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 deleted text begin WASTEWATER deleted text end new text begin WATER new text end INFRASTRUCTURE FUNDING PROGRAM.

Subdivision 1.

Establishment of program.

The authority will establish a deleted text begin wastewater deleted text end new text begin
water new text end infrastructure funding program to provide supplemental assistance to governmental
units receiving funding through the clean water revolving fund program new text begin , the drinking water
revolving fund program, new text end 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 deleted text begin treatment deleted text end new text begin
and drinking water new text end 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 deleted text begin wastewater deleted text end new text begin water new text end infrastructure fund to provide
grants deleted text begin and loans deleted text end for the purposes authorized under title VI of the Federal Water Pollution
Control Act new text begin and the federal Safe Drinking Water Act new text end . 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 new text begin or
the commissioner of health's project priority list new text end ;

(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 new text begin or the commissioner of health new text end .

(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 new text begin or the drinking water revolving fund program new text end with additional
information as required by the authority. In accordance with section 116.182, the Pollution
Control Agency new text begin or the commissioner of health new text end shall:

(1) calculate the essential project component percentage new text begin 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, new text end which must be
multiplied by the total project cost to determine the eligible project cost new text begin for the program
under this section new text end ; 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 new text begin or the commissioner of health's
project priority list new text end . 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 deleted text begin submits plans and specifications to deleted text end new text begin the project is certified by new text end the Pollution
Control Agency new text begin or the commissioner of health new text end . Funds must be reserved in an amount based
on the project cost estimate submitted to the authority deleted text begin prior to the appropriation of the funds
and awarded based on the lesser of that amount or the as-bid cost deleted text end new text begin when the project is certified
or the as-bid cost, whichever is less new text end .

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 deleted text begin $4,000,000 deleted text end new text begin $5,000,000 new text end per
project or deleted text begin $15,000 deleted text end new text begin $20,000 new text end 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 deleted text begin $4,000,000 deleted text end new text begin $5,000,000 new text end per project or deleted text begin $15,000 deleted text end new text begin
$20,000 new text end 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.

new text begin (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.
new text end

deleted text begin (c) deleted text end new text begin (d) new text end Notwithstanding the limits in paragraphs (a) deleted text begin and deleted text end new text begin , new text end (b), new text begin and (c), new text end 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.

deleted text begin Subd. 5b. deleted text end

deleted text begin Special assessment deferral. deleted text end

deleted text begin 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.
deleted text end

Subd. 6.

Disbursements.

Disbursements of grants deleted text begin or loans deleted text end 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.

deleted text begin Subd. 7. deleted text end

deleted text begin Loan repayments. deleted text end

deleted text begin 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.
deleted text end

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
deleted text begin sewer deleted text end service charges of a significant deleted text begin wastewater contributor deleted text end new text begin industrial user that has a
separate service charge agreement with the recipient new text end , or a single user that has caused the
need for the project or whose current or projected deleted text begin flow and load exceed deleted text end new text begin usage exceeds
new text end one-half of the current wastewater deleted text begin treatment plant's deleted text end new text begin or drinking water system new text end capacity.

Subd. 11.

Report on needs.

By February 1 of each even-numbered year, the authority,
in conjunction with the Pollution Control Agency new text begin and the commissioner of health new text end , 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 new text begin and drinking water new text end funding assistance needs of governmental
units under this section.

Subd. 12.

System replacement fund.

Each governmental unit receiving a deleted text begin loan or deleted text end 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 deleted text begin or deleted text end new text begin , new text end expansion new text begin , or
replacement new text end of the deleted text begin treatment deleted text end new text begin wastewater or drinking water new text end system deleted text begin , or replacement of the
treatment system at the end of its useful life deleted text end . Money must remain in the account for the life
of the new text begin corresponding project new text end 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 deleted text begin treatment deleted text end new text begin wastewater or drinking water new text end 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. new text begin A recipient is not required
to maintain a fund balance greater than the amount of the grant received. new text end 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. deleted text begin Failure to make the required deposit or pay the penalty fee as
required constitutes a default on the loan.
deleted text end

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 deleted text begin $3,000,000 deleted text end new text begin $7,000,000 new text end to
governmental units to cover deleted text begin up to one-half deleted text end new text begin 80 percent of new text end 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 new text begin concentration or mass new text end limit deleted text begin of deleted text end new text begin that requires discharging new text end ten milligrams
per liter or less deleted text begin for a land-based treatment system deleted text end new text begin at permitted design flow new text end .

Subd. 2.

Grant application.

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

deleted text begin (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
deleted text end

deleted text begin (2) deleted text end 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.

deleted text begin When money is appropriated for grants under this program, deleted text end
The authority shall accept applications new text begin under this program new text end 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 new text begin , based on the criteria and requirements established for drinking water projects under
the water infrastructure funding program under section 446A.072 new text end ;

(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.

deleted text begin (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.
deleted text end

deleted text begin (c) deleted text end new text begin (b) new text end 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.

deleted text begin (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.
deleted text end

Sec. 4. new text begin CLEAN WATER APPROPRIATIONS.
new text end

new text begin Subdivision 1. new text end

new text begin Total appropriation. new text end

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

new text begin Subd. 2. new text end

new text begin State match for federal grants. new text end

new text begin $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.
new text end

new text begin Subd. 3. new text end

new text begin Water infrastructure funding program. new text end

new text begin (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.
new text end

new text begin (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.
new text end

new text begin (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.
new text end

new text begin (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.
new text end

new text begin Subd. 4. new text end

new text begin Point source implementation grants program. new text end

new text begin $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.
new text end

new text begin Subd. 5. new text end

new text begin Bond sale. new text end

new text begin 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.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day following final enactment.
new text end