The Texas Water Development Board (Board) proposes new 31 TAC §§363.901-363.906, 363.921-363.923, 363.931-363.936, and 363.951-363.955 comprising new Subchapter I, Pilot Program for Water and Wastewater Loans to Rural Communities, to Chapter 363, Financial Assistance Programs. The new sections govern applications for loans of financial assistance to rural communities for the construction of water and wastewater facilities under the rural community water and wastewater loan fund established by Texas Water Code, Chapter 15, Subchapter O.

Sections 363.901 - 363.906 will comprise Division 1, Introductory Provisions. Section 363.901 describes the scope of the proposed new subchapter and notices customers that additional requirements from the Chapter 363 General Provisions apply to the program for rural communities unless in conflict with the rural communities rules. Section 363.902 provides definitions for two terms that have specific meanings for this subchapter and program.

Section 363.903 provides a brief summary for customers of who may receive funds for which kind of project. Section 363.904 limits the term of loans to 20 years and the amount of the loan to $250,000. The section further advises customers that no loan fee is charged.

Section 363.905 implements legislation allowing rural communities to incur long-term debt by entering into a loan agreement and promissory note. Section 363.906 further implements legislation that allows a municipality or county to pledge a percentage of the sales and use tax revenue to secure the debt.

Sections 363.921 - 363.923 will comprise Division 2, Application Procedures. Section 363.921 provides notice to customers of the information that must be submitted in conjunction with an application for loan assistance, in part to ensure that the applicant is authorized to incur debt and has the resources for repaying the debt. Section 363.922 provides information on the environmental activities that must be completed for the proposed project to be in compliance with state law. Section 363.923 advises customers of the statutory findings that the Board is required to make in order to approve the loan.

Sections 363.931 - 363.936 will comprise Division 3, Closing and Release of Funds. Section 363.931 sets out the terms and conditions for debt that is evidenced through a loan agreement and promissory note. The terms of the loan agreement ensure that the funded project is constructed and maintained in accordance with law and that the means of repaying the debt is properly monitored and documented.

Section 363.932 advises customers of the permits and completion documents that will have to be submitted before funds are released. The section ensures that applicable laws and rules are complied with in the pre-construction and construction phases of the proposed project. Section 363.933 provides notice to applicants of the process for applying for pre-design funding and describes the requirements for using the option. Section 363.934 describes engineering contracts, plans and specifications that must be submitted for a project to ensure that the project is in compliance with applicable laws and rules addressing construction.

Section 363.935 provides for the interest rate that will be charged on loans in this program. The interest rate implements the legislative intent to provide low-cost financing to rural communities.

Section 363.936 provides notice to customers that the Board reserves the right to conduct audits to ensure that projects are constructed according to Board approvals and that the borrower is following responsible financial accountability practices.

Sections 363.951 - 363.955 will comprise Division 4, Construction and Post-Construction.

Section 363.951 describes construction contract requirements. These requirements comply with statutory requirements as to competitive bidding, retainage, standard of work done under a contract, and the use of local labor. Section 363.952 implements a statutory requirement for an engineering review by Board staff of construction contracts and plans and specifications.

Section 363.953 requires borrowers to hire a registered professional to inspect and certify to construction work. The section also reserves the right of the Board to inspect the construction of the project to ensure that the facility is being built according to the specifications, plans and representations of the borrower. Section 363.954 provides that after approval, no material alterations in the project plans may be made without the authorization of the executive administrator so as to ensure that the project built is the project that was approved by the Board. Section 363.955 states the circumstances under which a certificate of approval of the project will not be issued.

Ms. Misti Hancock, Interim Director of Fiscal Services, has determined that for the first five-year period these sections are in effect there will be no fiscal implications to state government as a result of enforcement and administration of the sections. There will be fiscal implications to local governments in the form of savings. The projected net present value savings to local governments based on an assumption of $260,000 in loans in each of FY 2002 and FY 2003 will be $1,600.90 in FY 2002, $5,213.60 in FY 2003, $6,940.90 in FY 2004, $6,428.62 in FY 2005, and $5,943.80 in FY 2006.

Ms. Hancock has also determined that for the first five years the sections as proposed are in effect the public benefit anticipated will be low interest loans available specifically to rural communities through either the purchase of the community's bonds or a new loan agreement and promissory note option. Ms. Hancock has determined there will be no economic costs to small businesses or individuals required to comply with the sections as proposed.

Comments on the proposed amendments will be accepted for 30 days following publication and may be submitted to Bruce Crawford, Assistant Director, Policy Development Specialist, Texas Water Development Board, P.O. Box 13231, Austin, Texas, 78711-3231, or by fax at 512/305-9243.