Definitions
Environmental Improvement Fund
For definitions relating to each Environmental Improvement Fund (EIF) program, refer to the following administrative code sections:
Clean Water Fund Program - s. NR 162.003 Wis. Adm. Code
Safe Drinking Water Loan Program - s. NR 166.03, Wis. Adm. Code
Land Recycling Loan Program - s. NR 167.03, Wis. Adm. Code
A B C D E F G H I J K L M N O P Q R S T U V W X Y Z
ACCRUED INTEREST - refers to interest that has accumulated but has not yet been paid. In the EIF, interest accrues on loan monies from the date of the loan disbursement. Accrued interest is calculated at the end of a fiscal year for preparation of financial statements and to the Call Date when a debt is being refinanced.
AD VALOREM TAX (in Latin: to the value added) - refers to property taxes levied by local governments. General Obligation debts are secured by an Ad Valorem Tax.
AMENDMENT - a formal, written change to an existing Financial Assistance Agreement typically to approve a change in the scope of a project or to provide additional funds for increased project costs.
ARBITRAGE - earning more interest on an investment than the interest cost on the debt proceeds used to make that investment. The Internal Revenue Code regulates the amount and conditions under which arbitrage on the investment of bond proceeds is permissible and the 1986 Tax Reform Act requires, with a few exceptions, that arbitrage earnings must be rebated to the federal government.
ASSESSED VALUATION - the value of property against which an ad valorem tax is levied, usually a percentage of "true" or "market" value. In Wisconsin, the Department of Revenue annually publishes an "Equalized Value" report that estabishes the real estate value in each municipality for debt purposes. Under the Wisconsin Constitution, municipalities may not have general obligation debts outstanding that exceed 5% of their equalized value.
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BEST MANAGEMENT PRACTICES - practices, techniques or measures which are determined to be effective means of preventing or reducing pollutants from nonpoint sources to a level compatible with water quality objectives and which do not have an adverse impact on fish and wildlife habitat. The practice techniques or measures include land acquisition, storm sewer rerouting and the removal of structures necessary to install urban best management practices.
BOARD OF COMMISSIONERS OF PUBLIC LANDS - the organization comprised of the secretary of state, state treasurer, and the attorney general that operates under the authority of ch. 24, Wis. Stats. The EIF's Small Loan Program is based on loans made by the Board of Commissioners of Public Lands to local governments.
BOND - the written evidence of a debt. Chapters 66 and 67, Wis. Stats., contain the procedures and limitations for municipalities issuing general obligation bonds, revenue bonds and special assessment bonds.
BOND ANTICIPATION NOTE (BAN) - a note issued in anticipation of later issuance of bonds. BANs are usually payable from the proceeds of the sale of the bonds. For example, Sewerage System Revenue Bond Anticipation Notes are commonly issued by municipalities to temporarily fund a project in anticipation of a later bond sale to the Clean Water Fund Program.
BOND COUNSEL - an attorney specializing in the issuance of debt who prepares or obtains the documents necessary for a debt to be issued and sold. Bond Counsel typically have special knowledge in state and federal laws governing debt issues including regulations issued by the Internal Revenue Service (IRS) and the Securities Exchange Commission.
BOND TRANSCRIPT - the collection of documents that are prepared for a debt issue. The Bond Transcript is typically prepared by the Bond Counsel and copies are distributed to the participants in the transaction. The documents included would typically include the municipal debt sale resolution, closing certificate, open meeting compliance certificate, no-arbitrage certificate, IRS tax form, legal opinion, loan agreement, debt specimen, affidavit of publication of 893.77 Notice, parity bond compliance certificate and other supporting documents.
BOND YEAR - is the 12-month period that ends on the annual principal payment date for a specific bond issue. A bond that has principal payments on June 1st has a Bond Year (12 months) that ends on June 1st.
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CALL - the actions taken to pay, all or part of the bond/note prior to the stated maturity date. For example, a Bond Anticipation Note may require that a Notice (a Call Notice) be sent out at least 30 days prior to the date on which the note will be called in early.
CALLABLE - subject to payment of the principal amount (and accrued interest) prior to the stated maturity date, with or without payment of a call premium. For example, a Bond may be callable on or after June 1, 20XX subject to 30 days prior written notice to the holders of the Bond.
CAPITALIZED INTEREST - is using loan proceeds to make interest payments on the loan during a specified period such as during project construction. Capitalizing interest increases the loan balance and thereby increases future loan payments necessary to repay the loan. The EIF only allows interest to be capitalized on a loan when the municipality will not have a user charge revenue stream to make loan payments until after a sewer or water system is fully constructed.
CLOSE-OUT DATE - when the Department of Natural Resources (DNR) has determined that the project is complete and that it has met all applicable program requirements. No additional loan or grant disbursements for the project are made after the Close-Out Date.
CLOSING DATE - the date on which a new issuance of bonds is delivered to the purchaser upon payment of the purchase price and the satisfaction of all conditions specified in the agreement of the bond purchase. For EIF loans, the "closing date" is the date on which the bonds issued by a municipality are delivered to the State and the first disbursement of the bond/loan proceeds is made.
CURRENT EXPENSES - the reasonable and necessary costs of operating, maintaining, administering and repairing the System (sewer or water), including salaries, wages, costs of materials and supplies, insurance and audits, but shall exclude depreciation, debt service, tax equivalents and capital expenditures. This definition is typically used in establishing the Debt Coverage requirement. (See also Net Revenues)
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DEBT COVERAGE (a term usually connected with revenue bonds) - refers to the margin of safety for payment of debt services. Debt Coverage is typically calculated by dividing Net Revenues of the sewer or water utility by the maximum annual revenue bond debt service payable by that utility which results in a number such as 1.25 or 125% debt coverage. The EIF requires debt coverage of the greater of i) 110 percent, or ii) the highest coverage requirements on any revenue obligations payable from the revenues, of the sewerage system or water system. (See also Net Revenues)
DEBT SERVICE - the amount of principal and interest that is due on a particular bond/note, often expressed in the context of a timeframe (such as "annual debt service").
DEBT SERVICE FUND - is the municipal fund that is established to pay debt service on general obligation debts issued under Ch. 67, Wis. Stats., and revenue bonds issued under Ch. 66, Wis Stats. The purpose of the Debt Service Fund is to identify and segregate the money that is periodically set aside for the principal and interest payments on various debts.
DEFAULT - failure to pay debt service when due, or failure to comply with other covenants in the financing documents.
DISBURSEMENT - the act of drawing funding (loan or grant) awarded via the financial assistance agreement based on invoices submitted by the municipality to the EIF.
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FACILITIES PLANS - plans and studies which directly relate to the construction of a wastewater project or water project. A facilities plan investigates needs and provides information on the cost effectiveness of alternatives. A recommended plan and an environmental assessment of the recommendations are also presented in a facilities plan. For drinking water projects, an engineering report is equivalent to a facilities plan.
FINAL COMPLETION - project construction is complete, DNR certified that the project is constructed according to DNR approved plans and specifications, and the facilities are operating according to design.
FINANCIAL ADVISOR - a consultant to an issuer of municipal securities who provides the issuer with advice with respect to the timing, terms, structure, or other similar matters concerning a new issue of securities. The Financial Advisor may prepare a Finance Plan that contains such things as a chronology of financing events, cashflow projection, debt coverage calculation, etc.
FISCAL YEAR - for State government this means the 12-month period ending June 30th. For local governments this means the 12-month period ending December 31st. Indian Tribes may select a fiscal year that is different than December 31st. For the Federal government this means the 12 months ending September 30th.
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GENERAL OBLIGATION BOND (GO) - a bond secured by the pledge of the issuer's full faith and credit. For local government GO debt issues, at the time that the GO bonds are issued, the municipality puts in place a property tax levy that is sufficient to pay the principal and interest payments over the life of the GO debt being issued.
GENERAL OBLIGATION DEBT LIMIT - the statutory or constitutional limit on the principal amount of debt that an issuer may incur (or that it may have outstanding at any one time). In the State of Wisconsin, municipalities can only have outstanding general obligation debt up to 5% of the municipality's equalized value, which is established annually by the Department of Revenue.
GROSS EARNINGS - the gross earnings of the System (water or sewer), including all revenues, income and earnings of the System derived from user charges imposed by the municipality, all payments to the municipality under any agreements between the municipality and any contract users of the System, and any other monies received from any source by the System including all rentals and fees. This term is typically used in establishing the Debt Coverage requirement. (See also Net Revenues)
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INTENT TO APPLY - the DNR Notice of Intent to Apply form submitted by a municipality to the DNR by December 31 if EIF monies will be requested from the following State fiscal year. DNR uses this information for projecting the overall funding needs of the loan program.
ISSUANCE COSTS - the costs associated with issuing a debt. Such cost may include bond counsel fee, financial advisor fee, underwriter's discount, bond rating fee, bond insurance, official statement printing cost, trustee fee, etc.
JUNIOR BOND - a revenue bond issued, or to be issued, with a claim on the sewer utility revenues or water utility revenues that is junior and subordinate to the claim of one or more other revenue bonds. (See also Parity Bond and Senior Bond)LAGOON - a pond in which algae, sunlight, and oxygen interact to restore water to a quality that is often equal to the effluent from the secondary treatment stage. Lagoons are widely used by small communities to provide wastewater treatment.
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NEEDS CATEGORIES - categories of projects developed by the U.S. Environmental Protection Agency (EPA) that are potentially eligible for EPA financial assistance.
NEEDS LIST - a survey-based compilation of cost estimates for constructing publicly owned wastewater or water treatment facilities or best management practices potentially eligible for EPA financial assistance.
NET INTEREST EXPENSES - accrued interest on interim financing less any interest earnings the municipality may receive from investing unspent proceeds of the interim financing. This is used in the calculation to determine how much interest expense is eligible to be funded by the EIF loan.
NET REVENUES - means the Gross Earnings of the System (sewer or water) minus the Current Expenses. This calculation establishes how much money is available to pay debt service on revenue bonds for purposes of the Debt Coverage requirement.
NOTICE TO PROCEED - the formal notification by which the municipality tells the construction contractor to start work on the project.
NONPOINT SOURCE - a land management activity that contributes to rainfall runoff moving over and through the ground, carrying natural and manmade pollutants into waterways, which adversely affects or threatens the quality of water.
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PARITY BOND - a revenue bond issued, or to be issued, with equal and ratable claim on the sewer utility revenues or water utility revenues as another outstanding revenue bond. (See also Senior Bonds and Junior Bonds).
PRESENT VALUE SUBSIDY - the State's estimated cost, over the life of the loan, of subsidizing the interest rate on the loan. The cost is expressed on a net present value basis. In the case of a grant award, the present value subsidy is 100% of the grant amount since no funds are repaid to the State.
REFINANCING/REFUNDING - using EIF funding to pay off all or part of a debt that was taken out by the municipality to temporarily finance project costs.
REIMBURSEMENT - using EIF loan proceeds to pay back a municipal account that advanced internal funds to temporarily pay project costs.
REIMBURSEMENT RESOLUTION - a municipal resolution required by the IRS declaring the municipality's official intent to reimburse a municipal account with proceeds from a tax-exempt bond or promissory note. The IRS regulation can be found at 26 CFR 1.150-2. Failure to pass a Reimbursement Resolution can result in project costs that cannot be reimbursed by the EIF.
REPAYMENT - the principal payments due on the EIF loan.
RESERVE CAPACITY - extra treatment capacity built into treatment plants and interceptor sewers to accommodate flow increases due to future population growth.
REVENUE BOND - a bond on which the debt service is primarily payable from the revenue generated by the water utility, sewer utility, or stormwater utility. A majority of EIF loans are collateralized by revenue bonds.
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SENIOR BOND - a revenue bond issued, or to be issued, that has a first claim on the revenues of the sewer utility or water utility. (See also Junior Bond and Parity Bond)
SERVICING FEE - a fee that may be designated by the Department of Natural Resources (DNR) and the Department of Administration (DOA) pursuant to s. 281.58(9)(d), Wis. Stats., which shall cover the estimated costs of reviewing and acting upon a Clean Water Fund Program application and servicing of a loan.
SEWER USE ORDINANCE - a legal document enacted by a municipality that defines use of the municipality's treatment works and how the rules of use are enforced.
SPECIAL ASSESSMENT BOND (B Bond) - a bond on which the debt service is payable solely from the collection of installments (principal and interest) due on assessments levied on properties to pay for the construction of a project.
STATE REVOLVING FUND - a fund that makes loans, and then uses the loan payments, including interest, to make new loans for additional projects.
STOP-WORK ORDER - the suspension of state liability for work performed under a Financial Assistance Agreement after notification is given to the recipient.
STORM SEWER - a sewer intended to carry only storm waters, surface runoff, street wash waters and drainage.
STORM WATER - rain water runoff, snow or ice melt runoff, surface runoff and drainage.
SUBCONTRACTOR - a firm or individual hired by contract by the primary engineer or the primary construction contractor to perform all or a portion of the work that is included in the engineering contract between the municipality and the primary engineer or in the construction contract between the municipality and the primary construction contractor.
SUBSIDY - the cost to the State of making loans that have an interest rate that is less than the State's cost of funds. A grant award made by the State represents 100% subsidy by the State.
SUBSTANTIAL COMPLETION - the date on which project construction is complete and the treatment process is initiated or is capable of being put into operation. For purposes of the first principal payment on the EIF loan, the substantial completion date remains the date specified in the Financial Assistance Agreement and principal payments on the loan begin the May 1st after the Substantial Completion date.
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TAX BASE - the total property and resources subject to taxation. (See Assessed Valuation - Equalized Value)
TRUSTEE - a bank designated by the bond issuer as the custodian of funds and official representative of bondholders. "Trustees" are appointed to insure compliance with the contract and represent bondholders to enforce their contract with the issuers.
TWO-THIRDS RULE - an interest rate rule applied to the construction of the wastewater collection system, interceptor or individual system project in an unsewered municipality or portion thereof. At least two-thirds of the initial flow for the project must be for wastewater originating from residences in existence on October 17, 1972 (date of passage of original Clean Water Act), for the project to be eligible for a below market interest rate.
URBAN RUNOFF - Urban Runoff is composed of both storm water and non-storm water that originates in urbanized areas. When rain falls and snow melts, the runoff washes pollutants from the earth's surface directly into water bodies. Sources of Urban Runoff include precipitation, industry discharges, leaks, washing, irrigation, and natural springs.
USER CHARGE SYSTEM - a document that defines the wastewater treatment charges paid by customers of a municipality's treatment works or structural urban BMP or the water use charges paid by customers of a local governmental unit's drinking water system.
WASTEWATER - Municipal wastewater is a general term applied to sanitary wastewater and urban runoff treated in a municipal treatment plant via a sewage collection system.
Contact an EIF project manager for further information regarding the EIF.
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