KY Water and Wastewater Assistance for Troubled Systems

KY Water and Wastewater Assistance for Troubled or Economically Restrained Systems KY WWATERS Scoring, Funding Recommendations, and Decision Factors KIA Board Meeting September 5, 2024

KY WWATERS Timeline July 17 through August 30 Accept Applications November take projects to KIA Board for Scoring and Funding Recommendation December 1 Provide project applications and scores with funding recommendation to General Assembly January 2025 March 2025 General Assembly will select projects to receive funding April 2025 KIA will contact the applicants with approved terms

KIA Board Requirements - KRS 224A.320 (a) Hold at least monthly meetings, which may be in conjunction with regularly scheduled board meetings, to discharge its duties under this section; (b) Determine whether a funding applicant is an eligible funding recipient and is seeking funding for an eligible project; (c) Based on the criteria listed in paragraph (d) of this subsection, develop an objective score card or rubric, which may be amended from time to time, to aid in the analysis and scoring of funding applications; (d) Evaluate and score each funding applicant's project according to the extent to which it meets the [12 scoring] criteria: (e) Within sixty (60) days of a funding application being deemed complete under subsection (3)(b) of this section, make determinations on the eligibility of the proposed project and the applicant and issue a project score for the application; (f) Provide detailed feedback to all funding applicants within fourteen (14) days of the project score being completed; and

KIA Board Requirements - KRS 224A.320, cont. g) No later than December 1, 2024, and each December 1 thereafter, submit to the Legislative Research Commission for referral to the Interim Joint Committee on Appropriations and Revenue an annual report containing: 1. The evaluations and scores of the proposed funding recipients for the year to allow for the General Assembly to make the determinations for funding the proposed funding recipients. For each proposed funding recipient that meets the eligibility requirements for funding, the board shall provide a proposal for the structure and the terms of the funding, including but not limited to whether the funding should be awarded in whole or in part as a grant, loan, no-interest loan, or forgivable loan, the repayment terms and interest rates for loans or portions of loans, and any other conditions that the board proposes to be placed on the funding; 2. A list of all program applicants; 3. The identity of applicants who did not meet the eligibility requirements for participation in the program; 4. Trends found in feedback given to applicants who did not meet the eligibility requirements for participation in the program; and 5. Eligible uses of funding cited in the funding applications.

FY2025 KY WWATERS Interest Rates KY WWATERS Standard rate - Non-standard (a) rate - Non-standard (b) rate - 1.75% 0.75% 0.00%

Eligible Funding Recipient PUBLIC WATER OR WASTEWATER SYSTEM MEETS 1 OR MORE CRITERIA: 1. 2. 3. 4. Service Area MHI < State MHI; User rate affordability > 1% of annual MHI; No audit in at least one (1) of the prior three (3) years; Negative income in any two (2) of the previous five (5) years; Debt service coverage ratio < 1.1 in any three (3) of the previous five (5) years; 1. A water district, water association, or joint water commission formed under KRS Chapter 74; A sewer district or sanitation district formed under KRS Chapter 67, 76, or 220; A municipal water utility and water works, sewer utility, sewage system or works, or combined electric and water plant formed under KRS Chapter 96; and Any combination of two (2) or more of the entities listed in subparagraphs 1. to 3. of this paragraph. 2. 3. 5. 4. 6. 7. Accounts payable turnover ratio < 1 Days' sales in accounts receivable ratio > forty-five (45) days; Notice of violation or agreed order in the past year; Water loss percentage > thirty percent (30%); 8. 9.

Eligible Project Types Capital and Non-Capital Projects relating to: Developing technical, operational, and maintenance resources and expertise; Financial inadequacies, including debt service coverage through relief or refinance of debt; Improving utility infrastructure planning, repair, maintenance, renovation, and management of plants and assets; Payment assistance for excessive maintenance costs, fines and penalties from past violations, or consultants; and Inadequately maintained distribution, collection, or treatment works, including service extensions to unserved or underserved areas and the renovation of treatment works to conserve resources. Obtaining technical expertise in areas of rate-setting, cost-of- service, and proper utility accounting standards for the utility type; Performing and correcting deficiencies from drinking water, wastewater, and financial audits;

Scoring Criteria 1. Service Area MHI < State MHI; 7. Days' sales in accounts receivable ratio > forty-five (45) days; 2. User rate affordability > 1% of annual MHI; 8. Notice of violation or agreed order in the past year; 3. No audit in at least one (1) of the prior three (3) years; 9. Water loss percentage > thirty percent (30%); 4. Negative income in any two (2) of the previous five (5) years; 10. Funding will be able to fully resolve the pending issues in the application 5. Debt service coverage ratio < 1.1 in any three (3) of the previous five (5) years; 11. Proposed project demonstrates a high level of community or regional impact potential 6. Accounts payable turnover ratio < 1 12. Use funding for regionalization, consolidation, or partnerships

Scoring Criteria Discussion Recommendation - Weighted Score Base Weighted Score 10 20 0 10 8 12 8 12 8 12 0 8 0 6 0 6 6 9 0 10 0 10 0 10 Maximum Score 20 10 12 12 12 8 6 6 9 10 10 10 125 1 - MHI 2 - MHI 3 - Revenue 4 - Revenue 5 - Revenue 6 - Revenue 7 - Ratios 8 - Ratios 9 - Ratios 10 - Impact 11 - Impact 12 - Impact 10 10 8 8 8 8 6 6 6 10 10 10 80% >< 100%, 10 points 50%><80%, 15 points >50%, 20 points >1%, 10 points 3 Years +, 12 points 2 Years +, 12 points 3 Years +, 12 points <1%, 8 points >45 days, 6 points if yes, 6 points 50%+, 9 points if yes, 10 points if yes, 10 points if yes, 10 points 2 Years, 8 points 1 Year, 8 points 3 Years, 8 points 30%, 6 points

Scoring Criteria Discussion Other Option - Single Score Base 1 1 1 1 1 1 1 1 1 1 1 1 Score 1 1 1 1 1 1 1 1 1 1 1 1 12 1 - MHI 2 - MHI 3 - Revenue 4 - Revenue 5 - Revenue 6 - Revenue 7 - Ratios 8 - Ratios 9 - Ratios 10 - Impact 11 - Impact 12 - Impact

Structure, Term and Funding Recommendation Discussion Requesting Board Approval of: Standard Principal Forgiveness Amount Recommend 50% Standard Repayment Term Recommend 30 Years Target Debt Service Coverage Ratio Recommend 1.1 Target Funding Recommendation Scenario that first meeting the target Debt Service Coverage

Examples Debt Service Ratio Single Score Ranking Score Applicant Name Project Name WRIS Number Scenario 1 Scenario 2 Scenario 3 Scenario 4 Requested Amount 0.7 1.1 1.2 1.5 1.5 0.1 1.0 0.5 0.9 1.3 1.3 1.7 1.7 0.2 1.2 0.7 1.0 1.8 1.5 1.8 1.8 0.3 1.4 1.1 1.1 2.1 1.9 2.1 2.1 2.4 1.8 1.3 3,153,693 5,452,647 9,074,640 5,607,629 8,814,071 29,020,300 5,228,313 7,078,494 7 6 7 5 5 5 5 4 106 103 96 85 81 76 64 57 Water District AB Water District 4 Water District DF Water District 6 Water District RC Water District 1 Water District 7 Water District 3 Project Replace WWD Project Replace WWD Project Expanse District Project Replace WWD Project Replace WWD Project Expanse District Project Expanse District Project Expanse District WS-002 WS-004 WS-005 WS-006 WS-008 WS-001 WS-007 WS-003