DEPARTMENT OF ECOLOGY

(1) Where possible, the Washington state department of ecology combines the management of the centennial program with other funding programs, such as the water pollution control revolving fund, the stormwater financial assistance program, and the Clean Water Act section 319 nonpoint source program.

(2) The integrated funding process includes a combined funding cycle, program guidelines, funding offer and applicant list, and statewide funding workshops.

For the purposes of this chapter:

(1) Activities see water pollution control activities.

(2) Applicant means a public body that has applied for funding.

(3) Best management practices (BMP) means physical, structural, and/or managerial practices approved by the department that prevent or reduce pollutant discharges.

(4) Cash match means ((moneys)) funds used to match the state share of a grant.

(5) Ceiling amount means the highest level of financial assistance the department can provide to a recipient for an individual project.

(6) Centennial means the centennial clean water program.

(7) Commercial, industrial, and institutional flows mean the portion of the total flows to a facility that originate from large commercial establishments, industrial facilities, or institutional sources such as state schools, hospitals, and prisons.

(8) Competitive funding means ((moneys)) funds available for projects through a statewide evaluation process.

(9) Completion date or expiration date means the date indicated in the funding agreement in which all milestones and objectives associated with the goals of the project are met.

(10) Concentrated animal feeding operation (CAFO) means:

(a) An animal livestock feeding operation that discharges animal waste to the waters of Washington state more frequently than the twenty-five-year, twenty-four-hour storm event; or

(b) An animal livestock feeding operation that is under a department administrative order, notice of violation, or a National Pollution Discharge Elimination System permit; or

(c) An animal livestock feeding operation that will be required to have a National Pollution Discharge Elimination System permit coverage in the near future; or

(d) An animal livestock feeding operation designated by the Environmental Protection Agency as polluting the waters of Washington state.

(11) Conservation easement means a recorded legal agreement between a landowner and a public body to allow or restrict certain activities and uses that may take place on his or her property.

(12) Conservation plan means a document that outlines how a project site will be managed using best management practices to avoid potential negative environmental impacts.

(13) Construction means to erect, install, expand, or improve water pollution control facilities or activities. Construction includes construction phase engineering and preparation of the operation and maintenance manual.

(14) Cost-effective alternative means the option selected in an approved ((facilities plan)) planning document that meets the requirements of the project, recognizes environmental and other nonmonetary impacts, and offers the lowest cost over the life of the project (i.e., ((lowest present worth or equivalent annual value)) life cycle cost).

(15) Department means the Washington state department of ecology.

(16) Design means the preparation of the plans and specifications used for construction of water pollution control facilities or activities.

(17) Director means the director of the Washington state department of ecology or his or her authorized designee.

(18) Draft offer and applicant list means a catalog of all applications for financial assistance considered and those proposed for funding, based on estimates of state and federal budgets.

(19) Easement means a recorded legal agreement between a public body and a landowner that allows the public body to have access to the landowner's property at any time to inspect, maintain, or repair loan-or-grant-funded activities or facilities; sewer use ordinances and other legal documents may be sufficient.

(20) Effective date means the date the loan or grant agreement is signed by the department's water quality program manager.

(21) Eligible cost means the portion of a facilities or activities project that can be funded based on program eligibility as defined in WAC 173-98-100 and in the most recently updated edition of the Water Quality Financial Assistance Guidelines (publication #10-10-049).

(22) Enforcement order means an administrative requirement issued by the department under the authority of RCW 90.48.120 that directs a public body to complete a specified course of action within an explicit period to achieve compliance with the provisions of chapter 90.48 RCW.

(23) ((Engineering report means a document that includes an evaluation of engineering and other alternatives that meet the requirements in chapter 173-240 WAC, Submission of plans and reports for construction of wastewater facilities.

(24))) Environmental degradation means the reduced capacity of the environment to meet social and ecological objectives and needs.

(((25))) (24) Environmental emergency means a problem that a public body and the department agree poses a serious, immediate threat to the environment or to the health or safety of a community and requires immediate corrective action.

(((26))) (25) Equivalent residential unit (ERU) means a unit of measurement used to express the average sewage loading discharged from a typical full-time single-family dwelling unit.

(((27))) (26) Estimated construction cost means the expected amount for labor, materials, equipment, and other related work necessary to construct the proposed project.

(((28))) (27) Existing need means water pollution control facility's capacity reserved for all users, at the time of application.

(((29))) (28) Existing residential need means that portion of a water pollution control facility's capacity reserved for residential structures that:

(a) Exists within the project service area at the time of application;

(b) Is connected to the facility or is scheduled to be connected to the facility in an approved ((engineering report)) planning document; and

(c) Will bear the financial burden of paying for the new facility.

(((30))) (29) Extended grant payments means cash disbursements for eligible project costs made with equal annual payments as established in RCW 70.146.075.

(((31))) (30) Facilities see water pollution control facility.

(33))) (31) Final offer and applicant list means a catalog of all applications for financial assistance considered and those offered funding, based on adopted state and federal budgets.

(((34))) (32) Force account means loan or grant project work performed using labor, materials, or equipment of a public body.

(((35))) (33) Funding cycle means the events related to the competitive process used to allocate ((moneys)) funds from the water pollution control revolving fund, centennial clean water program, the stormwater financial assistance program, and the Clean Water Act section 319 nonpoint source program for a state fiscal year.

(((36))) (34) Grant agreement means a contractual arrangement between a public body and the department.

(((37))) (35) Growth means the portion of the flows to a facility reserved for future residential, commercial, industrial, or institutional flows.

(((38))) (36) Indirect cost means costs that benefit more than one activity of the recipient and not directly assigned to a particular project objective.

(((39))) (37) In-kind contributions means the value of noncash contributions provided for a project.

(((40))) (38) Interlocal agreement means a written arrangement between a grant recipient and another public body to provide eligible grant match contributions to a project. Interlocal agreements are subject to chapter 39.34 RCW, Interlocal Cooperation Act.

(((41))) (39) Interlocal costs means the value of goods or services provided to a project by a public body under the terms of an interlocal agreement. Interlocal contributions satisfy cash matching requirements.

(((42))) (40) Infiltration and inflow means water, other than wastewater, that enters a sewer system.

(((43))) (41) Infiltration and inflow correction means the cost-effective alternative or alternatives identified in an approved ((facilities plan or engineering report)) planning document for eliminating or reducing the infiltration and inflow to an existing sewer system.

(((44))) (42) Landowner agreement means a written arrangement between a public body and a landowner that allows the public body to have access to the property to inspect project-related components.

(((45))) (43) Loan agreement means a contractual arrangement between a public body and the department that involves a disbursement of ((moneys)) funds that must be repaid.

(((46))) (44) Loan default means failure to make a loan repayment to the department within sixty days after the payment was due.

(((47))) (45) Match means the recipient share of eligible project costs.

(((48))) (46) Nonpoint source water pollution means pollution that enters any waters from widespread water-based or land-use activities. Nonpoint source water pollution includes, but is not limited to, atmospheric deposition; surface water runoff from agricultural lands, urban areas, and forest lands; subsurface or underground sources; and discharges from boats or other marine vessels.

(((49))) (47) Plans and specifications means the construction contract documents and supporting engineering documents prepared in sufficient detail to allow contractors to bid on and construct water pollution control facilities. "Plans and specifications" and "design" may be used interchangeably.

(((50))) (48) Preliminary project priority list means a catalog of all applications for financial assistance considered for funding and submitted to the Washington state legislature for its consideration during budget development.

(((51))) (49) Project means a water quality improvement effort funded with a grant or loan.

(((52))) (50) Project completion or expiration means the date indicated in the funding agreement in which all milestones and objectives associated with the goals are met.

(((53))) (51) Public body means a state of Washington county, city or town, conservation district, other political subdivision, municipal corporation, quasi-municipal corporation, those Indian tribes recognized by the federal government, or institutions of higher education when the proposed project is not part of the school's statutory responsibility.

(((54))) (52) Public health emergency means a situation declared by the Washington state department of health in which illness or exposure known to cause illness is occurring or is imminent.

(((55))) (53) Recipient means a public body that has an effective loan or grant agreement with the department.

(((56))) (54) Residential means the portion of the total flows to a facility that originates from single family houses, apartments, mobile home parks, small commercial facilities, and community facilities such as local K-12 public schools, libraries, and fire stations.

(((57))) (55) Revolving fund means Washington state's water pollution control revolving fund.

(((58))) (56) Riparian buffer or zone means a swath of vegetation along a channel bank that provides protection from the erosive forces of water along the channel margins and external nonpoint sources of pollution.

(((59))) (57) Scope of work means a detailed description of project tasks, milestones, and measurable objectives.

(((60))) (58) Service area population means the number of people served in the area of the project.

(((61))) (59) Severe public health hazard means a situation declared by the Washington state department of health in which the potential for illness exists, but illness is not occurring or imminent.

(((62))) (60) Sewer means the pipe and related pump stations located on public property or on public rights of way and easements that convey wastewater from buildings.

(((63))) (61) Side sewer means a sanitary sewer service extension from the point five feet outside the building foundation to the publicly owned collection sewer.

(((64))) (62) State environmental review process (SERP) means the National Environmental Policy Act (NEPA)-like environmental review process adopted to comply with the requirements of the Environmental Protection Agency's Code of Regulations (40 C.F.R. § 35.3140). SERP combines the State Environmental Policy Act (SEPA) review with additional elements to comply with federal requirements.

(((65))) (63) Total eligible project cost means the sum of all expenses associated with a water quality project that are eligible for funding.

(((66))) (64) Total project cost means the sum of all expenses associated with a water quality project.

(((67))) (65) Water pollution means contamination or other alteration of the physical, chemical, or biological properties of any waters of the state, including change in temperature, taste, color, turbidity, or odor; or any discharge of a liquid, gas, solid, radioactive substance, or other substance into any waters of the state that creates a nuisance or renders the waters harmful, detrimental, or injurious to the public, to beneficial uses, or to livestock, wild animals, birds, fish, or other aquatic life.

(((68))) (66) Water pollution control activities or activities means actions taken by a public body for the following purposes:

(a) To prevent or mitigate pollution of underground water;

(b) To control nonpoint sources of water pollution;

(c) To restore the water quality of freshwater lakes; and

(d) To maintain or improve water quality through the use of water pollution control facilities or other means.

(((69))) (67) Water pollution control facility or facilities means any facilities or systems for the control, collection, storage, treatment, disposal, or recycling of wastewater((,)) including, but not limited to, sanitary sewage, stormwater, residential, commercial, industrial, and agricultural wastes. Facilities include all necessary equipment, utilities, structures, real property, and interests in and improvements on real property.

(((70))) (68) Water resource inventory area (WRIA) means one of the watersheds in the state of Washington, each composed of the drainage areas of a stream or streams, as established in the Water Resources Management Act of 1971 (chapter 173-500 WAC).

Certain projects or project elements, including but not limited to the following may be eligible for centennial loan or grant assistance:

(1) Aquatic plant control when the water quality degradation is due to the presence of aquatic plants, and the source(s) of pollution can be addressed sufficiently to ensure that the pollution is eliminated;

(2) BMP implementation on private property:

(a) Best management practices that consist of new, innovative or alternative technology not yet demonstrated in the department's region in which it is proposed;

(b) Best management practices in the riparian buffer or zone, such as revegetation or fence construction and where a conservation easement or landowner agreement is granted by the landowner; and

(c) Other water quality best management practices that are evaluated and approved by the department on a case-by-case basis, and where a conservation easement or landowner agreement is granted by the landowner;

(3) BMP implementation on public property;

(4) Computer equipment and software specific to the funded project and preapproved by the department;

(5) Diagnostic studies to assess current water quality;

(6) Education and outreach efforts for the public;

(7) Environmental checklists, assessments, and impact statements necessary to satisfy requirements for the SEPA, the NEPA, and the SERP;

(8) Equipment and tools as identified in a grant or loan agreement;

(9) Groundwater protection activities such as wellhead protection and critical aquifer recharge area protection;

(10) Hardship assistance for wastewater ((treatment)) facilities construction, on-site sewage system repair and replacement, and construction elements of ((a design-build-operate)) an alternative public works contracting project;

(11) Implementation of eligible projects identified in water quality plans;

(12) Indirect costs as defined in the most recently updated edition of Administrative Requirements for Ecology Grants and Loans (publication #91-18);

(13) Lake implementation and planning activities on lakes with public access;

(14) Land acquisition:

(15) Landscaping for erosion control directly related to a project, or site-specific landscaping to mitigate site conditions and comply with requirements in the State Environmental Policy Act or the National Environmental Policy Act;

(((15))) (16) Light refreshments for meetings when specified in the loan or grant agreement;

(((16))) (17) Monitoring BMP effectiveness;

(((17))) (18) Monitoring equipment used for water quality assessment;

(((18))) (19) Monitoring water quality;

(((19))) (20) On-site sewage systems:

(a) Development and administration of a local loan fund for on-site sewage system repair and replacement for residential and small commercial systems; and

(b) On-site sewage system surveys;

(((20))) (21) Model ordinances development and dissemination of model ordinances to prevent or reduce pollution from nonpoint sources;

(((21))) (22) Planning, including comprehensive basin plans, watershed plans, and area-wide water quality plans;

(((22))) (23) Planning and design for hardship wastewater facilities;

(24) Riparian and wetlands habitat restoration and enhancement, including revegetation;

(((23))) (25) Sales tax;

(((24))) (26) Stream restoration that meets recognized water quality standards;

(((25))) (27) Stormwater activities that are certain nonpermit-related planning activities, such as education and outreach, establishing a stormwater utility, identifying and mapping of pollution sources, and department-approved erosion control;

(((26))) (28) Total maximum daily load study development and implementation;

(((27))) (29) Training to develop specific skills that are necessary to directly satisfy the scope of work. Training, conference registration, or annual meeting fees must be preapproved by the department;

(((28))) (30) Wastewater or stormwater utility development;

(((29))) (31) Wastewater or stormwater utility rate or development impact fee studies;

(((30))) (32) Water quality education and stewardship programs; and

(((31))) (33) Wellhead protection.

Certain projects or project elements((,)) including, but not limited to, the following may be eligible for centennial loan assistance:

(1) CAFOs, for BMP implementation;

(2) Environmental emergencies as defined in WAC 173-95A-020 and applied for in accordance with the provisions described in the published funding guidelines for the funding cycle in which the emergency occurs;

(3) Facilities for nonhardship wastewater and stormwater:

(a) Planning:

(i) Comprehensive sewer planning, including wastewater elements of capital facilities planning under the Growth Management Act;

(ii) ((Facilities)) Planning for water pollution control facilities; and

(iii) Stormwater planning for permitted facilities;

(b) Design preparation of plans and specifications for water pollution control facilities;

(c) Construction of:

(i) Combined sewer overflow abatement;

(ii) ((Side sewers or individual pump stations or other appurtenances on private residential property;

(iv))) Facilities for the control, storage, treatment, conveyance, disposal, or recycling of stormwater; and

(((v))) (iii) Water pollution control facility construction to meet existing residential needs;

(d) Value engineering for water pollution control facilities;

(3))) (4) Land acquisition:

(a) As an integral part of the treatment process (e.g., land application); or

(b) ((For prevention of water pollution;

(c))) For siting of water pollution control facilities, sewer rights of way, easements, and associated costs; ((or

(4))) (5) Legal expenses will be determined on a case-by-case basis, such as development of local ordinances, use of a bond counsel, review of technical documents;

(((5))) (6) On-site sewage systems:

(a) Local loan fund program development and administration;

(b) New sewer systems to eliminate failing or failed on-site sewage systems;

(((6))) (7) Spare parts, an initial set of spare parts for equipment that is critical for a facility to operate in compliance with discharge permit requirements; and

(((7))) (8) Transferring ownership of a small wastewater system to a public body.

While it is impossible to list every project or project element that is not eligible, some examples of ineligible projects include:

(1) Abandonment or demolition of existing structures;

(2) ((Acts of nature that alter the natural environment, thereby causing water quality problems;

(3))) Commercial, institutional or industrial wastewater pretreatment;

(((4))) (3) Compensation or damages for any claim or injury of any kind arising out of the project, including any personal injury, damage to any kind of real or personal property, or any kind of contractual damages, whether direct, indirect, or consequential;

(((5))) (4) Cost-plus-a-percentage-of-cost contracts (also known as multiplier contracts), time and materials contracts, and percent-of-construction contracts in facilities projects a negotiated fee in general contractor/construction manager contracts is not a cost-plus-a-percentage-of-cost contract);

(((6))) (5) Facilities intended solely to control, transport, treat, dispose, or otherwise manage commercial, institutional, or industrial wastewater;

(((7))) (6) Fines and penalties due to violations of or failure to comply with federal, state, or local laws;

(((8))) (7) Flood control, projects or project elements intended solely for flood control;

(((9))) (8) Funding application preparation for loans or grants;

(((10))) (9) Interest on bonds, interim financing, and associated costs to finance projects;

(((11))) (10) Landscaping for aesthetic reasons;

(((12))) (11) Legal expenses associated with claims and litigation;

(((13))) (12) Lobbying or expenses associated with lobbying;

(((14))) (13) Monitoring equipment for sampling and analysis of commercial, institutional, or industrial discharges;

(((15))) (14) Office furniture not included in the recipient's indirect rate;

(((16))) (15) Operating expenses of local government, such as the salaries and expenses of a mayor, city councilmember, and city attorney;

(((17))) (16) Operation and maintenance costs for work not performed by contract and that is performed on a regularly scheduled basis (e.g., daily, weekly, monthly, seasonally, semiannually, but not less frequently than once per year), to service, check, or replace items that are not broken; or work not performed by contract that is not regularly scheduled but is required to maintain the asset so that repair does not become necessary;

(((18))) (17) Overtime differential paid to employees of a public body to complete administrative or force account work;

(((19))) (18) Permit fees not directly required for the completion of the project;

(((20))) (19) Professional dues;

(((21))) (20) Reclamation of abandoned mines;

(((22))) (21) Refinance of existing debt;

(((23))) (22) Rework costs or previously funded objectives;

(((24))) (23) Solid or hazardous waste;

(((25))) (24) Utility local improvement district formation;

(((26))) (25) Vehicle purchase, except for vehicles intended for the transportation of liquid or dewatered sludge or septage; and

(((27))) (26) Water quantity or other water resource projects that solely address water quantity issues such as reservoirs and dams.

(1) To apply for funding the applicant must submit a completed application to the department. The department will provide the application on the department web site.

(2) ((The applicant may be asked to provide the following project information:

(3))) Minimum score on application.

(a) An applicant must receive a minimum score equal to fifty percent of the available points on ((section three,)) the water quality and public health improvements form, of the water quality financial assistance application to be rated for the Draft Offer and Applicant List and Final Offer and Applicant List. ((An applicant with fewer than fifty percent of the points available on section three of the application is not eligible for funding consideration.)) The department may offer funding to applicants with fewer than fifty percent of the points available on ((section three)) the form if demand for funding is low.

(b) An applicant must receive a minimum score equal to sixty percent of the available points on the water quality financial assistance application to be eligible for funding consideration. The department may offer funding to applicants with fewer than sixty percent of the points available on the financial assistance application if demand for funding is low.

(1) A general funding cycle schedule is provided in Figure 1.

(2) In general, ((ecology)) the department will provide the following services, although annual modifications may be made to accommodate legislative schedules and requirements:

(a) Make available the application and applicable guidelines before the associated funding cycle begins;

(b) Conduct at least one application workshop in each of ecology's four regions;

(c) Conduct preapplication workshops to discuss regional level priorities if applicable;

(d) After the application deadline, complete an initial review of project proposals for funding eligibility;

(e) Request other agencies to provide evaluation assistance as needed;

(f) Rate and rank the applications using a consistent scoring system;

(g) ((Prepare a combined preliminary project priority list, after evaluation and scoring of all applications;

(i))) Develop a combined Draft Offer and Applicant List;

(((j))) (h) Facilitate a public review and comment period for the combined Draft Offer and Applicant List;

(((k))) (i) Sponsor at least one public meeting to explain the combined Draft Offer and Applicant List;

(((l))) (j) Develop a combined Final Offer and Applicant List. Public comments collected during ((draft)) the public review period will be incorporated ((and result in a responsiveness summary));

(((m))) (k) Issue funding decision letters to all applicants; and

(((n))) (l) Negotiate, develop, and finalize loan or grant agreements.

Loan and grant offers identified on the Final Offer and Applicant List will be effective for up to one year from the publication date of the Final Offer and Applicant List. Loan and grant offers that do not result in a signed agreement ((are automatically)) may be ended.

There are two project categories in which the competitive funding is allocated: Activities and facilities.

(1) The scores derived from the application rating and ranking process will determine the allocation of the competitive funding;

(2) No more than two-thirds of the fund can go to either category;

(3) If the demand for funding is low in either category, then ((moneys)) funds may be shifted amongst categories; and

(4) The department will adjust the funding allocation based on the following:

(a) To provide match for other funding sources, such as the Clean Water Act section 319 nonpoint source program or other funding programs; or

(b) To comply with funding restrictions in legislative appropriations.

For example:

If fifty percent of the competitive centennial program funding is comprised of state building construction account ((moneys)) funds, then fifty percent of the centennial program funding must be allocated to projects approved for that funding source.

(1) The recipient must acknowledge department funding in reports, technical documents, publications, brochures, and other materials.

(2) Site-specific projects must ((display a sign acknowledging department funding. The sign must be large enough to be seen from nearby roadways, and include a department logo)) acknowledge department funding by one of the following means:

(e) Press release.

(1) Activities projects. Grants for activities projects made under the centennial program are subject to ceiling amounts of:

(a) Five hundred thousand dollars if the match for the grant is in the form of cash and/or interlocal costs; or

(b) Two hundred fifty thousand dollars if any part of the match is in the form of in-kind goods and services; and

(c) Five hundred thousand dollars for activities project loans.

(2) Facilities projects. Loans are subject to ceiling amounts of five million dollars.

(3) Hardship projects.

(a) Grants for facilities construction projects are subject to ceiling amounts of five million dollars. If a centennial program grant is provided for a hardship project in conjunction with a water pollution control revolving fund (revolving fund) forgivable principal loan award for hardship, then the ceiling amount for the combined revolving fund forgivable principal loan and centennial program grant is five million dollars; and

(b) Grants for facilities planning and design may not exceed fifty percent of the total eligible costs.

(4) Water pollution control facilities construction bid overruns.

(a) If the low responsive responsible construction bid(s) exceeds the engineer's estimate of construction costs, the department may approve funding increases for up to ten percent of the engineer's ((original)) cost estimate as supplied with the bid documents;

(b) The ceiling amounts in the year the project was offered funding and as established in WAC 173-95A-520 apply; and

(c) First priority for availability of ((moneys)) funds will be given to hardship communities based on the severity of financial need. For more information, see WAC 173-95A-400.

(5) Water pollution control facilities construction change orders:

(a) The department may approve funding for change orders for up to five percent of the eligible portion of the low responsive responsible construction bid(s);

(b) The department may approve funding for change orders for greater than five percent of the eligible portion of the low responsive responsible construction bid(s) only if the recipient can demonstrate that the additional funding is needed to remedy unforeseeable, extraordinary site-specific conditions;

(c) The ceiling amounts in the year the project was offered funding and as established in WAC 173-95A-520 apply; and

(((c))) (d) First priority for availability of ((moneys)) funds will be given to hardship communities based on the severity of financial need. For more information on hardship, see WAC 173-95A-400.

(1) Depending on the grant amount, match can consist of cash or interlocal and in-kind contributions that total twenty-five percent of the total eligible project cost.

(2) No match is required for loans under the centennial program.

No loan agreement will be signed until all previous steps have been completed and approved by the department.)) Wastewater facility projects must follow the step process provisions in WAC 173-98-530.

(1) The portion of a project designed to serve the needs of commercial, industrial, and institutional customers may be funded using loans only.

(2) Capacity to serve local public primary and secondary schools may be grant eligible if the applicant can demonstrate financial hardship according to WAC ((173-95A-400)) 173-98-300.

The ((step)) following process is required for lake projects and recommended for all water pollution control activities projects.

(1) Planning involves the identification of problems ((and)), evaluation of cost-effective alternatives in accordance with WAC 173-98-730, and preparation of a planning document.

(2) Implementation is the actual implementation of the project based on the planning document. ((Where the project includes construction, a design element may be included before the implementation step.))

(1) Recipients must fully comply with all applicable federal, state, and local laws and rules relating to topics such as procurement, discrimination, labor, job safety, drug-free environments, and minority and women owned businesses.

(2) Ongoing management of most aspects of loan projects is subject to the most recent edition of Administrative Requirements for Recipients of Ecology Grants and Loans (publication #91-18) or Administrative Requirements for Recipients of Ecology Grants and Loans Managed in EAGL (publication #14-01-002).

(3) Ongoing management of all aspects of loan projects is subject to the associated funding program guidelines.

(4) The applicant shall secure all necessary permits required by authorities having jurisdiction over the project. Copies must be available to the department upon request.

(1) ((A local government not in compliance with the Growth Management Act may not receive loans or grants from the department, except, in limited circumstances, where a local government must address a public health need or substantial environmental degradation.)) A county, city, or town that has been offered a loan or grant for a water pollution control facilities project may not receive loan or grant funding while the county, city, or town is not in compliance with the Growth Management Act unless:

(2) For the purposes of this section, "compliance with the Growth Management Act" means that((:)) a county, city, or town that must or chooses to plan under RCW 36.70A.040 and has adopted a comprehensive plan, including a capital facilities plan element, and development regulations as required by chapter 36.70A RCW.

(3) For the purposes of this chapter, a public health need related to a loan or grant must be documented by a letter signed by the secretary of the Washington state department of health or his or her designee and addressed to the public official who signed the loan or grant application. "Public health need" means a situation where:

(a) There is a documented potential for:

(i) Contaminating a source of drinking water; or

(ii) Failure of existing wastewater system or systems resulting in contamination being present on the surface of the ground in the quantities and locations as to create a potential for public contact; or

(iii) Contamination of a commercial or recreational shellfish bed as to create a critical public health risk associated with consumption of the shellfish; or

(iv) Contamination of surface water so as to create a critical public health risk associated with recreational use; and

(b) The problem generally involves a serviceable area including, but not limited to, a subdivision, town, city, or county, or an area serviced by on-site sewage disposal systems; and

(c) The problem cannot be corrected through more efficient operation and maintenance of an existing wastewater disposal system or systems.

(4) For the purposes of this chapter, a substantial environmental degradation related to a loan or grant must be documented by a letter signed by the director and addressed to the public official who signed the loan or grant application. "Substantial environmental degradation" means that:

(a) There is a situation causing real, documented, critical environmental contamination that:

(i) Contributes to violations of the state's water quality standards; or

(ii) Interferes with beneficial uses of the waters of the state; and

(b) The problem generally involves a serviceable area including, but not limited to, a subdivision, town, city, or county, or an area serviced by on-site sewage disposal systems; and

(c) The problem cannot be corrected through more efficient operation and maintenance of an existing wastewater disposal system or systems.

PART 7

TIMELY USE OF CENTENNIAL PROGRAM ((MONEYS)) FUNDS

(2))) (1) Project initiation. Grant or loan ((moneys)) funds must be spent in a timely fashion. The recipient must consistently meet the performance measures agreed to in the grant or loan agreement. These performance measures include, but are not limited to, the following:

(a) Work on a project must be started within ((sixteen)) ten months of the publication date of the Final Offer and Applicant List on which the project was proposed.

(b) Starting a project means making any measurable steps toward achieving the milestones, objectives, and overall goals of the project.

(3))) (2) Project initiation extension. Certain circumstances may allow a time extension of no more than twelve months for starting a project. For example:

(a) Schedules included in water quality permits, consent decrees, or enforcement orders; or

(b) There is a need to do work during an environmental window in a specific season of the year.

(1) Recipients must maintain ((accounting records in accordance with RCW 43.09.200, Local government accounting—Uniform system of accounting. For example, charges must be properly supported, related to eligible costs, and documented by appropriate records. These records must be maintained separately)) accurate records and accounts for the project in accordance with Generally Accepted Accounting Principles (GAAP) as issued by the Governmental Accounting Standards Board (GASB), including standards related to the reporting of infrastructure assets, or in accordance with the state standards in RCW 43.09.200 Local government accounting—Uniform system of accounting.

(2) Accounting irregularities may result in an immediate payment hold. The director may require immediate repayment of misused loan or grant ((moneys)) funds.

If a dispute arises concerning eligibility decisions made by the department within the context of a loan agreement, the decision may be appealed. A lawsuit cannot be brought to superior court unless the aggrieved party follows these procedures, which are intended to encourage the informal resolution of disputes consistent with RCW 34.05.060.

(1) First, the recipient may seek review of the financial assistance program's initial decision within thirty days of the decision by a written appeal to the water quality program manager. The program manager will consider the appeal information and may choose to discuss the matter by telephone or in person;

(2) The program manager will issue a written decision within thirty days from the time the appeal is received;

(3) If the recipient is not satisfied with the program manager's decision, the recipient may request review of the decision within thirty days to the deputy director;

(4) The deputy director will consider the appeal information, and may ((chose)) choose to discuss the matter by telephone or in person. The deputy director will issue a written decision within thirty days from the time the appeal is received, and that decision will be the final decision of the department;

(5) If the recipient is not satisfied with the deputy director's final decision, the recipient may appeal to the Thurston County superior court, pursuant to RCW 34.05.570(4), which pertains to the review of "other agency action"; and

(6) Unless all parties to the appeal agree that a different time frame is appropriate, the parties shall attempt to bring the matter for a superior court determination within four months of the date in which the administrative record is filed with the court. This time frame is to ensure minimal disruptions to the program.

The department, or at the department's discretion another authorized auditor, ((will)) may audit the grant or loan agreement and records.

The purpose of this chapter is to set forth requirements for the Washington state department of ecology's (department) administration of Washington state's water pollution control revolving fund (revolving fund), and the water pollution control revolving administration account (administration account) as authorized by chapter 90.50A RCW, water pollution control facilities ((financing)) federal capitalization grants.

The revolving fund is primarily comprised of federal capitalization grants, state matching ((moneys)) funds, and principal and interest repayments. It is used to provide loan assistance to public bodies for statewide, high-priority water quality projects that are consistent with the Clean Water Act, 33 U.S.C. ((1251-1387)) 1251-1388.

The administration account is comprised of an administration charge applied to the outstanding loan balance on revolving fund loans. The administration account may be used for the following:

(1) Administration costs associated with conducting application processes, managing contracts, collecting loan repayments, managing the revolving fund, providing technical assistance, and meeting state and federal reporting requirements; and

(2) Information and data system costs associated with loan tracking and fund management.

At the point where the administration account adequately covers the program administration costs, the department may no longer use the federal administration allowance. If a federal capitalization grant is awarded after that point, all federal capitalization grant dollars must be used for making loans.

(1) Where possible, the department combines the management of the revolving fund with other funding programs, such as the centennial clean water program, the stormwater financial assistance program, and the federal Clean Water Act section 319 nonpoint source program.

(2) The integrated funding process includes a combined funding cycle, program guidelines, funding offer and applicant list, and statewide funding workshops.

For the purposes of this chapter:

(1) Act means the federal Clean Water Act (33 U.S.C.((1251-1387)) 1251-1388).

(2) Activities, see water pollution control activities.

(3) Annual debt service means the amount of debt the applicant is obligated to pay on the loan in one year.

(4) Applicant means a public body that has applied for funding.

(5) Best management practices (BMP) means physical, structural, and/or managerial practices approved by the department that prevent or reduce pollutant discharges.

(6) Capitalization grant means a federal grant awarded by the U.S. Environmental Protection Agency (EPA) to the state to help expand the revolving fund.

(7) Ceiling amount means the highest level of financial assistance the department can provide to a recipient for an individual project.

(8) Commercial, industrial, and institutional flows mean the portion of the total flows to a facility that originate from large commercial establishments, industrial facilities, or institutional sources such as state schools, hospitals, and prisons.

(9) Competitive funding means ((moneys)) funds available for projects through a statewide evaluation process.

(10) Completion date or expiration date means the date indicated in the funding agreement in which all milestones and objectives associated with the goals of the project are met.

(11) Concentrated animal feeding operation (CAFO) means:

(a) An animal livestock feeding operation that discharges animal waste to the waters of Washington state more frequently than the twenty-five-year, twenty-four-hour storm event;

(b) An animal livestock feeding operation that is under a department administrative order, notice of violation, or a National Pollution Discharge Elimination System permit;

(c) An animal livestock feeding operation that will be required to have a National Pollution Discharge Elimination System permit coverage in the near future; or

(d) An animal livestock feeding operation designated by the Environmental Protection Agency as polluting the waters of Washington state.

(12) Conservation easement means a recorded legal agreement between a landowner and a public body to allow or restrict certain activities and uses that may take place on his or her property.

(13) Conservation plan means a document that outlines how a project site will be managed using best management practices to avoid potential negative environmental impacts.

(14) Construction means to erect, install, expand, or improve water pollution control facilities or activities. Construction includes construction phase engineering and preparation of the operation and maintenance manual.

(15) Cost-effective alternative means the option selected in an approved ((facilities plan)) planning document that meets the requirements of the project, recognizes environmental and other nonmonetary impacts, and offers the lowest cost over the life of the project (i.e., ((lowest present worth or equivalent annual value)) life cycle cost).

(16) Debt service means the total of all principal, interest, and administration charges associated with a water pollution control revolving fund loan that must be repaid to the department by the public body.

(17) Department means the Washington state department of ecology.

(18) Design means the preparation of the plans and specifications used for construction of water pollution control facilities or activities.

(19) Director means the director of the Washington state department of ecology or his or her authorized designee.

(20) Draft offer and applicant list means a catalog of all applications for financial assistance considered and those proposed for funding, based on estimates of state and federal budgets.

(21) Easement means a recorded legal agreement between a public body and a landowner that allows the public body to have access to the landowner's property at any time to inspect, maintain, or repair loan-funded activities or facilities; sewer use ordinances and other legal documents may be sufficient.

(22) Effective date means the date the loan agreement is signed by the department's water quality program manager.

(23) Eligible cost means the portion of a facilities or activities project that can be funded based on program eligibility as defined in WAC 173-98-100 and in the most recently updated edition of the Water Quality Financial Assistance Guidelines (publication # 10-10-049).

(24) Energy efficiency means the use of improved technologies and practices to reduce the energy consumption of water quality projects, use energy in a more efficient way, and produce/use renewable energy.

(25) Enforcement order means an administrative requirement issued by the department under the authority of RCW 90.48.120 that directs a public body to complete a specified course of action within an explicit period to achieve compliance with the provisions of chapter 90.48 RCW.

(26) ((Engineering report means a document that includes an evaluation of engineering and other alternatives that meet the requirements in chapter 173-240 WAC.

(27))) Environmental degradation means the reduced capacity of the environment to meet social and ecological objectives and needs.

(((28))) (27) Environmental emergency means a problem that a public body and the department agree poses a serious, immediate threat to the environment or to the health or safety of a community and requires immediate corrective action.

(((29))) (28) Environmentally innovative means projects that demonstrate new or innovative approaches to managing water quality issues in a more sustainable way.

(((30))) (29) Equivalent residential unit (ERU) means a unit of measurement used to express the average sewage loading discharged from a typical full-time single-family dwelling unit.

(((31))) (30) Estimated construction cost means the expected amount for labor, materials, equipment, and other related work necessary to construct the proposed project.

(((32))) (31) Existing need means water pollution control facility's capacity reserved for all users, at the time of application.

(((33))) (32) Existing residential need means that portion of a water pollution control facility's capacity reserved for residential structures that:

(a) Exist within the project service area at the time of application;

(b) Are connected to the facility or scheduled to be connected to the facility in an approved ((engineering report)) planning document; and

(c) Will bear the financial burden of paying for the new facility.

(((34))) (33) Facilities, see water pollution control facility.

(36))) (34) Federal capitalization grant, see capitalization grant.

(((37))) (35) Final offer and applicant list means a catalog of all applications for financial assistance considered and those offered funding, based on adopted state and federal budgets.

(((38))) (36) Force account means loan project work performed using labor, materials, or equipment of a public body.

(((39))) (37) Forgivable principal means the portion of a loan made by the department that is not required to be paid back by the borrower if allowable by the act or Congress through federal appropriation.

(((40))) (38) Funding category see "water pollution control activities funding category," "water pollution control facilities funding category," and "preconstruction funding category((," and "green project reserves funding category))."

(((41))) (39) Funding cycle means the events related to the competitive process used to allocate ((moneys)) funds from the revolving fund, centennial clean water program, stormwater financial assistance program, and the Clean Water Act section 319 nonpoint source program for a state fiscal year.

(((42))) (40) General obligation debt means an obligation of the recipient secured by annual ad valorem taxes levied by the recipient and by the full faith, credit, and resources of the recipient.

(((43))) (41) Green infrastructure means a wide array of practices at multiple scales that manage wet weather and that maintain and restore natural hydrology by infiltrating, evapotranspiring and harvesting and using stormwater.

(((44))) (42) Green project reserve((s)) means water efficiency, energy efficiency, green infrastructure, and environmentally innovative projects.

(46))) (43) Growth means the portion of the total flows to a facility that is reserved for future residential, commercial, industrial, and institutional flows.

(((47))) (44) Indirect cost means costs that benefit more than one activity of the recipient and not directly assigned to a particular project objective.

(((48))) (45) Infiltration and inflow means water, other than wastewater, that enters a sewer system.

(((49))) (46) Infiltration and inflow correction means the cost-effective alternative or alternatives and the associated corrective actions identified in an approved ((facilities plan or engineering report)) planning document for eliminating or reducing the infiltration and inflow to existing sewer system.

(((50))) (47) Initiation of operation means the actual date the recipient begins using, or could begin using, the facilities for its intended purpose. This date may occur before final inspection or project completion.

(((51))) (48) Intended use plan means a document identifying the types of projects proposed and the amount of all money available for financial assistance from the revolving fund for a fiscal year as described in section 606(c) of the act.

(((52))) (49) Landowner agreement means a written arrangement between a public body and a landowner that allows the public body to have access to the property to inspect project-related components.

(((53))) (50) Loan agreement means a contractual arrangement between a public body and the department that involves a disbursement of ((moneys)) funds that must be repaid.

(((54))) (51) Loan default means failure to make a loan repayment to the department within sixty days after the payment was due.

(((55))) (52) Nonpoint source water pollution means pollution that enters any waters from widespread water-based or land-use activities. Nonpoint source water pollution includes, but is not limited to atmospheric deposition; surface water runoff from agricultural lands, urban areas, and forest lands; subsurface or underground sources; and discharges from some boats or other marine vessels.

(((56))) (53) Perpetuity means ((the point at which the revolving fund is earning at least fifty percent of the market rate for tax-exempt municipal bonds on its loan portfolio.

(57))) the department will seek to manage the revolving fund account so that available future funds at least match the rate of growth of Engineering News-Record "Construction Cost Index" for the city of Seattle.

(54) Plans and specifications means the construction contract documents and supporting engineering documents prepared in sufficient detail to allow contractors to bid on and construct water pollution control facilities. "Plans and specifications" and "design" may be used interchangeably.

(((58))) (55) Preconstruction means facility planning, facility design, rate studies, value engineering, sewer use ordinances, and utility formation.

(((59))) (56) Preconstruction funding category means that portion of the revolving fund dedicated to preconstruction projects.

(((60))) (57) Preliminary project priority list means a catalog of all applications for financial assistance considered for funding and submitted to the Washington state legislature for its consideration during budget development.

(((61))) (58) Project means a water quality improvement effort funded with a grant or loan.

(((62))) (59) Project completion or expiration means the date indicated in the funding agreement in which all milestones and objectives associated with the goals are met.

(((63))) (60) Public body means a state of Washington county, city or town, conservation district, other political subdivision, municipal corporation, quasi-municipal corporation, those Indian tribes recognized by the federal government, or institutions of higher education when the proposed project is not part of the school's statutory responsibility.

(((64))) (61) Public health emergency means a situation declared by the Washington state department of health in which illness or exposure known to cause illness is occurring or is imminent.

(((65))) (62) Recipient means a public body that has an effective loan agreement with the department.

(((66))) (63) Reserve account means an account created by the recipient to secure the payment of the principal and interest on the revolving fund loan.

(((67))) (64) Residential means the portion of the total flows to a facility that originates from single-family houses, apartments, mobile home parks, small commercial facilities, and community facilities such as local K-12 public schools, libraries, and fire stations.

(((68))) (65) Revenue-secured debt means an obligation of the recipient secured by a pledge of the revenue of a utility.

(((69))) (66) Revolving fund means Washington state's water pollution control revolving fund.

(((70))) (67) Riparian buffer or zone means a swath of vegetation along a channel bank that provides protection from the erosive forces of water along the channel margins and external nonpoint sources of pollution.

(((71))) (68) Scope of work means a detailed description of project tasks, milestones, and measurable objectives.

(((72))) (69) Senior lien obligations means all revenue bonds and other obligations of the recipient outstanding on the date of execution of a loan agreement (or subsequently issued on a parity therewith, including refunding obligations) or issued after the date of execution of a loan agreement having a claim or lien on the gross revenue of the utility prior and superior to the claim or lien of the loan, subject only to maintenance and operation expense.

(((73))) (70) Service area population means the number of people served in the area of the project.

(((74))) (71) Severe public health hazard means a situation declared by the Washington state department of health in which the potential for illness exists, but illness is not occurring or imminent.

(((75))) (72) Sewer means the pipe and related pump stations located on public property, or on public rights of way and easements that convey wastewater from buildings.

(((76))) (73) Side sewer means a sanitary sewer service extension from the point five feet outside the building foundation to the publicly owned collection sewer.

(((77))) (74) State environmental review process (SERP) means the National Environmental Policy Act (NEPA)-like environmental review process adopted to comply with the requirements of the Environmental Protection Agency's Code of Regulations (40 C.F.R. § 35.3140). SERP combines the State Environmental Policy Act (SEPA) review with additional elements to comply with federal requirements.

(((78))) (75) Total eligible project cost means the sum of all expenses associated with a water quality project that are eligible for funding.

(((79))) (76) Total project cost means the sum of all expenses associated with a water quality project.

(((80))) (77) Water efficiency projects means the use of improved technologies and practices to deliver equal or better water quality services with less water. Water efficiency encompasses conservation and reuse efforts, as well as water loss reduction and prevention, to protect water resources for the future.

(((81))) (78) Water pollution means contamination or other alteration of the physical, chemical, or biological properties of any waters of the state, including change in temperature, taste, color, turbidity, or odor of the waters; or any discharge of a liquid, gas, solid, radioactive substance, or other substance into any waters of the state that creates a nuisance or renders the waters harmful, detrimental, or injurious to the public, to beneficial uses, or to livestock, wild animals, birds, fish, or other aquatic life.

(((82))) (79) Water pollution control activities or activities means actions taken by a public body for the following purposes:

(a) To prevent or mitigate pollution of underground water;

(b) To control nonpoint sources of water pollution;

(c) To restore the water quality of freshwater lakes; and

(d) To maintain or improve water quality through the use of water pollution control facilities or other means.

(((83))) (80) Water pollution control activities funding category means that portion of the revolving fund dedicated to nonpoint source pollution projects.

(((84))) (81) Water pollution control facility or facilities means any facilities or systems for the control, collection, storage, treatment, disposal, or recycling of wastewater, including, but not limited to, sanitary sewage, stormwater, residential, commercial, industrial, and agricultural wastes. Facilities include all necessary equipment, utilities, structures, real property, and interests in and improvements on real property.

(((85))) (82) Water pollution control facilities funding category means that portion of the revolving fund dedicated to facilities projects.

(((86))) (83) Water pollution control revolving fund (revolving fund) means the water pollution control revolving fund established by RCW 90.50A.020.

(((87))) (84) Water resource inventory area (WRIA) means one of the watersheds in the state of Washington, each composed of the drainage areas of a stream or streams, as established in the Water Resources Management Act of 1971 (chapter 173-500 WAC).

The revolving fund may be used for the following purposes:

(1) To provide loans to finance the planning, design, and/or construction of water pollution control facilities;

(2) To provide loans for nonpoint source pollution control management projects that implement the Washington's Water Quality Management Plan to Control Nonpoint Sources of Pollution, and for developing and implementing a conservation and management plan under section 320 of the act;

(3) ((To provide loans for up to twenty years reserve capacity for water pollution control facilities;

(4))) To buy or refinance the debt obligations incurred by applicants after March 7, 1985, for the construction of water pollution control facilities;

(((5))) (4) To guarantee or buy insurance for local obligations to improve credit market access or reduce interest rates;

(((6))) (5) As a source of revenue or security for the payment of principal and interest on revenue or general obligation bonds issued by the state if the proceeds of those bonds will be deposited in the revolving fund;

(((7))) (6) To finance administration costs incurred by the department as authorized by the act and chapter 90.50A RCW; and

(((8))) (7) To provide loan subsidies in the form of reduced interest rates and forgivable principal to public bodies for statewide, high-priority water quality projects that are consistent with the Clean Water Act, 33 U.S.C. ((1251-1387)) 1251-1388.

Certain projects or project elements may be eligible for loan assistance including, but not limited to, the following:

(1) Alternative public works contracting for water pollution control facilities allowed under state statute including, but not limited to, design-build, design-build-operate, and general contractor/construction manager;

(2) Aquatic plant control when the water quality degradation is due to the presence of aquatic plants, and the source(s) of pollution is addressed sufficiently to ensure that the pollution is eliminated;

(((2))) (3) BMP implementation on private property:

(a) Best management practices that consist of new, innovative, or alternative technology not yet demonstrated in the department's region in which it is proposed;

(b) Best management practices in the riparian buffer or zone, such as revegetation or fence construction and where a conservation easement or landowner agreement is granted by the landowner; and

(c) Other water quality best management practices that are evaluated and approved by the department on a case-by-case basis, and where a conservation easement or landowner agreement is granted by the landowner.

(((3))) (4) BMP implementation on public property;

(((4))) (5) Capacity for growth. Loans for up to twenty years capacity for water pollution control facilities. Capacity in excess of the twenty year design capacity are not eligible;

(((5))) (6) Computer equipment and software specific to the funded project and preapproved by the department;

(((6))) (7) Confined animal feeding operations (CAFO) water pollution control projects located in federally designated national estuaries;

(((7))) (8) Conservation planning;

(9) Diagnostic studies to assess current water quality;

(10) Education and outreach efforts for the public;

(11) Environmental checklists, assessments, and impact statements necessary to satisfy requirements for the SEPA, the NEPA, and the SERP;

(12) Environmental emergencies as defined in WAC 173-98-030 and applied for in accordance with the provisions described in the published funding guidelines for the funding cycle in which the emergency occurs;

(13) Equipment and tools as identified in a loan agreement;

(((13))) (14) Facilities for the control, storage, treatment, conveyance, disposal, or recycling of domestic wastewater and stormwater for residential, and/or a combination of residential, commercial, institutional and industrial:

(a) Planning:

(i) Comprehensive sewer planning, including wastewater elements of capital facilities planning under the Growth Management Act;

(ii) Stormwater planning;

(iii) Facilities planning for water pollution control facilities((;)).

(b) Design preparation of plans and specifications for water pollution control facilities;

(c) Construction of:

(i) Facilities for the control, storage, treatment, conveyance, disposal, or recycling of domestic wastewater and stormwater;

(ii) Combined sewer overflow abatement;

(iii) ((Facilities to meet existing needs plus twenty years for growth;

(iv))) Side sewers ((or individual)), pump stations, or other appurtenances on public property or private ((residential)) property if solving a nonpoint source pollution problem, such as failing on-site sewage systems; and

(((v))) (iv) Side sewers ((existing)), pump stations, or other appurtenances on public property or private property (((with an easement))) to correct infiltration and inflow ((and replace existing water pollution control facilities; and

(d) Value engineering for water pollution control facilities((;

(e) Design or construction costs associated with design-build or design-build-operate contracts)).

(((14))) (15) Green project reserve((s)) projects such as water efficiency, energy efficiency, green infrastructure, and environmentally innovative projects or project elements as ((outlined in WAC 173-98-125, and as)) defined by EPA guidance((.));

(((15))) (16) Groundwater protection activities such as wellhead protection and critical aquifer recharge area protection;

(((16))) (17) Hardship assistance for preconstruction projects, wastewater treatment facilities construction, and on-site sewage system repair and replacement;

(((17))) (18) Indirect costs as defined in the most recently updated edition of Administrative Requirements for Recipients of Ecology Grants and Loans (publication #91-18) or Administrative Requirements for Recipients of Ecology Grants and Loans Managed in EAGL (publication #14-01-002);

(((18))) (19) Lake implementation and associated planning activities on lakes with public access;

(((19))) (20) Land acquisition:

(a) As an integral part of the treatment process (e.g., land application); ((or))

(b) For siting of water pollution control facilities;

(c) For wetland habitat preservation and protection;

(((20))) (d) For riparian area and watershed preservation and protection; or

(21) Landscaping for erosion control directly related to a project, or site-specific landscaping to mitigate site conditions and comply with requirements in the SERP;

(((21))) (22) Legal expenses will be determined on a case-by-case basis, such as development of local ordinances, use of a bond counsel, review of technical documents;

(((22))) (23) Light refreshments for meetings when preapproved by the department;

(((23))) (24) Mitigation, determined on a case-by-case basis, that addresses water quality impacts directly related to the project;

(((24))) (25) Monitoring BMP effectiveness;

(((25))) (26) Monitoring equipment used for water quality assessment;

(((26))) (27) Monitoring water quality;

(((27))) (28) Model ordinances development and dissemination of model ordinances to prevent or reduce pollution from nonpoint sources;

(((28))) (29) On-site sewage systems:

(a) On-site sewage system repair and replacement for residential and small commercial systems;

(b) On-site sewage system surveys;

(c) Local loan fund program development and implementation((;)).

(((29))) (30) Planning, including comprehensive basin plans, watershed plans, and area-wide water quality plans;

(((30))) (31) Refinancing of water pollution control facility debt;

(((31))) (32) Riparian and wetlands habitat restoration and enhancement, including revegetation;

(((32))) (33) Sales tax;

(((33))) (34) Spare parts, an initial set of spare parts for equipment that is critical for a facility to operate in compliance with discharge permit requirements;

(((34))) (35) Stream restoration projects;

(((35))) (36) Total maximum daily load study development and implementation;

(((36))) (37) Training to develop specific skills that are necessary to directly satisfy the funding agreement scope of work. Training, conference registration or annual meeting fees must be preapproved by the department;

(((37))) (38) Transferring ownership of a small wastewater system to a public body;

(((38))) (39) Wastewater or stormwater utility development;

(((39))) (40) Wastewater or stormwater utility rate or development impact fee studies;

(((40))) (41) Water quality education and stewardship programs.

Certain projects or project elements are not eligible for loan assistance including, but not limited to, the following:

(1) Abandonment or demolition of existing structures not interfering with proposed construction of a wastewater or stormwater treatment facility;

(2) ((Acts of nature that alter the natural environment, thereby causing water quality problems;

(3))) Aquatic plant control for aesthetic reasons, navigational improvements, or other purposes unrelated to water quality;

(((4))) (3) Bond costs for debt issuance;

(((5))) (4) Bonus or acceleration payments to contractors to meet contractual completion dates for construction;

(((6))) (5) Commercial, institutional or industrial wastewater pollution control ((activities or)) facilities or portions of those facilities that are solely intended to control, transport, treat, dispose, or otherwise manage commercial, institutional, or industrial wastewater;

(((7))) (6) Commercial, institutional or industrial monitoring equipment for sampling and analysis of discharges from municipal water pollution control facilities;

(((8))) (7) Commercial, institutional or industrial wastewater pretreatment;

(((9))) (8) Compensation or damages for any claim or injury of any kind arising out of the project, including any personal injury, damage to any kind of real or personal property, or any kind of contractual damages, whether direct, indirect, or consequential;

(((10))) (9) Cost-plus-a-percentage-of-cost contracts (also known as multiplier contracts), time and materials contracts, and percent-of-construction contracts in facilities projects (a negotiated fee in general contractor/construction manager contracts is not a cost-plus-a-percentage-of-cost contract);

(12))) (10) Fines and penalties due to violations of or failure to comply with federal, state, or local laws;

(((13))) (11) Flood control((,)) projects or project elements intended solely for flood control;

(((14))) (12) Funding application preparation for loans or grants;

(((15))) (13) Interest on bonds, interim financing, and associated costs to finance projects;

(((16))) (14) Landscaping for aesthetic reasons;

(((17))) (15) Legal expenses associated with claims and litigation;

(((18))) (16) Lobbying or expenses associated with lobbying;

(((19))) (17) Mitigation is not eligible unless it addresses water quality impacts directly related to the project, and will be determined on a case-by-case basis;

(((20))) (18) Office furniture not included in the recipient's indirect rate;

(((21))) (19) Operating expenses of local government, such as the salaries and expenses of a mayor, city councilmember, and city attorney;

(((22))) (20) Operation and maintenance costs for work not performed by contract and that is performed on a regularly scheduled basis (e.g., daily, weekly, monthly, seasonally, semiannually, but not less frequently than once per year), to service, check, or replace items that are not broken; or work not performed by contract that is not regularly scheduled but is required to maintain the asset so that repair does not become necessary;

(((23))) (21) Overtime differential paid to employees of public body to complete administrative or force account work;

(((24))) (22) Permit fees not directly required for the completion of a project;

(((25))) (23) Personal injury compensation or damages arising out of the project, whether determined by adjudication, arbitration, negotiation, or other means;

(((26))) (24) Professional dues;

(((27))) (25) Reclamation of abandoned mines;

(((28))) (26) Refinancing of existing debt not related to a water pollution control facility;

(((29))) (27) Solid or hazardous waste cleanup;

(((30))) (28) Utility local improvement district (ULID) formation;

(((31))) (29) Vehicle purchase, except for vehicles intended for the transportation of liquid, dewatered sludge, septage, or special purpose vehicles as approved by the department; and

(((32))) (30) Water quantity or other water resource projects that solely address water quantity issues such as reservoirs and dams.

(1) To apply for funding, the applicant must submit a completed application to the department. The department will provide the application on the department web site.

(2) ((The applicant may be asked to provide the following project information:

(3))) Minimum score on application.

(a) An applicant must receive a minimum score equal to fifty percent of the available points on ((section three,)) the water quality and public health improvements form, of the water quality financial assistance application to be eligible for funding consideration. The department may offer funding to applicants with fewer than fifty percent of the points available on ((section three)) the form if demand for funding is low; and

(b) An applicant must also receive a minimum score equal to sixty percent of the available points on the entire water quality financial assistance application to be eligible for funding consideration. The department may offer funding to applicants with fewer than sixty percent of the points available on the financial assistance application if demand for funding is low.

(1) A general funding cycle schedule is provided in Figure 1.

(2) In general, ((ecology)) the department will provide the following services, although ((annual)) modifications may be made to accommodate legislative schedules and requirements:

(a) Make available the application and applicable guidelines before the associated funding cycle begins;

(b) Conduct ((at least one)) application workshops ((in each of ecology's four regions)) that are accessible statewide;

(c) Conduct preapplication workshops to discuss regional level priorities if applicable;

(d) Complete an initial review of project proposals for funding eligibility after the application deadline;

(e) Request other agencies to provide evaluation assistance as needed;

(f) Rate and rank the applications using a consistent scoring system;

(g) ((Prepare a combined preliminary project priority list, after evaluation and scoring of all applications;

(i))) Develop a combined Draft Offer and Applicant List and a Draft Intended Use Plan (IUP);

(((j))) (h) Facilitate a public review and comment period for the combined Draft Offer and Applicant List and Draft IUP;

(((k))) (i) Sponsor at least one public meeting to explain the combined Draft Offer List and Applicant List and Draft IUP;

(((l))) (j) Develop a combined Final Offer and Applicant List and a Final IUP. Public comments collected during ((draft)) the public review period will be incorporated ((and result in a responsiveness summary));

(((m))) (k) Issue funding decision letters to all applicants; and

(((n))) (l) Negotiate, develop, and finalize loan agreements.

Loan offers identified on the Final Offer and Applicant List will be effective for up to one year from the publication date of the Final Offer and Applicant List. Loan offers that do not result in a signed agreement ((are automatically)) or a letter of binding commitment may be ended.

(1) As required by the EPA, the department issues a Draft IUP and a Final IUP for each funding cycle.

(2) The ((Final IUP is issued in conjunction with the Final Offer and Applicant List.

(3) It)) IUP contains a detailed report of how the department expects to allocate ((moneys)) funds available in the current funding cycle.

(1) There are three primary factors considered in determining hardship funding for the construction portion of wastewater treatment facilities projects:

(a) Service area population;

(b) Existing residential need at the time of application; and

(c) Level of financial burden placed on the ratepayers.

(2) Service area population. Applicants with a service area population of twenty-five thousand or less can request ((hardship-funding)) hardship funding consideration by submitting a financial hardship analysis form along with the funding application. If the service area population is different from the population of the applicant, the applicant must show that the hardship assistance is solely used to benefit the population of the service area.

(3) Existing residential need. The applicant and the department calculate the water pollution control facilities construction costs that are associated with existing residential need at the time of application.

(4) Level of financial burden.

(a) Financial burden for the sewer ratepayer is determined by calculating the residential sewer user fee as a percent of the median household income (MHI) for the project area. The annual residential sewer user fee is calculated using:

(i) Estimated construction costs;

(ii) Existing annual operation and maintenance costs;

(iii) Discounted, existing annual operation and maintenance costs as a result of constructing the project;

(iv) Projected future annual operation and maintenance costs for the total facility;

(v) The applicant's current and future annual debt service on the project;

(vi) The annual debt service for the project if funded with a revolving fund loan;

(vii) Other grants and loans funding the project;

(viii) The applicant's level of debt for other wastewater facilities not associated with the project;

(ix) The total number of households or equivalent residential units (ERUs) existing at the time of application that will be served by the project;

(x) The nonresidential share of the total annual costs is deducted; and

(xi) MHI for the project area;

(b) The sewer user fee as a percentage of MHI is the basis for the department's hardship loan ((hardship-funding continuum)) interest rates shown in ((figure 2)) Table 1;

(c) The most recent available American Community Survey data determines the MHI;

(d) If MHI data are not available for a community, the county MHI in which the community resides will be used; and

(e) If the applicant disputes the data used by the department, the department may allow an applicant to conduct a scientific survey to determine the MHI for the project area.

(5) Loan terms and interest rates. The department uses ((the loan hardship-funding continuum)) Table 1 to determine the ((hardship-loan)) hardship loan interest rates. ((Not more than fifty percent of the funding category can be awarded to any one applicant per funding cycle. In addition to a reduced interest rate, the applicant may receive longer loan repayment terms, not to exceed twenty years, and forgivable principal loans as specified in WAC 173-98-330.

(6) Partially funded projects: If a project in the hardship category receives partial funding due to department funding constraints, the department may offer the remaining funding, subject to funding ceilings, in the next funding cycle((, and on a case-by-case basis)). The department may require further hardship analysis before offering the remaining ((moneys)) funds.

(1) Applicants may apply for a revolving fund loan to establish or continue programs that provide funding for on-site sewage repair and replacement for homeowners and small commercial enterprises.

(2) Final loan blended interest rate. The department may adjust the recipient's interest rates based on the ((interest rates)) proportion of loans that the recipient charged provided to homeowners ((and small commercial enterprises. To receive the adjusted interest rate, the recipient must issue loans shown in figure 3.

(5))) in accordance with Table 2. Loans provided to small commercial enterprises do not affect the final loan blended interest rate.

(4) The recipient ((agrees to)) must submit a final compilation of the local loans provided to homeowners ((and small commercial enterprises)) throughout the duration of the project. The list will include information provided by the recipient regarding the number and final dollar amounts of loans funded in the following respective homeowner income ((and small commercial enterprise revenue)) levels:

(a) ((Homeowner income:

(i))) Above eighty percent of county MHI;

(((ii))) (b) Fifty to eighty percent of county MHI;

(((iii))) (c) Below fifty percent of county MHI.

(((1))) Forgivable principal. The department will ((apply the funding hardship continuum provided in figure 5 below)) use Table 3 to determine the amount of forgivable principal loan funding provided to an eligible hardship project. Financial hardship will be determined based on the provisions in WAC 173-98-300((.

and the ceiling amounts in WAC 173-98-520. In addition, in accordance with the act, the department must consider unemployment for the purposes of awarding forgivable principal loan for hardship.

(1) An applicant ((can request hardship-funding consideration)) will be considered for hardship funding when submitting a funding application if the service area population is twenty-five thousand or less and the MHI is less than eighty percent of the state MHI.

(2) If the service area population is different from the population of the applicant, the applicant must show that the hardship assistance is solely used to benefit the population of the service area.

(3) The most recent available American community survey data determines the MHI.

(4) If MHI data are not available for a community then the county MHI in which the community resides will be used.

(5) If the applicant disputes the data used by the department, the department may allow an applicant to conduct a scientific survey to determine the MHI for the project area.

(1) Interest will accrue on each disbursement as it is paid to the recipient. This is "deferred interest." Deferred interest is added to the principal at project completion.

(2) The department bases loan interest rates on the average market interest rate. The average market interest rate is:

(a) Based on the daily market rate published in the bond buyer's index for tax-exempt municipal bonds; and

(b) Taken from the period ((sixty to thirty)) one hundred eighty to thirty days before the ((annual)) funding application cycle begins.

(3) See WAC 173-98-300 and 173-98-310 for hardship interest rates.

(4) The standard interest rates for water pollution control activities projects are the rates calculated for "moderate" hardship in accordance with Table 1 in WAC 173-98-300. The department may work with stakeholders to develop a program that may further adjust interest rates for the purposes of further encouraging the funding of water pollution control activities projects.

(5) The director may ((approve lower)) adjust interest rates for the ((annual)) funding application cycle if a financial analysis of the revolving fund demonstrates that ((lower)) the interest rates ((for that year)) are not detrimental to the perpetuity of the revolving fund.

(((5))) (6) Prior to issuing its Final Offer and Applicant List the department will examine and may lower interest rates if the rates for tax-exempt municipal bonds are significantly lower than when the funding cycle interest rate was determined in accordance with subsection (2) of this section.

(7) An administration charge will be applied to all loans that enter repayment after the effective date of this section. The following conditions apply to the administration charge.

(a) The administration charge will be applied to the outstanding loan balance at the time of each payment.

(b) The administration charge will be subtracted from the interest rate established in the loan agreement so there is no additional cost to the borrower.

(c) The administration charge will not be applied to loans with interest rates less than the administration charge.

(d) The maximum allowable administration charge is one percent. Initially the administration charge will be set at this level.

(e) Beginning with its 2017-2019 biennial operating budget submittal and each biennium thereafter, the department will compare the projected administration account balance and the projected administration charge income with projected program costs, including an adequate working capital reserve as defined by the office of financial management. In its submittal to the office of financial management, the department may:

(i) Find that the projected administration charge income is inadequate to fund the cost of administering the program, and that the rate of the charge must be increased; however, the administration charge may never exceed one percent;

(ii) Find that the projected administration charge income exceeds what is needed to fund the cost of administering the program, and that the rate of the charge must be decreased;

(iii) Find that there is an excess balance in the administration account, and that the excess must be transferred to the water pollution control revolving fund to be used for loans; or

(iv) Find that there is no need for any rate adjustments or balance transfers.

(f) If the department determines the administration charge should be adjusted, it will increase (up to the maximum of one percent) or decrease the administration charge and apply the new administration charge to loans that enter repayment after the administration charge has been adjusted. Loans already in repayment will not be affected by the adjusted administration charge.

(1) There are two kinds of refinance with different rules: Standard refinance and interim refinance.

(2) Standard refinance refers to a completed project funded with ((moneys)) funds from a source other than the department. It is limited to water pollution control facilities where project construction began after March 7, 1985.

(a) Applicants requesting standard refinancing must meet all the requirements contained in the act;

(b) Standard refinance projects will only be funded if there is limited demand for ((moneys)) funds for new projects;

(c) All department prerequisites and revolving fund conditions must have been met at the time the project was undertaken;

(d) If multiple standard refinance applications are received, priority will be given based on impacts to the ratepayers in the service area of the project;

(e) Standard refinance projects are not eligible for hardship financial assistance; and

(f) Repayment begins six months after a funding agreement becomes effective.

(3) Interim refinance applies to a project that is in progress using ((moneys)) funds from a source other than the department. Interim refinance retires existing debt and also covers the remaining eligible project costs. Interim refinance projects must meet all applicable requirements of this chapter.

((For a revenue obligation secured loan with terms more than five years, the recipient must accumulate a reserve account equivalent to the annual debt service on the loan. This reserve must be established before or during the first five years of the loan repayment period. The reserve account may be used to make the last two payments)) The department may require a recipient to create a reserve account to secure the payment of the principal and interest on the revolving fund loan.

In the event of loan default, the state of Washington may withhold any amounts due to the recipient from the state for other purposes. The ((moneys)) funds will be applied to the debt.

A late fee of one percent per month on the past due amount ((will)) may be assessed starting on the date the debt becomes past due and until it is paid in full.

(1) The revolving fund is divided into ((four)) three funding categories:

(a) ((Green project reserves category: An amount equal to twenty-five percent of the capitalization grant is allocated to the green project reserves category.

(c))) Water pollution control facilities category: ((After allocating revolving fund moneys to the green project reserves category,)) Seventy-five percent of the ((remaining)) revolving fund will be available for facilities projects ((as established under section 212 of the act; and));

(((d))) (b) Preconstruction category: ((After allocating revolving fund moneys to the green project reserves category,)) Five percent of the ((remaining)) revolving fund will be available for preconstruction category; and

(((e))) (c) Water pollution control activities category: ((After allocating revolving fund moneys to the green project reserves category,)) Twenty percent of the ((remaining)) revolving fund will be available for the implementation of programs or projects established under the Washington's Water Quality Management Plan to Control Nonpoint Sources of Pollution.

(2) Forgivable principal.

(a) Additional subsidization in the form of forgivable principal loans may be provided at an amount equal to ((nine percent of the capitalization grant;

(c) The percentages listed in (a) and (b) of this subsection for forgivable principal offered may be adjusted as required to meet federal laws)) the maximum allowed by the act and/or a capitalization grant;

(((d))) (b) Additional subsidization in the form of forgivable principal loans may be provided for eligible hardship projects, eligible green project reserve((s)) projects or project elements, and eligible preconstruction projects.

(3) If the demand is limited in any of the funding categories or to meet funding levels required in federal laws, the department can shift ((moneys)) funds between the funding categories.

(1) Where applicable, the recipient must acknowledge department and EPA funding in reports, technical documents, publications, brochures, and other materials.

(2) Where applicable, the recipient must ((display signs for site-specific projects acknowledging department and EPA funding. The sign must be large enough to be seen from nearby roadways and include a department or EPA logo)) acknowledge department and EPA funding for site-specific projects by one of the following means:

(e) Press release.

(1) Green project reserve((s category)):

(b))) The ceiling amount for forgivable principal provided for eligible green project reserve((s)) projects is up to ((fifty)) twenty-five percent of the total green project reserve-eligible portion of the project costs. ((If demand is limited for green project reserves projects, the ceiling amount may be raised to fully use available funding.))

(2) Preconstruction category:

(a) No more than twenty percent of the revolving fund in this category will be available to any one applicant per funding cycle.

(b) The ceiling amount for a forgivable principal loan provided for financial hardship for WAC 173-98-330 is up to fifty percent of the eligible project costs. ((If demand is limited for projects eligible for preconstruction category, the ceiling amount may be raised to fully use available funding.))

(c) The ceiling amount for this category applies to the combined total of all preconstruction elements for loans and forgivable principal loans.

(3) Water pollution control facilities category:

(a) No more than fifty percent of the revolving fund in this category will be available to any one applicant per funding cycle;

(b) The ceiling amount for a forgivable principal loan provided for financial hardship for WAC 173-98-330 is five million dollars. If a forgivable principal loan is provided for a hardship project in conjunction with a centennial program grant award for hardship, then the ceiling amount for the combined forgivable principal loan and centennial program grant is five million dollars; and

(c) No more than ((five)) seven million dollars is available for each smaller combined design-construct project (step four). See WAC 173-98-530 for information on smaller combined design-construct projects (step four).

(4) Water pollution control activities category: ((Not)) No more than fifty percent of the revolving fund in this category will be available to any one applicant per funding cycle.

(5) Water pollution control facilities construction bid overruns:

(a) If the low responsive responsible construction bid(s) exceeds the engineer's estimate of construction costs, the department may approve funding increases for up to ten percent of the engineer's ((original estimate)) cost estimate as supplied with the bid documents;

(b) The ceiling amounts that were established in the fiscal year in which the project was offered funding apply; and

(c) First priority for funding bid overruns will be given to hardship communities based on the severity of financial need.

(6) Water pollution control facilities construction change orders:

(a) The department may approve funding for change orders for up to five percent of the eligible portion of the low responsive responsible construction bid(s);

(b) The department may approve funding for change orders for greater than five percent of the eligible portion of the low responsive responsible construction bid(s) only if the recipient can demonstrate that the additional funding is needed to remedy unforeseeable, extraordinary site-specific conditions;

(c) The ceiling amounts that were established in the fiscal year in which the project was offered funding apply; and

(((c))) (d) First priority for funding change orders will be given to hardship communities based on the severity of financial need.

(7) If a project qualifies for both hardship funding and green project reserve((s)) funding, then the ceiling amount for total forgivable principal and centennial grant funding for the project is the combined ceiling amount of both hardship and green project reserve((s)) categories.

(1) The step process is required for wastewater facilities projects. The process begins with site-specific planning, and continues through design to construction.

(2) For steps one through three, an applicant may only apply for funding for one step of the process at a time. ((At the time of application, completion of the previous steps must be approved by the department.)) Funding of one step does not guarantee the funding of subsequent steps.

(3) The step process includes the following:

(a) Planning (step one): Step one involves the preparation of a site-specific ((facilities plan)) planning document that identifies the cost-effective alternatives for addressing a water pollution control problem in accordance with WAC 173-98-730. There is no prerequisite for planning((. If there is an existing engineering report, it must be upgraded to a facilities plan));

(b) Design (step two): Step two includes the preparation of plans and specifications for use in construction. These must be based on the preferred cost-effective alternative identified in the ((facilities plan. A facilities plan)) planning document. In order to be eligible for design a planning document must be approved by the department ((before an application for design can be considered for funding)) without conditions at least thirty days before issuance of the Draft Offer and Applicant List.

((Facilities plans)) Planning documents approved by the department more than two years before the close of the application period must contain evidence of recent review by the department to ensure the document reflects current conditions; and

(c) Construction (step three): Step three includes ((the actual building)) construction of facilities based on the approved design. ((Design)) In order to be eligible for construction, design plans and specifications must be approved by the department ((before an application for construction can be considered for funding. The applicant must also have a current rate study that includes the proposed project before an application for construction can be considered for funding. The utility rate proposed in the rate study must be adequate to pay for O&M, debt service, and replacement of short lived assets, and any other associated project costs. The applicant must have an adopted fee ordinance based on the current rate study that includes the proposed project before the department will sign a loan agreement)) without conditions, in accordance with WAC 173-240-030, at least thirty days before issuance of the Draft Offer and Applicant List.

(4) Combined steps for smaller design-construct projects (step four): In some cases, design and construction may be combined into one ((loan)) project. Step four applicants must demonstrate that step two (design) can be completed and approved by the department within one year of the ((effective)) signature date of the funding agreement. ((The applicant must also complete a rate study that includes the proposed project and adopt a fee ordinance based on the rate study before the department will approve plans and specifications as required in WAC 173-98-560, approval of plans and specifications. The utility rate proposed in the rate study must be adequate to pay for O&M, debt service, and replacement of short lived assets, and any other associated project costs.)) In order to be eligible for step four, a planning document must be approved by the department without conditions at least thirty days before issuance of the Draft Offer and Applicant List. The total project costs for step four projects must be ((five)) seven million dollars or less.

(5) Step deviations. During the application phase of the funding cycle, the department may allow an applicant to deviate from the traditional step requirements if:

(a) The Washington state department of health has declared a public health emergency((;)), and

(((b))) the proposed project would remedy this situation((.

(b) The department has declared an environmental emergency, and the proposed project would remedy this situation.

The ((step)) following process is required for lake projects and recommended for all water pollution control activities projects.

(1) Planning involves the identification of problems ((and)), evaluation of cost-effective alternatives in accordance with WAC 173-98-730, and preparation of a planning document.

(2) Implementation is the actual implementation of the project based on the planning document. ((Where the project includes construction, a design element may be included before the implementation step.))

PART 6

((DESIGN-BUILD AND DESIGN-BUILD-OPERATE PROJECTS)) ALTERNATIVE PUBLIC WORKS CONTRACTING

(((1) Design-build or design-build-operate)) Alternative public works contracting projects must be consistent with the applicable ((statutes, such as)) sections of chapter 39.10 RCW, Alternative public works contracting procedures, chapter 70.150 RCW, Water Quality Joint Development Act, and/or chapter 35.58 RCW, Metropolitan municipal corporations.

(1) Recipients must fully comply with all applicable federal, state, and local laws and rules relating to topics such as procurement, discrimination, labor, job safety, drug-free environments, and minority and women owned businesses.

(2) Ongoing management of most aspects of loan projects is subject to the most recent edition of Administrative Requirements for Recipients of Ecology Grants and Loans (publication #91-18) or Administrative Requirements for Recipients of Ecology Grants and Loans Managed in EAGL (publication #14-01-002).

(3) Ongoing management of all aspects of loan projects is subject to the associated funding program guidelines.

(4) The applicant shall secure all necessary permits required by authorities having jurisdiction over the project. Copies must be available to the department upon request.

(1) ((A local government not in compliance with the Growth Management Act may not receive loans or grants from the department, except, in limited circumstances, where a local government must address a public health need or substantial environmental degradation.)) A county, city, or town that has been offered a loan for a water pollution control facilities project may not receive loan funds while the county, city, or town is not in compliance with the Growth Management Act unless:

(2) For the purposes of this section, "compliance with the Growth Management Act" means: A county, city, or town that must or chooses to plan under RCW 36.70A.040 and has adopted a comprehensive plan, including a capital facilities plan element, and development regulations as required by chapter 36.70A RCW.

(3) For the purposes of this chapter, a public health need related to a loan must be documented by a letter signed by the secretary of the Washington state department of health or his or her designee and addressed to the public official who signed the loan application. "Public health need" means a situation where:

(a) There is a documented potential for:

(i) Contaminating a source of drinking water; or

(ii) Failure of existing wastewater system or systems resulting in contamination being present on the surface of the ground in the quantities and locations as to create a potential for public contact; or

(iii) Contamination of a commercial or recreational shellfish bed as to create a critical public health risk associated with consumption of the shellfish; or

(iv) Contamination of surface water so as to create a critical public health risk associated with recreational use; and

(b) The problem generally involves a serviceable area including, but not limited to, a subdivision, town, city, or county, or an area serviced by on-site sewage disposal systems; and

(c) The problem cannot be corrected through more efficient operation and maintenance of an existing wastewater disposal system or systems.

(4) For the purposes of this chapter, a substantial environmental degradation related to a loan must be documented by a letter signed by the director and addressed to the public official who signed the loan application. "Substantial environmental degradation" means that:

(a) There is a situation causing real, documented, critical environmental contamination that:

(i) Contributes to violations of the state's water quality standards; or

(ii) Interferes with beneficial uses of the waters of the state;

(b) The problem generally involves a serviceable area including, but not limited to, a subdivision, town, city, or county, or an area serviced by on-site sewage disposal systems; and

(c) The problem cannot be corrected through more efficient operation and maintenance of an existing wastewater disposal system or systems.

(1) All recipients of funding for water pollution control facility projects must comply with the SERP.

(2) SERP includes all the provisions of the State Environmental Policy Act (SEPA), chapter 43.21C RCW, and the SEPA rules, chapter 197-11 WAC, and applicable federal requirements.

(3) All mitigation measures committed to in documents developed in the SERP process, such as the environmental checklist, environmental report, SEPA environmental impact statement (EIS), the finding of no significant impact/environmental assessment, or record of decision/federal EIS will become revolving fund loan agreement conditions. Failure to abide by these conditions will result in withholding of payments and may result in immediate repayment of the loan.

(1) Funding will only be considered if ((the)) a project is shown to be the cost-effective alternative/solution to ((the)) a water ((pollution control)) quality problem and that the project maximizes the potential for energy conservation and efficient water use, reuse, recapture, and conservation. The cost-effective alternative is determined using a cost-effectiveness analysis.

(2) A cost-effectiveness analysis ((must be included in the facilities plan and)) must include ((the following:

(a))) a comparison of the ((total cost, total present worth or annual equivalent)) life cycle costs of alternatives considered for the planning period((;

(c) A consideration of the monetary or nonmonetary costs/benefits of each alternative, such as the environmental impact, energy impacts, growth impacts, and community priorities)) taking into account:

(c) The cost of replacing the project or activity.

(3) ((Facilities plans)) Applicants proposing ((design-build or design-build-operate)) alternative public works contracting for projects must demonstrate that this approach is the cost-effective alternative for procurement.

PART 8

TIMELY USE OF REVOLVING FUND LOAN ((MONEYS)) FUNDS

(2))) (1) Project initiation. Loan ((moneys)) funds must be spent in a timely fashion. The recipient must consistently meet the performance measures agreed to in the loan agreement. These performance measures include, but are not limited to, the following:

(a) Work on a project must be started within ((sixteen)) ten months of the publication date of the Final Offer and Applicant List on which the project was proposed.

(b) Starting a project means making any measurable step toward achieving the milestones, objectives, and overall goals of the project.

(3))) (2) Project initiation extension. Certain circumstances may allow a time extension of no more than twelve months for starting a project. For example:

(a) Schedules included in water quality permits, consent decrees, or enforcement orders; or

(b) There is a need to do work during an environmental window in a specific season of the year; or

(c) Other reasons as identified by the department on a case-by-case basis.

(1) The act requires that the revolving fund be managed in perpetuity.

(2) The department will strive to achieve perpetuity, as defined by WAC 173-98-030((, by 2016)).

(1) Recipients must maintain ((accounting records in accordance with RCW 43.09.200 Local government accounting—Uniform system of accounting.)) accurate records and accounts for the project in accordance with generally accepted accounting principles (GAAP) as issued by the Governmental Accounting Standards Board (GASB), including standards related to the reporting of infrastructure assets, or in accordance with the state standards in RCW 43.09.200 "Local government accounting—Uniform system of accounting."

(2) Accounting irregularities may result in a payment hold until irregularities are resolved. The director may require immediate repayment of misused loan ((moneys)) funds.

Recipients shall maintain comprehensive insurance coverage on the project for an amount equal to the ((moneys)) funds disbursed.

(1) The department may authorize a recipient to certify compliance with selected program requirements. The recipient must:

(a) Request certification authority;

(b) Document that it has the capability and resources;

(c) Document that it is in the best interest of the state; and

(d) Demonstrate that the request is consistent with state and federal laws and rules.

(2) ((Concurrences)) Determinations required in the environmental review process cannot be delegated to recipients.