000 $33,997,623 $25,000,000 $20,000,000 $17,635,783 $20,367,805 $15,000,000 $10,000,000 $5,000,000 $- 21 EAST 9 PIEDMONT 10 WEST 25
CDBG Priority System Category 1 Project Purpose Category 2 Project Benefits Category 3 System Management Category 4 Financial Situation More emphasis on financial situation than SRF programs 26
CDBG Applications May, 2016, multiple locations throughout the State of North Carolina One round only: September 30, 2016 (anticipated) Available to meet with you, and we will step you through the process, discuss your application, etc. 27
State Reserve Programs To assist rural, local government units with water infrastructure needs 28
State Reserve Programs SFY 2015-2016 - $10 M (recurring) + $2.4 M (nonrecurring) SFY 2016-2017 - $10 M (recurring) + $5 M (nonrecurring) Changes for state reserve programs New affordability criteria New grants State reserve programs Drinking water and wastewater project grants & loans Asset Inventory & Assessment grants Merger / Regionalization Feasibility grants Local government units and nonprofit water corp. SWIA determines the distribution of funds 29
State Reserve Programs Affordability Criteria 30
Affordability Replaces High Unit Cost threshold Tier 1 and 2 restrictions Rank projects See specific priority system Not all aspects in all priority systems Grant versus loan For projects Not for AIA or MRF grants Broad statutory definition NCGS 159G-20.(1) Affordability The relative affordability of a project for a community compared to other communities in North Carolina based on factors that shall include, at a minimum, water and sewer service rates, median household income, poverty rates, employment, the population of the served community, and past expenditures by the community on water infrastructure compared to that community s capacity for financing of water infrastructure improvements. 31
Affordability - Goals SL 2013-360: to better facilitate the dissemination of funds and meet the project needs of rural, economically distressed local governments. NCGS 159G-71.(8) maximizing the use of state funding resources NCGS 159 Local Government Finance Act Draft master plan vision 32
Affordability Draft Criteria for Grant Limits Population What is impact of grant LGU Indicators Similar parameters as tiers Focused on individual unit (not county) Compared to state benchmark (not county v. county) Revenue Need a grant for project? Rates / Debt Rates high or low Debt high or low (including portion of project financed) 33
Affordability Draft Criteria for Grant Limits Population < 20,000 connections >20,000 connections, $3 million grant = +/- 60 / connection / month 1,000 connections, $3 million grant = +/- $12 / connection / month LGU Indicators MHI, poverty, unemployment, property / capita, population change 3 of 5 worse than state benchmark Revenue OR < 1.3 with financing debt for project Varies with project costs Rates / Debt Debt includes portion of project financed 34
Affordability Draft Criteria for Grant Limits >$58 100% 100% 100% 100% 100% 100% Rates >$47 - <= $58 >$40 - <= $47 >$33 - <= $40 >$26 - <= $33 75% 75% 75% 75% 100% 100% 50% 50% 50% 50% 75% 75% 25% 25% 25% 25% 50% 50% 0% 0% 0% 0% 25% 25% <$26 0% 0% 0% 0% 0% 25% <$110 >$110 - <=$210 >$210 - <=$350 >$350 - <=$550 >$550 - <=$1000 >$1000 Debt Service/ Connection As rates and debt increase >>> grant % increase 35
State Reserve Programs State Reserve Project Loans and Grants 36
State Project Grants & Loans Project grants (construction projects) $3 million over 3 years Subject to affordability limitations Project loans limited to: $3 million over 3 years for targeted interest rates $3 million / year for standard interest rates (i.e., ½ market rate) Eligible activities include: Distribution and treatment of drinking water Collection and treatment of wastewater No federal requirements 37
State Project Grants & Loans Draft priority based on current CWSRF and DWSRF Priority Rating Systems Financial Situation category has been replaced with the Affordability category Drinking Water State Reserve Exceptions from DWSRF Category 1 Project Purpose Does not include eliminating, by merger or dissolution, a failing public water supply system Wastewater State Reserve Exceptions from CWSRF Category 1 Project Purpose No prioritization for green projects Stream/wetland/buffer restoration Stormwater BMPs Reclaimed water/usage Rainwater harvesting/usage 38
State Project Grants & Loans Affordability may limit grant funding to a percentage of the funded project costs (including 0%) More emphasis on financial than SRF programs Affordability category prioritization Residential connections Current monthly utility rate at 5000 gallons Future annual debt service per connection Local Government Unit (LGU) indicators 39
DRAFT State Drinking Water Reserve Priority Ra6ng System Category 4 - Affordability Points 4.A Residen(al Connec(ons 4.A.1 Less than 20,000 residen(al connec(ons OR 1 4.A.2 Less than 10,000 residen(al connec(ons OR 2 4.A.3 Less than 5,000 residen(al connec(ons OR 4 4.A.4 Less than 1,000 residen(al connec(ons 8 4.B Current Monthly U(lity Rate at 5,000 gallons Usage 4.B.1 Greater than $26 OR 2 4.B.2 Greater than $33 OR 4 4.B.3 Greater than $40 OR 6 4.B.4 Greater than $47 OR 8 4.B.5 Greater than $58 12 4.C Future Annual Debt Service / Connec(ons 4.C.1 Greater than $110 OR 1 4.C.2 Greater than $210 OR 2 4.C.3 Greater than $350 OR 4 4.C.4 Greater than $550 OR 6 4.C.5 Greater than $1000 10 4.D Local Government Unit (LGU) Indicators 4.D.1 2 out of 5 LGU indicators worse than state benchmark OR 2 4.D.2 3 out of 5 LGU indicators worse than state benchmark OR 4 4.D.3 4 out of 5 LGU indicators worse than state benchmark OR 6 4.D.4 5 out of 5 LGU indicators worse than state benchmark 10 Subtotal for Category 4 - Affordability Total of Points for All Categories 40
State Reserve Programs Asset Inventory and Assessment Grants 41
Asset Inventory and Assessment Grants Asset Inventory and Assessment grants limited to $150,000 over 3 years To inventory existing water and/or sewer system and document the condition of inventoried infrastructure Eligible activities can* include: Identifying system components and where they are located Performing a risk analysis to establish which components are critical Determining the condition of critical components Establishing costs for replacement/repairs/upgrades (capital) and continuous operations and maintenance (O&M) Creating a prioritized list of projects to be completed Preparing a realistic Capital Improvement Plan (CIP) that includes critical projects *Contact us with questions about eligibility before applying 42
Asset Inventory and Assessment Grants Affordability does not determine eligibility for grant funding Proposed rating system is structured to prioritize applications that further the goal of the Authority to fund utilities that will actually use the data and information obtained through this project to manage their infrastructure assets 43
Asset Inventory and Assessment Grants Draft priority system rationale System Management (12 points max) Items in this category may be an indication of the utility s ability to obtain, maintain, and use this data Project Benefits (8 points max) Questions associated with this category provide information on the utility s understanding of what they want to get out of the project Affordability points (4 points max) Important when prioritizing applications with similar management and benefit aspects, but should not outweigh the benefits or the ability to better utilize the information obtained through this project 44
Line Item # Category DRAFT Asset Inventory and Assessment Grant Priority Ra6ng System Points 1. Project Benefits 0, 2, 4, 6, or 8 2. System Management 2.A Knowledge base of u(lity s internal asset management team 0, 2, or 4 2.B Current and past rate seyng prac(ces, CIPs, etc. 0, 1, or 2 2.C Management of asset inventory data 0, 2, or 4 2.D Opera(ng Ra(o (OR) is greater than or equal to 1.00 based on a current audit (2 points), or is less than 1.00 and water/sewer rates are high [based on Affordability Criteria-based threshold once determined] (1 point) 3. Affordability 3.A Affordability Criteria rate and debt/connec(on-related informa(on once determined (i.e., highest priority for high rates and high debt/connec(on) 3.B Local Government Unit (LGU) Indicators 0, 1, or 2 0, 1, or 2 3.B.1 3 out of 5 LGU indicators worse than the state benchmark OR 0 3.B.2 4 out of 5 LGU indicators worse than the state benchmark OR 1 3.B.3 5 out of 5 LGU indicators worse than the state benchmark 2 Total Points 24 Max 45
Asset Inventory and Assessment Grants System Management Questions - Narrative Team members training/experience in utility management Current rate setting and CIP planning Future CIP planning and revenue options Asset inventory maintenance/update System operating ratio for each of last 3 years 46
Asset Inventory and Assessment Grants Project Benefit Questions - Narrative Top 3 challenges and how project can help Past funding for CIP or asset inventory and use of information Future use of team members to inventory, assess, prioritize and plan Use of asset inventory & assessment project information to develop future infrastructure projects and in prioritization Additional benefits 47
Asset Inventory and Assessment Grants Match requirement Based on local government unit (LGU) indicators from Affordability Criteria 5 of 5 LGU indicators worse than state benchmark 5% match 4 of 5 LGU indicators worse than state benchmark 10% match 3 of 5 LGU indicators worse than state benchmark 15% match < 3 of 5 LGU indicators worse than state benchmark 20% match 48
State Reserve Programs Merger / Regionalization Feasibility Grants 49
Merger/Regionalization Feasibility Grants Merger (NCGS 159G-20) Combination of two or more water and/or sewer systems into one system with common ownership, management, and operation Regionalization (NCGS 159G-20) Physical interconnection Of a WW system to another WW system for regional treatment Of a public water system to another water system for regional water supply 50
Merger/Regionalization Feasibility Grants Merger/Regionalization Feasibility grants limited to $50,000 over 3 years Feasibility of consolidating the management of multiple utilities into a single utility operation or to provide regional treatment and the best way of carrying out the consolidation or regionalization 100% grant Affordability does not determine eligibility for grant funding 51
Merger/Regionalization Feasibility Grants Proposed rating system is structured to prioritize applications that in general have fewer connections, more compliance issues, smaller staffs, greater financial barriers, or any combination of the above that may hinder system viability and the ability to self-fund or conduct a feasibility study 52
Merger/Regionalization Feasibility Grants Draft Priority System Rationale Technical Status (6 points max) Items in this category address compliance issues, collaboration history, and physical proximity to other systems Organizational Status (6 points max) Items in this category address the organizational structure, challenges, and fiscal concerns of the applicant Affordability (8 points max) Used to prioritize applications with the greatest financial need 53
Merger/Regionaliza6on Feasibility Grant Priority Ra6ng System Line Item # Category Points 1. Technical Status 1.A Compliance History (Note: applicants with more severe issues receive more points) 0, 1, 2, or 3 1.B Past Collabora(on and Proximity (Note: higher priority for applicants with past collabora:on and/or proximity to other systems) 2. Organiza(onal Status 2.A Size and Capabili(es (Note: smaller and less capable applicants receive more points) 2.B LGC Unit Leder (Note: points if the LGU has received an LGC Unit LeBer) 0, 1, 2, or 3 0, 1, or 2 2.C Opera(ng Ra(o < 1.00 1 3. Affordability Affordability Criteria rate and debt/connec(on-related informa(on once 3.A determined (Note: highest priority for high rates and high debt/connec:on) 3.B Local Government Unit (LGU) Indicators 3 0, 2, or 4 3.B.1 3 out of 5 LGU indicators are worse than the state benchmark OR 0 3.B.2 4 out of 5 LGU indicators are worse than the state benchmark OR 2 3.B.3 5 out of 5 LGU indicators are worse than the state benchmark 4 Total Points 20 Max 54
Merger/Regionalization Feasibility Grants Application components Narrative General Discussion Technical Status Organizational Status Acknowledgement Letter(s) 55
Merger/Regionalization Feasibility Grants Narrative General Discussion Has the applicant performed a study like this before? Why/How might merging/regionalizing resolve the applicant s technical, organizational, and financial challenges? Technical Status Applicant s ongoing environmental issues Applicant s proximity to systems with adequate unallocated capacity [related to GS 130A-317(g)(2) Encourage Interconnection of Public Water Systems ] Has there been any past collaboration between the applicant and partner systems? 56
Merger/Regionalization Feasibility Grants Organizational Status Applicant s organizational size, structure, and composition Applicant s current operational challenges Local Government Commission (LGC) issuance of a Unit Letter to the applicant; if so, discuss issues Acknowledgement Letter Letter from each partner acknowledging potential collaboration with applying system(s) Division will develop a draft letter for each board or council s approval 57
State Reserve Programs Receive applications this spring and this fall April 29th next application period $12.4 million total available for all State Reserve Programs Training Week of March 14th, Mooresville and Valdese Week of March 28th, Washington and Fayetteville March 31, at the NC Rural Center (Raleigh) Available to meet with you, and we will step you through the process, discuss your application, etc. 58
State Reserve Programs Public Review Accepting public comments until February 19th Project grant limits based on affordability criteria Priority systems for state reserve programs Looking for both supporting comments and suggestions for changes (or both) Specific recommendations Documentation http://portal.ncdenr.org/web/wi/ Cathy Akroyd, Public Information Officer Division of Water Infrastructure Email: cathy.akroyd@ncdenr.gov 59
Looking Ahead $2 billion Connect NC Bond $309.5 million for state programs $100 million in grants $209.5 million in loans (revolving) permanent resource Requires voter approval March 15 th Split evenly between Drinking Water Reserve and Wastewater Reserve 60
Division of Water Infrastructure Questions? http://portal.ncdenr.org/web/wi/ 61