Current through Register Vol. 50, No. 9, March 1, 2024
RELATES TO: KRS Chapter 224A,
33 U.S.C.
1285,
1288,
1296,
1313,
1329,
1383,
40 C.F.R.
35.3140
NECESSITY, FUNCTION, AND CONFORMITY:
KRS
224A.070(1) and
224A.113
authorize the Kentucky Infrastructure Authority to promulgate administrative
regulations to implement
KRS
224A.111. This administrative regulation
governs the application for and provision of financial assistance to
governmental agencies for the planning, design, and construction of projects
funded from the Clean Water State Revolving Fund.
Section 1. Definitions.
(1) "Applicant" means any governmental agency
that has submitted an application to the authority for financial assistance
from the Clean Water State Revolving Fund.
(2) "Application" means the information
submitted by an applicant to the authority to obtain financial assistance,
including the need for a specific project or infrastructure, and including
financial information necessary to determine eligibility for financial
assistance from the Clean Water State Revolving Fund.
(3) "Assistance agreement" is defined by
KRS
224.011(3).
(4) "Authority" is defined by
KRS
224A.011(4).
(5) "Cabinet" means the Environmental and
Public Protection Cabinet established in accordance with
KRS
224.10-100.
(6) "Clean Water Act" is defined by
KRS
224A.011(12) and is
otherwise known as the Federal Water Pollution Control Act.
(7) "Clean Water State Revolving Fund" means
the federally-assisted wastewater revolving fund created by
KRS
224A.111. The Federally-assisted State
Revolving Fund was established by the Water Quality Act of 1987 (amending the
Clean Water Act), Pub.L. 100-4, and replaced the traditional federal Municipal
Wastewater Treatment Construction Grant Program to include other water quality
needs, including nonpoint sources. This fund is now designed to address the
greatest remaining environmental challenges to improve Kentucky's water
resources.
(8) "Closing date" means
the date established by the authority for execution of the assistance agreement
upon satisfaction of the conditions contained in the conditional commitment
letter.
(9) "Conditional commitment
letter" means a letter delivered to the applicant stating the authority's
commitment to provide financial assistance under specifications and subject to
the satisfaction of certain conditions by the applicant on or before the
closing date.
(10) "Kentucky
eClearinghouse" means the automated Kentucky State Clearinghouse coordinating
the Federal Executive Review Process and Kentucky Intergovernmental Review
Process, for which the Governor's Office for Local Development has been
designated as the single point of contact for federal or state funding
financial assistance as required by
KRS
147A.021(3)(k).
(11) "Kentucky state data center" means the
agency within the Urban Studies Institute of the University of Louisville
designated by the Commonwealth to serve as the repository and analyst of data
and information generated by the United States Census Bureau.
(12) "Median household income" means the
statistical middle value in household income, considering all households in
Kentucky with an equal number of households above and below the middle value,
as determined by the Kentucky State Data Center.
(13) "Municipality" means a governmental unit
as defined in
33
U.S.C. 1362(4).
(14) "NEPA-like process" means the state
environmental review process that is functionally equivalent to the review
undertaken by the U.S. Environmental Protection Agency under the National
Environmental Policy Act,
42 U.S.C.
4321 et seq.
(15) "Project priority list" means the
integrated list of projects developed annually by the cabinet, which includes a
priority ranking of applicants eligible for State Revolving Fund funding
pursuant to
33 U.S.C.
1381 and
33 U.S.C.
1296, and a list of activities eligible for
funding under
33 U.S.C.
1329 and
33 U.S.C.
1330.
(16) "Regionalization" means the creation of
expanded service areas which take in a large geographic area of multiple
systems; the creation of multijurisdictional utility commissions, special
districts, authorities, or corporations; the utilization of interlocal
cooperation agreements; the consolidated operation or management of multiple
systems which may include regional facilities, smaller systems, or onsite
systems; or the merger, consolidation, or combination of two (2) or more
existing facilities or systems.
(17) "Replacement reserve fund" means the
special depreciation fund that may be established and funded by an applicant in
connection with financial assistance from the Clean Water State Revolving
Fund.
(18) "Safe Drinking Water
Act" means the federal Safe Drinking Water Act, 33 U.S.C. 300 f-j.
Section 2. Eligible Applicants.
Any governmental agency shall be eligible to apply for financial assistance for
planning, design and construction of eligible projects described in Section 3
of this administrative regulation.
Section
3. Eligible Projects.
(1) Funds
in the Clean Water State Revolving Fund shall be used for:
(a) Planning, design and construction of
wastewater or stormwater collection, conveyance, and treatment
facilities;
(b) The implementation
of nonpoint source pollution control management programs;
(c) Refinancing or buying eligible debt
obligations of municipalities and intermunicipal and interstate agencies within
Kentucky at or below market rates, if the debt obligations were incurred after
March 7, 1985;
(d) Guaranteeing or
purchasing insurance for a local obligation to improve credit market access or
reduce the interest rate of the obligations;
(e) Transferring fund assets between the
Clean Water State Revolving Fund and the Drinking Water State Revolving Fund as
allowed by the Clean Water Act and the Safe Drinking Water Act;
(f) Providing a source of revenue or security
for the payment of principal and interest on revenue or general obligations
bonds issued by the state if the proceeds of the sale of the bonds will be
deposited in the fund; and
(g)
Purchase of another wastewater system eligible under
33 U.S.C.
1383(d).
(2) Fundable projects may include
any applicant's project eligible for funding under
33 U.S.C.
1383.
(3) Only projects identified on the cabinet's
project priority list shall be considered for funding.
(4) Funds in the Clean Water State Revolving
Fund shall not be used for:
(a) Laboratory
fees and other monitoring expenses; and
(b) Operation and maintenance
expenses.
Section
4. Submission Requirements.
(1)
Projects proposed to be placed on the project priority list shall be submitted
to the cabinet.
(2) After inclusion
on the project priority list, a complete application package, including all
supporting documentation, shall be submitted to the authority for consideration
for financial assistance from the Clean Water State Revolving Fund.
(3) The procurement of professional services
and construction contracts shall conform to KRS Chapter 45A or 424. Allowable
engineering service fees shall be determined using procedures similar to those
used by federal agencies conducting similar loan programs.
Section 5. Criteria for Ranking and
Recommending Eligible Projects.
(1) The
cabinet shall determine the priority for funding eligible projects to be
included on the project priority list based on criteria established in
33 U.S.C.
1296; and
(a) Whether the project promotes compliance
with the Clean Water Act and KRS Chapter 224;
(b) The impact the wastewater project has on
any existing drinking water supply;
(c) Outstanding resource waters in the area
as defined by 401 KAR 5:030, Section 1;
(d) Populations to be served that presently
do not have sewer systems available.
(2) The authority and the cabinet shall take
into consideration the following factors in recommending projects for funding:
(a) Whether the cost of completing the
wastewater project is reasonable given the geographic location of the project,
current pricing trends, required professional services, and any other factors
that may have a bearing on the wastewater project.
(b) Whether the most beneficial and cost
effective project has been planned for the use of the Clean Water State
Revolving Fund.
(c) Whether the
project will result in improved public health and environmental
protection.
(d) Whether the project
will result in greater efficiency and effectiveness.
Section 6. Project Requirements.
(1) In addition to other requirements stated
in this administrative regulation, the following specific requirements shall be
met:
(a) If the related sewer collection
system is subject to excessive inflow/infiltration, assurance for necessary
repairs shall be provided.
(b) The
project is consistent with plans developed pursuant to the applicable
requirements under
33 U.S.C.
1285,
33 U.S.C.
1288,
33 U.S.C.
1313, and
33 U.S.C.
1329.
(c) The applicant has developed an adequate
user charge system and the applicant has the legal, institutional, managerial
and financial capability to construct, operate and maintain the wastewater
project.
(d) The project has
undergone appropriate reviews to ensure compliance with the state NEPA-like
review process as required by
40 C.F.R.
35.3140.
(e) The applicant shall ensure compliance
with all applicable federal laws and regulations.
(f) The applicant shall certify that it has
complied with the procurement requirements as described in the
application
(g) Construction
contracts shall be awarded to the lowest responsive responsible
bidder.
(2) The
NEPA-like review process shall include consideration of regionalization, and
shall be reviewed through the Kentucky eClearinghouse
process.
Section 7.
Provisions for Financial Assistance.
(1) Upon
completion of the credit review by the authority's staff, the application shall
be submitted to the authority's board for action, subject to the cabinet's
priority ranking and favorable recommendation of the project. The credit review
shall include an analysis of the applicant's ability to generate sufficient
revenue based on financial statements provided by the applicant to cover
operating costs and to repay the required principal, interest, fees, and
reserves required by receipt of the financial assistance. The cabinet's
recommendation shall be based on the project's compliance with the technical
and environmental requirements of the Clean Water Act.
(2) If the authority approves the
application, a conditional commitment letter shall be issued to the applicant.
This letter shall set forth the conditions and documentation required by the
authority prior to execution of an assistance agreement. Funds shall not be
provided until the assistance agreement is fully executed and any special
conditions included therein met.
(3)
(a) The
authority shall establish interest rates annually based on:
1. Prevailing market conditions;
2. Availability of funds; and
3. Demand for financial assistance.
(b) The executive director of the
authority shall recommend rates to the authority board for approval at least
annually.
(c) The rate of interest
on financial assistance shall be set forth in the conditional commitment
letter.
(d) Interest rates shall be
offered at the:
1. Standard rate;
and
2. A nonstandard rate, which
may be lower than the standard rate.
(e) Applicants shall receive the standard
rate of interest unless they qualify for the nonstandard rate.
(f) The authority may establish one (1) or
more nonstandard rates and shall use the following criteria in establishing a
nonstandard rate:
1. Whether the median
household income of the applicant's jurisdiction or service area as published
by the Kentucky State Data Center is below the state median;
2. Whether the median household income of the
service area as identified by income surveys is below the state
median;
3. Regionalization as set
out in Section 1(16) of this regulation and verified by the
authority;
4. The existence of an
order or judgment addressing environmental noncompliance; or
5. Other criteria relating to public health
or safety, environmental concerns, or financial considerations that the
authority may determine.
(g) If the nature of a project financed by
the authority's financial assistance causes interest on any authority bonds
issued to fund the project to become taxable, the authority may consider
adjustments in the interest rate to reflect the additional costs of authority
funds.
(4) Principal on
any financial assistance shall be repaid over a period not to exceed federal
requirements or the life of the facilities being financed. Repayment of
principal shall commence within one (1) year of the initiation of operation of
the project or upon another date as many be set forth in the financial
assistance agreement. Principal shall be payable semiannually, unless the
authority establishes a more frequent payment schedule based on the credit
review. The financial assistance repayment period may be equal to less than the
federally-permitted maximum at the discretion of the authority.
(5) Interest payments on the outstanding
principal amount of the financial assistance shall be paid semiannually and
shall commence within six (6) months of initial disbursement of financial
assistance proceeds, unless the interest payments are directly dependent upon
revenues generated from the project. If interest payments are directly
dependent upon revenues, interest payments shall begin within six (6) months
after the project is completed, and interest to cover the authority's cost
money during the construction period may be added to the amount of the
financial assistance.
(6) The
principal amount of financial assistance shall be equal to the amount approved
by the authority's board financial assistance. The amount may be adjusted by
the authority's executive director up to ten (10) percent of the amount stated
in the conditional commitment letter without further actions by the authority,
subject to the availability of user fees sufficient to service the debt and
authority funds to provide the increase.
(7) To ensure adequate funds for major
maintenance and replacement of the projects funded by this program, the
applicant may be required to set aside annually to a replacement reserve fund
from current revenues, after taking into account costs of operations and
maintenance and debt service requirements, an amount to be determined by the
authority. Monies may be withdrawn from the account if major maintenance or
replacement of equipment in excess of budgeted amounts is required.
(8) The financial assistance agreement
between the authority and applicant shall contain terms and conditions as the
authority deems necessary to maintain the financial integrity of the Clean
Water State Revolving Fund according to the circumstances of each
project.
Section 8.
Submission and Review of Requisition for Funds.
(1) The requisition for funds with the
required invoices attached shall be submitted to the authority and one (1) copy
of each requisition for funds with the required invoices attached shall be
submitted to the cabinet.
(2) The
cabinet shall review requisitions for funds for compliance with federal and
state requirements as defined in the conditional commitment letter and
assistance agreement before approving payment by the authority.
Section 9. Financial Assistance
Closing.
(1) If an applicant does not meet all
condition for financial assistance closing and take action to award contracts
for the project as outlined in the conditional commitment letter, the financial
assistance commitment shall expire.
(2) An extension may be granted upon request
of the applicant, if the authority staff, after consultation with the cabinet,
determines that circumstances warrant the granting of the extension. If the
extension is denied, the loan commitment shall be rescinded. If a request for a
time extension is granted, but all the conditions still cannot be met during
the extension period, the loan commitment may be rescinded.
(3) The applicant may reapply for a loan for
any wastewater project for which the loan commitment has expired or has been
rescinded under this section. An applicant that reapplies for a loan for
substantially the same project shall be given, at the authority's discretion,
the standard or hardship interest rate applicable when reapplying or the
initial rate assigned, depending on afford-ability. Except, the interest rate
shall not be lower than the initial rate assigned to the project.
Section 10. Financial Assistance
Conditions.
(1) In order to establish and
maintain or improve technical, financial, and managerial capacity, the
applicant shall:
(a) Adopt a uniform system
of accounting, consistent with nationally recognized standards and approved by
the authority, which includes an annual budget, a chart of accounts, and a
monthly management reporting;
(b)
Certify that rates and charges for wastewater service are, or will be adjusted
to be, adequate to cover costs and that same are based upon the cost of
providing such service; and
(c)
Comply with other financial, managerial, and technical conditions as
established by the authority's board.
(2) If an applicant is found by a
administrative or court order to have violations which were cited by the
cabinet or other regulatory agency, the applicant shall be subject to a
financial review by the authority, and may be subject to a management
assessment or other review by the authority and shall comply with the
recommendations contained in the review or assessment.
Section 11. Authority to Administer the
Program. The authority staff shall monitor the assistance agreements and
require that financial reports be made available to the authority by the
governmental agency at intervals as shall be deemed necessary by the authority
based on financial performance or the compilation of a program report. The
authority staff shall monitor the cash flows of the wastewater project, and
perform all actions that shall be required to assure that the agreements
continuously meet the program standards established by this administrative
regulation.
Section 12.
Administrative Fees. At the beginning of each state fiscal year, the authority
shall set an administrative fee to be charged for all financial assistance
approved during that year. The fee shall apply to the unpaid balance of the
financial assistance and shall be used to defray the authority's expenses of
servicing the financial assistance and necessary operating expenses of the
program.
Section 13. Incorporation
by Reference.
(1) The following material is
incorporated by reference:
(a) "Fund A Loan
Form", 2006; and
(b) "Request for
Payment", 2006.
(2) This
material may be inspected, copied, or obtained, subject to applicable copyright
law, at Kentucky Infrastructure Authority, 1024 Capital Center Drive, Suite
340, Frankfort, Kentucky 40601, Monday through Friday, 8 a.m. to 4:30 p.m. This
material may also be obtained on the Kentucky Infrastructure Authority Internet
Web site at
http://kia.ky.gov.
STATUTORY AUTHORITY:
KRS
224A.070(1),
224A.113,
33 U.S.C.
1383