Environmental Loans Financial Assistance Agreement (FAA) and loan closing process

• Summary
• Pre-FAA requirements
• Loan closing process
• FAA terms & conditions

Summary

The Financial Assistance Agreement (FAA) is a written agreement between the municipality, the Department of Natural Resources, and the Department of Administration (DOA) that awards Clean Water Fund Program (CWFP) or Safe Drinking Water Loan Program (SDWLP) financial assistance. The FAA contains the terms and conditions of receiving financial assistance as well as 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 date of the CWFP or SDWLP loan. The DOA will wire the municipality's first disbursement of loan funds on the day of loan closing.

A Bond Counsel experienced in Wisconsin municipal debt issuance must be hired 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 Environmental Loans Program to demonstrate the acceptability of the counsel.

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Pre-FAA requirements

The following applicable requirements must be met before the project manager can prepare the municipality's Financial Assistance Agreement (FAA):

1. An EL project manager completes all application reviews.
   
   
2. A DNR plan reviewer approves the plans and specifications for the project.
   
   
3. DNR approves the parallel cost percentage, for projects being financed through the CWFP.
   
   
4. DOA determines whether 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 are approved for projects being financed through the SDWLP:
   
   
   • If the Public Service Commission of Wisconsin (PSC) regulates the municipality's water rates, the EIF requires a copy of the PSC issued order authorizing water rates and operating rules.
     
     
   • If the municipality's water system is not regulated by PSC, the municipality adopts operating rules and a user charge system for water rates.
   
   
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 adopts an ordinance for new development and redevelopment.
   
   
7. Environmental Loans (EL) staff and the municipality determine that all applicable federal tax-exempt bond regulations are met.
   
   
8. An EL project manager determines that the municipality has submitted all necessary documentation for the project, including:
   
   
   • Bid [PDF] and construction contract documentation. (See also, Construction Management.)
     
     
   • An executed copy of the architectural/engineering (A/E) contract(s) [PDF].
     
     
   • Legal statement or opinion from applicant's attorney on land ownership and easement rights necessary for the project.
     
     
   • A copy of the title or warranty deed for land purchased for the project, if land purchase costs are requested.
     
     
   • Estimate of the parallel cost percentage, for projects being financed through the CWFP.
     
     
   • The first Request for Disbursement form and supporting invoice documentation.
     
     
   • Draft legal documents related to the authorization and issuance of bonds [PDF]; typically submitted by the bond counsel.
     
     
   • Adopt and implement a Sewer Use Ordinance (SUO) & User Charge System (UCS), for projects being financed through the CWFP.
     
     
   • A copy of the water rate order approval, for projects being financed through the SDWLP.
     
     
   • A copy of the resolution adopting the rate increase, for projects being financed through the SDWLP.
     
     
   • Force account certification, if costs are requested.
     
     
   • An executed copy of the intermunicipal agreement(s), if necessary for the project:
     • CWFP intermunicipal agreement
     • SDWLP intermunicipal agreement
     
     
   • A statement of the payoff amount, if refinancing a portion of a debt or an entire debt.
     
     
   • Initial flow documentation, if an unsewered project.
     
     
   • Federal Equivalency Projects Assurances and Certification (Form 8700-201 [PDF]), mandatory for SDWLP and CWFP projects designated as federal equivalency projects.
     
     
   • Use of American Iron and Steel (UAIS) Certification.
     
     
   • Disadvantaged Business Enterprise (DBE) Good Faith Certification.
     
     
   • Cost and Effectiveness Certification, for projects being financed through the CWFP.
     
     
   • Fiscal Sustainability Plan (FSP) Certification, for projects being financed through the CWFP.
     
     
   • Final Green Project Reserve (GPR) cost documentation, including applicable business case.

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Loan closing process

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 Financial Assistance Agreement (FAA) and loan-closing schedule.

About two weeks prior to the scheduled CWFP or SDWLP 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 CWFP or SDWLP 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.

Hint: We close loans, so "loan closing." We close out projects, so "project closeout."

The EIF has made its loan closing process easier, read Advantages of 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 166.14, Wis. Adm. Code, for SDWLP projects. A municipality is also required to do the following:

• Comply with loan disbursement requirements, including:
  • Set-up a non-interest bearing account into which financial assistance wire transfers will be sent when the DOA disburses loan monies to the municipality.
  • Within three working days of receipt of CWFP or SDWLP monies, apply the monies to project costs such as paying invoices, refinancing debt, and reimbursing municipal accounts.
  
  
• Send DOA a copy of the municipal audit report or the municipality's year-end financial statements for each fiscal year that the CWFP or SDWLP 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 [PDF].

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