The amendments are adopted pursuant to Texas Water Code, Section 6.101, which requires the board to adopt rules necessary to carry out its powers and duties.

This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency’s legal authority.

Filed with the Office of the Secretary of State on January 22, 1999.

TRD-9900415

Suzanne Schwartz

General Counsel

Texas Water Development Board

Effective date: February 11, 1999

Proposal publication date: December 4, 1998

For further information, please call: (512) 463–7981

The repeal is adopted pursuant to Texas Water Code, Section 6.101, which requires the board to adopt rules necessary to carry out its powers and duties.

This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency’s legal authority.

Filed with the Office of the Secretary of State on January 22, 1999.

TRD-9900413

Suzanne Schwartz 

General Counsel 

Texas Water Development Board 

Effective date: February 11, 1999 

Proposal publication date: December 4, 1998 

For further information, please call: (512) 463–7981

Subchapter A. General Research and Planning

This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency’s legal authority. 

Filed with the Office of the Secretary of State on January 22, 1999. 

TRD-9900441 

Suzanne Schwartz 

General Counsel 

Texas Water Development Board 

Effective date: February 11, 1999 

Proposal publication date: December 4, 1998 

For further information, please call: (512) 463–7981

The Texas Water Development Board (the board) adopts amendments to 31 TAC §§363.2, 363.17, 363.704, 363.712, 363.713, 363.721, and 363.731 and new §§363.81-363.84, 363.86, 363.87, and §363.715, concerning Grants for Emergency and the Small Community Emergency Loan Program without changes to the proposed text as published in the December 4, 1998, issue of the Texas Register (23 TexReg 12203) and will not be republished. Section 363.85, Findings of the Board, was withdrawn from consideration for permanent adoption, as it was found to be unnecessary. The amendments and new sections are adopted to provide grants and short-term loans to community water and wastewater systems in need of emergency assistance due to emergency conditions.

Section 363.2, Definitions of Terms, is adopted for amendment to add definitions for "bonds, "delivery," "emergency," "grants for emergency" and "economically distressed areas" because these are terms used in the rules that govern the program. Adopted amendments also number definitions in compliance with Texas Register requirements. Section 363.17 addresses grants from the Water Loan Assistance Fund and is adopted for amendment to add to the list of projects which may receive grants, those water and/or sewer services which suffer a temporary interruption of service due to emergency conditions. 

New sections 363.81-363.84, 363.86 and 363.87 set out the eligibility criteria for political subdivisions that apply for and receive grants in response to emergency conditions. The adopted new sections provide for the use of a grant agreement to detail the requirements for environmental review, design standards, and closing and release of funds.

New §363.81, Grants for Emergency, provides guidelines for potential applicants by addressing eligibility factors in receiving grants. To meet eligibility criteria, a political subdivision must serve an economically distressed area and must suffer an interruption of existing water or wastewater services because of the emergency condition. 

New §363.82, Terms of Financial Assistance, provides that the amount of grants shall be limited to the amount necessary to restore service or ensure uninterrupted delivery of service. This limitation is imposed because the grants are intended only to address the problem that arises from the emergency condition. Adopted new §363.83, Application, provides uniformity for application requirements and directs that the grant applicant must submit an application for grant assistance in the form and numbers required by the executive administrator in order to be considered for grant assistance. 

New §363.84, Applicability, provides that applications for grant assistance must submit the same general, legal, fiscal and engineering information that is required for loan applications. The information will enable the agency to determine the eligibility of the application for an emergency grant. 

New §363.86, Grant Agreement, provides for additional information to customers by giving notice to a grant recipient of the terms of the grant through the means of a grant agreement. The provisions of the grant agreement will include the term of the grant commitment, conditions for closing, environmental approvals and engineering design standards that must be met to receive grant assistance. 

New §363.87, Environmental Review Before Board Approval, requires that staff will make a written report to the executive administrator on known or potentially significant social or environmental concerns prior to approval of the grant by the Board. As a means of ensuring that project design and implementation is environmentally responsible and complies with current law, the adopted new section further provides that the terms and conditions for completion of the environmental review process and identified mitigation measures will be included in the grant agreement. 

Section 363.704, Eligibility Requirements, states the requirements for eligibility for small community emergency loan consideration. The adopted amendment adds as an emergency the condition of drought that poses a threat to public health and safety. 

Adopted amendment to §363.712, Environmental Review before Board Approval, adds the requirement that the loan agreement provide for terms of completing the environmental review process and with identified mitigation measures so as to ensure that project design and implementation are environmentally responsible and comply with current law. Section 363.713 is proposed for amendment to delete the requirement that a recommendation on a loan application will be prepared within three days of submittal of a completed application. This requirement has been found to be unnecessarily burdensome for staff and achieves no purpose for the applicant as all loan recommendations must wait for the monthly board meetings to be considered by the board for approval. 

New section 363.715, Notes and Loan Agreements, is adopted to provide an option to borrowers to receive financial assistance either by issuing bonds or by entering into a loan agreement. The new section provides applicants with the option of entering into a note and loan agreement as a method of receiving funds. Prior to this amendment, applicants could only issue bonds which the agency purchased. The bond issuance method can result in delays of time. The new option offers a quicker means of completing the loan transaction. However, the option limits the term of the loan to one year. 

Adopted amendments to §363.721 address closing requirements for borrowers which select the new loan option offered pursuant to §363.715. 

Section 363.731 is adopted for amendment to ensure environmental compliance by adding the requirement that the project engineer must include in his assurances that the construction work is being performed in a satisfactory manner and that provision has been made for environmental mitigative measures.

No comments were received regarding adoption of the proposed amendments and new sections.

Subchapter A. General Provisions

The Texas Water Development Board (the Board) adopts amendments to 31 TAC §§365.2, 365.8, 365.11, 365.12, 365.18, 365.20 and 365.21, concerning Investment Rules without changes to the proposed text as published in the December 4, 1998, issue of the Texas Register (23 TexReg 12207) and will not be republished. The amendments are adopted to comply with the Public Funds Investment Act (PFIA) - Chapter 2256 of the Texas Government Code and to address changes resulting from the Board’s annual review of its investment policies and strategies.

Section 365.2 is adopted for amendment to reflect the change in the investment officer’s title as a result of agency restructuring and to number definitions in accordance with Texas Register requirements. Section 365.8 is adopted for amendment to clarify the internal auditor and finance committee’s annual review of investment controls. Section 365.11 is adopted for amendment to require the submission of dealers’ qualification information to the investment officer. Section 365.12 is adopted for amendment to delete an inapplicable term, and to remove the internal auditor as a participant in the annual review of dealers. Section 365.18 is adopted for amendment to remove the internal auditor as a participant in the placement of investment controls. It is inappropriate to the internal auditor’s position of independents to be involved in dealer reviews and investment controls. Section 365.20 is adopted for amendment to reflect changes to federal arbitrage regulations which now permit investment yields in excess of arbitrage yield restrictions. Section 365.21 is adopted for amendment to state the method used to determine market values as required by the PFIA.

No comments were received on the proposed amendments.

Subchapter A. General Provisions

31 TAC §§365.11, 365.12, 365.18, 365.20

The amendments are adopted under the authority of the Texas Water Code, §6.101 which provides the Texas Water Development Board with the authority to adopt rules necessary to carry out the powers and duties in the Water Code and other laws of the State. 

This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency’s legal authority. 

Filed with the Office of the Secretary of State on January 22, 1999. 

TRD-9900408 

Suzanne Schwartz 

General Counsel 

Texas Water Development Board 

Effective date: February 11, 1999 

Proposal publication date: December 4, 1998 

For further information, please call: (512) 463–7981

The Texas Water Development Board (board) adopts the repeal of 31 TAC Chapter 375, State Water Pollution Control Revolving Fund, §§375.1-375.4, 375.14-375.22, 375.31-375.38, 375.40, 375.51, 375.52, 375.61-375.63, 375.72, 375.74, 375.75, 375.81-375.86, 375.88, 375.101-375.103, and new §§375.1- 375.4, 375.11-375.18, 375.31-375.42, 375.51, 375.52, 375.61, 375.62, 375.71-375.73, 375.81-375.87 and 375.101-375.105 for Subchapter A, and §§375.201, 375.211-375.214 and 375.221, 375.222 for Subchapter B, comprising Chapter 375, Clean Water State Revolving Fund. Sections 375.2, 375.12, 375.13, 375.34, 375.36, 375.42, 375.71, 375.72 and 375.212 are adopted with changes to the proposed text as published in the December 4, 1998 issue of the Texas Register (23 TexReg 12209). The repeal of §§375.1-375.4, 375.14-375.22, 375.31- 375.38, 375.40, 375.51, 375.52, 375.61-375.63, 375.72, 375.74, 375.75, 375.81-375.86, 375.88, 375.101-375.103, and new §§375.1, 375.3, 375.4, 375.11, 375.14-375.18, 375.31- 375.33, 375.35, 375.37-375.41, 375.51, 375.52, 375.61, 375.62, 375.73, 375.81-375.87, 375.101-375.105, 375.201, 375.211, 375.213, 375.214, 375.221, and 375.222 are adopted without change and will not be republished.

New Chapter 375 addresses the creation, capitalization by federal grant and state match, purposes and administration of the Clean Water State Revolving Fund (CWSRF). The CWSRF provides low interest loans to eligible applicants of the state pursuant to the Federal Water Pollution Control Act, 33 U.S.C. 1251 et seq. (Act) and the Texas Water Code, Chapter 15, §§15.601-15.609 and Chapter 17, Subchapters C, E, and F. 

The board repeals former Chapter 375 and adopts new Chapter 375 in order to consolidate all rules governing the CWSRF program under one chapter. Prior to this time, the rules that governed the CWSRF program were divided into two chapters: the rules that applied to loans primarily financed through state funds were contained in Chapter 363; the rules that applied to loans primarily financed through federal funds were contained in Chapter 375. The scattered nature of the CWSRF rule provisions proved confusing and unwieldy for customers and for agency administration. The state and federally funded portions of the CWSRF program have now been combined into one chapter and divided into two subchapters. 

The changes to the structure of former Chapter 375 was so extensive as to justify repeal of the chapter and proposal of a new chapter. Subchapter A of the new chapter sets out the general criteria and methods for funding all CWSRF loans; subchapter B describes the federal requirements that are specific to the use of federal capitalization grant funds. Some of the provisions of the CWSRF program remain unaltered. Sections that have been amended are highlighted below. 

Sections 375.1-375.4 address introductory provisions of the CWSRF program. Section 375.1 is new and describes the scope of the rules of subchapter A. Section 375.2 relates to definitions and adds, to clarify the meaning of terms used in the rules, a definition of "commitment", "cost-effectiveness determination", "CWSRF" and "CWSRF program account". Additionally, the definition of "eligible applicant" is expanded as the result of comments from the U.S. Environmental Protection Agency to clarify that this category includes applicants for assistance for projects pursuant to §319 of the Act (nonpoint source pollution control) and §320 of the Act (estuary management). "Hardship Grants Program for Rural Communities" has also been added to the definitions to cite the source of the federal act (Public Law 104-403) which established this program. Section 375.3 states the agency’s policies with respect to the intent of the CWSRF program; the encouragement of regionalization and water conservation; protection of the environment; maximizing financial assistance through the provision of match funds; expediting of projects; and limitation of the use of force accounts. These policies are unchanged from those previous stated in former Chapter 375. Section 375.4 states that the date of applicability of the new chapter rules is to projects listed in the intended use plan for federal fiscal year 2000 and beyond. This provision is included because Chapter 363, Subchapter B of the Board rules will govern the administration of certain CWSRF loans prior to federal fiscal year 2000. 

Sections 375.11-375.18 address program requirements for the CWSRF program. Sections 375.11 and 375.12 describe the public participation process for the adoption of the CWSRF priority list and the purposes for which CWSRF loans may be used. Both sections repeat the program requirements of the federal Act. Sections 375.13 and 375.14 state the construction activities that may be funded from CWSRF funds and provide that the project priority list will be the same as the list of projects in the annual intended use plan. Both sections reflect the program requirements of the federal Act. 

Section 375.15 , Criteria and Methods for Distribution of Fund, has some changes from the requirements of former §363.206. The section provides notice to potential applicants of the population categories and the criteria and methods that will be employed by the agency in determining distribution of funds among projects. It includes categorizing and ranking within categories, the projects for which financial assistance is sought. The section further allows for the designation of a funding line, based on the amount of total loan funds available, so that applicants may determine if they are likely to receive funding during each funding cycle. The section additionally sets out the method the board will employ in notifying applicants when unused funds become available. The section further addresses requirements for applicants to timely submit applications and enter into commitments for assistance. 

Section 375.16 addresses the rating process that is used to rank principal projects and provides the criteria for determining a principal project as distinguished from additional projects. In compliance with the requirements of the Clean Water Act, §375.17 addresses the intended use plan, whereby the agency prepares a plan identifying the intended uses of the amounts of funds available to the CWSRF for a funding year. The section sets out a procedure of written notice to potential borrowers and the information that must be included in a submission in order for a project to receive a rating by agency staff. Section 375.18 provides for loan origination fees to provide funds for the agency to administer the CWSRF program. CWSRF program funds may also be used to pay administrative expenses, but the program funds have a ceiling of 4% of the amount of the federal funds. Because the agency provides a state match to these funds, the loan program is extensive and the 4% limitation is insufficient to administer the total program. Fees charged to borrowers are currently excluded from the ceiling on administrative expenses. 

Sections 375.31-375.42 address the procedures and the application information that must be provided when seeking CWSRF funding assistance. Section 375.31 requires applicants to meet with agency staff at a preapplication conferences, at which time the applicants can learn of the application progress and have their questions answers. The conference is required to assist applicants in preparing complete applications within the necessary time frames, thus improving the efficiency of the application process. 

Section 375.32 states the required general information that must be submitted by an applicant, including names and addresses of representatives and consultants which will be providing information on the loan. The general information is necessary in assisting agency staff to determine whether the applicant and the proposed project are eligible to receive CWSRF funding. Section 375.33 lists required legal information and establishes the legal documents that must be submitted to evidence that the applicant is authorized to incur debt and to proceed with construction. The documents include a resolution that the governing body has approved the loan application and has entered into necessary consultant contracts for the design of the project and the issuance of bonds. The section further requires proof of ownership or other rights to land on which the project will be located, and copies of water or wastewater treatment service contracts. Section 375.34 addresses required fiscal information that must be provided to establish the reasonableness of the project costs and the ability of the applicant to repay the loan from the taxes or revenues being pledged to repayment. The information includes details about bonds that will be issued, specifics as to tax rates and current service charges, operating statements and audited financial statements. The information is required for a determination that the applicant has the authority to incur and the ability to repay the debt obligations that are contemplated. 

In compliance with the federal regulations pursuant to the Act, §375.35 describes the procedures that must be followed for projects in completing an environmental assessment and impact statement. The section details public participation requirements, guidelines for environmental assessments, and the process for making environmental findings. 

Section 375.36 addresses engineering feasibility data and contains the requirements from 363.13. In response to EPA comments, sections have been added to include that nonpoint source and estuary management applications must comply with §319 and §320 of the federal Act. Additionally, provision is made that the data will be approved by the executive administrator after there is confirmation that all requirements of the section have been met, all environmental determinations are complete, and the applicant has agreed to comply with any mitigating measures. The section further provides that changes in the project may require further review. These measures are added to ensure the soundness of a proposed project. Section 375.37 requires the preparation and adoption of water conservation measures pursuant to state law and is unchanged from former §375.37 except that for uniformity and validity of terms "political subdivision" has been replaced with "applicant". 

Section 375.38 addresses review criteria for approving loans and refinancings and is unchanged from former §375.38 except that cites in the chapter are corrected to fit the new chapter and the requirement for the borrower to submit an operation and maintenance manual is deleted. Submitting the manual has proved to be unnecessarily burdensome to the loan recipient and of little value to the agency staff. 

Section 375.39 addresses the pre-design funding option and provides an alternative method to receive loan commitments and close loans which complies with federal requirements and provides flexibility in delivering funds to loan applicants. The section is unchanged from former §375.40 except that chapter cites have been corrected. Section 375.40 relates to the applicants resolution and financing agreements and is unchanged from §363.225. 

Section 375.41 establishes a combination CWSRF loan and hardship grants program for rural communities to implement provisions of the Omnibus Consolidated Recessions and Appropriations Act of 1996. The section is substantially similar to §363.226 except that a provision has been added to clarify that grants are not subject to administrative cost recovery provisions or to book entry closing or DTC requirements. Such provisions apply only to loans. Section 375.42 describes the requirements for the capital improvement plan option and is the same as §363.224 except that chapter cites have been corrected. This option offers applicants This option offers applicants additional flexibility in planning, designing and constructing projects. 

Sections 375.51 and 375.52 address the process by which the board reviews and approves loans and sets lending rates. Section 375.51 provides that the executive administrator will present applications to the board for action. The section further details actions available to the board and provides for establishment of an effective loan commitment period. The section is substantially similar to former §375.51 except that a commitment period is no longer specified. This change allows greater flexibility in setting a reasonable time for the commitment to remain open. Section 375.52 describes the process for establishing lending rates and details the criteria for fixed and variable rate loans based upon the applicant’s cost of funds in the public market. The section is unchanged from former §375.52 except that cites have been corrected and, for purposes of uniformity, a short title has been added to the text addressing adjustment of interest rate. 

Sections 375.61 and 375.62 relate to the engineering requirements for projects receiving CWSRF funding. Section 375.61 relates to contract documents and is substantially similar to former §375.62 except that the requirements for value engineering and the wage provisions of the Davis-Bacon Act have been deleted because they are no longer required by the federal Act for CWSRF funding. Section 375.62 is the same as former 375.63 except that the cites have been corrected. 

Sections 375.71-375.73 set out the requirements for release of loan funds. Section 375.71 is unchanged from former §375.72 except that "political subdivision" has been replaced with the more specific term of "applicant". Also, in response to EPA comments, loan recipients must demonstrate compliance with generally accepted accounting standards in maintaining records and accounts. Section 375.72 is substantially similar to former §375.74 but in response to EPA comments the section adds "all applicable sections of the Clean Air Act" to the list of federal provisions with which projects must be consistent. The new section additionally corrects cites and adds a requirement for submittal of a monthly reimbursement schedule which is necessary to the agency’s submittal of federally-required reports. The requirements of both sections provide evidence that the borrower has completed the fiscal, legal and engineering requirements necessary to receipt of public funds. Section 375.73 is unchanged from former §375.75 except that cites have been corrected. 

Sections 375.81-375.87 address requirements applicants must meet during the construction phase of funded projects. Section 375.81 is unchanged from former §375.81 except that cites have been corrected. Section 375.82 is changed from former §375.82 to provide applicants with flexibility by deleting the requirement that construction inspection of a project may only be made by the project engineer. The section now allows inspection by any registered professional engineer. The section also substitutes the more universally understood term "construction" for the term "building". Further, "in order to assure that contract documents are being followed and that the works are being built in accordance with sound engineering principles and building practices" is deleted as redundant from the provision authorizing inspection by the executive administrator. Section 375.83 is changed from former §375.84 by changing the outdated requirement for confirmation of emergency notification of changes from "by letter or telegraph" to "confirmation in writing". Section 375.84 is unchanged from former §375.85. Section 375.85 deletes four of the five requirements of former 375.86, relating to building phase submittals. The requirement for adopting and implementing a user charge system is deleted because it is no longer required by the federal Act. The requirement for submittal of an operation and maintenance manual is deleted because the submittal has proved to be unnecessarily burdensome to the loan recipient and of little value to the agency staff. Notice of completion of construction is no longer required in this provision as the requirement is redundant. There are other means utilized to determine that a project is complete. The requirement of "and any other requirements" is deleted as being without meaning; there are no other requirements. Section 375.86, relating to retainage, is substantially similar to former §375.88 except that the title of subsection (c) has been clarified. Section 375.87 relating to disbursements and outlay reports is substantially similar to §363.242(a) except that applicants whose projects are not required to comply with this section must still submit outlay reports and appropriate documentation to enable the agency to seek reimbursement of state funds from the federal treasury. 

In compliance with the requirements of Subchapter E of the Texas Water Code, §§375.101-375.105 address engineering and financial accountability by the applicant during the post building phase of the funded project. Section 375.101 is changed from former §375.101 to substitute the new, federally endorsed acronym CWSRF (Clean Water State Revolving Fund) for SRF (State Revolving Fund). To emphasize the present requirement that an applicant must comply with all representations and assurances made to the agency, a provision has been added that in the event of noncompliance by the applicant, the executive administrator shall require corrective action, including referral to the Attorney General if corrective action is not pursued. 

Section 375.102 is changed from former §375.103 to delete the reference to project performance, which is no longer required by the Act. An unnecessary cite is also deleted and reference to "SRF" is corrected to "CWSRF". Section 375.103 is unchanged from former 363.54. Section 375.104, requiring a certificate of approval, is substantially similar to former §363.55 except that the development fund manager of the agency, in place of the executive administrator, may now issue the certificate. Also, language has been added inform customers that the certificate approves the work as being completed in accordance with engineering principles and practices. Section 375.105 is unchanged from former §363.56. 

Section 375.201 states the scope of Chapter 375, Subchapter B, which addresses the information and actions of potential applicants for CWSRF funds which are needed in order for the State to satisfy the requirements associated with the State’s receipt of federal capitalization grant funds. 

Sections 375.211-375.214 provide for special requirements for program funds awarded through a federal capitalization grant agreement. Section 375.211 is unchanged from former 375.16. Section 375.212 is changed to delete the requirement for compliance with provisions of the Act, Title II, because they are no longer federal requirements for CWSRF funding. Additionally, compliance with The Wilderness Act, 16 USC 1131 et seq., and Executive Order 12898, Environmental Justice, have been added to the list of federal requirements. Also included in the list is compliance with Minority and Women Owned Business Enterprises, Small Business Enterprises and Small Business Enterprises in Rural Areas. All of the new requirements are added as a result of EPA guidelines and federal law. 

Section 375.213 provides potential applicants with notice of the process of inviting and processing applications for funding. The section further provides for priority consideration in the event of a funds shortage and establishes the alternatives available to applicants whose projects cannot be funded with the lower interest rates offered under this subchapter. The new section is required to provide accurate guidance to applicants and to establish for the agency an orderly mechanism for managing the process of inviting applications and funding projects. 

Section 375.214 details the process for environmental review and approvals necessary to comply with the Federal Water Pollution Control Act. The section is unchanged from former §375.35 except to correct cites. 

Sections 375.221-375.222 provide for special requirements for release of federal funds. Section 375.221 is substantially similar to former §375.40 except that it adds a provision limiting the duration of a loan commitment to six months unless extended by the Board. This limitation is added to prevent applicants from reserving Board funds for extended periods of time and thus denying use of the funds to other potential applicants which are ready to proceed with projects. Section 375.222 describes the procedure for setting the lower fixed and variable interest rates that are associated with the special federal requirements for use of federal funds. The section is unchanged from former §375.52 except that cites to board rules have been corrected. 

Comments on the proposed rules were received from the U.S. Environmental Protection Agency (EPA). The EPA pointed out that the proposed definition of "eligible applicant" did not include a reference to projects eligible for assistance pursuant to sections 319 and 320 of the Clean Water Act. 

Response: The Board agrees that projects pursuant to §319- §320 should be referenced to provide more complete information to customers. At §375.2 (27) , the definition of "eligible applicant" has been changed to reference applicants for non-point source pollution control projects and estuary management projects in accordance with sections 319 and 320 of the federal Act. 

The EPA notes that at §375.12, Types of Assistance, there was no provision of assistance for the guarantee or purchase of insurance for local debt obligations as is allowed pursuant to §35.3120(c). 

Response: The Board agrees that the guarantee or purchase of insurance for debt obligations is an authorized type of assistance pursuant to §35.3120(c) of the federal regulations. Section 375.12, Types of Assistance, is amended to add the guarantee or purchase of insurance for local debt obligations. This addition will provide more complete guidance for potential applicants. 

The EPA suggests that §375.13, relating to Activities Funded, include additional clarification by referencing §375.2. 

Response: The Board agrees that the elements of "construction" can be clarified by referencing the definition of "construction" in §375.2, Definitions of Terms. Section 375.13 has been so amended. 

The EPA notes that the financing of an administrative fee in a loan is a practice that will be allowed through federal Fiscal Year 99. EPA suggests that §375.18, relating to Administrative Cost Recovery, contain language that limits this activity through FY 99. 

Response: The agency anticipates that there will be further congressional action to resolve the question of how the loan origination fee may be financed. One of the options open to Congress is to allow the financing of the fee within the loan to continue past federal Fiscal Year 99. 

In the interest of changing the CWSRF rules as little as possible, the agency will maintain the proposed language until a decision is made by Congress, at which time the rules may or may not have to be changed. 

The EPA suggests changes to §375.34(12) relating to Required Fiscal Information, that will clarify that an applicant must provide audited financial statements prepared by an independent auditor. EPA further suggests that financial statements from at least the most recent two years (and preferably, three years) be required to allow for the assessment of financial trends. 

Response: The Board agrees that prudent lending requires the ability to assess financial trends. Section 375.34 (12) is amended to provide for audited financial statements from the most recent two years. 

The EPA notes that at §375.36, relating to Engineering Feasibility Data, applications for estuary management activities were not addressed.

Response: The Board agrees that estuary management projects must be consistent with §320 of the federal Act. Section §375.36 has been amended to reflect this requirement. 

The EPA comments that at §375.42, relating to the Capital Improvement Plan Option, safeguards are needed to stress that only CWSRF eligible activities are included under the CIP Option.

Response: In order to provide needed information to customers, §375.42 has been amended to add a clarifying provision that CIP projects must meet the criteria of §375.13, relating to Activities Funded.

The EPA suggests that in §375.71, relating to Loan Closing, it should be stated that loan recipients are required to use generally accepted government accounting standards (GAGAS). 

Response: The Board agrees that this standard should be stated for clarification purposes. Section 375.71 is amended to add that in its records and accounts, loan recipients must demonstrate compliance with generally accepted government accounting standards.

EPA suggests that in §375.72, relating to Release of Funds, the word "and" replace "or" in the list of applicable sections of the federal Act, and that applicable sections of the Clean Air Act also be added to the requirements.

Response: The Board agrees that these changes correct and clarify the section. Section 375.72 has been amended to substitute "and" for "or" and to include "applicable sections of the Clean Air Act".

EPA notes that §375.212, relating to Capitalization Grant Requirements, should include in the list of laws the Clean Water Act, PL 92-500, as amended, and Section 129, Small Business Administration Reauthorization and Amendment Act of 1988, PL 100-590.

Response: §375.212 has been amended to add the two laws, as EPA suggests. These additions will provide additional, needed information to potential applicants.

Subchapter A. Introductory Provisions

Subchapter A. General Provisions

Division 1. Introductory Provisions

This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency’s legal authority.

Filed with the Office of the Secretary of State on January 22, 1999.

TRD-9900423

Suzanne Schwartz

General Counsel

Texas Water Development Board

Effective date: February 11, 1999

Proposal publication date: December 4, 1998

For further information, please call: (512) 463–7981

§375.13. Activities Funded. 

The board may provide financial assistance under this chapter for one or more elements of construction, as defined pursuant to §375.2 of this title (relating to Definitions of Terms).

This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency’s legal authority.

Filed with the Office of the Secretary of State on January 22, 1999.

TRD-9900422

Suzanne Schwartz

General Counsel

Texas Water Development Board

Effective date: February 11, 1999

Proposal publication date: December 4, 1998

For further information, please call: (512) 463–7981

§375.36. Engineering Feasibility Data.

(a) Submittal of engineering feasibility data. The applicant shall submit engineering feasibility data signed and sealed by a professional engineer registered in the State of Texas. The data, based on guidelines provided by the executive administrator, shall provide: 

(1) description and purpose of the project; 

(2) entities to be served and current and future population; 

(3) the cost of the project; 

(4) a description of innovative and conventional alternatives considered and reasons for the selection of the project proposed;

(5) sufficient information to evaluate the engineering feasibility; and 

(6) maps and drawings as necessary to locate and describe the project area. The executive administrator may request additional information or data as necessary to evaluate the project. 

(b) Nonpoint source applications. Applications for assistance for nonpoint source pollution control projects must be consistent with an approved nonpoint source management plan pursuant to the Act, §319. 

(c) Estuary management applications. Applications for assistance for estuary management projects must be consistent with an approved estuary management plan pursuant to the Act, §320. 

(d) Approval of engineering feasibility data. The executive administrator will approve the engineering feasibility data after confirming that the items listed in subsection (a) of this section have been completed, the appropriate environmental determinations have been completed in accordance with §375.35 of this title (relating to Required Environmental Review and Determination) or §375.214 of this title (relating to Required Environmental Review and Determination), whichever is appropriate, and the loan recipient has agreed to incorporate all mitigating measures directed by the executive administrator.

(e) Changes to engineering feasibility data. If changes occur in the project after approval of the engineering feasibility data, the executive administrator may request additional engineering and/or environmental information in order to ascertain that the loan commitment and environmental determination continues to be appropriate.

§375.42. Capital Improvements Plan Option.

(a) The capital improvements plan CWSRF loan processing option will provide applicants an alternative to secure loan proceeds for eligible projects that meet the criteria of §375.13 of this title (relating to Activities Funded) under the applicant’s capital improvements plan. This option is a two-step loan processing method. First, an applicant will provide applicable information to the board for preliminary eligibility determination under subsection (b) of this section. Second, an applicant will submit a financial application in order to apply for financing under subsection (d) of this section. Under the capital improvements plan option, a loan may be closed: after bids are approved and prior to construction commencing as specified in §375.71 of this title (relating to Loan Closing) and §375.72 of this title (relating to Release of Funds); or utilizing the pre-design funding option as specified in §375.39 of this title (relating to Pre-Design Funding Option). This capital improvements plan option may be used for the purpose of reimbursement of system revenues and/or re-financing of interim financing, including commercial paper expended for approved project(s). General procedures and requirements for processing a loan application under the capital improvements plan option are described in subsections (b), (c) and (d) of this section.

(b) An applicant will request a preliminary eligibility determination from the board on the project(s) described in the applicant’s capital improvements plan or similar document addressing capital improvement planning. 

(1) The board’s action of preliminary eligibility determination will: 

(A) authorize board staff to expend agency resources to review and approve project documents as described in subsection (c) of this section for the proposed capital improvements plan; 

(B) establish that those portions of project(s) and costs approved in the preliminary eligibility determination are eligible for CWSRF financing provided that the requirements in subsection (c) of this section are met; and 

(C) acknowledge the applicant’s intention to construct the project(s) in the capital improvements plan and to seek financial assistance to finance, including refinancing all or part of, those project(s). 

(2) The board’s action of preliminary eligibility determination will provide no financial commitment by the board to the project(s) in the capital improvements plan. 

(3) Requests for preliminary eligibility determination must include: 

(A) a capital improvements plan or similar information which includes a description and purpose of the project(s), area maps or drawings which adequately locate the project area(s), a proposed project schedule, estimated project costs and sources of funds; 

(B) a forecast of system cash flow, timing and approximate amount of financial assistance to be requested from the CWSRF, and a description of any intention to use the CWSRF loan proceeds to refinance existing interim debt obligations, including a description of the debt obligations, interfund transfers or internal methods of finance; 

(C) a discussion of known permitting, social or environmental issues which may affect the alternatives considered and the implementation of the proposed project and any environmental information which may already be prepared pertaining to the proposed project(s) included in the capital improvement plan or documentation of environmental review of the proposed project(s) which may have been required by another state or federal agency; 

(D) a resolution of the applicant’s governing body requesting CWSRF preliminary eligibility determination from the board and stating that the applicant will comply with all board rules and requirements; and 

(E) any additional information the executive administrator may request to complete eligibility evaluation of the capital improvements plan.

(c) Procedures between board preliminary eligibility determination and before financial commitment are as follows:

(1) Prior to the initiation of construction of each project included in the capital improvements plan which will be funded by the board, the applicant will obtain from the executive administrator approval of the engineering feasibility data as addressed in §375.36 of this title (relating to Engineering Feasibility Data), a favorable environmental determination as addressed in §375.35 of this title (relating to Required Environmental Review and Determination) or §375.214 of this title (relating to Required Environmental Review and Determination), whichever is applicable; approval of design plans and specifications as addressed in §375.62 of this title (relating to Approval of Contract Documents). Prior to the initiation of construction, applicant will additionally submit to the executive administrator bidding documents, including executed contracts for the project.

(2) The executive administrator will make periodic inspections of projects under §375.82 of this title (relating to Inspection During Construction).

(3) The executive administrator will advise the board concerning projects that involve major economic or administrative impacts to the applicant resulting from environmentally-related special mitigative or precautionary measures from an environmental assessment under §375.35 of this title or as conditions in the environmental determination required by §375.214 of this title as applicable. 

(d) After the board’s preliminary eligibility determination under subsection (b) of this section and after all requirements under subsection (c) of this section have been met, any of the project(s) included in the applicant’s capital improvements plan may be considered for a commitment for financial assistance. An applicant must submit an application which includes the following: 

(1) all applicable information required in §375.32 of this title (relating to Required General Information), §375.33 of this title (relating to Required Legal Information), and §375.34 of this title (relating to Required Fiscal Information);

(2) a water conservation plan required by §375.37 of this title (relating to Required Water Conservation Plan); and

(3) any additional information the executive administrator may request to complete evaluation of the financial application. 

(e) After board commitment and after completion of all closing and release prerequisites specified in §375.39, §375.71, or §375.72 of this title, funds will be released.

(f) The executive administrator may recommend to the board the use of this section if, based on available information submitted under subsection (b), (c) or (d) of this section, there appear to be no significant permitting, social, environmental, engineering, or financial issues associated with the project. Any request for preliminary eligibility determination or financing under this option may be considered by the board despite a negative recommendation from the executive administrator.

(g) An applicant with outstanding commitments for financial assistance for projects previously approved by the board or with funds available from closed loans may utilize identified funds from the outstanding commitments or closed loans for costs approved in the preliminary eligibility determination when the requirements in subsection (c) of this section have been met. If the applicant uses this subsection, the board cannot guarantee that additional funds for projects or work previously approved by the board will be available. The applicant must submit a new request for additional financial assistance in the event funds from outstanding commitments or closed loans are utilized for projects in the preliminary eligibility determination and additional funding is required to complete the projects. The provisions of this subsection may not be used if the previously committed or closed loans are backed by project-specific revenues as opposed to system revenues or tax pledges of the applicant.

This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency’s legal authority.

Filed with the Office of the Secretary of State on January 22, 1999.

TRD-9900421

Suzanne Schwartz

General Counsel

Texas Water Development Board

Effective date: February 11, 1999

Proposal publication date: December 4, 1998

For further information, please call: (512) 463–7981

(b) Certified transcript. At such time as available following the final release of funds the applicant shall submit a transcript of proceedings relating to the debt purchased by the board which shall contain those instruments normally furnished a purchaser of debt.

(c) Refinancing construction loans. If the project includes the refinancing of a loan, the applicant shall submit all of the items specified in subsection (a) of this section and any records, assurances, or appraisals concerning the construction of the project. Additionally, the project must pass the executive administrator’s inspection of the project.

(d) Loan closing prior to completion of design. In the event financial assistance is needed by the applicant to complete design of a project without escrow of funds for building under §375.39 of this title (relating to Pre-Design Funding Option), the executive administrator will so advise the board. The board at its option may authorize the executive administrator to close the loan for planning and design without requiring the submittals in subsection (a)(1) and (6) of this section. However, the submittals in subsection (a)(1) of this section will be required prior to delivery of funds for building purposes. Applicants wishing to close prior to obtaining required commission permits will be required to present documentation that the required permits are expected to be issued.

(e) Loan closing for phased construction. The executive administrator may determine it appropriate to close only a portion of a loan for a phased construction project unless the applicant can demonstrate the need for phased construction and that closing the portion of the loan desired by the applicant is necessary to expedite construction.

(f) Closing requirements. The applicant shall be required to comply with the following closing requirements:

(1) all loans shall be closed in book-entry-only form;

(2) the applicant shall use a paying agent/registrar that is a Depository Trust Company (DTC) participant;

(3) the applicant shall be responsible for paying all DTC closing fees assessed to the applicant by the board’s custodian bank directly to the board’s custodian bank; and

(4) the applicant shall provide evidence to the board that one fully registered bond has been sent to the DTC or to the applicant’s paying agent/registrar prior to closing.

§375.72. Release of Funds.

(a) Release of funds for planning, design and permits. Prior to the release of funds for planning, design, and permits, the political subdivision shall submit for approval to the executive administrator the following documents:

(1) a statement as to sufficiency of funds to complete the activity;

(2) certified copies of each contract under which revenues for repayment of the political subdivision’s debt will accrue;

(3) executed consultant contracts relating to services provided for planning, design, and/or permits; and

(4) other such instruments or documents as the board or executive administrator may require.

(b) Pre-design funding. The funds needed for the total estimated cost of the engineering planning, and design cost if the engineering feasibility data required under §375.36 of this title (relating to Engineering Feasibility Data) has been approved, the cost of issuance associated with the loan, and any associated capitalized interest will be released to the loan recipient and the remaining funds will be escrowed to the escrow agent bank or to the trust agent until all applicable requirements in subsections (a) and (c) of this section and §375.39 of this title (relating to Pre-Design Funding Option) have been met.

(c) Release of funds for building purposes. Prior to the release of funds for building purposes, the political subdivision shall submit for approval to the executive administrator the following documents:

(1) a tabulation of all bids received and an explanation for any rejected bids or otherwise disqualified bidders;

(2) two executed original copies of each construction contract the effectiveness and validity of which is contingent upon the receipt of board funds;

(3) evidence that the necessary acquisitions of land, leases, easements and rights-of-way have been completed or that the applicant has the legal authority necessary to complete the acquisitions;

(4) a statement as to sufficiency of funds to complete the project;

(5) certified copies of each contract under which revenues to the project will accrue;

(6) evidence that the project is consistent with plans, if any, developed under the Act, §§205(j), 208, 303(e), 319 and 320, as well as the applicable sections of the Clean Air Act which apply to the project receiving the financial assistance;

(7) an updated schedule of projected monthly reimbursements for eligible project costs to be requested by the applicant throughout the project funding period. Any eligible project costs which will be paid by the applicant prior to receiving reimbursement must be identified separately in this schedule; and

(8) other such instruments or documents as the board or executive administrator may require.

(d) Release of funds for projects constructed through one or more construction contracts. For projects constructed through one or more construction contracts, the executive administrator may approve the release of funds for all or a portion of the estimated project cost, provided all requirements of subsection (c) of this section have been met for at least one of the construction contracts.

(e) Escrow of funds. The executive administrator may require the escrow of an amount of project funding related to contracts which have not met the requirements of subsection (c) of this section at the time of loan closing.

This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency’s legal authority.

Filed with the Office of the Secretary of State on January 22, 1999.

TRD-9900433

Suzanne Schwartz

General Counsel

Texas Water Development Board

Effective date: February 11, 1999

Proposal publication date: December 4, 1998

For further information, please call: (512) 463–7981

(b) Requirements for minority business enterprise/women’s business enterprise/small business enterprise/small business enterprise in a rural area.

(1) Definitions. For the purposes of this subsection the following definitions shall apply.

(A) Construction–Notwithstanding the provisions of §375.2 of this title (relating to Definition of Terms), any contract or agreement to provide the building, erection, alteration, remodeling, improvement or extension of a CWSRF funded project.

(B) Contract–A written agreement between a CWSRF recipient and another party and any lower tier agreement for equipment, supplies, or construction necessary to complete the project. Includes personal and professional services , agreements with consultants, and purchase orders.

(C) Equipment–Tangible, nonexpendable personal property having a useful life of more than one year and an acquisition cost of $5,000 or more per unit.

(D) MBE–A minority business enterprise, a business concern that is:

(i) at least 51% owned by one or more minority individuals who are U. S. Citizens, or in the case of a publicly owned business, at least 51% of the stock is owned by one or more minority individuals who are U. S. Citizens; and

(ii) whose daily business operations are managed and directed by one or more of the minority owners. Minority individuals include Black Americans, Hispanic Americans, Native Americans, Asian Pacific Americans or other groups whose members have been found to be disadvantaged by the Small Business Act or by the Secretary of Commerce under Executive Order 11625, §5.

(E) Prime contract–Any contract, agreement or other action entered into by a CWSRF applicant to procure construction, services, equipment or supplies.

(F) SBE–A small business enterprise, a business concern, including its affiliate, that is independently owned and operated, not dominant in the field of operation in which it operates, and that is qualified as a small business by the Small Business Administration.

(G) SBRA–A small business enterprise in a rural area, a small business concern that is located and conducts its principal operations in a non-metropolitan county as delineated by the Small Business Administration.

(H) Services–A contractor’s time and efforts which do not involve delivery of a specific end item other than documents (e.g. reports, design drawings, specifications, etc.).

(I) Subcontract–Any contract, agreement or other action to procure construction, services, equipment or supplies between a prime contractor and any other business to supply such goods or services for a CWSRF financial assistance action.

(J) Supplies–All tangible personal property other than equipment.

(K) WBE–A women’s business enterprise, a business concern that is:

(i) at least 51% owned by one or more women, or in the case of a publicly owned business, at least 51% of the stock is owned by one or more women; and

(ii) whose daily business operations are managed and directed by one or more of the women owners.

(2) Affirmative action steps. Those steps necessary by the applicant and the prime contractor to ensure that MBEs , WBEs, SBEs and SBRAs are utilized when possible including:

(A) placing qualified MBEs, WBEs, SBEs and SBRAs on solicitation lists;

(B) assuring that MBEs, WBEs, SBEs and SBRAs are solicited whenever they are potential sources;

(C) dividing total requirements, when economically feasible, into smaller tasks or quantities to permit maximum participation by MBEs, WBEs, SBEs and SBRAs;

(D) establishing delivery schedules, where the requirement permits, which encourage participation by MBEs, WBEs, SBEs and SBRAs;

(E) using the services and assistance of the Small Business Administration and the Minority Business Development Agency of the Department of Commerce; and

(F) requiring the prime contractor, if subcontracts are to be let, to take the affirmative action steps listed in subparagraphs (A)-(E) of this paragraph.

(3) Requirements for applicants.

(A) Pursuant to EPA policy and legal requirements, a goal oriented system has been established to promote MBE and WBE participation on all projects receiving funds from the CWSRF. In addition, it is the intent that SBEs and SBRAs be afforded the maximum practicable opportunity to participate in the CWSRF financial assistance program.

(B) Prior to receiving a loan commitment the applicant will submit an affirmative action plan on forms provided by the board. The plan shall be signed by the authorized representative of the applicant and shall contain estimates and/or actual amounts of MBE and WBE participation in the categories of construction, services, equipment, or supplies. Copies of any existing or proposed MBE and WBE contracts should be attached.

(C) In all procurements, the applicant will undertake a good faith effort to attract and utilize MBE, WBE, SBE and SBRA participation. This must include, but not be limited to taking the six affirmative action steps.

(D) In all procurements, the applicant will include provisions in prime contracts requiring the prime contractors to submit an affirmative action plan, and to undertake a good faith effort to attract and utilize MBEs, WBEs, SBEs and SBRAs, through subcontracts. This must include but not be limited to taking the affirmative action steps described in paragraphs (2)(A)-(E) of this subsection.

(E) As a condition to the release of funds or at any other time contracts or subcontracts are entered into, the applicant will report MBE and WBE participation and will provide documentation of good faith efforts on forms provided by board staff.

(F) The applicant and the prime contractor(s) will maintain all records documenting required good faith efforts. This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency’s legal authority.

Filed with the Office of the Secretary of State on January 22, 1999.

TRD-9900437

Suzanne Schwartz

General Counsel

Texas Water Development Board

Effective date: February 11, 1999

Proposal publication date: December 4, 1998

For further information, please call: (512) 463–7981