WSR 00-04-085

EXPEDITED ADOPTION

DEPARTMENT OF ECOLOGY


[ Order 00-02 -- Filed February 2, 2000, 8:50 a.m. ]

Title of Rule: Chapter 173-98 WAC, Uses and limitations of the water pollution control revolving fund.

Purpose: Allow ecology to offer lower interest rates on water quality loans to local governments.

Other Identifying Information: Made possible due to financial health of the state revolving fund.

Statutory Authority for Adoption: Chapter 90.50A RCW, Water pollution control facilities -- Federal capitalization grants.

Statute Being Implemented: Chapter 90.50A RCW, Water pollution control facilities -- Federal capitalization grants.

Summary: This amendment changes the way ecology calculates the interest rates and terms, lowering the maximum base rate and making it possible for ecology to lower the base rate further when analysis shows that a lower rate will not endanger the perpetuity of the loan fund. The lower rate will benefit the local governments and other groups who receive funding under the program.

Reasons Supporting Proposal: Lower rates will benefit local governments, and analysis of the fund by a third-party bond counsel showed that the perpetual health of the fund could be assured at lower interest rates.

Name of Agency Personnel Responsible for Drafting: Tim Hilliard, Lacey, (360) 407-6429; Implementation and Enforcement: Brian Howard, Lacey, (360) 407-6510.

Name of Proponent: Department of Ecology, governmental.

Rule is not necessitated by federal law, federal or state court decision.

Explanation of Rule, its Purpose, and Anticipated Effects: The entire rule manages the full spectrum of activities of the Washington state water pollution control revolving fund (SRF), a loan program that offers $40-$50 million each year for low-interest or interest-free loans to local governments, special districts and tribes. The money may be used for water pollution control facilities or activities.

This amendment changes the way ecology calculates the interest rates and terms, lowering the maximum base rate and making it possible for ecology to lower the base rate further when analysis shows that a lower rate will not endanger the perpetuity of the loan fund.

The lower rate will benefit the local governments and other groups who receive funding under the program.

Proposal Changes the Following Existing Rules: This amendment changes the way ecology calculates the interest rates and terms, lowering the maximum base rate and making it possible for ecology to lower the base rate further when analysis shows that a lower rate will not endanger the perpetuity of the loan fund.

NOTICE

THIS RULE IS BEING PROPOSED TO BE ADOPTED USING AN EXPEDITED RULE-MAKING PROCESS THAT WILL ELIMINATE THE NEED FOR THE AGENCY TO HOLD PUBLIC HEARINGS, PREPARE A SMALL BUSINESS ECONOMIC IMPACT STATEMENT, OR PROVIDE RESPONSES TO THE CRITERIA FOR A SIGNIFICANT LEGISLATIVE RULE. IF YOU OBJECT TO THIS RULE BEING ADOPTED USING THE EXPEDITED RULE-MAKING PROCESS, YOU MUST EXPRESS YOUR OBJECTIONS IN WRITING AND THEY MUST BE SENT TO Jerry Thielen, Rules Coordinator, Department of Ecology, P.O. Box 47600, Olympia, 98504-7600 , AND RECEIVED BY April 4, 2000.


January 30, 2000

Daniel J. Silver

Deputy Director

OTS-3812.1


AMENDATORY SECTION(Amending Order 98-10, filed 11/24/98, effective 12/25/98)

WAC 173-98-030
How, and under what conditions, can money from the state water pollution control revolving fund be used?

(1) Uses of the money. The state water pollution control revolving fund (SRF) may be used for the following purposes:

(a) To accept and retain funds from capitalization grants provided by the federal government, state matching funds appropriated in accordance with chapter 90.50A RCW, payments of principal and interest, and any other funds earned or deposited;

(b) To make loans to applicants in order to finance the planning, design, and/or the construction of water pollution control facilities, make loans to applicants for the implementation of nonpoint source pollution control management programs (which includes planning and implementing elements of the nonpoint source pollution assessment and management program), and make loans to applicants for the development and implementation of a comprehensive estuary conservation and management plan, subject to the requirements of the act;

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

(d) To buy or refinance the debt obligations incurred by applicants after March 7, 1985, for the construction of water pollution control facilities. (March 7, 1985, was the date that the amendments adding Title VI to the act were first considered by Congress. Any refinancing agreements must be for construction initiated after that date according to federal and state law);

(e) To guarantee or purchase insurance for local obligations where such an action would improve credit market access or reduce interest rates;

(f) 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 fund; and

(g) To finance the reasonable costs incurred by the department in the administration of the account as authorized by the act and chapter 90.50A RCW.

(2) Policies for establishing the terms of financial assistance. Recipients' interest rates will be based on the average market interest rate. The average market interest rate will be based on the daily market rate published in the Bond Buyer's Index for tax exempt municipal bonds((. The average market rate will be calculated three months before the SRF funding cycle begins using the daily market interest rate for those months. The average market interest rate will be recalculated three months before the Draft IUP is issued, based on the daily market interest rate for those months. If that interest rate is at least 0.1 percent below the previously calculated average market interest rate, recipients' interest rates will be based on the lower average market interest rate rounded to the nearest 0.1 percent. Recipients will not receive an interest rate higher than the interest rate established at the beginning of the funding cycle)) for the period from sixty to thirty days before the SRF annual funding application cycle begins, using the daily market interest rate for that period.

Loan terms and interest rates are as follows:


Repayment Period ((Project Duration))
Interest Rate
((Up to five years:)) ((Projects must be completed in less than two years from the effective date of the SRF loan agreement to project completion.)) ((Zero percent interest rate.))
Up to five years: ((Projects that take two years or more to complete from the effective date of the SRF loan agreement to project completion.)) ((Forty)) Thirty percent of the average market rate.
More than 5 but ((less)) no more than ((15)) 20 years: ((Not applicable.)) Sixty percent of the average market rate.
((15 to 20 years: Not applicable. Seventy-five percent of the average market rate.))

The director of the department of ecology or her/his designee may approve lower interest rates for annual funding application cycle if a financial analysis of the fund demonstrates that lower interest rates for that year are not detrimental to the perpetuity of the fund.

(3) Financial hardship assistance for facilities construction.

(a) Financial hardship assistance may be available to loan recipients for the existing residential need portion of a water pollution control facilities construction project if the project will cause a residential sewer user charge in excess of 1.5 percent of the median household income. Median household income is based on census data. Median household income data is updated yearly based on inflation. If median household income data is not available for a community the department will allow a local government to conduct a scientific survey to determine the median household income.

(b) The need for hardship assistance is calculated on water pollution control facilities construction costs associated with existing residential need at the time an application for funding is received by the department. The analysis does not include costs for growth. For example, if an applicant applies for ten million dollars to finance facilities construction costs, where six million dollars is for existing residential need and the remaining four million dollars is for growth, the hardship analysis would be based on the six million dollars for existing residential need.

(c) If the department determines that financial hardship exists, it may structure loan agreements with terms to help keep residential user charges below the financial hardship level for the existing residential need, if possible. Hardship terms may include lengthening the repayment period to a maximum of twenty years, lowering the interest rate, or a combination of a lower interest rate and an extended term.

(d) For some facilities projects, financial hardship cannot be established using residential user fees as a percent of median household income. In these situations, financial hardship determinations will be made on a case-by-case basis.

(e) If an applicant is requesting financial hardship assistance, it should submit a completed financial hardship analysis form with its application for financial assistance.

[Statutory Authority: RCW 43.21.080 and chapters 34.05 and 90.50A RCW. 98-24-036 (Order 98-10), 173-98-030, filed 11/24/98, effective 12/25/98. Statutory Authority: Chapter 90.50A RCW. 89-18-019 (Order 89-34), 173-98-030, filed 8/29/89, effective 9/29/89.]

Washington State Code Reviser's Office