Title of Proposed Rulemaking

Amend Clean Water State Revolving Fund - Permanent Rules. Chapter 340, Division 54

Statutory Authority or other Legal Authority

Statutes Implemented

The Oregon Department of Environmental Quality (DEQ) and the Environmental Quality Commission (EQC) have the statutory authority to address this issue under ORS 468.020 and 468.423 - 468.440.

Additional authority is provided by the American Recovery and Reinvestment Act of 2009

(Public Law 111-5).

These proposed rules implement ORS 468.423 - 468.440.

Need for the Rule(s)

President Obama signed the American Recovery and Reinvestment Act of 2009 (the Act) in February 2009. The Act provides economic stimulus funds to the federal Clean Water State Revolving Fund (CWSRF) loan program that is administered by the U.S. Environmental Protection Agency (EPA). The EPA allocated $44.3 million in funds to Oregon DEQ’s CWSRF program. In April 2009, the EQC adopted temporary amendments to DEQ’s CWSRF program administrative rules to ensure the program addressed all requirements of the Act and therefore was eligible to receive the $44 million capitalization grant.

By law, the temporary amendments adopted by the EQC in April will expire in 180 days (late October). This permanent rulemaking is necessary to ensure DEQ is able to meet the requirements of the Act and to receive possible additional funds from the Act if those funds become available after October 2009. The intention of this rulemaking is to permanently adopt the temporary amendments with only minimal changes in language necessary to ensure DEQ and borrowers are able to comply with requirements of the Act.

Documents Relied Upon for Rulemaking

The principal documents relied upon in preparing this rulemaking include:

•  The American Recovery and Reinvestment Act of 2009;

•  U.S. Environmental Protection Agency Memo dated March 2, 2009 from the EPA Office of Wastewater Management – guidance document on awarding capitalization grants under the Act;

•  Oregon administrative rules, chapter 340, division 54.

These documents are available from DEQ's Water Quality Division, 811 SW Sixth Avenue, Portland Oregon. To arrange to review these documents call Larry McAllister, (503) 229-6412.

Requests for Other Options

Pursuant to ORS 183.335(2)(b)(G), DEQ requests public comment on whether other options should be considered for achieving the rule’s substantive goals while reducing negative economic impact of the rule on business.

Fiscal and Economic Impact, Statement of Cost Compliance

Overview

Adoption of the proposed rule amendments will allow DEQ's CWSRF program to address certain requirements of the American Recovery and Reinvestment Act. As a result of addressing those requirements, DEQ's CWSRF loan program was eligible for $44.3 million in funding from the Act. The additional funds will be used for loans incorporating zero percent interest rates and substantial principal forgiveness. The incentives of these loans will make it possible for borrowers to substantially reduce the cost of needed water quality improvement projects

These loans will be available to cities, counties and other public entities. There are additional reporting requirements under ARRA associated with the loans, but the cost of that reporting are expected to be negligible.

Impacts on the General Public

The adoption of the proposed rules will have no direct impact on the general public. Borrowers of these loans are limited to public agencies and they will benefit from the additional subsidization of the loans offered under the rules in financing their water quality projects. For example, a loan made to a small community would include a subsidy of 75% principal forgiveness. In this example, only $250,000 of a $1 million loan would have to be repaid to DEQ.

The public should benefit from the water quality improvements made possible by projects receiving CWSRF loans. Due to variables such as the type and size of the project and a community’s population, quantifying specific fiscal impacts to the public from this rulemaking is beyond the scope of this fiscal analysis.

Impacts to Small Business

(50 or fewer employees –ORS183.310(10))

Small businesses are not eligible applicants to the CWSRF loan program, so the proposed rules will have no measurable direct impact on Oregon's small businesses.

DEQ’s funding of additional water quality improvement projects may increase the demand for some services provided by Oregon’s small businesses such as consulting and construction services.

Cost of Compliance on Small Business (50 or fewer employees –ORS183.310(10))

a) Estimated number of small businesses subject to the proposed rule

Small businesses are not eligible applicants to the CWSRF program and are not subject to the proposed rules.

b) Types of businesses and industries with small businesses subject to the proposed rule

There are various types and numbers of companies who might indirectly benefit from the proposed rules. These primarily include consultants and contractors who would be employed to design and construct funded projects.

c) Projected reporting, recordkeeping and other administrative activities required by small businesses for compliance with the proposed rule, including costs of professional services

The Act does require additional reporting by borrowers. As contractors or consultants to borrowers, small businesses may be required to report regularly on the number of jobs created and hours worked.

d) The equipment, supplies, labor, and increased administration required by small businesses for compliance with the proposed rule

This information is not available. The additional reporting (see above) is the only identified additional administrative activities associated with CWSRF loans using Act funds.

e) A description of the manner in which DEQ involved small businesses in the development of this rulemaking

Small businesses were not involved in the development of the proposed rules.

Impacts on Large Business

(all businesses that are not “small businesses” under ORS183.310(10))

If adopted, the proposed rules are not expected to have any measurable direct impact on Oregon's large businesses. Businesses are not eligible applicants to the CWSRF loan program and so are not expected to be impacted by the proposed changes in the loan program.

Impacts on Local Government

Local governments are the primary borrowers of CWSRF loans. The proposed rule revisions will ensure that local governments (borrowers) remain in compliance with the requirements of the Act.

The generous incentives within these loans would result in measurable project cost savings compared to most other financing options available. Again, as an example, a small community in Oregon with a population of 5,000 or less might qualify for 75% of the cost of their wastewater project being forgiven. Other communities with larger populations qualifying for these loans might have 50% of their loan amount forgiven if the proposed rules are adopted. Determining specific fiscal impacts to local governments requires information on variables that is beyond the scope of this fiscal analysis.

Impacts on State Agencies other than DEQ

It is not expected the proposed rules will have a measurable impact on other state agencies, although certain agencies play a role in the CWSRF loan program’s environmental review process. For instance, the Department of Land Conservation and Development (DLCD) is responsible for evaluating certain environmental impacts of projects receiving CWSRF funding. Additional projects (due to Act funding) may result in additional environmental review work by staff at DLCD.

Impacts on DEQ

Adoption of the proposed rule amendments will have no significant impact on DEQ’s CWSRF program or the Department. The related activities due to the availability of the Act funding are being addressed with current DEQ resources.

Assumptions

The proposed permanent rules are critical for DEQ to successfully implement the American Recovery and Reinvestment Act. The rules will ensure Oregon’s CWSRF loan program and its borrowers continue to meet the requirements of the Act at that time the temporary rules expire.

Housing Costs

DEQ has determined that this proposed rulemaking will have no measurable effect on the cost of development of a 6,000 square foot parcel and the construction of a 1,200 square foot detached single family dwelling on that parcel.

Administrative Rule Advisory Committee

An advisory committee was not used in developing this permanent rulemaking. Because this rulemaking does not address new policy issues, an advisory committee was not convened. A financial work group provided policy direction during the development of the earlier temporary rule language.