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Clean Water
State Revolving Fund
States Use Innovative Programmatic Financing
Approach to Maintain Stable CWSRF Demand
ACTIVITY
UPDATE
In a recent meeting between state CWSRF
program staff and the director of a large
metropolitan utility, the utility director
posed the question, "Why can't the CWSRF
fund my entire capital improvement
program, rather than individual projects,
the way a municipal bond does?" As it turns
out, a few forward-thinking CWSRF state
programs have successfully used this
"Programmatic Financing" approach with
their largest borrowers for several years.
Programmatic Financing (or "Pro-Fi" for
short) offers mutual benefits for CWSRF
programs and their largest customers. For
the utility, Pro-Fi provides a stable,
predictable funding source to incorporate
into the annual budget process, as well as a
simplified CWSRF application process. For
CWSRF state programs, Pro-Fi provides a
guaranteed source of regular
disbursements that allows for reliable cash
flow planning and reduces the risk that
unliquidated obligations will grow out of
control. Here's how it works:
•	SRF managers evaluate their cash flow
and lending projections for the upcoming
year to pinpoint the amount of funds
available for the Pro-Fi customer. For
this example, we'll say $20 million.
•	Decision-makers at the community or
utility review their capital improvement
plans for the upcoming year and identify
all CWSRF-eligible activities that they
expect to move forward soon.
•	The community or utility submits a
CWSRF application listing all of the
eligible activities. The activities could
span dozens of different projects in
various stages of planning design, and
construction. For this example, we'll say
the utility has identified $60 million in
activities expected to proceed in the
upcoming year.
•	The CWSRF state program issues a loan
agreement for $20 million to the Pro-Fi
borrower. The loan agreement states
that the money may be disbursed for any
of the eligible activities identified in the
loan agreement as long as they have
complied with applicable CWSRF
requirements, and specifies that all funds
must be disbursed within the upcoming
fiscal year. The loan agreement might
also require invoices to be submitted on
a regular basis, often monthly.
•	The borrower continues work on its $60
million capital improvement plan for the
year. As design and construction occur,
the borrower periodically submits
invoices to the CWSRF for any of the
activities included in the loan agreement.
Since the CWSRF loan agreement
encompasses such a broad array of
eligible activities, the program is
guaranteed to disburse the full $20
million in CWSRF funds during the
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Clean Water
State Revolving Fund
ACTIVITY
UPDATE
course of the year. If one of the projects
in the loan agreement is delayed, there
are many other ongoing activities to
receive disbursements in its place.
•	As the year comes to a close, the utility
has received $20 million in CWSRF
disbursements and still has many
ongoing projects. Those projects can be
rolled into a new CWSRF loan agreement
providing another hefty sum to cover
capital improvement activities for the
upcoming year.
•	Certain CWSRF requirements are
"bundled" to incorporate all of the
activities listed in the loan agreement.
For instance, a single CWSRF application
is used for all of the Pro-Fi activities and
the borrower can submit a single
authorizing resolution, although
separate plans and specifications should
still be submitted for each activity. A
weighted average scoring process can be
used for priority ranking or the activities
may be ranked separately. A single loan
agreement is signed, and the activities
can be treated as a single loan for the
purposes of Disadvantaged Business
Enterprise (DBE), CWSRF Benefits
Reporting (CBR), Single Audit Act
compliance, and potentially others.
Figure 1: Programmatic Financing Illustration
Step 1: Borrower signs a $20M
CWSRF loan agreement encompassing
all eligible near-term activities on the
current CIP
Step 2: Borrower completes
$60M in work on a variety of
CIP project activities
Step 3: Borrower submits invoices on
a regular basis until the full $20M
CWSRF loan amount is disbursed
within one year
CWSRF Loan Agreement
Planning Project 1

Planning Project 2

Design Project 3

Design Project 4

Construction Project
5
Construction Project
6
Construction Project
7
Construction Project
8
Construction Project
9
Construction Project
10
Total Loan Amount:

$20,000,000

Project 1
—
i—r
Project 5
S0
Project 3
Project 8

IS
Total Work Completed:
$60,000,000
Invoice
Project 1
Total Completed:
$5,000,000
SRF Request:
$500,000
Invoice
Project 5
Total Completed:
$20,000,000
SRF Request:
$9,000,000
Invoice

Project 3
Total Completec
$5,000,000
SRF Request:
$500,000
Invoice
Project 8
Total Completed:
$30,000,000
SRF Request:
$10,000,000

Total SRF Disbursements:
$20,000,000

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Clean Water
State Revolving Fund
ACTIVITY
UPDATE
Although this concept may be new to many in the CWSRF world, it's routine for the Rhode
Island and Minnesota CWSRF programs. These two states have been using variations on the
Pro-Fi concept for years with their largest borrowers.
The Minnesota CWSRF Benefits from a Long-Term Programmatic Financing
Relationship with the Twin Cities Utility
The Minnesota CWSRF, operated by the Minnesota Public Facilities Authority (MPFA) and
Minnesota Pollution Control Agency (MPCA), has maintained a "cash flow financing"
arrangement with the largest borrower in the state since the first CWSRF loans were signed
in 1989. Each year, the MPFA signs a programmatic financing agreement with Metropolitan
Council (Met Council), the regional wastewater utility for the Twin Cities metropolitan
region.
Features of Minnesota's Pro-Fi Arrangement
There is one loan
agreement each fiscal year
for the list of all of Met
Council's projects on the
Intended Use Plan. The loan
agreement may also include
"pending" projects that will
not receive funding until they
have been reviewed and
approved by the CWSRF
agencies. Met Council's Pro-
Fi loan agreement includes
an exhibit listing 30-40
individual sub-projects that
are eligible to receive
funding from the loan.
Priority ranking is based
on the "main" projects on the
list, each of which covers a
variety of subsequent sub-
project activities.
MPFA offers a CWSRF
"base discount" to all of its
borrowers. The base
discount offered to Met
Council is capped at $45M.
If Met Council wants to
borrow more than $45M,
they have to pay a slightly
higher interest rate for
every million borrowed over
$45M.
Pro-Fi allows some
federal requirements to be
consolidated. Met Council
does annual Disadvantaged
Business Enterprise
reporting for the entire loan,
rather than each sub-project.
Tracking of
disbursements occurs on a
sub-project basis.
Plans and specifications
for sub-projects must be
submitted to MPCA to allow
the project to be certified
for funding by MPFA.
The Pro-Fi loan
agreement is similar to
standard loan agreement,
but includes a list of all the
sub-projects to be funded.
The amount of CWSRF
funding that MPFA
commits to Met Council
changes every year based
on the amount that Met
Council anticipates using
during the 12-month
period covered by the loan
agreement. In 2016, Met
Council's Pro-Fi loan was
approximately $70M.
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£ Clean Water
State Revolving Fund
ACTIVITY
UPDATE
Rhode Island's Programmatic Financing Arrangement with the Narragansett
Bay Commission Brings Flexibility and Certainty to Both Parties
The Narragansett Bay Commission (NBC), which is headquartered in Providence and
operates Rhode Island's two largest wastewater treatment facilities, has historically
received about half of the available funds each year from the state's CWSRF, operated by
the Rhode Island Department of Environmental Management (RIDEM) and Rhode Island
Infrastructure Bank. The stability and predictability of this funding pattern has allowed
the Rhode Island CWSRF to adopt a Programmatic Financing-type arrangement with NBC.
NBC's application to the CWSRF and resolution authorizing the loan each include a lengthy,
all-encompassing list of 20-30 projects eligible to receive the funds. To allow maximum
flexibility, the list also specifies that funds may be used for acquisition, design, evaluation,
inspection, construction, improvement, installation, rehabilitation, furnishing and
equipping. Each sub-project is named in the loan agreement and receives a Certificate of
Approval from the environmental agency. Individual disbursement requests are submitted
for each project within the loan.
For priority scoring, RIDEM scores each project individually and any projects below the
amount of available resources cannot receive CWSRF funds. However, the Rhode Island
CWSRF typically has enough funds to cover all ready-to-proceed projects, so it has almost
always been able to fund every sub-project submitted by NBC.
Providence, Rhode Island

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£ Clean Water
State Revolving Fund
ACTIVITY
UPDATE
The Hawaii CWSRF Adapts Standard Procedures to Accomodate
Programmatic Financing
In Hawaii, SRF managers were searching for a strategy that would lend more certainty to
their cash flow. After one of the CWSRF's frequent borrowers expressed interest in the Pro-
Fi concept, the Hawaii CWSRF manager adapted several SRF processes and materials to
accommodate Pro-Fi.
The mechanics of Pro-Fi are a natural fit for Hawaii's CWSRF program. A Pro-Fi
arrangement generally works best with large, municipal borrowers who are continually
implementing a multi-million dollar capital improvement program. The Hawaii CWSRF
program has traditionally had only four borrowers; the four island counties of Honolulu,
Maui, Kauai, and Hawaii (Big Island). The larger counties of Honolulu, Maui, and Big Island
each have multi-million dollar capital improvement plans being implemented through a
continual yearly process of budgeting, planning, design and construction, meaning a
Pro-Fi loan for a portion of the annual capital improvement budget (covering a variety of
projects) would be easily disbursed during the year.
Honolulu's Sand Island Treatment Plant. Photo Source: American Infrastructure

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Clean Water
State Revolving Fund
ACTIVITY
UPDATE
The Pro-Fi concept required a paradigm
shift for the Hawaii CWSRF program and
its customers. For that reason, in 2015 the
Hawaii SRF held a webinar with the four
counties to explain the ProFi concept,
followed by face-to-face meetings to work
through the logistics together.
Hawaii's CWSRF standard loan agreement
has been revised with language that can
accommodate a Pro-Fi loan. One of the
key points of debate was how to handle
the CWSRF statutory requirement that
loan repayment begin within one year of
project completion, since some projects
covered by a single Pro-Fi loan may be
completed years before other projects
funded by the same loan. The solution
was to set the repayment period for each
annual Pro-Fi loan to commence one year
from the date of loan signing.
Perhaps the most important part of
preparing for a successful Pro-Fi loan has
been the ongoing financial modeling that
allows the CWSRF manager to track the
amount of funds available for Pro-Fi loans
each year. Using a financial modeling tool,
the Hawaii CWSRF program is able to
update financial projections on a monthly
basis using real-time commitment and
disbursement data. This allows them to
pinpoint the exact amount of funds that
could be available for a Pro-Fi loan
agreement at any time, while ensuring
that a healthy working capital balance
remains.
Although the Hawaii CWSRF program has
not yet signed a Pro-Fi loan with the
county borrowers, the changes to CWSRF
processes and materials ensure that the
program is poised to work with any
borrower seeking the flexibility and
reliability of a Pro-Fi loan in the future.
Did You Know...?
Pro-Fi Can be Used for
Integrated Water Quality
Solutions
A growing number of municipalities
and utilities are incorporating low-
impact green infrastructure solutions
into their capital improvement plans.
A Pro-Fi loan allows green
infrastructure projects to be bundled
along with traditional "gray" pipe and
plant infrastructure improvements
into a single CWSRF loan secured by
user charges.
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Clean Water
State Revolving Fund
ACTIVITY
UPDATE
Summary: Key Considerations for Implementing Programmatic Financing
Programmatic Financing is an alternative to project-by-project funding that has allowed a
few CWSRF programs and their large borrowers to maintain a simpler, more reliable
funding relationship. However, Pro-Fi requires commitment and planning from both
parties, and may not work for every CWSRF program. Below are some factors that create
ideal conditions for a state CWSRF program to offer Programmatic Financing:
•	A large, reliable borrower that has continuous CIP construction, a flexible budget
process, and is responsive to the CWSRF process (i.e, submits disbursement
requests and invoices in a timely manner)
•	Strong financial modeling capabilities
•	Ability to allow a more flexible application process (i.e., bundling certain
requirements, reports, and certifications)
•	Ability to execute a loan agreement on a set schedule each year
Clean Water
State Revolving Fund
Office of Water # February 2018 # EPA Publication 810F18001
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