STEPS TO COMPLETING THE SRF LOAN PROCESS June 2011

1. STEPS TO COMPLETING THE SRF LOAN PROCESS June 2011

3. What’sNewfor 2011 • Davis Bacon wage rates applicable to all 2011 construction projects • A portion of the federal grant must provide additional subsidy • Environmental Justice Communities • Renewal Energy Projects • 20% of federal grant must go towards “Green” projects • New Disadvantaged Business Enterprise (DBE) Goals

4. Additional Subsidy • Clean Water - $4.6 million • Drinking Water - $5.2 million • Projects must be under contract by April 1, 2012 • ~3% estimated principal forgiveness for CW projects • ~10% estimated principal forgiveness for DW projects

5. The SRF Is An Intergovernmental Partnership

6. Steps to Financing • Intended Use Plan - Done • Local Authorization- by June 30, 2011 • Loan Application to DEP – Oct. 14, 2011 • Project Approval Certificate - MassDEP • Loan Commitment from MWPAT

7. Steps to Financing • Procurement Process- Authorization to Award - MassDEP • Project Regulatory Agreement - MassDEP • Loan Agreement – MWPAT • Loan Closing - MWPAT • Short Term Loans (Interim loans) • Permanent Loans

9. Local Authorization Town Meeting/City Council Vote: • Must be voted by June 30, 2011 • General Obligation Pledged as Security • Authorization to Borrow • Use suggested language written by MWPAT Bond Counsel • Appropriation • Make sure you ask for enough. Include: • Eligible + Ineligible costs • Construction Management Fees • Police Details • Inflation

10. Suggested Form of Town Hall Meeting Article and Vote Article To see if the Town will vote to appropriate a sum of money for the [construction] [planning] of (insert description of the water pollution abatement project); to determine whether this appropriation shall be raised by borrowing from the Massachusetts Water Pollution Abatement Trust or otherwise; and to take any other action relative thereto. Vote Voted: that $ is appropriated for the purpose of financing the [construction] [planning] of (insert description of the water pollution abatement project) including without limitation all costs thereof as defined in Section 1 of Chapter 29C of the General Laws, as most recently amended by St. 1998, c.78; that to meet this appropriation the Treasurer with the approval of the Selectmen is authorized to borrow $ and issue bonds or notes therefore under (Chapter 44 of the General Laws or insert reference to other applicable general or special law governing the issuance of local bonds) and/or Chapter 29C of the General Laws, as most recently amended by St. 1998, c.78; that such bonds or notes shall be general obligations of the Town unless the Treasurer with the approval of the Selectmen determines that they should be issued as limited obligations and may be secured by local system revenues as defined in Section 1 of Chapter 29C, as most recently amended by St. 1998, c.78; that the Treasurer with the approval of the Selectmen is authorized to borrow all or a portion of such amount from the Massachusetts Water Pollution Abatement Trust established pursuant to Chapter 29C, as most recently amended by St. 1998, c.78; and in connection therewith to enter into a loan agreement and/or security agreement with the Trust and otherwise to contract with the Trust and the Department of Environmental Protection with respect to such loan and for any federal or state aid available for the project or for the financing thereof; that the (Board of Selectmen, Board of Public Works or other appropriate local body or official) is authorized to enter into a project regulatory agreement with the Department of Environmental Protection, to expend all funds available for the project and to take any other action necessary to carry out the project.

11. SUGGESTED FORM OF CITY COUNCIL LOAN ORDER Ordered: that $ is appropriated for the purpose of financing the [construction] [planning] of (insert description of the water pollution abatement project) including without limitation all costs thereof as defined in Section 1 of Chapter 29C of the General Laws, as most recently amended by St. 1998, c.78; that to meet this appropriation the Treasurer with the approval of the (Mayor or Manager) and the (Auditor, Finance Committee or other appropriate local body or official) is authorized to borrow $ and issue bonds or notes therefore under (Chapter 44 of the General Laws or insert reference to other applicable general or special law governing the issuance of local bonds) and/or Chapter 29C of the General Laws, as most recently amended by St. 1998, c.78; that such bonds or notes shall be general obligations of the City unless the Treasurer with the approval of the (Mayor or Manager) and the (Auditor, Finance Committee or other appropriate local body or official) determines that they should be issued as limited obligations and may be secured by local system revenues as defined in Section 1 of Chapter 29C, as most recently amended by St. 1998, c.78; that the Treasurer with the approval of the (Mayor or Manager) [and the (Auditor, Finance Committee or other appropriate local body or official)] is authorized to borrow all or a portion of such amount from the Massachusetts Water Pollution Abatement Trust established pursuant to Chapter 29C, as most recently amended by St. 1998, c.78; and in connection therewith to enter into a loan agreement and/or a security agreement with the Trust and otherwise to contract with the Trust and the Department of Environmental Protection with respect to such loan and for any federal or state aid available for the project or for the financing thereof; that the (Mayor or Manager) is authorized to enter into a project regulatory agreement with the Department of Environmental Protection, to expend all funds available for the project and to take any other action necessary to carry out the project.

12. BorrowerLoanApplication • Due to MassDEP October 14, 2011 • Loan Application has three parts • Applicant Information - Authorized Representative, Local Appropriation etc. • Project Requirements - Plans and Specifications, Cost, Schedule, etc. • Supplemental Requirements - Permits, Planning, Professional Services Agreement, etc.

13. MassDEP Project Approval Certificate (PAC) • PAC Issued by MassDEP to the MWPAT • A copy is sent to Community • PAC certifies project eligibility, costs, and lists conditions

14. Sample- Project Approval Certificate Loan Number Loan Amount and Interest Rate Project Number and Project Description Loan Certification

15. Sample- PAC Special Conditions Page Detailed conditions listed on the PAC

16. MWPAT Loan Commitment Package • Board Vote creates Commitment to Borrower • Board meets on the first Wednesday of every month • Board consists of: • State Treasurer Steven Grossman, Chair • Secretary of Executive Office of Administration and Finance, Jay Gonzalez • Commissioner of Department of Environmental Protection, Kenneth Kimmell • Includes Requirements Letter outlining the step by step process to close the loan • Loan Questionnaire • Green Light Letter – from local bond counsel • Return One (1) Signed Questionnaire to MWPAT

17. Loan Questionnaire • City or town provides: • Updated, accurate information in order for MWPAT to comply with bond rules • One (1) completed questionnaire during loan process and one (1) before pool closing • Accurate wiring instructions for loan disbursements

18. Green Light Letter & Bond • Borrowers Bond Counsel prepares: • “Green Light Letter” to MWPAT certifying the local vote is legal. • Local bond and Interim Loan Note for delivery to MWPAT for interim and permanent loan. • MWPAT does not finance local costs for bond counsel.

19. Sample Green Light Letter Loan Number and Borrower Name SAMPLE Maximum Principle Loan Amount Approved The Town vote or City loan order that you provide to Bond Counsel which outlines your borrowing authority. Specimen

20. Borrower Procurement Process • Before bidding, MassDEP must give “Permission to Advertise” • Bid Specs/Contracts must be approved by MassDEP • MassDEP Civil Rights Section reviews and approves MBE/WBE participation. • MassDEP reviews bid results and issues “Authorization to Award”

21. MassDEP Project Regulatory Agreement (PRA) • Contract between MassDEP and Borrower • Establishes MassDEP control over project • Outlines project eligibility and funding • Establishes disbursement procedures • Loan closeout process • Legal requirements of Borrower • Discusses project defaults and how to remedy

22. Sample PRA Exhibit A General Borrower Information Sample Project Title Project Description Loan Agreement Amount

23. MWPATLoan Agreement • Contract between MWPAT and Borrower • Outlines MWPAT and Borrower’s responsibilities • States how a loan default can occur and how to cure the default • Towns Receive: • Two (2) copies of the Project Regulatory Agreement (PRA) • Two (2) copies of the Loan Agreement • Sign and Return: • One (1) copy of the (PRA) • One (1) copy of the Loan Agreement to MWPAT.

24. Interim Financing • Preferable to BANs • Lower interest rate • Interest rate = ½ Market (currently 0.24%) • Loan origination fee of $500 - $1000 • Bond Counsel issues interim loan note to MWPAT • Become permanently financed usually within one year • Interest accrues only on amount drawn • Interest payment due at close of permanent loan • Contact MWPAT and local bond counsel

25. Sample Interim Loan Note Interim Loan Amount Interim Loan Interest Rate Maturity Date The Enabling Act which outlines the Borrowing Authority Specimen Specimen

26. Permanent Financing • Funded by MWPAT bonds • Clean water loans are amortized for 20 years, up to 30 years with engineers’ certification • Flexibility to amortize quicker • Higher interest rate for 30 year loans • Drinking water loans are amortized for up to 20 years • Spend-down within 24 months • All interim loans, active projects will be financed. • Interim Loan Interest due at close of permanent loan • Local Bond Counsel issues Borrower’s bond to MWPAT • MassDEP/MWPAT will contact each borrower regarding schedule

27. Sample of a Bond Principal Loan Amount Trust Bond Closing Date Loan Repayment Details

28. Loan Terms/Fees * Rate calculated at time of bond sale, estimated between 2.4-2.9% * To be determined at time of bond sale to offset costs

29. Disbursements • Proceeds of the loan are generally disbursed to the community monthly. • “Payment Requisition” is completed by the community and forwarded to MassDEP with the appropriate documentation • MassDEP reviews the request and approves eligible costs • MassDEP forwards the request to the MWPAT • MWPAT wires to borrower every Thursday with funds often available the next day

30. DisbursementNumber Loan Number And Mass DEP Project Number Payment Request Amount Total Interim Loan Amount Specimen Signed and Dated by Borrower Approval Signature from Mass DEP Specimen

31. Loan Repayment • Due July 15 and January 15 • MWPAT will send an invoice 30 days in advance • Invoice will include wire instructions • Debt Service Payments • Administrative Fee Payments • Origination Fee Payment – at first debt service payment

32. Debt Service Schedule (Schedule C)

33. Contact Information • Financial • Enrique Zuniga 617-367-9333 x493 • Nate Keenan 617-367-9333 x508 • Drew Smith 617-367-9333 x501 • Program • Steve McCurdy 617-292-5779 • Joe Delaney 617-292-5808 • John Felix 617-292-5523

34. Website Addresses • MassDEP: www.mass.gov/dep/water/wastewater/wastewat.htm • MWPAT: www.mass.gov/treasury/MWPAT