1. (a) General provisions. This fund is available to eligible units of general local government to provide financial assistance to cities and communities that are willing to address water and sewer needs through self-help methods that are encouraged and supported by the Small Towns Environment Program (STEP). The self-help method for addressing water and sewer needs is best utilized by cities and communities recognizing that conventional water and sewer financing and construction methods cannot provide an affordable response to the water or sewer needs. By utilizing a city's or community's own resources (human, material, and financial), the costs for the water or sewer improvements can be reduced significantly from the retail costs of the improvements through conventional construction methods. Participants in the small town environment program fund should attain at least a forty percent reduction in the costs of the water or sewer project by using self-help in lieu of conventional financing and construction methods.

   1. (1) Small towns environment program funds can be used to cover material costs, certain engineering costs, administrative costs, and other necessary project costs that are approved by program staff.
   2. (2) In addition to the threshold requirements of §255.1(h) and (n) of this title (relating to General Provisions), in order to be eligible to apply for small towns environment program funds, an applicant must document that at least 51% of the persons who would directly benefit from the implementation of each activity proposed in the application are of low to moderate income.
   3. (3) Cities and counties receiving 2011 and 2012 Community Development Fund grant awards for applications that do not include water, sewer, or housing activities are not eligible to receive a 2011 grant award from this fund. However, the Department may consider a city's or county's request to transfer funds that are not financing water, sewer, or housing activities under a 2011 or 2012 Community Development Fund grant award to finance water and sewer activities that will be addressed through self-help methods.

2. (b) Eligible activities. For the small towns environment program fund eligible activities are limited to the following:

   1. (1) The installation of facilities to provide first-time water or sewer service.
   2. (2) The installation of water or sewer system improvements.
   3. (3) Ancillary repairs related to the installation of water and sewer systems or improvements.
   4. (4) The acquisition of real property related to the installation of water and sewer systems or improvements (easements, rights of way, etc.).
   5. (5) Sewer or water taps and water meters.
   6. (6) Water or sewer yard service lines (for low and moderate income persons).
   7. (7) Water or sewer house service connections (for low and moderate income persons).
   8. (8) Plumbing improvements associated with providing water or sewer service to a housing unit.
   9. (9) Water or sewer connection fees (for low and moderate income persons).
   10. (10) Rental of equipment for installation of water or sewer.
   11. (11) Reasonable associated administrative costs.
   12. (12) Reasonable associated engineering services costs.
3. (c) Ineligible activities. Any activity not described in subsection (b) of this section is ineligible under this fund unless the activity is approved by the TxCDBG. Other ineligible activities are temporary solutions, such as emergency inter-connects that are not used on an on-going basis for supply or treatment and back-ups not required by the regulations of the Texas Commission on Environmental Quality. The TxCDBG will not reimburse for force account work for construction activities on the STEP project.
4. (d) Funding cycle. Applications are accepted two times a year as long as funds are available. Funds will be divided among the two application periods. After all projects are ranked, only those that can be fully funded will be awarded a grant. There will be no marginally funded grant awards. The TxCDBG will not accept an application for STEP fund assistance until TxCDBG staff and representatives of the potential applicant have evaluated the self-help process and TxCDBG staff determine that self-help is a feasible method for completion of the water or sewer project, the community is committed to self-help as the means to address the problem, and the community is ready and has the capacity to begin and complete a self-help project. If it is determined that the community meets all of the STEP criteria then an invitation to apply for funds will be extended to the community and the application may be submitted.

5. (e) Threshold criteria. The self-help response to water and sewer needs may not be appropriate in every community. In most cases, the decision by a community to utilize self-help to obtain needed water and sewer facilities is based on the community's realization that it cannot afford even a "no frills" water or sewer system based on the initial construction costs and the operations/maintenance costs (including debt service costs) for water or sewer facilities installed through conventional financing and construction methods. The following are threshold requirements for the STEP framework: Without all these elements the project may not be considered under the STEP fund.

   1. (1) The community receiving benefits from the project must have one or more sparkplugs (preferably three). Sparkplugs are local leaders willing to both lead and sustain the effort to complete the project. While local officials may serve as sparkplugs, at least two of the three sparkplugs must be residents and not local officials. One of the sparkplugs should have the skills necessary to maintain the paperwork needed for the project. One of the sparkplugs should have knowledge or skills necessary to lead the self-help effort, and one sparkplug can have a combination of these skills or just be the motivator and problem solver of the group.

   2. (2) The community receiving benefits from the project should exhibit a readiness to proceed with the project. The community's readiness to proceed is based on a strong local perception of the problem and the willingness to take action to solve the problem. A community's readiness to proceed is shown when the following conditions exist:

      1. (A) A strong local perception of the problem exists.
      2. (B) The community has the perception that local implementation is the best and maybe only solution to the problem.
      3. (C) The residents of the community have confidence that they can adequately complete the project.
      4. (D) The community has no strong competing priority.
      5. (E) The local government is supportive of the effort and understands the urgency.
      6. (F) There exists a public and private willingness to pay additional costs if needed such as fees, hook-ups for churches, and other costs.
      7. (G) Some effort and attention have already been given to local assessment of the problem.
      8. (H) There is enthusiastic, capable support for the community from the county or regional field staff of any regulatory agency involved with solutions to the problem.

   3. (3) The community receiving benefits from the project should have the capacity and manpower with the skills needed to complete the project and operate applicable construction equipment. The capacity and skills to complete the project include the following:

      1. (A) Skilled workers within the community such as an electrician, plumber, engineer water system operator and persons with experience operating heavy equipment, and persons with construction skills and pipe laying experience.
      2. (B) The community has a list of volunteers that includes the tasks that are assigned to each volunteer.
      3. (C) The community has equipment that will be needed to complete the project.
      4. (D) The community has letters stating support from local businesses in form of donation of supplies or manpower.
      5. (E) The community has letter from the water and/or sewer service provider supporting the project and agreeing to provide service.
      6. (F) A letter from a Certified Public Accountant documenting that applying locality has financial and management capacity to compete project.

   4. (4) The community receiving benefits from the project must be able to show that by completing the proposed project through self-help volunteer methods the community can achieve at least a 40% savings off the retail price of completing the same project through the bid/contract process. The 40% savings and requirement that the project must be performed predominately by community volunteer workers is determined for each water or sewer activity with its own distinct beneficiaries. The information provided to the TxCDBG to document the reduced project cost through self-help includes the following:

      1. (A) Two engineering break-outs of cost, one that shows the retail construction cost and another that shows the self-help cost and demonstrates the 40% savings.
      2. (B) Documents containing material prices and pledges of equipment.
      3. (C) A list of the volunteers by project completion task.
      4. (D) A determination of appropriate technology for the project and the feasibility of project through a letter from an engineer.
   5. (5) Project work, except for any contract administrative activities or engineering services activities, must be performed predominately by community volunteer workers.
   6. (6) To be eligible for additional STEP awards, an applicant must have demonstrated to TxCDBG management that its existing STEP contracts are currently being implemented on schedule in accordance with the applicable contracts and in accordance with any TxCDBG-approved allowances.

6. (f) Selection procedures.

   1. (1) During each of the two application rounds, the Department staff initially evaluate eligible cities or counties that have expressed an interest in using the self-help method and potentially applying for funding under the STEP Fund. Department staff assess whether self-help is a feasible method for completion of the water or sewer project, the community is committed to self-help as the means to address the problem, and the community is ready along with having the capacity to begin and complete a self-help project. If Department staff determines that the community meets all of the STEP threshold criteria then the community is invited to apply prior to the application deadline.
   2. (2) The Department will not accept an application under the STEP Fund unless this assessment and invitation process is followed.
   3. (3) Applicants invited to apply under the STEP Fund are scored using the selection criteria to determine the ranking.
   4. (4) Following a final technical review, the TxCDBG staff makes funding recommendations to the Executive Director of the Department.
   5. (5) Upon announcement of contract awards, the Department staff works with recipients to execute the contract agreements. While the award must be based on the information provided in the application, the Department may negotiate any element of the contract with the recipient as long as the contract amount is not increased and the level of benefits described in the application is not decreased. The level of benefits may be negotiated only when the project is partially funded.

7. (g) Selection criteria. The following is an outline of the selection criteria used by the Department for scoring applications under the STEP fund. One hundred twenty (120) points are available. A project must score at least 75 points overall and 15 points under the factor in paragraph (2) of this subsection to be considered for funding.

   1. (1) Project impact (total--up to 60 points). When necessary, a weighted average is used to assign scores to applications which include activities in the different project impact scoring levels. Using as a base figure the TxCDBG funds requested minus the TxCDBG funds requested for engineering and administration, a percentage of the total TxCDBG construction dollars for each activity will be calculated. The percentage of the total TxCDBG construction dollars for each activity will then be multiplied by the appropriate project impact point level. The sum of these calculations will determine the composite project impact score. Factors that are evaluated by the TxCDBG staff in the assignment of scores within the predetermined scoring ranges for activities include, but are not limited to, how the proposed project will resolve the identified need and the severity of the need within the applying jurisdiction; and projects designed to bring existing services up to at least the state minimum standards as set by the applicable regulatory agency are generally given additional consideration. The different project impact scoring levels and scoring ranges within each level are:

      1. (A) first time water and/or sewer service--up to 60--40 points
      2. (B) water activities addressing drought conditions--up to 60--40 points
      3. (C) activities addressing severe impact to a water system (imminent loss of well, transmission line, supply impact)--up to 60--40 points
      4. (D) water and/or sewer activities addressing an imminent threat to health as documented by the Texas Commission of Environmental Quality or Texas Department of State Health Services--60--40 points
      5. (E) Problems due to severe sewer issues that can be addressed through the STEP process (documented)--up to 60--40 points
      6. (F) activities addressing documented severe water pressure problems--up to 50--40 points
      7. (G) replacement of existing water or sewer lines that are not addressing activities described in subparagraphs (A) - (F) of this paragraph--up to 40--30 points
      8. (H) all other proposed water and sewer projects that are not addressing activities described in subparagraphs (A) - (G) of this paragraph--up to 30--20 points

   2. (2) STEP Characteristics, Merits of the Project, and Local Effort (total--up to 30 points). The TxCDBG staff will assess the proposal for the following STEP characteristics not scored in other factors:

      1. (A) Degree work will be performed by community volunteer workers, including information provided on the volunteer work to total work;
      2. (B) Local leaders (sparkplugs) willing to both lead and sustain the effort;
      3. (C) Readiness to proceed--the local perception of the problem and the willingness to take action to solve it;
      4. (D) Capacity--the manpower required for the proposal including skills required to solve the problem and operate applicable construction equipment;
      5. (E) Merits of the projects, including the severity of the need, whether the applicant sought funding from other sources, cost in TxCDBG dollars requested per beneficiary, etc.; and
      6. (F) Local efforts being made by applicants in utilizing local resources for community development.

   3. (3) Past participation and performance (total--up to 15 points). An applicant receives up to 15 points on the following two factors.

      1. (A) Ten of the 15 points available are awarded to applicants that do not have a current TxCDBG STEP grant.

      2. (B) An applicant can receive from zero to five points based on the applicant's past performance on previously awarded TxCDBG contracts. The applicant's score will be primarily based on our assessment of the applicant's performance on the applicant's two most recent TxCDBG contracts that have reached the end of the original contract period stipulated in the contract. The TxCDBG may also assess the applicant's performance on existing TxCDBG contracts that have not reached the end of the original contract period. Applicants that have never received a TxCDBG grant award will automatically receive these points. The TxCDBG will assess the applicant's performance on TxCDBG contracts up to the application deadline date. The applicant's performance after the application deadline date will not be evaluated in this assessment. The evaluation of an applicant's past performance may include, but is not necessarily limited to the following:

         1. (i) The applicant's completion of the previous contract activities within the original contract period.
         2. (ii) The applicant's submission of all contract reporting requirements such as Quarterly Progress Reports, Certificates of Expenditures, and Project Completion Reports.
         3. (iii) The applicant's submission of the required close-out documents within the period prescribed for such submission.
         4. (iv) The applicant's timely response to monitoring findings on previous TxCDBG contracts especially any instances when the monitoring findings included disallowed costs and the applicant's timely response to audit findings on previous TxCDBG contracts.
         5. (v) The applicant's timely response to audit findings on previous TxCDBG contracts.

   4. (4) Percentage of savings off the retail price (total--up to 10 points). For STEP, the percentage of savings off of the retail price is considered a form of community match for the project. In STEP, a threshold requirement is a minimum of 40% savings off the retail price for construction activities. The population category under which county applications are scored is dependent upon the project type and the beneficiary population served. If the project is for beneficiaries for the entire county, the total population of the county is used. If the project is for activities in the unincorporated area of the county with a target area of beneficiaries, the population category is based on the unincorporated residents for the entire county. For county applications addressing water and sewer improvements in unincorporated areas, the population category is based on the actual number of beneficiaries to be served by the project activities. The population category under which multi-jurisdiction applications are scored is based on the combined populations of the applicants according to the 2000 Census. An applicant can receive from zero to 10 points based on the following population levels and savings percentages:

      1. (A) Communities with populations equal to or less than 1,500 according to the 2000 census:

         1. (i) 55% or more savings--10 points
         2. (ii) 50% - 54.99% savings--9 points
         3. (iii) 45% - 49.99% savings--7 points
         4. (iv) 41% - 44.99% savings--5 points

      2. (B) Communities with populations above 1,500 but equal to or less than 3,000 according to the 2000 census:

         1. (i) 55% or more savings--10 points
         2. (ii) 50% - 54.99% savings--8 points
         3. (iii) 45% - 49.99% savings--6 points
         4. (iv) 41% - 44.99% savings--3 points

      3. (C) Communities with populations above 3,000 but equal to or less than 5,000 according to the 2000 census:

         1. (i) 55% or more savings--10 points
         2. (ii) 50% - 54.99% savings--7 points
         3. (iii) 45% - 49.99% savings--5 points
         4. (iv) 41% - 44.99% savings--2 points

      4. (D) Communities with populations above 5,000 but less than 10,000 according to the 2000 census:

         1. (i) 55% or more savings--10 points
         2. (ii) 50% - 54.99% savings--6 points
         3. (iii) 45% - 49.99% savings--3 points
         4. (iv) 41% - 44.99% savings--1 point

      5. (E) Communities with populations that are 10,000 or above 10,000 according to the 2000 census:

         1. (i) 55% or more savings--10 points
         2. (ii) 50% - 54.99% savings--5 points
         3. (iii) 45% - 49.99% savings--2 points
         4. (iv) 41% - 44.99% savings--0 points
   5. (5) Benefit to low/moderate income persons (total--up to 5 points). Applicants are required to meet the 51 percent low/moderate-income benefit for each activity as a threshold requirement. Any project where at least 60 percent of the TxCDBG funds benefit low/moderate-income persons will receive 5 points.

Source Note:The provisions of this §30.9 adopted to be effective August 5, 1997, 22 TexReg 6937; amended to be effective November 24, 1998, 23 TexReg 11795; amended to be effective August 18, 1999, 24 TexReg 6281; amended to be effective September 17, 2000, 25 TexReg 9216; transferred effective October 31, 2001, as published in the Texas Register August 2, 2002, 27 TexReg 6835; amended to be effective January 26, 2003, 28 TexReg 537; amended to be effective May 4, 2003, 28 TexReg 3712; amended to be effective May 4, 2004, 29 TexReg 4144; amended to be effective July 2, 2006, 31 TexReg 5085; amended to be effective March4,2007, 32 TexReg 829; amended to be effective February 28, 2008, 33 TexReg 1522; amended to be effective October 29, 2008, 33 TexReg 8763; amended to be effective March 16, 2009, 34 TexReg 1799; amended to be effective December 27, 2009, 34 TexReg 9179; amended to be effective September 11, 2011, 36 TexReg 5676; transferred effective October 1, 2011, as published in the Texas Register December 23, 2011, 36 TexReg 9011.