Ryan Gleason New Mexico State Director

1. New Mexico Infrastructure Finance Conference Ryan Gleason New Mexico State Director

2. Rural Development - NM

3. Community Programs Water and Environmental Programs (WEP)

4. 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

5. Rural Development Water and Environmental Programs Water and Waste Disposal (W&WD) Loans and Grants

6. W&WD Loans and GrantsNM Allocation in FY2008 Loans Direct $ 13,884,000 Guaranteed $ 1,095,000 Grants $ 4,795,000 Total $ 19,774,000

7. W&WD Loans and GrantsImportant Dates • April 25 – Mid-Year Pooling Date • August 1 – Year-End Pooling Date

8. W&WD Loans and GrantsWhat projects are eligible? Water Storage Facility

9. W&WD Loans and GrantsWhat projects are eligible? Water Supply (Includes treatment)

10. W&WD Loans and GrantsWhat projects are eligible? Distribution System Water Wells

11. W&WD 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

12. W&WD 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

13. W&WD Loans and GrantsHow does it work? • Eligible participant submits: • Application for Federal Assistance (SF-424) • Preliminary Engineering Report • Environmental Information • Financial Statements • Organizational Documents

14. W&WD 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 community’s 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)

15. W&WD 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

16. W&WD 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

17. W&WD 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 organization’s facilities

18. W&WD 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

19. W&WD 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

20. W&WD 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 Didn’t 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

21. W&WD 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

22. W&WD Loans and GrantsUnderwriting Two parts to the new underwriting system • Loan Determination • Project Funding Breakdown

23. W&WD Loans and GrantsUnderwriting – Loan Determination • Rural Development’s 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

24. W&WD Loans and GrantsUnderwriting – Loan Determination • Rural Development’s 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?

25. W&WD 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

26. W&WD 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

27. W&WD 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

28. W&WD 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 borrower’s rate schedule has not changed since the last filing

29. W&WD Loans and GrantsSpecial Funding Initiatives • Colonias • Emergency Community Water Assistance Grants • Native American

30. W&WD 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

31. W&WD 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

32. W&WD 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

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