AN ACT relating to public water and wastewater systems and declaring an emergency.

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AN ACT relating to public water and wastewater systems and declaring an 1
emergency. 2
Be it enacted by the General Assembly of the Commonwealth of Kentucky: 3
Section 1. KRS 224A.320 is amended to read as follows: 4
(1) As used in KRS 224A.320 to 224A.325: 5
(a) "Board" means the Kentucky Infrastructure Authority board established in 6
KRS 224A.030; 7
(b) "Eligible funding recipient" means a public water or wastewater system that 8
meets three (3)[one (1)] or more of the criteria listed in subsection (7)(d)1. to 9
8.[9.] of this section; 10
(c) "Eligible project": 11
1. Means a project that would require capital or non -capital expenses 12
including but not limited to expenses relating to: 13
a.[1.] Developing technical, operational, and maintenance resources and 14
expertise; 15
b.[2.] Improving utility infrastructure planning, repai r, maintenance, 16
renovation, and management of plants and assets; 17
c.[3.] Obtaining technical expertise in areas of rate -setting, cost -of-18
service, and proper utility accounting standards for the utility type; 19
d.[4.] Performing and correcting deficiencies fro m drinking water, 20
wastewater, and financial audits; 21
e.[5.] Providing financing for financial inadequacies, including debt 22
service coverage through relief or refinance of the drinking water 23
or wastewater system's debt; 24
f.[6.] Providing payment assistance fo r other financial inadequacies 25
including but not limited to excessive maintenance costs, fines and 26
penalties from past violations, or consultants; and 27
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g.[7.] Extending financing for inadequately maintained distribution, 1
collection, or treatment works, incl uding service extensions to 2
unserved or underserved areas and the renovation of treatment 3
works to conserve resources; and 4
2. Does not include any project to expand the utility service area of a 5
funding applicant; 6
(d) "Kentucky Water and Wastewater Assista nce for Troubled or Economically 7
Restrained Systems Program" or "Kentucky WWATERS Program" means the 8
program established under this section and administered by the Kentucky 9
Infrastructure Authority under the direction of its board; and 10
(e) "Public water or wastewater system" means any of the following that serve a 11
community: 12
1. A water district, water association, or joint water commission formed 13
under KRS Chapter 74; 14
2. A sewer district or sanitation district formed under KRS Chapter 67, 76, 15
or 220; 16
3. A municipal water utility and water works, sewer utility, sewage system 17
or works, or combined electric and water plant formed under KRS 18
Chapter 96; and 19
4. Any combination of two (2) or more of the entities listed in 20
subparagraphs 1. to 3. of this paragraph. 21
(2) The Kentucky WWATERS Program is hereby established under the authority to 22
provide for an orderly process for eligible public water or wastewater systems to 23
apply for funds for eligible projects and for those applications to be evaluated, 24
scored, and pre sented to the General Assembly for consideration for funding. The 25
administration of the program by the authority, under the direction of the board, 26
includes but is not limited to the following: 27
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(a) Creating and making available standardized funding applica tions and regional 1
funding applications; 2
(b) Verifying the eligibility of proposed funding recipients, including but not 3
limited to engaging in financial reviews of proposed funding recipients to 4
ensure that they will be able to repay the requested amounts; 5
(c) Verifying that the proposed funding recipient seeks money for an eligible 6
project; 7
(d) Awarding funding to selected eligible funding recipients, which shall be 8
accomplished within sixty (60) days of the effective date of legislation 9
enacted by the Ge neral Assembly that authorizes and appropriates the 10
funding; 11
(e) Administering the funding and monitoring funding recipients for their success 12
in improving on any of the performance criteria described in subsection 13
(7)(d)1. to 8.[9.] of this section; 14
(f) Enforcing compliance with the requirements of this section for eligible 15
funding recipients; and 16
(g) On or before October 1, 2025, and each quarter thereafter, submitting a report 17
on the status of all funding awarded and administered by the authority 18
pursuant to this section and KRS 224A.322 to the Legislative Research 19
Commission for referral to the Interim Joint Committee on Appropriations 20
and Revenue, or to the House and Senate Standing Committees on 21
Appropriations and Revenue when the General Assembly is in session. 22
(3) (a) To participate in the Kentucky WWATERS Program, a funding applicant 23
shall submit an application to the board, which shall include: 24
1. A corrective action plan detailing how the requested funds would be 25
used to address the performance deficiencies that made the applicant 26
eligible for the funding; and 27
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2. A detailed budget for all proposed project expenses, including but not 1
limited to depreciation plans and explanations for expenses 2
categorized as administrative, miscellaneous, or other expenses. 3
(b) Funding applications may be shared with third -party independent consultants, 4
state agencies, or special purpose governmental entities in reviewing the 5
funding application as all owed under subsection (4) of this section. Once the 6
application process is complete and the funding application is ready for 7
review, it shall be made available to the public. 8
(c) Funding applicants wishing to engage in a regional project shall submit a 9
single application. 10
(d) A funding application for a capital construction project shall include cost 11
and timeline estimates. 12
(e) The board may evaluate and score funding applications for proposed 13
projects in phases as it deems appropriate. 14
(4) The board may co ntract or consult with a third -party independent consultant, state 15
agencies, or special purpose governmental entities to assist with the funding 16
applicant analysis and scoring described in this section. 17
(5) If a funding applicant is selected as an eligible funding recipient approved under the 18
Kentucky [(]WWATERS[)] Program, it shall: 19
(a) Comply with any reporting or other requirements deemed necessary by the 20
authority to verify that the awarded funding goes toward an eligible project 21
and that the funding re cipient is making improvements on the performance 22
criteria described in subsection (7)(d)1. to 8.[9.] of this section;[. The eligible 23
funding recipient shall also ] 24
(b) Comply with any internal management and governance procedures that the 25
authority may im pose in order to correct any performance deficiencies that 26
gave rise to the need for the requested funds; and 27
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(c) Adopt best management practices as established and administered by the 1
board that would address the performance deficiencies that made the 2
applicant eligible for the funding, including but not limited to practices 3
relating to: 4
1. Regulatory compliance; 5
2. Minimum debt service coverage ratios; 6
3. Operating ratio targets; 7
4. Regular rate reviews and adjustments; 8
5. Minimum cash reserve requirements; 9
6. Accounts receivable turnover and collection rates; 10
7. Asset management, lifecycle planning, capital depreciation, and 11
capital reserve funding; 12
8. Audits, financial reporting, and rate transparency; 13
9. Water loss reduction; and 14
10. Training, certification, and emergency preparedness. 15
(6) (a) A funding recipient shall forfeit all moneys received pursuant to this section 16
and KRS 224A.322 and all outstanding funding amounts, including accrued 17
interest, shall be immediately due to the authority if the sele cted funding 18
recipient: 19
1. Fails to comply with any of the requirements of this section; 20
2. Uses the awarded funding for any purpose other than the eligible project 21
for which the funding was awarded; or 22
3. Transfers or assigns the obligation to repay the f unding amounts to any 23
other entity, including any successor in interest. 24
(b) Funding recipients may also forfeit funds and be subject to immediate 25
repayment to the authority of all outstanding funding amounts, including 26
accrued interest, if the authority finds that the recipient has not made adequate 27
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improvements on the performance criteria described in subsection (7)(d)1. to 1
8.[9.] of this section. 2
(7) In the implementation of the Kentucky WWATERS Program, the board shall: 3
(a) Hold at least monthly meetings, which may be in conjunction with regularly 4
scheduled board meetings, to discharge its duties under this section; 5
(b) Determine whether a funding app licant is an eligible funding recipient and is 6
seeking funding for an eligible project; 7
(c) Based on the criteria listed in paragraph (d) of this subsection, develop an 8
objective score card or rubric, which may be amended from time to time, to 9
aid in the analysis and scoring of funding applications; 10
(d) Separately evaluate and score each funding applicant's individual project 11
according to the extent to which it meets the following criteria: 12
1. The median household income within the service area of the fundi ng 13
applicant is less than the Commonwealth's median household income; 14
2. User rates for the public drinking water or wastewater services provided 15
by the funding applicant are at or above one percent (1%) of annual 16
household income for its service area; 17
3. The funding applicant has failed to produce a financial statement audit 18
in at least one (1) of the prior three (3) years; 19
4. The funding applicant has negative income in any two (2) of the 20
previous five (5) years; 21
5. The funding applicant's debt service co verage ratio, calculated by 22
dividing its annual net operating income by its annual debt payments, 23
was less than one and one -tenth (1.1) in any three (3) of the previous 24
five (5) years; 25
6.[ The funding applicant's current accounts payable turnover ratio, 26
calculated by dividing its monthly net credit purchases from suppliers by 27
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its average accounts payable balance for the month, is less than one (1); 1
7. The funding applicant's current days' sales in accounts receivable ratio, 2
calculated by dividing its monthl y accounts receivable by its monthly 3
credit sales value and multiplying the resulting quotient by the number 4
of days in that month, is greater than forty-five (45) days; 5
8.] The funding applicant has received a notice of violation or has entered 6
into an ag reed order or consent decree as a result of a violation of the 7
requirements of the Safe Drinking Water Act, 42 U.S.C. sec. 300f et 8
seq., or the Clean Water Act, 33 U.S.C. sec. 1251 et seq., and the 9
funding applicant's proposed project would contribute to resolving the 10
violation, ensuring its continued compliance with the relevant 11
requirements of law, or both[in the past year]; 12
7.[9.] The percentage of water loss of the funding applicant's sys tem is greater 13
than thirty percent (30%); 14
8. The funding applicant can demonstrate, in the form and to the extent 15
that the board may require, that the amount of stormwater inflow and 16
groundwater infiltration entering the funding applicant's system 17
seriously impairs its effectiveness; 18
9. The funding applicant can demonstrate that the estimated costs of the 19
proposed project are comparable to the actual costs incurred for 20
similar recently completed projects in the same or other systems; 21
10. The funding applica nt has previously received funding through the 22
Kentucky WWATERS Program for a prior phase of the proposed 23
project that has been completed in accordance with the requirements 24
of the program and the funding applicant is seeking additional 25
funding to complete the next phase; 26
11. For a funding application for a capital construction project, the cost 27
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and timeline estimates have been reviewed by a licensed professional 1
engineer permitted to provide such service in the Commonwealth; 2
12.[10.] The funding applicant is willing to use the funding for 3
regionalization, consolidation, or partnerships, consistent with the policy 4
stated in KRS 224A.300(1); 5
13.[11.] The funding applicant, after receiving the funding, will be able to 6
fully resolve the pending issues that are the subject of its application 7
using the funding and other funding sources, if available; and 8
14.[12.] The funding applicant's proposed project demonstrates a high level 9
of community or regional impact potential if funding is awarded; 10
(e) Separately score and individually rank all eligible projects, including 11
proposed projects from the same funding applicant, with additional 12
consideration given to how important the completion of the proposed project 13
would be in providing or restoring safe water or wastewate r utility service 14
that is compliant with state and federal law; 15
(f) Within sixty (60) days of a funding application being deemed complete under 16
subsection (3)(b) of this section, make determinations on the eligibility of the 17
proposed project and the applic ant and issue a project score for the 18
application; 19
(g)[(f)] Provide detailed feedback to all funding applicants within fourteen (14) 20
days of the project score being completed; and 21
(h)[(g)] No later than December 1, 2024, and each December 1 thereafter, 22
submit to the Legislative Research Commission for referral to the Interim 23
Joint Committee on Appropriations and Revenue an annual report containing: 24
1. The evaluations and scores of the proposed funding recipients for the 25
year to allow for the General Assembl y to make the determinations for 26
funding the proposed funding recipients. For each proposed funding 27
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recipient that meets the eligibility requirements for funding, the board 1
shall provide a proposal for the structure and the terms of the funding, 2
including but not limited to whether the funding should be awarded in 3
whole or in part as a grant, loan, no -interest loan, or forgivable loan, the 4
repayment terms and interest rates for loans or portions of loans, and 5
any other conditions that the board proposes to be placed on the funding; 6
2. A list of all program applicants; 7
3. The identity of applicants who did not meet the eligibility requirements 8
for participation in the program; 9
4. Trends found in feedback given to applicants who did not meet the 10
eligibility requirements for participation in the program; and 11
5. Eligible uses of funding cited in the funding applications. 12
Section 2. Whereas it is critical to the proper administration of the Kentucky 13
Water and Wastewater Assistance for Troubled or Economically Restrained Systems 14
Program that ch anges to its eligibility criteria, application process, and funding 15
requirements take effect for new funding applicants as soon as possible, an emergency is 16
declared to exist, and this Act takes effect upon its passage and approval by the Governor 17
or upon its otherwise becoming a law. 18