Ryan Gleason

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New Mexico Infrastructure Finance Conference
Ryan Gleason New Mexico State Director
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Rural Development - NM
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Community Programs
Water and Environmental Programs (WEP)
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Water Environmental ProgramsMajor Programs

• Water and Waste Disposal Loans and Grants
• Technical Assistance Programs
• Electric Programs
• Distance Learning / Telemedicine
• Broadband Loans and Loan Guarantees

Torreon Rincon Marquez Water Construction Project
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Rural Development Water and Environmental Programs
Water and Waste Disposal (WWD) Loans and Grants
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WWD Loans and GrantsNM Allocation in FY2008

• Loans
• Direct 13,884,000
• Guaranteed 1,095,000
• Grants 4,795,000
• Total 19,774,000

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WWD Loans and GrantsImportant Dates

• April 25 Mid-Year Pooling Date
• August 1 Year-End Pooling Date

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WWD Loans and GrantsWhat projects are eligible?
Water Storage Facility
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WWD Loans and GrantsWhat projects are eligible?
Water Supply (Includes treatment)
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WWD Loans and GrantsWhat projects are eligible?
Water Wells
Distribution System
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WWD Loans and GrantsWhat expenses are eligible?

• Reasonable engineering / architectural fees and
  costs
• Acquiring land rights-of-way
• Purchasing water rights
• Connecting the user to the main service line
• Purchase / renting of equipment
• Refinance debts

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WWD Loans and GrantsWho can participate?

• Eligible participants include rural areas or
  towns with populations of less than 10,000
• Municipality
• County
• Special Purpose District
• Non-Profit Corporation or Cooperative
• Federally-Recognized Indian Tribe

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WWD Loans and GrantsHow does it work?

• Eligible participant submits
• Application for Federal Assistance (SF-424)
• Preliminary Engineering Report
• Environmental Information
• Financial Statements
• Organizational Documents

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WWD Loans and GrantsApplication assistance

• Predevelopment and Planning Grants
• Available to assist in paying costs associated
  with developing the application
• Preliminary Engineering Report
• Environmental Report
• In order to be eligible, the communitys Median
  Household Income (MHI) must be less than 31,526
• The grant can be for up to 15,000 or 75 of the
  cost (whichever is less)

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WWD Loans and GrantsTechnical Assistance and
Training Grants

• Eligible uses
• Identify and evaluate solutions to water and
  waste disposal problems in rural areas
• Assist applicants in preparing applications for
  water and waste grants made at the State level
  offices
• Improve operation and maintenance of existing
  water and waste disposal facilities in rural
  areas
• Application period
• October 1 to December 31

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WWD Loans and GrantsHow does it work?

• USDA Rural Development
• Reviews the completed application package
• Offers a loan / grant package
• If the applicant accepts, USDA Rural Development
  issues a Letter of Conditions and obligates
  (reserves) the funds
• The applicant has 180 days to meet the conditions

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WWD Loans and GrantsLoan terms

• Interest Rates
• 2.75-4.5
• Change on a quarterly basis

• Security Options
• Accounts receivable
• GO or Revenue Bonds
• Lodgers Tax
• Contracts
• Mortgage on the organizations facilities

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WWD Loans and GrantsLoan terms

• Repayment Terms
• Loan only
• Useful life of the facility, or
• Up to 40 years
• Grant / loan combination
• 40 years
• In an exceptional case, we can shorten the
  repayment period

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WWD Loans and GrantsGrant limitations

• Maximum Grant
• 75 percent
• MHI below 25,200
• Project is necessary to alleviate a health or
  sanitary problem
• 45 percent
• MHI exceeds 25,200 but is less than 31,526
• Grant funds will not be used to reduce user rate
  costs to a level less than similar systems cost
• All projects must take as much loan as they can
  afford
• Rates may have to be increased
• Average water bill nationally is 40 per month

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WWD Loans and GrantsUnderwriting

• Old System Grant Determination
• Calculates maximum eligibility for grant based on
  revenue of the similar systems with all expenses
  based on the proposed project
• Didnt take into account the actual need for
  grant funding

• New System Loan Determination
• Calculates the maximum loan based on projected
  revenue of the proposed project for a typical
  year of operation
• Takes into account the amount of grant funding
  necessary to achieve a positive cash flow

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WWD Loans and GrantsUnderwriting

• Old System Grant Determination
• Percent of Eligible Project Cost
• Debt Service to MHI
• Similar Systems

• New System Loan Determination
• Percent of Eligible Project Cost

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WWD Loans and GrantsUnderwriting

• Two parts to the new underwriting system
• Loan Determination
• Project Funding Breakdown

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WWD Loans and GrantsUnderwriting Loan
Determination

• Rural Developments Objectives
• Determine the maximum possible loan repayment
• Based on a typical year of operation as opposed
  to the first full year of operation
• Calculate the maximum loan based on the balance
  available for new debt and proposed debt service
  reserve requirements

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WWD Loans and GrantsUnderwriting Loan
Determination

• Rural Developments Analysis
• Can the applicant afford commercial credit
  (100)?
• Can the applicant afford Rural Development loan
  (100)?
• What is the best loan source to maximize debt
  capacity and reduce demand for grant?
• Does the applicant need grant funds to achieve
  positive cash flow?

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WWD Loans and GrantsUnderwriting Loan
Determination

• We realize that all applicants can afford 100
  loan if you raise the rates high enough
• Our goals and objectives are to
• Start with a reasonable user rate that is
  comparable to similar systems
• Maximize the amount of loan
• Put only enough grant funds into the project to
  achieve a positive cash flow

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WWD Loans and GrantsUnderwriting Project
Funding Breakdown

• Purpose - Determine the need for Rural
  Development grant based on
• Project Costs
• - Proposed other funding
• - Applicant contributions
• - Connection or tap fees
• - Maximum loan (from Loan Determination)
• Need for Rural Development Grant

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WWD Loans and GrantsUser Rates

• Due to limited grant funds, all applicants will
  be required to take as much loan as they can
  afford prior to receiving any grant
• This may require increasing water or wastewater
  rates
• National average water rates for rural systems is
  in the 31 - 34 per month range
• Less than cable TV or phone
• Rates should be affordable, but there will be no
  more subsidizing of artificially low rates

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WWD Loans and GrantsReporting Requirements

• Thirty days prior to the beginning of each fiscal
  year
• Annual Budget two copies
• Projected Cash Flow Statement two copies
• Thirty days after the end of the first three
  quarters of the fiscal year (for borrowers who
  are receiving their first RD loan or experiencing
  financial or managerial problems)
• Current Quarter Income Calculation two copies
• Year-to-Date Income Calculation two copies
• Supplemental Data contained in Form RD 442-2,
  Schedule 1, page 2
• Sixty days after the end of the fiscal year
• Form RD 442-2, Schedule 1 two copies
• Form RD 442-3 two copies
• An audit report may be submitted in lieu of these
  forms if the audit is submitted no later than 150
  days after the end of the fiscal year
• Include current rate schedule or a statement that
  the borrowers rate schedule has not changed
  since the last filing

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WWD Loans and GrantsSpecial Funding Initiatives

• Colonias
• Emergency Community Water Assistance Grants
• Native American

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WWD Loans and GrantsColonias Earmark

• To qualify, a Colonia must be located within 150
  miles of the Mexican border or in a county where
  over 50 of the county is within 150 miles of the
  Mexican border
• Dona Ana Catron
• Luna Eddy
• Grant Otero
• Hidalgo Sierra
• Parts of Lincoln
• Lea
• Socorro
• Chaves
• USDA Rural Development can offer 100 grant
• Colonia must take a loan if it can afford it
• 7,963,000 available for New Mexico

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WWD Loans and GrantsEmergency Community Water
Assistance Grant

• Congress has set aside money for the following
  emergencies
• Communities may receive a grant of up to 500,000
  when
• There has been a significant decline in quantity
  or quality of water, and
• The decline occurred within two years of filing
  the application
• Communities with an existing system who have an
  acute shortage or decline in water quality may
  receive a grant of up to 75,000 for
• Repairs
• Partial replacement
• Significant maintenance

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WWD Loans and GrantsNative American Earmark

• Congress has set aside money for projects on
  Tribal lands
• The project must serve a Federally-Recognized
  Indian Tribe
• The Tribal project is eligible to receive 100
  grant, up to 1 million
• There is no state allocation so projects must
  compete with applications from other states
• 16,007,160 for FY2008

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Ryan Gleason State Director 505-761-4950
Martha Torrez Program Director 505-761-4955