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Title II — Recycling, storage, and integrated water management

S. 2771 · 113th Congress · Jul 31, 2014 · Lineage

II Recycling, storage, and integrated water management

Sec. 201 Definitions

In this title:
(1)
Eligible entity— The term eligible entity means—
(A)
a corporation;
(B)
a partnership;
(C)
a joint venture;
(D)
a trust;
(E)
a Federal, State, or local governmental entity, agency, or instrumentality; and
(F)
a conservancy district, irrigation district, canal company, mutual water company, water users’ association, Indian tribe, agency created by interstate compact, or any other entity that has the capacity to contract with the United States under Federal reclamation law.
(2)
Federal credit instrument— The term Federal credit instrument means a secured loan, loan guarantee, or other credit enhancement authorized to be made available under this title with respect to a project.
(3)
Investment-grade rating— The term investment-grade rating means a rating of BBB minus, Baa3, bbb minus, BBB (low), or higher as assigned by a rating agency to project obligations.
(4)
Lender—
(A)
In general— The term lender means any non-Federal qualified institutional buyer (as defined in section 230.144A(a) of title 17, Code of Federal Regulations (or a successor regulation) (commonly known as “Rule 144A(a) of the Securities and Exchange Commission” and issued under the Securities Act of 1933 (15 U.S.C. 77a et seq.))).
(B)
Inclusions— The term lender includes—
(i)
a qualified retirement plan (as defined in section 4974 of the Internal Revenue Code of 1986) that is a qualified institutional buyer; and
(ii)
a governmental plan (as defined in section 414 of the Internal Revenue Code of 1986) that is a qualified institutional buyer.
(5)
Loan guarantee— The term loan guarantee means any guarantee or other pledge by the Secretary to pay all or part of the principal of, and interest on, a loan or other debt obligation issued by an obligor and funded by a lender.
(6)
Obligor— The term obligor means an eligible entity that is primarily liable for payment of the principal of, or interest on, a Federal credit instrument.
(7)
Project obligation—
(A)
In general— The term project obligation means any note, bond, debenture, or other debt obligation issued by an obligor in connection with the financing of a project.
(B)
Exclusion— The term project obligation does not include a Federal credit instrument.
(8)
Rating agency— The term rating agency means a credit rating agency registered with the Securities and Exchange Commission as a nationally recognized statistical rating organization (as defined in section 3(a) of the Securities Exchange Act of 1934 (15 U.S.C. 78c(a)).
(9)
Reclamation State— The term Reclamation State means any of the States of—
(A)
Arizona;
(B)
California;
(C)
Colorado;
(D)
Idaho;
(E)
Kansas;
(F)
Montana;
(G)
Nebraska;
(H)
Nevada;
(I)
New Mexico;
(J)
North Dakota;
(K)
Oklahoma;
(L)
Oregon;
(M)
South Dakota;
(N)
Texas;
(O)
Utah;
(P)
Washington; and
(Q)
Wyoming.
(10)
Secretary— The term Secretary means the Secretary of the Interior.
(11)
Secured loan— The term secured loan means a direct loan or other debt obligation issued by an obligor and funded by the Secretary in connection with the financing of a project under subtitle A.
(12)
Subsidy amount— The term subsidy amount means the amount of budget authority sufficient to cover the estimated long-term cost to the Federal Government of a Federal credit instrument, as calculated on a net present value basis, excluding administrative costs and any incidental effects on Governmental receipts or outlays in accordance with the Federal Credit Reform Act of 1990 (2 U.S.C. 661 et seq.).
(13)
Substantial completion— The term substantial completion, with respect to a project, means the earliest date on which a project is considered to perform the functions for which the project is designed.

A Innovative financing

Sec. 211 Purposes

The purposes of this subtitle are—
(1)
to promote increased development of critical water resources infrastructure by establishing additional opportunities for financing water resources projects;
(2)
to attract new investment capital to infrastructure projects that are capable of generating revenue streams through user fees or other dedicated funding sources;
(3)
to complement existing Federal funding sources and address budgetary constraints on Bureau of Reclamation programs; and
(4)
to leverage private investment in water resources infrastructure.

Sec. 212 Authority to provide assistance

(a)
In general— The Secretary may provide financial assistance under this subtitle to carry out projects within—
(1)
any Reclamation State;
(2)
any other State in which the Bureau of Reclamation is authorized to provide project assistance; and
(3)
the States of Alaska and Hawaii.
(b)
Selection— In selecting projects to receive financial assistance under subsection (a), the Secretary shall ensure diversity with respect to—
(1)
project types; and
(2)
geographical locations.

Sec. 213 Applications

To be eligible to receive assistance under this subtitle, an eligible entity shall submit to the Secretary an application at such time, in such manner, and containing such information as the Secretary may require.

Sec. 214 Eligibility for assistance

(a)
Eligible projects— The following projects may be carried out using assistance made available under this subtitle:
(1)
A project for the reclamation and reuse of municipal, industrial, domestic, and agricultural wastewater, and naturally impaired ground and surface waters, which the Secretary, acting through the Commissioner of Reclamation, is authorized to undertake.
(2)
Any water infrastructure project not specifically authorized by law that—
(A)
the Secretary determines, through the completion of an appraisal investigation and feasibility study, would contribute to a safe, adequate water supply for domestic, agricultural, environmental, or municipal and industrial use; and
(B)
is otherwise eligible for assistance under this title.
(3)
A project for enhanced energy efficiency in the operation of a water system.
(4)
A project for accelerated repair and replacement of an aging water distribution facility.
(5)
A brackish or sea water desalination project.
(6)
Acquisition of real property or an interest in real property for water storage, reclaimed or recycled water, or wastewater, if the acquisition is integral to a project described in paragraphs (1) through (5).
(7)
A combination of projects, each of which is eligible under paragraphs (1) through (6), for which an eligible entity submits a single application.
(b)
Activities eligible for assistance— For purposes of this subtitle, an eligible activity with respect to an eligible project under subsection (a) includes the cost of—
(1)
development-phase activities, including planning, feasibility analysis, revenue forecasting, environmental review, permitting, transaction costs, preliminary engineering and design work, and other preconstruction activities;
(2)
construction, reconstruction, rehabilitation, and replacement activities;
(3)
the acquisition of real property (including water rights, land relating to the project, and improvements to land), environmental mitigation, construction contingencies, and acquisition of equipment;
(4)
capitalized interest necessary to meet market requirements, reasonably required reserve funds, capital issuance expenses, and other carrying costs during construction;
(5)
refinancing interim construction funding, long-term project obligations, or a secured loan, loan guarantee, or other credit enhancement made under this subtitle;
(6)
reimbursement or success payments to any public or private entity that achieves predetermined outcomes on a pay-for-performance or pay-for-success basis; and
(7)
grants, loans, or credit enhancement for community development financial institutions, green banks, and other financial intermediaries providing ongoing finance for projects that meet the purposes of this subtitle.

Sec. 215 Determination of eligibility and project selection

(a)
Eligibility requirements— To be eligible to receive financial assistance under this subtitle, a project shall meet the following criteria, as determined by the Secretary:
(1)
Creditworthiness—
(A)
In general— Subject to subparagraph (B), the project shall be creditworthy, as determined by the Secretary, who shall ensure that any financing for the project has appropriate security features, such as a rate covenant, to ensure repayment.
(B)
Preliminary rating opinion letter— The Secretary shall require each applicant to provide a preliminary rating opinion letter from at least 1 rating agency indicating that the senior obligations of the project (which may be the Federal credit instrument) have the potential to achieve an investment-grade rating.
(2)
Eligible project costs— The eligible project costs of a project and other projects in a watershed shall be reasonably anticipated to be not less than $10,000,000.
(3)
Dedicated revenue sources— The Federal credit instrument for the project shall be repayable, in whole or in part, from dedicated revenue sources that also secure the project obligations.
(4)
Public sponsorship of private entities— In the case of a project carried out by an entity that is not a State or local government or an agency or instrumentality of a State or local government, the project shall be publicly sponsored.
(b)
Selection criteria—
(1)
Establishment— The Secretary shall establish criteria for the selection of projects that meet the eligibility requirements of subsection (a), in accordance with paragraph (2).
(2)
Criteria— The selection criteria shall include the following:
(A)
The extent to which the project is nationally or regionally significant.
(B)
The extent to which assistance under this section would foster innovative public-private partnerships and attract private debt or equity investment.
(C)
The likelihood that assistance under this section would enable the project to proceed at an earlier date than the project would otherwise be able to proceed.
(D)
The extent to which the project uses new or innovative approaches.
(E)
The extent to which projects track evidence about the effectiveness of the 1 or more projects financed and the availability of the evidence and project information to the public to facilitate replication.
(F)
The amount of budget authority required to fund the Federal credit instrument made available under this subtitle.
(G)
The extent to which the project helps maintain or protect the environment.
(H)
The extent to which the project supports the local economy and provides local jobs.
(c)
Receipt of other Federal funding— Receipt of a Federal grant or contract or other Federal funding to support an eligible project shall not preclude the project from being eligible for assistance under this subtitle.
(d)
Federal requirements—
(1)
Effect of section— Nothing in this section supersedes the applicability of other requirements of Federal law (including regulations).
(2)
NEPA— A Federal action carried out regarding a loan or loan guarantee provided under this subtitle shall not be considered to be a Federal action for purposes of the National Environmental Policy Act of 1969 (42 U.S.C. 4321 et seq.).

Sec. 216 Secured loans

(a)
Agreements—
(1)
In general— Subject to paragraphs (2) through (4), the Secretary may enter into agreements with 1 or more obligors to make secured loans, the proceeds of which shall be used—
(A)
to finance eligible project costs of any project selected under section 206;
(B)
to refinance interim construction financing of eligible project costs of any project selected under section 206; or
(C)
to refinance long-term project obligations or Federal credit instruments, if that refinancing provides additional funding capacity for the completion, enhancement, or expansion of any project that—
(i)
is selected under section 206; or
(ii)
otherwise meets the requirements of section 206.
(2)
Limitation on refinancing of interim construction financing— A secured loan under paragraph (1) shall not be used to refinance interim construction financing under paragraph (1)(B) later than 1 year after the date of substantial completion of the applicable project.
(3)
Risk assessment— Before entering into an agreement under this subsection for a secured loan, the Secretary, in consultation with the Director of the Office of Management and Budget and each rating agency providing a preliminary rating opinion letter under section 206(a)(1)(B), shall determine an appropriate capital reserve subsidy amount for the secured loan, taking into account each such preliminary rating opinion letter.
(4)
Investment-grade rating requirement— The execution of a secured loan under this section shall be contingent on receipt by the senior obligations of the project of an investment-grade rating.
(b)
Terms and limitations—
(1)
In general— A secured loan provided for a project under this section shall be subject to such terms and conditions, and contain such covenants, representations, warranties, and requirements (including requirements for audits), as the Secretary determines to be appropriate.
(2)
Maximum amount— The amount of a secured loan under this section shall not exceed the lesser of—
(A)
an amount equal to 100 percent of the reasonably anticipated eligible project costs; and
(B)
if the secured loan does not receive an investment-grade rating, the amount of the senior project obligations of the project.
(3)
Payment— A secured loan under this section—
(A)
shall be payable, in whole or in part, from State or local taxes, user fees, or other dedicated revenue sources that also secure the senior project obligations of the relevant project;
(B)
shall include a rate covenant, coverage requirement, or similar security feature supporting the project obligations; and
(C)
may have a lien on revenues described in subparagraph (A), subject to any lien securing project obligations.
(4)
Interest rate— The interest rate on a secured loan under this section shall be not more than the yield on United States Treasury securities of a similar maturity to the maturity of the secured loan on the date of execution of the loan agreement, as determined by the Secretary.
(5)
Maturity date— The final maturity date of a secured loan under this section shall be not later than 35 years after the date of substantial completion of the relevant project.
(6)
Nonsubordination— A secured loan under this section shall not be subordinated to the claims of any holder of project obligations in the event of bankruptcy, insolvency, or liquidation of the obligor of the project.
(7)
Fees— The Secretary may establish fees at a level sufficient to cover all or a portion of the costs to the Federal Government of making a secured loan under this section.
(8)
Non-Federal share— The proceeds of a secured loan under this section may be used to pay any non-Federal share of project costs required if the loan is repayable from non-Federal funds.
(c)
Repayment—
(1)
Schedule— The Secretary shall establish a repayment schedule for each secured loan provided under this section, based on the projected cash flow from project revenues and other repayment sources.
(2)
Commencement— Scheduled loan repayment of principal or interest on a secured loan under this section shall commence not later than 5 years after the date of substantial completion of the project.
(3)
Deferred payments—
(A)
Authorization— If, at any time after the date of substantial completion of a project for which a secured loan is provided under this section, the project is unable to generate sufficient revenues to pay the scheduled loan repayments of principal and interest on the secured loan, the Secretary may allow the obligor, subject to subparagraph (C), to add unpaid principal and interest to the outstanding balance of the secured loan.
(B)
Interest— Any payment deferred under subparagraph (A) shall—
(i)
continue to accrue interest in accordance with subsection (b)(4) until fully repaid; and
(ii)
be scheduled to be amortized over the remaining term of the secured loan.
(C)
Criteria—
(i)
In general— Any payment deferral under subparagraph (A) shall be contingent on the project meeting such criteria as the Secretary may establish.
(ii)
Repayment standards— The criteria established under clause (i) shall include standards for reasonable assurance of repayment.
(4)
Prepayment—
(A)
Use of excess revenues— Any excess revenues that remain after satisfying scheduled debt service requirements on the project obligations and secured loan and all deposit requirements under the terms of any trust agreement, bond resolution, or similar agreement securing project obligations may be applied annually to prepay a secured loan under this section without penalty.
(B)
Use of proceeds of refinancing— A secured loan under this section may be prepaid at any time without penalty from the proceeds of refinancing from non-Federal funding sources.
(d)
Sale of secured loans—
(1)
In general— Subject to paragraph (2), as soon as practicable after the date of substantial completion of a project and after providing a notice to the obligor, the Secretary may sell to another entity or reoffer into the capital markets a secured loan for a project under this section, if the Secretary determines that the sale or reoffering can be made on favorable terms.
(2)
Consent of obligor— In making a sale or reoffering under paragraph (1), the Secretary may not change the original terms and conditions of the secured loan without the written consent of the obligor.
(e)
Loan guarantees—
(1)
In general— The Secretary may provide a loan guarantee to a lender in lieu of making a secured loan under this section, if the Secretary determines that the budgetary cost of the loan guarantee is substantially the same as that of a secured loan.
(2)
Terms— The terms of a loan guarantee provided under this subsection shall be consistent with the terms established in this section for a secured loan, except that the rate on the guaranteed loan and any prepayment features shall be negotiated between the obligor and the lender, with the consent of the Secretary.

Sec. 217 Program administration

(a)
Requirement— The Secretary shall establish a uniform system to service the Federal credit instruments made available under this subtitle.
(b)
Fees— The Secretary may collect and spend fees, contingent on authority being provided in appropriations Acts, at a level that is sufficient to cover—
(1)
the costs of services of expert firms retained pursuant to subsection (d); and
(2)
all or a portion of the costs to the Federal Government of servicing the Federal credit instruments provided under this subtitle.
(c)
Servicer—
(1)
In general— The Secretary may appoint a financial entity to assist the Secretary in servicing the Federal credit instruments provided under this subtitle.
(2)
Duties— A servicer appointed under paragraph (1) shall act as the agent for the Secretary.
(3)
Fee— A servicer appointed under paragraph (1) shall receive a servicing fee, subject to approval by the Secretary.
(d)
Assistance from experts— The Secretary may retain the services, including counsel, of any organization or entity with expertise in the field of municipal and project finance to assist in the underwriting and servicing of Federal credit instruments provided under this subtitle.
(e)
Loan coordination; interagency cooperation— The Secretary—
(1)
shall coordinate implementation of loan guarantees under this section with the Administrator to avoid duplication and enhance the effectiveness of implementation of the State revolving funds established under the Federal Water Pollution Control Act (33 U.S.C. 1251 et seq.) and the Safe Drinking Water Act (42 U.S.C. 300f et seq.);
(2)
shall consult with the Secretary of Agriculture before promulgating criteria with respect to financial appraisal functions and loan guarantee administration for activities carried out under this subtitle; and
(3)
may enter into a memorandum of agreement providing for Department of Agriculture financial appraisal functions and loan guarantee administration for activities carried out under this subtitle.

Sec. 218 State and local permits

The provision of financial assistance for a project under this subtitle shall not—
(1)
relieve any recipient of the assistance of any obligation to obtain any required State or local permit or approval with respect to the project;
(2)
limit the right of any unit of State or local government to approve or regulate any rate of return on private equity invested in the project; or
(3)
otherwise supersede any State or local law (including any regulation) applicable to the construction or operation of the project.

Sec. 219 Regulations

The Secretary may promulgate such regulations as the Secretary determines to be appropriate to carry out this subtitle.

Sec. 220 Funding

(a)
In general— There is authorized to be appropriated to the Secretary to carry out this subtitle $50,000,000 for each of fiscal years 2015 through 2019, to remain available until expended.
(b)
Administrative costs— Of the funds made available to carry out this subtitle, the Secretary may use for the administration of this subtitle not more than $2,200,000 for each of fiscal years 2015 through 2019.

Sec. 221 Report to Congress

Not later than 2 years after the date of enactment of this Act, and every 2 years thereafter, the Secretary shall submit to the Committee on Energy and Natural Resources of the Senate and the Committee on Natural Resources of the House of Representatives a report summarizing the financial performance and on-the-ground outcomes of the projects that are receiving, or have received, assistance under this subtitle, including an assessment of whether the objectives of this subtitle are being met.

B Integrated regional water management, reclamation, and recycling projects

Sec. 231 Water storage projects

(a)
Agreements— The Secretary may enter into a cost-shared financial assistance agreement with any non-Federal entity in a Reclamation State or the State of Hawaii to carry out the planning, design, and construction of any permanent water storage and conveyance facility used solely to regulate and maximize the water supply arising from a project that is eligible for assistance under this title or any other provision of law—
(1)
to recycle wastewater, impaired surface water, and ground water; or
(2)
to use integrated and coordinated water management on a watershed or regional scale.
(b)
Financial assistance— In providing financial assistance under this section, the Secretary shall give priority to storage and conveyance components that—
(1)
ensure the efficient and beneficial use of water or reuse of the recycled water;
(2)
make maximum use of natural systems;
(3)
consistent with Secretarial Order No. 3297, dated February 22, 2010, support sustainable water management practices and the water sustainability objectives of 1 or more offices of the Department of the Interior or any other Federal agency;
(4)
(A)
increase the availability of usable water supplies in a watershed or region to benefit people, the economy, and the environment; and
(B)
include adaptive measures needed to address climate change and future demands;
(5)
where practicable—
(A)
provide flood control or recreation benefits; and
(B)
include the development of incremental hydroelectric power generation;
(6)
include partnerships that go beyond political and institutional jurisdictions to support the efficient use of the limited water resources of the United States and the applicable region;
(7)
generate environmental benefits, such as benefits to fisheries, wildlife and habitat, and water quality and water-dependent ecological systems, as well as water supply benefits to agricultural and urban water users; and
(8)
the financing of which leverages private and other non-Federal resources.
(c)
Federal share— The Federal share of the cost of a project carried out under subsection (a) shall be—
(1)
equal to the lesser of—
(A)
50 percent of total cost of the project; and
(B)
$15,000,000, adjusted for inflation; and
(2)
nonreimbursable.
(d)
Non-Federal share— The non-Federal share of the cost of a project carried out under subsection (a) may include in-kind contributions to the planning, design, and construction of a project.
(e)
Title and costs— A non-Federal entity entering into a financial assistance agreement under this section shall—
(1)
hold title to all facilities constructed under this section; and
(2)
be solely responsible for the costs of operating and maintaining those facilities.

Sec. 232 Authorization of appropriations

There is authorized to be appropriated $150,000,000 to carry out this subtitle.

C Title transfers

Sec. 241 Authorization to transfer title

The Secretary may transfer to any non-Federal operating entity title to any Reclamation project or facility, or any separable element of such a project or facility, that is authorized before the date of enactment of this Act, if—
(1)
all previous Federal construction contract obligations or other related repayment contracts or agreements associated with the project have been paid out by a non-Federal project beneficiary;
(2)
(A)
a project facility or separable element of such a facility is in need of rehabilitation or improvement, as determined by the Secretary; and
(B)
the non-Federal operating entity is otherwise eligible for a loan guarantee under this title;
(3)
the title transfer meets all applicable Federal laws and regulations, as determined by the Secretary; and
(4)
(A)
the Secretary notifies each congressional committee of jurisdiction of the transfer by not later than 60 days before the date of the transfer; and
(B)
no objection to the transfer is raised by any such committee.