ITEM 1: PROPOSED STATE FISCAL YEAR (SFY) 1998/99 STATE REVOLVING FUND (SRF) LOAN PROGRAM PROJECT PRIORITY LIST

DISCUSSION: The State Water Resources Control Board (SWRCB) is changing the SRF Loan Program as well as the SRF Priority List from a Federal Fiscal Year (October 1 to September 30) to a State Fiscal Year (July 1 to June 30).

Staff of the Division of Clean Water Programs (Division) has published, revised and updated the draft SFY 1998/99 SRF Loan Program Priority List in accordance with the Clean Water Act and federal regulations. The revised list contained in Exhibit A (the list was mailed initially to the public on March 27, 1998) reflects requests submitted by all of the Regional Water Quality Control Boards.

It is estimated that about $1.0 billion will be appropriated by Congress nationally in SFY 1998/99 for SRF loans. These monies can be used for construction of wastewater treatment and water reclamation facilities, correction of nonpoint source and stormwater pollution problems, and implementation of estuary enhancement activities. California can expect to have about $90 million available for loans in SFY 1998/99. The adopted SFY 1998/99 Project Priority List will be used to determine the projects that can compete for loan assistance in SFY 1998/99.

Because it is difficult to predict how many projects will be ready in any given year, we are proposing that Priority Classes A through D be placed on the fundable portion of the list. All projects scheduled for loans in SFY 1998/99 will compete on a first-come, first-served basis until the State Water Resources Control Board (SWRCB) has made preliminary loan commitments for all the available funds. A project must appear on the Priority List to qualify for loan assistance. Though a project may be identified on the fundable portion of the Priority List, this is not a commitment to provide loan assistance.

A number of key issues were identified in the Public Hearing announcement regarding the development of the SFY 1998/99 List. Exhibit B is a summary of written comments received to date on the List.

The following is a discussion of the key issues taking into consideration all the input received to date:

I. Funding Cap - The SWRCB estimates that about $90 million will be available in SFY 1998/99 for commitment by the SWRCB. The Division, based on analysis of project schedules and costs recommends that the cap be set at $10 million for SFY 1998/99. This cap would only apply to projects brought before the SWRCB for a preliminary loan commitment in SFY 1998/99. This action would not affect applicants who received preliminary loan commitments from the SWRCB prior to July 1, 1998.

II. Funding for Major Sewer Rehabilitation - Major sewer rehabilitation projects may be funded from the regular allotment. Since the current Priority List contains over $1.0 billion in rehabilitation projects that could be funded in SFY 1998/99, the staff recommends that the SWRCB continue its funding deferral of major sewer rehabilitation projects. Staff believes the money is better spent on the other eligible projects.

III. Adoption of the SFY 1998/99 SRF Loan Program Project Priority List - The staff recommends that the SWRCB adopt the SFY 1998/99 SRF Loan Program Project Priority List.

POLICY ISSUE: Should the final SFY 1998/99 SRF Project Priority List be adopted?

FISCAL IMPACT: The development and adoption of the Priority List is a requirement of the Federal Clean Water Act and regulations. The staff effort required to administer loans for projects on the fundable portion of the list is funded by the SRF Capitalization Grant (up to four percent of each Capitalization Grant can be used for SRF administration). Staffing levels approved for the Division of Clean Water Programs for State Fiscal Year 1997 - 1998 are sufficient to review and process projects from the fundable portion of the list which are expected to submit documents for review.

RWQCB IMPACT: Yes - All regions.

STAFF RECOMMENDATION: That the SWRCB adopt the final SFY 1998/99 SRF Project Priority List and set a funding cap at $10 million for SFY 1998/99.

[Attachments to this item not available electronically but can be obtained by calling Eric Torguson (916) 227-4449.]

DRAFT May 22, 1998

WHEREAS:

1. The Division of Clean Water Programs (Division) has developed the SFY 1998/99 SRF Loan Program Priority List based on Regional Water Quality Control Board and public input consistent with the Federal Clean Water Act;

2. The availability of funds under the SRF Loan Program and the interest expressed for developing and implementing wastewater treatment and water recycling, nonpoint source and storm drainage pollution correction, and estuary enhancement programs and projects support funding Priority Classes A through D in SFY 1998/99;

3. It is expected that the federal appropriations bill for Federal Fiscal Year (FFY) 1999 will allow the states to fund major sewer system rehabilitation (Needs Category IIIB), new collection system (Needs Category IVA), and combined sewer overflow projects (Needs Category V) projects without limitation;

4. The SWRCB has historically deferred funding for major sewer system rehabilitation (Needs Category IIIB);

5. Because there is a shortage of funds to assist all projects likely to request loans, the Division proposes that a $10 million cap be set for SFY 1998/99; and

6. Up to four percent of the FFY 1999 federal Capitalization Grant is available for state administration.

THEREFORE BE IT RESOLVED THAT:

The State Water Resources Control Board:

1. Approves the placement of Priority Classes A through D on the fundable portion of the SFY 1998/99 Priority List;

2. Approves funding in SFY 1998/99 for new collection system and combined sewer overflow projects and directs that funding for major sewer rehabilitation projects be deferred and the projects placed on the unscheduled portion of the SFY 1998/99 list;

3. Approves a $10 million funding cap on the amount of loan assistance per agency for SFY 1998/99;

4. Approves the set-aside of four percent of the FFY 1998 Capitalization Grant amount for SRF Loan Program administration; and

5. Adopts the Final SFY 1998/99 SRF Loan Program Project Priority List.

The undersigned, Administrative Assistant to the Board, does hereby certify that the foregoing is a full, true, and correct copy of a resolution duly and regularly adopted at a meeting of the State Water Resources Control Board held on June 18 1998.

Maureen Marché

Administrative Assistant to the Board