(1) There are three primary factors considered in determining hardship funding for the construction portion of wastewater treatment facilities projects:
(a) Service area population;
(b) Existing residential need at the time of application; and
(c) Level of financial burden placed on the ratepayers.
(2) Service area population.
Applicants with a service area population of twenty-five thousand or less can request hardship-funding consideration by submitting a financial hardship analysis form along with the funding application. If the service area population is different from the population of the applicant, the applicant must show that the hardship assistance is solely used to benefit the population of the service area.
(3) Existing residential need.
The applicant and the department calculate the water pollution control facilities construction costs that are associated with existing residential need at the time of application.
(4) Level of financial burden.
(a) Financial burden for the sewer ratepayer is determined by calculating the residential sewer user fee as a percent of the median household income (MHI) for the project area. The annual residential sewer user fee is calculated using:
(i) Estimated construction costs;
(ii) Existing annual operation and maintenance costs;
(iii) Discounted, existing annual operation and maintenance costs as a result of constructing the project;
(iv) Projected future annual operation and maintenance costs for the total facility;
(v) The applicant's current and future annual debt service on the project;
(vi) The annual debt service for the project if funded with a revolving fund loan;
(vii) Other grants and loans funding the project;
(viii) The applicant's level of debt for other wastewater facilities not associated with the project;
(ix) The total number of households or equivalent residential units (ERUs) existing at the time of application that will be served by the project;
(x) The nonresidential share of the total annual costs is deducted; and
(xi) MHI for the project area;
(b) The sewer user fee as a percentage of MHI is the basis for the department's loan hardship-funding continuum shown in figure 2;
(c) The most recent available American community survey data determines the MHI;
(d) If MHI data are not available for a community, the county MHI in which the community resides will be used; and
(e) If the applicant disputes the data used by the department, the department may allow an applicant to conduct a scientific survey to determine the MHI for the project area.
(5) Loan terms and interest rates.
The department uses the loan hardship-funding continuum to determine the hardship-loan interest rates. Not more than fifty percent of the funding category can be awarded to any one applicant per funding cycle. In addition to a reduced interest rate, the applicant may receive longer loan repayment terms, not to exceed twenty years, and forgivable principal loans as specified in WAC 173-98-330
Assuming that the average market rate for tax-exempt municipal bonds is five percent, the following would apply.
When an applicant with a service area population of twenty-five thousand or less can demonstrate that its sewer user rates for the proposed project are between three and five percent of the MHI, the applicant may be eligible for a twenty-year repayment term and a one percent interest rate. This interest rate represents twenty percent of the average market rate for tax-exempt municipal bonds (see figure 2).
(6) Figure 2. Loan Hardship-Funding Continuum
|Sewer User Fee divided by MHI ||Below two percent ||Two percent and above, but Below three percent ||Three percent and above, but Below five percent ||Five percent and above |
|Hardship Designation ||Nonhardship |
(Low sewer user rates in relation to MHI)
(Not funded with grant or forgivable principal dollars)
|Moderate Hardship ||Elevated Hardship ||Severe Hardship (Very high sewer user rates in relation to MHI) |
|Loan Hardship-Funding Continuum ||Loan at sixty percent of market rate ||Loan at forty percent of market rate ||Loan at twenty percent of market rate ||Loan at zero percent interest |
(7) Partially funded projects: If a project in the hardship category receives partial funding due to department funding constraints, the department may offer the remaining funding, subject to funding ceilings, in the next funding cycle, and on a case-by-case basis. The department may require further hardship analysis before offering the remaining moneys.
[Statutory Authority: Chapter 90.50A RCW, RCW 90.48.035, and 43.21A.080. 11-20-036 (Order 10-14), § 173-98-300, filed 9/27/11, effective 10/28/11. Statutory Authority: RCW 90.48.035. 07-14-096 (Order 05-16), § 173-98-300, filed 6/29/07, effective 7/30/07.]