New Mexico Register / Volume XXXI, Issue 5 / March 10, 2020
This is an amendment to 20.7.6 NMAC, Sections 7, 8, 11,
12, 13, 15, 20 and 21, effective 3/10/2020.
20.7.6.7 DEFINITIONS: As used in this part.
A. "Administrative fee" means a
fee assessed and collected by the department from the [local authority] state
agency or qualified borrower on each loan with an interest greater than
zero percent and expressed as a percentage per year on the outstanding
principal amount of the loan, payable by the borrower on the same date that
principal and interest on the loan are due, for deposit in the clean water
administrative fund.
B. "Applicant" means a [local
authority] state agency or qualified borrower that meets the
following criteria: (1) placement on the
current fiscal year priority list, (2) financial capability to service a loan,
to perform operation and maintenance, to maintain a replacement fund and debt
service reserve fund, and (3) readiness to proceed.
C. "Borrower" means a [local
authority] state agency or qualified borrower whose application has
been approved for eligibility and is ready to proceed to an interim loan agreement.
D. "Commission" or "WQCC" means the New Mexico water quality control commission.
E. "Department" or "NMED" means the New Mexico environment department.
F. "Event of default" means the borrower failed to make the complete annual payment of principal, plus interest and administrative fee when the same shall become due and payable, as identified in the repayment schedule of the final loan agreement.
G. "Final loan agreement" means
a note issued by the borrower and the state upon completion of the project to [evidence]
document the permanent financing of the final loan amount in
substantially the form as shown in the attachments.
H. "Final loan amount" means the aggregate amount of the principal disbursed by NMED to the borrower during the project, together with accrued interest on the aggregate principal thereof.
I. "Force account" means [that
the local authority provides the materials, equipment, or labor necessary to
design or construct the project.] construction performed by the
employees of a local authority rather than through a contractor.
J. "Fund" or "SRF" means the state water pollution control revolving fund pursuant to Title VI of the Clean Water Act.
K. "Interim loan agreement" means a note, in the form of a line-of-credit, issued by the borrower and the state at the beginning of the project in anticipation of the issuance of the final loan agreement upon completion of the project in substantially the form as shown in the attachments.
L. "Loan issuance" means execution of the final loan agreement and revised promissory note.
M. "Local authority" means any municipality, intermunicipal agency, county, incorporated county, water and sanitation district or any similar district, recognized Indian tribe, mutual domestic water consumers association as defined by the Sanitary Projects Act, or other issuing agency created pursuant to a joint powers agreement acting on behalf of any entity listed in this subsection.
N. "Operate and maintain" means all necessary activities including replacement of equipment or appurtenances to ensure the dependable and economical function of a wastewater facility in accordance with its intended purpose.
O. "Priority system" means the
system for ranking [wastewater facility construction projects] eligible
projects for which loan applications have been received pursuant to the Wastewater
Facility Construction Loan Act.
P. "Priority list" means the
list of [wastewater facility construction projects] eligible projects
ranked according to the priority system pursuant to the Wastewater Facility
Construction Loan Act.
Q. "Project" means the planning, design, construction, repair, extension, improvement, alteration, or reconstruction of the wastewater facilities or other eligible projects as listed in the Clean Water Act by the borrower as described in the loan application.
R. "Project completion" means
the date that [operations of the completed works are initiated or capable of
being initiated, whichever is earlier.
This also applies to individual phases or segments.] the Department has procedurally determined that
the project, phase, or segment is completed.
S. "Project engineer" means the NMED staff engineer assigned to the project.
T. “Qualified Borrower” means any credit
worthy borrower with an identified and verifiable repayment source that is
eligible for funding pursuant to the Clean Water Act.
U. “State
agency” means an agency or department of the executive branch of
government.
[T.] V. "Wastewater facility" means a
publicly owned system for treating or disposing of sewage or wastes either by
surface or underground methods, including any equipment, plant, treatment
works, structure, machinery, apparatus or land in any combination, that is
acquired, used, constructed or operated for the storage, collection, reduction,
recycling, reclamation, disposal, separation or treatment of water or wastes,
or for the final disposal of residues resulting from the treatment of water or
wastes, such as pumping stations, facilities, plants and works, outfall sewers,
interceptor sewers and collector sewers and other real or personal property and
appurtenances incidental to their use or operation. "Wastewater facility" also includes
a nonpoint source water pollution control or Brownfield redevelopment project
as eligible under the Clean Water Act.
[20.7.6.7 NMAC - Rp, 20.7.6.7 NMAC, 12/30/2015; A, 3/10/2020]
20.7.6.8 BACKGROUND: [The Environment Department Act, Section 9-7A-6.F
NMSA 1978,] The Department of Environment Act, Section 9-7A-6.D, NMSA
1978, provides authority to the secretary of environment to make and adopt
reasonable and procedural rules and regulations as may be necessary to carry
out the duties of the department and its division. The authority for the New Mexico environment
department to provide loans to eligible applicants for the construction of
wastewater facilities is provided in Sections 74-6A-1 to 15 NMSA 1978, Wastewater
Facility Construction Loan Act and in Sections 74-6-1 to 17 NMSA 1978, the New
Mexico Water Quality Act. The water
quality control commission adopted regulations pursuant to the Wastewater
Facility Construction Loan Act which [address:
6-102 Definitions;
6-103 Eligibility;
6-104 Eligible and Non-eligible
Construction Items;
6-105 Priority System and
Priority List; and
6-107
Application Procedures.] establish
a program to provide financial assistance to state agencies, local authorities,
interstate agencies, and other qualified borrowers for the acquisition,
construction, or modification of wastewater facilities or other eligible
projects or activities. Title VI of
the Federal Clean Water Act, as amended, authorizes the U.S. environmental
protection agency (EPA) to make capitalization grants to states for deposit in
the wastewater facility construction loan fund (state revolving fund -
SRF). "Final Initial Guidance -
State Water Pollution Control Revolving Fund" was published by EPA on
January 28, 1988, which represents EPA's approach to implementation of Title
VI. EPA updated its approach to
implementation of Title VI with the “Interpretive Guidance for Certain
Amendments in the Water Resources Reform and Development Act to Titles I, II,
V, and VI of the Federal Water Pollution Control Act” published on January 6,
2015.
[20.7.6.8 NMAC - Rp, 20.7.6.8 NMAC, 12/30/2015; A, 3/10/2020]
20.7.6.11 GENERAL:
A. Direct loans from the fund may be offered for up to one hundred percent of total eligible project costs under state and federal statutes and regulations, subject to availability of loan monies.
B. Two types of loans are available: planning/design loans and construction loans.
(1) Planning/design
loans. The maximum repayment period is
limited to five years from the date of the interim loan agreement. If the borrower receives a construction loan
for the same project, the borrower will be provided the option of [reamortizing] re-amortizing any remaining
principal balance plus accrued interest and administrative fees on the
planning/design loan upon completion of the construction project, or may make
payments under both loans.
(2) Construction loans. The length of the loan repayment period will not exceed 30 years or the expected life of the project improvements, whichever is less. Loans of lesser amounts will receive a shorter repayment period depending upon the borrower's ability to service the debt in a reduced time period. The construction loan may include the cost of design and may precede the design phase of the project if the design period is relatively short and if a reasonable estimate of construction costs is available. Since the interim loan agreement is essentially a line-of-credit for planning, design, and construction of the project the borrower must agree to complete the appropriate planning requirements prior to proceeding to the design and construction phases of the project.
C. A long-term commitment for future funding of a phased or segmented project will not be made; although, partial or phased funding for a project (without a guarantee of future funding) may be offered when deemed necessary to meet state water quality and financial assistance objectives.
D. Monies in the fund shall be loaned to eligible applicants as soon as possible after the monies become available. The fund will be managed so that a reserve is held available. The amount of the reserve will be dependent on the total size of the fund, including both available and committed monies. This reserve may be used for administration of the fund, investment, and limited-purpose contingencies, including increases subject to federal and state statutes.
E. In
the event project costs exceed the estimates in the interim loan agreement, the
borrower may request that NMED consider an increase to the loan. Such request will be evaluated [in] with
respect to available uncommitted monies in the fund, financial risk of the
request, and other criteria set by NMED.
NMED may follow any procedure deemed appropriate under the
circumstances, including renegotiation of the loan agreement in accordance with
federal and state statutes.
F. In the event project costs are less than the estimates in the interim loan agreement, then the loan amount shall be adjusted downward by a corresponding amount at the time the final loan agreement is executed following completion of the project.
G. A
loan shall be declared in default if the full payment is not received on the
due date. Should a loan be declared in
default, NMED may initiate legal action to collect past due amounts. NMED may also notify other state agencies and
may take actions to preclude the borrower from receiving grant or other
financial assistance from state agencies until all delinquent amounts due on the
loan have been paid. In addition to
these provisions, technical assistance will be provided to a borrower with a
loan in default to help assess the problem and advise
on corrective actions needed to bring the loan current. Should these efforts fail to produce results
and the borrower fails to adhere to the prescribed payment schedule, [the]
NMED will dispatch an interdisciplinary team (representatives of the general counsel,
state auditor, and local government division, as needed) to conduct a comprehensive
assessment of the borrower, including, but not limited to, financial condition,
management practices, fiscal capacity, economic circumstances, and violations
of the terms and conditions of the legally binding final loan agreement. Upon the report of this team, NMED shall take
whatever actions deemed appropriate, including court actions, to resolve the
outstanding obligation.
H. NMED may waive or adjust any rule relative to the administration of the wastewater facility construction loan fund where it is deemed that the waiver or adjustment is in the best interest of the state and the community, and the waiver or adjustment does not violate any state or federal statute or regulation.
[20.7.6.11 NMAC - Rp, 20.7.6.11 NMAC, 12/30/2015; A, 3/10/2020]
20.7.6.12 APPLICATION
PROCEDURES FOR PRIORITY LIST PLACEMENT:
A. The
commission at 20.7.5.11 NMAC specifies loan program application
procedures. Applicants for loans shall
submit a complete loan application to NMED on a form specified by [the]
NMED. Applications may be submitted at
any time; although, generally an annual funding cycle is followed.
B. NMED shall review the applications for eligibility, technical merits, and rank the applications based on the project priority system described in 20.7.5.12 NMAC, following NMED procedures for priority system and priority list.
[20.7.6.12 NMAC - Rp, 20.7.6.12 NMAC, 12/30/2015; A, 3/10/2020]
20.7.6.13 PRIORITY
SYSTEM AND PRIORITY LIST PROCEDURES:
A. [A
project must be on the current federal fiscal year priority list in order to
receive a planning/design or construction loan.
It is the policy of NMED to make loans to communities in order of
priority on the current federal fiscal year priority list for loans to the extent
reasonable considering the following:] A project must be on the
state priority list to receive a planning/design or construction loan. It is
the policy of NMED to make loans to state agencies and qualified borrowers in
order of priority on the current state priority list for loans to the extent
reasonable considering the following:
(1) willingness of [a community] an applicant to
accept a loan;
(2) [financial
capability of the community to service the loan, to perform operation and
maintenance, to maintain a replacement fund and a debt service reserve fund;
and] financial capability of the applicant to service the loan, to
perform operation and maintenance, and to maintain a debt coverage ratio as
determined by NMED; and
(3) readiness to proceed.
B. Procedures for developing and handling the annual priority system and priority list under the loan program generally follow existing procedures for the construction grants program which are briefly summarized here.
(1) A specific cap on an individual loan amount may be established by NMED each fiscal year so that the fund will be able to assist several communities each year. The cap may be set as a total of the loan funds available or as a specific dollar amount.
(2) This policy serves to maintain the flexibility of the fund each year by not excluding higher cost projects from participation, yet ensures that more than one worthwhile project will be funded each year.
(3) Fundable applicants will be notified by NMED following approval of the final priority list and a preplanning conference will be held with the applicant and its consulting engineer to identify the procedures and requirements which must be met prior to execution of an interim loan agreement.
[20.7.6.13 NMAC - Rp, 20.7.6.13 NMAC, 12/30/2015; A, 3/10/2020]
20.7.6.15 GENERAL PROJECT ADMINISTRATIVE REQUIREMENTS:
A. Loan agreement.
(1) An
interim loan agreement will be prepared by [the] NMED and executed by
the borrower for the project which can be financed with available loan funds
and which has completed requirements set by [the] NMED pursuant to the
Clean Water Act, as amended, and the New Mexico Wastewater Facility
Construction Loan Act. Projects which
are not ready to proceed to the interim loan agreement stage within six months
of allocation of available loan funds may be bypassed by projects lower on the
priority list which are ready to proceed.
(2) The interim loan agreement contains several conditions and certifications including:
(a) certification that the borrower is a legal entity with authority to execute a loan agreement by ordinance; certification that a resolution designating signatory authority has been passed;
(b) copies of all executed contracts, subcontracts, agreements, and related amendments entered into by the borrower prior to the interim loan agreement, but related to this project;
(c) request for proposals (RFP) documentation and an engineering agreement, or letter of certificate if employing staff engineers.
B. Security interest.
(1) Upon
execution of an interim loan agreement with [the] NMED for a
construction project and before any proceeds of the loan are paid out to the
borrower, the borrower shall execute a promissory note for the principal amount
of the interim loan agreement plus interest and administrative fee on the
unpaid balance at the appropriate rate per annum, and may transfer title to the
property upon which the facilities are to be constructed to [the]
NMED. In lieu of, or in addition to, the
transfer of title requirement, the borrower may transfer whatever interest it possesses
in the property upon which facilities are to be constructed, to [the]
NMED. In either case, the value of such
property or interest so transferred shall be at least equal to the amount of
the loan. All such titles and interest
transferred to [the] NMED shall be secured by title insurance, if
applicable, the cost of which shall be paid by the borrower. [The] NMED shall be named as primary
beneficiary of all such title insurance policies. If title insurance for the property is not
applicable or is not reasonably available, as determined by [the] NMED,
then the borrower shall provide a title company's opinion on the abstract of
title to the property up to the time the property was acquired by the borrower
for use as a wastewater facility.
(2) Upon repayment of the loan, such interest or title shall be reconveyed to the borrower. Where the transfer of title or interest in the property would preclude the obtaining of federal grants, or where such transfer of title or interest is inappropriate or is prohibited by or would be in violation of existing grant-in-aid agreements, NMED may waive the requirements of transfer of title or transfer of any interest in the property, and substitute therefore such other security of sufficient value it deems necessary such as an irrevocable pledge of revenue covenant by the borrower.
(3) After
the borrower transfers title or its interest in the property to [the]
NMED as security, the borrower shall:
(a) continue to insure the property;
(b) be liable for all taxes and assessments; and
(c) refrain from making major alterations that destroy the value of the security, unless NMED gives prior approval.
C. Allowable and unallowable costs.
(1) Allowable costs shall be limited to those costs which are necessary, reasonable, and directly related to the efficient achievement of the objectives of the project. Costs incurred by the borrower for work performed on the project prior to execution of the interim loan agreement, but which received NMED prior approval, may be considered as allowable costs. The borrower must justify all expenditures for which it requests a disbursement of loan funds according to accepted NMED criteria and procedures. NMED may withhold disbursement of funds and may reclaim improperly documented disbursements until the borrower provides sufficient justification.
(2) All unallowable costs, including but not limited to overhead charges, administrative expenses, indirect costs, and all costs of borrower's employed inspectors and noneligible construction costs shall be paid by the borrower. The administrative fee shall not be included as principal in the loans and therefore considered an unallowable cost.
(3) The borrower agrees that it will implement, in all respects, the project outlined in the interim loan agreement.
(4) The borrower agrees to make no change in the project description without first submitting a written request to NMED and obtaining NMED approval of the required change.
D. Accounting. Funds received by the borrower from NMED and those funds which are contributed by the borrower shall be deposited in separate bank accounts or in a separate, identifiable ledger account. In addition, the borrower shall establish and maintain accounting procedures which will ensure strict accountability for all funds received and disbursements made by the borrower in connection with the interim loan agreement. NMED shall be responsible for examining the borrower's audited financial statements in accordance with the most recent circular on audits of states, local governments and non-profit organizations as published by the U.S. office of management and budget.
E. Records. The borrower shall maintain books, records, documents, and other evidence sufficient to reflect properly all costs of whatever nature claimed to have been incurred for the performance of this interim loan agreement. Such books, records, documents, ledgers, and other evidence shall be preserved and made available to NMED, state auditor, U.S. governmental accounting office, and U.S.E.P.A. office of the inspector general during the loan agreement period and for a period of six years from date of final repayment. If upon termination of the interim loan agreement, questions exist concerning proper expenditure of funds, then the borrower shall preserve and make available all books, records, documents, ledgers and other evidence relating to the interim loan agreement until such questions are settled and the borrower has received written notification to that effect from NMED.
F. Audit and inspection. The project sites and borrower facilities which are in any part the subject of the loan agreement, and borrower records as defined elsewhere herein, shall be subject at all reasonable times to inspection and audit by NMED, state auditor, U.S. governmental accounting office, and U.S.E.P.A. office of the inspector general during the period of the loan agreement and for a period of six years following final payment hereunder. All subcontracts let by the borrower, the cost of which are included in the interim loan agreement, shall include the substance of this audit and inspection clause.
G. Occupational
health and safety. The borrower
covenants that it will take affirmative action to ensure that the project shall
be conducted in conformance with federal and state laws and regulations
relating to occupational health and safety.
In addition, the borrower shall assure that any contract entered into by
the borrower for the performance of work on this project shall contain language
by which the contractor and the borrower agree that authorized representatives
of [the] NMED occupational health and safety bureau shall have free
access to the project site, and shall not be impeded in any way from
performance of their duties.
H. Nondiscrimination.
(1) During the performance of the interim loan agreement, the borrower shall not discriminate against any employee or applicant for employment because of race, color, age, religion, sex, or national origin. The borrower shall take affirmative action to ensure nondiscrimination in employee recruitment advertising, hiring, upgrading, promotion, and selection for training (including apprenticeship).
(2) The borrower agrees to post in conspicuous places, available to employees and applicants for employment, notices setting forth the provisions of this clause. All solicitation or advertisement for employees placed by or on behalf of the borrower shall state that all qualified applicants will receive consideration without regard to race, color, age, religion, sex, sexual preference, or national origin. The borrower shall comply with all provisions of Title VI of the Civil Rights Act of 1964, Executive Order 11246, dated September 24, 1965, and all relevant rules, regulations, and orders of the U.S. secretary of labor. The borrower shall include the provisions of the clause in all project subcontracts.
I. Termination. NMED shall have the right to terminate the
interim loan agreement if at any time in the judgement of NMED, the terms of
the interim loan agreement have been violated or the activities described in
the project description are not progressing satisfactorily. The borrower may terminate the interim loan
agreement with sufficient reason. In
either case, [the] NMED shall establish following negotiations with the
borrower a repayment schedule for the funds disbursed to the borrower. Such termination must be in writing.
J. Procurement. Sections 13-1-28 through 13-1-199 NMSA 1978 of, The Procurement Code, imposes civil and criminal penalties for its violation. In addition, New Mexico criminal statutes impose felony penalties for illegal bribes, gratuities, and kick-backs.
[20.7.6.15 NMAC - Rp, 20.7.6.15 NMAC, 12/30/2015; A, 3/10/2020]
20.7.6.20 PROJECT
CONSTRUCTION REQUIREMENTS:
A. All plans and specifications and related addenda for the project must be submitted to NMED for review and approval before the project is advertised for sealed construction bids.
B. All work relating to easements, rights of way, other property rights, and financing provisions shall be completed prior to advertising for construction sealed bids.
C. Certified bid tabulation, recommendation of award, and evidence of full project financing should be submitted to NMED for review and approval prior to construction contract award.
D. Competitive bidding, in accordance with applicable state laws (including local wage determinations as provided for in Section 13-4-11 NMSA 1978), shall be used for awarding of contracts. Contracts shall be awarded to the responsible bidder who submits the lowest acceptable bid, or as provided for by state law.
E. Following
NMED approval of the proposed award the borrower shall provide for each
contract: (1) notice of award, (2)
notice of preconstruction conference, (3) executed copies of previously
approved contract form documents, and (4) notice to contractor to proceed. Performance, and payment bonds in the amount
of one [humdred] hundred percent of the
project bid will be required of each contractor and copies of said documents
will be filed with NMED. A copy of bid
bond (for five percent of the construction cost) for the selected contractor
will be filed with [the] NMED.
F. The contractor shall be required to submit a schedule for construction at the preconstruction conference for that contract.
G. The borrower shall submit all modifications to plans, specifications, and contract change orders to NMED's project engineer promptly for approval prior to implementation of such modification or change. NMED's decision shall be rendered promptly in writing. In cases necessitating immediate action, a verbal decision will be rendered by NMED and followed by a written notification.
H. The borrower shall arrange for the services of a qualified full-time resident project inspector, unless waived by NMED, during construction of the project. Borrower shall provide NMED with a summary of the inspector's qualifications and training to be approved by NMED prior to the preconstruction conference.
I. Notwithstanding those inspections performed by the borrower and its engineer, NMED shall have the right to examine all installations comprising the project, including materials delivered and stored on-site for use on the project.
J. After completion of the project, the borrower shall obtain from its engineer as built drawings for the project and certify to NMED that such drawings have been received.
K. The borrower shall provide for NMED review and approval, unless waived by NMED, an operation and maintenance manual for the project prior to ninety percent construction completion. The operation and maintenance manual shall conform to NMED requirements.
L. If this assistance is awarded for construction of collection lines, the borrower shall assure NMED that the existing population will connect to the collection system within a reasonable time after project completion. This shall be accomplished by adoption and annual review of an ordinance and user charge system requiring such connection to the system.
[20.7.6.20 NMAC - Rp, 20.7.6.20 NMAC, 12/30/2015; A, 3/10/2020]
20.7.6.21 FINAL LOAN AGREEMENT AND REPAYMENT POLICY: Upon completion of the planning/design or construction project and after final disbursement of principal to the borrower:
A. NMED and borrower shall execute a final loan agreement which details the final loan amount plus accrued interest and administrative fees due to the date of the final loan agreement.
B. NMED and borrower shall execute a revision to the promissory note and real estate mortgage (if applicable) which were recorded at the county seat at the time of the initial loan agreement. The revision shall reflect final loan amount, plus accrued interest and administrative fees due.
C. NMED shall prepare a repayment schedule for the borrower which details principal, plus accrued interest and administrative fees due. The schedule shall fully amortize the loan within 30 years of project completion. In some cases the amortization shall be less than 30 years. NMED shall address each loan on a case-by-case basis. The borrower may prepay the loan or any portion thereof at any time. The repayment period for a planning/design loan shall not exceed five years. The first annual repayment of principal, interest and administrative fees shall be due within one year after completion of the project.
D. For borrowers with planning/design loans who subsequently receive a construction loan and who choose to reamortize (roll-over) the planning/design loan, repayments for the planning/design loan may be postponed until construction of the project is completed, at which time the principal plus accrued interest and administrative fees for the planning/design loan will be rolled into the final loan agreement for the construction loan with one subsequent repayment schedule.
E. NMED shall annually prepare and send to the borrower a notice of payment due.
F. The borrower shall make a check for the full amount of the notice payable to Wastewater Facility Construction Loan Fund, Attention:
Chief, Construction Programs Bureau
New Mexico Environment Department
P.O.
Box [26110] 5469
Santa Fe, New Mexico 87502-6110
and mail in time to insure delivery by due date.
G. In the event of late payment or default by the borrower, NMED shall have the option to declare the principal, interest accrued and administrative fee on, any outstanding indebtedness forthwith due and payable automatically without notice or demand of any kind, whereupon the same shall become forthwith due and payable; and NMED may take legal recourse to implement collection.
[20.7.6.21 NMAC - Rp, 20.7.6.21 NMAC, 12/30/2015; A, 3/10/2020]