Executive Summary: DEQ Non-Limited Budget

Transcription

1 Executive Summary: DEQ Non-Limited Budget Primary Outcome Area: Secondary Outcome Area: Program Contact: Jobs and Innovation Healthy Environment Dick Pedersen, DEQ director Ten-Year Plan 200 Non-Limited Funds (bar) and Population of Communities Receiving Loans 1,100,000 Dollars in Millions One Time ARRA Funding ,000, , , , , , , ,000 Population of Coummunities Receiving Loans Loans from DEQ s Clean Water State Revolving Fund make up the non-limited portion of DEQ s budget. This loan program, which is implemented through DEQ s water quality program budget, protects public health and the environment by offering financial assistance to communities and special districts for water pollution control projects. DEQ Non-Limited Executive Summary Non-Limited Budget: Page 10-1

2 Program Overview The Clean Water State Revolving Fund loan program provides low-cost loans for the planning, design or construction of projects that prevent or mitigate water pollution. These projects include wastewater treatment facilities and upgrades, sewer replacement and rehabilitation, stormwater controls, irrigation improvements and certain types of nonpoint source projects such as animal waste management or stream restoration. Eligible agencies include Indian tribal governments, cities, counties, sanitary districts, soil and water conservation districts, irrigation districts, various special districts and certain intergovernmental entities. New facilities and facility upgrades enable communities to meet the demands of growing populations and new or expanding business and industrial sectors and replace aging infrastructure. Program Funding Request The agency proposal for the non-limited budget totals $112.4 million dedicated to providing low interest loans for projects that prevent or mitigate water pollution. These resources enable DEQ to continue to coordinate with other funding agencies to help communities finance water quality improvement projects to meet the demands of growing populations and expanding economies. Program Description The Clean Water State Revolving Fund loan program provides low-cost loans for the planning, design or construction of projects that prevent or mitigate water pollution. These projects include wastewater treatment facilities and upgrades, sewer replacement and rehabilitation, stormwater controls, irrigation improvements and certain types of nonpoint source projects such as animal waste management or stream restoration. Eligible agencies include Indian tribal governments, cities, counties, sanitary districts, soil and water conservation districts, irrigation districts, various special districts and certain intergovernmental entities. New facilities and facility upgrades enable communities to meet the demands of growing populations and new or expanding business and industrial sectors and replace aging infrastructure. DEQ s Clean Water State Revolving Fund program has provided more than $1 billion in low-cost loans since 1990 to assist 143 Oregon communities with water quality improvement projects. The low-interest rates and terms of the loans make this program an attractive alternative to the municipal bond market. For example, a $4 million, 20-year loan with a Clean Water State Revolving Fund interest rate that is one percentage point lower than a bond reduces interest costs by $500,000 over the life of the loan. DEQ accepts new applications year-round and ranks projects based upon established criteria. DEQ Non-Limited Executive Summary Non-Limited Budget: Page 10-2

3 Program Justification and Link to 10-Year Outcome DEQ s Clean Water State Revolving Fund program links to Strategy 2 in the Jobs and Innovation outcome area. The program contributes to Jobs and Innovation outcomes by funding construction projects with a clean water benefit statewide. These projects contribute to Oregon s resiliency by supporting local construction companies, creating opportunities for disadvantaged businesses, encouraging long-term planning for public facilities, promoting sustainability and providing funding for public projects that aid in protecting the quality of life of Oregonians. The program gives technical assistance to disadvantaged communities to identify infrastructure needs, asset management and sustainable project development. DEQ s Clean Water State Revolving Fund program contributes to Jobs and Innovation Outcomes in Strategy 2 by integrating public funding for projects through participation in inter-entity and one-stop meetings involving representatives from federal Rural Development offices, the Infrastructure Financing Authority and other state agencies that provide communities with customized funding packages. Coordination and prudent fund management has resulted in leveraging federal funds by over 200 percent since the beginning of the loan program since it executed its first loan in DEQ conducts a Clean Watersheds Needs Survey every four years to identify clean water infrastructure needs statewide, with a planning horizon of 20 years. In 2008, DEQ documented needs in Oregon totaling $4.9 billion. This was a 40 percent increase from the $3.5 billion in needs documented in 2004, and outpaces by far the $50 million per year the CWSRF program typically provides for funding projects. Data from 2012 is still being compiled by EPA. Enabling Legislation/Program Authorization Federal legislation authorizes the U.S. Environmental Protection Agency to implement a state water pollution control revolving fund program and provide capitalization grants to states that have established a loan program that meets federal requirements. Oregon Revised Statutes through provide the authority for DEQ to establish a program to administer the Clean Water State Revolving Fund. Oregon Administrative Rule Chapter 340 Division 54 establishes procedures for implementing this loan program. The rules include criteria DEQ uses to rank project applications for funding priority. Program Funding The Agency proposal for the non-limited budget totals $112.4 million dedicated to providing low interest loans for projects that prevent or mitigate water pollution. These resources enable DEQ to continue to coordinate with other funding agencies to help communities finance water quality improvement projects to meet the demands of growing populations and expanding economies. DEQ Non-Limited Executive Summary Non-Limited Budget: Page 10-3

4 Program Performance DEQ is responsible for ensuring the financial integrity, viability and perpetuity of the Clean Water State Revolving Fund. The longterm goal is to keep cash reserves low by providing funding to local communities to the maximum extent possible while balancing the need for cash to cover variability in project completion. The percentage of executed loan agreements to the funds available to loan is 98.4 percent as of The chart below depicts this performance measure since Percentage of Executed Loans to Funds Available For Loans 120% Dollars in Millions One Time ARRA Funding 115% 110% 105% 100% 95% 90% 85% 20 80% % Note: DEQ can execute loan agreements that total more than total loan funding available because the demand for loan funds will lag behind loan disbursements. There is no danger of insufficient funds available to borrowers. Significant Proposed Program Changes from and Funding There are no significant program changes in the budget request for DEQ Non-Limited Executive Summary Non-Limited Budget: Page 10-4

5 NON-LIMITED DEQ is requesting a debt issuance limit of $10.0 million for the biennium to provide State Revolving Loan Fund Match. Program Designation Recommended Maximum Levels State Revolving Loan Fund Match $5,000,000 $5,000,000 $10,000,000 TOTAL $5,000,000 $5,000,000 $10,000,000 Pollution Control Bond Funds Use of Proceeds The debt service narrative chapter provides a detailed description of the DEQ Pollution Control Bond Fund (PCBF) Programs. In , the maximum authorized bond sales of $10 million will be completed in the latter half of calendar year For , bond sales of $10 million will be needed to meet the twenty percent state match requirement for federal capitalization grants. If the amount of state matching funds generated by the bond sales exceeds the twenty percent requirement, the excess can be used to match future federal grants. In , a bond sale of approximately $6.74 million enabled DEQ to meet federal (Superfund) match, to operate and maintain remedies at both federal and non-federal sites, and to investigate and clean up sites where no remedy has been installed. No bonds for orphan site cleanup are planned for or for NL Oregon DEQ Non-Limited Budget: Page 10-5

6 Projected uses of bond proceeds in the biennium are: PROGRAM DESIGNATION BOND AMOUNT USE SECURITY/PRIMARY REPAYMENT SOURCE Clean Water State Revolving Loan Fund $10 million $9.85 million - State match for federal money in CWSRF for sewer and water loans to municipalities. $0.15 million - Bond transaction costs Self-financed using the interest received component of the repayment schedules of existing and past CWSRF loans and of the CWSRF account itself. Estimated New CWSRF Loans Demand for low interest loans from the Clean Water State Revolving Fund is linked to the strength of the economy and the timing of the construction of approved projects. New grant and match monies, as well as the Clean Water State Revolving Fund Account, are used to make loans. For the biennium, DEQ estimates that it will issue up to $112.4 million in loans NL Oregon DEQ Non-Limited Budget: Page 10-6

7 POLLUTION CONTROL BONDS POLICY PACKAGE NARRATIVE Title: Clean Water State Revolving Fund Loans and Bonds (#181) Purpose: This package seeks to obtain non-limited expenditure approval to fund $150,000 of bond issuance costs, including legal and other fees, associated with bonds issued to provide the state match component of up to three federal capitalization grants to maintain Oregon s Clean Water State Revolving Fund. The package also seeks limitation to provide $30 million of additional CWSRF loans using the federal grant monies received. Background The federal Water Quality Act amendments of 1987 created the state wastewater treatment revolving loan fund program (the CWSRF). The primary source of funds for this program is federal capitalization grants and repayments of principal and interest on existing loans. The federal act requires states to match federal dollars with state funds in an amount at least equal to twenty percent of the federal capital grant. DEQ issues General Obligation Bonds for the purpose of the match, which is authorized by the statewide Bond Bill each biennium. The CWSRF provides below market interest rate loans to public agencies, including counties and municipalities, for three kinds of water pollution abatement projects: wastewater collection, treatment, and disposal systems; nonpoint source water pollution control measures: and implementation of management plans for federally designated estuaries (Tillamook and Lower Columbia River). DEQ issued its first CWSRF loan in 1991, and as of June 30, 2014, has written loans amounting to over $1.03 billion to 155 Oregon communities. For this package, bond issuance costs for the bonds will be sourced from the interest earnings received by the CWSRF and/or from bond proceeds. Interest earnings may be used to pay bond issuance costs. Approval of this package ensures we continue to provide communities with affordable financing options for wastewater treatment and other clean water projects. Adequate wastewater treatment capacity is needed for communities economic development future. Without this package, DEQ would need to decline federal capitalization grants of approximately $15 million per year, and there would be less state assistance to Oregon communities for such projects. Additionally, communities may face delays or higher financing costs for wastewater treatment and other clean water projects and DEQ would make fewer loans. NL_181 Non-Limited Budget: Page 10-7

8 POLLUTION CONTROL BONDS POLICY PACKAGE NARRATIVE How accomplished: The state seeks authority to issue up to $10 million of CWSRF General Obligation Bonds during the biennium in the statewide Bond Bill as the means to meet the twenty percent state match requirement for federal capitalization grants. If the amount of state matching funds generated by the bond sales exceeds the twenty percent requirement, the excess can be used to match future federal grants. Package #191 provides the debt service for these bonds issued on a short-term basis to meet match requirements. If the demand for CWSRF loans remains strong and the long-term bond markets are favorable, DEQ will consider the alternative of issuing bonds with a 20-year maturity. This package seeks non-limited expenditure approval for up to $150,000 of bond-issuance costs for those bonds and for $30,000,000 of CWSRF loans associated with the federal capitalization grants expected in the biennium. Budget: $30,150,000 Staffing impact: None Revenue source: Non-Limited Funds NL_181 Non-Limited Budget: Page 10-8

9 Non-Limited DETAIL OF OTHER FUNDS AND FEDERAL FUNDS REVENUE Source Fund Actuals Legislatively Approved Agency Request Governor's Balanced Legislatively Adopted Existing CWSRF Bonds OF 103,055, ,150, ,550, Orphan Bonds OF 203, Subtotal 103,258, ,150, ,550, BPR01 DEQ Non-Limited Budget: Page 10-9

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