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Financial Assistance Programs: Water Quality
A Community's Guide to the Utah Water Quality Project Assistance Program
Chapter 5: Receiving Your Loan and/or Grant
Project planning and design are not the only steps necessary to receive a loan or grant. As with any financial matters, there are certain requirements that you must meet before you can receive funding. This section will discuss the necessary paperwork and other steps that you must take so that your loan is ready when you need it.
All financial assistance from the WQPAP is authorized by the Water Quality Board (the Board). The Board is comprised of the Director of the DEQ and ten other members appointed by the governor with the advice and consent of the Senate. The appointed members, insofar as practicable, include one member from each of the following interests: mineral industries; food processing industries; other manufacturing industries; agricultural and livestock interests; fish, wildlife and recreation interests; improvement and service districts; two members who are officials of municipal government or their representatives involved the management of operation of wastewater treatment facilities; and two members at large. The Board usually meets every third Friday of the month.
he authorization occurs in two steps; an introduction and a final authorization. Your project will be introduced to the Board when a project is presented for a Hardship Advance funding request or; if an advance is not needed, when the scope of your project can be defined. All of the details of the total project may not be known at that time.
The DWQ staff will prepare a Feasibility Report which describes the project and makes a staff recommendation. An example Feasibility Report is included in Appendix E. We will prepare the Feasibility Report with your assistance, review it with you and make sure we have all the facts straight before we send it out in packets to the Board two weeks before the meeting. The project engineer on the DWQ staff who has been assigned to your project will introduce your community representatives and present the report at the meeting. Following the presentation you will be given the opportunity to add comments and make a presentation also. The Board will ask questions and request additional information. Usually a Hardship Advance is authorized for funding at this time; however, final project funding will take place at a later meeting.
The final authorization procedure is much like the introductory process. The DWQ staff will prepare a Feasibility Report which you will review and approve. This report will answer questions from the Board and perhaps complete some of the details which were not available at the introductory meeting.
The DWQ will send a Grant, copy of a State Treasurer's (PTIF) Escrow Account Agreement and an example Reimbursement Request Form to you after a Hardship Grant has been authorized by the Board. An example grant, escrow account agreement and reimbursement request form are included in Appendix F,G, & H.
You will receive an Authorization Letter from the DWQ after a loan has been authorized. The letter will describe the loan closing process in detail. A copy of a standard Authorization Letter is included in Appendix I. We will arrange a conference call or meeting to coordinate activities necessary for loan closing. The Water Quality Board will purchase a bond from you to evidence the loan. The Board will purchase a revenue bond, general obligation bond, special assessment bond or any other legal instrument which meets the requirements of the Utah Municipal Bond Act.
You will need to hire an attorney who specialized in bonding requirements to advise you, to prepare a bond resolution and to prepare the bond documents which contain covenants and resolutions needed to meet the Utah Municipal Bond Act. The DWQ will provide a list of qualified bond counsels if you project assistance.
Project Escrow Account
When the grant or loan agreement documentation is complete proceeds from the WQPAP loan and/or grant and all other funds necessary to complete your project will be placed in an escrow account. You may use the State Treasurer's Fund (PTIF) if there are no federal funds involved with your project financing. If your financing involves federal funds or, if you choose, you may use a bank as your escrow agent.
The DWQ will review and approve all payment requests and send them to your escrow agent. If you use the PTIF, you will need to pay the vendor and request reimbursement from the escrow account. The Treasurer will transfer the requested and approved reimbursement to a bank account or PTIF account as you designate. If the account is maintained at a local bank, the escrow agent will pay your contractors and vendors directly.
Fidelity Bond Requirements
You are required to provide a copy of the Treasurer's Fidelity Bond demonstrating that you meet the legal requirements of Utah Code 51-7-15 and rule 4 of the Utah Money Management Council.
Easements and Land Acquisition
You may need to acquire private property, including easements, for your project. The actions that you need to take in acquiring land must be fair to the people selling the land, while also being fair to the taxpayers. The procedures required by the law allow for this to happen. Generally, land acquisition is not a problem, but all work to achieve the necessary easements and obtain land should be started as soon in the process as possible. This early start could prevent your project from being delayed due to litigation or other land owner opposition.
User Charge System and Sewer Use Ordinance
There are two administrative requirements of receiving a WQPAP loan that require local legislative actions: the User Charge System and Sewer Use Ordinance.
User Charge System
Proper financial management is an important aspect of the successful operation of your wastewater treatment facilities. The User Charge System describes how to charge users of the project so you can generate enough money to operate and maintain the project after construction is done. The costs of operating and maintaining the facility (such as salaries, utilities, chemicals, etc.) should be distributed to the users in a proportional manner, according to each user's contribution to those costs. The format of your User Charge System must be approved prior to receiving a loan, but the local legislation formally adopting the system does not need to be passed until construction is 50 percent completed.
You must be able to demonstrate how debt service and any applicable reserves for debt service and repair and replacement are going to be funded. If you issue a revenue bond, reserves of one and one-half of an annual payment will be required to be funded over a six year period. In addition you will be required to demonstrate that net revenues (revenues after operation & maintenance expenses are subtracted) equal at least 125% of the wastewater fund debt service.
A special assessment bond will have specific guarantee fund requirements which will be determined at the time loan terms are agreed upon. General obligation bonds do not require a reserve.
Sewer Use Ordinance
The Sewer Use Ordinance gives you control over how your sewer system can be used, to protect the integrity of your treatment facilities. The ordinance will prohibit the discharge of toxic chemicals into the sewers, outline procedures for when there are accidental spills or overflows, discuss the rights of your community regarding the types and amounts of sewage you will accept into your sewer system, and address issues such as the connection of residences to the sewer system.
If your sewer system connects to someone else's treatment plant, or your treatment plant treats sewage from outside your jurisdiction, you must have an agreement with them to provide service. This agreement may be between your community and another, or even between you and individual homeowners or corporations.
The agreement should address issues such as the purpose for the agreement, the parties involved, the boundaries of the areas to be served, and the duration of the agreement.
Operation and Maintenance Program
An Operation and Maintenance (O&M) Program is vital to the successful operation of your project, and is meant to ensure that your facility will be operated and maintained properly for the life of the loan. The goal of the WQPAP O&M program is to tailor the required information to your community's needs. Your O&M program will be designed to give your community the tools needed (training, manuals, and administrative support) to consistently meet NPDES permit limits and to ensure that your facility is operated cost-effectively. Each community that receives a WQPAP loan must enact an O&M Program for the funded project.
Your O&M program may consist of items such as an O&M manual, standard operating procedure manuals, videotaped training and operation lessons, or other classroom training. We will work with you to determine the best O&M program for your employees and facility. Meetings held during the loan application process will help you develop a plan to implement your O&M program during construction.
The first step in the bidding process is to advertise. Generally, bid advertisements are published in local papers and trade magazines at least 90 days before the estimated start of construction. The 90-day time period provides 30 days for actual advertisement for bids plus another 60 days for you to evaluate the bids received, select a contractor, and finalize your financing. Advertising requirements may vary for your community, so please check with your community's attorney if you have any questions.
After you have received bids for your project, and before you award the contract, you must submit your bidding process documentation to us. You must submit documentation that all applicable state procurement and federal laws pertaining to construction contracting have been followed.
You are one step closer to completing your project. The next step is for you to initiate construction. Although you have received your loan, our involvement does not end here. We will be available for you throughout construction to answer any questions you have and help your project go smoothly. The next chapter discusses building your project in more detail.
Receiving Your Loan or Grant Checklist
Things that should be done by the end of RECEIVING YOUR LOAN and/or GRANT:
- Completed and submitted your loan application package.
- Completed land or easement acquisition.
- Developed User Charge System and Sewer Use Ordinance and received approval from DWQ.
- Developed and signed any service agreements needed for service outside your jurisdiction.
- Developed the plan for your Operation and Maintenance program to be implemented during construction.
- Signed a contract with your engineering firm for construction supervision and initial operational assistance.
- Advertised, opened, and reviewed construction bids and submitted bid documentation to DWQ.
- Hired a bond counsel to prepare bond resolutions and documents.
- Established a project escrow account.
- Obtained a position fidelity bond or established an escrow account for monthly deposits of funds dedicated to debt service and reserves.
- Bond documents were signed at a loan closing.
- Awarded the construction contract(s).