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State of New Mexico
CLEAN WATER STATE REVOLVING FUND
ANNUAL REPORT STATE FISCAL YEAR 2017
July 1, 2016 - June 30, 2017
New Mexico Environment Department
Water Protection Division
Construction Programs Bureau
P.O. Box 5469
Santa Fe, New Mexico 87502
(505) 827-2806
EPA Region 6
Submission Date: September 29, 2017
ANNUAL REPORT 2017
TABLE OF CONTENTS
Title Page
I. INTRODUCTION ............................................................................................................... 3
II. EXECUTIVE SUMMARY .................................................................................................... 3
A. Financial Highlights for State Fiscal Year 2017 .................................................... 3
B. Increasing Strength of Fund 121 ............................................................................. 4
C. Factors Affecting the Fund ...................................................................................... 4
D. Interest Rate Structure ............................................................................................... 5
E. Activities of the Program .......................................................................................... 6
III. GOALS, OBJECTIVES, AND ACCOMPLISHMENTS ................................................... 7
A. Long-term Goals ......................................................................................................... 7
B. Short-term Goals ....................................................................................................... 10
IV. FUND ADMINISTRATION AND OPERATIONS ........................................................... 14
A. Sources and Uses of Funds ..................................................................................... 14
B. Administrative Portion .............................................................................................. 14
C. CWSRF Administrative Fund Activity .................................................................... 14
D. Assistance Activity .................................................................................................... 15
E. Criteria and Method Established for Distribution of Funds (Title VI) ............ 15
F. Environmental Reviews ........................................................................................... 16
G. American Iron and Steel (AIS) ............................................................................... 16
H. Davis-Bacon ............................................................................................................... 17
I. NEPA ............................................................................................................................. 17
J. Generally Accepted Accounting Principles (GAAP) ..................................... 17
K. Use of Fees .................................................................................................................. 17
L. Expanded Eligibilities ................................................................................................ 18
M. Loan Terms Up to 30 Years ..................................................................................... 18
N. Fiscal Sustainability Plans (FSP) .............................................................................. 18
O. Administrative Costs ................................................................................................. 18
P. Definition of 212 Projects ........................................................................................ 18
Q. Provisions of the Operating Agreement/Condition of Grant Agreement 18
V. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES......................................... 22
VI. ACCRUED INTEREST RECEIVABLE ON CONSTRUCTION LOANS ........................ 23
VII. DISCUSSION OF ADMINISTRATIVE REIMBURSEMENT PROCESS .......................... 23
VIII. FINANCIAL INDICATORS ............................................................................................. 23
IX. CONCLUSION ................................................................................................................ 24
ANNUAL REPORT 2017
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FIGURES
1. New Mexico CWSRF Increase in Fund 121 Net Position
2. CWSRF Funds Disbursed 2008-2017
3. New Mexico CWSRF Cash Flow Projection
4. New Mexico Clean Water Admin Fund 327
5. CWSRF New Loan/Grant Agreements Signed per State Fiscal Year
ATTACHMENTS
1. SFY 2017 Detail of Binding Commitments to Date
2. Federal Awards and State Match Through SFY 2017
3. Binding Commitments With-in One Year of Increase to EPA-ACH as of June 30,
2017
4. SFY 2017 Repayment Principal/Interest/Construction Interest/Admin Fee Receipt
Register
5. SFY 2017 Schedule of Disbursements
6. SFY 2017 Summary of Projects under Construction
7. SFY 2017 Summary of Projects in Repayment
8. Admin Draws vs. Availability through SFY 2017
9. Projects That Support Sustainability Criteria
10. Identified Green Project Reserve for FFY 16 Allotment – 2016 CG
11. Identified Subsidy for FFY 16 Allotment – 2016 CG
12. Cash Flow Projections 2018-2022 and 2023-2042
13. SFY 2017 Draft Audit
14. Benefits Reporting “One Pagers” for new projects in SFY 2017 – Village of Angel
Fire, Village of Cuba, SSCAFCA, Town of Peralta, Village of Los Lunas, City of
Belen, Village of Tijeras, and City of Santa Rosa.
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ANNUAL REPORT
CLEAN WATER STATE REVOLVING FUND PROGRAM
I. INTRODUCTION
The Federal Water Pollution Act more commonly called the Clean Water Act
(CWA) was enacted by Federal Legislation in 1972. The amended Clean Water
Act of 1987 created the Clean Water State Revolving Fund (CWSRF).
The State of New Mexico CWSRF Program (Program) was established in 1986
pursuant to the New Mexico Wastewater Facility Construction Loan Act, Section
74-6A-1 et seq. New Mexico Statutes Annotated (NMSA) 1978 and the Federal
Clean Water Act of 1987, as amended.
The Program assists local authorities with financing the construction of critical
wastewater facilities and non-point source projects. The revolving nature of the
loan fund provides that loan repayments and interest are cycled back into the
fund for additional clean water projects in perpetuity. The Program has provided
over $403 million in construction funding for water quality protection to date
(Attachment 1).
The State of New Mexico presents the following CWSRF Annual Report for state
fiscal year (SFY) 2017. This report addresses how New Mexico worked toward
meeting the goals and objectives of the CWSRF Program for SFY 2017 as identified
in the approved SFY 2017 Intended Use Plan (IUP). Also, included in this report are
the actual uses of CWSRF funds and the financial position of the Program.
II. EXECUTIVE SUMMARY
New Mexico Environment Department (NMED) submitted the CWSRF SFY 2017 IUP
to the U.S. Environmental Protection Agency (EPA) on August 10, 2016. Public
comments for the IUP were solicited July 25, 2016 through August 12, 2016. The
IUP describes the Program goals, activities and intended uses of funds for SFY 2017
and was approved on August 25, 2016. This Annual Report details the results of
the SFY 2017 intended use plan.
A. Financial Highlights for State Fiscal Year 2017
• At the close of SFY 2017, the Program reports a total net position of
$311,169,041, an increase of $9,108,729. This 3% annual growth represents
a healthy fund (Attachment 13).
• The Program was awarded one capitalization grant (Cap Grant) for state
fiscal year 2017 of $6,525,000.
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• The Program collected $31,705,242 in loan repayment principal and
$3,526,210 in loan repayment interest. The Program also collected $314,582
in administrative fees from 20 projects. Total principal, interest on principal
and administrative fees received were $35,546,033.67 (Attachment 4).
• The Program earned a combined total of $807,503 of interest income on
Fund 121 and Fund 327 deposited at the State Treasurer’s Office in SFY 2017.
• The Program disbursed $23,194,426 for construction projects in SFY 2017
(Attachment 5).
B. Increasing Strength of Fund 121 – The Loan fund
The Program’s financial position continued to improve in SFY 2017. Over the past
ten years Fund 121’s net position increased an average of $10.2 million annually
(Figure 1). The fund’s total net position at state fiscal year-end (FYE) 2017 was
$309,243,213 million (Attachment 13).
C. Factors Affecting the Fund
The CWSRF Program competes with and complements State funding programs
including the Special Appropriation Program (SAP) and the Rural Infrastructure
Program (RIP). SAP provides entities with 100% grant funding via legislative Capital
Outlay appropriations. In 2017, SAP executed $4,529,693 in wastewater funding
agreements. The RIP program provides loan and grant funding to rural entities.
The program has an open application cycle and quick loan execution, but has
population restrictions and a maximum loan amount of two million dollars per
year. RIP funded $1.2 million in wastewater projects in SFY 2017. One project
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funded through RIP was co-funded with CWSRF, providing maximum assistance
to the community. Working jointly with SAP and RIP provides opportunities to
augment CWSRF funding to entities in need.
The Water Resources Reform and Development Act (WRRDA) provides the
Program with permanent authority to offer a certain percentage of the total Cap
Grant as additional subsidization. The percentage for the FFY 2016 Allotment was
30%. Additionally, the FFY 2016 Allotment allowed a supplemental 10% of the
award as additional subsidization. In total, the Program provided entities with the
maximum amount of additional subsidization allowed, a total of $2,610,000.
Interest earned on the Program’s fund balance was up 148% in SFY 2017 over SFY
2016 due to higher overnight interest rates. Interest received on investment
income from the State Treasurer’s Office in SFY 2017 was $798,175 for Fund 121
and $9,328 for Fund 327.
City of Belen – Camino Del Llano Stormwater Management Pond
project
D. Interest Rate Structure
NMED worked through the administrative rule making process to reduce loan
interest rates in SFY 2017. Lower rates allow the Program to provide more
affordable financing to New Mexico entities and will provide the opportunity to
disburse more capital.
At the close of SFY 2017, the Program’s base rate is 2.375%. The State has three
additional hardship rates; 1.2% for entities with a per capita income less than the
statewide average; 0.6% for entities with a per capita income less than three-
ANNUAL REPORT 2017
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fourths of the statewide average; and 0% for entities with a household income less
than three-fourths of the statewide median household income and an average
user rate equal to or greater than $15.00 per month.
E. Activities of the Program
As of June 30, 2017, the Program had 21 projects in process. The Program drew
down all the FFY 2016 Allotment and disbursed $23,194,426 in SFY 2017 (Figure 2).
A cash flow model is used as a management tool for the Program. The cash flow
model is reviewed and updated annually to reflect economic and programmatic
changes (Attachment 12).
A 5-year graph of the model for Fund 121 is shown in Figure 3, and demonstrates
that Program funding levels will support approximately $17.3 million in funding
annually.
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Cash balance totals contribute to existing and anticipated projects. Cash is
reconciled monthly to ensure that sufficient funds are available. Funding
projections indicate that the Program can continue to execute effective loans.
III. GOALS, OBJECTIVES, AND ACCOMPLISHMENTS
The Intended Use Plan for the SFY 2017 listed specific goals, objectives and
accomplishments; the following is a summary on the success of our efforts.
A. Long-term Goals
1. Provide local authorities in New Mexico with low-cost financial assistance for
the construction of eligible Clean Water projects by maintaining a self-
sustaining Clean Water State Revolving Loan Fund Program.
This is an on-going goal for the Program. Low interest rates and full utilization
of additional subsidization allow New Mexico entities affordable financing.
2. Maintain the CWSRF into perpetuity by adding repayments, investment interest
and by maintaining the principal amounts of capitalization grants and state
matching funds within the CWSRF.
The State tracks fund balances, sources of revenue, repayments and
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investment activity with the intent of maintaining the fund into perpetuity.
Annual increases in net position, no loans in default, a growing loan portfolio,
low expenses and average annual increases in Net Position of $10.3 million
(Figure 1) help to achieve this goal.
As of FYE 2017, there are 21 loans in repayment that include the administrative
fees (Attachment 7). These loan repayments continue to provide the funds
needed to run the program into perpetuity.
The Program earns annual administrative fees from borrowers on principal
owed. The administrative fee is set at a rate not to exceed 5% of the total loan
amount over the life of the loan. Variable rates allow the Program to maximize
administrative fees earned. The administrative fee is included in the interest
rate charged to borrowers and does not add to the financial burden of the
borrowers. It allows for administration of the fund with no fiscal impact on the
State’s general fund or any material impact on the financial strength of the
fund.
Cash balances are invested by the New Mexico State Treasurer’s Office (NM
STO). The NM STO investment policy ensures that the CWSRF investments are
sound and adequately positioned for the best return at limited risk. NM STO
website is http://www.nmsto.gov
Figure 4 shows the FYE 2017 fund balance and the annual amount of fee
collected and deposited in Fund 327 since SFY 2009, when the first loan that
included the fee went into repayment.
City of Grants WWTP Improvements project
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3. Maintain the fiscal integrity of the CWSRF.
The Program contracts with an Independent Certified Public Accounting
(CPA) firm each year. The CPA firm provides performance recommendations
and a formal opinion on the financial statements presented in the CWSRF’s
annual audit; the firm conforms to Generally Accepted Accounting Principles.
The SFY 2017 draft audit (Attachment 13) for the CWSRF has been completed
with a favorable, unmodified opinion. The final audit will be issued when the
NMED audit is completed in late 2017 and will be forwarded to the EPA upon
completion.
4. Provide funding to reduce and/or eliminate discharges of pollutants into the
State’s waters and to improve water quality in all state waters.
The Program offers technical, managerial and financial assistance to as many
entities as possible in the pursuit of reducing and eliminating pollutants from
reaching water resources.
5. Encourage Green Projects by providing funding opportunities for eligible
projects that support energy and water efficiency, green infrastructure and
environmentally innovative works.
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The Program encourages Green Projects by awarding 25 points in the ranking
process to any project that incorporates one or more of the four green
categories into their project.
6. Continue to provide subsidy to eligible entities.
In SFY 2017, NMED provided $3,608,657 in subsidy to six entities; Village of Angel
Fire, Village of Cuba, SSCAFCA, Town of Peralta, Village of Tijeras and the City
of Santa Rosa (Attachment 1).
B. Short-term Goals
1. Completion of the annual audit, intended use plan, and annual report in a
timely manner. CWA Sec. 606 (b, c, d).
The SFY 2017 IUP was submitted on June 14, 2016, finalized August 10, 2016, and
accepted by EPA August 25, 2016.
This goal will be met with the submission of this report and the audit.
2. Identify recipients from the SFY 2017 Integrated Projects Priority List (IPPL) to
receive the remaining subsidy amount of $711.75 from the FFY 2010 Allotment.
The total subsidy from the FFY 2010 Allotment has been provided to eligible
entities.
This goal was met.
3. Identify recipients from the SFY 2017 IPPL to receive the remaining subsidy
amount of $490,000 from the FFY 2014 Allotment.
The total subsidy from the FFY 2014 Allotment has been provided to eligible
entities.
This goal was met.
4. Identify recipients from the SFY 2017 IPPL to receive the remaining subsidy
amount of $298,281 from the FFY 2015 Allotment.
The total subsidy from the FFY 2015 Allotment has been provided to eligible
entities.
This goal was met.
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5. Identify recipients from the SFY 2017 IPPL to receive subsidy in the amount of
$2,610,000 from the FFY 2016 Allotment.
The total subsidy from the FFY 2016 Allotment has been provided to eligible
entities.
This goal was met.
6. Close out the 2014 Cap Grant that was fully expended in SFY 2016.
A Final Federal Financial Report to close out the 2014 Cap Grant was submitted
to EPA on August 18, 2016.
This goal was met.
7. Close out the 2015 Cap Grant that was fully expended in SFY 2016.
A Final Federal Financial Report to close out the 2015 Cap Grant was submitted
to EPA on August 18, 2016.
This goal was met.
8. Begin draw-down and complete the FFY 2016 Allotment in the amount of
$6,525,000.
Draw down of the FFY 2016 Allotment (16 CG) began March 6, 2017 and
concluded with a final draw on June 20, 2017.
This goal was met.
9. Execution of approximately $26 million in binding commitments.
Although we received approximately $40 million in project applications
through the SFY 2017 IPPL, not all applicants accepted our funding offer or
were eligible to receive funding; $9,578,386 was executed in SFY 2017.
This goal was partially met.
10. Identify the $652,500 in green projects for the FFY 2016 Allotment from the
binding commitments listed above as “to be determined from attached 2017
IPPL.”
Three projects from the 2017 IPPL were identified as being green, the City of
Santa Rosa, Anthony Water & Sanitation District (W&SD) and SSCAFCA. Santa
Rosa and SSCAFCA were funded. Santa Rosa’s Green Infrastructure
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component for $700,000 and SSCAFCA’s Energy Efficiency component for
$90,000 exceeded the $652,500 requirement.
This goal was met.
11. Apply for the current federal fiscal year’s allotment in the first year that it is
appropriated.
The Program received the final FFY 2016 allotment on April 19, 2016 and
applied on June 22, 2016.
This goal was met.
12. Execution of 20-year loan agreements (converting loans from construction
phase to post construction/repayment phase) for the City of Las Vegas; City of
Rio Rancho; SSCAFCA; City of Belen; City of Portales; El Valle de Los Ranchos;
City of Socorro; and the City of Carlsbad.
The Cities of Las Vegas, Portales, Socorro, Carlsbad and El Valle de Los
Ranchos W&SD did not convert to repayment. The Program was successful in
converting the Cities of Rio Rancho, Belen and SSCAFCA.
This goal was partially met.
13. The state commits to completing the environmental benefits in the CWSRF
Benefits Reporting System (CBR) (Attachment 14) by the end of the quarter in
which a loan agreement is signed and providing printouts of the environmental
benefits with our Annual Report.
In SFY 2017, binding commitments (Attachment 1) were secured for eight new
CWSRF loans. The Environmental Benefits were entered in the CBR database
by the end of the quarter for each loan agreement signed (Attachment 14).
This goal was met.
14. Convert the fillable Adobe Acrobat based CWSRF Application Form used by
potential borrowers to apply for inclusion on the IPPL into an online application
form.
NMED did not complete the online application form. NMED is continuing to
work with NMED’s Information Technology group to complete this project.
This goal is ongoing.
15. Refine the process for soliciting and funding non-traditional CWSRF projects to
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include expanded eligibilities as defined in the Water Resources Reform and
Development Act (WRRDA). To achieve this goal, NMED must review and
update New Mexico statutes and administrative code.
NMED continues to pursue updates to state statute and rules to allow for
expanded eligibilities and eligible borrowers.
This goal is ongoing.
16. Exceed the national average in terms of financial indicators.
Based on financial indicators, NM CWSRF did not exceed national averages.
Per 2016 data, the most recent available of states that did not leverage, the
percent of executed loans to funds available was 90% for New Mexico
compared to a national average of 93%. New Mexico achieved 80% of funds
disbursed to loans executed compared to a national average of 84%. New
Mexico will continue to work on increasing the averages comparative to the
national averages.
This goal was not met.
City of Grants WWTP Improvements project
ANNUAL REPORT 2017
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IV. FUND ADMINISTRATION AND OPERATIONS
A. Sources and Uses of Funds
Table 1 - the actual sources and uses of CWSRF Fund 121 for SFY 2017.
B. Administrative Portion
In SFY 2017, NMED chose to use 1/5th of one percent ($600,688) of the current
valuation of the CWSRF fund for the costs of administering the fund. As of June
30, 2016, the audited current valuation (Total Net Position) of the CWSRF fund was
$300,344,024. NMED has no remaining amounts for administrative costs from open
Cap Grants.
C. CWSRF Administrative Fund Activity
The purpose of Fund 327 is to administer the Program into perpetuity and is used
solely for the NM CWSRF program. Beginning SFY 2017, the balance of Fund 327
was $1,716,289. The operating expenses charged to Fund 327 include payroll,
travel, computers and other office expenses. In SFY 2017, Fund 327 had the
following activity:
Table 1 Sources and Uses
Actuals for SFY 2017
Ending cash balance 6/30/2016: $127,105,953
Sources during SFY 2017: FFY 2016 Allotment $6,525,000 FFY 2016 Allotment State Match (Laws 2016) $1,400,000 2017 Repayment Principal (Attachment 4) $31,705,241 2017 Repayment Interest (Attachment 4) $3,526,210 2017 Overnight Interest $798,175
Total Sources $171,060,580
Uses during SFY 2017:
Admin Expense (Attachment 8) $478,323 Disbursements for SFY 2017 (Attachment 5) $23,194,426 Remaining balance to be disbursed from loans & grants in construction as of 6/30/17 (Attachment 6) $49,719,963
Balance available for use on future projects 1 $97,667,868 Total Uses $171,060,580
1 NMED plans to use all CWSRF funds not committed to projects in the manner detailed in the Cash Flow Projection charts attached to this report. NMED plans to make approximately $15.8 million in binding commitments in SFY 2018 out of the $98 million in available resources.
ANNUAL REPORT 2017
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Description Amount
Balance beginning of SFY 2017 $1,716,289
Investment interest from the State Treasurer’s Office earned in SFY 2017 +9,328
Loan Administrative Fees collected SFY 2017 +314,582
Program operating expenses charged to Fund 327 in SFY 2017 -478,323
Balance end of SFY 2017 $ 1,561,876
D. Assistance Activity
In SFY 2017, the Program signed eight new loan/grant agreements totaling
$9,328,386 and amended three existing agreements: one to increase the loan
amount by $250,000, two to decrease the loan amounts by $5,931,283 for a total
of $3,647,103 (Attachment 1). Figure 5 shows the amount and number of new
agreements signed over the last 10 years.
E. Criteria and Method Established for Distribution of Funds (Title VI)
Pursuant to the Loan Act, the WQCC adopted regulations concerning eligibility
requirements for financial assistance, application procedures, priority ranking
system and administration of the loan program and fund. The current priority
ranking system was approved by EPA and adopted by the WQCC on April 9, 2013
and amended by the WQCC on January 24, 2014. Information on the ranking
ANNUAL REPORT 2017
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system can be found at https://www.env.nm.gov/cpb/CWSRFPage.htm under
CWSRF Priority Ranking System Guidance.
The CWSRF staff and NMED ground water and surface water staff evaluate and
ranks projects that will mitigate point source discharges, such as discharges from
wastewater treatment facilities (WWTF) (§212), and non-point source (§319)
impacts to both surface and groundwater. All §319 activities must implement the
state’s §319 Nonpoint Source Management Plan. The state will review this plan
when determining eligibility. NM CWSRF evaluated all projects in SFY 2017 and
there were no §319 or §320 activities.
Public notice of the Projects Priority List (PPL) process was provided through
publication in independent newspapers statewide and the NMED website. NMED
accepted public comments regarding the SFY 2017 Intended Use Plan (IUP) and
associated PPL from July 25 – August 12th of 2016, no comments were received.
A project must be on the current New Mexico state fiscal year PPL to receive a
loan. It is the policy of NMED to make loans to entities in order of priority on the
current fiscal year priority list to the extent reasonable considering the following:
1. Willingness of the entity to accept a loan;
2. Financial capability of the entity to service the loan, to perform operation
and to maintain a replacement reserve fund; and
3. Readiness to proceed.
There were several entities that were ineligible on the SFY 2017 PPL because they
were not willing to accept a loan, were financially incapable of servicing the loan
and/or were not ready to proceed with the project.
F. Environmental Reviews
In compliance with the CWSRF requirements, the Program conducted environmental reviews for all the projects with executed loan/grant agreements, and will continue to do so in the future.
G. American Iron and Steel (AIS)
In accordance with Section 608 of the Federal Water Pollution Control Act
(FWPCA), effective June 10, 2014, construction, alteration, maintenance and
repair of treatment works requires the use of American-made iron and steel
products. The following eight new projects in SFY2017 requiring compliance with
AIS have agreed to the AIS requirements via the execution of their Interim Loan
Agreements and through the Supplemental Conditions Form AIS CWSRF 314,
unless they can provide a waiver from EPA, or NMED determines that the AIS
requirement is not applicable to the project. None of these projects have
reached the construction phase; current projects and their status is as follows:
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• Village of Angel Fire CWSRF 056 — Preliminary Engineering Report (PER) in
progress
• Village of Cuba CWSRF 061 — Notice to Proceed issued 9/18/17
• Town of Peralta CWSRF 057 – Planning
• SSCAFCA CWSRF 059 — Planning
• City of Belen CWSRF 058 – Planning
• Village of Los Lunas CWSRF 060 – Planning
• Village of Tijeras CWSRF 063 – Planning
• City of Santa Rosa CWSRF 062 - Planning
H. Davis-Bacon
NMED ensured compliance with this requirement by requiring all Borrower’s, via
execution of an Interim Loan Agreement, to follow Davis Bacon regardless of the
source of funding. NMED provided Borrowers with the specific EPA Davis-Bacon
contract language that is to be included in bid specifications and/or contracts
and confirmed that the correct wage determinations were included in the bid
specifications and/or construction contracts.
NMED’s Borrowers agreed to follow Davis Bacon by:
1. Executing an Interim Loan Agreement;
2. Executing a Certification of Compliance (Form XP-315); and
3. Executing a Certification by Contractor Statement of Compliance with
Labor Standards (Form XP-214) with each applicable disbursement request.
I. NEPA
NMED follows the State Environmental Review Process (SERP) approved by the
EPA and applied the National Environmental Policy Act (NEPA) to all the CWSRF
projects.
J. Generally Accepted Accounting Principles (GAAP)
NMED requires Borrowers, via the Interim Loan Agreement to maintain project
accounts per GAAP as issued by the Government Accounting Standards Board.
This requirement also requires Borrowers to use standards relating to the
reporting of infrastructure assets.
K. Use of Fees
This provision requires States to manage the CWSRFs in such a way that the funds
will be available into perpetuity for activities under the FWPCA. NMED has
achieved compliance with this provision through investing the CWSRF funds with
the New Mexico State Treasurer’s Office General Fund. The primary objectives
are safety of the fund, maximizing return on the fund, and maintaining liquidity
of the fund.
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L. Expanded Eligibilities
NMED did not fund any projects during SFY 2017 that comprised of the new
expanded eligibilities criteria.
M. Loan Terms Up to 30 Years
New Mexico statute allows loan terms of up to 30 years.
N. Fiscal Sustainability Plans (FSP)
NMED requires Borrowers, via the Interim Loan Agreement to certify a FSP is in
place prior to the final loan disbursement for the project.
O. Administrative Costs
NMED implemented the maximum annual amount of CWSRF money that may
be used to cover the reasonable costs of administering the fund by budgeting
1/5 of one percent of the current valuation of the fund. This provision began
with the FFY 2016 Allotment (SFY 2017).
P. Definition of 212 Projects
The expanded definition of “treatment works” is now recognized by NMED to
include land temporarily needed for construction. To date, no projects have
required this expanded definition.
Q. Provisions of the Operating Agreement/Condition of Grant Agreement
Accept Payments: Sec. 602(b)(1). The State certifies that it will accept grant
payments in accordance with the negotiated payment schedule and use those
payments for the activities of its established CWSRF.
In SFY 2017 one federal payment (deposit) was made to the Program’s EPA-ACH
for the FFY 2016 Allotment Cap Grant ($6,525,000). The State follows compliance
with the operating agreement.
Provide a State Match: Sec. 602(b)(2). The State certifies that it will deposit into
the CWSRF an amount equaling at least 20 percent above the amount of each
capitalization grant payment. The State match shall be deposited on or before the
date on which the State received each payment from the grant award.
The Program received an appropriation from the state legislature for $1,400,000
from the Public Projects Revolving Fund, which is administered by the New Mexico
Finance Authority to match the FFY 2016 Allotment Cap Grant of $6,525,000. On
July 1, 2016, $1,400,000 was transferred to the CWSRF Fund 12100. The $6,525,000
in federal Cap Grant funds was awarded on August 8, 2016.
Binding Commitments within One Year: Sec. 602(b)(3). The State agrees to enter
ANNUAL REPORT 2017
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into binding commitments with recipients to provide financial assistance from the
CWSRF. The binding commitments shall be in an amount equal to 120 percent of
each quarterly grant payment.
The State is required to have binding commitments (defined by the state as
executed loan agreements) totaling $254,885,638 for the life of the Program
through June 30, 2017. The total binding commitments as of FYE 2017 were
$403,904,493 or 191%, exceeding the required 120% by $157,643,867 (Attachment
3).
Expeditious and Timely Expenditures: Sec. 602(b)(4).
The State agrees to expend all funds in the CWSRF in an expeditious and timely
manner.
The State has addressed the issue of expeditious and timely expenditures for the
CWSRF funds by having less than two years’ worth of Cap Grants open and by
drawing down on the grant within two years of receiving the award.
Subsidized Projects Sustainable Criteria
NM CWSRF tracks projects that support sustainability criteria. These projects focus
on system upgrades and replacements in existing entities, involve studies or plans
that improve technical, managerial or financial capacity, and focus on
preliminary planning, alternative assessment and eligible capital projects that
reflect the full life cycle cost of infrastructure assets, conserve natural resources or
use alternative approaches to integrate natural systems into the built
environment. (Attachment 9).
FFATA Projects Reported in FSRS.
The Village of Cuba, Town of Peralta, SSCAFCA, City of Belen and Village of Los
Lunas are identified as FFATA projects reported in FSRS from the 2016 Allotment
(2016 CG).
Compliance with Federal Cross Cutting authorities:
The State affirms that all federal cross cutters have been complied with by the
State and its entities. NM CWSRF applies all federal crosscutter requirements
across all projects funded by the Program.
In accordance with 40 CFR, Part 33, Subpart D, compliance with the negotiated
Disadvantaged Business Enterprise (DBE) "Fair Share" objectives for the State is
presented in the table below.
ANNUAL REPORT 2017
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DBE reporting is annualized.
FFY 2016 DBE numbers are the most recent available for reporting. The chart
below shows NMED’s negotiated DBE objectives for all EPA grant funds that NMED
received in SFY 2016 and the actual percentages achieved by the CWSRF
Program:
Total MBE
MBE Negotiated
objectives
Actual
Percentages Total WBE
WBE Negotiated
objectives
Actual
Percentages
Construction 34.39% 7.78% Construction 11.02% 0.00%
Equipment 18.87% 0.00% Equipment 15.40% 0.00%
Services 33.88% 0.19% Services 21.72% 0.30%
Supplies 19.46% 0.09% Supplies 21.15% 0.01%
Technical staff members verify that DBE requirements are followed for all bids and
have been working with funding recipients to encourage more effort during the
bidding process to get more participation by DBE firms. There is no statewide
resource to help identify DBEs. While not all the negotiated objectives were met
in SFY 2016, the State affirms that all six good faith efforts pursuant to 40 CFR,
Section 33.301 were followed.
State Laws and Procedures: Sec. 602(b)(7). The State agrees to commit or expend
each quarterly capitalization grant payment in accordance with state laws and
procedures regarding the commitment or expenditure of revenues.
The State confirms compliance with this requirement. The loan fund was
examined as a major federal program within the Environment Department's single
audit for state fiscal years 1990 through 2017. The SFY 2017 draft Independent
Auditor’s Report for the CWSRF Program is attached (Attachment 13). The final
CWSRF Audit is expected in late 2017 along with the NMED audit.
State Accounting and Auditing Procedures: Sec. 606(a). The State agrees to
establish fiscal controls and accounting procedures that are sufficient to assure
proper accounting for: (1) payments received by the CWSRF; (2) disbursements
made by the CWSRF; and (3) CWSRF balances at the beginning and end of the
accounting period. In carrying out these requirements, the State agrees to use
accounting, audit, and fiscal procedures conforming to "generally accepted
government accounting standards." These standards are usually defined as, but
not limited to, those contained in the U.S. General Accounting Office (GAO)
publication Standards for Audit for Governmental Organizations, Programs,
Activities, and Functions, (2/27/81).
The State confirms compliance with this requirement. The Program is managed in
compliance with all applicable regulations, and the State is cooperating with EPA
oversight efforts. The State has contracted with a CPA firm for an Independent
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Financial Audit on the CWSRF in addition to the single audit requirement.
Recipient Accounting and Audit Procedures: Sec. 602(b)(9) as amended. The
State agrees that as a condition of making a loan or other form of assistance, it
will require recipients of SRF assistance to maintain project accounts in
accordance with generally accepted government accounting standards,
including standards relating to the reporting of infrastructure assets and as defined
in the section above.
The State confirms that Generally Accepted Government Accounting Standards
are required of all CWSRF recipients through signed loan agreements.
Compliance is confirmed annually in a desk audit conducted on borrowers'
annual audits.
Annual Report: Sec. 602(b) (10). The State agrees to make annual reports to the
administrator on the actual use of the funds in accordance with Sections 606(d)
of the Act and negotiated State/EPA guidance.
The Annual Report for SFY 2016 was submitted on September 27, 2016, updated
November 10th and 23rd, 2016 and accepted November 29, 2016. The State is
submitting the SFY 2017 Annual Report on September 30, 2017 to satisfy this
requirement.
Compliance with the Environmental Review Requirements: Sec. 602(b)(6) as
amended. The State agrees that it will conduct an environmental review of each
project receiving assistance from the CWSRF and will follow procedures which
comply with criteria established by EPA in the Initial Guidance - State Revolving
Fund, Appendix D.
The State confirms compliance with this requirement. Environmental review
procedures for projects funded through the Wastewater Facility Construction
Loan Program are implemented through the Internal Procedures Manual,
Attachment V (New Mexico State Environmental Review Process (SERP)). The
current EPA approved SERP is dated July 2016 and reflects the changes to the
Environmental Justice Index. An environmental review has been conducted on
each new CWSRF loan. All reviews comply with EPA implementation regulations
contained in 40 CFR Part 6.
Legal, Managerial, Technical, and Operational Capabilities: The State certifies
that it has the legal, managerial, technical, and operational capabilities to
administer the Program competently.
The State certifies that it has the legal, managerial, technical and operational
capabilities to administer the Program competently. The Program is fully staffed
to administer current loans in construction and repayment and to make new
loans in the upcoming year. The Program is in the process of ongoing initiatives
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such as making regulation changes, putting the priority list application form
online, conducting outreach and providing technical assistance.
Debarment and Suspension: The State agrees that the State and all recipients of
CWSRF assistance will comply with 40 CFR, Part 32, Debarment and Suspension.
The State confirms compliance with this requirement. During the funding process
and the State’s review of engineering agreements and construction contractors’
bid tabulations, the Program searches the System for Award Management (SAM)
to confirm that the funding recipients, engineering firms or contractors are not
subject to debarment and suspension from participation on federal contracts
and that the certification is current.
Consistency with Planning Requirements: Sec. 603(f). The State certifies that it will
provide financial assistance from CWSRF only with respect to a project, which is
consistent with plans, if any, developed under Section 205(j), 208, 303(e), 319, and
320 of the Act.
The State confirms compliance with this requirement. NMED’s Surface Water
Quality Bureau, Planning Section and Ground Water Quality Bureau, Pollution
Prevention Section are offered an opportunity to review the facility plans and
environmental information documents to assure the project is consistent with
applicable requirements.
Compliance with CWSRF Capitalization Grant, General and Special Conditions:
The State certifies compliance with General Conditions and Special Conditions of
EPA Assistance Agreements within the reporting period and within the
achievements described above.
Delinquencies:
There were no delays in the repayments of any loans.
V. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
CLEAN WATER STATE REVOLVING FUND - This fund is an enterprise fund used to provide low-cost financial assistance to eligible entities to construct or modify wastewater facilities and non-point source projects. The primary initial funding sources are state general fund appropriations, severance tax bond sale proceeds, public project revolving funds and federal Cap Grants. This fund is expected to eventually become self-sufficient as the volume of loan repayments and interest on outstanding loans increases.
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VI. ACCRUED INTEREST RECEIVABLE ON CONSTRUCTION LOANS
Interest receivable on Clean Water State Revolving Fund Loans is accrued during the construction period. At the end of construction, the interest accrued may be capitalized in the final loan execution or the entity may pay off the accrued interest.
VII. DISCUSSION OF ADMINISTRATIVE REIMBURSEMENT PROCESS
The administrative costs for this Program are reimbursed to the state agency as they accrue. Reimbursement is requested and received into the fund. At year-end, all applicable receivables are posted. The state match is obtained through a legislative appropriation. The State of New Mexico will expend all State Revolving Fund (SRF) State match funds first in disbursements/loans to entities. This is done at the request of EPA headquarters and for the convenience of NMED.
Once the total required State match for each SRF Cap Grant has been
expended, the State will draw all Federal funds for each respective CWSRF Cap
Grant. In accordance with Section 603(d)(7) of the CWA, monies in the CWSRF
may be used for the reasonable costs of administering the fund and conducting
activities under this title. These amounts shall not exceed the greater amount of 4
percent of all grant awards to such fund under this title, $400,000 per year, or 1/5
of one percent per year of the current valuation of the fund, plus the amount of
any fees collected by the State for such purpose regardless of the source.
VIII. FINANCIAL INDICATORS
The Table below demonstrates efficient use of funding and the increasing
strength of the fund.
NM CWSRF FINANCIAL INDICATORS YEAR TO YEAR COMPARISION
(Sources: The National Information Management System ‘NIMS’ Report SFY 2017 from 2013-2017
dated 8/25/2017 and Draft SFY 2017 Program Audit dated 9/7/2017)
1. Federal Return (ratio of total SRF loan disbursements to federal disbursements):
The ratio of total cumulative CWSRF loan disbursements to federal
(see # below also) 2013 2014 2015 2016 2017
1. Federal Return 154% 152% 153% 155% 166%
2. Percentage of Executed
Loans to Funds Available 83% 86% 87% 90% 82%
3. Percentage of Funds
Disbursed to Executed Loans 87% 82% 82% 80% 85%
5. Sustainability (Retained
Earnings) $65,627,964 $68,480,391 $71,074,151 $73,635,187 $77,959,572
5. Net Position $264,248,074 $275,150,820 $291,071,684 $300,344,024 $309,243,213
5. Net Position change in % 5.3% 4.1% 5.8% 3.2% 3.0%
ANNUAL REPORT 2017
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disbursements was 166%.
2. Percentage of executed loans to funds available:
The cumulative percentage of executed loans as a percentage of funds
available is 82%.
3. Percentage of funds disbursed to executed loans:
The cumulative disbursements amount as a percentage of executed loans is
85%.
4. Additional SRF loans made due to leveraging:
The State of New Mexico is currently not leveraging Clean Water State
Revolving Funds.
5. Sustainability:
Retained earnings increased from $74 million in SFY 2016 to approximately $78
million in SFY 2017. In the past five years, net position increased an average of
$11.7 million per year. In SFY 2017, net position increased by $8.9 million, from
$300.3 million in SFY 2016. This increase in net assets represents a 3% increase
in fund balance.
6. Subsidy information:
In SFY 2017, the Program granted $3,608,657 in additional subsidization,
(Attachment 1) an increase of approximately $1.4 million from the previous
year.
IX. CONCLUSION
The NM CWSRF disbursed $23,194,426.45 in SFY 2017, approximately $8.5 million more than the previous year. Approximately $17.3 million (Figure 3) in clean water infrastructure projects can be funded each year. The fund can also provide the administrative budget to manage the program with no impact to taxpayers. With an increasing fund balance and improved stability, this fund will continue to play an important role in promoting clean water for the state now and in perpetuity.
