PURPOSE: This rule establishes the department’s grant application procedures requirements and for construction of projects at public water supply districts and rural community water systems, and providing source water protection grants to support the Conservation Reserve Enhancement Program.

1. (1) Application Requirements.

   1. (A) As required by section 640.615, RSMo, the applicant must first apply with the agency or other financial source which is to furnish the primary financial assistance, and after the amount of that assistance has been determined, an application for a grant under this rule may be made to and processed by the department. This requirement may be met by the submittal of a pre-application form and preliminary engineering report to the Missouri Water and Wastewater Review Committee. The application shall be submitted on forms provided by the department. The application shall be supported by the necessary documents and forms from other state and federal grant or lending agencies or private lending agencies to enable the department to establish eligibility and need for grant funds.
   2. (B) The project for which the grant application is submitted shall comply with appropriate state and local laws, rules and ordinances.
   3. (C) These grants are to be considered secondary sources of funding and, as such, shall in no case exceed one thousand four hundred dollars ($1,400) per contracted connection, fifty percent (50%) of the total project cost, or five hundred thousand dollars ($500,000), whichever is less.

   4. (D) Other than pre-approved financing costs, no more than fifty percent (50%) of of the total eligible cost will be reimbursed through the grant. Grant funds can be used for the following costs:

      1. 1. Construction contracts for new con-

struction, rehabilitation or upgrade of publicly owned treatment systems including upgrades made to comply with additional safe drinking water requirements.

1. 2. Engineering costs including design,

planning and construction phase engineering if the costs are supported by an engineering agreement pre-approved by the department. The proportional cost of the engineering will be eligible when the project includes non-eligible construction costs.

1. 3. One hundred percent (100%) of the

reasonable costs of a grant anticipation loan will be eligible. Departmental approval must be obtained prior to securing the grant anticipation loan. Grant anticipation loan costs will be approved when they are needed for cash flow purposes for the period between the grant award and the first payment from the department. The approved costs of the grant anticipation notes will be in addition to the approved grant amount.

1. (E) The grant application packet shall contain the following information:

   1. 1. A preliminary engineering cost study

for the proposed project including, but not limited to, the following items: development and administration costs; land, structures, right-of-way costs; legal costs; engineering costs; interest costs; equipment costs; contingencies; other costs; and total project costs;

1. 2. An engineering report for the pro-

posed project which is in accordance with accepted engineering practices, the current “Design Guide for Community Water System” and “Ten State Standards” and applicable rules should be considered for design standards;

1. 3. The information required to deter-

mine the cost per contracted connection;

1. 4. The median annual household income

of the residents in the district or community as determined in the latest federal census;

1. 5. Information required to determine the

ratio of the contracted users to the potential users; and

1. 6. An evaluation of the applicant’s tech-

nical, managerial, and financial (TMF) capacity on forms provided by the department. An applicant that does not meet the TMF capacity requirements established in 10 CSR 60-3.030 shall submit a plan outlining the steps the applicant will take to meet the requirements. The plan shall show the applicant will meet TMF requirements before the project is complete or within one (1) year of the award of the grant unless the department determines that a longer period of time is necessary.

1. (2) Grant Priorities.

   1. (A) Priorities for grants for public water supply districts and rural community water systems shall be established by the department.
   2. (B) Determination of relative need will be coordinated with appropriate federal grant and lending agencies and with appropriate state agencies. Preference may be given to 10 CSR 60-13

projects needing a grant in order to obtain state or federal drinking water loan assistance. It is the intent of the department to maximize the effective use of state and federal grant and loan funds.

1. (C) Additional priority will be awarded to projects whose projected financial need is based on potential compliance with additional safe drinking water requirements.
2. (D) Priority will be given to applicants who consider regionalization or for projects that include regionalization.

1. (3) Approval and Payment of Grants Made and Amended Between March 4, 2007 and August 30, 2007.

   1. (A) The applicant shall be notified by the department when the grant application has been approved. Grant award shall be made upon receipt and approval of bid documents and executed contract documents.

   2. (B) Full payment of the grant amount for the construction project less any payments processed prior to the date of this rule shall be made at the time of the department’s receipt of the executed grant or grant amendment. The following provisions shall apply:

      1. 1. The grantee shall establish a separate

escrow account with a bank as defined in Chapter 409, section 409-1.102;

1. 2. The full grant award amount, less any

payments processed prior to the date of this rule, will be paid to the grantee for deposit into the grantee’s established escrow account;

1. 3. Grant funds in the escrow account

may be used to pay up to fifty percent (50%) of the costs of construction, equipment and construction phase engineering as the costs are incurred; and

1. 4. The grantee shall submit the bank

statement of the escrow account monthly, within thirty (30) days of the end of the month. If the monthly statement indicates that funds were withdrawn, the grantee shall submit copies of the invoices to document the costs.

1. (C) Any cost of work completed after the department’s final inspection approval shall not be an eligible project cost. The grant amount will be reduced, if necessary, to reflect actual project costs as determined by the invoices submitted by the grantee.
2. (D) An audit to verify expenditures of grant funds may be made by the department after the completion of each approved project. Any funds found not expended for the purposes listed in subsection (1)(D) of this regulation will be recovered.

1. (4) Approval and Payment of Grants Made after August 30, 2007.

   1. (A) The applicant shall be notified by the department when the grant application has been approved. Grant award shall be made upon receipt and approval of bid documents and executed contract documents. The department, based on the status of state funding, may elect to pay out the full grant amount at the time of grant award or to make payments to the grantee.

   2. (B) If the department elects to make full payment of the grant amount for the construction project, payment shall be made at the time of the department’s receipt of the executed grant document. The following provisions shall apply:

      1. 1. The grantee shall establish a separate

escrow account with a bank as defined in Chapter 409, section 409-1.102;

1. 2. The full grant award amount, less any

payments processed prior to the date of this rule, will be paid to the grantee for deposit into the grantee’s established escrow account;

1. 3. Grant funds in the escrow account

may be used to pay up to fifty percent (50%) of the eligible costs shown in subsection (1)(D) of this rule except that one hundred percent (100%) of the reasonable costs associated with a grant anticipation loan will be eligible when this financing is pre-approved by the department.

1. 4. The grantee shall submit the bank

statement of the escrow account monthly, within thirty (30) days of the end of the month. If the monthly statement indicates that funds were withdrawn, the grantee shall submit copies of the invoices to document the costs.

1. 5. The bank account may earn interest,

however, all withdrawals from the account must be documented with eligible invoices. If the project costs are inadequate to withdraw all the funds in the account, the balance must be refunded to the department.

1. (C) If the department elects to make grant payments rather than fund the full grant, payment can be requested no more frequently than monthly. The department will provide a payment request form for the grantee to use. The payment request must be supported by invoices that document the costs incurred.
2. (D) Any cost of work completed after the department’s final inspection approval shall not be an eligible cost. The grant amount will be reduced, if necessary, to reflect actual project costs as determined by the invoices submitted by the grantee.
3. (E) An audit to verify expenditure of grant funds may be made by the department after the completion of each approved project. Any funds found not expended for the purposes listed in paragraph (4)(B)3. of this regulation will be recovered.
4. (F) Any funds remaining in the escrow account three (3) years after the date of the initial grant payment will be recovered by the department. On grants that are paid incrementally by the department, no payments will be made after three (3) years from the initial grant award acceptance.
5. (G) An audit to verify expenditure of grant funds may be made by the department after the completion of each approved project. Any funds found not expended for the purposes listed in subsection (1)(D) of this regulation will be recovered.

1. (5) If at any time during the first twenty (20)- years of the design life of the facility(ies) funded under this rule the facility is sold, leased or otherwise transferred, either outright or on a contract for deed or lease-purchase agreement, to other than a political subdivision of the state, the state shall require reimbursement of the grant funds. The total amount of the grant funds to be reimbursed shall be based on a twenty (20)-year straightline depreciation. Grant funds to be reimbursed, shall become due and payable upon transfer of ownership of the facility(ies).

2. (6) Grants for Conservation Reserve Enhancement Program Participants.

   1. (A) Program Description and Definition of Terms.

      1. 1. The Conservation Reserve Enhance-

ment Program (CREP) is a state-federal partnership program targeted to address specific water quality, soil erosion and wildlife habitat issues related to agricultural use. The CREP uses financial incentives to encourage farmers to voluntarily enroll in contracts to remove lands from agricultural production and, instead, to implement approved conservation reserve practices.

1. 2. Approved conservation reserve prac-

tices in this program are: introduced grasses and legumes, native grasses, hardwood tree planting, wildlife habitat, contour grass strips, filter strips, riparian buffers, and wetland restoration.

1. 3. The purpose of the grants provided

under this section (6) is to provide an additional cash incentive (“rental enhancement payment”) to farmers to encourage participation in CREP. The rental enhancement payment is a per-acre cash payment to participating farmers for land enrolled in the CREP that is in addition to other payments or financial assistance from federal or state funds and is a percentage of the annual base rental payment.

1. 4. The annual base rental payment is the

average weighted soil rental rate for the three (3) predominant soil types on the acreage offered. The U.S. Department of Agriculture maintains this information on a county-bycounty basis for the entire country.

1. (B) Application Requirements.

   1. 1. As required by section 640.615,

RSMo, the applicant must first apply with the agency or other financial source which is to furnish the primary financial assistance. After the amount of that assistance has been determined, an application for a grant shall be submitted on forms provided by the department. The application shall be supported by the necessary documents and forms from other state and federal grant or lending agencies or private lending agencies to enable the department to establish eligibility and need for grant funds.

1. 2. The application shall contain:

   1. A. The number of acres being pro-

tected;

1. B. The source for the local match;
2. C. A letter from the local soil conser-

vation district approving the proposed practices to be implemented including a reasonable time line for completion;

1. D. A legal description of the project;

and

1. E. The name and address of the

farmer(s) (subrecipients) proposing the practices.

1. 3. The project for which the grant appli-

cation is submitted shall comply with appropriate state and local laws, rules and ordinances. These projects shall be limited to those areas with a source water protection program approved by the department.

1. 4. These grants are to be considered sec-

ondary sources of funding and, as such, shall in no case exceed one thousand four hundred dollars ($1,400) per contracted connection, fifty percent (50%) of the total project cost, or five hundred thousand dollars ($500,000), whichever is less.

1. 5. A local match for the rental enhance-

ment payment grant is expected.

1. A. The department expects rental

enhancement payment grants not to exceed the product of five percent (5%) of the annual base rental payment times the duration of the contract in years (for example, if the contract is in effect fifteen (15) years, the rental enhancement grant would equal seventy-five percent (75%) of the total of all annual base rental payments), and expects this to be matched with an equal amount of other nonfederal funding.

1. B. Funding priority will be given to

those applicants that offer the highest percentage of matching funds. If matching funds are not available, the applicant may request a reduction or waiver of the match requirement, in which case the rental enhancement payment grant shall not exceed the product of ten percent (10%) of the annual base rental payment times the duration of the contract in years.

1. (C) Approval and Payment of Grants.

   1. 1. The applicant shall be notified by the

department when the grant application has been approved.

1. 2. Payments will be made to the recipi-

ent after completion of the approved practice. These grant payments shall be made immediately available to the farmer (subrecipient) implementing the practices. Grant payments to the recipient may be combined to cover multiple subrecipients.

1. 3. The payment procedures in subsec-

tions (5)(B) and (5)(C) of this rule may be used by the department in order to better manage the cash available to the department. The department will notify the CREP fund recipient if this occurs.

1. (D) If a subrecipient fails to carry out the terms and conditions of the CREP contract, the state may require reimbursement of the rental enhancement payment portion of the grant with interest.

AUTHORITY: section 640.615, RSMo 2000.* This rule was previously filed as 10 CSR 60- 2.020 Sept. 21, 1973, effective Oct. 1, 1973. Amended: Filed May 4, 1979, effective Sept. 14, 1979. Amended: Filed April 14, 1981, effective Oct. 11, 1981. Rescinded and readopted: Filed Feb. 2, 1983, effective July 1, 1983. Emergency amendment filed July 3, 1989, effective July 27, 1989, expired Nov. 23, 1989. Amended: Filed July 3, 1989, effective Nov. 23, 1989. Amended: Filed Jan. 19, 2001, effective Sept. 30, 2001. Emergency amendment filed Feb. 1, 2007, effective March 4, 2007, expired Aug. 30, 2007. Amended: Filed March 14, 2007, effective Oct. 30, 2007. *Original authority: 640.615, RSMo 1989, amended 1999.