Drinking
Water State Revolving Fund
Loan
Terms
The repayment period for loans is
20 years except for loans to project sponsors qualifying as financially disadvantaged
communities. Then the limitation is 30 years. The interest rate is 60% of the market rate
as established using the "Bond Buyer 20 - Bond General Obligation Bond Index".
The rate does not change over the life of the loan. Repayment begins six months after
project work is scheduled to be completed. Payback consists of equal semiannual
repayments. The revenue source to be used to repay the loan must be identified. Standard
loan agreements are set up for a pledge of water and sewer utility revenues. These are
commonly used but other types of revenues can be considered.
Pledged Revenues
Generally, pledged revenues
resulting from the operation of water systems or water and sewer systems shall be as
follows:
- Pledged revenue shall be
not less than 1.15 times the amount required to make each semiannual loan repayment.
- In addition, for project sponsors who have not
demonstrated the ability to service long term debt, special loan security provisions shall
be negotiated that provide assurance that debt service requirements will be fulfilled.
Security Provisions
For project sponsors who have not
demonstrated the ability to service long term debt additional security provisions shall be
negotiated to provide:
- Additional escrowed
reserve funds (equivalent to not less than five semiannual loan repayments) and a lien on
the assets of the project sponsor.
- A letter of
credit from a bank or trust company and a lien on the assets of the project sponsor.
- A personal or corporate, as applicable, obligation
ensuring that all semiannual repayments can be made.
- Other security features equivalent to those
described above.
