WAC 173-95A-400   Wastewater treatment facilities construction.  (1) There are three primary factors considered in determining hardship funding for the construction portion of a 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 serving an area of twenty-five thousand or less can request hardship-funding consideration by submitting a financial hardship analysis form, provided by the department, along with the grant and loan 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. Water pollution control facilities construction costs that are associated with existing residential need at the time of application may be eligible for funding. Additional reserve capacity for growth is not eligible for grant funding.

     (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 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 water pollution control 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; and

     (xi) The MHI for the project area;

     (b) The sewer user fee as a percentage of the MHI is the basis for the department's grant and loan hardship-funding continuum (shown below in figure 2 and figure 3);

     (c) The most recent available American community survey data determines the MHI; and

     (d) If MHI data are not available for a community, the county MHI in which the community resides will be used;

     (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) Hardship grant ceiling amounts. The department uses the grant hardship-funding continuum, shown in figure 2 below, to determine the percent of grant awarded. There is a funding ceiling of five million dollars per project.

     For example:

When a grant 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 median household income, the applicant may receive a grant of seventy-five percent of eligible project costs, not to exceed five million dollars (see figure 2 below).


     (6) If a project in the hardship category receives partial funding due to department funding constraints, the department may offer the remaining funding, up to five million dollars, in the next funding cycle, and on a case-by-case basis. The department may require further hardship analysis before offering the remaining moneys.

     (7) Loan terms and interest rates. The department uses the loan hardship-funding continuum, shown in figure 2 below, to determine the hardship-loan interest rates. There is a funding ceiling of five million dollars. In addition to a reduced interest rate, the applicant may receive longer loan repayment terms, not to exceed twenty years.

     For example:

Assuming that the average market rate for tax-exempt municipal bonds is five percent, the following would apply.


When a loan 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 median household income, 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 3 below).


     (8) Design-build-operate (construction portion).

     (a) Design-build or design-build-operate projects must be consistent with applicable statutes, such as chapter 39.10 RCW, Alternative public works contracting procedures, chapter 70.150 RCW, Water Quality Joint Development Act, and/or chapter 35.58 RCW, Metropolitan municipal corporations;

     (b) The construction portion of a design-build-operate project under chapter 70.150 RCW, Water Quality Joint Development Act, may be eligible for a grant if the public body can demonstrate financial hardship in accordance with WAC 173-95A-400. Hardship-grant ceiling amounts found in WAC 173-95A-520 apply;

     (c) Design-build-operate projects must comply with chapter 35.58 RCW, Metropolitan municipal corporations;

     (d) The project scope of work must implement a department-approved facilities plan;

     (e) In addition to the project application information found in WAC 173-95A-300, the project will be evaluated on the applicant's level of administrative and technical expertise;

     (f) At the time of application, the following must be provided:

     (i) A legal opinion from an attorney of the public body indicating that the public body has sufficient legal authority to use the process;

     (ii) A department-approved facilities plan;

     (iii) A report detailing the projected savings based on a cost and time-to-complete as compared to the traditional design-bid-construct process;

     (g) The department may require that the public body obtain delegation authority consistent with chapter 90.48 RCW, Water pollution control, and assume the responsibility for sequential review and approval of plans, specifications, and change orders. The department will continue to make all eligibility determinations;

     (h) Costs associated with change orders are not eligible for reimbursement;

     (i) Projects must be completed according to the timeline in WAC 173-95A-700 and 173-95A-710; and

     (j) Before the loan agreement is signed, the following must be approved by the department:

     (i) Primary design elements;

     (ii) Final service agreements.

     (9) Extended grant payments. In some cases, the legislature may appropriate extended grant payments per RCW 70.146.075.

     (10) Figure 2: Grant 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 dollars)		 Moderate Hardship Elevated Hardship Severe Hardship (Very high sewer user rates in relation to median household income (MHI))
Grant Hardship-Funding Continuum Zero percent Grant Fifty percent Grant (up to five million dollars) Seventy-five percent Grant (up to five million dollars) One hundred percent Grant (up to five million dollars)

     (11) Figure 3: 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 dollars)		 Moderate Hardship Elevated Hardship Severe Hardship (Very high sewer user rates in relation to median household income (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




[Statutory Authority: Chapter 90.50A RCW, RCW 90.48.035, and 43.21A.080. 11-20-036 (Order 10-14), § 173-95A-400, filed 9/27/11, effective 10/28/11. Statutory Authority: RCW 90.48.035. 07-14-096 (Order 05-16), § 173-95A-400, filed 6/29/07, effective 7/30/07.]