Clean Water State Revolving Fund Program

 GENERAL INFORMATION

            The Clean Water State Revolving Fund (CWSRF) program was authorized by the U.S. Congress through Title VI of the Clean Water Act (CWA) as amended in 1987.  The Act authorizes the Environmental Protection Agency (EPA) to provide federal funds to the states to capitalize State Revolving Funds (SRFs).  The SRFs are established and managed by the states and the states must provide a 20 percent match for the federal capitalization grants. 

             The North Dakota SRF is jointly managed by the North Dakota Department of Health and the North Dakota Public Finance Authority.  The Department of Health receives the Federal Capitalization Grant and is responsible for the technical and overall administrative functions of the program.  The Public Finance Authority, under agreement with the Department of Health, acts as the Department�s financial agent and is responsible for the preparation and issuance of bonds, reviewing the financial capability of political subdivisions, investing program proceeds, handling loan repayments, and other necessary financial functions.

            Each year, the Department of Health prepares a capitalization grant application and submits it to the Environmental Protection Agency.  When the grant money is received, the Public Finance Authority initiates a sale of bonds to be used for the state�s 20 percent match requirement.  The capitalization grant and bond proceeds are deposited in the SRF and made available to political subdivisions for eligible projects.  As communities pay back their loans, the interest payments are used to retire the state match bonds and the principal is deposited in the SRF to be used for additional projects.  The revolving aspect of the program will assure that North Dakota has funds for needed projects far into the future.  The current rate for SRF loans is 2.5 percent plus a .5 percent administration fee for a maximum term of 20 years.

FEDERAL REQUIREMENTS

            SRFs have replaced the old Construction Grants Program as the major funding source for upgrading community wastewater systems.  Under the SRF, however, project eligibilities have been expanded and federal requirements reduced.  The following types of projects are eligible for SRF funding: 

             Even though certain federal requirements have been eliminated in the SRF Program, there are still a number of them that must be complied with.  These fall within two categories, equivalency requirements and �cross-cutting� requirements.  The equivalency category consists of those requirements that were carried over from the Construction Grants Program and apply mostly to the technical and engineering aspects of the SRF program.  Equivalency requirements do not apply to nonpoint source projects.

             The �cross-cutting� requirements may be contained in other federal laws, Executive Orders or government-wide policy statements and generally apply broadly to a wide range of federal financial assistance programs.  These cross-cutting federal authorities can be divided into three groups.  First, several environmental laws and executive orders relating to such things as preservation of historical and archaeological objects, endangered species, wetlands, agricultural land and the like, apply to construction activities.  Second, are requirements such as minority and women�s business enterprise participation goals and equal employment opportunity rules that can be classified as social authorities.  Third, are cross-cutting authorities, such as the prohibition against entering into contracts with debarred or suspended firms, that directly regulate the expenditure of federal funds.  A complete listing of  authorities is attached.

LOAN APPLICATION PROCESS

            Before a political subdivision can receive loan money, their proposed project must be identified on the Project Priority List and the Intended Use Plan.  These are documents required by federal regulation and prepared by the Department of Health annually.  To be included on the lists, a community should notify the Department of Health of their intent as soon as possible.  While an application can be processed and preliminary work completed without being on these lists, no funds can be transferred to the community until their project appears on the approved documents. 

 Application packets can be obtained from either the Department of Health, the Public Finance Authority, or online at http://www.nd.gov/pfa/srf.html. 

 When the Department is contacted regarding an application, depending on the complexity of the project, a preapplication meeting may be scheduled.  At this meeting, a representative of the Department will explain the program, answer any question and assist the community as needed.  Upon completion, copies of the application should be sent to both the Department of Health and the Public Finance Authority.  The Department of Health reviews the technical and programmatic aspects and the Public Finance Authority reviews the financial information.  If additional information is needed, the community will be promptly notified.

 PROFESSIONAL SERVICES

            A community will typically require the services of a consulting engineer and bond counsel.  The engineer is responsible for preparing all required technical documents.  These include the facility plan, building plans, specifications, bidding documents, operation and maintenance manuals, and others.  In addition, the engineer provides on site inspection services during construction to insure quality control and construction in accordance with the approved plans and specifications.  The Department of Health will work closely with the community�s engineer to assure compliance with federal and state requirements.  The Public Finance Authority will work with the community�s bond counsel to assure that all legal and financial requirements are met.

 PROJECT DEVELOPMENT

            The typical SRF project consists of three steps, the facility plan, plans and specifications, and construction.  As the name implies, the facility plan is a planning document that establishes existing conditions, identifies the current problems, projects future conditions at the design year, and evaluates alternatives to solve the existing problems and meet future needs.  The evaluation of alternatives includes both a cost effectiveness analysis and an environmental assessment.  The intent of the facility plan is to arrive at the most cost effective, environmentally sound solution to the problem.  The facility plan must be approved by the Department of Health before the project can proceed to the next step.

             When the facility plan is approved, plans, specifications, and bidding documents are prepared based on the recommended alternative from the facility plan.  These must comply with, among other things, MBE/WBE and EEO requirements.  Once the documents are approved by the Department of Health, the project can be advertised and bids opened.  If the bids are acceptable, the construction contract must be awarded to the low, responsive, responsible bidder following Department of Health approval.  Construction can now begin at the community�s convenience.

             At this time, the Department of Health will schedule a preconstruction meeting with the community and contractor to explain the construction related requirements that must be complied with and to answer any questions that arise.  In addition to the preconstruction meeting, periodic interim inspections will be conducted by Department of Health engineers during the construction phase of the project.  Since SRF loans are cost reimbursable, construction costs must be incurred before the community can receive payments.  Once costs are incurred, the community should submit periodic payment requests to the Department of Health for processing.  Payment should be received by the community within two weeks of receipt of the request by the Department.  When construction is completed, the Department of Health will conduct a final inspection to verify compliance with federal requirements, verify that the project was constructed in accordance with the approved plans and specifications, and establish final costs.

             Repayment of principle must begin no more than one year after the project is declared operational.  Prior to this, the Public Finance Authority will work with the community to establish a repayment schedule.

EQUIVALENCY REQUIREMENTS OF THE SRF PROGRAM

Title VI of the Clean Water Act lists 16 specific Title II requirements which must be met for section 212 projects funded in an amount equal to the capitalization grants. These 16 are 201(b), 201(g)(1), 201(g)(2), 201(g)(3), 201(g)(5), 201(g)(6), 201(n)(1), 201(o), 204(a)(1), 204(a)(2), 204(b)(1), 204(d)(2), 211, 218, 511(c)(1), and 513.

• Section 201(b)- Requires that projects apply best practicable waste treatment technology.

• Section 201(g)(1)- Limits assistance to projects for secondary treatment, advanced treatment, or any cost-effective alternative, new interceptors and appurtenances, and infiltration-inflow correction. Allows up to 20 percent of the yearly allotment for other projects within the definition of treatment works in section 212(2).

• Section 201(g)(2)- Requires that alternative technologies be considered in project design.

• Section 201(g)(3)- Requires the applicant to show that the related sewer collection system is not subject to excessive infiltration.

• Section 201(g)(5)- Requires that applicants study innovative and alternative treatment technologies and take into account opportunities to construct revenue producing facilities and to make more efficient uses of energy and resources.

• Section 201(g)(6)- Requires that the applicant analyze the potential recreation and open space opportunities in the planning of the proposed facility.

• Section 201(n)(1)- Provides that funds under section 205 may be used for water quality problems due to discharges of combined sewer overflows, which are not otherwise eligible, if such discharges are a major priority in a state.

• Section 201(o)- Calls on the state to encourage and assist communities in the development of capital financing plans

• Section 204(a)(1) and (2)- Requires that treatment works projects be included in plans developed under section 208 and 303(e).

• Section 204(b)(1)- Requires communities to develop user charge systems and to have the legal, institutional, managerial, and financial capability to construct, operate, and maintain the treatment works.

• Section 204(d)(2)- Requires that, one year after the date of completion of construction and initiation of operation the owner/operator of the treatment works must certify that the facility meets design specifications and effluent limitations included in its permit.

• Section 211- Provides that major rehabilitation or replacement of collectors is not eligible under the Governor's 20 percent discretionary authority, unless the collector is needed to assure the total integrity of the treatment works or that, for a new collector, adequate capacity exists at the treatment facility.

• Section 218- Assures that treatment systems are cost-effective and requires that projects of over $10 million include a value-engineering review.

• Section 511(c)(1)- Applies the Environmental Impact Statement requirement of the National Environmental Policy Act to treatment projects.

• Section 513- Applies Davis-Bacon labor wage provisions to treatment works construction.

CROSS CUTTING AUTHORITIES

ENVIRONMENTAL

• Archeological and Historic Preservation Act

• Clean Air Act

• Endangered Species Act

• Executive Order 11593- Protection and Enhancement of the Cultural Environment

• Executive Order 11988- Floodplain Management

• Executive Order 11990- Protection of Wetlands

• Farmland Protection Policy Act

• Fish and Wildlife Coordination Act

• National Historic Preservation Act

• Safe Drinking Water Act

• Wild and Scenic Rivers Act

ECONOMIC

• Demonstration Cities and Metropolitan Development Act

• Section 306 of the Clean Air Act and Section 508 of the Clean Water Act, including Executive Order 11738-Administration of the Clean Air Act and the Federal Water Pollution Control Act with Respect to Federal Contracts, Grants, or Loans

SOCIAL

• Age Discrimination Act

• Civil Rights Act of 1964

• Executive Order 11246- Equal Employment Opportunity

• Executive Orders 11625 and 12138- Women's and Minority Business Enterprises

• Section 13 of PL 92-500; Prohibition against sex discrimination under the Federal Water Pollution Control Act

MISCELLANEOUS AUTHORITY

• Uniform Relocation and Real Property Acquisition Policies Act

• Executive Order 12549- Debarment and Suspension