Section R653-2-6 - Financial Arrangements (RCF, CWLF, CDF)(1) Project Cost Sharing: (a) The Board desires to optimize available funding through the overall water development programs of the state and therefore requires sponsors to share in the cost of projects.(b) The applicants financial ability to cost share will be determined in the project investigation. On the basis of the investigation, the Division will recommend to the Board the portion of the project cost to be furnished by the applicant. A minimum cost share of 15% will be required.(c) If additional funds become available to the applicant after the project is authorized, and if project costs do not increase, the additional funds will be used to reduce the Board's financial participation.(2) Alternate Financing: (a) The Board may consider alternative project funding methods such as letters of credit, bond insurance, and various methods of interest rate buydown, instead of directly funding construction of project features.(b) When a project is approved for bond insurance only, the Board may provide the financial assistance as a grant.(c) When a project is approved for both a loan and bond insurance, the bond insurance portion will be added to the loan amount.(3) Repayment of Financial Assistance: (a) The repayment period will be at least 15 years (unless the applicant requests a shorter period) and generally be less than 25 years.(b) The affordability guideline for municipal projects will be 1.40 % of the region or project area's annual median adjusted gross income (MAGI). If the average cost of water per resident in the area (including average culinary water bill, average secondary water bill, or any property tax paid for water) is below this guideline, the repayment amount will be set to bring this cost up to the guideline. If the average cost (including the proposed repayment amount per resident) exceeds the guideline, adjustments to interest rate and repayment terms will be made accordingly.(c) As a guideline, the interest rate for agricultural projects funded from the CDF will be 1.0%(d) The starting interest rate for municipal projects funded through CWLF of the CDF will be 75% of the Revenue Bond Index (RBI). This rate will be updated quarterly on the first day of January, April, July, and October. (i) The interest rate to be used for a particular project will be the rate in place at the time that feasibility report is completed.(ii) The interest rate authorized by the Board for a project will be valid through committal of funds, as long as this committal takes place within 18 months of authorization. If not, staff will reevaluate the repayment terms using the updated interest rate. The Board also reserves the right to withdraw funds or reconsider the authorization with different terms.(e) The board will apply further interest rate reductions for municipal projects as follows: (i) Communities with a MAGI less than 80% of the current state MAGI will receive an interest rate reduction of 0.5 percentage points.(ii) Communities with a MAGI less than 60% of the current state MAGI will receive an interest rate reduction of 1.0 percentage points.(iii) In either case above, the interest rate will not be less than 1.0% from the CDF and 0% from the CWLF.(f) As a guideline, the interest rate for industrial projects will be 7.0%.(g) When annual payments are to be made with revenues from the sale or use of project water, the Board may allow the applicant one year's use of the project before the first payment is due.(4) Security Arrangements:(a) Depending upon the type of organization sponsoring the project and the Board fund involved, financial assistance may be secured either by a purchase agreement or bond issue. (i) Projects financed through the RCF must be secured by a purchase agreement.(ii) Projects financed through the CWLF or the CDF will be secured either by a purchase agreement or by the sale of a bond.(b) If project financing is secured by a purchase agreement, the following conditions apply: (i) The Board must take title to the project including water rights, easements, deeded land for project facilities, and other assets subject to security interest.(ii) An opinion from the applicant's attorney must be submitted stating the applicant has complied with its articles and bylaws, state law, and the Board's contractual requirements.(iii) Title to the project shall be returned to the applicant upon successful completion of the purchase agreement.(c) If project financing is secured by the sale of a bond, the following conditions apply: (i) The procedures for bond approval will be substantially the same as required by the Utah Municipal Bond Act.(ii) If the sponsor desires to issue a non-voted revenue bond, the sponsor will be required to: (A) Hold a public meeting to describe the project and its need, cost, and effect on water rates.(B) Give written notice describing the proposed project to all water users in the applicant's service area. The notice shall include a solicitation of response to the proposed project. A copy of all written responses received by the applicant shall be forwarded to the Division. If the area Board member determines there is substantial opposition to the project, the Board may require the applicant to hold a bond election before funds will be made available.(5) Secondary Water Metering Program: (a) The Board will allocate up to $10 million in loans annually at an interest rate of 1.0% to entities to fund the installation of secondary meters.(b) Only entities that manage pressurized secondary systems, which provide service to commercial, industrial, institutional, or residential users will be eligible for funding.(c) Funds will be made available for the meter itself, installation and equipment costs, meter-reading technology, and the cost of databases and billing or reporting software. It will not include costs tied to ongoing reading of the meters, additional staffing, etc.(d) Funds will be allocated only for the installation of new secondary water meters, not the repair and replacement of such meters.(e) The repayment term will be five years less than the warranty of the meters, not to exceed 30 years.(f) In circumstances where secondary water metering is only a component of an overall project, only that component will qualify for the 1.0% interest rate.(g) The applicant will be required to mandate that all new developments within their service area install secondary water meters.(h) The applicant will be required to either provide an educational component on the billing statement and/or charge based on usage with a tiered conservation rate.(i) The applicant will be required to report water usage data gathered through the new metered secondary water systems annually to the Utah Division of Water Rights.Utah Admin. Code R653-2-6
Adopted by Utah State Bulletin Number 2015-24, effective 11/23/2015Amended by Utah State Bulletin Number 2020-08, effective 3/26/2020