What is the DWSRF Program?
The Drinking Water State Revolving Fund
(DWSRF) provides loans at interest
rates lower than the market offers to finance
projects for public drinking water systems that facilitate
compliance with primary drinking water regulations or otherwise
significantly further the health protection objectives of
the federal Safe Drinking Water Act (SDWA). Projects must
also be consistent with the 2007 State Water Plan.
Who Can Apply?
| Applicants may be: |
- political subdivisions of the state
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- nonprofit water supply corporations
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- privately-owned water systems
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How Can DWSRF Loans Be Used?
| Loans can be used for the planning, design, and
construction of projects: |
- to upgrade or replace water supply infrastructure,
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- to correct exceedances of SDWA health standards,
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- to consolidate water supplies and
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- to purchase capacity in water systems.
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DWSRF loan proceeds can also be used to purchase land integral
to the project.
Under the Source Water Protection Program, an applicant
may apply for a loan to purchase land or conservation easements,
if the purpose of the purchase is to protect the source
water of a public system from contamination and to ensure
compliance with national primary drinking water regulations.
What Loan Terms will be Offered through the DWSRF?
The DWSRF offers a net long-term interest lending rate
of 1.2 percent below the rate the borrower would receive
on the open market at the time of loan closing. The maximum
repayment period for most DWSRF loans is 20 years from the
completion of construction. A limited amount of funding
is available each year at even greater subsidies to applicants
which qualify as “disadvantaged communities.”
Disadvantaged communities may also receive a 30-year loan
term.
A cost-recovery loan origination charge is imposed to cover
the administrative costs of operating the DWSRF, but an
additional interest rate subsidy is offered to offset the
charge.
What is the Application
and Approval Process?
Pre-Application: |
Prospective loan applicants are asked to submit
a brief DWSRF Information Form to the Texas Water
Development Board (TWDB) each year for inclusion
in an Intended Use Plan (IUP) developed for that
year. The Information Form describes the applicant’s
existing water facilities, additional facility needs
and the nature of projects being considered for
meeting those needs and project cost estimates.
It also provides information to establish “disadvantaged
community” status. The Texas Commission on
Environmental Quality (TCEQ) prioritizes potential
DWSRF loan applicants’ projects using information
contained in their files. Loan funds are distributed
based upon the priority rating and an applicant’s
readiness to proceed.
TWDB staff will notify prospective applicants of
their priority rating and will encourage them to
schedule a pre-planning conference for guidance
in preparing the engineering, planning, environmental,
financial and water conservation portions of the
DWSRF application.
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Application and Commitment:
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The applicant must submit an engineering feasibility
report and environmental information, as well as
general, fiscal and legal application information
to the appropriate TWDB regional project manager
for staff review. These application materials must
be submitted by the first business day of the month
preceding the month during which the applicant desires
Board consideration. The applicant is encouraged
to meet with TWDB staff for assistance in the preparation
of the application and to discuss the terms of the
loan.
Completed applications for DWSRF loans are considered
by the Board at its monthly public meeting usually
held in Austin on the third Tuesday of each month.
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Loan Closing Options: |
Using the TWDB’s
pre-design funding option, an eligible applicant
receives a loan commitment based on preliminary
engineering, environmental, economic and social
information. Because the DWSRF program is a reimbursement
program due to U.S. Environmental Protection Agency
requirements, DWSRF loans are closed in installments.
The interest rate is locked in at the first installment
loan closing. Approved applications typically receive
a two-year commitment. The applicant’s ability
to repay the loan is the major determining factor
in the approval for using the pre-design funding
option.
If the pre-design funding option is not used, the
applicant must develop plans and specifications
and have them approved, obtain all necessary permits
and open bids prior to closing the first installment
of the loan.
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Funding and Monitoring: |
Prior to loan closing,
the applicant submits a final bond ordinance or
resolution to the TWDB for review and approval.
The applicant’s bond counsel arranges for
the approval of the debt by the Attorney General’s
office and the financial adviser schedules a closing
date for the exchange of debt for loan money. The
applicant and TWDB staff monitor the project during
the construction process. Loans are monitored by
TWDB staff for the life of the outstanding debt
to ensure compliance with the bond indenture requirements
and the maintenance of a sound financial condition.
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Are There any Special Requirements?
- Applicants for loans greater than $500,000 must adopt
a water conservation and drought contingency plan (a statutory
requirement).
- A National Environmental Policy Act type environmental
review is required by the SDWA. TWDB staff is available
to assist applicants in determining the scope of investigation
required, preparing reports and coordinating with environmental
regulatory agencies. TWDB archeologists may also assist
applicants by conducting necessary archeological surveys,
when appropriate, and securing regulatory agency approval.
- All DWSRF projects must comply with the Board’s
Small, Minority, and Women-Owned Business Enterprise (SMWBE)
program, which requires applicants and prime contractors
to follow six affirmative steps in procurement.: These
steps require loan recipients and prime contractors to:
- include qualified SMWBE’s on solicitation
lists;
- Solicit potential SMWBE’s, whenever they
are potential sources;
- Reduce contract size/quantities, when economically
feasible, to permit maximum participation of SMWBE’s;
- Establish delivery schedules to encourage participation
by SMWBE’s;
- Use the services and assistance of the Small Business
Administration, Minority Business Development Agency,
and the U.S. Department of Commerce, as appropriate;
and
- Require all prime contractors to follow steps 1-5
when awarding subcontracts or sub-agreements.
- The document entitled “SMWBE State Revolving
Fund Program Guidance Document for the Utilization of
Small, Minority, and Women-Owned Business Enterprises
in Procurement” describes the program in detail
and is available online at:
www.twdb.state.tx.us/publications/forms_manuals/SRF-052.rtf.
If you don’t have access to the Internet or for
specific questions regarding the required procurement
steps, please contact the Board’s SMWBE coordinator: (512) 463-1878
What Are the Special Terms
of Financial Assistance?
Security Instrument: Political Subdivisions will
need to issue Bonds. Private and Nonprofit organizations
may issue contracts.
Pledge: System revenues or tax pledges are typically
required. Contract revenue pledges for river authorities
and others are possible.
Length of Loans: The maximum repayment period for
a DWSRF loan is 20 years from the completion of construction.
Bonds may not be pre-paid (called) for approximately 10
years (10 year call provisions).
Interest Rates: The DWSRF program can provide funds
that are either from State sources or funds directly made
available by Federal capitalization grants.
- The Federal Capitalization Grant funds result in an
overall lower interest rate but require additional planning
and procurement requirements.
- There are two additional choices of loan terms for borrowers
under each source of funds:
Borrowers also have an option to convert to long-term,
fixed-rate financing at any time prior to project completion.
- For loans made with State sources, the borrower receives
a net long-term interest rate of 0.7 percentage points
below the rate the borrower would receive on the open
market at the time of loan closing.
- For loans made with Federal Capitalization Grants, the
borrower receives a net long-term interest rate of 1.2
percentage points below the rate the borrower would
receive on the open market at the time of loan closing.
The short-term, variable interest rate will generally be
about 2 percentage points below long-term market
rates in effect at the time. An administrative cost-recovery
charge is imposed to cover administrative costs of operating
the CWSRF, but an additional interest rate subsidy of 0.25
basis points is offered to offset the charge.
Conditions to Close: Environmental Review and Water
Conservation Plans are in addition to financial conditions.
Upon Board commitment, a letter is provided detailing all
special conditions. General closing conditions are in Board
rules 31 TAC 371.71 and 371.72.
Applicable Rules:
31 TAC 371 Subchapters A through H.
Where Can I Get More Information?
For further information on the Drinking Water State Revolving
Fund (DWSRF) Program: (512) 475-4816
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