1. (a) Eligibility. Subject to limitations of federal law, the board may provide financial assistance in the form of low interest loans and/or loan subsidies through the Disadvantaged Community Account of the DWSRF to:

   1. (1) a political subdivision:

      1. (A) that is a disadvantaged community; or

      2. (B) for a project serving an area that:

         1. (i) is located outside the boundaries of the political subdivision; and
         2. (ii) meets the definition of a disadvantaged community; or
   2. (2) an owner of a community water system that is ordered by the commission to provide service to a disadvantaged community, provided that the financial assistance is for the sole purpose of providing service to a disadvantaged community.

2. (b) Definition of Disadvantaged Community.

   1. (1) A community is a disadvantaged community if it meets the definition of a disadvantaged community presently or if as a result of a proposed project, the community becomes a disadvantaged community.

   2. (2) Disadvantaged community means the service area of a public water system that has an adjusted median household income which is no more than 75% of the median state household income for the most recent year for which statistics are available; and

      1. (A) if the service area is not charged for sewer services, has a household cost factor for water rates that is greater than or equal to 1.0%; or
      2. (B) if the service area is charged for water and sewer services, has a Combined Household Cost Factor for water and sewer rates that is greater than or equal to 2.0%.
   3. (3) The household cost factor is calculated as the average yearly water bill divided by adjusted median household income.
   4. (4) The combined household cost factor is calculated as the average yearly water bill plus the average yearly sewer bill divided by the adjusted median household income.
   5. (5) The average yearly water bill is calculated as the average number of persons per occupied household multiplied by 2,325 gallons per person per month multiplied by the proposed monthly water rate multiplied by 12. The proposed monthly water rate shall include the cost of the proposed project. Any funds for the proposed project received from sources other than the DWSRF shall be deducted from the cost of the project.
   6. (6) The average yearly sewer bill is calculated as the average number of persons per occupied household multiplied by 1,279 gallons per person per month multiplied by the monthly sewer rate multiplied by 12.
   7. (7) The adjusted median household income is calculated as the 1990 annual median household income multiplied by the current Texas Consumer Price Index divided by the 1990 Texas Consumer Price Index. The necessary information will be provided by the board to the applicant during the solicitation process.
   8. (8) If taxes, surcharges or other fees are used to subsidize the water and/or sewer system, the average annual amount per household should be included in calculating the household cost factor or the combined household cost factor.

3. (c) Interest Rates and Subsidies. Notwithstanding the provisions of §371.52 of this title (relating to Lending Rates), the interest rates and the levels of subsidies under the disadvantaged community program will be determined by the provisions of this subsection. The loan amount that is subject to forgiveness will not be subject to an interest rate.

   1. (1) If the adjusted median household income for the service area is between 75% and 70% of the median state household income, the board's financial assistance shall be in the form of a loan with a 1.0% interest rate.
   2. (2) If the adjusted median household income for the service area is less than or equal to 70% but greater than 60% of the median state household income, the board's financial assistance shall be in the form of a loan with a 0.0% interest rate.
   3. (3) If the adjusted median household income for the service area is less than or equal to 60% but greater than 50% of the median state household income, the board's financial assistance shall be in the form of a loan with a 0.0% interest rate and 15% of the principal will be forgiven.
   4. (4) If the adjusted median household income for the service area is less than or equal to 50% of the median state household income, the board's financial assistance shall be in the form of a loan with a 0.0% interest rate and 35% of the principal will be forgiven.
4. (d) If the actual cost of a project funded under this section exceeds the estimated cost of the project as listed on the intended use plan, the additional cost will be funded through the Water Supply Account of the Texas Water Development Fund and interest rates for the additional cost will be set according to the provisions of §363.33 of this title (relating to Interest Rates for Loans and Purchase of Board's interest in State Participation Projects).
5. (e) Term of Loan. Notwithstanding the provisions of §371.12(1)(B) of this title (relating to Uses of the Fund), the board may extend the term of a loan made through the Disadvantaged Community Account of the DWSRF if the extended term terminates not later than the date that is 30 years after the date of project completion and does not exceed the expected design life of the project.
6. (f) Total Amount of Subsidies. For each fiscal year, the total amount of loan subsidies made by the board under this section may not exceed 30% of the amount of the capitalization grant received by the board for that year.

7. (g) Consolidations.

   1. (1) Financial assistance for consolidations.

      1. (A) If the applicant acquires another public water system or provides retail service to another public water system, 20% of the cost of the project is subject to forgiveness of principal.
      2. (B) If the applicant provides wholesale service to another public water system, 15% of the cost of the project is subject to forgiveness of principal.
      3. (C) The amount of principal that will be forgiven for the consolidation will be deducted from the cost of the project before calculating the amount of financial assistance for the remaining cost of the project pursuant to subsection (c) of this section.

   2. (2) Eligible costs.

      1. (A) Any one or more of the following costs of consolidation are eligible for funding:

         1. (i) system acquisitions;
         2. (ii) the cost of plant upgrades or expansions specific to providing service to the disadvantaged community;
         3. (iii) the cost of rehabilitating or replacing the distribution system of an existing water system to bring the system into compliance with drinking water regulations;
         4. (iv) the provision of wholesale service; and
         5. (v) master meters and upgrades needed to receive wholesale service from the consolidating system.
      2. (B) Notwithstanding the provisions of §371.13(a)(4) of this title (relating to Projects Eligible for Assistance), purchase of existing capacity in the consolidating system are not eligible for funding through the Disadvantaged Community Account of the DWSRF.

Source Note:The provisions of this §371.24 adopted to be effective December 31, 1997, 22 TexReg 12784; amended to be effective March 11, 1998, 23 TexReg 2396; amended to be effective October 8, 1998, 23 TexReg 10042; amended to be effective December 8, 1999, 24 TexReg 10886.