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ARIZONA STATE SENATE

Forty-eighth Legislature, First Regular Session

FACT SHEET FOR H.B. 2692

water supply development; fund

Purpose

            Establishes the Water Supply Development Fund Committee and the Water Supply Development Fund for financing water supply development projects.

Background

            The Water Infrastructure Finance Authority of Arizona (WIFA) was created in 1997 to provide a source of financing for drinking water, wastewater and other water quality facility projects. WIFA acquires federal financial assistance pursuant to the Safe Drinking Water Act (SDWA), with a 20 percent state match to provide low interest loans for communities throughout Arizona. WIFA is authorized to issue Water Quality Bonds on behalf of communities for basic water infrastructure.  WIFA is overseen by a 12-member Board of Directors with some of the members designated by statute and others appointed by the Governor to represent various constituencies throughout the state.  Additionally, WIFA is authorized to provide grants, staff assistance and technical assistance to counties with a population less than 500,000, Indian tribes and community water systems for the development or financing of wastewater, drinking water, water reclamation or related water infrastructure.

            The Statewide Water Advisory Group (SWAG) was created in 2006 to advise the Arizona Department of Water Resources (ADWR) regarding programs for water resources development and management.  It is made up of 54-members from all over the state in a variety of occupations, including county supervisors, city and state legislators, business owners and water providers.

            There is no anticipated impact to the General Fund as a result of this legislation.

Provisions

Water Supply Development Fund Committee

1. Establishes a 13 member Water Supply Development Fund Committee (Committee).  The Committee members are not eligible to receive compensation, but may be reimbursed for travel and other expenses.

2. States that Committee members appointed by the Governor serve staggered five-year terms as outlined and clarifies that the members are public officers and the Committee are public bodies and may not have a direct or indirect financial interest in any water supply development project financed by WIFA.

3. Authorizes the Committee to adopt rules governing the application for and awarding of Water Supply Development Revolving Fund (Fund) monies and the administration of monies in the Fund.

4. Requires the Committee to determine the order and priority of applications based on certain criteria including financial and legal abilities and to review applications on merits and notify an applicant within ninety days.

5. Allows the Committee to appoint a technical subcommittee to advise on the technical feasibility of water supply projects or request technical assistance from ADWR.

WIFA Board

6. Authorizes the WIFA Board, for water providers for water supply development purposes, to do the following:

a) issue water supply development bonds.

b) provide financial assistance from monies in the Fund.

c) guarantee debt obligations of, and provide linked deposit guarantees through third party lenders.

7. Provides authority for the WIFA Board to provide grants, staff assistance or technical assistance in the form of loan repayment agreements and other professional assistance to water providers in connection with planning and designing of water supply development projects as determined by the Committee.

8. Limits a single grant from WIFA to $100,000 and requires that a grant be repaid within three years of the date that the money is advanced.

Water Supply Development Revolving Fund

9. Establishes the Fund to be maintained in perpetuity and consisting of:

a) monies received from the issuance of water supply development bonds.

b) monies appropriated from the Legislature.

c) monies for water supply development from the United States Government.

d) monies from water providers as loan repayments, interest and penalties.

e) interest and other income from investing the monies in the Fund.

f) gifts, grants and donations from public or private sources.

10. Stipulates the monies in the Fund are continuously appropriated and exempt from lapsing.

11. Requires the WIFA Board to administer the Fund and notify the State Treasurer to invest and divest monies in the Fund.  Monies from interest must be credited to the Fund.

12. Outlines how monies in the Fund may be used for purposes related to water supply development projects as follows:

a. making water supply development loans to water providers.

b. making loans or grants to water providers for planning or design of water supply development projects and limits grants to $100,000.

c. purchasing or refinancing debt obligations of water providers at or below market rate if the debt was issued for water supply development.

d. providing financial assistance to water providers with bonding authority to purchase insurance for local bond obligations.

e. paying the costs to administer the Fund.

f. providing linked deposit guarantees through third party lenders.

13. Authorizes the WIFA Board to instruct the State Treasurer to liquidate securities in the Fund if monies in the Fund become insufficient to pay the principal and interest on water supply development bonds and outlines the process the State Treasurer, Attorney General and Auditor General must follow in the event of insufficient funds in the Fund.

14. Stipulates that monies in the Fund may only be used to provide financial assistance for projects for a water provider, other than an Indian tribe, if the city, town or county where the water provider is located has adopted an ordinance requiring an assured water supply for all new subdivisions or the water provider is located inside an AMA.

Water Supply Development Revolving Fund Financial Assistance

15. Authorizes a water provider to apply to WIFA for and accept a loan or other financial assistance from the Fund for water supply and outlines the requirements for prescribing the rate of interest and interest payment details and authorizes loans to be conditioned on establishment of a dedicated revenue sources.

16. Stipulates that water supply development bonds may be issued to provide financial assistance to increase the capitalization of the Water Supply Development Revolving Fund and requires that a loan be repaid within 30 years.

17. Bases approval of loans on the condition that the water provider gives a written commitment to complete applicable reviews and approvals and secure required permits.

18. Allows an irrevocable pledge of state shared revenues to be used to secure a loan and outlines requirements if a water provider defaults, including withholding state shared revenues. Any pledge made is valid and binding from the time the pledge is made.  

19. Stipulates that water supply development bonds are obligations of WIFA and are not obligations of the state and are exempt from taxation. The Attorney General may take actions necessary to enforce loan contracts and achieve repayment.

20. Pledges that the state will not limit or alter rights vested in WIFA or any successor agency to collect monies necessary to fulfill terms of any agreements made with holders of bonds until all costs and expenses in connection are fully met and discharged.

21. Specifies that any member of the WIFA Board, Committee or any person executing the bonds is not personally liable for the payment of the bonds.

Additional Provisions

22. Provides a conditional enactment clause stating that enactment of this authority is contingent on the passage a bill relating to water adequacy provisions.

23. States legislative intent for establishing the Fund as providing financial assistance to water providers, particularly in rural areas, for construction of water supply projects.

24. Changes the heading title for A.R.S. title 49, chapter 8, article 2, to Clean Water Revolving fund, Drinking water revolving fund and Hardship grant Fund Financial Provisions and establishes article 3 Water Supply Development Revolving Fund Financial Provisions.

25. Defines Committee, water supply development and water provider and modifies the definition of technical assistance loan repayment agreement for the purposes of WIFA statutes.

26. Makes technical and conforming changes.

27. Becomes effective on the general effective date, subject to the provisions of the conditional enactment.

House Action

WA                 2/08/07    DPA    10-0-0

3^rd Read           3/22/07                 57-0-3

Prepared by Senate Research

March 26, 2007

MG/ac