SPEAKER 1: Hi and welcome to the Financial Assistance Program Overview webinar.
This webinar will provide an overview
of the Stay Revolving Fund Programs,
the State Water Implementation Fund for Texas.
The Texas Water Development Fund, as well as,
the Infrastructure Investment and Jobs Act,
and the Economically Distressed Areas program.
In addition, I will be going over some
helpful tips that we have compiled,
and I'll share agency contacts that can help you answer
your questions or talk about your specific projects.
But before I begin, I would like to give you a bit
of background information about our agency.
Starting off with their mission.
The mission of the Texas Water Development Board is to lead the state's
efforts in ensuring a secure water future for Texas and its citizens.
The 1957 Legislature created the agency that would
become the Texas Water Development Board.
This was a response to a severe drought period in the 1950s,
commonly referred to as a drought of record.
Our agency provides water planning, data collection and dissemination,
financial assistance and technical assistance to the citizens of Texas.
We begin with the Drinking Water State Revolving Fund.
In 1996, Congress passed federal amendments to the Safe Drinking Water
Act that established the Drinking Water State Revolving Fund program.
The Texas word of on board is authorized by state
law to administer this program for Texas.
The Drinking Water State Revolving Fund,
assists communities by providing below market rate
financing and various levels of principal forgiveness
for disadvantaged communities,
disadvantaged small rural communities, very small systems,
green projects, emergency preparedness and urgent need.
Planning, acquisition, design and construction
phases are all eligible under the program,
and it offers a repayment term of up to 30 years.
Who can apply?
Existing community Public Water Systems,
including political subdivisions,
nonprofit water supply corporations and privately
owned community water systems,
nonprofit not community public water systems, and state agencies.
Eligible projects.
We've included some example of those which include
correct water systems deficiencies,
upgrade or replace water systems, consolidated systems,
purchase capacity,
purchase other systems, implement green projects,
implement source water protection projects
and refinance under limited scenarios.
Moving on to the Clean Water State Revolving Fund.
In 1987, Congress passed federal amendments to the Clean Water Act
that established the Clean Water State Revolving Fund program.
Like the drinking water, the Texas Water Development Board is
authorized by state law to administer this program for Texas.
It provides low-cost financial assistance for planning, acquisition,
design and construction of wastewater,
reuse and stormwater infrastructure.
It also offers repayment terms up to 30 years,
and has subsidy allotments set aside
in form of partial principal forgiveness
available for disadvantaged communities,
disadvantaged small rural communities, green projects,
emergency preparedness and urgent need.
Who can apply?
Political subdivisions, including water supply corporations
that are Designated Management Agencies.
Federally authorized tribal organizations and private entities.
And the private entities are for non-point
source or estuary projects only.
On the right hand side, we have examples of eligible projects.
Wastewater treatment facilities,
wastewater recycling and reuse facilities,
including purple pipe distribution systems,
non-potable reuse, wastewater collection systems, meter replacements,
stormwater control, conservation easements,
non-point source pollution control projects such as correction
of failing on site systems and wetlands restorations,
estuary management projects identified in either the Galveston
Bay or Coastal Bend Estuary Management Plans.
Let's discuss some of the SRF revolving fund options
that we've mentioned in the previous slide.
All of these options are within the Drinking Water State
Revolving Fund and the Clean Water State Revolving Fund.
They offer the potential of principal forgiveness,
0% interest or a combination of both,
depending on your particular circumstances.
To be considered a disadvantaged community,
the community must meet the clean water or drinking
water programs affordability criteria,
which is based on income, unemployment rates and population trends.
For a disadvantaged communities, small or rural only.
In order to meet small, your community must
meet the 10,000 or less in population.
There are three factors to meet the rule definition or specifics.
Those are located in the 2022 intended use plan.
For very small systems, the population threshold is a thousand or less,
and cannot exceed the 150% of the state's
annual median household income.
And as part of the very small systems,
the Securing Safe Initiative Water Initiative is funding
set aside to address communities struggling
with contaminants in their water supply.
Like radionuclide, arsenic and lead.
Entities may also receive subsidized green principal forgiveness.
Either project has elements that are considered green,
and the cost of the green portion of their project
is at least 30% of the total project costs.
Principal forgiveness of up to 50% of the total eligible green component
costs funded either through drinking water or clean water.
State Revolving Fund programs up to a maximum
of a million dollars in either program.
I'm sure all of you have heard about our winter storm
that we had last year and all the power outages.
Well, the emergency preparedness category was a result of the storm.
There is a $75,000 grant to prepare an emergency preparedness plan.
And lastly, urgent need projects.
Those must address situations that require immediate attention
in order to protect public health and safety.
There are various situations that meet urgent need,
and those are also listed in the intended use plan.
As mentioned, all this information can
be found in the intended use plan.
The IUP outlines program goals, funding allocations,
and requirements for each year.
Please take some time to review the plan so you were able
to see the specific details under each category.
To elaborate on the disadvantaged community eligibility, as I mentioned,
a disadvantaged community is a community that meets
the SRF affordability criteria that is based on income,
unemployment rates, and population trends.
The entity's annual median household income of the entire portion of
the service area must be less than or equal to 75% of the state's AMHI,
as listed in the most recent available
American Survey five year estimates.
In communities, disadvantaged community status may be
documented using either Census data or a survey.
If you use this survey, you must submit documentation
that proves the inadequate
or absent Census data that led to the need to conduct a survey.
All entities must obtain prior approval to use a survey method.
Previously completed surveys,
including surveys completed for funding from other sources,
will be rejected if they do not follow survey methods
that are listed in the latest version of the Social
Economic Survey Guidelines and approved survey may be
considered valid for five years prior to the date.
The agency receives a project information form.
For those of you that don't know your project
information form is filled out and submitted,
telling us some basic details about your project
and what funding faces you wish to do,
and how much funding you will require for the project.
Also, the community must meet the Household Cost Factor thresholds.
The Housel Cost Factor estimates a loss impact on
residential ratepayers and considers income,
unemployment rates, and populations trends.
The AMHI and the agency calculated together,
we'll give you the level of principal forgiveness you qualify for,
which can be 30%, 50% or 70%.
To give you an idea of the set aside principal forgiveness amounts,
I've included the state fiscal year 2022 allotments.
These may change for 2023 cycle.
We're still working on the 2023 draft intended use plan.
But as a reference in the IUP clean water SRF there was 28.6
million, and in the drinking water,
SRF IUP there was 30 million set aside for principal forgiveness.
These were the program changes for 2020.
Today's focus is looking forward to the 2023 funding cycle.
From 2022 to the program changes were, new interest rate methodology,
emergency preparedness for severe weather,
and the change of emergency relief in
the clean water to urgent need funding,
so to be consistent with the drinking water.
Again, these were changes for 2022.
As mentioned in the previous slide, the 2022 funding cycle,
the agency established new interest rate reduction methodology.
The interest rate is a percentage reduction from
the MMD rate adjusted for yield to maturity,
that is applicable to the entities reading,
with non rated entities using the BCA rate as follows,
for the Clean Water State Revolving Fund Program Equivalency Project,
40% reduction, non equivalency projects, 35% reduction,
for the Drinking Water State Revolving
Fund program equivalency projects,35%
reduction, non equivalency projects 30% reduction.
What does is equivalency mean?
Equivalency projects are federal requirements.
A portion of the Clean Water and Drinking
Water State Revolving Fund projects
must follow all federal requirements, commonly known as, cost cutters.
Some example of those are the Davis-Bacon Wage,
Disadvantage Business Enterprises,
National Environmental Policy Act, environmental review.
This type of financial system, as referred to broadly as, equivalency.
Non equivalency projects.
Those are projects not subject to federal cross-cutters requirements,
with the exception of federal anti-discrimination
laws also known as the super cross-cutters.
To give you an example of what interest rate reduction
for a 20 year non equivalency finance would look like.
Here's an illustrative rate we created based
on a BAA rating for non rated entities.
At the time of generating this example, the market rate was 2.79%.
We used a 20 year debt service term on a $10 million project.
When compared to the market rate of the 2.7
line under the clean water SRF non equivalency,
35% reduction on the interest rate.
You end up with a 1.69% net interest rate,
and it cost savings of more than $1.1 million.
Using Texas Water Development Board Funds,
the difference between the principal amount
assumes that most folks will have to pay
closing costs when going to market,
and in our funds, the closing costs will
be rolled into the total amount.
You can see the cost savings for the 30% reduction for the Drinking
Water State Revolving Fund with the same parameters.
You will end up with a net interest rate of 1.744%.
And a cost saving of over 900,000.
Please keep in mind that this is rate that you get from a BAA rating.
If your rating is higher, the net interest rate would probably,
be even lower and the cost savings for you will eventually be higher.
This is a chart of the State Revolving Fund annual funding cycle,
starting with a project solicitation.
We move on to the agency, the Texas Wide Amendment
Board of TCEQ scoring projects.
The agency publishes draft intended use plan.
We open up the Intended Use Plan for public review and comment.
We finalized the intended use plan and then,
the agency advice entities from the intended
use plan to apply for financing.
And then, we review applications and make funding commitments.
And finally, the bar closes on loans.
Please keep in mind that the project information
forms for 2023 are due, March 4th.
With funding capacities in the State Revolving Fund Program this year,
it's expected that we may be in the same case for 2023.
So, seeking out alternative financial resources
to fund projects should be considered.
If your project is recommended, water management
strategy project with an associated non-zero
capital cost and the state water plan,
you may want to consider the SWIFT program.
We have a separate webinar on this program available
on our website that will go into a lot of detail.
Then I have time for it today, so I'm going to quickly
do an overview of the condensed version of that.
The Texas Water Development Fund, or DFund,
can also be used as additional funding
with the State Revolving Fund program,
if you need more funds to complete the project.
So, let's start with a SWIFT program first.
As you can see from this timeline, water supply issues have
been a concern throughout history and here in Texas,
our story has been shaped many times by drought,
which brings us to the most recent multi-year drought.
And that was from 2010 to 2014.
The SWIFT program was developed as a response
to the drought to incentivize implementation
of the recommended water management strategies
that are outlined in the state water plan.
By the way, the 2022 State Water Plan was
adopted by our board earlier this summer,
and I highly recommend everyone take a look at it.
It is available on our website.
To illustrate just how intense the 2010 through 2014 drought became,
here is a map of the drought conditions in 2011,
which is the most intense one year drought for
the state of Texas, going back to 1895.
In 2013, the 83rd Texas Legislature passed House
Bill 4 and Senate joint resolution 1,
providing for the creation of the State Water Implementation Fund
and the State Water Implementation Revenue Fund for Texas.
In addition, House Bill 1025 authorized
a 2 billion supplemental appropriation
from the state's rainy day fund to the SWIFT, Proposition 6,
approved by the voters on November 5th,
2013 amended the Texas Constitution to create
a constitutionally dedicated fund.
This investment and financing program,
commonly referred to as SWIFT program,
is designed to support funding of 27 billion in
water supply projects based on a 50-year need.
The fiscal year 2020, the board has committed approximately,
$9 billion in SWIFT funding for 54 for recommended
water management strategy projects,
estimated to produce approximately 1.5
million acre feet of water supply.
And program participants are estimated to have saved over
1 billion compared to a market interest rate financing.
So, I would definitely keep this program in mind when you're
considering your water supply or conservation projects.
Who can borrow?
For 2022 funding cycle, any political subdivision
or non-profit Water Supply Corporation
with a project included in the approved 2022
water plan for their region, is eligible.
To be eligible for funding commitment, as I mentioned previously,
your projects must be recommended water management strategy
projects with an associated non-zero capital cost.
These are examples of eligible projects.
Conservation reuse, desalinization groundwater
and seawater, building new pipelines,
developing reservoirs and well fields,
purchasing water rights, numerous others.
Again, all project phases are eligible.
Planning, acquisition, design and construction.
The SWIFT does offer long term fixed rate loans at below market rate.
The maturity rates range from 30 to 30 years.
Interest rates are based on the Water Development Cost of Funds,
which reflects the agency's AAA credit rating.
This interest rate is further reduced by a subsidy
established by the board for each funding cycle.
These are the 2021 funding cycles subsidy
percentages shown as an example only.
Interest rate subsidy percentages for
the fiscal year 2022 cunding cycle will be
determined at the time of prioritization,
which will be in the spring of 2022.
I want to point out that in order to qualify for
a role or agriculture low interest obligation,
entities must do one of the following.
Propose a project that provides agriculture water conservation
or irrigation benefits or survey a population of 10,000
or less, and fall entirely outside of an urbanized area
as defined by the most recent available US Census.
Other financial options.
You start off with a Differed loan option.
And it's used to fund developmental costs
like planning and design phases.
Maturity ranges from 20 to 30 years.
Principal and interest is deferred up to eight years from the delivery
date or until the end of construction, whichever is sooner.
The deferred payment option is targeted at projects that have
long development periods in which the applicant must spend
considerable time and money before actual delivery of water,
and the accompanying revenue stream materializes.
Interest rates are based on the agency's cost of funds,
which reflect the program's AAA credit rating.
No additional interest rate subsidy is applied.
The board participation option requires specific
determinations to be made by the board,
including that the estimated cost of the facility exceeds
current financial capabilities of the area,
and the public interest will be served by
the board's participation in the project.
The agency's interest is in the excess capacity portion of
the project and limited to 80% of the total project cost.
The local sponsor repurchases the agency's ownership
interest under a repayment schedule
that allows for the structured deferral of both principal and interest.
Financing terms vary, but are generally 34 years,
funding through the board.
For less funding option, applicants may propose a multi-year closing
schedule based on a single SWIFT program funding commitment.
The multi-year commitment option provides
entities additional flexibility
to support project needs spanning up to five years.
Including first year closing and may be requested in combination
with any of the financing structures listed above.
Once committed, subsidies are locked in through
the end of the following state fiscal year only.
Updating rules for SWIFT with the Legislature passed House Bill 1905,
which amended water code for the SWIFT.
It drops the IFR survey requirements and removes
the requirements for the regional water planning groups,
to prioritize project at their level.
This resulted in changes to our prioritization, since we considered
the original prioritization in our scoring criteria.
So, these special requirements applied too for 2021 funding cycle,
as well as, for the 2022 funding cycle.
I wanted you to have an idea of what the program requirements are.
I would suggest, signing up for our email communications,
so, we'll keep you updated about a program changes.
So, you have probably, figured out how the SWIFT
program operates on an annual funding cycle.
First, we receive some preliminary information
in an abridged application
that it used to prioritize projects and perform capacity modeling.
So that, we can determine how many of the proposed
projects can feasibly be funded in any given year.
The abridged applications were due, February 1st.
That deadline has passed.
I just wanted to give you some additional information.
When we do receive the abridged application.
We then invite full applicants for the projects that
fall within the program's capacity for the year.
SWIFT uses the same application as are other
programs which asks for engineering,
financial, legal, and other information
needed to make a financial commitment.
As mentioned, the 2022 funding cycle is now open.
The abridged applications were due February 1st.
For more information, please feel free to
check our Web page for the link provided,
through the Link provided.
Our State Programs coordinator is Miss Alyssa Azari.
Please feel free to reach out to her with any questions, as well.
Moving on to our next program that is the Texas Water Development Fund.
It's our oldest program that offers a flexible year around funding.
The DFund has the flexibility to fund multiple
types of projects in a single commitment.
For example, if a city has both water and sewer line projects to fund,
it can fund both under the different.
Whereas under the State Revolving Fund, it would have to be separate
between the clean water and drinking water programs.
It has near market rates based on the Water Development Cost of Funds,
and you get the benefit of a AAA bond rating.
Please note that there are some special requirements.
Those are noted on the right hand side.
Your water supply projects must be consistent
with the current agency state water plan.
And to entities receiving assistance greater than 500,000
must adopt a water conservation and drought contingency plan,
US Iron and Steel Manufactured Goods requirements,
and review of legislative requirements
regarding water loss threshold limits.
Please call us to discuss the availability of funds before applying
for this type of assistance as we sell bonds to fund this program.
I've included this comparison, so, you'll have all the programs we
discussed and the types of projects that are eligible under them.
Do you have any questions about if your project is eligible?
Please reach out to us to discuss that.
I'd like to highlight some helpful tips that staff have compiled.
Starting off with financial audits.
Are they up-to-date?
Audits are a requirement after financial assistance
is received for the life of the project.
Cost can be captured in project budgets.
Ability to take out debt.
Analysis will be completed.
Rates and charges in place?
Will they need to be raised?
Updated water use survey and water loss audits,
water conservation and drug contingency plan, if you are applicable.
Online loan application.
Communicate or coordinate data entry.
Only one person at a time can work on the project information form,
or the abridged application, or application.
Project scope and budget.
Make sure all consultants and entity officials are
clear on your project elements and details.
Be mindful of project schedules and budgets.
With funding caps in place,
make sure you have alternate funding in mind.
Most financing comes through bonds or COs.
Recommend seeking out bond counsel and financial
advisers early if planning to apply.
Only water supply corporations and private entities receive loans.If
an entity has the ability to issue bonds,
the Texas Water Development Board buys those bonds.
We have program coordinators and seven regional teams,
managers and we'd be happy to help you with
any questions about funding and projects.
I'm also available, as well as, Miss Alyssa Azari,
who is our state programs coordinator, and Mr.
Easton McDaniel, who is our Drinking Water State Revolving Fund
Coordinator and Clean Water State Revolving Fund Coordinator.
Moving on to our next programs discussion.
The Infrastructure Investment and Job
Act and economically distressed areas
program starting off with the Infrastructure
Investment and Jobs Act.
The IIJA was signed on November 15.
As you can see, this investment focuses on several
priorities of which include water systems.
There are approximately $48.42 billion for water
infrastructure to cover a five year period.
The money will be distributed through the Drinking
Water and Clean Water State Revolving Funds,
and are separate from our regular SRF appropriations.
You will see that there are four categories
and various amounts under each category.
For the drinking water, SRF, the totals are significant.
For drinking water, we have 11.713 billion.
For Drinking Water Lead Service Line Replacement, we have 15 billion.
For a Drinking Water Emergency Contaminants, 4 billion.
For Water Infrastructure Improvements for the Nation to
address emerging emerging contaminants, 5 billion.
Please note that these totals are for all states and territories.
On the Clean Water SRF site, you see only two categories.
Like the Drinking Water, the Clean Water State Revolving Fund has 11.713
billion and 1 billion for Emergency Contaminants.
Once again, these are totals for all states and territories.
Here we have the Texas allotment.
This chart illustrates the categories and the amount.
For drinking water, we have over 140 million.
For Drinking Water Lead Service Line Replacement,
we have over 221 million.
For Drinking Water Emergency Contaminants, over 59 million.
For clean water, we have over 82 million.
And for Clean Water Emergency Contaminants, we have over 4.3 million.
The total amount for Texas is over 507 million.
The drinking water and clean water based program will require
49% of the funds to be provided as additional subsidy.
For Drinking Water Service Line Replacement,
that will require 49% of the funds to be provided as additional subsidy.
And for both the Clean Water and Drinking
Water Emergency Contaminant Program,
that will require 100% of the funds to
be provided as additional subsidies.
Please note, that at this time we are waiting for rules
and guidance from EPA because those have not been completed.
Moving on to the Economically Distressed Areas Program.
Starting off with some history on EDA.
The program was created in 1989.
It was and still is specific to financing water and wastewater
projects that addressed immediate health and safety concerns.
Eligibility was based on a county's proximity to
an international border or unemployment and income.
In 2005 there was some changes and those requirements were removed.
Moving on to economically distressed area definition,
which is your water supply or sewer service are inadequate
to meet minimal needs of residential users.
Financial resources are inadequate to provide water supply
or sewer service that will satisfy those needs.
And an established residential subdivision
was located on June 1st, 2005.
Please note, that the annual median household income for
the service area cannot be greater than 75% of the state, AMHI.
Who can apply?
Applicants consist of political subdivisions
that are economically distressed,
such as cities, counties, nonprofit water
supply corporations, and water districts.
There is a caveat to apply.
The city or county where the project is located must
adopt and enforce the model subdivision rules.
These are the four faces of eligible activities planning,
land acquisition, design, and construction.
You may include all four phases or only those
phases that apply to your specific project.
The eligible projects vary, as well.
Those include first time water and wastewater service,
water supply and or treatment system improvements,
water collection system or treatment works, improvements.
These are some examples of first time water and wastewater.
I do want to clarify that this is not an all inclusive list.
Residential connections to a new public water supply
system constructed with financial assistance,
individual on-site or cluster treatment system such as septic tanks.
Yard land service connections, indoor plumbing facilities and fixtures,
residential connections to a sanitary sewer system
constructed with financial assistance,
and necessary connection and permit fees.
Some examples of water supply and or treatment system improvements.
Treatment plant improvements, water transmission
and distribution lines, wells, plump stations,
water system, asset management planning, and regionalization projects.
Again, this is not an all inclusive list.
Next, wastewater collection system and all treatment works improvements,
treatment plant improvements,
wastewater collection and transmission line,
lift station septic tank decommissioning,
wastewater system asset management planning,
and regionalization projects.
Moving on to financing.
is a EDAP long grant program for the portion that is not grant,
the cause will be provided through a loan.
As indicated, the maximum grant percentage is capped at 70%.
If you are seeking more than 50% grant,
you will need a public health nuisance determination.
This must come from the Texas Department of State Health Services.
We provide loans with low interest rates
like our state revolving fund programs.
EDAP has a prioritization project process,
with priority given to projects that address
public health and safety and those that
are under enforcement actions by the Texas
Commission on Environmental Quality,
and the US Environmental Protection Agency.
How much funding is available?
Well, available funding is based on legislative
appropriations for debt service.
The Texas Water Development Board expects
to raise up to approximately 100
million per year for each of the next two years as aggregate bonds,
which is for the next by annual, and up to an estimated 35 million in
total grant awards will be available per year for the next two years.
And those are subject to appropriations.
EDAP also has some special requirements,
which include the Model Subdivision Rules, US Iron and Steel,
State Environmental Review, If over 500,000,
Water Conservation and Drought Contingency Plan,
Water Loss Threshold Limits Review,
Water Supply Projects Consistent with a State Water Plan,
Certificate of Convenience and Necessity,
On site Service Facility Site Maps,
TCQ On Site Sewer Facility Authorized Agent.
As mentioned in one of the previous slides,
this is the caveat to access EDAP funds.
These set of rules must be adopted and enforced by the applicant,
and they must be done prior to submitting your abridged application.
Each too regarding the rules are available online.
You will find laws, rules, sample,
forms and the MSR training on the link shown here.
This is an illustrative map of the EDAP project funding through 2021.
As noted here, complete information may be
found in the 2021 EDAP annual report,
which can be found on a web page.
The link is also provided.
So, when can you access the funds?
Well, the project solicitation period starts early spring 2022,
with the acceptance of abridged applications by spring of 2022.
Once those are received, ranked and rated.
We'll start early summer of 2022.
If you're invited to apply,
your full applications are due by summer or early fall of 2022.
And funding commitments will begin the winter of 2022.
You've heard me mention the EDAP intended use
plan a few times throughout the presentation,
similar to the State Revolving Fund Programs,
the EDAP program will now have an Intended Use Plan.
The Intended Use Plan is a document that provides
details on specific loans and grants eligibility,
available funding capacity, and prioritization criteria.
The public comment period was through January 31st of 2022.
Please feel free to review that.
For more information, we've also provided a web page for those
public comments and to review the Intended Use Plan.
I previously provided you this chart,
which include additional funding program
along with the eligible activity.
I just wanted to add this just as a reminder
of our different funding programs,
and the activities that you can you can use under
or you can access under each potential program.
In closing, I wanted to revisit our map,
which includes the contact information for our
regional water project development teams.
And it also includes my information, as well as, Alyssa Azari.
And Alyssa Azari is our statewide programs coordinator.
Thank you for listening to this webinar.
Feel free to reach out to us with any questions
or to discuss your individual projects.
Have a good day!