Title of Rule and Other Identifying Information: WAC 246-296-040 Use of funds by the state, 246-296-060 Establishing a drinking water state revolving fund (DWSRF) loan fee, loan fee account, and loan fee uses, and 246-296-080 Ineligible projects and project-related costs. This rule making will clarify and align WAC 246-296-040 with the federal rule under 40 C.F.R. Part 35 for set-aside activities which will allow the department of health (department) to broaden the use of the loan fee account. This rule making will amend WAC 246-296-060 to include the use of the loan fee account for projects that are eligible to receive a DWSRF loan under 40 C.F.R. 35.3520. The United States Environmental Protection Agency (EPA) has the authority to grant a deviation for prohibited projects on a case-by-case basis. This rule making will amend WAC 246-296-080 to allow projects currently prohibited from receiving a DWSRF loan under 40 C.F.R. 35.3535 to be considered eligible to receive funds when EPA grants a deviation. This change will allow the department to request a deviation from EPA on a case-by-case basis.

Purpose of the Proposal and Its Anticipated Effects, Including Any Changes in Existing Rules: WAC 246-296-040 only allows the department to use the loan fee for program administrative activities. However, 40 C.F.R. Part 35 allows other uses. This rule making will align the state rule with the federal rule to give the department the ability to use the loan fee for projects such as consolidation feasibility studies. WAC 246-296-060 disallows the use of the loan fee account funds for purposes other than program administration. This rule making will allow the department to also use the loan fee account for projects that are eligible to receive a loan. WAC 246-296-080 will identify that EPA may grant a deviation for projects normally prohibited from receiving a loan such as dam rehabilitation, and purchasing water rights.

Reasons Supporting Proposal: The DWSRF loan program provides low-interest loans to help public water systems build, repair, and redesign public water system infrastructure. The department's public health protection goals are to help public water systems provide safe and reliable drinking water to their communities by addressing problems such as replacing aging infrastructure, installing treatment to remove contaminants, restructuring failing water systems, and responding to drinking water emergency events. This rule making better serves the department's public health protection goal of loaning funds to public water systems by fully using the authorities provided in the federal rule which allow more uses of the loan fee account for infrastructure improvement projects, and allow deviations for projects otherwise prohibited from receiving a loan on a case-by-case basis.

A cost-benefit analysis is not required under RCW 34.05.328. The agency did not complete a cost-benefit analysis under RCW 34.05.328. RCW 34.05.328 (5)(b)(iii) exempts rules that adopt or incorporate by reference without material change federal statutes or regulations, Washington state law, the rules of other Washington state agencies, or national consensus codes that generally establish industry standards.

Is exempt under RCW 19.85.061 because this rule making is being adopted solely to conform and/or comply with federal statute or regulations. Citation of the specific federal statute or regulation and description of the consequences to the state if the rule is not adopted: A small business economic impact statement (SBEIS) was not prepared. Under RCW 19.85.025 and 34.05.310 (4)(c), an SBEIS is not required for proposed rules that adopt or incorporate by reference, without material change, federal statutes or regulations, Washington state law, the rules of other Washington state agencies, or national consensus codes that generally establish industry standards. The proposed rule is being adopted to conform with Section 1452 of the Safe Drinking Water Act and 40 C.F.R. Part 35. If the state does not adopt the proposed rule, the state will not be able to allow more uses of the loan fee account nor will it be able to request and receive deviations from EPA for infrastructure improvement projects.

Is exempt under RCW 19.85.025(3) as the rules are adopting or incorporating by reference without material change federal statutes or regulations, Washington state statutes, rules of other Washington state agencies, shoreline master programs other than those programs governing shorelines of statewide significance, or, as referenced by Washington state law, national consensus codes that generally establish industry standards, if the material adopted or incorporated regulates the same subject matter and conduct as the adopting or incorporating rule.

Explanation of exemptions: The agency did not complete a cost-benefit analysis under RCW 34.05.328. RCW 34.05.328 (5)(b)(iii) exempts rules that adopt or incorporate by reference without material change federal statutes or regulations, Washington state law, the rule[s] of other Washington state agencies, or national consensus codes that generally establish industry standards.

(1) The department may use the following funds to carry out the purposes of the DWSRF:

(a) Capitalization grants provided by the federal government;

(b) State matching funds appropriated under RCW 70.119A.170;

(d) DWSRF loan fees; and

(e) Any other funds earned and deposited.

(2) The department may use these funds to:

(a) Finance DWSRF loans for planning, design, and construction of public water system infrastructure projects that will address or prevent violations of applicable federal, state, and local drinking water requirements;

(b) Finance reasonable costs for the department to administer the DWSRF program; and

(c) Fund set-aside activities as authorized in ((categories (b) through (e) of))40 C.F.R. Section 35.3535 ((of the SDWA,)) including, but not limited to:

(i) DWSRF program administration;

(ii) Technical assistance specific to small public water systems;

(iii) State drinking water program management; and

(iv) Local assistance and other state programs.

(1) The department shall:

(a) Establish the terms of a DWSRF loan fee; and

(b) Annually set the DWSRF loan fee amount.

(2) The department shall set the DWSRF loan fee for each project.

(3) The DWSRF loan amount may include the DWSRF loan fee.

(4) The department shall determine the amount of DWSRF loan fee account funds to be used for program administration.

(5) The department shall use DWSRF loan fees ((only)) for program administration activities and for projects in accordance with WAC 246-296-040.

(6) The department shall deposit and retain DWSRF fees in a dedicated DWSRF loan fee account.

Except for projects and project-related costs under subsections (1) and (2) of this section, which are considered eligible to receive funds when EPA grants a deviation as allowed under Section 1452 of the SWDA, the following projects and project-related costs ((that)) are not eligible for assistance from the DWSRF program ((include)):

(1) Acquiring, building, or repairing dams or raw water reservoirs;

(2) Acquiring water rights, except if the water rights are owned by a public water system that is being acquired by restructuring;

(3) Laboratory costs for monitoring;

(4) Operation and maintenance costs;

(5) Projects needed primarily for fire protection;

(6) Projects needed primarily to serve future population growth;

(7) Projects that have received assistance from the national set-aside for Indian tribes and Alaska native villages under Section 1452(i) of the SDWA;

(8) Projects for an individual water supply system or a Group B public water system unless the public water system is being restructured into a Group A public water system under WAC 246-296-110; and

(9) Projects that are solely for the purpose of installing service meters.