"Sec. 1   RCW 90.50A.020 and 1993 c 329 s 1 are each amended to read as follows:
     (1) The water pollution control revolving fund is hereby established in the state treasury. Moneys in this fund may be spent only after legislative appropriation. Moneys in the fund may be spent only in a manner consistent with this chapter.
     (2) The water pollution control revolving fund shall consist of:
     (a) All capitalization grants provided by the federal government under the federal water quality act of 1987;
     (b) Other moneys provided by the federal government including funds under the American recovery and reinvestment act of 2009 for water pollution control facilities and related activities to achieve federal water pollution requirements;
     (c) All state matching funds appropriated or authorized by the legislature;
     (((c))) (d) Any other revenues derived from gifts or bequests pledged to the state for the purpose of providing financial assistance for water pollution control projects;
     (((d))) (e) All repayments of moneys borrowed from the fund;
     (((e))) (f) All interest payments made by borrowers from the fund;
     (((f))) (g) Any other fee or charge levied in conjunction with administration of the fund; and
     (((g))) (h) Any new funds as a result of leveraging.
     (3) The state treasurer may invest and reinvest moneys in the water pollution control revolving fund in the manner provided by law. All earnings from such investment and reinvestment shall be credited to the water pollution control revolving fund.

Sec. 2   RCW 90.50A.030 and 2007 c 341 s 38 are each amended to read as follows:
     The department shall use the moneys in the water pollution control revolving fund to provide financial assistance, as provided in the water quality act of 1987 and ((as provided in)) RCW 90.50A.040, and pursuant to other federal requirements for achieving state and federal water pollution control for protection of the state's waters:
     (1) To make loans, on the condition that:
     (a) Such loans are made at or below market interest rates, including interest free loans, at terms not to exceed twenty years;
     (b) Annual principal and interest payments will commence not later than one year after completion of any project and all loans will be fully amortized not later ((then)) than twenty years after project completion;
     (c) The recipient of a loan will establish a dedicated source of revenue for repayment of loans; and
     (d) The fund will be credited with all payments of principal and interest on all loans.
     (2) Loans, including additional subsidization to eligible recipients in the form of forgiveness of principal and negative interest loans or grants or any combination thereof, may be made for the following purposes:
     (a) To public bodies for the construction or replacement of water pollution control facilities as defined in section 212 of the federal water quality act of 1987;
     (b) For the implementation of a management program established under section 319 of the federal water quality act of 1987 relating to the management of nonpoint sources of pollution, subject to the requirements of that act; and
     (c) For development and implementation of a conservation and management plan under section 320 of the federal water quality act of 1987 relating to the national estuary program, subject to the requirements of that act.
     (3) The department may also use the money in the water pollution control revolving fund provided by congress for additional subsidization to eligible recipients in the form of forgiveness of principal, negative interest loans or grants or any combination thereof. Uses of forgiveness of principal and negative interest loans or grants include but are not limited to the following purposes:
     (a) To public bodies for the construction or replacement of water pollution control facilities as defined in section 212 of the federal water quality act of 1987;
     (b) For the implementation of a management program established under section 319 of the federal water quality act of 1987 relating to the management of nonpoint sources of pollution, subject to the requirements of that act;
     (c) For development and implementation of a conservation and management plan under section 320 of the federal water quality act of 1987 relating to the national estuary program, subject to the requirements of that act;
     (d) For storm water projects; and
     (e) For combined sewer overflow projects.
     (4) If additional subsidization is made available from moneys provided by congress to eligible recipients in the form of forgiveness of principal or negative interest loans or grants or any combination thereof, the department shall accept applications consistent with this chapter.
     (5) The department may also use the moneys in the fund for the following purposes:
     (a) To buy or refinance the water pollution control facilities' debt obligations of public bodies at or below market rates, if such debt was incurred after March 7, 1985;
     (b) To guarantee, or purchase insurance for, public body obligations for water pollution control facility construction or replacement or activities if the guarantee or insurance would improve credit market access or reduce interest rates, or to provide loans to a public body for this purpose;
     (c) 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 the sale of such bonds will be deposited in the fund;
     (d) To earn interest on fund accounts; and
     (e) To pay the expenses of the department in administering the water pollution control revolving fund according to administrative reserves authorized by federal and state law.
     (((4))) (6) The department shall present a biennial progress report on the use of moneys from the account to the appropriate committees of the legislature. The report shall consist of a list of each recipient, project description, and amount of the grant, loan, or both.
     (((5) The department may not use the moneys in the water pollution control revolving fund for grants.))
     (7) When prioritizing project applications for loans, forgiveness of principal, and negative interest loans or grants or any combination thereof for water pollution control facilities, the department shall consider the following:
     (a) The protection and improvement of water quality and public health;
     (b) The cost to residential ratepayers if they must finance water pollution control facilities without state assistance;
     (c) Actions required under federal and state permits and compliance orders, including projects with a history of noncompliance;
     (d) Readiness of the project to proceed with planning, design, or construction;
     (e) The cost-effectiveness of the project based on an analysis of alternatives, including regionalization;
     (f) Whether the entity receiving assistance is a Puget Sound partner, as defined in RCW 90.71.010;
     (g) Whether the project is referenced in the action agenda developed by the Puget Sound partnership under RCW 90.71.310;
     (h) Effective one calendar year following the development and statewide availability of model evergreen community management plans and ordinances under RCW 35.105.050, whether the project is sponsored by an entity that has been recognized, and what gradation of recognition was received, in the evergreen community recognition program created in RCW 35.105.030;
     (i) The extent to which the applicant county or city, or if the applicant is another public body, the extent to which the county or city in which the applicant public body is located, has established programs to mitigate nonpoint pollution of the surface or subterranean water sought to be protected by the water pollution control facility named in the application for state assistance; and
     (j) The recommendations of the Puget Sound partnership, created in RCW 90.71.210, and any other board, council, commission, or group established by the legislature or a state agency to study water pollution control issues in the state.

Sec. 3   RCW 90.50A.040 and 2007 c 341 s 39 are each amended to read as follows:
     Moneys deposited in the water pollution control revolving fund shall be administered by the department. In administering the fund, the department shall:
     (1) Consistent with RCW 90.50A.030 and 90.50A.080, allocate funds for loans, forgiveness of principal, negative interest loans or grants or any combination thereof in accordance with the annual project priority list in accordance with section 212 of the federal water pollution control act as amended in 1987, and allocate funds under sections 319 and 320 according to the provisions of that act, and allocate funds for separate competitive programs relating to storm water systems, sewer systems, and septic systems prioritized on a worst case first need basis;
     (2) Use accounting, audit, and fiscal procedures that conform to generally accepted government accounting standards;
     (3) Prepare any reports required by the federal government as a condition to awarding federal capitalization grants;
     (4) Adopt by rule any procedures or standards necessary to carry out the provisions of this chapter;
     (5) Enter into agreements with the federal environmental protection agency;
     (6) Cooperate with local, substate regional, and interstate entities regarding state assessment reports and state management programs related to the nonpoint source management programs as noted in section 319(c) of the federal water pollution control act amendments of 1987 and estuary programs developed under section 320 of that act;
     (7) Comply with provisions of the water quality act of 1987; and
     (8) After January 1, 2010, not provide funding for projects designed to address the restoration of Puget Sound that are in conflict with the action agenda developed by the Puget Sound partnership under RCW 90.71.310.

NEW SECTION.  Sec. 4   A new section is added to chapter 90.50A RCW to read as follows:
     Any public body receiving a loan, forgiveness of principal, or negative interest loan or grant or any combination thereof from the fund shall:
     (1) Appear on the annual project priority list to be identified for funding under section 212 of the federal water pollution control act amendments of 1987 or be eligible under sections 319 and 320 of that act;
     (2) Submit an application to the department;
     (3) Establish and maintain a dedicated source of revenue or other acceptable source of revenue for the repayment of the loan; and
     (4) Demonstrate to the satisfaction of the department it has sufficient legal authority to incur the debt for the loan that it is applying for.

Sec. 5   RCW 90.50A.060 and 1988 c 284 s 7 are each amended to read as follows:
     If a public body defaults on loan payments due to the fund, the state may withhold any amounts otherwise due to the public body and direct that such funds be applied to the indebtedness and deposited into the account.

Sec. 6   RCW 90.48.110 and 2007 c 343 s 13 are each amended to read as follows:
     (1) Except under subsection (2) of this section, all engineering reports, plans, and specifications for the construction of new sewerage systems, sewage treatment or disposal plants or systems, or for improvements or extensions to existing sewerage systems or sewage treatment or disposal plants, and the proposed method of future operation and maintenance of said facility or facilities, shall be submitted to and be approved by the department, before construction thereof may begin. No approval shall be given until the department is satisfied that said plans and specifications and the methods of operation and maintenance submitted are adequate to protect the quality of the state's waters as provided for in this chapter.
     (a) The department shall require, through the development of rules, that plans established in this subsection (1) include the following elements:
     (i) Reviews and updates of sewer plans on a six-year cycle, including asset management and financial planning;
     (ii) An equitable sewer user charge system for residential, commercial, and industrial users to cover all financial obligation of the planned sewer utility;
     (iii) Connection fees for new connections to a sewer system that reflect a fair share cost of infrastructure from which new connections will benefit;
     (iv) A capital wastewater facilities reserve fund dedicated to paying for wastewater infrastructure and equipment replacement; and
     (v) A sewer use ordinance that restricts certain connections and wastes to protect a local government's investment and enhance the wastewater treatment's process stability and effluent quality. The ordinance must, at least:
     (A) Require new sewers and connections to be properly designed and constructed;
     (B) Require a provision with a timeline and proximity in which existing and future residences must connect to the sewer system;
     (C) Prohibit inflow sources into the sewer system; and
     (D) Prohibit introduction of toxic or hazardous wastes into the sewer system in an amount or concentration that endangers the public's safety or the physical integrity of the system which may cause violations of the national pollutant discharge elimination system permit or state waste discharge permit.
     (b) Approval under this chapter is not required for large on-site sewage systems permitted by the department of health under chapter 70.118B RCW or for on-site sewage systems regulated by local health jurisdictions under rules of the state board of health.
     (2) To promote efficiency in service delivery and intergovernmental cooperation in protecting the quality of the state's waters, the department may delegate the authority for review and approval of engineering reports, plans, and specifications for the construction of new sewerage systems, sewage treatment or disposal plants or systems, or for improvements or extensions to existing sewerage system or sewage treatment or disposal plants, and the proposed method of future operations and maintenance of said facility or facilities and industrial pretreatment systems, to local units of government requesting such delegation and meeting criteria established by the department.
     (3) For any new or revised general sewer plan submitted for review under this section, the department shall review and either approve, conditionally approve, reject, or request amendments within ninety days of the receipt of the submission of the plan. The department may extend this ninety-day time limitation for new submittals by up to an additional ninety days if insufficient time exists to adequately review the general sewer plan. For rejections of plans or extensions of the timeline, the department shall provide in writing to the local government entity the reason for such action. In addition, the governing body of the local government entity and the department may mutually agree to an extension of the deadlines contained in this section.

NEW SECTION.  Sec. 7   The department of ecology may adopt rules to implement this act.

NEW SECTION.  Sec. 8   This act is necessary for the immediate preservation of the public peace, health, or safety, or support of the state government and its existing public institutions, and takes effect immediately."