Subd. 1. Establishment of program.

The authority will establish a wastewater infrastructure funding program to provide supplemental assistance to municipalities applying for funding under the water pollution control revolving loan program or the United States Department of Agriculture Rural Economic and Community Development's (USDA/RECD) Water and Waste Disposal Loans and Grants program for the design and planning, improvements to, and construction of municipal wastewater treatment systems.

Subd. 2. Type of supplemental assistance.

Supplemental assistance shall be in the form of grants. If one year after the initiation of operation of the project, the project does not meet the operational performance standards established by the agency, the grant must be repaid. Grant repayments shall be deferred upon request from the commissioner of the agency for six-month periods, provided the commissioner has determined that satisfactory progress is being made to achieve project performance or is developing or implementing a corrective action plan.

Subd. 3. Program administration.

The authority shall provide supplemental assistance, as provided in subdivision 2, to municipalities demonstrating financial need, as provided in subdivision 4, whose projects have been certified to the authority by the commissioner of the agency. The authority shall reserve supplemental assistance for projects in order of their priority ranking established by the agency.

Subd. 4. Funding level.

1. (a) The authority shall provide supplemental assistance for essential project component costs as certified by the commissioner of the pollution control agency under section 116.182, subdivision 4.
2. (b) A municipality may not receive more than $4,000,000 under this section unless specifically approved by law.
3. (c) The authority shall provide supplemental assistance for up to one-half of the eligible grant funding level determined by the United States Department of Agriculture Rural Development funding for projects listed on the agency's project priority list, in priority order. For municipalities that are not eligible for United States Department of Agriculture Rural Development funding for wastewater, the authority shall provide supplemental assistance for: (1) essential project component costs calculated by first determining the amount needed to reduce a municipality's annual residential sewer costs to 1.4 percent of the municipality's median household income or $25 per month per household, whichever is greater, and then multiplying that amount by 80 percent to determine the actual award amount to supplement loans under section 446A.07; and (2) up to 50 percent of the incremental costs specifically identified by the agency as being attributable to more stringent wastewater standards required to protect outstanding resource value waters or outstanding international resource value waters.
4. (d) Notwithstanding paragraph (b), in the event that a municipality's monthly residential sewer service charges average above $50, the authority will provide 90 percent of the grant amount needed to reduce the average monthly sewer service charge to $50, provided the project is ranked in the top 50 percentile of the agency's intended use plan.
5. (e) Notwithstanding paragraphs (b), (c), and (d), a municipality with an annual median household income of $40,000 or greater shall not be eligible for a grant, except for incremental costs specifically identified by the agency as being attributable to more stringent wastewater standards required to protect outstanding resource value waters or outstanding international resource value waters.

6. (f) The authority shall provide supplemental assistance to a municipality that would not otherwise qualify for supplemental assistance if:

   1. (1) the municipality voluntarily accepts a sewer connection from another governmental unit to serve residential, industrial, or commercial developments that were completed before March 1, 1996, or are on lots whose plats were recorded before that date; and

   2. (2) fees charged by the municipality for the connection must take into account state and federal grants used by the municipality for the construction of the treatment plant.

      The amount of supplemental assistance under this paragraph must be sufficient to reduce debt service payments under section 446A.07 to an extent equivalent to a zero percent loan in an amount up to the other governmental unit's project costs necessary for connection. Eligibility for supplemental assistance under this paragraph ends three years after the agency certifies that the connection has met the operational performance standards established by the agency.

Subd. 4a.

Repealed, 1998 c 404 s 84

Subd. 5. Applications.

Applications for the wastewater infrastructure funding program must be made to the authority on forms prescribed by the authority and the agency for the water pollution control revolving loan program. The commissioner of the pollution control agency shall determine if the project meets the criteria in section 116.182. The commissioner of the pollution control agency shall certify projects to the authority under section 116.182, and shall rank the certified applications in accordance with section 116.182, and determine the essential project component percentage for each certified application.

Subd. 6. Disbursements.

Disbursements made by the authority to recipients must be made for eligible project costs as incurred by the recipients, and must be made by the authority in accordance with the project financing agreement and applicable state and federal laws and rules governing the payments.

Subd. 7. Loan repayments.

All loan repayments received by the authority under subdivision 2 must be used to provide additional assistance under this section.

Subd. 8. Eligibility.

A municipality is eligible only after grant funding from other sources has been applied for, obtained, rejected, or the authority has determined that the potential funding is unlikely.

Subd. 9. Loan limitation.

Supplemental assistance may not be used to reduce the sewer service charges of a significant wastewater contributor, or a single user that has caused the need for the project or whose current or projected flow and load exceed one-half of the current wastewater treatment plant's capacity, unless the applicant can demonstrate to the authority that the significant wastewater contributor cannot pay its fair share. Funding will not be provided for projects that are not qualified for assistance or that would violate the state's constitution or laws regarding the use of funds appropriated for the program.

Subd. 10. High cost projects.

The authority shall not award supplemental assistance for projects in excess of $10,000 per household unless the agency has ranked the project in the top half of the project priority list.

Subd. 11. Report on needs.

By October 15 of each odd-numbered year, the authority, in conjunction with the pollution control agency, shall prepare a report to the finance division of the senate environment and natural resources committee and the house environment and natural resources finance committee on wastewater funding assistance needs of municipalities under this section.

Subd. 12. System replacement fund.

Each recipient of assistance under this section shall establish a system replacement fund setting aside a minimum of $.10 per 1,000 gallons of flow for major rehabilitation, expansion, or replacement of the treatment plant at the end of its useful life. Money must remain in the account, for the life of the loan associated with the supplemental assistance under this section, unless use of the fund is approved by the authority for major rehabilitation, expansion, or replacement of the treatment plant. Failure to maintain the fund will cancel the loan forgiveness provided under subdivision 2.

Subd. 13. Planning grants.

In order to determine the feasibility of providing wastewater treatment in unsewered areas and encourage multijurisdictional coordination, the authority may provide grants to local governments to prepare preliminary engineering plans and develop, as appropriate, intermunicipal agreements, joint powers boards, or sanitary sewer districts. Planning grants shall be equal to one-half of the eligible engineering, legal, and administrative costs as determined by the authority, up to a maximum of $50,000. The authority shall award planning grants based on the severity of the environmental need and the potential for cooperation among local governments.