ITEM 3: ACCEPTANCE OF FEDERAL HARDSHIP GRANT, AND AMENDMENT OF FEDERAL FISCAL YEAR (FFY) 1997 INTENDED USE PLAN

DISCUSSION: Congress passed an appropriation bill in 1996 which provides $50 million nationally for Federal Hardship Grants to small, poor communities. California's share of the appropriation is $1,427,200. Program funding of $50 million per year through the year 2000 was proposed in House Resolution (H.R.) 961, the reauthorization of the Clean Water Act. Although the reauthorization has not been passed, it is the U.S. Environmental Agency's (USEPA) opinion that Congress will appropriate funds for this program as outlined in H.R. 961. If this occurs, California would receive $7,136,000 over a five-year period.

The Division of Clean Water Programs (DCWP) proposes that these funds be used in conjunction with the $30 million Small Community Grant (SCG) Program since a 5 percent state match is required to obtain the federal money. The Federal Hardship Grant money would be used in lieu of SCG monies, thereby stretching these limited funds for more projects.

The DCWP proposes that the Executive Director be authorized to accept the Federal Hardship Grant in the amount of $1,427,200.

The USEPA guidance issued on March 20, 1997 allows the states to draw administration monies from the four percent SRF administration allowance and to apply State Revolving Fund (SRF) rules instead of the old Title II Construction Grant rules if the State issues at least a 15 percent SRF loan. If SRF loan assistance is offered, the State must show the projects expected to receive Federal Hardship Grant funding on its SRF Intended Use Plan (IUP). The DCWP proposes to amend the FFY 1997 IUP (see Section XII. attached) listing Monte Rio as the community expected to receive the Federal Hardship Grant.

POLICY ISSUE: Should the State Water Resources Control Board (SWRCB) approve 1) the use of the $30 million SCG Program for the required 5 percent match; 2) authorize the Executive Director to accept the FFY 1996 Federal Hardship Grant, and; 3) approve the issuance of at least a 15 percent SRF loan and amendment of the FFY 1997 IUP?

FISCAL IMPACT: The Federal Hardship Grant Program does not allow any of the funds available to be used for state administration. The USEPA however, will allow the state to charge its administrative expenses against the 4 percent SRF administrative set-aside provided the community(s) receiving a Federal Hardship Grant are required to take at least a 15 percent SRF Loan.

The DCWP proposes that the Federal Hardship Grant Program be administered using the SRF administrative set-aside.

Since the DCWP administrative effort is expected to be minimal, there is almost no fiscal impact on the 4 percent SRF Capitalization Grant administrative allowance.

RWQCB: None

STAFF RECOMMENDATION: That the SWRCB adopt a resolution 1) approving use of the $30 million SCG monies as a source of the required 5 percent match; 2) authorizing the Executive Director to accept the FFY 1996 Federal Hardship Grant of $1,427,200; and 3) approving the issuance of at least a 15 percent SRF loan with the Federal Hardship Grant and amendment of the FFY 1997 IUP.

DRAFT July 28, 1997

WHEREAS:

1. The U.S. Environmental Protection Agency has promulgated final guidance on March 20, 1997 indicating that California's share of the $50 million Federal Hardship Grants Program is $1,427,200;

2. The March 20, 1997 guidance requires that the State make a 5 percent match ($71,360) in order to obtain the grant;

3. The March 20, 1997 guidance requires the State to issue at least a 15 percent State Revolving Fund (SRF) Loan and an amended Intended Use Plan (IUP) if it wants to charge program administration costs to the 4 percent SRF set-aside; and

4. Authorization to accept the Federal Hardship Grant is needed.

THEREFORE BE IT RESOLVED THAT:

The State Water Resources Control Board:

1. Approves the use of the Small Community Grant Program as the source of the required 5 percent match;

2. Approves the issuance of a minimum SRF Loan of 15 percent to community(s) receiving a Federal Hardship Grant;

3. Approves the amended FFY 1997 IUP listing the community of Monte Rio as the expected recipient of assistance under the Federal Hardship Grant Program; and

4. Authorizes the Executive Director to accept the Federal Hardship Grant.

The undersigned, Administrative Assistant to the Board, does hereby certify that the foregoing is a full, true, and correct copy of a resolution duly and regularly adopted at a meeting of the State Water Resources Control Board held on August 21, 1997.

Maureen Marché

Administrative Assistant to the Board

JULY 28, 1997 DRAFT

XII. FEDERAL HARDSHIP GRANT PROGRAM

California expects to apply for and receive a $1,427,200 Federal Hardship Grant in FFY 1998.

The SWRCB intends to administer this program and use funds from the State's $30 million Small Community Grant (SCG) Program to pay the required 5 percent state match. The SWRCB also intends to issue a minimum of 15 percent SRF loan in order to allow the SWRCB to administer the program using SRF requirements in the approved SRF Operating Agreement.

It is projected that the SWRCB will issue a $1,427,200 Federal Hardship Grant to the Community of Monte Rio. This community will receive a combination of a SCG, a Federal Hardship Grant, and a minimum SRF loan of 15 percent.

It is anticipated that the Federal Hardship Grant contract will be issued to the SWRCB in October 1997, and that the Community of Monte Rio will complete design and be issued a Federal Hardship Grant amount of $1,427,200 within one year of issuance of the Federal Hardship Grant to the SWRCB.