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Environmental Loans Parallel cost percentage

"Parallel cost percentage" means the proportion of project costs eligible for below-market rate financing relative to the total project cost eligible for Clean Water Fund Program (CWFP) financing. The parallel cost percentage may include project costs eligible for:

  • a reduced interest rate (i.e., 55%, 65%, or 70% of the market rate); and/or
  • a 0% interest rate (i.e., those incremental costs related to septage receiving and treatment).

Before receiving a loan from the CWFP, a municipality must submit a parallel cost estimate to the DNR Bureau of Water Quality. Typically, the municipality's engineer provides the information necessary for the DNR plan review engineer to review and approve a parallel cost percentage for the municipality's wastewater treatment or urban runoff (storm water) project.

Calculating the parallel cost percentage

The calculation of the parallel cost percentage is described in Market Rate Cost Calculation, s. NR 162.04(1)(c), Wis. Adm. Code [exit DNR]. Calculate the parallel cost percentage as follows:

1. Determine the total design capacity based on total flows and loadings, including septage, estimated for the project design year condition.

2. Calculate a reduced capacity condition by subtracting from the total design capacity the flows and loadings associated with each of the following as applicable:

  1. The reserve capacity associated with a sewage collection system, individual system or interceptor project in an unsewered municipality that is provided to serve projected flows beyond the initial flow expected at the project completion date.

  2. The reserve capacity that is provided in the wastewater project to treat projected flows (including septage treatment capacity) beyond 10 years from the project completion date.

  3. The capacity for both present and future flows and loadings from industrial wastewater users or from industrial areas regulated under Storm Water Discharge Permits, ch. NR 216, Wis. Adm. Code [exit DNR]. An "industrial (wastewater) user" is defined in Water and Sewage, s. 281.58(1)(c), Wis. Stats. [exit DNR]. The Department has some discretion to define industrial users based on the unique characteristics of the generated wastewater but, typically, an "industrial user" means the flow from the industry must be more than the equivalent of 25,000 gallons per day of sanitary wastes. This equivalency may be defined in terms of flow, biochemical oxygen demand, or suspended solids.

  4. The capacity for flow from state and federal facilities if the flow from these facilities exceeds 5% of the total flow to the treatment works or best management practices.

3. Estimate the eligible project construction costs associated with each of the conditions in 1 and 2 above.

Normally, not all capital costs for various project elements will be directly proportional to flow or loading. Therefore, the cost estimate for a reduced capacity typically cannot be estimated by simply applying a ratio of the two design flow conditions to the cost estimate for the total design flow. The Department does not require that a complete redesign be performed for the reduced capacity condition. Typically, the same unit processes identified for the total design flow project are used, but downsized as appropriate for the reduced capacity condition.

The submitted cost estimates for both conditions should contain sufficient detail (itemized costs) and a narrative explanation to enable Department plan review engineers to fully assess the basis of the cost estimates.

4. Divide the cost of the reduced capacity condition by the costs of the total design capacity.

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Determine the parallel cost percentage as follows:

PC = RC/DC

Where:

  • PC = the parallel cost percentage expressed as a decimal
  • RC = construction costs associated with the reduced capacity condition
  • DC = construction costs associated with the total design capacity

Calculating the septage percentage

If the project includes costs for septage receiving facilities and/or septage treatment capacity, those costs may be eligible for a 0% loan rate. For information on what costs qualify for the 0% rate, read Guidance for Septage Considerations in Municipal Wastewater Facility Planning and for Application of Zero Percent Clean Water Fund Loans [PDF].

In order to segregate the costs eligible for the 0% rate, estimate another design condition and associated cost (RC2).

Calculate the percentage of costs eligible for the 0% rate as follows:

SP = (RC-RC2) /DC

Where:

  • SP = septage percentage (percentage of project costs eligible for a 0% rate)
  • RC2 = construction costs associated with a capacity condition without market rate items and without septage receiving facilities or septage capacity

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Applying the parallel cost percentage to the CWFP loan

The costs identified in 2 above are eligible for market rate financing only. The DNR plan review engineer provides the approved parallel cost percentage and, if applicable, the approved septage percentage to the CWFP project manager. The project manager then applies the approved percentages to the total eligible project costs to determine the amount of costs the CWFP can fund at the market rate, the reduced rate and the 0% rate. In other words:

  • If the parallel cost percentage is 100%, there are no market rate costs; all costs are funded at the reduced rate or the 0% rate.

  • On a $1,000,000 project with a 90% parallel cost percentage and no septage related costs, $900,000 would be financed at the reduced rate with $100,000 at the market rate.

  • On a $1,000,000 project with a 90% parallel cost percentage and a 5% septage percentage, $50,000 would be financed at the 0% rate, $850,000 would be financed at the reduced rate, and $100,000 would be financed at the market rate.

Note: There are a few other circumstances under which some project costs may be placed at the market rate:

  1. when an MBE/WBE/SBRA sanction for non-compliance is applied;
  2. when there are costs included in a project that are solely related to flood control;
  3. when an urban runoff project includes areas that exclusively serve future development; and
  4. when costs of a project are for correcting violations of an effluent limit in a WPDES permit or of performance standards.
Contact information
Direct questions about parallel cost percentage estimates to:
DNR wastewater systems plan review staff
or
Jeanne Cargill
Policy coordinator, statutes & codes specialist
EL section, Bureau of CFA
608-267-7587

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Last revised: Thursday June 29 2017