Financial Assistance Agreement and Loan Closing Process
The Financial Assistance Agreement (FAA) is a written agreement between the municipality, the DNR, and the Department of Administration (DOA) that awards Clean Water Fund Program (CWFP) or Safe Drinking Water Loan Program (SDWLP) financial assistance. The FAA contains the terms and conditions of receiving financial assistance as well as the terms and conditions of repaying the loan.
The municipality will need to sign the agreement and the bond documents at a municipal meeting prior to the scheduled closing date of the CWFP or SDWLP loan. The DOA will wire the municipality's first disbursement of loan funds on the day of loan closing.
A Bond Counsel experienced in Wisconsin municipal debt issuance must be hired to prepare the bond documents and the bond transcript for the loan. Evidence of qualifications, experience, and liability insurance coverage may be required by the Environmental Loans Program to demonstrate the acceptability of the counsel.
The following requirements must be met before the loan project manager can prepare the municipality's Financial Assistance Agreement.
1. A loan project manager completes all application reviews.
2. A DNR plan reviewer approves the plans and specifications for the project.
3. DNR approves the parallel cost percentage, for projects being financed through the CWFP.
4. DOA determines whether the municipality has the financial capacity to assure sufficient revenues to operate and maintain the project and to pay the debt service on the obligations that it issues for the project.
5. Municipal water rates and operating rules are approved for projects being financed through the SDWLP.
- If the Public Service Commission of Wisconsin (PSC) regulates the municipality's water rates, the Environmental Improvement Fund (EIF) requires a copy of the PSC issued order authorizing water rates and operating rules.
- If the municipality's water system is not regulated by PSC, the municipality adopts operating rules and a user charge system for water rates.
6. For stormwater projects being funded under the CWFP, the municipality adopts local regulations for construction sites, adopts a municipal stormwater management plan and adopts an ordinance for new development and redevelopment.
7. Environmental Loans staff and the municipality determine that all applicable federal tax-exempt bond regulations are met.
8. A loan project manager determines that the municipality has submitted all necessary documentation for the project, including:
- bid and construction contract documentation;
- an executed copy of the architectural/engineering (A/E) contract(s);
- draft legal documents related to the authorization and issuance of bonds -- typically submitted by the bond counsel;
- a statement of the payoff amount, if refinancing a portion of a debt or an entire debt;
- the first request for disbursement form and supporting invoice documentation;
- force account certification, if costs are requested;
- a copy of the title or warranty deed for land purchased for the project, if land purchase costs are requested;
- legal statement or opinion from applicant's attorney on land ownership and easement rights necessary for the project;
- an executed copy of the intermunicipal agreement(s), if necessary for the project:
- final Green Project Reserve (GPR) cost documentation, including applicable business case;
- Federal Equivalency Projects Assurances and Certification Form 8700-201, mandatory for CWFP and SDWLP projects designated as federal equivalency projects;
- initial flow documentation, if an unsewered project;
- estimate of the parallel cost percentage, for projects being financed through the CWFP;
- Cost and Effectiveness Certification, for projects being financed through the CWFP;
- Fiscal Sustainability Plan (FSP) Certification, for projects being financed through the CWFP;
- adopt and implement a sewer use ordinance (SUO) and user charge system (UCS), for projects being financed through the CWFP;
- a copy of the water rate order approval, for projects being financed through the SDWLP; and
- a copy of the resolution adopting the rate increase, for projects being financed through the SDWLP.
Loan closing process
When all the pre-FAA requirements are met, the loan project manager will work with the municipality to establish a loan closing date. This date is normally the second or fourth Wednesday of the month. Once this date is established, the loan project manager can prepare the Financial Assistance Agreement FAA and loan-closing schedule.
About two weeks prior to the scheduled CWFP or SDWLP loan closing, the municipality must hold a meeting at which they will execute the FAA and documents prepared by the bond counsel to issue a tax-exempt bond/note to the CWFP or SDWLP as security on the loan. This issuance mirrors the process municipalities must follow for any issuance of debt, either in the public or private markets.
FAA terms and conditions
Upon entering into an FAA, the municipality agrees to the terms and conditions set forth in s. NR 162.12, Wis. Adm. Code, for CWFP projects or s. NR 166.14, Wis. Adm. Code, for SDWLP projects. A municipality is also required to do the following:
- comply with loan disbursement requirements, including:
- Set-up a non-interest bearing account into which financial assistance wire transfers will be sent when the DOA disburses loan monies to the municipality;
- Within three working days of receipt of CWFP or SDWLP monies, apply the monies to project costs such as paying invoices, refinancing debt, and reimbursing municipal accounts;
- send DOA a copy of the municipal audit report or the municipality's year-end financial statements for each fiscal year that the CWFP or SDWLP loan is outstanding;
- repay the loan over a term not to exceed twenty (20) years from the date of the FAA; and
- construct the project according to approved plans and specifications.
- Contact information
- For information on Financial Assistance Agreements, contact:
- Jeanne Cargill, FAA specialist
- For information on the loan closing process, contact:
- Kim Leizinger, Closing specialist
Disclaimer of guidance: This document is intended solely as guidance and does not contain any mandatory requirements except where requirements found in statute or administrative rule are referenced. Any regulatory decisions made by the Department of Natural Resources in any matter addressed by this guidance will be made by applying the governing statutes and administrative rules to the relevant facts. Program implementation details are outlined in the governing administrative codes and statutes: §§ 281.58 and 281.59 and 281.61, Wis. Stat., and chs. NR 162 and 166, Wis. Adm. Code.