WASTEWATER FACILITY CONSTRUCTION LOAN POLICIES AND GUIDELINES

[SEPARATOR]

Statutory Authority: Department of Environment Act, NMSA 1978

Regulation Effective as of: 11/30/95

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[SEPARATOR]

NEW MEXICO ENVIRONMENT DEPARTMENT

P.O. BOX 26110/1190 ST. FRANCIS DRIVE

SANTA FE, NM 87502

TITLE 20 ENVIRONMENTAL PROTECTION

CHAPTER 7 WASTEWATER AND WATER SUPPLY FACILITIES

PART 6 WASTEWATER FACILITY CONSTRUCTION LOAN POLICIES AND GUIDELINES

SUBPART I - GENERAL PROVISIONS

100. ISSUING AGENCY. New Mexico Environment Department. [11-30-95]

101. SCOPE. These policies, procedures and guidelines apply to all construction projects funded in-part from funds within the Wastewater Facilities Construction Loan Fund. [10-22-88, 11-30-95]

102. STATUTORY AUTHORITY. Department of Environment Act, NMSA 1978, 9-7A-6.F; Wastewater Facility Construction Loan Act, NMSA 1978, 74-6A-1 to 15; and Water Quality Control Act, NMSA 1978, 74-6-1 to 17 [10-22-88, 11-30-95]

103. DURATION. Permanent. [11-30-95]

104. EFFECTIVE DATE. November 30, 1995. This Part amends and replaces the New Mexico Wastewater Facility Construction Loan Fund Policies, Procedures and Guidelines, HED 88-2 (EID), filed September 22, 1988, as amended. [11-30-95]

A. All references to HED 88-2 (EID) or to the New Mexico Wastewater Facility Construction Loan Fund Policies, Procedures and Guidelines in any other rule shall be construed as a reference to this Part. [11-30-95]

B. The amendment and replacement of HED 88-2 (EID) shall not affect any administrative or judicial enforcement action pending on the effective date of such amendment nor the validity of any financial assistance provided pursuant to HED 88-2 (EID). [11-30-95]

105. OBJECTIVE. The objective of this Part is to establish policies, procedures and guidelines in the administration of loans from the Wastewater Facility Construction Loan Fund. [10-22-88, 11-30-95]

106. BACKGROUND. The Environment Department Act, NMSA 1978, 9-7A-6.F, provides authority to the Secretary of Environment to make and adopt reasonable and procedural rules and regulations as may be necessary to carry out the duties of the Department and its Division. The authority for the New Mexico Environment Department to provide loans to eligible applicants for the construction of wastewater facilities is provided in NMSA 1978, 74-6A-1 to 15 Wastewater Facility Construction Loan Act and in the New Mexico Water Quality Act, NMSA 1978, 74-6-1 to 17. The Water Quality Control Commission adopted regulations pursuant to the Wastewater Facility Construction Loan Act which address:

6-102 Definitions;

6-103 Eligibility;

6-104 Eligible and ineligible Construction Items;

6-105 Priority System and Priority List; and

6-107 Application Procedures.

[10-22-88; 11-30-95]

Title VI of the Federal Clean Water Act, as amended, authorizes the U. S. Environmental Protection Agency (EPA) to make capitalization grants to states for deposit in the Wastewater Facility Construction Loan Fund (State Revolving Fund - SRF). "Final Initial Guidance - State Water Pollution Control Revolving Fund" was published by EPA on January 28, 1988, which represents EPA's approach to implementation of Title VI. [10-22-88]

107. CONSTRUCTION. This Part shall be liberally construed to carry out the purposes of the Act. If any provision or application of this Part is held invalid, the remainder or its application to other situations or persons shall not be affected. [11-30-95]

108. COMPLIANCE WITH OTHER REGULATIONS. Compliance with this Part does not relieve a person from the obligation to comply with other applicable state and federal regulations. [11-30-95]

109. DEFINITIONS. As used in this Part:

A. "Applicant" means a local authority that meets the following criteria: (1) placement on the current fiscal year priority list, (2) financial capability to service a loan, to perform operation and maintenance, to maintain a replacement fund and debt service reserve fund, and (3) readiness to proceed. [10-22-88]

B. "Borrower" means a local authority whose application has been approved for eligibility and is ready to proceed to an Interim Loan Agreement within six months of loan funds being available. [10-22-88]

C. "Commission" or "WQCC" means the New Mexico Water Quality Control Commission. [10-22-88]

D. "Department" or "NMED" means the New Mexico Environment Department. [11-30-95]

E. "Equivalency projects" means those projects cited by NMED to satisfy sixteen specific Title II requirements identified in Title VI, Section 602(b)(6), of the Clean Water Act which are constructed in whole or in part before 1995 with funds directly made available by federal capitalization grants. [10-22-88]

F. "Event of default" means the borrower failed to make the complete annual payment of principal, plus interest when the same shall become due and payable, as identified in the repayment schedule of the final loan agreement. [10-22-88]

G. "Final loan agreement" means a note issued by the borrower and the state upon completion of the project to evidence the permanent financing of the final loan amount in substantially the form as shown in the attachments. [10-22-88]

H. "Final loan amount" means the aggregate amount of the principal disbursed by NMED to the borrower during the project, together with accrued interest on the aggregate principal thereof. [10-22-88; 11-30-95]

I. "Force account" means that the local authority provides the materials, equipment, or labor necessary to design or construct the project. [10-22-88]

J. "Fund" or "SRF" means the state water pollution control revolving fund pursuant to Title VI of the Clean Water Act. [10-22-88]

K. "Interim loan agreement" means a note, in the form of a line-of-credit, issued by the borrower and the state at the beginning of the project in anticipation of the issuance of the final loan agreement upon completion of the project in substantially the form as shown in the attachments. [10-22-88]

L. "Loan issuance" means execution of the final loan agreement, revised promissory note, and real estate mortgage upon completion of the project. [10-22-88]

M. "Local authority" means any municipality, county, or sanitation district. [10-22-88]

N. "Operate and maintain" means all necessary activities including replacement of equipment or appurtenances to assure the dependable and economical function of a wastewater facility in accordance with its intended purpose. [10-22-88]

O. "Priority system" means the system for ranking wastewater facility construction projects for which loan applications have been received pursuant to the Wastewater Facility Construction Loan Act. [10-22-88]

P. "Priority list" means the list of wastewater facility construction projects ranked according to the priority system pursuant to the Wastewater Facility Construction Loan Act. [10-22-88]

Q. "Project" means the planning, design, construction, repair, extension, improvement, alteration, or reconstruction of the wastewater facilities by the borrower as described in the loan application. [10-22-88]

R. "Project completion" means the date that operations of the completed works are initiated or capable of being initiated, whichever is earlier. This also applies to individual phases or segments. [10-22-88]

S. "Project engineer" means the NMED staff engineer assigned to the project. [10-22-88; 11-30-95]

T. "Title II requirements" means sixteen specific federal Clean Water Act statutory requirements for projects identified as equivalency projects by NMED. These requirements do not apply to projects funded with other monies. [10-22-88; 11-30-95]

U. "Wastewater facility" means a publicly owned system for treating and/or disposing of wastes, either by surface or underground methods, and includes any equipment, plant, treatment works, structure, machinery, apparatus, land, or any combination thereof, which is acquired, used, constructed, or operated for the storage, collection, reduction, recycling, reclamation, disposal, separation, or treatment of water or wastes, or for the final disposal of residues resulting from the treatment of water or wastes, and includes, but is not limited to: pumping and ventilating stations, facilities, plants and works, outfall sewers, interceptor sewers and collector sewers, and other real or personal property and appurtenances incident to their use or operation. [10-22-88]

V. "Wastewater facility construction loan fund," means that portion of the state loan program established pursuant to the Wastewater Facility Construction Loan Act, NMSA 1978, 74-6A-1 to 15, which is 100% state financed and which is not used to match a federal capitalization grant pursuant to the Clean Water Act. [10-22-88; 11-30-95]

110. - 199. [Reserved]

SUBPART II - POLICY, APPLICATION AND PRIORITY SYSTEM

200. GENERAL.

A. Direct loans from the fund may be offered for up to 100% of total eligible project costs under state and federal statutes and regulations, subject to availability of loan monies. [10-22-88]

B. Two types of loans are available: planning/design loans and construction loans. [10-22-88]

1. Planning/Design Loans. The maximum repayment period is limited to five years from the date of the Interim Loan Agreement. If the borrower receives a construction loan for the same project, the borrower will be provided the option of reamortizing any remaining principal balance plus accrued interest on the planning/design loan upon completion of the construction project, or may make payments under both loans. [10-22-88]

2. Construction Loans. The length of the loan repayment period will not exceed twenty (20) years or the expected life of the project improvements, whichever is less. Loans of lesser amounts will receive a shorter repayment period depending upon the borrower's ability to service the debt in a reduced time period. The construction loan may include the cost of design and may precede the design phase of the project if the design period is relatively short and if a reasonable estimate of construction costs is available. Since the interim loan agreement is essentially a line-of-credit for planning, design and construction of the project the borrower must agree to complete the appropriate planning requirements prior to proceeding to the design and construction phases of the project. [10-22-88]

B. A long-term commitment for future funding of a phased or segmented project will not be made; although, partial or phased funding for a project (without a guarantee of future funding) may be offered when deemed necessary to meet state water quality and financial assistance objectives. [10-22-88]

C. Monies in the fund shall be loaned to eligible applicants as soon as possible after the monies become available. The fund will be managed so that a reserve is held available. The amount of the reserve will be dependent on the total size of the fund, including both available and committed monies. This reserve may be used for administration of the fund, investment, and limited-purpose contingencies, including increases subject to federal and state statutes. [10-22-88]

D. In the event project costs exceed the estimates in the Interim Loan Agreement, the borrower may request that NMED consider an increase to the loan. Such request will be evaluated in respect to available uncommitted monies in the fund, financial risk of the request, and other criteria set by NMED. NMED may follow any procedure deemed appropriate under the circumstances, including renegotiation of the loan agreement in accordance with federal and state statutes. [10-22-88; 11-30-95]

E. In the event project costs are less than the estimates in the interim loan agreement, then the loan amount shall be adjusted downward by a corresponding amount at the time the final loan agreement is executed following completion of the project. [10-22-88]

F. A loan shall be declared in default if the full payment is not received on the due date. Should a loan be declared in default, NMED will initiate legal action to collect past due amounts. NMED will also notify other state agencies and will take actions to preclude the borrower from receiving grant or other financial assistance from state agencies until all delinquent amounts due on the loan have been paid. In addition to the these provisions, technical assistance will be provided to a borrower with a loan in default to help assess the problem and advise on corrective actions needed to ping the loan current. Should these efforts fail to produce results and the borrower fails to adhere to the prescribed payment schedule, the NMED will dispatch an interdisciplinary team (representatives of the General Counsel, State Auditor, and Local Government Division, as needed) to conduct a comprehensive assessment of the borrower, including, but not limited to, financial condition, management practices, fiscal capacity, economic circumstances, and violations of the terms and conditions of the legally binding final loan agreement. Upon the report of this team, NMED shall take whatever actions deemed appropriate, including court actions, to resolve the outstanding obligation. [10-22-88; 11-30-95]

G. NMED may waive or adjust any rule relative to the administration of the Wastewater Facility Construction Loan Fund where it is deemed that the waiver or adjustment is in the best interest of the State and the community, and the waiver or adjustment does not violate any State or Federal statute or regulation. [10-22-88; 11-30-95]

201. APPLICATION PROCEDURES FOR PRIORITY LIST PLACEMENT.

A. The Commission at 20 NMAC 7.5 201 specify loan program application procedures. Applicants for loans shall submit a complete loan application to NMED on a form specified by the NMED. Applications may be submitted at any time; although, generally an annual funding cycle is followed. [10-22-88; 11-30-95]

B. NMED shall review the applications for eligibility, technical merits and financial capability, and rank the applications based on the project priority system described in 20 NMAC 7.5 202, following NMED procedures for priority system and priority list. [10-22-88; 11-30-95]

202. PRIORITY SYSTEM AND PRIORITY LIST PROCEDURES.

A. A project must be on the current federal fiscal year priority list in order to receive a planning/design or construction loan. It is the policy of NMED to make loans to communities in order of priority on the current federal fiscal year priority list for loans to the extent reasonable considering the following: [10-22-88; 11-30-95]

1. Willingness of a community to accept a loan; [10-22-88]

2. Financial capability of the community to service the loan, to perform operation and maintenance, to maintain a replacement fund and a debt service reserve fund; and [10-22-88]

3. Readiness to proceed. [10-22-88]

B. Procedures for developing and handling the annual priority system and priority list under the loan program generally follow existing procedures for the construction grants program which are piefly summarized here. [10-22-88]

1. The priority list is divided into two sections. The fundable portion and the planning portion. The former contains only those projects which reasonably can be expected to be funded within the current year's allotment. The planning portion contains those projects scheduled for funding through the following four years. NMED may in the future establish reserves for small communities and for increases as experience is gained in administering a loan program. [10-22-88; 11-30-95]

2. A specific cap on an individual loan amount may be established by NMED each fiscal year so that the fund will be able to assist several communities each year. The cap may be set as a total of the loan funds available or as a specific dollar amount. [10-22-88; 11-30-95]

3. This policy serves to maintain the flexibility of the fund each year by not excluding higher cost projects from participation, yet ensures that more than one worthwhile project will be funded each year. [10-22-88; 11-30-95]

4. NMED will examine the fundable projects to determine which projects can satisfy the "Title II requirements of equivalency projects" pursuant to the Clean Water Act, as amended. The total combined cost of equivalency projects must equal the amount of federal funds transferred to the SRF each year. [10-22-88; 11-30-95]

5. Projects which cannot satisfy Title II requirements may be funded by the nonfederal funds in the SRF. Whether a project is an "equivalency project" or not, priority must be given to funding projects which contribute to maintaining progress toward meeting the enforceable requirements of the Clean Water Act. [10-22-88]

6. Fundable applicants will be notified by NMED following approval of the final priority list and a preplanning conference will be held with the applicant and its consulting engineer to identify the procedures and requirements which must be met prior to execution of an interim loan agreement. [10-22-88; 11-30-95]

203. - 299. [Reserved]

SUBPART III - PROJECTS GUIDELINES

300. APPLICATION FOR FUNDABLE PROJECTS GUIDELINES - PROJECT PREPLANNING CONFERENCE.

A. At NMED's request, a preplanning conference will be scheduled. The applicants' representatives and possibly the applicants' consulting engineers will meet with the NMED project engineers to discuss the project. Items that may be discussed are: [10-22-88; 11-30-95]

1. Review of SRF policies, procedures, and guidelines; [10-22-88]

2. Enforceable requirements; [10-22-88]

3. Eligibility of applicant; [10-22-88]

4. Appropriate technology; [10-22-88]

5. User charges in relation to financial capability of the applicant being able to repay the loan; [10-22-88]

6. Environmental impacts; [10-22-88]

7. Procurement of A/E services; [10-22-88]

8. The importance of public participation; (Citizen involvement will be an asset in the development of plans that reflect the needs and values of your community. Informing the public early on can result in issues being resolved before delay and additional costs occur. Citizen support is necessary for capital and user charge systems to fund a project.) and [10-22-88; 11-30-95]

9. Project schedule. [10-22-88]

301. GENERAL PROJECT ADMINISTRATIVE REQUIREMENTS.

A. Loan Agreement. [10-22-88]

1. An interim loan agreement will be prepared by the NMED and executed by the borrower for the project which can be financed with available loan funds and which has completed requirements set by the NMED pursuant to the Clean Water Act, as amended, and the New Mexico Wastewater Facility Construction Loan Act. Projects which are not ready to proceed to the interim loan agreement stage within six months of allocation of available loan funds will be bypassed by projects lower on the priority list which are ready to proceed. [10-22-88; 11-30-95]

2. The interim loan agreement contains several conditions and certifications including:

a. Certification that the borrower is a legal entity with authority to execute a loan agreement by ordinance. Certification that a resolution designating signatory authority has been passed.

b. Copies of all executed contracts, subcontracts, agreements, and related amendments entered into by the borrower prior to the Interim Loan Agreement, but related to this project.

c. Request for proposals (RFP) documentation and an engineering agreement, or letter of certificate if employing staff engineers.

[10-22-88; 11-30-95]

B. Security Interest. [10-22-88]

1. Upon execution of an interim loan agreement with the NMED for a construction project and before any proceeds of the loan are paid out to the borrower, the borrower shall execute a promissory note for the principal amount of the interim loan agreement plus interest on the unpaid balance at the rate of 5% per annum, and shall transfer title to the property upon which the facilities are to be constructed to the NMED. In lieu of, or in addition to, the transfer of title requirement, the borrower may transfer whatever interest it possesses in the property upon which facilities are to be constructed, to the NMED. In either case, the value of such property or interest so transferred shall be at least equal to the amount of the loan. All such titles and interest transferred to the NMED shall be secured by title insurance, if applicable, the cost of which shall be paid by the borrower. The NMED shall be named as primary beneficiary of all such title insurance policies. If title insurance for the property is not applicable or is not reasonably available, as determined by the NMED, then the borrower shall provide a title company's opinion on the abstract of title to the property up to the time the property was acquired by the borrower for use as a wastewater facility. [10-22-88; 11-30-95]

2. Upon repayment of the loan, such interest or title shall be reconveyed to the borrower. Where the transfer of title or interest in the property would preclude the obtaining of federal grants, or where such transfer of title or interest is inappropriate or is prohibited by or would be in violation of existing grant-in-aid agreements, NMED may waive the requirements of transfer of title or transfer of any interest in the property, and substitute therefore such other security of sufficient value it deems necessary such as an irrevocable pledge of revenue covenant by the borrower. [10-22-88; 11-30-95]

3. After the borrower transfers title or its interest in the property to the NMED as security, the borrower shall:

a. Continue to insure the property;

b. Be liable for all taxes and assessments; and

c. Refrain from making major alternations that destroy the value of the security, unless NMED gives prior approval.

[10-22-88; 11-30-95]

C. Allowable and Unallowable Costs. [10-22-88]

1. Allowable costs shall be limited to those costs which are necessary, reasonable, and directly related to the efficient achievement of the objectives of the project. Costs incurred by the borrower for work performed on the project prior to execution of the interim loan agreement, but which received NMED prior approval, may be considered as allowable costs. The borrower must justify all expenditures for which it requests a disbursement of loan funds according to accepted NMED criteria and procedures. NMED may withhold disbursement of funds and may reclaim improperly documented disbursements until the borrower provides sufficient justification. [10-22-88; 11-30-95]

2. All unallowable costs, including but not limited to overhead charges, administrative expenses, indirect costs, and all costs of borrower's employed inspectors and ineligible construction costs shall be paid by the borrower. [10-22-88]

3. The borrower agrees that it will implement, in all respects, the project outlined in the interim loan agreement. [10-22-88]

4. The borrower agrees to make no change in the project description without first submitting a written request to NMED and obtaining NMED approval of the required change. [10-22-88; 11-30-95]

D. Accounting. [10-22-88]

1. Funds received by the borrower from NMED and those funds which are contributed by the borrower shall be deposited in separate bank accounts or in a separate, identifiable ledger account. In addition, the borrower shall establish and maintain accounting procedures which will ensure strict accountability for all funds received and disbursements made by the borrower in connection with the interim loan agreement. NMED shall be responsible for examining the borrower's accounting procedures for purposes of that agreement, and certifying their adequacy in writing once per year in accordance with generally accepted government accounting standards. These standards are usually defined as those contained in the U.S. General Accounting Office (GAO) publication, "Standards for Audit of Governmental Organizations, Programs, Activities, and Functions," dated 2/27/81. [10-22-88; 11-30-95]

E. Records. The borrower shall maintain books, records, documents, and other evidence sufficient to reflect properly all costs of whatever nature claimed to have been incurred for the performance of this interim loan agreement. Such books, records, documents, ledgers, and other evidence shall be preserved and made available to NMED, State Auditor, US Governmental Accounting Office, and USEPA Office of the Inspector General during the loan agreement period and for a period of six (6) years from date of final repayment. If upon termination of the interim loan agreement, questions exist concerning proper expenditure of funds, then the borrower shall preserve and make available all books, records, documents, ledgers and other evidence relating to the interim loan agreement until such questions are settled and the borrower has received written notification to that effect from NMED. [10-22-88; 11-30-95]

F. Audit and Inspection. The project sites and borrower facilities which are in any part the subject of the loan agreement, and borrower records as defined elsewhere herein, shall be subject at all reasonable times to inspection and audit by NMED, State Auditor, US Governmental Accounting Office, and USEPA Office of the Inspector General during the period of the loan agreement and for a period of six (6) years following final payment hereunder. All subcontracts let by the borrower, the cost of which are included in the interim loan agreement, shall include the substance of this audit and inspection clause. [10-22-88; 11-30-95]

G. Occupational Health and Safety. The borrower covenants that it will take affirmative action to ensure that the project shall be conducted in conformance with federal and state laws and regulations relating to occupational health and safety. In addition, the borrower shall assure that any contract entered into by the borrower for the performance of work on this project shall contain language by which the contractor and the borrower agree that authorized representatives of the NMED Occupational Health and Safety Bureau shall have free access to the project site, and shall not be impeded in any way from performance of their duties. [10-22-88; 11-30-95]

H. Nondiscrimination. [10-22-88]

1. During the performance of the interim loan agreement, the borrower shall not discriminate against any employee or applicant for employment because of race, color, age, religion, sex, or national origin. The borrower shall take affirmative action to ensure nondiscrimination in employee recruitment advertising, hiring, upgrading, promotion, and selection for training (including apprenticeship). [10-22-88]

2. The borrower agrees to post in conspicuous places, available to employees and applicants for employment, notices setting forth the provisions of this clause. All solicitation or advertisement for employees placed by or on behalf of the borrower shall state that all qualified applicants will receive consideration without regard to race, color, age, religion, sex, sexual preference, or national origin. The borrower shall comply with all provisions of Title VI of the Civil Rights Act of 1964, Executive Order 11246, dated September 24, 1965, and all relevant rules, regulations, and orders of the U. S. Secretary of Labor. The borrower shall include the provisions of the clause in all project subcontracts. [10-22-88]

I. Termination. NMED shall have the right to terminate the interim loan agreement if at any time in the judgement of NMED, the terms of the interim loan agreement have been violated or the activities described in the project description are not progressing satisfactorily. The borrower may terminate the interim loan agreement with sufficient reason. In either case, the NMED shall establish following negotiations with the borrower a repayment schedule for the funds disbursed to the borrower. Such termination must be in writing. [10-22-88; 11-30-95]

J. Procurement. The Procurement Code, NMSA 1978, 13-1-28 through 13-1-199, imposes civil and criminal penalties for its violation. In addition, New Mexico criminal statutes impose felony penalties for illegal pibes, gratuities, and kick-backs. [10-22-88; 11-30-95]

302. PROJECT PLANNING GUIDELINES.

A. Facilities planning consists of those necessary plans and studies that directly relate to treatment works needed to comply with enforceable requirements of the Federal Clean Water Act and New Mexico Water Quality Act. Facilities planning will substantiate the need for the proposed facilities. It is a systematic evaluation of alternatives in regard to unique demographic, topographic, hydrologic, and institutional characteristics of the area that demonstrates that the selected alternative is cost effective in meeting the applicable effluent, groundwater, and surface water quality and public health requirements over the design life of the facility (while recognizing environmental and other nonmonetary considerations). [10-22-88]

B. The selection of the best wastewater and sludge management alternative is the most important outcome of the planning process. [10-22-88]

C. The facilities plan (feasibility report or engineer's report) should include: [10-22-88]

1. A description of the proposed project and the complete system of which it is a part. [10-22-88]

2. A description of the Best Practicable Wastewater Treatment Technology (BPWTT). [10-22-88]

3. A cost-effective analysis of the project in meeting enforceable requirements over the design life of the facility which includes a 20-year reserve capacity, if appropriate. Costs to be considered must include the present worth or equivalent annual value of all capital costs as well as operation and maintenance costs. Population forecasts should be consistent with the state needs survey. [10-22-88]

4. An evaluation of improved effluent quality attainable by upgrading the operation and maintenance ("O & M") and efficiency of existing facilities as an alternative to new construction. [10-22-88]

5. Cost information on total capital costs and annual O & M as well as estimated annual or monthly costs to residential and commercial users. [10-22-88]

6. A demonstration of the nonexistence or possible existence of excessive infiltration/inflow in an existing system. [10-22-88]

7. An adequate evaluation of the environmental impacts of alternatives. [10-22-88]

8. An evaluation of the water supply implications of the project. [10-22-88]

9. For the selected alternative, a concise description that details:

a. Relevant design parameters;

b. Estimated capital construction cost and operation and maintenance costs identifying sources of funds and local share; and

c. Cost impact on users.

[10-22-88]

10. A description of the proposed pretreatment program may be applicable. [10-22-88]

11. A demonstration that the selected alternative is consistent with the applicable water quality management (WQM) plan. [10-22-88]

12. Demonstration that the borrower has the legal, institutional, managerial, and financial capability to ensure adequate construction and operation and maintenance of the treatment works throughout the service area. Financial capability to service this loan must also be demonstrated. [10-22-88]

13. Summary of public participation in the development of the facilities plan. [10-22-88]

D. If any of the above information has been developed separately, it may be incorporated by reference rather than duplication. [10-22-88]

303. - 399. [Reserved]

SUBPART IV - PAYMENT REQUIREMENTS

400. INTERIM PAYMENTS.

A. For satisfactory performance of all work and services required to be performed under the terms of the interim loan agreement, NMED shall reimburse the borrower its actual costs incurred. The borrower may submit requests for reimbursement as often as every month. NMED shall disburse funds to the borrower when NMED determines, in its sole discretion, that expenditures have been properly documented. as provided for in general requirements for allowable and unallowable costs, accounting procedures, and record keeping. Copies of all pay request vouchers shall be submitted to NMED with request for payment. Two copies of all requests shall be submitted on the appropriate form furnished by NMED and shall be accompanied by appropriate documentation to assure that those costs are correct and within the approved scope of work and attached budget form. Requests shall include expenditures to date by category. [10-22-88; 11-30-95]

B. Unless good cause exists which would justify a higher amount, NMED shall withhold five percent of payments due and owing a contractor from the borrower until fifty percent of the contract has been billed. Unless good cause exists, the NMED shall not withhold any additional retainage from billings after fifty percent of the contract has been billed by the borrower and approved by the NMED. [10-22-88; 11-30-95]

1. Such retainage shall be held by NMED pending its final project inspection and acceptance, which shall be performed promptly and the results of which conveyed to the borrower in writing. [10-22-88; 11-30-95]

2. The project will not be considered complete until the work as defined in the interim loan agreement has been fully performed and finally and unconditionally accepted by the borrower and NMED. [10-22-88; 11-30-95]

C. Interim payments will be made as the work progresses. Said payments will be based upon requests for payment prepared and certified by the borrower or the borrower's engineer to include value of work performed, materials on hand, and materials in place in accordance with the contract. Interim payments for engineering, inspection, legal services, or other approved services shall be made in accordance with the approved contracts or agreements. [10-22-88]

D. Any portion of funds paid by NMED to the borrower which remain unexpended after completion of the project shall revert to the Wastewater Facility Construction Loan Fund. [10-22-88; 11-30-95]

E. The borrower shall furnish NMED with an estimated disbursement schedule at the beginning of the project. [10-22-88; 11-30-95]

401. FINAL PAYMENT. Upon completion of the project, final payment shall be made after final inspection has been conducted and the following have been provided, reviewed, and approved by NMED: [10-22-88; 11-30-95]

A. The borrower's certified request for payment prepared by the engineer and approved by the borrower. [10-22-88]

B. A statement by the project engineer that work has been satisfactorily completed and the contractor has fulfilled all of the obligations required under the contract documents with the borrower, or if payment and materials performance bonds are "called," an acceptable close-out settlement to the borrower and contractors shall be submitted to NMED for review and approval. [10-22-88; 11-30-95]

C. Final engineering statement and recap of all engineering services, legal, administrative, and other eligible and ineligible expenses and a final request for disbursement. [10-22-88]

D. Certification by the borrower that the labor standards contract provisions have been met. [10-22-88]

E. Final project inspection report prepared by the engineer. [10-22-88]

F. Record drawings and, if applicable, an operation and maintenance manual. [10-22-88]

G. Final budget showing all funding sources utilized for costs incurred for the project by designated budget categories. [10-22-88]

H. Written consent of the surety, if any, to final payment is prepared and submitted. [10-22-88]

I. For projects which receive planning/design loans but do not proceed to the construction phase, completion of the project is defined as substantial completion of the project description in the interim loan agreement as determined by NMED. [10-22-88; 11-30-95]

402. - 499. [Reserved]

SUBPART V - TITLE II EQUIVALENCY PROJECTS; REVIEW PROCEDURES

500. PURPOSE AND POLICY.

A. Section 602(b)(6) of the Clean Water Act ("CWA") attaches sixteen specific statutory requirements to projects funded in whole or in part before FY 1995 with funds directly made available by federal capitalization grants to the SRF. Several cross-cutting federal laws and authorities apply, by their own terms, to all activities assisted with funds directly made available by capitalization grants. Equivalency projects will have to comply with these federal authorities which are listed as an attachment to this document. Pursuant to this authority, EPA requires states to agree to develop their own procedures for implementing the statutory provisions or to adopt and apply pertinent portions of existing EPA regulations. [10-22-88]

B. NMED has adopted procedures for implementing those requirements under the Section 205(g), Delegation Agreement for the EPA Construction Grants Program, and will apply those procedures to the specific regulations cited below, as applicable under the SRF. [10-22-88; 11-30-95]

501. STATUTORY REQUIREMENTS WITH CITATION TO EPA REGULATIONS.

A. CWA Section 201(b), which requires that projects apply best practicable waste treatment technology (see 40 CFR 35.2005(b)(7): Definition of BPWTT), 40 CFR 35.2030(b)(2): Facilities Planning); [10-22-88]

B. CWA Section 201(g)(1), which limits assistance to projects for secondary treatment, advanced treatment, or any cost-effective alternative, new interceptors and appurtenances, and infiltration-inflow correction. This section retains the Governor's discretionary set-aside by which a state can use up to 20 percent of its allotment for other projects within the definition of treatment works in Section 212(2), and for certain nonpoint source control and ground water protection purposes, as defined in Section 319 of the act and subsequent agency regulations (40 CFR 35.2015(b)(2)(ii-iv): State Priority System and Project Priority List); [10-22-88]

C. CWA Section 201(g)(2), which requires that alternative technologies be considered in project design (40 CFR 35.2030: Facilities Planning); [10-22-88]

D. CWA Section 201(g)(3), which requires the applicant to show that the related sewer collection system is not subject to excessive infiltration (40 CFR 35.2030(b)(4): Facilities Planning, 40 CFR 35.2120: Infiltration/Inflow);

E. CWA Section 201(g)(5), which requires that applicants study innovative and alternative treatment technologies and take into account opportunities to construct revenue-producing facilities and to make more efficient use of energy and resources (40 CFR 35.2030: Facilities Planning); [10-22-88]

F. CWA Section 201(g)(6), which requires that the applicant analyze the potential recreation and open space opportunities in the planning of the proposed facility (40 CFR 35.2030(b)(5): Facility Planning); [10-22-88]

G. CWA Section 201(n)(1), which provides that funds under Section 205 may be used for water quality problems due to discharges of combined sewer overflows which are not otherwise eligible, if such discharges are a major priority in a state (40 CFR 35.2015(b)(2)(iv): State Priority Systems - categories of need and 35.2024(a): Combined Sewer Overflows); [10-22-88]

H. CWA Section 201(o), which calls on the administrator ("state" under a capitalization grant) to encourage and assist communities in the development of capital financing plans; [10-22-88]

I. CWA Section 204(a)(1) and (2), which require that treatment works projects be included in plans developed under Sections 208 and 303(e), (40 CFR 35.2102: Water Quality Management Plans); [10-22-88]

J. CWA Section 204(b)(1), which requires communities to develop user charge systems and to have the legal, institutional, managerial, and financial capability to construct, operate. and maintain the treatment works (40 CFR 35.2208: Adoption of Sewer Use Ordinance and User Charge System, 35.2130: Sewer Use Ordinance, 35.2140: User Charge System, and 35.2214: Grantee Responsibilities, 35.2122: Approval of User Charge System and Proposed Sewer Use Ordinance, 35.2110: Access to Individual Systems, and 35.2206(a): Operation and Maintenance); [10-22-88]

K. CWA Section 204(d)(2), which requires that one year after the date of construction, the owner/operator of the treatment works must certify that the facility meets design specifications and effluent limitations included in its permit (40 CFR 35.2218(c), (d), and (e)(2): Project Performance); [10-22-88]

L. CWA Section 211, which provides that major rehabilitation or replacement of collectors are not eligible under the Governor's 20 percent discretionary authority of 201(9)(1), unless the collector is needed to assure the total integrity of the treatment works or that for a new collector, adequate capacity exists at the facility (40 CFR 35.2116 Collection System); (Note that the 1987 amendments extend the prohibition for funding separate storm sewers through Fiscal Year 1990.) [10-22-88]

M. CWA Section 218, which assures that treatment systems are cost-effective and requires that projects of over $10 million include a value-engineering review (40 CFR 35.2030(b)(3): Cost Effectiveness, Facilities Planning, and 35.2114: Value Engineering); [10-22-88]

N. CWA Section 511(c)(1), which applies the Environmental Impact Statement requirement of the National Environmental Policy Act to projects receiving Title II grants (40 CFR 35.2113: Environmental Review); [10-22-88]

O. CWA Section 513, which applies Davis-Bacon labor wage provisions to treatment works construction (see 29 CFR, Part 5). Wages paid for the construction of treatment works must conform to the prevailing wage rates established for the locality by the U. S. Department of Labor under the Davis-Bacon Act (Section 513, applies 40 U.S.C. 276 et seq.); [10-22-88]

P. 40 CFR Part 33, Federal Regulations governing procurement which include requirements for the participation of minority and women owned businesses (MBE/WBEs). [10-22-88]

502. REVIEW PROCEDURES.

A. The above-cited statutory requirements, federal laws, and authorities for projects funded in whole or in part before FY 1995 with funds directly made available by federal capitalization grants to the SRF shall be completed by the borrower in the following stages of the project. [10-22-88]

1. Project Planning:

CWA Section 201(b), Best Practicable Waste Treatment Technology

CWA Section 201(g)(1), Eligible Projects

CWA Section 201(g)(2), Alternative Technology

CWA Section 201(g)(3), Infiltration/Inflow

CWA Section 201(g)(5), Innovative and Alternative Treatment Technology

CWA Section 201(g)(6), Recreation and Open Space Opportunities

CWA Section 201(n)(1), Combined Sewer Overflows

CWA Section 201(o), Capital Financing Plans

CWA Section 204(a)(1) and (2), Water Quality Management Plans

CWA Section 204(b)(1), User Charge System, Sewer Use Ordinance

CWA Section 211, Collection System

CWA Section 511(c), Environmental Review

40 CFR Part 33, MBE/WBE

[10-22-88]

2. Project Design:

CWA Section 218, Value Engineering

[10-22-88]

3. Project Construction:

CWA Section 513, Davis-Bacon Labor Wage Rates

CWA Section 204 (d)(2), Project Performance Certification

40 CFR Part 33, MBE/WBE

[10-22-88]

B. At the beginning of the project, NMED will discuss with the borrower and his consulting engineer the level of effort or detail appropriate for each of the requirements listed above. Projects which are larger, more complex, or socially or environmentally sensitive, would require a greater level of effort or scrutiny than others. When applicable, NMED will use existing EPA guidance and publications and generally will follow existing state procedures from the construction grant program in reviewing the adequacy of submittals in conformance with the act until such time as it develops review procedures for the loan program which have been concurred on by USEPA. The state project engineer (reviewer) will use a "Project Compliance Checklist" as a tool to monitor completion of these requirements. [10-22-88; 11-30-95]

503. - 599. [Reserved]

SUBPART VI - DESIGN AND CONSTRUCTION; FINAL LOAN AND REPAYMENT

600. PROJECT DESIGN REQUIREMENTS. Before beginning the design of the project, the following requirements must be completed and submitted by the borrower to NMED and approved by NMED: [10-22-88; 11-30-95]

A. Engineering Report/Facilities Plan, which will include: [10-22-88]

1. When real property is to be acquired as part of the project and within the project period submit documentation of the acquisition, including legal description, the date the property was acquired, a certified copy of title to the property, and an appraisal report by a qualified appraiser. [10-22-88]

2. Cost effective analyses of project alternatives capable of meeting state and federal water quality and public health requirements. [10-22-88]

3. Consideration of present worth or equivalent annual value of all capital cost, operation, and replacement costs. [10-22-88]

4. Environmental information document in detail sufficient to determine categorical exclusion, finding of no significant impact (FNSI), or need for an environmental impact statement (EIS). [10-22-88]

5. Evidence of public participation. [10-22-88]

6. Information to demonstrate legal, managerial, and financial capability to properly operate and maintain the facility, maintain a repair and replacement reserve, and the ability to service this debt. [10-22-88]

B. Proof of adequate property, liability, and fidelity insurance coverage to the project as shall be required by NMED. Fidelity insurance shall be for borrower employees who are responsible for handling loan monies. [10-22-88; 11-30-95]

C. Draft plan of operation which outlines staffing in compliance with the New Mexico Utility Operator Certification Act with start-up procedures that assure efficient operation and maintenance for the facilities. [10-22-88]

D. Project schedule. [10-22-88]

E. Proposed sewer use ordinance. [10-22-88]

F. Proposed User Charge System. The user charge system represents revenue for good operation and maintenance and replacement of worn-out equipment. One basis for the system is actual use which is measured in terms of water meter readings, measurement of sewer flow, etc. The rates are uniformly applied to each class (residential, commercial, or industrial) of user in proportions. If there is no existing user charge system, the first year rates should be based on the estimates of O & M costs and then adjusted annually thereafter to reflect actual O & M and replacement costs. [10-22-88]

G. Number and name of NPDES permit and/or state groundwater permit. [10-22-88]

H. Sludge management plan which assures compliance with Sections 201 and 405 of the Clean Water Act, 40 CFR, Parts 35 and 257, and New Mexico Water Quality Control Commission Groundwater Discharge Regulations 20 NMAC 6.2. Process Design Manual - Land Application of Sludge (EPA-625/1-83-016) & EPA BGM77 may be referenced in the development of the plan. [10-22-88]

I. Sixteen specific Title II requirements pursuant to the federal Clean Water Act, as amended, which are applied to "equivalency" projects only. [10-22-88]

J. Design of the project shall be done by a consulting engineer who is registered in the state. [10-22-88]

1. Designs should adhere to sound construction practice using materials, methods, and equipment of proven dependability. [10-22-88]

2. Building shall be economical to operate and maintain and should be accessible to the handicapped. [10-22-88]

3. Design shall insure nonviolations of the NPDES permit or state groundwater discharge permit as appropriate. [10-22-88]

4. Safety shall be a prime consideration in design. [10-22-88]

601. PROJECT CONSTRUCTION REQUIREMENTS.

A. All plans and specifications and related addenda for the project must be submitted to NMED for review and approval before the project is advertised for sealed construction bids. [10-22-88; 11-30-95]

B. All work relating to easements, rights of way, other property rights, and financing provisions shall be completed prior to advertising for construction sealed bids. [10-22-88]

C. Certified bid tabulation, recommendation of award, and evidence of full project financing should be submitted to NMED for review and approval prior to construction contract award. [10-22-88]

D. Competitive bidding, in accordance with applicable state laws (including local wage determinations as provided for in NMSA 1978, 13-4-11), shall be used for awarding of contracts. Contracts shall be awarded to the responsible bidder who submits the lowest acceptable bid, or as provided for by state law. [10-22-88; 11-30-95]

E. Following NMED approval of the proposed award the borrower shall provide for each contract: (1) notice of award, (2) notice of preconstruction conference, (3) executed copies of previously approved contract form documents, and (4) notice to contractor to proceed. Performance, and payment bonds in the amount of 100 percent of the project bid will be required of each contractor and copies of said documents will be filed with NMED. A copy of bid bond (for 5% of the construction cost) for the selected contractor will be filed with the NMED. [10-22-88; 11-30-95]

F. The contractor shall be required to submit a schedule for construction at the preconstruction conference for that contract. [10-22-88; 11-30-95]

G. The borrower shall submit all modifications to plans, specifications, and contract change orders to NMED's project engineer promptly for approval prior to implementation of such modification or change. NMED's decision shall be rendered promptly in writing. In cases necessitating immediate action, a verbal decision will be rendered by NMED and followed by a written notification. [10-22-88; 11-30-95]

H. The borrower shall arrange for the services of a qualified full-time resident project inspector, unless waived by NMED, during construction of the project. Borrower shall provide NMED with a summary of the inspector's qualifications and training to be approved by NMED prior to the preconstruction conference. [10-22-88; 11-30-95]

I. Notwithstanding those inspections performed by the borrower and its engineer, NMED shall have the right to examine all installations comprising the project, including materials delivered and stored on site for use on the project. [10-22-88; 11-30-95]

J. After completion of the project, the borrower shall obtain from its engineer and provide to NMED record drawings for the project. [10-22-88]

H. The borrower shall provide for NMED review and approval, unless waived by NMED, an operation and maintenance manual for the project prior to 90% construction completion. The operation and maintenance manual shall conform to NMED requirements. [10-22-88; 11-30-95]

I. If this assistance is awarded for construction of collection lines, the borrower shall assure NMED that the existing population will connect to the collection system within a reasonable time after project completion. This shall be accomplished by adoption and annual review of an ordinance and user charge system requiring such connection to the system. [10-22-88; 11-30-95]

602. FINAL LOAN AGREEMENT AND REPAYMENT POLICY. Upon completion of the planning/design or construction project and after final disbursement of principal to the borrower: [10-22-88]

A. NMED and borrower shall execute a final loan agreement which details the final loan amount plus accrued interest due to the date of the final loan agreement. [10-22-88; 11-30-95]

B. NMED and borrower shall execute a revision to the promissory note and real estate mortgage (if applicable) which were recorded at the county seat at the time of the initial loan agreement. The revision shall reflect final loan amount and accrued interest due. [10-22-88; 11-30-95]

C. NMED shall prepare a repayment schedule for the borrower which details principal and accrued interest due. The schedule shall fully amortize the loan within twenty years of project completion. In some cases the amortization shall be less than twenty years. NMED shall address each loan on a case-by-case basis. The borrower may prepay the loan or any portion thereof at any time. The repayment period for a planning/design loan shall not exceed five years. The first annual repayment of principal and interest shall be due no later than December 1 of the year in which the final loan agreement is issued or within one year after completion of construction, whichever is earlier. [10-22-88; 11-30-95]

D. For borrowers with planning/design loans who subsequently receive a construction loan and who choose to reamortize (roll-over) the planning/design loan, repayments for the planning/design loan may be postponed until construction of the project is completed, at which time the principal plus accrued interest for the planning/design loan will be rolled into the final loan agreement for the construction loan with one subsequent repayment schedule. [10-22-88]

E. NMED shall prepare and send by certified mail to the borrowers a notice of payment due on November 1 of each year. These notices shall detail principal and accrued interest.

F. The borrower shall make a check for the full amount of the notice payable to Wastewater Facility Construction Loan Fund, Attention:

Chief, Program Support Bureau

New Mexico Environment Department

P. 0. Box 26110

Santa Fe, New Mexico 87502-6110

and mail by certified mail in time to insure delivery by December 1. [10-22-88; 11-30-95]

G. Receipt of payment from the borrower shall be acknowledged in writing by NMED. [10-22-88; 11-30-95]

H. In the event of late payment or default by the borrower, NMED shall have the option to declare the principal of, and interest accrued on, any outstanding indebtedness forthwith due and payable automatically without notice or demand of any kind, whereupon the same shall become forthwith due and payable; and NMED shall take legal recourse to implement collection. [10-22-88; 11-30-95]

603. - 699. [Reserved]

[SEPARATOR]

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