HB2096 - 572R

Be it enacted by the Legislature of the State of Arizona:

Section 1. Section 11-671, Arizona Revised Statutes, is amended to read:

START_STATUTE11-671. Financing wastewater treatment facilities and nonpoint source projects; financial assistance loan repayment agreements; financial assistance; definition

A. Notwithstanding any other law, a county that is authorized to operate a sewage system pursuant to section 11-264 or that identifies and remediates a cesspool pursuant to subsection G of this section may construct or improve a wastewater treatment facility or nonpoint source project with monies borrowed from or financial assistance provided by the water infrastructure finance authority of Arizona.

B. To repay financial assistance from the water infrastructure finance authority of Arizona, a county may enter into a financial assistance loan repayment agreement with the authority. A financial assistance loan repayment agreement is payable from any revenues otherwise authorized by law to be used to pay long-term obligations. If revenue from a property tax assessment is the designated source of repayment under the agreement, the property tax assessed and levied is a secondary property tax levy for the purposes of article IX, Constitution of Arizona.

C. The county board of supervisors shall submit the question of entering and performing a financial assistance loan repayment agreement to the qualified electors voting at a regular or special general election in the county, except that if revenue from a secondary property tax levy is the designated source of repayment or if the project is constructed with an improvement district, the question shall be submitted to the qualified electors at an election held on the first Tuesday following the first Monday in November. Otherwise, an election is not required if voter approval has previously been obtained for substantially the same project with another funding source. If a majority of the qualified electors voting on the question:

1. Approves, the board of supervisors may execute, deliver and perform the financial assistance loan repayment agreement.

2. Disapproves, the board of supervisors shall not execute a financial assistance loan repayment agreement.

D. Payments made pursuant to a financial assistance loan repayment agreement are not subject to section 42-17106.

E. A financial assistance loan repayment agreement entered into pursuant to this section shall contain the covenants and conditions pertaining to the construction of a wastewater treatment facility or nonpoint source project and repayment of the loan as the water infrastructure finance authority of Arizona deems proper. Financial assistance loan repayment agreements may provide for the payment of interest on the unpaid principal balance of such agreement at the rates established in the agreement. The agreement may also provide for payment of the county's proportionate share of the expenses of administering the clean water revolving fund established by section 49-1221 and may provide that the county pay financing and loan administration fees approved by the water infrastructure finance authority of arizona. These costs may be included in the levy or assessment amounts pledged to repay the financial assistance. Counties are bound by and shall fully perform the financial assistance loan repayment agreements, and the agreements are incontestable after the loan is funded by the water infrastructure finance authority of Arizona. The county shall also agree to pay the authority's costs in issuing bonds or otherwise borrowing to fund a loan.

F. A financial assistance loan repayment agreement under this section does not create a debt of the county, and the authority shall not require that payment of a financial assistance loan agreement be made from other than those sources permitted allowed in subsection B of this section.

G. A county may apply for and receive financial assistance, including forgivable principal, from the water infrastructure finance authority of Arizona for the remediation, closure or replacement of cesspools that present a demonstrated risk to surface water, groundwater or public health. The water infrastructure finance authority of arizona may award financial assistance, including forgivable principal, using monies from the clean water revolving fund established by section 49-1221 or the drinking water revolving fund established by section 49-1241. financial assistance, including forgivable principal, received pursuant to this subsection may be used only for projects that eliminate existing cesspools and replace the existing cesspool with an on-site wastewater system that is approved by the department of environmental quality or that has a connection to a wastewater treatment facility. A county that receives financial assistance, including forgivable principal, pursuant to this subsection shall prioritize the remediation, closure or replacement of cesspools that are located within areas of known groundwater vulnerability, that are near surface waters or that are in communities with low-to-moderate income households. A county may establish income-based eligibility criteria for owner-occupied properties but may not apply means testing to the remediation of abandoned or uninhabitable properties. A county shall coordinate with the department of environmental quality to ensure that each project that has received financial assistance, including forgivable principal, pursuant to this subsection is consistent with the county's water quality management plan. A county that receives financial assistance, including forgivable principal, pursuant to this subsection is not required to obtain voter approval to accept the financial assistance, including forgivable principal.

G. H. A county may employ attorneys, accountants, financial consultants and such other experts in their field as deemed necessary to perform services with respect to the financial assistance loan repayment agreement.

H. I. This section is supplemental and alternative to any other law under which a county may borrow money monies or issue bonds. This section shall is not be construed as the exclusive authorization to enter into loan agreements with the authority.

I. j. A county may borrow additional monies or enter into additional financial assistance loan repayment agreements with the water infrastructure finance authority of arizona in an amount up to the amount approved by the voters pursuant to subsection C of this section less the amount that the county is already obligated to repay to the water infrastructure finance authority of arizona pursuant to a financial assistance loan repayment agreement.

J. k. For the purposes of this section, "nonpoint source project" has the same meaning as prescribed in section 49-1201. END_STATUTE

Sec. 2. Section 49-1203, Arizona Revised Statutes, is amended to read:

START_STATUTE49-1203. Powers and duties of authority; definition

A. The authority is a corporate and politic body and shall have an official seal that shall be judicially noticed. The authority may sue and be sued, contract and acquire, hold, operate and dispose of property. Notwithstanding any other law and unless expressly waived by the authority, the authority is not subject to any statutory requirement to pay another party's attorney fees or costs in any administrative or judicial proceeding. The authority is not a public service corporation subject to regulation by the corporation commission.

B. The authority, through its board, may:

1. Issue negotiable water quality bonds pursuant to section 49-1261 for the following purposes:

(a) To generate the state match required by the clean water act for the clean water revolving fund and to generate the match required by the safe drinking water act for the drinking water revolving fund.

(b) To provide financial assistance to political subdivisions, Indian tribes and eligible drinking water facilities for constructing, acquiring or improving wastewater treatment facilities, drinking water facilities, nonpoint source projects and other related water quality facilities and projects.

2. Issue water supply development bonds for the purpose of providing financial assistance to eligible entities for water supply development purposes pursuant to sections 49-1274 and 49-1275.

3. Provide financial assistance to political subdivisions and Indian tribes from monies in the clean water revolving fund to finance wastewater treatment projects.

4. Provide financial assistance to drinking water facilities from monies in the drinking water revolving fund to finance these facilities.

5. Provide financial assistance from monies in the water supply development revolving fund to finance water supply development as prescribed by this article.

6. Guarantee debt obligations of, and provide linked deposit guarantees through third-party lenders to:

(a) Political subdivisions that are issued to finance wastewater treatment projects.

(b) Drinking water facilities that are issued to finance these facilities.

7. Provide linked deposit guarantees through third-party lenders to political subdivisions and drinking water facilities.

8. Apply for, accept and administer grants and other financial assistance from the United States government and from other public and private sources.

9. Enter into capitalization grant agreements with the United States environmental protection agency.

10. Adopt rules pursuant to title 41, chapter 6 governing the application for and awarding of wastewater treatment facility, drinking water facility and nonpoint source project financial assistance under this chapter, administering the clean water revolving fund and the drinking water revolving fund and issuing water quality bonds.

11. Hire a director who serves at the pleasure of the board and who shall hire staff for the authority. The board may prescribe the terms and conditions of the director's and staff's employment as necessary to carry out the purposes of the authority. The board shall adopt written policies, procedures and guidelines, similar to those adopted by the department of administration, regarding officer and employee compensation, observed holidays, leave and reimbursement of travel expenses. The officers and employees of the authority may participate in the arizona state retirement system prescribed established by title 38, chapter 5, article 2, and the board, consistent with section 38-656, subsection A, may provide that the authority's officers and employees participate in the state employee health, disability and accident insurance prescribed by title 38, chapter 4, article 4. The officers and employees of the authority are exempt from any laws regulating state employment, including the following:

(a) Title 41, chapter 4, article 4, relating to the state personnel system.

(b) Title 41, chapter 4, articles 5 and 6, relating to state service.

12. Contract for or employ the services of outside advisors, attorneys, engineers, financial and other consultants and aides reasonably necessary or desirable to allow the authority to adequately perform its duties.

13. Contract and incur obligations as reasonably necessary or desirable within the general scope of authority activities and operations to allow the authority to adequately perform its duties.

14. Assess financial assistance origination fees and annual fees to cover the reasonable costs of administering the authority and the monies administered by the authority. Any fees collected pursuant to this paragraph constitute governmental revenue and may be used for any purpose consistent with the mission and objectives of the authority.

15. Perform any function of a fund manager under the CERCLA Brownfields cleanup revolving loan fund program as requested by the department. The board shall perform any action authorized under this article on behalf of the Brownfields cleanup revolving loan fund program established pursuant to chapter 2, article 1.1 of this title at the request of the department. In order to perform these functions, the board shall enter into a written agreement with the department.

16. Provide grants, staff assistance or technical assistance in the form of loan repayment agreements and other professional assistance to political subdivisions, any county with a population of less than five hundred thousand persons, Indian tribes and community water systems in connection with developing or financing wastewater, drinking water, water reclamation or related water infrastructure. Assistance provided under a technical assistance loan repayment agreement shall be in a form and under terms determined by the authority and shall be repaid not more than three years after the date that the monies are advanced to the applicant. Technical assistance provided by the authority does not create any liability for the authority or this state regarding designing, constructing or operating any infrastructure project.

17. Provide grants, staff assistance or technical assistance in the form of loan repayment agreements and other professional assistance in accordance with section 49-1273. Assistance provided under a technical assistance loan repayment agreement shall be repaid not more than three years after the date that the monies are advanced to the applicant. Technical assistance provided by the authority does not create any liability for the authority or this state regarding designing, constructing or operating any water supply development project.

18. Award financial assistance, including forgivable principal, for the remediation, closure or replacement of cesspools pursuant to section 11-671, subsection G.

C. The authority may adopt rules pursuant to title 41, chapter 6 governing the application for and awarding of assistance under this chapter and the administration of the funds established by this chapter.

D. The board shall deposit, pursuant to sections 35-146 and 35-147, any monies received pursuant to subsection B, paragraph 8 of this section in the appropriate fund as prescribed by the grant or other financial assistance agreement.

E. The authority is not subject to title 41, chapter 23. In coordination with the department of administration, the authority shall establish procurement procedures by rule to administer the long-term water augmentation fund.

F. For the purposes of the safe drinking water act and the clean water act, the department is the state agency with primary responsibility for administering this state's public water system supervision program and water pollution control program and, in consultation with other appropriate state agencies as appropriate, is the lead agency in establishing assistance priorities as prescribed by section 49-1224, subsection B, paragraph 3, section 49-1243, subsection A, paragraph 6 and section 49-1244, subsection B, paragraph 3.

G. For the purposes of this section, "CERCLA" has the same meaning prescribed in section 49-201. END_STATUTE

Sec. 3. Section 49-1204, Arizona Revised Statutes, is amended to read:

START_STATUTE49-1204. Annual audit and report

A. The board shall cause an audit to be made of the funds administered by the authority. The audit shall be conducted by a certified public accountant within one hundred twenty days after the end of the fiscal year. The board shall immediately file a certified copy of the audit with the auditor general.

B. The auditor general may make any further audits and examinations as deemed necessary and may take appropriate action relating to the audit or examination pursuant to title 41, chapter 7, article 10.1. If the auditor general takes no official action within twenty days after the audit is filed, the audit is deemed sufficient.

C. The board shall pay any fees and costs of the certified public accountant and auditor general under this section from the funds administered by the board.

D. Not later than January 1 of each year the board shall make an annual report of its activities, including a copy of the annual audit, to the governor, the president of the senate and the speaker of the house of representatives.

E. In addition to the reporting requirements of subsection D of this section, not later than january 1 of each year, the board shall make an annual report that summarizes financial assistance, including forgivable principal, awarded by the board pursuant to section 11-671, subsection G. The report shall include all of the following:

1. The number and location of cesspools that have been remediated or replaced using financial assistance, including forgivable principal.

2. The total amount of financial assistance, including forgivable principal, that was awarded and forgiven.

3. Recommendations for improving the ADMINISTRATION of financial assistance, including forgivable principal, that is awarded for the remediation, closure or replacement of cesspools pursuant to section 11-671, subsection G. END_STATUTE

Sec. 4. Section 49-1223, Arizona Revised Statutes, is amended to read:

START_STATUTE49-1223. Clean water revolving fund; purposes; capitalization grants

A. Monies in the clean water revolving fund may be used for the following purposes:

1. Making wastewater treatment facility and nonpoint source project loans to political subdivisions and Indian tribes under section 49-1225.

2. Purchasing or refinancing debt obligations of political subdivisions or refinancing debt obligations of Indian tribes at or below market rates, provided that the debt obligation was issued after March 7, 1985 for the purpose of constructing, acquiring or improving wastewater treatment facilities or nonpoint source projects.

3. Providing financial assistance to political subdivisions to purchase insurance for local wastewater treatment facility or nonpoint source project bond obligations.

4. Paying the costs to administer the fund, but no more than four per cent of the aggregate of federal capitalization grants may be used to pay these costs. Monies from other sources may be used without limit to pay these costs.

5. Funding other programs that are authorized for federal monies deposited in the fund including programs relating to nonpoint source discharges.

6. Providing linked deposit guarantees through third party lenders by depositing monies with the lender on the condition that the lender make a loan on terms approved by the board, at a rate of return on the deposit approved by the board and the state treasurer and by giving the lender recourse against the deposit of loan repayments that are not made when due.

7. Funding of financial assistance, including forgivable principal, that is awarded pursuant to section 11-671, subsection G.

B. If the monies pledged to secure water quality bonds become insufficient to pay the principal and interest on the water quality bonds that are guaranteed by the clean water revolving fund, the board shall direct the state treasurer to liquidate securities in the fund as may be necessary and apply those proceeds to make current all payments then due on the bonds. The state treasurer shall immediately notify the attorney general and auditor general of the insufficiency. The auditor general shall audit the circumstances surrounding the depletion of the fund and report the findings to the attorney general. The attorney general shall conduct an investigation and report those findings to the governor and the legislature.

C. All proceeds of capitalization grants received from the United States pursuant to the clean water act shall be deposited in the capitalization grant transfer account and shall be used solely to provide financial assistance to political subdivisions and Indian tribes to construct, acquire, restore or rebuild wastewater treatment facilities, to purchase bond insurance or for any other purpose permitted by the clean water act including nonpoint source projects. All principal received on loan repayments made by borrowers pursuant to this section shall be deposited in the clean water revolving fund and shall be invested and used to provide additional financial assistance or shall be used to support the administration of the fund subject to the limits prescribed by the clean water act. END_STATUTE

Sec. 5. Section 49-1243, Arizona Revised Statutes, is amended to read:

START_STATUTE49-1243. Drinking water revolving fund; purposes; capitalization grants

A. Monies in the drinking water revolving fund may be used for the following purposes:

1. Making drinking water facility loans, including forgivable principal, to political subdivisions of this state, Indian tribes under section 49-1245 and other eligible entities as determined by the board pursuant to the safe drinking water act.

2. Making drinking water facility loans under section 49-1244.

3. Purchasing or refinancing debt obligations of drinking water facilities at or below market rate if the debt obligation was issued after July 1, 1993 for the purpose of constructing, acquiring or improving drinking water facilities.

4. Providing financial assistance to drinking water facilities to purchase insurance for local drinking water facility bond obligations.

5. Paying the costs to administer the fund but not more than four per cent of the aggregate of federal capitalization grants may be used to pay these costs. Monies from other sources may be used without limit to pay these costs.

6. Funding other programs that are authorized pursuant to the safe drinking water act.

7. Providing linked deposit guarantees through third party lenders by depositing monies with the lender on the condition that the lender make a loan on terms approved by the board, at a rate of return on the deposit approved by the board and the state treasurer and by giving the lender recourse against the deposit of loan repayments that are not made when due.

8. Funding of financial assistance, including forgivable principal, that is awarded pursuant to section 11-671, subsection G.

B. If the monies pledged to secure water quality bonds become insufficient to pay the principal and interest on the water quality bonds guaranteed by the drinking water revolving fund, the board shall direct the state treasurer to liquidate securities in the fund as may be necessary and shall apply those proceeds to make current all payments then due on the bonds. The state treasurer shall immediately notify the attorney general and auditor general of the insufficiency. The auditor general shall audit the circumstances surrounding the depletion of the fund and report the findings to the attorney general. The attorney general shall conduct an investigation and report those findings to the governor and the legislature.

C. All proceeds of capitalization grants received from the United States pursuant to the safe drinking water act shall be deposited in the capitalization grant transfer account and shall be used solely to make loans to drinking water facilities to construct, acquire, restore or rebuild these facilities, to purchase bond insurance or for any other purpose permitted by the safe drinking water act. All principal received on loan repayments made by borrowers under this section shall be deposited in the drinking water revolving fund and shall be invested, used to provide financial assistance or used to support the administration of the fund subject to the limits defined in the safe drinking water act. END_STATUTE

Sec. 6. Legislative findings and intent

A. The legislature finds and declares that:

1. Cesspools have been prohibited for installation in Arizona since 1976.

2. Thousands of legacy cesspools remain in operation in certain counties and pose a direct and continuing threat to the public health and safety and groundwater quality.

3. Remediation of cesspools represents a pressing public health need that is distinct from voluntary septic upgrades or private convenience improvements.

4. Current Arizona law limits county eligibility for financial assistance to those counties that operate sewer systems.

B. It is therefore the intent of the legislature to do both of the following:

1. Authorize all counties to access financial assistance, including forgivable principal, that is administered by the water infrastructure finance authority of Arizona for the sole purpose of remediating or replacing cesspools that pose a verified public health or environmental risk.

2. Ensure that this act shall have no financial impact on the state general fund. Financial assistance, including forgivable principal, shall be issued solely from the federally capitalized monies from the clean water revolving fund established by section 49-1221, Arizona Revised Statutes, and the drinking water revolving fund established by section 49-1241, Arizona Revised Statutes, that are administered by the water infrastructure finance authority of Arizona.