200 KAR 17:030.
Guidelines for Water Resources Loan Fund.
RELATES TO: KRS
AUTHORITY: KRS Chapter 13A, 224A.070(1), 224A.113, Part I, OPERATING BUDGET,
sec. E. -Finance and Administration Cabinet, 44. a. General Administration, Part
II, CAPITAL PROJECTS BUDGET, sec. D. -Finance and Administration Cabinet, 4. a.
Ky. Infrastructure Authority of Chapter 514 of the 1990 Ky. Acts, provides for
funds-administer the Water Resources Loan Fund.
FUNCTION, AND CONFORMITY: KRS 224A.070(1) and 224A.113 authorize the Kentucky
Infrastructure Authority to promulgate administrative regulations in accordance
with KRS Chapter 13A, to govern the application for and provision of financial
assistance to governmental agencies for the construction or acquisition of
water resources projects from the Drinking Water Loan Fund.
Definitions. For the purposes of this administrative regulation the words and
terms used shall have the same meaning as in KRS 224A.011, with the following
"Applicant" shall mean any governmental agency that has submitted an
application to the authority for a loan from the Water Resources Loan Fund.
"Application" shall mean the application submitted by an applicant
for a loan from the Water Resources Loan Fund.
clearinghouse review" shall mean a review conducted within the Department
of Local Government pursuant to federal or state law or regulations.
"Authority staff" shall mean the Office of Financial Management and
"Conditional commitment letter" shall mean a letter delivered to the
applicant issuing the authority's commitment to provide a loan under specific
terms and subject to the satisfaction of certain conditions by the applicant on
or before the closing date.
"Department" shall mean the Department of Local Government.
"Closing date" shall mean the date established by the authority for
execution of the assistance agreement upon satisfaction of the conditions
contained in the conditional commitment letter.
Resources Loan Fund" shall mean the Water Resources Loan Fund established
pursuant to the authority of KRS Chapter 224A.
"Capital investment plan" shall mean the plan developed by the
applicant for investment in capital projects as required by KRS 224A.112(6)(b).
rate" shall mean the average of the Bond Buyer's Index of twenty (20) G.O.
Bonds as published weekly in the Bond Buyer (a financial newspaper published in
New York) calculated based on the weeks falling within each calendar quarter.
This average shall be rounded the nearest one-tenth (.1) of one (1) percent.
"Special Depreciation Fund" shall mean the Special Depreciation Fund
required to be established by an applicant by Section 6 of this administrative
regulation in connection with a loan from the Water Resources Loan Program.
General Eligibility Requirements and Conditions to Financial Assistance. (1)
Applications shall only be submitted by applicants for water resources projects
located in the Big Sandy, Cumberland Valley, Kentucky River, or Gateway Area
applicants that certify in writing that they are unable to finance the entire
water resources project from their own resources shall be eligible for a loan.
Documentation evidencing such inability shall include the following:
(a) Letters from
local lending institutions.
(b) Letters from
financial advisors, accountants or fiscal agents, if applicable.
(c) If the
applicant is in an area which qualifies for assistance through the Farmer's
Home Administration, (FmHA), a statement stating either:
1. The applicant
will not qualify for funding;
2. The applicant
has previously applied for FmHA funding and has failed to receive assistance in
two (2) consecutive attempts; or
3. The applicant
needs to supplement the FmHA funds with Water Resources Loan Funds.
from any other sources or other certifications having a bearing on the
application which the authority in its discretion deems relevant for purposes
of making the determination that an applicant is unable to finance the entire
water resources project from its own resources.
applicant shall have or shall attain the legal authority necessary for
constructing, operating and maintaining the proposed water resources project.
Eligible Water Resources Projects. Monies in the Water Resources Loan Fund
shall be used for water resources projects which shall enhance the health,
safety and welfare, and encourage economic development opportunities in local
communities as determined by the authority based upon each application.
Submission Requirements and Review Process. (1) The original and two (2) copies
of each application shall be submitted to: Department of Local Government,
Capital Plaza Tower, 2nd Floor, Frankfort, Kentucky 40601, Attention: Director,
Division of Community Programs.
application form, substantially in the form as in effect on April 15, 1991,
which is incorporated by reference and is made a part hereof as if fully set
forth herein, may be obtained at the Department of Local Government from 8 a.m.
to 4:30 p.m., Monday through Friday. Only a completed application, including
all supporting documentation, shall be submitted before an application will be
considered for assistance from the Water Resources Loan Fund.
shall be subject to Kentucky state clearinghouse review, shall be reviewed by
the Department of Local Government, and shall be subject to authority credit
review. Extensions of any review periods that are established may be necessary
if the applicable reviewing agency determines that additional time is required
for a more thorough review, or if any such agency determines that additional
information or clarification is required to complete review of the application.
Applicants may supplement their applications during the review process to:
(a) Clarify or
explain the water resources project scope;
(b) To provide
additional information or clarification concerning the funds pledged as
repayment of the loan; or
(c) To make
adjustments in the application to enhance the programmatic or financial
feasibility of the water resources project.
Criteria for Selecting Eligible Water Resources Projects. (1) The Department of
Local Government shall select and determine eligible water resources projects
for loans. The department shall take into consideration the following:
data, which shall be specific to the county or counties from which the
application originates and shall reflect the most recent figures available from
(b) The extent
to which the water resources project fits into the economic development
strategy of the community. A water resources project which relates to economic
development is one that stimulates the potential for economic growth. A water
resources project shall be considered based on the degree to which it enhances
economic development efforts and its level of priority in the community's
capital investment plan.
(c) The extent
of the need for the water resources project and the impact which the water
resources project will have on the local economic development efforts.
(d) Whether the
proposed costs of completing the water resources project are reasonable given
the geographic location of the water resources project, current pricing trends,
required professional services, and any other factors that may have a bearing
on the water resources project. Cost figures submitted in the application will
be reviewed to determine whether the proposed budget is sound. Any costs
considered questionable will be analyzed to determine whether the integrity of
the water resources project is suspect.
based upon the department's evaluation of the overall water resources project
effectiveness, the most beneficial water resources project has been designed
for the use of the Water Resources Loan Fund.
department shall review applications and assign a priority ranking based on the
selection criteria. Water resources projects shall be ranked as Priority I,
Priority II, or Priority III.
(a) A Priority I
ranking shall be assigned when, having considered all of the criteria, the
water resources project will have a significant economic impact on the
community; is well designed; cost effective; and, generally, determined by the
department to be the most suitable solution to the community's needs.
(b) Priority II
shall be assigned when one (1) or more factors exist which would limit the
success or feasibility of the water resources project.
(c) Priority III
shall be assigned when, having considered all the criteria, the department
finds that the water resources project is premature, is not feasible, or is
inappropriate for assistance from the Water Resources Loan Fund.
(d) The department
shall recommend Priority I rankings to the authority's staff for financial
staff shall conduct a financial review of the Priority I designated water
resources project applications.
financial review shall include an analysis of:
1. The adequacy
and quality of the revenues pledged for the repayment of the loan;
2. The validity
of the assumptions used to project new revenues resulting from the water
monies other than the water resources loan have been committed and shall be
available to fund the cost of the water resources project;
4. The ability
of the applicant to provide for maintenance and operations cost of the water
resources project and related public service system;
5. The ability
of the applicant to service existing debt of the system related to the water
6. The nature of
any funds pledged or committed by entities, other than the applicant, to repay
the water resources loan; and
7. The ability
of the authority to finance the applicant's water resources project using the
financing programs permitted by Kentucky and federal laws or regulations.
(b) At any time
during the financial analysis, an applicant may be notified of a deficiency. If
the problem cannot be resolved through negotiation, the authority may remove
the application from consideration.
Section 6. Loan
Process. (1) Upon completion of the credit review by the authority's staff, the
application shall be submitted to the authority for final action.
(2) If the
authority approves the application, a conditional commitment letter shall be
issued to the applicant. This letter shall set forth the conditions and
documentation required by the authority prior to execution of an assistance
agreement. No funds shall be provided until the assistance agreement is fully
executed. The commitment shall be made upon the authority's satisfaction that
the water resources project proposed is financially feasible, the applicant is
credit worthy and that the water resources project will comply with all
technical and program requirements set forth in state and federal laws and
authority shall establish the interest rate quarterly based on prevailing
market conditions. The rate of interest on each loan shall be set forth in the
conditional commitment letter. There shall be one (1) rate of interest offered
which will be the index rate less four (4) percent. If the nature of a water
resources project financed by the authority's loan causes interest on any
authority bonds issued to fund the water resources project to become taxable,
the authority may consider adjustments in the interest rate to reflect the
additional costs of authority funds.
repayment shall not exceed thirty (30) years, and principal shall be payable
annually and interest semiannually unless the authority establishes a more
frequent payment schedule due to credit concerns. The loan repayment period may
be less than thirty (30) years upon election of the authority. Loan repayment shall
commence within six (6) months after the start of construction, unless
repayment is dependent upon revenues generated from the specific water
resources project. In such cases, loan repayment shall begin within six (6)
months after the water resources project is operational, and interest to cover
the authority's cost of money during the construction period may be added to
the amount of the loan.
principal amount of each loan shall be equal to the amount approved by the
authority. The final loan amount may be adjusted by up to ten (10) percent of
the commitment without further action by the authority, subject to availability
of funds to service the debt.
certification by the water resources project engineer of construction of the
water resources project as eighty (80) percent complete, and submission by the
applicant of evidence of the exact cost of the water resources project, an
inspection shall be conducted by the authority staff to provide for any
adjustments in the loan amount.
(7) To assure
adequate funds for major maintenance and replacement of the water resources
projects funded by this program, the applicant shall be required to set aside
annually, to a Special Depreciation Fund, from current revenues, after taking
into account costs of operations and maintenance and debt service requirements,
an amount to be determined by the authority. Monies may be withdrawn from the
account when major maintenance or replacements of equipment in excess of
budgeted amounts are required.
assistance agreement between the authority and applicant shall contain such
terms and conditions as the authority deems necessary to maintain the integrity
of the Water Resources Loan Fund according to the circumstances of each water resources
Applicant's Management Capacity. The department and the authority's staff shall
require as a condition of any loan that the applicant perform any or all of the
compliance with statutory mandates for financial accountability and personnel
the ability to operate, as well as maintain, the water resources project in a
proper manner through the final maturity date of the loan.
compliance with any other state or federal laws or regulations.
Section 8. Loan
Closing and Extensions. An applicant shall meet all conditions of the
conditional commitment letter and take bids for the water resources project
within not more than eleven (11) calendar months after the date of the
conditional commitment letter, otherwise, the loan commitment shall expire.
(For example, if an application was approved on January 1, 1992, bids for the
project must be accepted and the assistance agreement signed by November 30,
1992.) One (1) extension period of up to six (6) months may be granted upon
request of the applicant, if the authority determines that circumstances
warrant the granting of the extension. If the extension is denied, the loan
commitment shall be rescinded. If a request for a time extension is granted,
but all the conditions still cannot be met during the extension period, the
loan commitment may be rescinded. The applicant may reapply for any water
resources project for which the loan commitment has expired or been rescinded
under this section.
Authority to Administer the Program. The authority shall monitor the assistance
agreements and require that financial reports be made available to the
authority by the applicant at such intervals as shall be deemed necessary by
the authority. The authority shall monitor the economic impact on the
community, the cash flows of the project, and perform all actions that shall be
required to assure that the agreements continuously meet the program standards
established by this administrative regulation. There shall be an annual
administrative fee of two-tenths (.2) of one (1) percent charged on the unpaid
balance of all loans. This fee shall be applied to the servicing costs of the
loans and necessary operating expenses of the program. (17 Ky.R. 3321; Am. 18
Ky.R. 674; eff. 8-22-91.)