Section 373.475, F.S., requires the Department to adopt rules that set up procedures for providing loans to local governments or water supply entities for the development and construction of water storage facilities. The law defines a “water storage ...

 

DEPARTMENT OF ENVIRONMENTAL PROTECTION

RULE NOS.:RULE TITLES:

62-554.100Definitions

62-554.200General Program Requirements

62-554.300Project Selection Criteria

62-554.400Loan Application and Agreements

62-554.500Audits Required

PURPOSE AND EFFECT: Section 373.475, F.S., requires the Department to adopt rules that set up procedures for providing loans to local governments or water supply entities for the development and construction of water storage facilities. The law defines a “water storage facility” as all facilities (publicly, privately, investor, or cooperatively owned), including land, necessary for an above-ground or in-ground reservoir.

SUMMARY: Chapter 62-554, Florida Administrative Code (FAC), titled Water Storage Facility Loan Program, will establish procedures for administering this loan program, similar to the Drinking Water State Revolving Fund Program but without the Federal requirements. The Department will solicit proposals once per year when funding is available. Projects deemed environmentally sound and implementable will be ranked in accordance with criteria set forth in 373.475(4), F.S., and funded until funds run out. Loan application, agreement requirements, and state auditing requirements are similar to requirements in Drinking Water State Revolving Loan Program.

SUMMARY OF STATEMENT OF ESTIMATED REGULATORY COSTS AND LEGISLATIVE RATIFICATION:

The Agency has determined that this will not have an adverse impact on small business or likely increase directly or indirectly regulatory costs in excess of $200,000 in the aggregate within one year after the implementation of the rule. A SERC has not been prepared by the Agency.

The Agency has determined that the proposed rule is not expected to require legislative ratification based on the statement of estimated regulatory costs or if no SERC is required, the information expressly relied upon and described herein: The proposed rules are not regulatory in nature, and, therefore, do not impose any costs. Any person who wishes to provide information regarding a statement of estimated regulatory costs, or provide a proposal for a lower cost regulatory alternative must do so in writing within 21 days of this notice.

Any person who wishes to provide information regarding a statement of estimated regulatory costs, or provide a proposal for a lower cost regulatory alternative must do so in writing within 21 days of this notice.

RULEMAKING AUTHORITY: 373.475, FS.

LAW IMPLEMENTED: 373.475, FS.

IF REQUESTED WITHIN 21 DAYS OF THE DATE OF THIS NOTICE, A HEARING WILL BE HELD AT THE DATE, TIME AND PLACE SHOWN BELOW (IF NOT REQUESTED, THIS HEARING WILL NOT BE HELD):

DATE AND TIME: April 24, 2018, 10:00 a.m. and ending no later than 2:00 p.m.

PLACE: Room 137 of the Douglas Building at 3900 Commonwealth Blvd., Tallahassee, FL 32399

Pursuant to the provisions of the Americans with Disabilities Act, any person requiring special accommodations to participate in this workshop/meeting is asked to advise the agency at least 5 days before the workshop/meeting by contacting: Shanin Speas-Frost at [phone] or email at [e-mail]. (OGC NO. 17-0987). If you are hearing or speech impaired, please contact the agency using the Florida Relay Service, 1(800)955-8771 (TDD) or 1(800)955-8770 (Voice).

THE PERSON TO BE CONTACTED REGARDING THE PROPOSED RULE IS: Shanin Speas-Frost at [phone] or email at [e-mail].

 

THE FULL TEXT OF THE PROPOSED RULE IS:

 

62-554.100 Definitions.

For purposes of this rule chapter:

(1) “Local governmental agency” means any municipality, county, district, or authority, or any agency thereof, or a combination of such, acting jointly in connection with a project, which has jurisdiction over a water storage facility.

(2) “Project Sponsor” means a local government or water supply entity that has applied, or intends to apply, for funding under this chapter.

(3) “Water storage facility” or “facility” means all facilities, including land, necessary for an above-ground or in-ground reservoir, including aquifer storage and recovery. Such facilities may be publicly owned, privately owned, investor-owned, or cooperatively held.

(4) “Water Supply Entity” means a water utility, local government, or a multijurisdictional water supply entity as defined in 373.019(12), F.S., that is responsible for public water supply development or alternative water supply development projects listed pursuant to a regional water supply plan.

Rulemaking Authority 373.475 FS. Law Implemented 373.475 FS. History–New _______.

 

62-554.200 General Program Requirements.

(1) This chapter implements Section 373.475, F.S., and provides procedures and criteria for making loans to water supply entities for the development and construction of water storage facilities to increase the availability of sufficient water for all existing and future reasonable-beneficial uses and natural systems.

(2) Loan amounts for up to 75 percent of the costs of planning, designing, constructing, upgrading, or replacing water resource infrastructure or facilities, whether natural or man-made, including the acquisition of real property for water storage facilities may be awarded. Loans shall be a minimum of $75,000.

(3) The Department shall solicit proposals at least once a year, in years which funding is appropriated by the legislature for water storage facility projects to receive loan funding under this chapter. Any solicitation for proposals by the Department shall specify the weight to be given to the criteria set forth in subsection 62-554.300(2), F.A.C., for purposes of ranking proposals that are received by the Department. In years in which funding is available, projects will be awarded funding in order of rank until the appropriated funds are exhausted.

(4) If the Department is soliciting proposals for projects, an interested applicant may apply for loan funding under this chapter for activities identified in 373.475(3)(a), F.S., by submitting Water Storage Facility Loan Program Request for Funding, Form 1, effective _______, hereby adopted and incorporated by reference. Copies of the form may be obtained by writing to the Florida Department of Environmental Protection, Drinking Water State Revolving Fund, 3900 Commonwealth Boulevard, Mail Station 3505, Tallahassee, Florida 32399 or the form can be obtained at http://www.flrules.org/Gateway/reference.asp?No=Ref-XXXXX.

(5) The Department shall perform an environmental review for each project to be funded in accordance with 62-552.680, F.A.C.

(6) The project sponsor shall submit the following:

(a) Evidence of the permittability or implementability of the facility proposed for financial assistance.

(b) Evidence that the purpose of the water storage facility proposed for financial assistance is consistent with the applicable water supply plan.

(c) The public participation process used to explain the project and the financial impacts to the public.

(d) Financial feasibility information addressing the following:

1. The sources and amounts of revenues to be dedicated to repaying the loan and the expenses, charges, and liens against or to be paid from such dedicated funds or revenues. The information shall demonstrate the ability to repay the loan with a margin of safety, which includes the following:

a. Pledged revenue coverage ratio of at least 1.15 for projects sponsored by a local governmental agency;

b. A current term debt and capital lease coverage ratio of at least 1.15, as explained in subsection 62.554.300(7), F.A.C., for projects sponsored by other than a local governmental agency; or

c. Other equivalent means of providing a margin of safety, as approved by the Department.

2. Capital improvements that will be financed from the same funds or revenues dedicated to repaying the loan.

3. The proposed system of charges, rates, fees, and other collections that will generate the revenues to be dedicated to loan repayment. The rate structure of the revenue generation system shall be approved at least six months before the first loan repayment is due or before the project closeout, whichever occurs first. The rate structure shall be implemented in a timely manner to ensure the generation of sufficient revenues dedicated to loan repayment and may be implemented in phases to the extent timely and sufficient revenue generation will be accomplished. The revenue generation system shall be revised, as necessary, to satisfy the pledged revenue requirements of the loan.

(7) Procurement. Procurement of goods and services by loan recipients under this loan program must be in conformance with the applicable provisions of Chapter 287, F.S. When procuring property and services under a Department loan, a project sponsor shall follow the policies and procedures it uses for procurements from its non-Department funds provided that the procurement conforms to applicable state and local laws and regulations.

Rulemaking Authority 373.475 FS. Law Implemented 373.475 FS. History–New _______.

 

62-554.300 Project Selection Criteria.

(1) After the closing date for submittal of requests for funding, complete and timely project requests meeting the requirements of Rule 62-554.200, F.A.C., shall be evaluated and ranked on the criteria in this section in accordance with the Department solicitation.

(2) In developing the solicitation criteria, the Department shall give special consideration to one or more of the following:

(a) Projects that provide for the development of alternative water supply projects and management techniques in areas where existing source waters are limited or threatened by saltwater intrusion, excessive drawdowns, contamination, or other problems;

(b) Projects that contribute to the sustainability of regional water sources;

(c) Projects that produce additional water available for consumptive uses or natural systems;

(d) Projects that diversify water supply so that the needs of consumptive uses and the natural system are met during wet and dry conditions;

(e) Projects that provide flexibility in addressing the unpredictability of water conditions from water year to water year;

(f) Projects that are cost-effective; or

(g) Projects that are ready to proceed.

Rulemaking Authority 373.475 FS. Law Implemented 373.475 FS. History–New _______.

 

62-554.400 Loan Applications and Agreements.

(1) General.

(a) To receive a loan, a project sponsor must submit a complete loan application, provide reasonable assurance that it has the financial capability to complete the project and repay the loan, and enter into a written loan agreement. A complete loan application, Water Storage Facility Loan Program, Form 2, effective _______, adopted and incorporated by reference shall be submitted to the Department within 120 days after the after the project sponsor receives confirmation of award. The project sponsor may incorporate into the loan application, by reference, any information previously submitted to the Department. This form is available from the Department’s Drinking Water State Revolving Fund Program, 3900 Commonwealth Blvd., Tallahassee, Florida 32399-3000, or at http://www.flrules.org/Gateway/reference.asp?No=Ref-XXXXX.

(b) If a project sponsor does not submit a complete loan application within 120 days, or a loan agreement is not executed within 210 days after sponsor receives confirmation of award, the notice of award will be rescinded and the next highest priority project that did not receive complete requested funding will be awarded those funds; unless the project sponsor can show good cause prior to that meeting documenting why the application was not submitted or why the agreement was not executed by the appropriate deadline. For the purpose of this paragraph, good cause shall mean unforeseen circumstances outside of the sponsor’s control or a showing that the sponsor is making a diligent effort to complete or execute the loan application or loan agreement.

(c) Project sponsors shall provide financial assurance that project activities will be completed, including requirements for service providers and equipment suppliers or manufacturers to provide performance guarantees, insurance covering workers’ compensation, comprehensive general liability, vehicle liability, and property damage to the extent that coverage is available for project activities.

(d) A loan service fee between two and four percent of the total loan amount less capitalized interest shall be estimated at the time of execution of the loan agreement, revised with any increase or decrease amendment, and shall be finalized in the final loan amendment based on the total loan disbursed. The loan recipient shall pay the loan service fee from the first repayment(s) following the final amendment. The Loan Service Fee shall not be included in the principal of the loan.

(e) Before approval of a loan, the local government or water supply entity must, at a minimum, submit all the following to the department:

1. A proposed repayment schedule.

2. Evidence that all required permits have been obtained, or written documentation from the applicable permitting authorities that the project will be permitted, or that a permit is not required.

3. Plans and specifications, biddable contract documents, or other documentation of appropriate procurement of goods and services.

4. Written assurance that records will be kept using generally accepted accounting principles and that the department or its agents and the Auditor General will have access to all records pertaining to the loan.

5. If the facility is primarily for the purpose of water supply for consumptive use as provided in 373.475(4)(e), F.S., documentation that it will be self-supporting.

6. Documentation that the water management district’s governing board within whose boundaries the facility will be located has approved the facility. If the facility crosses jurisdictional boundaries, approval from each applicable district must be documented and provided to the department.

7. Survey of property to be mortgaged and title opinion, as applicable.

(2) Interest Rate. The interest rate shall be 60% of the market rate as established using the Thomson Publishing Corporation’s “Bond Buyer" 20-Bond GO Index and shall not exceed that paid on the last bonds sold pursuant to s. 14, Art. VII, State Constitution. The market rate is established by the Department as of January 1, April 1, July 1, and October 1 of each year and it is the average weekly yield during the three (3) months immediately preceding the date of determination. The average weekly yield is derived from the yields reported in the “Bond Buyer” for the full weeks occurring during the three-month period. Once established in the loan agreement, the interest rate shall be fixed for the principal amount of the loan.

(3) Pledged Revenues. The loan recipient shall make deposits of pledged revenues to a restricted or assigned debt service account and shall be responsible for the maintenance of that account.

(a) Pledged revenues for projects sponsored by a local government shall be a minimum of 1.15 times the amount required to make each semiannual loan repayment unless the project sponsor establishes a restricted or assigned reserve account in an amount not less than the equivalent of two semiannual loan repayments. The pledged revenue coverage for the loan from the Department shall not be transferred or derived from coverage required by senior lien debt instruments.

(b) Pledged revenues for projects sponsored by other than a local governmental agency shall be a minimum of 1.15 times the amount required to make each semiannual loan repayment and shall be secured with collateral having an appraised market value not less than 125% of the total of both the dollar amount owed on the property and the dollar amount of the loan principal. The appraisal report must be less than 12 months old at the time the loan application is received. The loan applicant must own the real property in fee simple without any encumbrances on the title that would prevent sale of the property in case of default on the loan.

(4) Legal Affirmation. When a loan agreement executed by a project sponsor is submitted to the Department for execution, it shall include an affirmation by the project sponsor’s legal counsel that:

(a) The loan agreement constitutes a valid and legal obligation of the borrower;

(b) The loan agreement specifies the revenues pledged to the repayment of the loan; and,

(c) The pledge is valid and enforceable.

(5) Security. The Department shall have no lien on or security interest in or claim on any monies or property except as expressly provided in the loan agreement and, for projects sponsored by other than a local government, the security interest agreement and mortgage, as applicable.

(6) Assurance of Compliance. The project sponsor shall provide assurance that:

(a) Records will be kept using generally accepted accounting principles. The Department, the Auditor General, and their agents shall have access to all records pertaining to the loan.

(b) Project facilities will be properly operated and maintained and best management practices shall be continued, as appropriate.

(c) Loan funds will not be used for the purpose of lobbying.

(7) Disbursements. Disbursements to the project sponsor shall be for allowable invoiced costs, unless the project sponsor qualifies and is approved for advanced payments in accordance with subsection 216.181(16), F.S. Disbursements shall be subject to the following requirements:

(a) Requests for disbursements for construction, technical services, and for planning and design costs shall be accompanied by itemized summaries of the materials, labor, or services to identify the nature of the work performed. The disbursement package shall also include a statement that the construction or other services for which payment or reimbursement is sought has been satisfactorily performed;

(b) The materials, labor, and services shall be part of the approved project scope; and,

(c) The disbursement shall be due under the terms of the loan agreement, and there shall be money available under the loan agreement for payment.

(8) Repayments. The project sponsor shall begin repaying a loan no later than the date scheduled under the loan agreement.

(9) Loan Repayment Term. Loan repayment periods for construction projects sponsored by a water supply entity shall not exceed thirty (30) years.

(10) Loan Certification. If requested in writing by the Department, the project sponsor’s authorized representative or its chief financial officer shall submit a certification that:

(a) Pledged revenue collections satisfy the rate coverage requirement;

(b) The debt service account contains the funds required;

(c) The restricted or assigned pledged revenue account contains the funds required, if applicable; and,

(d) The revenue generation system is in conformance with subparagraph 62-554.200(6)(d)3., F.A.C.

(11) Remedies for Defaults. Remedies for delinquent loan repayment and other events of default shall be limited to those set forth in the loan agreement. Events of default shall include non-compliance with any of the terms of the loan agreement. No delay or omission to exercise any right or power accruing upon an event of default shall impair any such right or power or shall be construed to be a waiver of any such default or acquiescence therein.

Rulemaking Authority 373.475 FS. Law Implemented 373.475 FS. History–New _______.

 

62-554.500 Audits Required.

(1) State Audit Required. Section 215.97, F.S., imposes audit requirements on the project sponsor and sub-recipients based on designated thresholds for expenditures. Each agreement entered into pursuant to this rule chapter shall include the audit requirements applicable to the project at the time the agreement is executed.

(2)  Loan recipients are advised that pursuant to Section 215.97, F.S., the state is authorized to conduct an audit within five (5) years following project closeout if loan compliance problems have been noted; record keeping deficiencies are noted during close-out; the project involves unusual or questioned costs; or other justification for conducting the audit becomes apparent.

(a) The Department shall give the project sponsor reasonable advance notice of any audit.

(b) The Department shall prepare a written report on each audit and shall provide a copy of the report to the project sponsor. The project sponsor must respond, in writing, to the findings and recommendations within 20 days after receipt of the written report from the Department.

Rulemaking Authority 373.475 FS. Law Implemented 373.475 FS. History–New _______.

 

NAME OF PERSON ORIGINATING PROPOSED RULE: Trina Vielhauer, Director, Division of Water Restoration Assistance

NAME OF AGENCY HEAD WHO APPROVED THE PROPOSED RULE: Noah Valenstein, Secretary,

Department of Environmental Protection

DATE PROPOSED RULE APPROVED BY AGENCY HEAD: March 7, 2018

DATE NOTICE OF PROPOSED RULE DEVELOPMENT PUBLISHED IN FAR: October 20, 2017