House Bill No. 483

Introduced By mood, aklestad, beaudry, walters, knox, holland, devaney, denny, kitzenberg, brooke, ohs, ellis, stovall, squires, hibbard, schmidt

A Bill for an Act entitled: "An Act generally revising the laws relating to the safe drinking water and wastewater treatment revolving funds and water system licensing; amending sections ~~17-7-502,~~ 37-42-102, 75-5-1101, 75-5-1102, 75-5-1103, 75-5-1104, 75-5-1105, 75-5-1106, 75-5-1107, 75-5-1111, 75-5-1112, 75-5-1113, 75-5-1121, 75-6-201, 75-6-202, 75-6-203, 75-6-204, 75-6-205, 75-6-211, 75-6-212, 75-6-221, 75-6-222, 75-6-223, and 75-6-224, MCA; repealing sections ~~75-5-1108,~~ 75-6-213, and 75-6-215, MCA; and providing an immediate effective date and an applicability date."

Be it enacted by the Legislature of the State of Montana:

Section 1. Section 17-7-502, MCA, is amended to read:

"17-7-502. Statutory appropriations -- definition -- requisites for validity. (1) A statutory appropriation is an appropriation made by permanent law that authorizes spending by a state agency without the need for a biennial legislative appropriation or budget amendment.

~~(2) Except as provided in subsection (4), to be effective, a statutory appropriation must comply with both of the following provisions:~~

~~(a) The law containing the statutory authority must be listed in subsection (3).~~

~~(b) The law or portion of the law making a statutory appropriation must specifically state that a statutory appropriation is made as provided in this section.~~

(3) The following laws are the only laws containing statutory appropriations: 2-9-202; 2-17-105; 2-18-812; 3-5-901; 5-13-403; 10-3-203; 10-3-310; 10-3-312; 10-3-314; 10-4-301; 15-1-111; 15-23-706; 15-30-195; 15-31-702; 15-37-117; 15-38-202; 15-65-121; 15-70-101; 16-1-404; 16-1-410; 16-1-411; 16-11-308; 17-3-106; 17-3-212; 17-5-404; 17-5-424; 17-5-804; 17-6-101; 17-6-201; 17-7-304; 18-11-112; 19-2-502; 19-6-709; 19-9-1007; 19-17-301; 19-18-512; 19-18-513; 19-18-606; 19-19-205; 19-19-305; 19-19-506; 20-8-107; 20-8-111; 20-9-361; 20-26-1503; 23-5-136; 23-5-306; 23-5-409; 23-5-610; 23-5-612; 23-5-631; 23-7-301; 23-7-402; 32-1-537; 37-43-204; 37-51-501; 39-71-503; 39-71-907; 39-71-2321; 39-71-2504; 44-12-206; 44-13-102; 50-4-623; 50-5-232; 50-40-206; 53-6-150; 53-6-703; 53-24-206; 60-2-220; 67-3-205; 75-1-1101; 75-5-1108; 75-6-214; 75-11-313; 76-12-123; 80-2-103; 80-2-222; 80-4-416; 81-5-111; 82-11-136; 82-11-161; 85-1-220; 85-20-402; 90-3-301; 90-4-215; 90-6-331; 90-7-220; 90-7-221; and 90-9-306.

(4) There is a statutory appropriation to pay the principal, interest, premiums, and costs of issuing, paying, and securing all bonds, notes, or other obligations, as due, that have been authorized and issued pursuant to the laws of Montana. Agencies that have entered into agreements authorized by the laws of Montana to pay the state treasurer, for deposit in accordance with 17-2-101 through 17-2-107, as determined by the state treasurer, an amount sufficient to pay the principal and interest as due on the bonds or notes have statutory appropriation authority for the payments. (In subsection (3): pursuant to sec. 7, Ch. 567, L. 1991, the inclusion of 19-6-709 terminates upon death of last recipient eligible for supplemental benefit; and pursuant to sec. 7(2), Ch. 29, L. 1995, the inclusion of 15-30-195 terminates July 1, 2001.)"

Section 1. Section 37-42-102, MCA, is amended to read:

"37-42-102. Definitions. Unless the context requires otherwise, in this chapter, the following definitions apply:

(1) "Certificate" means a certificate of competency issued by the department, stating that the operator holding the certificate has met the requirements for the specified operator classification of the certification program.

(2) "Community water system" means the term as defined in 75-6-102.

(3) "Council" means the water and wastewater operators' advisory council provided for in 2-15-2105.

(4) "Department" means the department of environmental quality provided for in 2-15-3501.

(5) "Nontransient noncommunity water system" means a public water system, as defined in 75-6-202, that is not a community system and that regularly serves at least 25 of the same persons for at least 6 months a year.

~~(5)~~(6) "Operator" means the person in direct responsible charge of the operation of a water treatment plant, water distribution system, or wastewater treatment plant.

~~(6)~~(7) "State waters" means the term as defined in 75-6-102.

~~(7)~~(8) "Wastewater treatment plant" means a facility that:

(a) is designed to remove solids, bacteria, or other harmful constituents of sewage, industrial wastes, or other wastes;

(b) discharges an effluent directly into state waters; and

~~(8)~~(9) "Water distribution system" means that portion of the water supply system that conveys water from the water treatment plant or other supply source to the premises of the consumer and that is part of a community water system or a nontransient noncommunity water system.

~~(9)~~(10) "Water supply system" means a system of pipes, structures, and facilities through which water is obtained, treated, sold, distributed, or otherwise offered to the public for household use or use by humans and that is part of a community water system or a nontransient noncommunity water system.

~~(10)~~(11) "Water treatment plant" means that portion of the water supply system that alters either the physical, chemical, or bacteriological quality of the water and renders it safe and palatable for human use."

Section 2. Section 75-5-1101, MCA, is amended to read:

"75-5-1101. Short title. This part may be cited as the ~~"Wastewater Treatment~~ "Water Pollution Control State Revolving Fund Act"."

Section 3. Section 75-5-1102, MCA, is amended to read:

"75-5-1102. Definitions. Unless the context requires otherwise, in this part the following definitions apply:

(1) "Administrative costs" means costs incurred by the department and the department of natural resources and conservation in the administration of the program, including but not limited to costs of servicing loans and issuing debt; program start-up costs; financial, management, and legal consulting fees; and reimbursement costs for support services from other state agencies.

(2) "Cost" means, with reference to a ~~wastewater treatment works~~ project, all capital costs incurred or to be incurred by a municipality or a private ~~concern~~ person, including but not limited to engineering, construction, financing, and other fees, interest during construction, and a reasonable allowance for contingencies to the extent permitted by the federal act and regulations promulgated thereunder.

(3) "Federal act" means the Federal Water Pollution Control Act, also known as the Clean Water Act, 33 U.S.C. 1251 through 1387, as amended.

(4) "Intended use plan" means the annual plan adopted by the department and submitted to the environmental protection agency that describes how the state intends to use the money in the revolving fund.

~~(4)~~(5) "Loan" means a loan of money from the revolving fund to a municipality or a private ~~concern~~ person.

~~(5)~~(6) "Municipality" means any state agency, city, town, or other ~~local government unit having authority to own and operate a sewage system and wastewater treatment works~~ public body created pursuant to state law.

~~(6)~~(7) "Private ~~concern"~~ person" means ~~an individual or other entity eligible for a loan or loans for a pollution control project for a nonpoint source under section 319 of the federal act~~ an individual, corporation, partnership, or other nongovernmental legal entity.

~~(7)~~(8) "Program" means the ~~wastewater treatment works~~ water pollution control state revolving fund ~~loan~~ program established by this part.

~~(8)~~(9) "Project" means ~~a wastewater treatment works or part of a wastewater treatment works for~~ an activity that is eligible for financing by the program under the federal act, including treatment works, as defined under section 1292 of the federal act (33 U.S.C. 1292), and nonpoint source pollution control under section 1329 of the federal act (33 U.S.C. 1329), EXCEPT A SOLID WASTE MANAGEMENT SYSTEM OR RESOURCE RECOVERY FACILITY REGULATED UNDER AND DEFINED IN TITLE 75, CHAPTER 10, and for which a municipality or private ~~concern~~ person makes an application for a loan or other financial assistance.

~~(9)~~(10) "Revolving fund" means the fund established by 75-5-1106."

Section 4. Section 75-5-1103, MCA, is amended to read:

"75-5-1103. ~~Wastewater treatment works~~ Water pollution control state revolving fund ~~loan~~ program. There is a program under which the state may provide financial assistance to municipalities and private ~~concerns~~ persons to finance or refinance part or all of the cost of projects. The program must be administered in accordance with this part and the federal act."

Section 5. Section 75-5-1104, MCA, is amended to read:

"75-5-1104. Authorization of agreement -- content. (1) The department may enter into a capitalization grant agreement or other agreement with the United States environmental protection agency to implement the program and may accept from that agency other grants and loans to carry out the program.

(2) In entering into the agreement, the director of the department may commit the state to:

(a) accept grant payments from the environmental protection agency in accordance with the schedule established by the administrator of that agency and deposit the payments in the revolving fund established in 75-5-1106;

(b) deposit in the revolving fund from state money an amount equal to at least 20% of the total amount of all capitalization grants made to the state as provided by 75-5-1106 on or before the date on which each quarterly federal grant payment is made to the state;

(c) provide financial assistance to municipalities and private ~~concerns~~ persons in accordance with this part in an amount equal to 120% of the amount of each grant payment within a time period not to exceed 1 year after receipt of a grant;

(d) expend all funds in the revolving fund in an expeditious and timely manner;

(e) use all funds deposited in the revolving fund as a result of the capitalization grant to ensure progress, as determined by the governor of the state, toward compliance with enforceable deadlines, goals, and requirements of the federal act;

(f) expend each quarterly grant payment in accordance with the laws and procedures applicable to commitment or expenditure of revenues of the state;

(g) use accounting, audit, and fiscal procedures conforming to generally accepted government accounting standards;

(h) as a condition of making a loan or providing other financial assistance from the revolving fund, require that the municipality or private ~~concern~~ person will maintain project accounts in accordance with generally accepted government accounting standards;

(i) make annual reports to the environmental protection agency concerning the use of the revolving fund as required by the federal act; and

(j) any other covenants, commitments, and obligations necessary to ensure that the state's administration of the program is consistent with the provisions of this part."

Section 6. Section 75-5-1105, MCA, is amended to read:

"75-5-1105. Rulemaking. The department and the department of natural resources and conservation may adopt rules to implement the provisions of this part, including rules:

(1) prescribing the form and content of applications for loans and refinancing agreements;

(2) governing the application of the criteria for awarding loans;

(3) establishing additional terms and conditions for the making of loans and the security instruments and other necessary agreements; and

(4) establishing ceilings on the amount of individual loans to be made to municipalities and private ~~concerns~~ persons, if considered appropriate and necessary for the successful administration of the program."

Section 7. Section 75-5-1106, MCA, is amended to read:

"75-5-1106. Revolving fund. (1) There is established in the state treasury a separate account designated as the ~~wastewater treatment works~~ water pollution control state revolving fund. There are established in the revolving fund as subaccounts a federal allocation account, a state allocation account, an administration account, an investment income account, and a debt service account.

(2) There must be credited to:

(a) the federal allocation account, all amounts received by the state from the following sources:

(i) funds provided pursuant to the federal act as capitalization grants for a state revolving fund to assist construction of ~~wastewater treatment works and~~ projects;

(ii) grants or transfers of grants received under subchapter II of the federal act for ~~construction of wastewater treatment works~~ projects; and

(iii) money transferred to the fund from the drinking water state revolving fund pursuant to 75-6-211;

(b) the state allocation account, the net proceeds of bonds of the state issued pursuant to 75-5-1121 and other money appropriated by the legislature;

(c) the administration account, 4% of the capitalization grant award, or the maximum amount allowed by the federal act~~, of the capitalization grant award~~ for payment of administrative costs;

(d) the investment account, all money received from investment of amounts in those accounts in the revolving fund designated by the board of examiners in the resolution or trust indenture authorizing the issuance of bonds; and

(e) the debt service account, the interest portion of loan repayments.

(3) Each loan made as authorized by 75-5-1113 must be funded and disbursed from the federal allocation account or the state allocation account, or both, by the department and the department of natural resources and conservation as recommended by the department. All amounts received in payment of principal or interest on a loan must be credited to the revolving fund. If bonds have been issued pursuant to 75-5-1121 and are outstanding, the interest payments must be transferred to the debt service account securing the bonds. Money in the debt service account that is not required for debt service may be transferred to other accounts within the revolving fund as provided in the resolution or trust indenture authorizing the bonds.

(4) The department of natural resources and conservation may establish additional accounts and subaccounts within the revolving fund as it considers necessary to account for the program money and to ensure compliance with the federal act and this part.

(5) As allowed under the federal Safe Drinking Water Act, 42 U.S.C. 300f, et seq., and with the governor's permission, AN AMOUNT EQUIVALENT TO up to 33% of each year's DRINKING WATER STATE REVOLVING FUND federal capitalization grant may be transferred from the federal allocation account, established under subsection (2)(a), to the drinking water state revolving fund federal allocation account established in 75-6-211."

Section 8. Section 75-5-1107, MCA, is amended to read:

"75-5-1107. Uses of revolving fund. Money in the revolving fund ~~may~~ must be used to:

(1) make loans to municipalities ~~and private concerns persons~~ to finance all or a portion of the cost of a project AND TO MAKE LOANS TO PRIVATE PERSONS TO FINANCE ALL OR A PORTION OF THE COST OF NONPOINT SOURCE POLLUTION CONTROL PROJECTS;

(2) buy or refinance debt obligations of municipalities that were issued to finance projects within the state at or below market rates, provided that the obligations were incurred after March 7, 1985;

(3) guarantee or purchase insurance for obligations of municipalities that were issued to finance projects in order to enhance credit or reduce interest rates;

(4) provide a source of revenue or security for general obligation bonds the proceeds of which are deposited in the revolving fund;

(5) provide loan guarantees for similar revolving funds established by municipalities;

(6) earn interest on fund accounts; and

(7) pay reasonable administrative costs of the ~~revolving loan~~ program not to exceed 4%, of all federal grant awards to the fund or the maximum amount allowed under the federal act~~, of all federal grant awards to the fund~~."

Section 9. Section 75-5-1111, MCA, is amended to read:

"75-5-1111. Applications. (1) The department shall, after consultation with the department of natural resources and conservation, establish loan application procedures, including forms for the applications. Each application for a loan to finance construction of a project must include:

(a) a reasonably detailed description of the project;

(b) a reasonably detailed estimate of the cost of the project;

(d) identification of the source or sources of funds to be used in addition to the proceeds of the loan to pay the cost of the project;

(e) the source or sources of revenue proposed to be used to repay the loan;

(f) a current financial statement showing assets, liabilities, revenue, and expenses of the applicant;

~~(f)~~(g) if the applicant is a municipality, a statement as to whether, at the time of application, there are any outstanding ~~bonds,~~ loans, notes, bonds, or other obligations of the municipality that were issued or incurred to finance any part of the municipality's ~~sewage~~ project or system of which the project is a part and, if so, a description of the ~~bonds,~~ loans, notes, bonds, or other obligations; ~~and~~

(h) if the applicant is a private person, a statement as to whether, at the time of application, there are any outstanding loans, notes, or other obligations of the private person and, if so, a description of the loans, notes, or other obligations; and

~~(g)~~(i) any other information that the department or the department of natural resources and conservation may require to determine the feasibility of a project and the applicant's ability to repay the loan, including but not limited to engineering reports, economic feasibility studies, and legal opinions.

(2) Each application for a loan to refinance a project, including a purchase of outstanding obligations issued by a municipality to finance a project in whole or in part, must include:

(a) a reasonably detailed description of the project;

(b) a schedule of the cost of the project;

(d) a description of the ~~bonds,~~ loans, notes, bonds, or other obligations to be refinanced and of any other loans, notes, bonds, or obligations issued or incurred to finance any part of the municipality's ~~sewage system~~ project; and

(e) any other information that the department or the department of natural resources and conservation may require.

(3) Each application for financial assistance in the form of a guaranty or the purchase of insurance for a municipal obligation must include all items required by subsection (1) and any other information the department may require."

Section 10. Section 75-5-1112, MCA, is amended to read:

"75-5-1112. Evaluation of projects and loan applications. ~~After consultation with the~~ The department of natural resources and conservation, and the department shall evaluate projects ~~for loans and other financial assistance and place them on a priority list or intended use plan~~ and loan applications. In evaluating projects and loan applications, the ~~department shall consider the~~ following factors must be considered:

(1) the technical design of the project to ensure compliance with all applicable statutes, rules, and design standards;

(2) the financial capacity of the municipality or private person to repay the loan;

(3) the financial, managerial, and technical ability of the municipality or private person to properly operate and maintain the project;

(4) the feasibility of project completion given the total financing available;

~~(1)~~(5) the ability of the municipality or private ~~concern~~ person to pay the costs of the project without the requested financial assistance;

~~(2)~~(6) the total amount of loan funds available for financial assistance in the revolving fund;

~~(3)~~(7) the total amount requested by in other applications that have been received or that are likely to be received;

~~(4)~~(8) ~~the need for and benefit to be derived from the project~~ the ranking of the project on the priority list or intended use plan; and

(5) in the case of an application to refinance an outstanding obligation, the benefit of refinancing as measured by a decrease in interest rates and whether the refinancing permits the construction of an additional project by the municipality; and

~~(6)~~(9) any other criteria that the department determines appropriate, considering the purposes of the federal act and the program."

Section 11. Section 75-5-1113, MCA, is amended to read:

"75-5-1113. ~~Loans~~ Conditions on loans. (1) Upon approval of a project by the department, the department of natural resources and conservation may lend amounts on deposit in the revolving fund to a municipality or private ~~concern~~ person to pay part or all of the cost of a project or to buy or refinance an outstanding obligation of a municipality that was issued to finance a project. The loan is subject to the municipality or private ~~concern~~ person complying with the following conditions:

(a) meeting requirements of financial capability set by the department of natural resources and conservation to ~~assure~~ ensure sufficient ~~revenues~~ revenue to operate and maintain the project for its useful life and to repay the loan, including the establishment and maintenance by the municipality of a reserve or revolving fund to secure the payment of principal of and interest on the loan to the extent permitted by the applicable law governing the municipality's obligation;

(b) agreeing to operate and maintain the project properly over its structural and material design life, which may not be less than ~~20 years~~ the term of the loan;

(c) agreeing to maintain proper financial records in accordance with ~~recognized government~~ generally accepted accounting ~~procedures~~ standards and agreeing that all records are subject to audit;

(d) meeting the requirements listed in the federal act for projects constructed with funds directly made available by federal capitalization grants;

(e) providing legal assurance that all necessary property titles, easements, and rights-of-way have been obtained to construct, operate, and maintain the project;

(f) submitting an engineering report evaluating the proposed project, including information demonstrating its cost-effectiveness and environmental information necessary for the department and the department of natural resources and conservation to fulfill their responsibilities under the Montana Environmental Policy Act and rules adopted to implement that act;

(g) complying with plan and specification requirements ~~for public wastewater systems~~ and other requirements established by the ~~board~~ department; and

(h) providing for proper construction inspection and project management.

(3) Subject to the limitations of the federal act, the interest rate on a loan must ensure that the interest payments on the loan and on other outstanding loans will be sufficient, if paid timely and in full, with other available funds in the revolving fund, including investment income, to enable the state to pay the principal of and interest on the bonds issued pursuant to 75-5-1121.

(a) The interest rate must be determined as of the date the loan is authorized by the department of natural resources and conservation.

(b) The rate may include any additional rate that the department of natural resources and conservation considers reasonable or necessary to provide a reserve for the repayment of the loan. The additional rate may be fixed or variable or may be calculated according to a formula, and it may differ from the rate established for any other loan.

(4) Each loan must be evidenced by a bond, note, or other evidence of indebtedness of the municipality or private ~~concern~~ person, in a form prescribed or approved by the department of natural resources and conservation, except that the bond, note, or other evidence must include provisions required by the federal act and must be consistent with the provisions of this part. The bond, note, or other evidence is not required to be identical for all loans. The department of natural resources and conservation may require that loans to private persons be further secured by a mortgage and other security interests in the project that is being financed or other forms of additional security as considered necessary, including personal guarantees and letters of credit.

(5) As a condition to making a loan, the department of natural resources and conservation, with the concurrence of the department, may impose a reasonable administrative fee that may be paid from the proceeds of the loan or other available funds of the municipality or private ~~concern~~ person. Administrative fees may be deposited:

(a) in a special administrative costs account that the department of natural resources and conservation may create for that purpose outside the revolving fund provided for in 75-5-1106; or

(b) in the administration account. Money deposited in the administration account established in 75-6-211 must be used for the payment of administrative costs of the program. Money deposited in the special administration costs account must be used for the payment of administrative costs of the program unless not required for that purpose, in which case the money may be transferred to other funds and accounts in the program."

Section 12. Section 75-5-1121, MCA, is amended to read:

"75-5-1121. Authorization of bonds -- appropriation of proceeds. (1) Upon request of the department of natural resources and conservation and upon certification by the department ~~of natural resources and conservation~~ that the state has entered into a capitalization grant agreement or other agreement with the United States government pursuant to 75-6-204 and that federal capitalization grants have been made to the state for the program, the board of examiners is authorized to issue and sell bonds of the state as authorized by the legislature to provide money for the ~~revolving loan~~ program. The bonds are general obligations on which the full faith, credit, and taxing powers of the state are pledged for payment of the principal and interest. The bonds must be issued as provided by Title 17, chapter 5, part 8.

(2) The proceeds of the bonds, other than any premium and accrued interest received or amounts to be used to pay interest on the bonds or the costs of issuing the bonds, are appropriated to the state allocation account of the ~~wastewater treatment works~~ revolving fund. Any premium and accrued interest and bond proceeds to be used to pay interest must be deposited in the debt service account. Proceeds of bonds to be used to pay the costs of issuing the bonds must be deposited in a cost of issuance account established outside of the revolving fund by the board of examiners in the resolution or trust indenture authorizing the issuance of the bonds. For purposes of sections 17-5-803 and 17-5-804, the state allocation account and the cost of issuance account constitute a capital projects account. The proceeds must be available to the department and the department of natural resources and conservation and may be used for the purposes authorized in this part without further budgetary authorization.

(3) In the resolution authorizing the sale and issuance of the bonds, the board of examiners, upon the request of the department of natural resources and conservation, may create separate accounts or subaccounts to provide for the payment security of the bonds and may pledge the interest component of the loan repayments credited to the revolving fund and the revolving fund as security for the bonds.

(4) The board of examiners may allow bonds issued under this section to be secured by a trust indenture between the board of examiners and a trustee. The trustee may be a trust company or bank having the powers of a trustee inside or outside the state.

(a) If the board of examiners elects to issue bonds pursuant to a trust indenture, the trustee may, as determined by the board of examiners, hold one or more of the funds and accounts created pursuant to this chapter.

(b) In addition to provisions that the board of examiners determines to be necessary and appropriate to secure the bonds, provide for the rights of the bondholders, and ensure compliance with all applicable law, the trust indenture must contain provisions that:

(i) govern the custody, safeguarding, and disbursement of all money held by the trustee under the trust indenture; and

(ii) permit representatives of the state treasurer, department, or department of natural resources and conservation, upon reasonable notice and at reasonable times, to inspect the trustee's books and records concerning the trust indenture.

(c) A trust indenture or an executed counterpart of a trust indenture developed pursuant to this chapter must be filed with the secretary of state."

Section 13. Section 75-6-201, MCA, is amended to read:

"75-6-201. Short title. This part may be cited as the "~~Safe~~ Drinking Water ~~Treatment~~ State Revolving Fund Act"."

Section 14. Section 75-6-202, MCA, is amended to read:

"75-6-202. Definitions. Unless the context requires otherwise, in this part, the following definitions apply:

(1) "Administrative costs" means costs incurred by the department and the department of natural resources and conservation in the administration of the program, including but not limited to:

(a) costs of servicing loans and issuing debt;

(b) program startup costs;

(d) reimbursement costs for support services from other state agencies.

(2) "Community water system" means a public water system that is ~~either privately or publicly~~ owned BY A PRIVATE PERSON OR A MUNICIPALITY and that serves at least 15 service connections used by year-round residents of the area served by the system or regularly serves at least 25 year-round residents. The term does not include a public water system that is owned by the federal government.

~~(2)~~(3) "Cost" means, with reference to a project, all capital costs incurred or to be incurred for a public water system, including but not limited to:

(a) engineering, financing, and other fees;

(b) interest during construction; ~~and~~

~~(c)~~(d) a reasonable allowance for contingencies to the extent permitted by the federal act and rules promulgated under the federal act.

(4) "Department" means the department of environmental quality provided for in 2-15-3501.

(5) "Disadvantaged community" means one in which the service area of a public water system meets the affordability criteria established by rule adopted pursuant to this part.

~~(3)~~(6) "Federal act" means the federal Safe Drinking Water Act, 42 U.S.C. 300f, et seq., as that act read on [the effective date of this act].

~~(4) "Governmental agency" means a city, county, water and sewer district, or other local government unit having authority to own, construct, or operate a public water system.~~

~~(5) "Grant" means a grant of money from the revolving fund for project costs.~~

~~(6)~~(7) "Indian tribe" means an Indian tribe ~~within the state of Montana that is recognized by the secretary of the U.S. department of interior~~ that has a federally recognized governing body carrying out substantial governmental duties and powers over any area.

(8) "Intended use plan" means the annual plan adopted by the department and submitted to the environmental protection agency that describes how the state intends to use the money in the revolving fund.

(7) "Investor-owned public water system" means a public water system that is not owned by a governmental agency, an intergovernmental agency, a nonprofit organization, an Indian tribe, or a combination of governmental entities.

~~(8)~~(9) "Loan" means a loan of money from the revolving fund for project costs.

(10) "Municipality" means a state agency, city, town, or other public body created pursuant to state law or an Indian tribe.

(11) "Noncommunity water system" means a public water system that is not a community water system.

~~(9)~~(12) "Nonprofit ~~organization"~~ noncommunity water system" means a noncommunity water system owned by an organization that is organized under Montana law and that qualifies as a tax-exempt organization under the provisions of section 501(c)(3) of the Internal Revenue Code.

(13) "Private person" means an individual, corporation, partnership, or ~~company~~ OTHER NONGOVERNMENTAL LEGAL ENTITY.

~~(10)~~(14) "Program" means the ~~safe~~ drinking water ~~treatment~~ state revolving ~~loan~~ fund program established by this part.

~~(11)~~(15) "Project" means improvements or activities that are:

(a) to be undertaken for a public water system and that are of a type that will facilitate compliance with the national primary drinking water regulations applicable to the system; or

(b) to further the health protection objectives of the federal act.

~~(12)~~(16) "Public water system" means a system for the provision to the public of ~~piped~~ water for human consumption, through pipes or other constructed conveyances, if that system has at least 15 service connections or regularly serves at least 25 individuals. The term includes any collection, treatment, storage, and distribution facilities under control of an operator of a system that are used primarily in connection with a system and any collection or pretreatment storage facilities not under control of ~~the~~ an operator and that are used primarily in connection with a system.

~~(13)~~(17) "Revolving fund" means the ~~safe~~ drinking water ~~treatment~~ state revolving fund established by 75-6-211."

Section 15. Section 75-6-203, MCA, is amended to read:

"75-6-203. ~~Safe drinking~~ Drinking water ~~treatment~~ state revolving fund program. There is a program under which the state may provide financial assistance to ~~public~~ community water systems and nonprofit noncommunity water systems. The program must be administered in accordance with this part and the federal act."

Section 16. Section 75-6-204, MCA, is amended to read:

"75-6-204. Authorization of agreement -- content. (1) The department may enter into a capitalization grant agreement or other agreement with the ~~U.S.~~ environmental protection agency to implement the program and may accept from that agency other grants and loans to carry out the program.

(2) In entering into an agreement, the director of the department may commit the state to:

(a) accept grant payments from the ~~U.S.~~ environmental protection agency in accordance with the schedule established by the administrator of that agency and deposit the payments in the revolving fund established in 75-6-211;

(b) deposit in the revolving fund from state money an amount equal to at least 20% of the total amount of all capitalization grants made to the state as provided by 75-6-211 on or before the date on which each federal grant payment is made to the state;

(c) deposit in the nonproject account for department programs authorized under section 300j-12(g)(2) of the federal act (42 U.S.C. 300j-12(g)(2)) a state match equal dollar-for-dollar to the capitalization grant deposited in the account;

~~(c)~~(d) provide financial and technical assistance to a public water system in accordance with this part in an amount equal to 120% of the amount of each grant payment within a period not to exceed 1 year after receipt of a grant;

~~(d)~~(e) expend all funds in the revolving fund in an expeditious and timely manner;

~~(e)~~(f) use all funds deposited in the revolving fund as a result of the capitalization grant to ensure progress, as determined by the governor, toward compliance with enforceable deadlines, goals, and requirements of the federal act;

~~(f)~~(g) expend each grant payment in accordance with the laws and procedures applicable to commitment or expenditure of ~~revenues~~ revenue of the state;

~~(g)~~(h) use accounting, audit, and fiscal procedures conforming to generally accepted government accounting standards;

~~(h)~~(i) make ~~annual~~ biennial reports and provide annual audits to the ~~U.S.~~ environmental protection agency concerning the use of the revolving fund as required by the federal act; and

~~(i)~~(j) any other covenants, commitments, and obligations necessary to ensure that the state's administration of the program is consistent with the provisions of this part and the federal act.

(3) as As a condition of making a loan or providing other financial assistance from the revolving fund, the department shall require that the public water system maintain project accounts in accordance with generally accepted government accounting standards."

Section 17. Section 75-6-205, MCA, is amended to read:

"75-6-205. Rulemaking authority. The ~~board~~ department and the ~~board~~ department of natural resources and conservation may adopt rules within their respective authorities established within the provisions of this part, including rules:

(1) prescribing the form and content of applications for loans and ~~grants~~ technical assistance;

(2) governing the application of the criteria for awarding loans and ~~grants~~ technical assistance;

(3) establishing additional terms and conditions for the making of loans and the security instruments and other necessary agreements;

(4) establishing ceilings on the amount of individual loans ~~and grants~~ to be made if considered appropriate and necessary for the successful administration of the program;

(5) establishing affordability criteria to be used in awarding subsidies to disadvantaged communities;

~~(5)~~(6) regarding other matters that may be required to ensure compliance of the program with the provisions ~~and~~ of the federal act and rules promulgated under the federal act, unless these matters are specifically governed by this part; and

~~(6)~~(7) to maintain the financial integrity of the program."

Section 18. Section 75-6-211, MCA, is amended to read:

"75-6-211. Revolving fund. (1) There is established in the state treasury a separate account designated as the ~~safe~~ drinking water ~~treatment~~ state revolving fund. The corpus of the fund must be available in perpetuity for providing assistance under this part. There are established within the revolving fund a federal allocation account, a state allocation account, an administration account, an investment income account, ~~and~~ a debt service account, and a nonproject account.

(2) There must be credited to:

(a) the federal allocation account:

(i) all amounts received by the state pursuant to the federal act as capitalization grants for a state revolving fund to ~~assist construction of or improvements to public~~ provide loans or other assistance, as authorized under this part, to community water systems and nonprofit noncommunity water systems; and

(ii) all amounts transferred to the fund from the water pollution control state revolving fund under 75-5-1106;

(b) the state allocation account:

(i) the net proceeds of bonds of the state issued pursuant to 75-6-225; ~~and~~

(ii) ~~other~~ money appropriated by the legislature; and

(iii) other available qualifying funds;

(c) the administration account, 4% of the federal capitalization grant award or the maximum amount allowed by the federal act for payment of administrative costs;

(e) the debt service account, the interest portion of loan repayments; and

(f) the nonproject account for department programs authorized under section 300j-12(g)(2) of the federal act (42 U.S.C. 300j-12(g)(2)), up to 10% of the capitalization grant and the state's match as described in 75-6-204.

(3) Each loan made ~~as authorized by 75-6-225~~ under this part must be funded and disbursed from the federal allocation account or the state allocation account, or both, by the department of natural resources and conservation as recommended by the department. All amounts received in payment of principal or interest on a loan must be credited to the revolving fund. If bonds have been issued pursuant to 75-6-225 and are outstanding, the interest payments must be transferred to the debt service account securing the bonds. Money in the debt service account that is not required for debt service may be transferred to other accounts within the revolving fund as provided in the resolution or trust indenture authorizing the bonds.

(4) The department of natural resources and conservation may establish additional accounts and subaccounts within the revolving fund that it considers necessary to account for the program money and to ensure compliance with the federal act and this part.

(5) As allowed under the federal act and with the governor's permission, the department may transfer up to 33% of each year's federal capitalization grant from the federal allocation account, established under subsection (2)(a), to the water pollution control state revolving fund federal allocation account established in 75-5-1106. The transfer of funds must be included in the intended use plan in [section 22 21]."

Section 19. Section 75-6-212, MCA, is amended to read:

"75-6-212. Use of revolving fund. (1) Money in the revolving fund ~~must~~ may be used to:

(a) ~~for providing financial assistance that is in the form of~~ make loans ~~and grants to public water systems and that is of the type~~ to community water systems and nonprofit noncommunity water systems as provided in this part.;

(2) (a) Financial assistance may be used by a public water system only for expenditures that the U.S. environmental protection agency has determined through its regulations are appropriate. Financial assistance may be used for acquisition, from willing sellers at fair market value, of real property or interests that are integral to establishing a public water system.

(b) buy or refinance the debt obligation of a municipality at an interest rate that does not exceed market rates, provided that the obligations were incurred and construction of the project began after July 1, 1993;

(c) guarantee or purchase insurance in order to enhance credit or reduce interest rates for obligations of municipalities that are issued to finance eligible projects;

(d) leverage the total amount of revolving funds available by providing a source of revenue or security for the payment of principal and interest on revenue or general obligation bonds issued by the state, the net proceeds of which are deposited in the revolving fund;

(e) pay reasonable administrative costs of the program, not to exceed 4% of the annual capitalization grant or the maximum amount allowed under the federal act;

(f) if matched by an equal amount of state funds, pay the department's costs in an amount not to exceed 10% of the annual capitalization grant for the following:

(i) public water system supervision programs;

(ii) administering or providing technical assistance through source water protection programs;

(iii) developing and implementing a capacity development strategy under section 300g-9 of the federal act (42 U.S.C. 300g-9); AND

(iv) administering an operator certification program in order to meet the requirements of section 300g-8 of the federal act (42 U.S.C. 300g-8); and

~~(v) payment of~~ (G) PAY the department's costs in an amount not to exceed 2% of the annual capitalization grant for the purpose of providing technical assistance to public water systems serving 10,000 or fewer persons.

~~(b)~~(2) ~~Financial assistance~~ Except as provided in subsection (3), money in the fund may not be used for:

(a) expenditures related to monitoring, operation, and maintenance;

(b) the acquisition of real property or any interest in real property, unless the acquisition is integral to a project authorized under this part and the purchase is from a willing seller;

(i) does not have the financial, managerial, and technical capability to ensure compliance with the requirements of the federal act; or

(ii) is in significant noncompliance with any requirement of a national primary drinking water regulation or variance; or

(d) any other activity prohibited from funding under the federal act.

(3) (a) A public water system described in subsection (2)(c) may receive assistance under this part if:

(i) the use of the assistance will ensure compliance; and

(ii) for a system that the department has determined does not have the financial, managerial, or technical capability to ensure compliance with the federal act, the owner or operator of the system agrees to undertake feasible and appropriate changes in operations, including ownership, management, accounting, rates, maintenance, consolidation, alternative water supply, or other procedures, as determined necessary by the department to ensure compliance.

(b) Prior to providing assistance to a public water system that is in significant noncompliance with any requirement of a national primary drinking water regulation or variance pursuant to the federal act, the department shall determine whether the provisions of subsection (2)(c)(i) apply to the system."

NEW SECTION. Section 20. Loan subsidy for disadvantaged communities. (1) Notwithstanding any other provision in this part, if the program makes a loan pursuant to 75-6-221(1) to a disadvantaged community or to a community that the department expects to become a disadvantaged community as a result of a proposed project, the department may provide additional subsidization in the form of a reduced interest rate.

(2) The total annual amount of loan subsidies made by the department pursuant to subsection (1) may not exceed 30% of the capitalization grant received by the department for each fiscal year.

NEW SECTION. Section 21. Intended use plan. (1) The department shall prepare an annual intended use plan for the state that meets the requirements of section 300j-12(b) of the federal act (42 U.S.C. 300j-12(b)).

(2) The intended use plan must include:

(a) a list of projects in the state that are eligible for assistance, including both the priority assigned to each project based on public health needs and on the financial needs of the project and, to the extent known, the expected funding schedule for each project; and

(b) a description of the funds to be allocated to activities under 75-6-212 and 75-6-221(2) and funds to be transferred to or received by the water pollution control state revolving fund, as allowed in 75-6-211(5), for the annual fiscal period following publication of the intended use plan.

(3) Before finalizing an intended use plan, the department shall prepare a draft document containing the information required in subsection (2) and shall provide public notice and opportunity to comment on the draft document.

NEW SECTION. Section 22. Insurance and guarantee program. (1) The revolving fund may be used to purchase insurance for or guarantee the timely payment of principal and interest on a debt obligation issued by a municipality if the department of natural resources and conservation determines that the guarantee or insurance would improve the credit market access of the municipality or reduce the interest rate on the municipal obligation.

(2) The department of natural resources and conservation shall adopt rules setting forth the conditions under which the program will guarantee or insure municipal obligations, including the amount of fees to be charged for the guarantee or the purchase of insurance and the amount of reserves, if any, to be established in the fund to cover any guarantee. The program may not be used to guarantee a municipal obligation for a project or municipality not meeting the requirements of 75-6-224, except to the extent that they are inconsistent with the guarantee.

Section 23. Section 75-6-221, MCA, is amended to read:

"75-6-221. ~~Loan program~~ General loan and assistance program. (1) The department may provide financial assistance in the form of a loan to public water systems owned by a governmental agency, an intergovernmental agency, a nonprofit corporation, an Indian tribe, or any combination of those entities program may, subject to the requirements in 75-6-222 through 75-6-224., make loans to community water systems and nonprofit noncommunity water systems that:

(a) will facilitate compliance with national primary drinking water regulations pursuant to the federal act; or

(b) will further the health protection objectives of the federal act, including but not limited to projects that involve:

(i) upgrading and replacing infrastructure;

(ii) addressing exceedances of the federal act or preventing future violations;

(iii) consolidating water supplies;

~~(iv) a system that meets the definition of a public water system contained in section 300f(4) of the federal act (42 U.S.C. 300f(4));~~

~~(v)~~(IV) the acquisition of land, at fair market value, that is integral to the project;

~~(vi)~~(V) planning and designing of a project; ~~and~~ OR

~~(vii)~~(VI) other activities allowed under the federal act.

(2) In addition to loans authorized under subsection (1), the program may make loans to public water systems for one or more of the following purposes:

(a) to a community water system or nonprofit noncommunity water system to acquire land or a conservation easement from a willing party if the land is necessary to ensure compliance with the national primary drinking water regulations or to protect the source of water from contamination;

(b) to a community water system to implement local, voluntary source water protection measures in order to protect source water in areas delineated under a source water assessment program in order to facilitate compliance with the national primary drinking water regulations or otherwise significantly further the health protection objectives of the federal act;

(c) to a community water system to provide funding for the development and implementation of a source water quality assessment, contingency plans, and demonstration projects for partners within a delineated source water area.

(3) The department may:

(a) provide financial and technical assistance to any public water system as part of a capacity development strategy developed and implemented in accordance with the federal act;

(b) make expenditures from the capitalization grant to delineate and assess source water protection areas, provided that funds set aside for such expenditures must be obligated within 4 fiscal years; and

(4) The ~~department~~ program may provide financial assistance ~~only in the form of a loan to an investor-owned~~ to a public water system according to priorities established by the department in the department's intended use plan adopted pursuant to [section 22 21]~~, based on greatest public health needs and financial needs~~. Prior to making a loan to ~~an investor-owned~~ a public water system, the department shall determine that the system has the ability to repay the loan according to its terms and conditions and may require a dedicated source of repayment and impose additional requirements. ~~A loan to an investor-owned public water system is subject to the requirements of 75-6-222 through 75-6-224.~~

(5) The total amount of assistance provided and expenditures made by the ~~department~~ PROGRAM under subsections (2) and (3) may not exceed 15% of the amount of the capitalization grant received by the department for that year and may not exceed 10% of that amount for any one of the activities listed under subsection (2) or (3)."

Section 24. Section 75-6-222, MCA, is amended to read:

"75-6-222. Evaluation of projects and loan applications. ~~After consultation with the~~ The department and the department of natural resources and conservation~~, the department~~ shall evaluate projects ~~for loans and grants and place them on a priority list or intended use plan~~ and loan applications. In evaluating projects and applications, the ~~department shall consider the~~ following factors must be considered:

(1) the technical design of the project to ensure compliance with all applicable statutes, rules, and design standards;

(2) the financial capacity of the applicant;

(3) the financial, managerial, and technical ability of the applicant to properly operate and maintain the project;

(4) the total financing of the project to ensure completion;

~~(1)~~(5) the viability of the public water system;

~~(2)~~(6) the ability of the public water system to pay the costs of the project without the requested financial assistance;

~~(3)~~(7) the total amount of loan funds available for financial assistance in the revolving fund;

~~(4)~~(8) the total amount requested by other applications that have been received or that are likely to be received;

~~(5)~~(9) ~~the need for and the benefit to be derived from the project~~ the ranking of the project on the priority list in the intended use plan; and

~~(6)~~(10) any other criteria that the department determines to be appropriate, considering the purposes of the program and the federal act."

Section 25. Section 75-6-223, MCA, is amended to read:

"75-6-223. Applications for loans ~~and grants~~. (1) The department shall, after consultation with the department of natural resources and conservation, establish loan ~~and grant~~ application procedures, including forms for the applications. Each application for a loan must include:

(a) a reasonably detailed description of the project;

(b) a reasonably detailed estimate of the cost of the project;

(d) identification of the source or sources of funds to be used in addition to the proceeds of the loan to pay the cost of the project;

(e) the source or sources of revenue proposed to be used to repay the loan;

(f) a current financial statement of the system showing assets, liabilities, revenue, and expenses;

~~(f)~~(g) a statement as to whether, at the time of application, there are any outstanding ~~bonds,~~ loans, notes, bonds, or other obligations payable from the revenue of the public water system and, if so, a description of the ~~bonds,~~ loans, notes, bonds, or other obligations; ~~and~~

(h) if the applicant is a private person, a statement as to whether, at the time of the application, there are any outstanding loans, notes, or other obligations of the private person and, if so, a description of the loans, notes, or other obligations; and

(i) engineering reports;

(ii) economic feasibility studies; and

(iii) legal opinions.

(2) Each application for a ~~grant~~ loan subsidy must include:

(a) a reasonably detailed description of the project;

(b) a reasonably detailed estimate of the cost of the project;

(d) identification of the source or sources of funds to be used in addition to the proceeds of the ~~grant~~ loan to pay the cost of the project;

(e) a statement as to whether, at the time of application, there are any outstanding ~~bonds,~~ loans, notes bonds, or other obligations payable from the revenue of the public water system and, if so, a description of the ~~bonds,~~ loans, notes, bonds, or other obligations;

(f) an explanation, including supporting information, as to why a ~~grant rather than a~~ loan subsidy is requested; ~~and~~

(g) evidence that the applicant qualifies as a disadvantaged community; and

~~(g)~~(h) any other information that the department or the department of natural resources and conservation may require."

Section 26. Section 75-6-224, MCA, is amended to read:

"75-6-224. Loan conditions. (1) Upon approval of an application by the department, the department of natural resources and conservation may lend amounts on deposit in the revolving fund to a public water system to pay part or all of the cost of a project. The loan is subject to the applicant complying with the following conditions:

(a) meeting requirements of financial capability set by the department of natural resources and conservation to ensure sufficient revenue to operate and maintain the project for its useful life and to repay the loan, including the establishment of a dedicated source of revenue and the establishment and maintenance by the applicant of a reserve or revolving fund to secure the payment of principal of and interest on the loan to the extent permitted by the applicable law governing the public water system or the applicant's financial authority;

(b) in the case of a ~~privately owned~~ system OWNED BY A PRIVATE PERSON, in addition to establishing a dedicated source of revenue, which may include the pledge of accounts receivable, providing, as required by the department of natural resources and conservation, credit enhancements, a pledge of collateral, or other types of security, such as a corporate or personal guarantee;

~~(b)~~(c) agreeing to operate and maintain the project properly over its structural and material design life, which may not be less than ~~20 years~~ the term of the loan;

~~(c)~~(d) agreeing to maintain proper financial records in accordance with generally accepted ~~government~~ accounting standards and agreeing that all records are subject to audit;

~~(d)~~(e) meeting the requirements listed in the federal act for projects constructed with funds directly made available by federal capitalization grants;

~~(e)~~(f) providing legal assurance that all necessary property titles, easements, and rights-of-way have been obtained to construct, operate, and maintain the project;

~~(f)~~(g) submitting an engineering report evaluating the proposed project, including information demonstrating its cost-effectiveness and environmental information necessary for the department and the department of natural resources and conservation to fulfill their responsibilities under the Montana Environmental Policy Act and rules adopted to implement that act;

~~(g)~~(h) complying with plan, ~~and~~ specification, and other requirements for public water systems established by the ~~board~~ department; ~~and~~

~~(h)~~(i) providing for proper construction inspection and project management; and

(j) meeting requirements of financial, managerial, and technical capability to maintain compliance with the federal act.

(2) Each loan, unless prepaid, is payable subject to the limitations of the federal act, with interest paid in annual or more frequent installments, the first of which must be received not more than 1 year after the completion date of the project and the last of which must be received not more than 20 years after the completion date. If the applicant is a disadvantaged community that has qualified and applied for a loan subsidy, the department may determine that the last installment must be received not more than 30 years after the completion date, provided that the period of the loan does not exceed the expected design life of the project.

(3) (a) Subject to the limitations of the federal act, the interest rate on a loan must ensure that the interest payments on the loan and on other outstanding loans will be sufficient, if timely paid in full, with other available funds in the revolving fund, including investment income, to enable the state to pay the principal of and interest on the bonds issued pursuant to 75-6-225.

(b) The interest rate may include any additional rate that the department of natural resources and conservation considers reasonable or necessary to provide a reserve for the repayment of the loan. The additional rate may be fixed or variable, may be calculated according to a formula, and may differ from the rate established for any other loans.

(4) Each loan must be evidenced by a bond, note, or other evidence of indebtedness of the borrower, in a form prescribed or approved by the department of natural resources and conservation, except that the bond, note, or other evidence must include provisions required by the federal act and must be consistent with the provisions of this part. The bond, note, or other evidence is not required to be identical for all loans.

(a) in a special administrative costs account that the department of natural resources and conservation may create for that purpose outside the revolving fund provided for in 75-6-211; or

(b) in the administrative account provided for in 75-6-211. In determining into which account the administrative fees are deposited, the department shall take into consideration the needs and requirements of the programs. Money deposited in the special administrative costs account or the administration account must be used for the payment of administrative costs of the program."

NEW SECTION. Section 27. Repealer. Sections ~~75-5-1108,~~ 75-6-213, and 75-6-215, MCA, are repealed.

NEW SECTION. Section 28. Codification instruction. [Sections ~~21 through 23~~ 20 THROUGH 22] are intended to be codified as an integral part of Title 75, chapter 6, part 2, and the provisions of Title 75, chapter 6, part 2, apply to [sections ~~21 through 23~~ 20 THROUGH 22].

NEW SECTION. Section 29. Saving clause. (1) [This act] does not affect rights and duties that matured, penalties that were incurred, or proceedings that were begun before [the effective date of this act].

(2) Rules that were adopted pursuant to Title 75, chapter 5, part 11, or Title 75, chapter 6, part 2, prior to [the effective date of this act] continue in force until amended or repealed pursuant to those parts.

NEW SECTION. Section 30. Effective date -- applicability. (1) [This act] is effective on passage and approval.

(2) [Section 2 1] applies to the licensing of nontransient noncommunity water system operators on or after July 1, 1998.

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