1. Department of Environmental Quality Water Infrastructure November 17, 2015 Water Infrastructure Funding to Financing

2. Overview 2 Department of Environmental Quality Program information Fundamental changes in grants Connect NC Bonds

3. Funding Programs 3 Department of Environmental Quality Clean Water State Revolving Fund Drinking Water State Revolving Fund Community Development Block Grants – Infrastructure State Programs

4. Funding Programs 4 Department of Environmental Quality Clean Water State Revolving Fund Largest funding program (>$100 million / year) Capitalized over 20 years Loans at ½ market rate; 0% also available Principal forgiveness available Drinking Water State Revolving Fund Community Development Block Grants – Infrastructure State Programs

5. Funding Programs 5 Department of Environmental Quality Clean Water State Revolving Fund Drinking Water State Revolving Fund Similar to CWSRF Approximately $50 million / year Loans at ½ market rate; 0% also available Some principal forgiveness available Community Development Block Grants – Infrastructure State Programs

6. Funding Programs 6 Department of Environmental Quality Clean Water State Revolving Fund Drinking Water State Revolving Fund Community Development Block Grants – Infrastructure Grant program for low- and moderate-income people Non-entitlement local government units only Approximately $26 million available State Programs

7. Funding Programs 7 Department of Environmental Quality Clean Water State Revolving Fund Drinking Water State Revolving Fund Community Development Block Grants – Infrastructure State Programs – Drinking Water and Wastewater Revolving loans – similar to SRFs Grants – $12.4 million FY 2015-16; $15 million FY 2016-17 Significant changes this year

8. Funding Program Changes - 2013 8 Department of Environmental Quality Golden LEAF Rural Economic Development Center Clean Water Management Trust Fund Dept. of Environment and Natural Resources Dept. of Commerce Capacity/ Planning Grant Supplemental Grants Economic Infrastructure Grants Wastewater Infrastructure Grants Public Water Supply Drinking Water State Revolving Fund Loans General Revolving Loans Technical Assistance Grants Emergency Loans High Unit Cost Grants Infrastructure Finance Section Clean Water State Revolving Fund Loans General Revolving Loans Technical Assistance Grants Emergency Loans High Unit Cost Grants Division of Community Assistance CDBG Infrastructure Funds Commerce Finance Center CDBG Economic Development Funds Industrial Development Fund

9. Funding Program Changes - 2013 9 Department of Environmental Quality Golden LEAF Clean Water Management Trust Fund Dept. of Commerce Golden LEAF Rural Economic Development Center Clean Water Management Trust Fund Dept. of Environment and Natural Resources Dept. of Commerce Capacity/ Planning Grant Supplemental Grants Economic Infrastructure Grants Wastewater Infrastructure Grants Water and Wastewater Infrastructure Funding FEDERAL FUNDS State Revolving Fund (SRF) Loans Community Development Block Grant-Infrastructure (CDBG-I) Grants STATE FUNDS General Revolving Loans Emergency Loans Technical Assistance Grants High Unit Cost Grants Division of Water Infrastructure Division of Community Assistance CDBG Infrastructure Funds Commerce Finance Center CDBG Economic Development Funds Industrial Development Fund NEW Appropriation

10. State Water Infrastructure Authority 10 Department of Environmental Quality 9 member board Main areas Distribute loan and grant funds Define water infrastructure needs and funding Assess emerging practices in utility planning and funding Assess need for “troubled system” protocol Master plan Annual report Suggested statutory changes Demand for funding

11. Statutory Changes 11 Department of Environmental Quality New Grant Types Asset Inventory and Assessment Merger / Regionalization Affordability Replaces High-Unit Cost threshold (Rates 1.5% of MHI) Qualifications for grants Percent of grant versus loan

12. Asset Inventory and Assessment Grant 12 Department of Environmental Quality Assist utilities in beginning an asset management program to help them move from reactive to proactive work strategies Better develop capital, operating, and life cycle costs To enable utilities to apply to the Division funding programs with capital improvement projects that meet the most critical needs of the system

13. Merger / Regionalization Grant 13 Department of Environmental Quality Merger – consolidation of two or more systems into one system with common ownership, management and operation Regionalization – physical interconnection of water and/or wastewater system for regional treatment or regional water supply Must consider multiple options Allows informed local decision

14. Affordability 14 Department of Environmental Quality N.C.G.S. 159G-20.(1) The relative affordability of a project for a community compared to other communities in North Carolina based on factors that shall include, at a minimum, water and sewer service rates, median household income, poverty rates, employment rates, the population of the served community, and past expenditures by the community on water infrastructure compared to that community's capacity for financing of water infrastructure improvements.

15. Enterprise System 15 Department of Environmental Quality Revenues (charges for use) covers expenses Transfers from enterprise fund G.S. 159G-37(b) prohibits a local government from receiving assistance if transfers are made from enterprise fund It does not apply to legitimate reimbursements of the general fund See Coates’ Cannons Blog by Kara Millonzi

16. Affordability 16 Department of Environmental Quality Factors beyond control of Local Government Unit (LGU) Income levels Unemployment Factors specific to the utility (LGU can control) Debt Rates Operating Ratio

17. Water and Sewer Debt 17 Department of Environmental Quality Rates <=$50$50-$65$65-$80$80-$95$95-$110$110-$200 Residential Debt $0388112 $1-$2509114410 $250-$500296021 $500-$10001129830 $1000-$2000378632 $2000-$15000166243

18. Water and Sewer Debt 18 Department of Environmental Quality Rates <=$50$50-$65$65-$80$80-$95$95-$110$110-$200 Residential Debt $0388112 $1-$2509114410 $250-$500296021 $500-$10001129830 $1000-$2000378632 $2000-$15000166243

19. Water and Sewer Debt 19 Department of Environmental Quality Rates <=$50$50-$65$65-$80$80-$95$95-$110$110-$200 Residential Debt $0388112 $1-$2509114410 $250-$500296021 $500-$10001129830 $1000-$2000378632 $2000-$15000166243

20. Rates v. Operating Ratio 20 Department of Environmental Quality Rates Count of OR <1$0 - 50$50 - 65$65 - 80$80 - 95$95 - 110$110 - 200 Connections 0 - 500 366331 500 - 1000 013023 1000 - 3000 370710 3000 - 10000 154111 10000 - 50000 0000 N/A 50000 - 300000 000 N/A

21. Rates v. Operating Ratio 21 Department of Environmental Quality Rates Count of OR <1$0 - 50$50 - 65$65 - 80$80 - 95$95 - 110$110 - 200 Connections 0 - 500 366331 500 - 1000 013023 1000 - 3000 370710 3000 - 10000 154111 10000 - 50000 0000 N/A 50000 - 300000 000 N/A

22. Rates v. Operating Ratio 22 Department of Environmental Quality Rates Count of OR <1$0 - 50$50 - 65$65 - 80$80 - 95$95 - 110$110 - 200 Connections 0 - 500 366331 500 - 1000 013023 1000 - 3000 370710 3000 - 10000 154111 10000 - 50000 0000 N/A 50000 - 300000 000 N/A

23. Next Steps 23 Department of Environmental Quality Division developing recommendations to the Authority Affordability Asset Inventory and Assessment Merger / Regionalization Implementation with grant cycle Spring, 2016 Authority Master Plan – focus on viability Utility management issues

24. Connect North Carolina Bonds 24 Department of Environmental Quality $2 billion bonds $309.5 million for water and sewer $209.5 million loans $100 million grants Split evenly between Drinking Water and Wastewater Voter approval in March 2016

25. Contact Information 25 Department of Environmental Quality Division of Water Infrastructure Homepage: http://portal.ncdenr.org/web/wi/http://portal.ncdenr.org/web/wi/ Phone: 919-707-9160 Kim H. Colson, P.E. 919-707-9177 kim.colson@ncdenr.gov