Environmental Loans November 2024 Newsletter
The Wisconsin Department of Natural Resources (DNR)’s Environmental Loans programs provide affordable financial assistance to Wisconsin communities for water infrastructure projects that protect and improve public health and water quality for current and future generations.
New Taxable Bond Market Rate
Municipal borrowers typically secure a Clean Water Fund Program or Safe Drinking Water Loan Program loan by issuing a tax-exempt bond to the program. The Wisconsin Department of Administration (DOA) and the Wisconsin Department of Natural Resources (DNR) have added a market rate for taxable bonds to the state fiscal year 2025 intended use plans for both programs.
The market rate for loans issued on a taxable basis will be slightly higher than the market rate for loans issued on a tax-exempt basis. The taxable bond market rate is determined by dividing the tax-exempt bond market rate by the prior calendar year's average taxable/tax-exempt ratio.
Effective Oct. 1, 2024:
- The market rate for tax-exempt loans with loan terms of 20 years or less is 4%, and with loan terms of 21-30 years is 4.200%.
- The market rate for taxable loans with loan terms of 20 years or less is 4.494%, and with loan terms of 21-30 years is 4.719%.
For loans issued on a taxable basis, at the time of writing, the market rate would be 4.494% (tax-exempt rate of 4% divided by calendar year 2023’s average taxable/tax-exempt ratio of 89%) for a 20-year amortization, and 4.719% (tax-exempt rate of 4.20% divided by 89%) for loans amortized over a period greater than 20 years and up to 30 years. The additional subsidy percentage (55% or 33%) is then applied against the taxable market rate.
View current market rates and program-subsidized interest rates on the DNR’s Interest Rates webpage.
Davis-Bacon Applicability Changes For Lead Service Line Replacement Projects Using A Prequalified List
Highlights:
- The Davis-Bacon and Related Acts (federal wage rates) apply to all lead service line replacement projects that will receive funding from the DNR’s Lead Service Line Replacement Program.
- The Davis-Bacon Act regulations apply to all private lead service line replacement projects regardless of whether a municipality chooses to bid a municipal contract for the work, or to develop a list of prequalified plumbers and contractors for property owners to contract with directly.
- The Davis-Bacon Act regulations apply to all private lead service line replacements done utilizing a prequalified list, regardless of property ownership.
- The “heavy” Davis-Bacon construction type applies rather than “residential” when requesting the wage determination for lead service line replacement projects, even when all the work is on the private side of the water service line, and regardless of whether a municipality utilizes a prequalified list or a municipally-bid contract.
- If the wage determination is missing a wage rate needed for a specific work/job classification (i.e. plumber), construction type (i.e. heavy) and/or project location, contact the U.S. Department of Labor for guidance on completing the Request for Authorization of Additional Classification and Rate form.
Changes To Davis-Bacon Applicability
When the Safe Drinking Water Loan Program first started funding lead service line replacements in state fiscal year 2017, we worked with the U.S. Environmental Protection Agency (EPA) to develop Davis-Bacon guidance for projects where replacements were being done utilizing a prequalified list of plumbers and contractors. At that time, the determination was that Davis-Bacon requirements only applied to properties that were owned in the name of a business.
The Davis-Bacon Act (DBA) regulations were updated by the U.S. Department of Labor (DOL) in August 2023. The EPA contacted us in October 2024 to provide the opinion of its Office of General Counsel (OGC). The OGC had reviewed our Davis-Bacon guidance and were of the opinion that due to the changes made to the DBA, that it now applied to all lead service line replacements done using a prequalified list of plumbers and contractors if the project was utilizing Drinking Water State Revolving Fund money, regardless of property ownership.
The OGC’s opinion was primarily based on two aspects.
The first is that the DBA applies to contracts “in excess of $2,000, to which the Federal Government or the District of Columbia is a party, for construction, alteration, or repair, including painting and decorating, of public buildings and public works.” (40 USC 3142).
The second is the definition of “public work.” “Public building or public work” is a construction project “carried on directly by authority of or with funds of a federal agency to serve the interest of the general public regardless of whether title thereof is in a federal agency.” (29 CFR 5.2). According to the DOL’s updated Prevailing Wage Resource Book, a ‘“Public building or public work” also includes the construction of a portion of a building or work that is carried on directly by authority of or with funds of a Federal agency to serve the interest of the general public, even where construction of the entire building or work does not fit within this definition.” The EPA feels that lead service line replacements are for the benefit of the general public and would be considered a “public work.”
Ultimately, Davis-Bacon compliance is up to the municipality, but we want to be certain that all Lead Service Line Replacement Program applicants are aware that our guidance, and the EPA’s, has changed.
Obtain Wage Classification For Plumber
In addition, earlier this year the DOL informed us that for lead service line replacements, whether utilizing a prequalified list or a municipally-bid contract, the "heavy" wage determination applies, not the “residential.” Since Wisconsin law requires that the connection be made by a licensed plumber, and the "heavy" wage determinations normally do not include a plumber rate, the conformance request process must be utilized. This process is designed for municipally-bid contracts, so it does not fit well with prequalified lists. Our contact at the DOL has indicated it can be used in this circumstance but there are still some questions surrounding the proper way to fill out the form.
When we have more information, we will make it available, but in the meantime:
- The Request for Authorization of Additional Classification and Rate (Standard Form 1444) can be found here.
- A memo on the conformance process can be found here.
- Guidance on the process can be found here.
- The contact at the Department of Labor is Yuepeng (Mike) Yang, Office of Enterprise Data and Analytics, Division of Construction Wage Determinations, at Yang.Yuepeng@dol.gov or 202-693-1162.
Notes: The DNR’s Complying With Davis-Bacon Requirements (PUB-CF-074) contains additional information. We published the “Updated BABA And Davis-Bacon Applicability For Lead Service Line Replacement Projects” article in the Environmental Loans July 2024 Newsletter.
If you have any Lead Service Line Replacement Program questions, please contact Kate Leja-Brennan, lead service line specialist, at Kathryn.Leja@wisconsin.gov or Becky Scott, environmental loans section manager, at Rebecca.Scott@wisconsin.gov.
Final 2024 Loan Disbursement Date And Deadline
For a municipality to receive a loan disbursement/payment from the Clean Water Fund Program or the Safe Drinking Water Loan Program on Monday, Dec. 23, 2024, the municipality must submit to the DNR a complete Request for Disbursement form with supporting invoices and documentation for eligible costs by Thursday, Dec. 12, 2024.
Note: No loan closings will occur on Monday, Dec. 23, 2024.
View guidance for the disbursement process on the DNR’s Requests for Disbursement webpage. Email complete disbursement requests as PDFs to DNRcfelDisbursements@wisconsin.gov.
Upcoming Deadlines And Events
The notices of intent to apply, applications and loan closing deadlines are set in the corresponding program's annual intended use plan (IUP). The IUPs are available on the DNR's Project Lists and Intended Use Plans webpage.
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Nov. 4: The DNR published the state fiscal year 2025 Safe Drinking Water Loan Program and Lead Service Line Replacement Program draft funding lists.
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December 2024: The DNR intends to publish the state fiscal year 2025 Clean Water Fund Program funding list and the state fiscal year 2025 Safe Drinking Water Loan Program and Lead Service Line Replacement Program final funding lists.
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Spring 2025: The DNR intends to publish the state fiscal year 2026 Clean Water Fund Program and Safe Drinking Water Loan Program project priority lists.
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April 30: The last recommended date for opening bids for the state fiscal year 2025 Clean Water Fund Program and Safe Drinking Water Loan Program projects.
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May 31: Executed construction contracts due to the DNR loan project manager for the state fiscal year 2025 Safe Drinking Water Loan Program projects.
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June 15: Public Service Commission-approved contracts due to the DNR loan project manager for the state fiscal year 2025 Safe Drinking Water Loan Program projects.
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June 30: Application deadline if competing for principal forgiveness for the state fiscal year 2026 Safe Drinking Water Loan Program funding cycle. The DNR recommends that all applicants (even those not competing for principal forgiveness) submit an application by the June 30 deadline due to potential limitations on loan capacity. See the Loan Capacity webpage for more information. Note the following reminders:
– Plans and specifications need to be uploaded with the application AND submitted to the DNR Bureau of Drinking Water and Groundwater through the Public Water System Plan Review process by the application deadline.
– The period to submit both an appeal to an eligibility determination and a priority score reevaluation request opens the day after the application deadline and runs for a period of 30 days.
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June 30: Readiness-to-proceed deadline for the state fiscal year 2025 Clean Water Fund Program principal forgiveness projects. All required bid documentation, including executed construction contracts, are due.
Staff Change: Dee Surillo Resigned
Dee Surillo left the DNR Environmental Loans Section on Sept. 20, 2024. She had been with the DNR since 2018. Before joining us, she served as the Remediation and Redevelopment Program business coordinator working on the fiscal aspects of that program. Since March 2022, Dee served as a loan project manager. Dee took on environmental review responsibilities for the Safe Drinking Water Loan Program in the summer of 2023.
We wish Dee the best possible future as she begins a new chapter of her life with her family in North Carolina. We know she will stay busy reading mysteries, spending time outdoors and sightseeing in her new state.
Dee’s existing active projects have been reassigned to DNR loan project managers who will be in contact with their newly assigned communities.
Loan Project Manager Recruitment
The DNR Bureau of Community Financial Assistance (CFA) will be recruiting for a loan project manager position in the Environmental Loans Section. The job (and full position description) will likely be announced early in 2025 through Wisc.Jobs. The deadline to apply will be listed in the job posting.
The recruitment may also be used for any future vacancies that might occur during 2025.
This position is an excellent opportunity for anyone considering a career focused on the environment and the water/wastewater industry. If you are interested in this type of opportunity with the DNR, please apply!
If you have questions about a position, please reach out to an Environmental Loans Section manager:
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