State Forty Percent Construction Grant Program

PURPOSE: This rule sets forth the requirements and process of application for a state grant for construction of wastewater treatment works and the terms and conditions for receipt of this grant. This rule also clarifies the requirements, the types of facilities eligible for grant funds and the grant amount available for eligible grantees. (1) Applicability. This rule defines the minimum requirements which apply to all recipients of assistance under the State Forty Percent Grant Program. The recipient must satisfy more stringent requirements, if required to do so by state or local statutes, policies, rules, ordinances or orders. (2) Grant Amount. With exception of preapproved grant anticipation financing costs, the grant amount is limited to forty percent (40%) of the eligible project costs or two (2) million dollars, whichever is less. (3) Eligible Applicants. (A) Eligible applicants must be a county, public sewer district, public water supply district, municipality or combination of the same. (B) Eligible applicants are limited to those applicants which do not qualify for a loan for the total eligible project costs under 10 CSR 20-4.042. (C) Eligible applicants must have submitted a preliminary project proposal to the Missouri Water and Wastewater Review Committee (MWWRC) and received an invitation from the MWWRC to apply for financial assistance. (4) Definitions. The definitions of terms for this rule are contained in 10 CSR 20-2.010 and 10 CSR 20-4.040(2)(A)–(S). (5) General Grant Requirements. (A) A construction permit and an operating permit must be obtained in accordance with (B) Acceptance of a grant constitutes agreement that cost overrun shall be borne by the applicant. (C) Provisions must be made for adequate inspection during construction by the grantee. (D) No grant will be awarded to an applicant who is in noncompliance with the monitoring or reporting requirements of a valid National Pollutant Discharge Elimination System (NPDES) permit or who is not properly operating or maintaining an existing system. (E) Project cost eligibility is limited to those listed in section (6) of this rule. (6) Classification of Costs. The information in this section represents policies and procedures for determining the eligibility of project costs for assistance under programs supported by the Forty Percent Grant Program. (A) General. It is the policy of the commission that all project costs will be eligible if they meet the following tests: 1. Reasonable and cost effective; 2. Necessary for the construction of an operable wastewater facility including required mitigation and are described in the approved facility plan; and 3. Resolve water pollution problems in existence prior to the date of grant application. (B) Eligible Costs. Eligible costs include, at a minimum: 1. The reasonable costs of planning and design of a wastewater treatment system project. 2. The reasonable cost of services incurred during the building and initial operation phase of the project to ensure that it is built in conformance with the design drawings and specifications. Eligible construction phase and initial operation phase services are limited to— A. Office engineering; B. Construction surveillance; C. Stakeout surveying; D. As-built drawings; E. Special soils/materials testing; F. Operation and maintenance manual; G. Follow-up services and the cost of start-up training for operators of mechanical facilities constructed by the project to the extent that these costs are incurred prior to this department’s final inspection. Costs shall be limited to on-site operator training tailored to the facilities constructed or on- or off-site training may be provided by the equipment manufacturer if this training is properly procured; H. User charge and sewer use ordinance; and I. Plan of operation; 3. The cost of subagreements for constructing the facilities listed if the associated problems are not caused by inadequate operation and maintenance practices: A. New interceptors; B. New pump stations; C. New wastewater treatment facilities; D. Rehabilitation or upgrading of treatment plants; E. Rehabilitation or replacement of existing pump stations whichever is most cost effective; F. Replacement of force mains and interceptors as needed to reduce infiltration/inflow; G. Collection sewers; and H. The cost of sewer rehabilitation, other than normal maintenance costs for reduction of infiltration/inflow (I/I) or as needed to eliminate sanitary sewer overflows or bypassing of treatment plants; 4. Change orders and the costs of meritorious contractor claims for increased costs under subagreements as follows: A. Within the allowable scope of the project; B. Costs of equitable adjustments due to differing site conditions; and C. Settlements, arbitration awards and court judgments which resolve contractor claims shall be allowable only to the extent that they are not due to the mismanagement of the recipient; 5. Costs necessary to mitigate only direct, adverse, physical impacts resulting from building of the treatment works; 6. The cost of groundwater monitoring facilities necessary to determine the possibility of groundwater deterioration, depletion or modification resulting from building the project; 7. Equipment, materials and supplies. A. The cost of a reasonable inventory of laboratory chemicals and supplies necessary to initiate plant operations and laboratory items necessary to conduct tests required for plant operation. B. Cost of shop equipment installed at the treatment works necessary to the operation of the works. C. The costs of necessary safety equipment, provided the equipment meets applicable federal, state, local or industry safety requirements. D. The costs of mobile equipment necessary for the operation of the overall wastewater treatment facility, transmission of wastewater or sludge or for the maintenance of equipment. These items include: (I) Portable standby generators; (II) Large portable emergency pumps to provide pump-around capability in the event of pump station failure or pipeline breaks; (III) Trailers and other vehicles having as their purpose the transportation and/or application of liquid or dewatered sludge or septage; and (IV) Replacement parts identified and approved in advance; 8. Costs of royalties for the use of or rights in a patented process or product with the prior approval of the department; 9. Land or easements when used as an integral part of the treatment process; 10. Purchase of private wastewater treatment systems, excluding collector and interceptor sewers, provided the project will upgrade the existing facilities; 11. Force account work for construction oversight; and 12. One hundred percent (100%) of the reasonable costs of a grant anticipation loan will be eligible. Departmental approval must be obtained prior to securing the grant anticipation loan. Grant anticipation loan costs will be approved when they are needed for cash flow purposes for the period between grant award and the first grant payment from the department. The approved costs of grant anticipation notes will be in addition to the approved grant amount. (7) Project Selection Process. Priority will be based upon the priority system established in (A) The commission shall hold an annual competition for receipt of state grant assistance. (B) Applicants must submit an application as described in section (8) of this rule on or before November 15 prior to the fiscal year for which state grant assistance is being sought. Unsuccessful applicants requesting funds during a given fiscal year shall be considered for funding the next fiscal year and need not reapply. This deadline may be extended by the commission if inadequate applications are received. (C) All qualified applications will be rated and placed on the planning list in accordance with 10 CSR 20-4.010(1)(A). (D) The commission will select the highest rated projects for state grant assistance from state grant funds anticipated to be available during the upcoming fiscal year. (E) As funds become depleted, staff will present recommendations to the commission to fund or bypass an applicant’s project. Projects failing to progress towards fundable status are subject to funding “bypass.” A project with fewer priority points may be placed ahead of a project with a higher priority point ranking that is failing to make sufficient advancement towards funding eligibility. Recommendations to the commission to fund or bypass a project may be made at any commission meeting throughout the fiscal year. Applicants whose projects are recommended for bypass or funding will be notified prior to the commission meeting when their projects appear on the agenda and will be allowed time to present their points of view regarding the proposed change in project status. Projects that have awarded construction contracts and do not require financial assistance under this regulation will be subject to bypass by the commission. (8) Application Requirements. Applicants must submit the documents listed in the following subsections (8)(A)–(D) to be considered for inclusion on the priority list. Some documents may be waived by the department if justified— (A) An application form; (B) A project summary which includes: 1. The need for the project; 2. The project components including maps or drawings showing the project location and layout; and 3. A cost estimate including a cost breakdown; (C) Draft financial capability analysis prepared in accordance with paragraph (9)(B)4. of this rule; and (D) Proposed project schedule. The following represents the minimum requirements for the project schedule: 1. Construction start defined as date of issuance of notice to proceed; 2. Construction completion; 3. Initiation of operation; and 4. Project completion. (9) Requirements Preceding Bidding Authorization. In addition to the requirements of section (8) of this rule, applicants must submit the documents listed in subsection (9)(A)–(J) and obtain departmental approval prior to award of grant funds. (A) A facility plan prepared in accordance with section (14) of this rule must be submitted within four (4) months of the application being placed on the fundable list. (B) Resolution Identifying the Authorized Representative. Applicants for assistance under the State Forty Percent Grant Program shall provide a resolution by the governing body designating a representative by name authorized to file the application for assistance. (C) Plans and specifications. (D) Financial Capability Analysis. The applicant, along with its application, shall submit written certification that the applicant has analyzed the costs and financial impacts of the proposed facilities and, that the applicant has the capability to finance and manage the construction and operation of the facilities. The wastewater facilities’ financial information sheet shall be submitted with the certification. (E) Draft engineering contract as described in section (11). (F) Draft user charge ordinance as described in section (17). (G) Draft sewer use ordinance as described in section (17). (H) Updated Project Schedule, if Re - quired. The following represents the minimum requirements for the project schedule: 1. Construction start defined as date of issuance of notice to proceed; 2. Construction completion; 3. Initiation of operation; and 4. Project completion. (I) Certification of Easements and Real Property Acquisition. Recipients of assistance under the state grant program shall have obtained title or option to the property or easements or condemnation proceedings initiated for the project prior to award of a grant. (J) Other information or documentation deemed necessary by the applicant or the department to ensure the proper expenditure of state funds. (10) Accounting and Audits. Applicants are required to have an adequate financial management system and audit procedure for the project which provides efficient and effective accountability and control of all property, funds and assets related to the project. The applicant’s financial system is subject to state audits to assure fiscal integrity of public funds. (11) Architectural or Engineering Contracts. The following represents the minimum requirements for the architectural or engineering contracts: (A) General requirements for subagreements are, that they— 1. Be necessary for and directly related to the accomplishment of the project work; 2. Be in the form of a bilaterally executed written agreement; 3. Be for monetary consideration; 4. Not be in the nature of a grant or gift; 5. State a time frame for performance; 6. State a cost which cannot be exceeded except by amendment; and 7. State provisions for payment; and (B) The nature, scope and extent of work to be performed during construction should include, but not be limited to, the following: 1. Preparing an operation and maintenance manual if required by the department and as defined in subsection (20)(B); 2. Assisting the recipient in bid letting; 3. Assisting the recipient subdivision in reviewing and analyzing construction bids and making recommendations for award; and 4. Inspection during construction to ensure conformance with the construction contract documents unless waived by the department. (12) Procurement of Engineering Services. It is the policy of the commission that contracts for architectural, engineering and land surveying services be negotiated on the basis of demonstrated competence, qualifications for the type of services required and at fair and reasonable prices. The procedures listed in subsections (12)(B) and (C) are contained in sections 8.285–8.291, RSMo. (A) Use of the Same Architect or Engineer During Construction. If the recipient is satisfied with the qualifications and performance of the architect or engineer who provided any or all of the facilities planning or design services for the project and wishes to retain that firm or individual during construction of the project, it may do so without further evaluation of qualifications, provided the recipient selected the firm using at a minimum the procedures outlined in subsections (12)(B) and (C) of this rule. (B) Whenever a project requiring architectural, engineering or land surveying services is proposed, the owner shall evaluate current statements of qualifications and performance data of prequalified firms on file together with those that may be submitted by other firms regarding the proposed project. In evaluating the qualifications of each firm, the owner shall use the following criteria: 1. The specialized experience and technical competence of the firm with respect to the type of services required; 2. The capacity and capability of the firm to perform the work in question, including specialized services, within the time limitations fixed for the completion of the project; 3. The past record of performance of the firm with respect to such factors as control of costs, quality of work and ability to meet schedules; and 4. The firm’s proximity to and familiarity with the area in which the project is located. (C) Negotiation of a Contract. 1. The recipient shall list three (3) highly qualified firms. The recipient then shall select the firm considered best qualified and capable of performing the desired work and attempt to negotiate a contract for the project with the firm selected. 2. For a basis for negotiations, the recipient shall prepare a written description of the scope of the proposed services. 3. If the recipient is unable to negotiate a satisfactory contract with the firm selected, negotiations with that firm shall be terminated. The owner then shall undertake negotiations with another of the qualified firms selected. If there is a failing of accord with the second firm, negotiations with the firm shall be terminated. The recipient then shall undertake negotiations with the third qualified firm. 4. If the recipient is unable to negotiate a contract with any of the selected firms, the recipient shall reevaluate the necessary architectural, engineering or land surveying services, including the scope of services and reasonable fee requirements, again compile a list of qualified firms and proceed in accordance with the provisions of subsections (12)(B) and (C). (13) Public Participation. The public must be allowed an opportunity to exchange ideas with the applicant during project development. Public participation must be preceded by timely distribution of information and must occur sufficiently in advance of decision making to allow the recipient to assimilate public views into action. At a minimum, the recipient must provide an opportunity for public participation, prior to approval of the facility plan and draft user charge ordinance, at a public meeting at which the proposed alternative and the proposed user charge rates are discussed. The recipient shall prepare a transcript, recording or other complete record of the proceeding and submit it to the department and make it available at no more than cost to anyone who requests it. A copy of the record should be available for public review. (14) Facility Planning. Facility plans or engineering reports must be in accordance with 10 CSR 20–8, Wastewater Treatment Design Standards and accepted engineering practice. (A) Communities that do not propose to employ a full-time operator, forty (40) hours per week, must evaluate passive or easy to operate treatment alternatives before considering a mechanical activated sludge package plant. Passive or easy to operate alternatives may include, but are not limited to, enhanced natural systems, submerged fixed film systems, sand filters, and recirculating pea gravel filters. (B) Wastewater treatment facilities shall provide for meeting the effluent limitations as determined by the department in an evaluation of the application of 10 CSR 20-7.015 and 10 CSR 20-7.031 to the proposed discharge. (C) The facility plan for a community that experiences sanitary sewer overflows (SSO) must address eventual elimination of the overflows. The project under review does not have to achieve the goal of SSO elimination. The facility plan may provide for elimination of the sanitary sewer overflows at some point in the future and be in compliance with any permit or enforcement schedules. (D) An estimate of the average user charge including documentation of the basis of the estimate. (E) An evaluation of the impact of the proposed project on the environment is required. (15) Design. Design of the project will be in conformance with accepted engineering practices and the current Waste Treatment Design Guide, 10 CSR 20-8. A preliminary design submittal, including the design criteria and facilities layout sheet, may be required at approximately the twenty percent (20%) design stage. (16) Intermunicipal Agreements. If the project serves two (2) or more public entities, the applicant shall submit executed agreements or contracts between the public entities for the financing, construction and operation of the proposed treatment facilities. (17) User Charge and Sewer Use Ordinance. Recipients are required to adopt and implement, for the useful life of the treatment works, approved user charge and sewer use ordinances. (A) The user charge system must be designed to produce adequate revenues required for the operation and maintenance, including a reserve for replacement. Each user charge system must include an adequate financial management system that will accurately account for revenues generated by the system, debt service and expenditures for operation and maintenance based on an adequate budget identifying the basis for determining the annual operation and maintenance costs and the costs of personnel, material, energy and administration. The system shall provide for an annual review of charges. A system shall be adopted by all political subdivisions receiving service from the recipient. (B) The sewer use ordinance shall prohibit any new connections from inflow sources into the treatment works and require that new sewers and connections to the treatment works are properly designed and constructed. The ordinance shall also require that all wastewater introduced into the treatment works not contain toxic or other pollutants in amounts or concentrations that endanger public safety and physical integrity of the treatment works cause, violation of effluent or water quality limitations, preclude the selection of the most cost-effective alternative for wastewater treatment and sludge disposal or inhibit the performance of a pretreatment facility. The ordinance shall require the recipient to notify all potential users of service availability and that all users shall connect to the system within ninety (90) days of notice of service availability. (C) At ninety percent (90%) construction completion, the final user charge and sewer use ordinances, as approved, shall be implemented. (18) Specifications. The construction specifications must contain the features listed in subsections (18)(A)–(M). (A) The project must be advertised for thirty (30) days between the time the notice is published and when bids are opened. The public notice should be published in an area newspaper of general circulation and/or contractors’ publications. (B) In accordance with section 71.140, RSMo, preference shall be given to Missouri products. (C) Pursuant to section 34.076, RSMo, a preference shall be given to those persons doing business as Missouri firms, corporations or individuals, or which maintain Missouri offices or places of business, when the quality of performance promised is equal or better and the price quoted is the same or less. In addition, in order for a nondomiciliary bidder to be successful, his/her bid must be that same percentage lower than a domiciliary Missouri bidder’s bid as would be required for a Missouri bidder to successfully bid in the nondomiciliary’s state. Any bidder domiciled outside the boundaries of Missouri shall submit an audited financial statement as would be required of a Missouri domiciled contractor or bidder on a bid being let in the domiciliary state of that contractor or bidder. (D) The proposal form must contain a nondiscrimination statement. (E) Each bidder must furnish a bid guarantee equivalent to five percent (5%) of the bid. (F) The proposal must fully explain the basis for determining the low bidder and include a statement that the contract will be awarded to the lowest responsive, responsible bidder. (G) The specifications must state that when manufacturers’ names are used they are used to establish a standard and the words or equal, if not stated, are implied. (H) The specifications must contain a provision for the maximum calendar or work days allowed for completion of the project. (I) The specifications must allow for representatives of the Department of Natural Resources to have access to the work wherever it is in preparation or progress. (J) The specifications shall require the contractor to furnish a performance and a payment bond each in an amount at least equal to one hundred percent (100%) of the contract price as security for the faithful performance of his/her contract and for the payment of all persons performing labor on the project and furnishing materials in connection with the project under this contract as set forth in the standard form of performance/payment bond included in the contract documents. The surety on this bond shall be a duly authorized surety company satisfactory to the owner. (K) State wage determinations must be included in the specifications. (L) The specifications must include a sales tax exemption clause consistent with the Missouri State Sales Tax Law, section 144.030(15), RSMo. (M) The specifications must include the following statement: “The owner shall make payment to the contractor in accordance with section 34.057, RSMo.” (19) Bidding Requirements. (A) Each contract shall be awarded after formal advertising. (B) Departmental concurrence with contract award must be obtained prior to actual contract award. Recipients shall notify the department in writing of each proposed construction contract which has an aggregate value over twenty-five thousand dollars ($25,000). The recipient shall notify the department within ten (10) calendar days after the bid opening for each construction subagreement. The notice shall include: 1. Publisher’s affidavit of advertising; 2. Tabulation of bids; 3. Low bid and/or proposal the recipient wishes to accept; 4. Recipient’s recommendation of award; 5. Any addenda not submitted previously and bidder acknowledgment of all addenda; 6. Copy of the bid bond; 7. One (1) set of as-bid specifications; 8. Missouri domestic products certification if applicable; and 9. Revised financial capability worksheet and certification if bids exceed prebid estimates by more than fifteen percent (15%). (20) Operation and Maintenance. (A) Operation and Maintenance Manual. The recipient must make provision satisfactory to the department for assuring effective operation and maintenance of the constructed project throughout its design life. If required by the department, recipients of assistance for construction of mechanical facilities must develop an operation and maintenance manual. The operation and maintenance manual must be submitted by eighty percent (80%) construction completion before final payment can be made. (B) Start-Up Training. At fifty percent (50%) construction, a start-up training proposal (if required) and proposed follow-up services contract must be submitted and approved by ninety percent (90%) construction completion. (C) Wastewater Operator. The recipient must make provision satisfactory to the department for assuring that qualified wastewater works operating and maintenance personnel are hired in accordance with an approved schedule. Qualified personnel shall be those meeting the requirements established under 10 CSR 20-9.020. (21) Progress Payments to Contractors. (A) It is the commission’s policy that recipients should make prompt progress payments to prime contractors and prime contractors should make prompt progress payments to subcontractors and suppliers for eligible construction, supplies and equipment costs. 1. For purposes of this section, progress payments are defined as follows: A. Payments for work in place; and B. Payments for materials or equipment which have been delivered to the construction site or which are stockpiled in the vicinity of the construction site in accordance with the terms of the contract, when conditional or final acceptance is made by or for the recipient. The recipient shall assure that items for which progress payments have been made are adequately insured and are protected through appropriate security measures. (B) Appropriate provisions regarding progress payments must be included in each contract and subcontract. (C) Retention From Progress Payments. The recipient may retain a portion of the amount otherwise due the contractor. The amount the recipient retains shall be in accordance with section 34.057, RSMo. (22) Approval and Payment of Grants Made and Amended Between March 4, 2007 and August 30, 2007. (A) The applicant shall be notified by the department when the grant is awarded. (B) Full payment under the grant shall be made at the time of the department’s receipt of the executed grant award or grant amendment. The following provisions shall apply: 1. The grantee shall establish a separate escrow account with a bank as defined in Chapter 409, section 409-1.102, RSMo; 2. The full grant amount, less any payments processed prior to the date of this rule, will be paid to the grantee for deposit into the grantee’s established escrow account; 3. Grant funds in the escrow account may be used to pay up to forty percent (40%) of the costs of section (6) of this rule; and 4. The grantee shall submit the bank statement of the escrow account monthly, within thirty (30) days of the end of the month. If the monthly statement indicates that funds were withdrawn, the grantee shall submit copies of the invoices to document the costs. (C) Withdrawals at no time shall exceed forty percent (40%) of the eligible project cost incurred at the time the withdrawal is made. Final grant amount will be adjusted to reflect the actual project costs as determined by the invoices submitted by the grantee. (D) The department will verify project completion after a final inspection by the department has been conducted. (E) An audit to verify expenditure of grant funds may be made by the department after the completion of the approved project. Any funds found not expended for purposes listed in section (6) of this regulation will be recovered in addition to any applicable penalties. (23) Approval and Payment of Grants Made after August 30, 2007. (A) The applicant shall be notified by the department when the grant is awarded. (B) The department may elect to make full payment under the grant at the time of the department’s receipt of the executed grant award or grant amendment. Grantees who receive full payment shall comply with the following provisions: 1. The grantee shall establish a separate escrow account with a bank as defined in Chapter 409, section 409-1.102, RSMo; 2. The full grant amount, less any payments processed prior to the date of this rule, will be paid to the grantee for deposit into the grantee’s established escrow account; 3. Grant funds in the escrow account may be used to pay up to forty percent (40%) of the costs of section (6) of this rule; 4. The bank account may earn interest; however, all withdrawals from the account must be documented with eligible invoices. If the project costs are inadequate to withdraw all the funds in the account, the balance must be refunded; 5. The grantee shall submit the bank statement of the escrow account monthly, within thirty (30) days of the end of the month. If the monthly statement indicates that funds were withdrawn, the grantee shall submit copies of the invoices to document the costs; and 6. Withdrawals at no time shall exceed forty percent (40%) of the eligible project cost incurred at the time the withdrawal is made. Final grant amount will be adjusted to reflect the actual project costs as determined by the invoices submitted by the grantee. (C) If the department elects to make grant payments rather than fund the full grant, payments can be requested no more frequently than monthly. The department will provide a payment form for the grantee to use. The payment request must be supported by invoices that document the costs incurred. (D) The department will verify project completion after a final inspection by the department has been conducted. (E) Any funds remaining in the escrow account three (3) years after the date of the initial grant payment will be recovered by the department. On grants that are paid incrementally by the department, no payments will be made after three (3) years from the initial grant award acceptance. (F) An audit to verify expenditure of grant funds may be made by the department after the completion of the approved project. Any funds found not expended for purposes listed in section (6) of this regulation will be recovered in addition to any applicable penalties. (24) If at any time during the twenty (20)- year design life of the facility(ies) funded under this rule is sold, either outright or on contract for deed, to other than a political subdivision of the state, the state shall receive reimbursement of the grant funds. The total amount of grant funds to be reimbursed shall be based on a twenty (20)-year straight-line depreciation. Grant funds to be reimbursed shall become due and payable upon transfer of ownership of the facility(ies). AUTHORITY: section 644.026, RSMo Supp. 2000.* Original rule filed April 2, 1990, effective Nov. 30, 1990. Amended: Filed Sept. 4, 1991, effective Feb. 6, 1992. Amended: Filed April 14, 1994, effective Nov. 30, 1994. Amended: Filed March 1, 1996, effective Nov. 30, 1996. Amended: Filed June 24, 1999, effective March 30, 2000. Emergency amendment filed Feb. 1, 2007, effective March 4, 2007, expired Aug. 30, 2007. Amended: Filed March 14, 2007, effective Oct. 30, 2007. *Original authority: 644.026, RSMo 1972, amended 1973, 1987, 1993, 1995, 2000.