Water Infrastructure Funding Sources Podcast
Join Business Unit Leader Lindsay Beaman as she hosts Civil Engineer Kelli Scott for an in-depth discussion on drinking water and wastewater project funding. During this second episode of a two-part series (check out episode one), the funding discussion takes a deeper dive into the steps to acquire funding using a real-life project example.
- Upgrading Facilities to Improve Compliance Issues (0:19)
- Changes in Block Grant Requirements (1:18)
- Planning Financing Process (2:42)
- Engineering Design Financing Process (3:54)
- Financing Process During Construction (4:22)
- Financing Post Construction (7:01)
- Compliance Schedule Amendments (7:49)
Changes in Block Grant Requirements
Lindsay Beaman (0:19)
Okay, Kelli, can you give me an example of a project that maybe had to do a compliance improvement, and can you take me step-by-step kind of through what a community should anticipate for planning, engineering design through construction, as far as financing goes?
Kelli Scott (0:35)
I’m thinking Toledo. Yeah. I’m thinking they used both SRF loans and CDBG grants for a new water treatment plant facility. They had been having compliance issues for a period of time and therefore were required to do an upgrade to their plant, fix it, replace it, expand it, something like that. There really weren’t any issues with all the funding going together. The application process, as I said before, was fairly straightforward. You need the finances of the city and the block grant. You needed to meet the income limits on that. One of the things that the block grant did change or enforce more readily a few years ago was the limit to spend the money within the three years of being awarded. People would apply for the money, and then for whatever reason, they wouldn’t get it spent in the three years, and therefore it would hold up funding from other projects. One thing to keep in mind with the block grant is, on this one, actually, there were two different projects, a water plant, and a sewer infiltration study and improvements project, that each were awarded $600,000. Still, the overall percentage of the project that the money would cover was different. So, for example, one of them that $600,000 would cover 20% of the project, and the other project, covered 50% of the project. If the project came in less money, you still would only get the 20% or the 50%. So essentially, you might not get that full award amount. If your project became more expensive, you would not get additional money above and beyond what you were originally awarded. So kind of something to keep in mind when you’re doing the applications.
Planning Financing Process (2:42)
As you know, with any of those projects, you go through the application process, the preliminary engineering report, or the facility plan. DNR reviews those reports and approves the recommendations that are made by the engineer on what the improvements should be. So that would include the type of treatment options selected and generally the costs of the project. In order to get the funding, after the report is approved by the DNR, the city would need to authorize the engineer to proceed with the design of said facility or improvement. So if it’s a wastewater plant, the city says, okay, let’s go ahead and proceed with the design of the wastewater facility. They would get a contract with their engineer. The engineer then coordinates with the DNR and the current records of the facility to proceed with the design looking at the site for the facility, its size, proximity to other buildings, residents, and so on and so forth.
Engineering Design Financing Process (3:54)
Periodically, there are typically meetings with a select group of people from the city. A lot of times, it’s the operator and the mayor or the operator and the clerk. Sometimes council members are involved in that sort of thing to kind of discuss progress and any questions that we may have. A lot of times, we will discuss with the operator what’s working for you now, and what’s not working for you now, and try to incorporate that into the design.
Financing Process During Construction (4:22)
Once you get through the design, the city will approve that, and it will get sent to the DNR for the DNR to approve it. They take a look at it to make sure that what the engineer has put forth in the construction documents matches the recommendations in the original report. If that all matches up, they’ll give you your construction permits, and then you can go out for bids from contractors. If it doesn’t match up, the DNR will have a conversation with the city and the engineering and say, Hey, did something change? Or what’s going on here? And if there is some reason that it did change, that you decided to use a different system. UV, for example, you can have contact with the bulbs, or you can have a non-contact if you chose to do non-contact in your report, and you did a contact system in the final design, they may ask you about that, and changes like that are fairly simple just to do a report amendment so that the DNR has on file, what those changes were.
Then if they do approve it, you go onto your bid letting put it out for bids to contractors in the area. Usually, you give them three to four weeks or so to take a look at the plans and specs and give their bid documents to the city. There’s a set date and time for them to all turn them in. Then we will assist the city with opening those all at the same time and take a look. And usually, at that time, there’s an apparent low bidder. And then we will take the documents and look at them a little closer to make sure that all of the bonding and the math for their bid prices all work out, and then we let the city know who the low bidder was and typically recommend and award that contract to the low bidder. Once that gets awarded by the city council, we get contracts back from the contractor, and then the contractor starts construction, depending on the size of the project. Most projects from start to completion are about 12 to 18 months. A lot of that depends on if there’s large equipment that is needed for the project. Sometimes it takes 12, 18, or 20 weeks just to receive the equipment. So it’s not necessarily under construction that entire time.
Financing Post Construction (7:01)
Upon completion of the construction, the DNR, if you have an SRF loan or grant, the DNR will come and do a final inspection of the project. One of the things they do also look for in the interim is there’s currently an American Iron and Steel (AIS) requirement. So there’ll be documentation on valves, piping, bolts, and nuts. Any of your equipment that meets American Iron and Steel (AIS) has to have the provided documentation. There are very minimal exceptions to that rule. But that would be the DNR involvement on that side, which is to make sure that you meet those requirements.
Lindsay Beaman (7:42)
Does the DNR ever give a city a lot more time to pursue these different options?
Compliance Schedule Amendments (7:49)
If you were given a compliance schedule, they are usually right around four years, and the compliance schedules given are typically based on treatment. So if you have a contaminant in you’re drinking water that’s exceeding the limits, or if you continually exceed your discharge limits on your wastewater facility, or if new regulations come into place, all those are usually right around four years. You have four years that include the city getting their compliance schedule and then hiring your engineer, going through that reporting process, the funding application process, the design, and construction. So what that means is, from start to finish, that new improvement must be 100% operational and functioning as needed so that that facility is in compliance within that four years.
Most projects really take about that long; by the time you get through all the processes, there is potential for extensions to those compliance schedules. One of them that we hear frequently is financing. That can be very difficult because you have to prove that the financing is not able to be obtained, or it would significantly impact the residents of the community in a negative way. Those numbers are usually pretty high. They do have a classification of disadvantaged communities. So there’s information out there on that, but the rates are generally extremely, would have to be extremely high in order to qualify for being a disadvantaged community and get an extension based on lack of funding.
Other things would be a facility that has just been neglected for years and years and years, and nothing has been repaired, and the compliance schedule is for disinfection, for example, and do you want to go ahead and move forward with your disinfection, and you also want to upgrade your control system and your electrical and maybe there were some repairs on lift stations structures and pumps. So, if you’re expanding the scope of the project beyond what the compliance requirements are, you can also request a compliance schedule amendment, and then they will deem whether or not that’s sufficient justification and extend that or not.
We have not really experienced official compliance schedule amendments that have been granted. There are times that due to unforeseen circumstances, weather, or contractor issues or things like that, where the project is not completed by the final compliance date, and as long as you are still making forward progress, and you’re actually making an effort to move towards that. The DNR is usually fairly flexible about that.
Lindsay Beaman (11:06)
Awesome, this has been a great talk. Thank you for your time today. It’s been very informative.