HF 642

as introduced - 90th Legislature (2017 - 2018) Posted on 01/30/2017 01:25pm

A bill for an act
relating to capital investment; appropriating money and providing for clean water,
water infrastructure, and related purposes; authorizing the sale and issuance of
state bonds; amending Minnesota Statutes 2016, sections 446A.072; 446A.073;
446A.081, subdivision 9.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:

Section 1.

Minnesota Statutes 2016, section 446A.072, is amended to read:

446A.072 WASTEWATER WATER INFRASTRUCTURE FUNDING PROGRAM.

Subdivision 1.

Establishment of program.

The authority will establish a wastewater
water infrastructure funding program to provide supplemental assistance to governmental
units receiving funding through the clean water revolving fund program, the drinking water
revolving fund program, or the United States Department of Agriculture Rural Economic
and Community Development's (USDA/RECD) Water and Waste Disposal Loans and
Grants program for the predesign, design, and construction of municipal wastewater treatment
and drinking water systems, including purchase of land and easements. The purpose of the
program is to assist governmental units demonstrating financial need to build cost-effective
projects to address existing environmental or public health problems. To implement the
program, the authority shall establish a wastewater water infrastructure fund to provide
grants and loans for the purposes authorized under title VI of the Federal Water Pollution
Control Act and the federal Safe Drinking Water Act. The fund shall be credited with all
investment income from the fund and all repayments of loans, grants, and penalties.

Subd. 3.

Program administration.

(a) The authority shall provide supplemental
assistance, as provided in subdivision 5a to governmental units:

(1) whose projects are listed on the Pollution Control Agency's project priority list or
the commissioner of health's project priority list;

(2) that demonstrate their projects are a cost-effective solution to an existing
environmental or public health problem; and

(3) whose projects are approved by the USDA/RECD or certified by the commissioner
of the Pollution Control Agency or the commissioner of health.

(b) For a governmental unit receiving grant funding from the USDA/RECD, applications
must be made to the USDA/RECD with additional information submitted to the authority
as required by the authority. Eligible project costs and affordability criteria shall be
determined by the USDA/RECD.

(c) For a governmental unit not receiving grant funding from the USDA/RECD,
application must be made to the authority on forms prescribed by the authority for the clean
water revolving fund program or the drinking water revolving fund program with additional
information as required by the authority. In accordance with section 116.182, the Pollution
Control Agency or the commissioner of health shall:

(1) calculate the essential project component percentage based on the portion of project
costs necessary to convey or treat the existing wastewater flows and loadings or, for drinking
water projects, to provide safe drinking water to meet existing needs, which must be
multiplied by the total project cost to determine the eligible project cost for the program
under this section; and

(2) review and certify approved projects to the authority.

(d) Each fiscal year the authority shall make funds available for projects based on their
ranking on the Pollution Control Agency's project priority list or the commissioner of health's
project priority list. The authority shall reserve funds for a project when the applicant receives
a funding commitment from the United States Department of Agriculture Rural Development
(USDA/RECD) or submits plans and specifications to the project is certified by the Pollution
Control Agency or the commissioner of health. Funds must be reserved in an amount based
on the project cost estimate submitted to the authority prior to the appropriation of the funds
and awarded based on the lesser of that amount or the as-bid cost when the project is certified
or the as-bid cost, whichever is less.

Subd. 5a.

Type and amount of assistance.

(a) For a governmental unit receiving grant
funding from the USDA/RECD, the authority may provide assistance in the form of a grant
of up to 65 percent of the eligible grant need determined by USDA/RECD. A governmental
unit may not receive a grant under this paragraph for more than $4,000,000 $5,000,000 per
project or $15,000 $20,000 per existing connection, whichever is less, unless specifically
approved by law.

(b) For a governmental unit receiving a loan from the clean water revolving fund under
section 446A.07, the authority may provide assistance under this section in the form of a
grant if the average annual residential wastewater system cost after completion of the project
would otherwise exceed 1.4 percent of the median household income of the project service
area. In determining whether the average annual residential wastewater system cost would
exceed 1.4 percent, the authority must consider the total costs associated with building,
operating, and maintaining the wastewater system, including existing wastewater debt
service, debt service on the eligible project cost, and operation and maintenance costs. Debt
service costs for the proposed project are calculated based on the maximum loan term
permitted for the clean water revolving fund loan under section 446A.07, subdivision 7.
The amount of the grant is equal to 80 percent of the amount needed to reduce the average
annual residential wastewater system cost to 1.4 percent of median household income in
the project service area, to a maximum of $4,000,000 $5,000,000 per project or $15,000
$20,000 per existing connection, whichever is less, unless specifically approved by law.
The eligible project cost is determined by multiplying the total project costs minus any other
grants by the essential project component percentage calculated under subdivision 3,
paragraph (c), clause (1). In no case may the amount of the grant exceed 80 percent of the
eligible project cost.

(c) For a governmental unit receiving a loan from the drinking water revolving fund
under section 446A.081, the authority may provide assistance under this section in the form
of a grant if the average annual residential drinking water system cost after completion of
the project would otherwise exceed 1.2 percent of the median household income of the
project service area. In determining whether the average annual residential drinking water
system cost would exceed 1.2 percent, the authority must consider the total costs associated
with building, operating, and maintaining the drinking water system, including existing
drinking water debt service, debt service on the eligible project cost, and operation and
maintenance costs. Debt service costs for the proposed project are calculated based on the
maximum loan term permitted for the drinking water revolving fund loan under section
446A.081, subdivision 8, paragraph (c). The amount of the grant is equal to 80 percent of
the amount needed to reduce the average annual residential drinking water system cost to
1.2 percent of median household income in the project service area, to a maximum of
$5,000,000 per project or $20,000 per existing connection, whichever is less, unless
specifically approved by law. The eligible project cost is determined by multiplying the
total project costs minus any other grants by the essential project component percentage
calculated under subdivision 3, paragraph (c), clause (1). In no case may the amount of the
grant exceed 80 percent of the eligible project cost.

(c) (d) Notwithstanding the limits in paragraphs (a) and, (b), and (c), for a governmental
unit receiving supplemental assistance under this section after January 1, 2002, if the authority
determines that the governmental unit's construction and installation costs are significantly
increased due to geological conditions of crystalline bedrock or karst areas and discharge
limits that are more stringent than secondary treatment, the maximum award under this
section shall not be more than $25,000 per existing connection.

Subd. 5b.

Special assessment deferral.

A governmental unit receiving a loan under
subdivision 5a that levies special assessments to repay the loan under subdivision 5a or
section 446A.07 may defer payment of such assessments under the provisions of sections
435.193 to 435.195.

Subd. 6.

Disbursements.

Disbursements of grants or loans awarded under this section
by the authority to recipients must be made for eligible project costs as incurred by the
recipients, and must be made by the authority in accordance with the project financing
agreement and applicable state and federal laws and rules governing the payments.

Subd. 7.

Loan repayments.

Notwithstanding the limitations set forth in section 475.54,
subdivision 1, this subdivision shall govern the maturities and mandatory sinking fund
redemptions of the loans under this section. A governmental unit receiving a loan under
this section shall repay the loan in semiannual payment amounts determined by the authority.
The payment amount must be based on the average payments on the governmental unit's
clean water revolving fund loan or, if greater, the minimum amount required to fully repay
the loan by the maturity date. Payments must begin within one year of the date of the
governmental unit's final payment on the clean water revolving fund loan. The final maturity
date of the loan under this section must be no later than 20 years from the date of the first
payment on the loan under this section and no later than 40 years from the date of the first
payment on the clean water revolving fund loan.

Subd. 8.

Eligibility.

A governmental unit is eligible for assistance under this section
only after applying for grant funding from other sources and funding has been obtained,
rejected, or the authority has determined that the potential funding is unlikely.

Subd. 9.

Funding limitation.

Supplemental assistance may not be used to reduce the
sewer service charges of a significant wastewater contributor industrial user that has a
separate service charge agreement with the recipient, or a single user that has caused the
need for the project or whose current or projected flow and load exceed usage exceeds
one-half of the current wastewater treatment plant's or drinking water system capacity.

Subd. 11.

Report on needs.

By February 1 of each even-numbered year, the authority,
in conjunction with the Pollution Control Agency and the commissioner of health, shall
prepare a report to the Finance Division of the senate Environment and Natural Resources
Committee and the house of representatives Environment and Natural Resources Finance
Committee on wastewater and drinking water funding assistance needs of governmental
units under this section.

Subd. 12.

System replacement fund.

Each governmental unit receiving a loan or grant
under this section shall establish a system replacement fund and shall annually deposit a
minimum of $.50 per 1,000 gallons of flow for major rehabilitation or, expansion, or
replacement of the treatment wastewater or drinking water system, or replacement of the
treatment system at the end of its useful life. Money must remain in the account for the life
of the corresponding project loan from the authority or USDA/RECD, unless use of the
fund is approved in writing by the authority for major rehabilitation, expansion, or
replacement of the treatment wastewater or drinking water system. By March 1 each year
during the life of the loan, each recipient shall submit a report to the authority regarding the
amount deposited and the fund balance for the prior calendar year. A recipient is not required
to maintain a fund balance greater than the amount of the grant received. Failure to comply
with the requirements of this subdivision shall result in the authority assessing a penalty
fee to the recipient equal to one percent of the supplemental assistance amount for each
year of noncompliance. Failure to make the required deposit or pay the penalty fee as
required constitutes a default on the loan.

Subd. 14.

Consistency with land use plans.

A governmental unit applying for a project
in an unsewered area shall include in its application to the authority a certification from the
county in which the project is located that:

(1) the project is consistent with the county comprehensive land use plan, if the county
has adopted one;

(2) the project is consistent with the county water plan, if the county has adopted one;
and

(3) the county has adopted specific land use ordinances or controls so as to meet or
exceed the requirements of Minnesota Rules, part 7082.0050.

Sec. 2.

Minnesota Statutes 2016, section 446A.073, is amended to read:

446A.073 POINT SOURCE IMPLEMENTATION GRANTS.

Subdivision 1.

Program established.

When money is appropriated for grants under this
program, the authority shall award grants up to a maximum of $3,000,000 $7,000,000 to
governmental units to cover up to one-half 80 percent of the cost of water infrastructure
projects made necessary by:

(1) a wasteload reduction prescribed under a total maximum daily load plan required by
section 303(d) of the federal Clean Water Act, United States Code, title 33, section 1313(d);

(2) a phosphorus concentration or mass limit which requires discharging one milligram
per liter or less at permitted design flow which is incorporated into a permit issued by the
Pollution Control Agency;

(3) any other water quality-based effluent limit established under section 115.03,
subdivision 1, paragraph (e), clause (8), and incorporated into a permit issued by the Pollution
Control Agency that exceeds secondary treatment limits; or

(4) a total nitrogen concentration or mass limit of that requires discharging ten milligrams
per liter or less for a land-based treatment system at permitted design flow.

Subd. 2.

Grant application.

Application for a grant must be made to the authority on
forms prescribed by the authority for the total maximum daily load grant program, with
additional information as required by the authority, including a project schedule and cost
estimate for the work necessary to comply with the point source wasteload allocation
requirements listed in subdivision 1. The Pollution Control Agency shall:

(1) in accordance with section 116.182, calculate the essential project component
percentage, which must be multiplied by the total project cost to determine the eligible
project cost; and

(2) review and certify to the authority those projects that have plans and specifications
approved under section 115.03, subdivision 1, paragraph (f).

Subd. 3.

Project priorities.

When money is appropriated for grants under this program,
The authority shall accept applications under this program during the month of July and
reserve money for projects expected to proceed with construction by the end of the fiscal
year in the order listed on the Pollution Control Agency's project priority list and in an
amount based on the cost estimate submitted to the authority in the grant application or the
as-bid costs, whichever is less. Notwithstanding Minnesota Rules, chapter 7077, the Pollution
Control Agency may rank a drinking water infrastructure project on the agency's project
priority list if the project is necessary to meet an applicable requirement in subdivision 1.

Subd. 4.

Grant approval.

The authority must make a grant for an eligible project only
after:

(1) the applicant has submitted the as-bid cost for the water infrastructure project;

(2) the Pollution Control Agency has approved the as-bid costs and certified the grant
eligible portion of the project; and

(3) the authority has determined that the additional financing necessary to complete the
project has been committed from other sources.

Subd. 5.

Grant disbursement.

Disbursement of a grant must be made for eligible project
costs as incurred by the governmental unit and in accordance with a project financing
agreement and applicable state and federal laws and rules governing the payments.

Sec. 3.

Minnesota Statutes 2016, section 446A.081, subdivision 9, is amended to read:

Subd. 9.

Other uses of fund.

(a) The drinking water revolving loan fund may be used
as provided in the act, including the following uses:

(1) to buy or refinance the debt obligations, at or below market rates, of public water
systems for drinking water systems, where the debt was incurred after the date of enactment
of the act, for the purposes of construction of the necessary improvements to comply with
the national primary drinking water regulations under the federal Safe Drinking Water Act;

(2) to purchase or guarantee insurance for local obligations to improve credit market
access or reduce interest rates;

(3) to provide a source of revenue or security for the payment of principal and interest
on revenue or general obligation bonds issued by the authority if the bond proceeds are
deposited in the fund;

(4) to provide loans or loan guarantees for similar revolving funds established by a
governmental unit or state agency;

(5) to earn interest on fund accounts;

(6) to pay the reasonable costs incurred by the authority, the Department of Employment
and Economic Development, and the Department of Health for conducting activities as
authorized and required under the act up to the limits authorized under the act;

(7) to develop and administer programs for water system supervision, source water
protection, and related programs required under the act;

(8) notwithstanding Minnesota Rules, part 7380.0280, to provide principal forgiveness
or grants to the extent permitted under the federal Safe Drinking Water Act and other federal
law, based on the criteria and requirements established for drinking water projects under
the water infrastructure funding program under section 446A.072;

(9) to provide loans, principal forgiveness or grants to the extent permitted under the
federal Safe Drinking Water Act and other federal law to address green infrastructure, water
or energy efficiency improvements, or other environmentally innovative activities; and

(10) to provide principal forgiveness, or grants for 50 percent of the project cost up to
a maximum of $10,000 for projects needed to comply with national primary drinking water
standards for an existing community or noncommunity public water system.

(b) Principal forgiveness or grants under paragraph (a), clause (8), must only be provided
if the average annual residential drinking water system cost after completion of the project
would otherwise exceed 1.2 percent of the median household income in the project service
area. In determining whether the average annual residential drinking water system cost
would exceed 1.2 percent, the authority must consider the total costs associated with building,
operating, and maintaining the drinking water system, including debt service and operation
and maintenance costs. Debt service costs for the proposed project must be calculated based
on the maximum loan term permitted for the drinking water revolving fund loan under this
section. The amount of the principal forgiveness or grant must be equal to 80 percent of the
amount needed to reduce the average annual residential drinking water system cost to 1.2
percent of median household income in the project service area, to a maximum of $4,000,000
or $15,000 per connection, whichever is less, and not to exceed 80 percent of the total project
cost.

(c) (b) Principal forgiveness or grants provided under paragraph (a), clause (9), may not
exceed 25 percent of the eligible project costs as determined by the Department of Health
for project components directly related to green infrastructure, water or energy efficiency
improvements, or other environmentally innovative activities, up to a maximum of
$1,000,000.

(d) The authority may reduce the percentage of median household income at which a
loan term could extend to 30 years under subdivision 8, paragraph (c), and at which principal
forgiveness or grants could be provided under paragraph (b) if it determines that the federal
money allotted to the state cannot be fully utilized without the reduction. If it determines
that the reduction is necessary to fully utilize the federal money, the authority must effect
the change through its approval of the annual intended use plan.

Sec. 4. CLEAN WATER APPROPRIATIONS.

Subdivision 1.

Total appropriation.

$167,000,000 is appropriated from the bond
proceeds fund to the public facilities authority for the purposes of this section.

Subd. 2.

State match for federal grants.

$25,000,000 of this appropriation is to match
federal grants for the clean water revolving fund under Minnesota Statutes, section 446A.07,
and the drinking water revolving fund under Minnesota Statutes, section 446A.081. This
appropriation must be used for qualified capital projects.

Subd. 3.

Water infrastructure funding program.

(a) $80,000,000 of this appropriation
is for grants to eligible municipalities under the water infrastructure funding program under
Minnesota Statutes, section 446A.072.

(b) $55,000,000 is for wastewater projects listed on the Pollution Control Agency's
project priority list in the fundable range under the clean water revolving fund program.

(c) $25,000,000 is for drinking water projects listed on the Department of Health's project
priority list in the fundable range under the drinking water revolving fund program.

(d) After all eligible projects under paragraph (b) or (c) have been funded, the Public
Facilities Authority may transfer any remaining, uncommitted money to eligible projects
under a program defined in paragraph (b) or (c) based on that program's project priority list.

Subd. 4.

Point source implementation grants program.

$62,000,000 of this
appropriation is for grants to eligible municipalities under the point source implementation
grants program under Minnesota Statutes, section 446A.073. This appropriation must be
used for qualified capital projects.

Subd. 5.

Bond sale.

To provide the money appropriated in this section from the bond
proceeds fund, the commissioner of management and budget shall sell and issue bonds of
the state in an amount up to $167,000,000 in the manner, upon the terms, and with the effect
prescribed by Minnesota Statutes, sections 16A.631 to 16A.675, and by the Minnesota
Constitution, article XI, sections 4 to 7.

EFFECTIVE DATE.

This section is effective the day following final enactment.