Kansas Public Water Supply Loan Fund
The KPWSLF Interest Rate for May is 2.35%
The following KPWSLF documents are currently available in electronic format. Editable documents are in Microsoft Word Format (.doc) and those that only require blanks to be filled are in Adobe Portable Document Format (pdf). Click on the group headings for an explanation of what the documents are and how they are used in the Fund.
The KPWSLF is a state revolving loan fund (SRF) program which provides financial assistance in the form of loans to Kansas municipalities, at below market interest rates, for construction of public water supply system infrastructure. Kansas Statues 65-163d through 163u establishing the Loan Fund were passed by the legislature and Kansas Administrative Regulations 28-15-50 through 28-15-65 were promulgated by KDHE.
The National Drinking Water State Revolving Fund (DWSRF) program, which was established by the Safe Drinking Water Act (SDWA) Amendments of 1996, authorizes the U.S. Environmental Protection Agency (EPA) to award capitalization grants to the States. The EPA capitalization grant for the KPWSLF is not loaned directly to municipalities. Instead, the grant is deposited into a reserve account, and pledged as security for repayment of state issued revenue bonds. Proceeds from the revenue bonds are loaned to the municipalities. The reserve account is invested, and the interest earnings are combined with the loan repayments from municipalities to buy down the loan's interest rate. Municipalities are charged interest rates equal to 80% of the previous three months average of the Bond Buyer 20 General Obligation Index. Rates have averaged 4.08 % for the first 8 years of the program. The Loan Fund currently leverages at a ratio of four to one, that is four dollars can be borrowed for every dollar placed into the reserve fund.
Loan funds can be received by two distinct types of municipalities, cities and rural water districts (RWD). Rural water districts lack the general taxing powers of cities, and are perceived in credit markets as a greater financial risk. The Kansas Public Water Supply Loan Fund provides equal access and interest rates to both types of borrowers, but requires different pledges of security to receive a loan, which is discussed in the loan agreement section of this page.
KPWSLF Application Phase
In order for a municipality to be eligible for consideration of a loan, it must adopt and implement a Water Conservation Plan consistent with guidelines developed by the Kansas Water Office. For more information on obtaining and implementing a water conservation plan, contact the Kansas Water Office at 785-296-3185.
After a water conservation plan is approved and implemented, the Municipality must then submit to KDHE a project submittal form. The project is then ranked by KDHE and put on a project priority list, which is part of an Intended Use Plan developed by KDHE. Higher ranking will be given to projects that address the most serious health risks, that are necessary to assure compliance with requirements of the national primary drinking water regulations, and that assist public water supplies most in need. Projects that are needed solely for future growth or fire protection, can not be considered for funding.
The highest ranked projects will have first availability to funds. If higher ranked projects are not ready to start the funding and construction process, that money is made available to lower ranking projects. Municipalities that submit projects will be notified by KDHE when funding is available, and given a loan application form. An application is considered complete when all of the following materials are submitted to KDHE:
- Completed Loan Application
- Resolution Authorizing the Application, for Cityfor Resolution Designating Authorized Representative of Applicant or RWDfor Resolution Designating Authorized Representative of Applicant
- Record of Minutes of Public Meeting, for Cityfor Record of Minutes of Public Meeting or RWD
- Notice of Public Meeting, for Cityfor Notice of Public Meeting or RWDfor Notice of Public Meeting
- 2 Copies of the Municipality's last 3 years of Financial Statements
- Environmental Review Comments
- Map Showing Project Location
- Documented Water Rate (Current, Previous, and Proposed)
- Engineering Study for Project
- Completed EPA Form 4700-4
KPWSLF Loan Agreement
Once the municipality has a complete application, KDHE performs an environmental assessment and a financial capacity analysis.
The environmental assessment is based on the environmental review comments received from various agencies and will address any special circumstances that are found. The environmental assessment is put on public review for 30 days. Any environmental concerns that are made must be addressed before a loan agreement is drafted.
KDHE contracts with the Kansas Rural Water Finance Authority (KRWFA) to perform the financial capacity analysis. This report analyzes the financial capabilities of the municipality to repay the loan.
If the environmental assessment and financial capacity analysis are approved, KDHE will then draw up a loan agreement. The standard loan agreement is for a 20 year repayment schedule that begins either one year after project completion or two years after the first disbursement, whichever comes first. There is a Loan Origination Fee equal to .25% of the loan amount, which is typically borrowed (capitalized into the loan) from the KPWSLF.
Municipalities with taxing authority (City) are required to either pledge that authority as a safeguard against loss of water system revenues, or pledge system revenues only and purchase a bond insurance policy. Municipalities with no taxing authority (RWD) are required to purchase an insurance policy, maintain a debt service coverage ratio of 125% with a 10% reserve account, or maintain a 140% debt service coverage ratio. The municipality typically borrows (capitalized into the loan) the 10% reserve account from the KPWSLF.
Before loan disbursements can be made the following must be submitted to KDHE:
- A signed loan agreement (City) or (RWD);
- A resolution (RWD) or an ordinance (City) must be passed authorizing the execution of a loan agreement, and minutes of the meeting in which it was passed must also be submitted;
- A form of opinion of municipality's counsel for a RWD or City.
All Rural Water Districts and some Cities are required to enter into a Financial Integrity Assurance Contract (FIAC) with the Kansas Rural Water Finance Authority as a condition of receiving a loan. The FIAC has a one time fee of 1% of the loan and is typically borrowed (capitalized as part of the loan) from the KPWSLF. The municipality must submit an annual budget and quarterly financial and management reports to KRWFA under this contract. The intent of the FIAC is to make professional financial and management assistance available to the recipient, to assure debt obligations are satisfied and to identify problems in daily operations so they can be corrected before they lead to financial problems.
KPWSLF Project Construction Phase
Construction of KPWSLF projects, sometimes referred to as SRF projects (State Revolving Fund) require certain procedures and documents that normal construction projects do not need. The KPWSLF allows for two types of construction procurement, Design/Build and Design/Bid/Build. For a Design/Build project, the Design/Build Procurement Guidelines must be followed. KDHE should be notified prior to loan execution if a Design/Build process is to be utilized. KDHE review of the Request for Qualifications and/or Request for Proposals prior to issuance is required. Contract Documents must contain the Design/Build Contract Assurances and the Preaward Design/Build Checklist must be completed and documents submitted to KDHE for authorization of award. For a Design/Bid/Build procurement process, the design plans and specifications must be approved by KDHE, prior to advertisement for bids. The specifications must contain certain Construction Contract Assurances that comply with Federal Cross Cutters. KDHE review and approval of bids is required prior to award (bid checklist and supporting forms). Pre-construction meetings must be coordinated with the KDHE inspector and a certification form must be submitted when the project is complete.
The consultant engineering agreement must be approved by KDHE before any engineering costs can be reimbursed by the loan fund. For Design Services, KDHE only requires a description of those services and a defined compensation amount. For construction phase engineering services requirements please refer to the SRF Engineering Requirements Explained document.
Loan disbursements are made as construction costs are incurred and require the municipality to fill out an Outlay Report and Request for Disbursement. Loan amendments must be requested in writing (describing the need) if the municipality needs to increase the loan amount for increasing construction costs.
If you have questions about the Kansas Public Water Supply Loan Fund or need documents in a different format, please contact William Carr at (785)296-0735 or email email@example.com.