Financial Assistance Agreement (FAA) and Loan Closing Process

Environmental Improvement Fund

SUMMARY

The FAA is a written agreement between the municipality, the Department of Natural Resources (DNR) and the Department of Administration (DOA) that awards EIF financial assistance. The FAA contains the terms and conditions of receiving financial assistance from the EIF and the terms and conditions of repaying the loan. The municipality will need to sign the agreement and the bond documents at a municipal meeting prior to the scheduled closing of the EIF loan. The DOA will wire the municipality's first disbursement of EIF monies on the day of loan closing.

A Bond Counsel experienced in Wisconsin municipal debt issuance is required to prepare the bond documents and the bond transcript for the loan. Evidence of qualifications, experience and liability insurance coverage may be required by the EIF to demonstrate the acceptability of the counsel.

PRE-FAA REQUIREMENTS

The following applicable requirements must be met before the EIF project manager can prepare the municipality's FAA:

1. An EIF project manager completes all application reviews.

2. A DNR Watershed Management plan reviewer approves the plans and specifications for the project.

3. DNR approves the parallel cost percentage, for projects being financed through the Clean Water Fund Program (CWFP).

4. DOA determines if the municipality has the financial capacity to assure sufficient revenues to operate and maintain the project and to pay the debt service on the obligations that it issues for the project.

5. Municipal water rates and operating rules for projects being financed through the Safe Drinking Water Loan Program (SDWLP).
• The Public Service Commission regulates the municipality's water rates, the EIF requires a copy of the PSC issued order authorizing water rates and rules.

• If the municipality's water system is not regulated by PSC, the municipality adopts a user charge system for water rates and operating rules.
6. For storm water projects being funded under the CWFP the municipality adopts local regulations for construction sites, adopts a municipal storm water management plan and ordinance for new development and redevelopment.

7. EIF staff and the municipality determine that all applicable federal tax-exempt bond regulations are met.

8. An EIF project manager determines that the municipality has submitted all necessary documentation for the EIF project, including:

• Bid documentation.
• Legal statement on land ownership, and acquisition of easements and right-of-ways necessary for the project.
• Parallel cost estimate for CWFP.
• Request for disbursement and supporting invoices.
• Draft legal documents related to the authorization and issuance of bonds. Typically submitted by bond counsel.
• A plan of operation for a wastewater treatment works or structural urban BMP project.
• Adopt and implement a user charge system and sewer use ordinance, if the project is a CWFP.
• A copy of the Public Service Commission (PSC) water rate order approval for an SDWLP project.
• A copy of the resolution adopting the PSC rate increase for SDWLP project.
• An executed copy of the construction engineering contract.
• Force account certification, if costs requested.
• An executed copy of the intermunicipal agreement (CWFP), if applicable. For SDWLP intermunicipal agreements.
• A copy of the title or warranty deed for land purchased for the project, if land purchase costs are requested.
• A statement of the payoff amount, if refinancing a portion of or an entire debt.
• Initial flow documentation, if an unsewered project.
• Pre-Award Compliance Review Report (Exit DNR), mandatory for all SDWLP projects and federally funded CWFP projects.
• Federal Equivalency Projects Assurances and Certification, mandatory for all SDWLP projects and CWFP projects designated as federal equivalency projects.

EIF staff and the municipality agree upon terms of the loan repayment, namely, the dates of the first principal and interest payments.

When all the pre-FAA requirements are met, the project manager will work with the municipality to establish a loan closing date. This date is normally the second or fourth Wednesday of the month. Once this date is established, the project manager can prepare the FAA and loan-closing schedule.

EIF LOAN CLOSING PROCESS

About two weeks prior to the scheduled EIF loan closing, the municipality must hold a meeting at which they will execute the FAA and documents prepared by the bond counsel to issue a tax-exempt bond/note to the EIF as security on the loan. This issuance mirrors the process municipalities must follow for any issuance of debt, either in the public or private markets. The EIF has made this process easier. (See Advantages to Financing Projects with EIF.)

FAA TERMS AND CONDITIONS

Upon entering into a FAA, the municipality agrees to the terms and conditions set forth in s. NR 162.12, Wis. Adm. Code, for CWFP projects or s. NR 166.15, Wis. Adm. Code, for SDWLP projects. A municipality is also required to do the following:

• Set-up a non-interest bearing account into which EIF wire transfers will be sent when the EIF disburses loan monies to the municipality.

• Within three working days of receipt of EIF monies, apply the monies to project costs such as paying invoices, refinancing debt, and reimbursing municipal accounts.

• Send the EIF a copy of the municipal audit report or the municipality's year-end financial statements for each fiscal year that the EIF loan is outstanding.

• Repay the loan over a term not to exceed 20 years from the date of the FAA.

• Construct the project according to approved plans and specifications.
  Last Revised: Monday February 18 2008