Current through Register Vol. 63, No. 3, March 1, 2024
(1) Loan types. A CWSRF loan to a public
agency borrower must be one of the following:
(a) A loan secured by a general obligation
bond, as defined in ORS
287A.001(10).
(b) A loan secured by the public agency
borrower's pledge of its full faith and credit and taxing power, as described
in ORS 287A.315.
(c) A loan agreement, bond or other
unconditional obligation that meets the requirements specified in section (2)
of this rule.
(d) An alternative
loan that meets the requirements specified in section (3) of this
rule.
(2) A CWSRF loan
to a public agency borrower that is a revenue secured loan must:
(a) Be represented by a properly executed
loan agreement, bonds or other unconditional obligations to pay from specified
revenues that are pledged by the public agency borrower to DEQ. The obligation
to pay must include a pledge of security DEQ accepts.
(b) Include a rate provision that requires
the public agency borrower to impose and collect revenues sufficient to pay:
(A) All expenses of operating, maintaining
and replacing a project;
(B) All
debt service;
(C) All other
financial obligations including, but not limited to, contributions to reserve
accounts imposed in connection with prior lien obligations; and
(D) An amount equal to the loan's coverage
requirements. This requirement is the product of the coverage factor times the
debt service due in that year on the CWSRF loan. The coverage factor used must
correspond to the coverage factor and reserve percentage the public agency
borrower selects from subsection (d) of this section of the rule.
(c) Include a debt service reserve
provision requiring the public agency borrower to maintain a pledged reserve
dedicated to the CWSRF loan payment and that meets the following requirements:
(A) The debt service reserve must be
maintained in an amount at least equal to the product of the reserve percentage
listed in subsection (d) of this section of the rule times one half the average
annual debt service during the repayment period based on the repayment schedule
or revised repayment schedule in the loan agreement. The reserve percentage
selected from subsection (d) of this section of the rule must correspond to the
coverage factor selected for the CWSRF loan.
(B) A loan reserve may be funded with the
public agency borrower's cash, a letter of credit, repayment guaranty or other
third party commitment to advance funds that is satisfactory to DEQ. If DEQ
determines reserve funding imposes an undue hardship on the public agency
borrower, DEQ may allow reserves to be funded with CWSRF loan
proceeds.
(d) Comply
with the one of the following coverage factors (net income to debt service) and
reserve percentages (percentage of one-half the average annual debt service):
(A) 1.05:1-100 percent.
(B) 1.15:1-75 percent.
(C) 1.25:1-50 percent.
(D) 1.35:1-25 percent.
(e) Include a requirement for the public
agency borrower to conduct a periodic rate review and rate adjustment, if
necessary, to ensure estimated revenues in subsequent years are
sufficient.
(f) Include a
requirement that, if revenues fail to achieve the required rate level, the
public agency borrower must promptly adjust rates and charges to assure future
compliance with the rate requirements. DEQ may determine that not adjusting
rates does not constitute a default if the public agency borrower transfers
unencumbered resources in an amount equal to the revenue deficiency to the
utility system that generates the revenues.
(g) Include a requirement that if the reserve
account is depleted for any reason, the borrower must take prompt action to
restore the reserve to the required minimum amount.
(h) Include a requirement restricting
additional debt appropriate to the public agency borrower's financial
condition.
(i) Prohibit the public
agency borrower from selling, transferring or encumbering any financial or
fixed asset of the utility system that produces the pledged revenues if the
public agency borrower is in violation of a CWSRF loan requirement, or if such
sale, transfer or encumbrance may cause a violation of a CWSRF loan
requirement.
(3)
Alternative loans. DEQ may authorize an alternative loan to a public agency
borrower for a reasonable alternative financing method if the public agency
borrower demonstrates to DEQ's satisfaction that:
(a) Borrowing money from the CWSRF through
general obligation bonds, revenue bonds or a revenue-secured loan, as described
in subsection (a), (b), (c), or (d) of section (1) of this rule, is unduly
burdensome or costly to the public agency borrower; and
(b) The alternative loan has a credit quality
substantially equal to, or better than, the revenue secured loan credit quality
to the public agency borrower. DEQ may consult with a financial advisor and may
charge the public agency borrower reasonable consultation costs to determine if
an alternative loan meets the credit quality requirement.
(4) Interest rates for public agency
borrowers.
(a) Effective date. The interest
rates as specified in this section are effective for all loan agreements
executed on or after January 1, 2013.
(b) Base rate. DEQ will determine the base
rate used in computing the interest rates on all direct loans for a quarter
based on the weekly average of state and local government bond interest rates
for the preceding quarter. This base rate will be the "state and local bonds"
entry reported in "Selected Interest Rates, H.15" posted by the Federal Reserve
from the "Bond Buyer Index" for general obligation bonds (20 years to maturity,
mixed quality).
(c) Planning loans.
The interest rate for a planning loan will be equal to 25 percent of the base
rate.
(d) Local community loans.
The interest rate for a local community loan will be equal to 50 percent of the
base rate.
(e) Federal loans. DEQ
will determine the interest rate for federal loans. DEQ will not set a rate
that exceeds the highest rate described in Table 2 of this rule.
(f) All other direct loans. Except as
provided in OAR 340-054-0065(10), DEQ will provide the following interest rates
for all other CWSRF loans:
(A) For loans with
a maximum repayment period of up to 20 years, DEQ will provide the following
interest rates as detailed in Table 1 of this rule.
(B) (Effective January 1, 2016) For loans
with a maximum repayment period of up to 30 years, DEQ will provide the
following interest rates as detailed in Table 2 of this rule.
(C) DEQ will set interest rate premiums as
described in Tables 1 and 2 in this rule so as to safeguard the fund's
perpetuity and DEQ will reevaluate them from time to time.
(g) Sponsorship option. When a sponsorship
option is implemented within the scope of a construction loan, DEQ:
(A) Will calculate the debt service on the
wastewater facility project based on subsection (f) of this section of the
rule;
(B) Will calculate the debt
service on a combined sponsorship loan by reducing the interest rate so the
debt service on the sponsorship loan equals the debt service as calculated in
paragraph (g)(A) of this section of the rule only upon completion of both the
sponsorship and its associated point source project; and
(C) May not reduce the resulting interest
rate below one percent.
(h) Bond proceeds for direct loans. DEQ may
use bond proceeds that are matching funds for federal capitalization grants to
fund direct loans at the interest rates listed in this section. Any change in
the source of repayment for matching bonds will not affect this subsection's
requirements.
(5)
Interest accrual and payment period for public agency borrowers. Interest
begins accruing when DEQ makes the first CWSRF loan disbursement to a public
agency borrower. A public agency borrower must include all outstanding accrued
interest with each loan repayment.
(6) Annual loan fee for public agency
borrowers.
(a) Except as provided in
subsection (b) of this section of the rule, a public agency borrower must pay
DEQ an annual loan fee of 0.5 percent on the unpaid loan balance specified in
the payment schedule in its loan agreement. This annual loan fee is in addition
to any other payments a public agency borrower is required to make under its
loan agreement.
(b) DEQ will not
charge a public agency borrower any annual loan fee for a planning
loan.
(7) Commencement
of loan repayment for public agency borrowers. A public agency borrower must
begin its loan principal and interest repayments within one year of the date
the facility is operationally complete and ready for the purpose for which it
was planned, designed, and built or DEQ determines that the project is
completed.
(8) Loan term for public
agency borrowers.
(a) A public agency borrower
must fully repay a loan under a repayment schedule DEQ determines. DEQ will
consider the useful life of the assets financed when determining the repayment
schedule. The repayment term for:
(A) A
planning loan may not exceed five years;
(B) A local community loan may not exceed ten
years;
(C) All other loans may not
exceed 20 years after project completion; and
(D) Effective January 1, 2016, loan terms may
not exceed 30 years after project completion.
(b) DEQ will allow prepayments without
penalty on all CWSRF loans except as section (11) of this rule specifies.
Public agency borrowers must provide a written prepayment notification at least
30 days before the estimated pay off date.
(c) A loan must be fully amortized by the
maturity date of the loan.
(9) Minor variations in loan terms for public
agency borrowers. DEQ may authorize minor variations in financial terms of
loans described in this rule to facilitate administration and repayment of a
loan.
(10) Restructure and
refinance of CWSRF loans for public agency borrowers.
(a) DEQ may consider a one-time loan
restructure, such as combining two or more existing CWSRF loans, if such
restructure safeguards the CWSRF's perpetuity. DEQ has the discretion as to
whether or not to offer a restructure in any individual case. DEQ also has the
discretion to set all terms of any restructure.
(A) The existing CWSRF loans must have at
least 10 years term remaining except where a Planning loan is combined with a
Construction loan.
(B) A
Sponsorship loan may not be combined with any other loan except its sponsoring
point source project and only after the construction period for the nonpoint
source control project has closed.
(b) DEQ may consider a one-time refinance of
an existing CWSRF loan if such refinance safeguards the CWSRF's perpetuity and
fund utilization rate. DEQ has the discretion as to whether or not to offer
refinancing in any individual case. DEQ also has the discretion to set all
terms of any refinance.
(A) The existing CWSRF
loan must have at least 10 years term remaining.
(B) Any extension of term must not exceed the
project's useful life.
(C) The
refinance may not reduce the interest rate below one percent.
(D) A refinance may only be for rate, term,
or rate and term and may not include any funding disbursed to the public agency
borrower.
(c) DEQ may
not charge a fee for a restructure or refinance.
(11) Leveraged loans for public agency
borrowers.
(a) DEQ may fund loans with bond
proceeds through a leveraged loan program under the following terms and
conditions:
(A) Interest rates will be less
than the interest rate paid by the state on bonds sold to fund the leveraged
loans. Rates will be fixed at 65 percent of the base rate.
(B) Loan fees will be calculated in
accordance with section (6) of this rule.
(C) Notwithstanding other provisions of this
rule, DEQ may make changes to the terms and conditions of a leveraged CWSRF
loan to make it marketable. To the maximum extent practicable, the terms and
conditions will be the same as for direct loans.
(b) Bond issuance and related transaction
costs will be paid out of bond proceeds to the extent permitted by
law.
(12) Principal
forgiveness for public agency borrowers. DEQ may provide additional
subsidization to public agency borrowers in the form of principal forgiveness
to the maximum extent the federal capitalization grant allows and as the
criteria established in this section require. A loan with principal forgiveness
is subject to standard interest rates, fees, and loan terms as defined in this
rule. Whenever DEQ receives a federal capitalization grant in addition to the
annual base capitalization grant, DEQ may provide additional subsidization to
eligible borrowers in the form of principal forgiveness to the maximum extent
that the additional capitalization grant allows, and subject to its terms and
the criteria established in this section.
(a)
Eligibility. Except as specified in subsection (b) of this section of the rule,
the following public agency borrowers are eligible for principal forgiveness:
(A) Public agency borrowers that are an
eligible recipient and meet affordability criteria as specified in subsection
(c) of this section of the rule;
(B) Public agency borrowers that are an
eligible recipient with a project that DEQ determines implements a process,
material, technique, or technology to address water-efficiency goals,
energy-efficiency goals, to mitigate stormwater runoff, or to encourage
sustainable project planning, design, and construction; or
(C) Public agency borrowers that are an
eligible recipient and that do not meet the requirements of paragraph (a)(A) or
(a)(B) in this section of the rule but have individual ratepayers who will
experience financial hardship from a rate increase that financing a project
causes. Applicants qualifying under this section must have an established
ratepayer hardship assistance program. DEQ will review the applicant's
ratepayer hardship assistance program for duration and effectiveness.
(b) Ineligible loans. The
following types of loans are not eligible for principal forgiveness:
(A) Loans for projects that are not ready to
proceed;
(B) Loans that have loan
agreements that include incentives such as sponsorship option loans;
(C) Interim loans
(c) Affordability Criteria. Affordability
criteria shall be based on income and unemployment data, population trends, and
other data determined relevant by the State, including whether the project or
activity is to be carried out in an economically distressed area.
(d) Principal forgiveness allocation amount.
DEQ may allocate or adjust the allocation of additional subsidization every
federal fiscal year as a percentage of the annual federal capitalization grant,
not to exceed the maximum the federal allocation regulation permits. DEQ will
determine the maximum allowable annual percentage allocation of subsidization
from time to time to safeguard the loan fund's perpetuity.
(e) Alternate subsidy. DEQ may offer an
alternate subsidy in lieu of principal forgiveness, such as a reduced interest
rate, to eligible recipients that meet all other principal forgiveness
criteria. DEQ will include any alternate subsidy awarded in the total
additional subsidization allocated in any fiscal year and may not exceed the
individual award amount in subsection (f) of this rule.
(f) Award Amount.
(A) Eligible public agency borrowers that are
an eligible recipient may receive additional subsidization for their loan in an
amount not to exceed the maximum amount determined by DEQ.
(B) For public agency borrowers that are an
eligible recipient and that qualify for principal forgiveness under paragraph
12(a)(B), DEQ will limit the additional subsidization to 50 percent of the
project components qualifying under paragraph 12(a)(B).
(C) Public agency borrowers that are an
eligible recipient may only receive one additional subsidization award per
project.
(g) Award
Reserves.
(A) DEQ will reserve seventy percent
of the additional subsidization allocation for public agency borrowers that are
an eligible recipient meeting the affordability criteria in subsection (a)(A)
of this section of the rule.
(B)
DEQ will reserve thirty percent of the additional subsidization allocation for
public agency borrowers that are an eligible recipient with projects eligible
under paragraph 12(a)(B) of this section of the rule.
(C) At the close of the federal fiscal year,
DEQ may reallocate any unawarded allocation of additional subsidization in one
reserve to the other reserve. If after such reallocation, unawarded allocation
still remains, DEQ may reallocate unawarded additional subsidization to those
public agency borrowers that are an eligible recipient and that are eligible
under paragraph (a)(C) of this section of the rule.
(h) Loan Term. Public agency borrowers that
are an eligible recipient and are eligible for principal forgiveness under the
affordability criteria as specified in paragraph (a)(A) of this section of the
rule must take the longest term available for their loan. All other applicants
may choose any term permitted in section (8) of this rule. A public agency
borrower may prepay its loan without penalty.
To view attachments referenced in rule text,
click here to view
rule.
Statutory/Other Authority: ORS
468.020 & 468.440
Statutes/Other Implemented: ORS
468.423 -
468.440