Recent Changes to Clean Water State Revolving Fund (CWSRF) Policy

1. April 2019 RECENT CHANGES TO THE POLICY FOR IMPLEMENTING THE CLEAN WATER STATE REVOLVING FUND (CWSRF) Presented by: Robert Pontureri Division of Financial Assistance (DFA)

2. Division of Financial Assistance • Clean Water State Revolving Fund • Office of Sustainable Water Infrastructure • Small Disadvantaged Community funding for both Wastewater and Drinking Water • Water Recycling Funding Program • Many other funding programs: • Drinking Water State Revolving Fund • Sea Water Intrusion • Ground Water • Cleanup & Abatement • Areas of Special Biological Significance • Clean Beaches • Nonpoint Source Pollution • Storm Water • Underground Petroleum Tank Cleanup & Replacement

3. Clean Water State Revolving Fund • Primarily Low Interest Loans with Limited Principal Forgiveness • $10.9 Billion Since 1989; Average $628 Million Annually • Annual Funding Target - $1 Billion

4. CWSRF Funding Activity

5. CWSRF Policy Background • Policy covers CWSRF and complementary financing • Last Amended on November 28, 2018 • Historical Average: 2 – 3 years • Demand on the CWSRF has greatly increased • >$8 billion

6. Drivers for Recent Change • Prioritize applications • Maintain sustainable finances • Additional flexibility to deal with wide range of borrower credits • Consistency between CWSRF and DWSRF Policies • Additional Clarity

7. CWSRF Eligibility

8. CWSRF Financing Terms

9. New to CWSRF - Fundable List • Only projects on Fundable List will be eligible for financing • Small SDAC, Small DAC, and Public Health Projects automatically Fundable; not subject to scoring • All other applications will be ranked by “Priority Score” • All applications will be scored – complete & incomplete

10. Fundable List • 90%  125% of sustainable funding level ~ $ 1.0 billion/year • Execute agreements for all Fundable applications by end of fiscal year • Applications roll over if not funded

11. Process

12. Priority Scoring System • Priority Score will be the sum of three components: • Primary Score, • Secondary Score, and • Readiness Score • Maximum Priority Score = 16

13. Priority Score Calculation Example: Critical Improvements at a WWTP

14. Developing the Fundable List • Iterative Process • After applicants review scores, all scores will be compiled and sorted highest to lowest • Applications with the same score either Fundable or not Fundable • Pick a cutoff score: • If total $ < 90% of funding target, pick a lower score • If total $ > 90% and < 125%, then ✓ • If total $ > 125%, then modify scores = or > proposed cutoff score

15. Financial Review Changes • Allow Deputy Director discretion in cases where applicants have existing debt programs and are highly rated • Can accept existing definitions and covenants • New Credit Review appendix (Appendix N) • Allows Deputy Director to update process consistent with Policy requirements • Debt Service Coverage • Increased senior and parity coverage from 1.1 to 1.2 times • Lowered subordinate coverage to 1.0 times

16. Other Changes • Eligible Start Date • Redefining term to allow construction costs to be eligible starting with Notice to Proceed • Planning/Design Loans • Changing from refinance to restructure to match DWSRF Policy • Also, Planning/Design Loan Application is subject to scoring and must be on Fundable List

17. Other Changes (cont.) • Align Water Conservation and Management with current State Law • Water Suppliers must certify meeting Division 6 of Water Code • Non-Water Suppliers must certify that area water suppliers meet Division 6 • Dropping Pledged Revenues Fund Resolution, but must submit a closing resolution consistent with Gov. Code §5852.1

18. Other Changes (cont.) • Appraisal requirement dropped for purchase of land or easements, but will be required if land is used as security • Policy generalized to apply to all types of project (i.e., “Project” Financing) • No longer using term “ Expanded Use” Projects • Pre-Payments require consent

19. Office of Sustainable Water Solutions Disadvantaged Community Assistance • Wastewater Rate DAC: Rate >1.5% of MHI; • DAC/SDAC Population < 20,000; • Community MHI < 80% of statewide MHI = DAC • Community MHI < 60% of statewide MHI = SDAC • Technical Assistance available to assist DACs • Loan and Grant financing available: • Principal Forgiveness, Small Community Grant (SCG) Fund, Bond Funds from Prop 1 and Prop 68 • Application forms and approval process same as CWSRF • Applications Accepted Continuously – No deadlines!

20. Water Recycling Funding Program • Promote Wastewater Reuse to Augment/Offset State/Local Fresh Water • Applications Accepted Continuously • Application forms and approval process is the same as the CWSRF • Low Interest Loans + Minimal Grants • 1.9% Rate ($137M Prop 1 loans) (Limited Prop 68 construction grants) • Planning grants – 50% of eligible costs up to $75,000

21. Financial Assistance Application Submittal Tool (FAAST) • Now accepting All CWSRF, Wastewater, Water Recycling, and SDAC Funding Applications • Easy Document Uploading • Accepts both Initial and Post Submittals • https://faast.waterboards.ca.gov/

22. Contacts CWSRF/WRFP Program Management Mr. Christopher Stevens Supervising Engineer Christopher.Stevens@waterboards.ca.gov (916) 341-5698 Wastewater Mr. Robert Pontureri Senior Engineer Robert.Pontureri@waterboards.ca.gov (916) 341-5828 Water Recycling Mr. Michael Downey Senior Engineer Michael.downey@waterboards.ca.gov (916) 324-8404 OSWS Program Management Ms. Nicole Morgan Supervising Engineer Nicole.morgan@waterboards.ca.gov (916) 341-5822 Small Communities Ms. Jennifer Toney Senior Engineer Jenifer.toney@waterboards.ca.gov (916) 319-8246 Small Communities Ms. Wennilyn Fua Senior Engineer Wennilyn.fua@waterboards.ca.gov (916) 322-1026

23. More Information • Division of Financial Assistance https://www.waterboards.ca.gov/water_issues/programs/grants_loans • Clean Water State Revolving Fund https://www.waterboards.ca.gov/water_issues/programs/grants_loans/srf • Office of Sustainable Water Solutions https://www.waterboards.ca.gov/water_issues/programs/grants_loans/sustainable_water_solutions/ • Water Recycling Funding Program https://www.waterboards.ca.gov/water_issues/programs/grants_loans/water_recycling

24. Questions ?????