Fact Sheet
- Provides low interest loans to municipalities for Public Water Supply Projects
- "Public Water Supply Projects" include wells, water treatment plants, water transmission mains, water line extensions, water storage tanks and reservoirs, and major system rehabilitation and improvements.
- "Municipalities" are Cities, Rural Water Districts, Improvement Districts, or other political or taxing subdivisions of the state.
- The revolving "Fund" is designed to last into perpetuity, loan repayments from Municipalities are used to repay State revenue bonds, with excess dollars returned to the Fund to provide future loans.
- A municipality must adopt and implement a Water Conservation Plan approved by either the Kansas Water Office or the Division of Water Resources to participate.
- Repayment period can be up to 20 years; payments are made semi-annually. The applicant must show a "dedicated" source of revenue for repayment. Municipalities with taxing authority must pledge taxing authority as a backstop for water system revenues or purchase bond insurance. Municipalities without taxing authority must provide a Reserve Account equal to 10% of the loan amount and maintain a debt service coverage ratio of 125%, or a debt service coverage ratio of 140%. First payment is due within 1 year of project completion or 2 years from the first draw of funds. The reserve account can be funded in the loan; the reserve account earns the same interest rate as the borrower pays, thus this insurance does not cost the utility.
- The interest rate for any borrower is based on 80% of the average of the previous three months "Bond Buyer 20 Bond Index". Once a loan agreement is developed and executed by KDHE and the Municipality, the scope of the project and interest rate are fixed for the term of the loan. The loan amount may increase or decrease based upon actual costs within the scope of the project and availability of funds. Interest rates have ranged from 3.39% to 4.98%.
- Nearly all project costs can be included in the loan amount including interest during construction, lease and easements. Land and easements acquired through eminent domain are not eligible. Temporary financing is not needed when participating in the loan program.
- Up to 20% of monies must be made available to municipalities serving 5,000 or fewer population.
- Project categories not eligible for loans are: purchase of water rights, loans to municipalities that have not adopted a water conservation plan; municipalities which are in "significant non-compliance" with any applicable primary drinking water regulation unless the project will return the applicant to compliance; and projects involving the transfer to water as defined in K.S.A. 82a-1501 and amendments.
- Projects are not subject to the Davis-Bacon prevailing wage rates.
- An SRF Loan Commitment can be used as leverage (Local Match) on CDBG applications.