Fiscal Sustainability Plan Guidance

Illinois Environmental Protection Agency’s Water Pollution Control Loan Program

On June 10, 2014, President Obama signed into law the Water Resources Reform and Development Act of 2014 (WRRDA).  Among its provisions are amendments to the Federal Water Pollution Control Act (FWPC). The WPC includes administrative requirements for each state’s Clean Water State Revolving Fund (SRF) program which in Illinois is known as the  Water Pollution Control Loan Program. Due to the amendments, all SRF  loan recipients must complete and implement a fiscal sustainability plan (FSP). The new requirement applies to all loan recipients who submit an application on or after October 1, 2014. Certain projects are exempt from this requirement.

As amended, the FWPCA now includes section 603(d)(1)(E), which states:

(E) for a treatment works proposed for repair, replacement, or expansion, and eligible for assistance under subsection (c)(1), the recipient of a loan shall-

(i) develop and implement a fiscal sustainability plan that includes-

(I) an inventory of critical assets that are a part of the treatment works

(II) an evaluation of the condition and performance of inventoried assets or asset groupings;

(III) a certification that the recipient has evaluated and will be implementing water and energy conservation efforts as part of the plan;  and

(IV) a plan for maintaining, repairing, and, as necessary, replacing the  treatment works and a plan for funding such activities; or

(ii) certify that the recipient has developed and implemented a plan that meets the requirements under clause (i);

A Fiscal Sustainability Plan is required by any loan recipients receiving SRF funding for a project that involves the repair, replacement or expansion of a publicly owned treatment works. At a minimum, an FSP must include the following four items:

1. Inventory of critical assets that are part of the treatment works;
2. Evaluation of the condition and performance of inventoried assets or asset groupings;
3. Certification that the recipient has evaluated and will be implementing water and energy conservation efforts as part of the plan; and
4. A plan for maintaining, repairing, funding, and as necessary, replacing the treatment works.

Fiscal Sustainability Plans (FSPs) should be treated as “living documents” that are regularly reviewed, revised, and expanded. There is no final deadline for the completion of an FSP; however, certification that an FSP has been developed and implemented is required. To accomplish this, new procedures have been developed. Prior to receiving a loan agreement, all applicants will certify that they will prepare a FSP as a condition of receiving funds. IEPA loan agreements now contain a new standard condition #21 which states, “The loan recipient shall comply with the Fiscal Sustainability Plan (FSP) requirement contained in Section 603(d)(1)(E) of the Federal Water Pollution Control Act by submitting a certification that they have developed and implemented a FSP”.

Prior to loan closing, recipients will certify that they have developed and implemented an FSP. Loan recipients will not be required to submit the FSP for review, but agree to make the FSP available for review if requested by IEPA or U.S. EPA. The FSP must be retained by the borrower and be easily accessible to utility staff, elected officials and others involved with the operation of the facilities. This may require multiple copies to be retained in multiple locations.

What is an FSP and when is it completed?
An FSP is very similar to an Asset Management Plan (AMP) and should be viewed as a “living document” that is regularly reviewed, revised, and expanded. For this reason, there is no final deadline for FSP completion. However, in order to ensure compliance with these new statutory requirements, applicants must certify that they have created and implemented an FSP containing the minimum components listed above.

Who must produce an FSP? Who is exempt from the requirements?
An FSP is required by any loan recipient receiving SRF funding for a  project that involves the repair, replacement or expansion of a publicly owned treatment works. FSP’s are not required for new treatment works (no existing system) or for projects that involve an update that does not repair, replace or expand the treatment capacity such as a project with the sole purpose of increasing the level of treatment. The FSP requirement does not apply to the Public Water Supply Loan Program.

If an application was received before October 2014, an FSP is not required.

Must the FSP cover the entire system? 
No, the FSP can pertain to only those critical assets that are a part of the  SRF-financed project along with closely associated components. For example, an SRF project has a purpose of replacing a portion of the collection system; the FSP would only cover that portion of the collection system. Treatment plant infrastructure would be optional.

If the same loan applicant borrowed a “Phase 2” loan to repair the  remainder of the collection system, the FSP would then be updated to include the entire collection system.

Is the development of an FSP an SRF eligible loan cost? 
Yes, an applicant can request loan funds to create and implement an FSP.

Do FSP’s need to be submitted for review/approval?
No, FSP’s do not need to be submitted to IEPA; however, the document must be made available upon request by the Agency or by U.S. EPA. Some states are requiring state inspector’s review a loan recipient’s FSP during a site visit or inspection. This is not the case in Illinois.

What is a critical asset?
Critical assets include equipment, accessories, or appurtenances necessary to maintain the capacity and performance of the treatment works during its useful life. The inventory of critical assets should only include those components intended to maintain the current capacity and performance of the facilities, and not any capital improvements to improve or expand the facilities.

What is an evaluation of the condition and performance of inventoried critical assets?
Either describe the item as “New” with date purchased/installed along with estimated useful life; or provide a description of the actual condition of the asset with date purchased/installed and estimated remaining useful life.

Do you have an example?
An example of a critical asset inventory may include:    

The plan should explain how these replacements will be financed, and include the Operations and Maintenance Plan.

What are water conservation efforts? 
Water Conservation is a strategy for reducing the consumption of water, reducing the loss or waste of water, improving or maintaining the efficiency in the use of water, or increasing recycling and reuse of water. Wastewater utilities can reduce operating costs through water conservation measures. These measures may include, but are not limited, to:

1. Green stormwater infrastructure that minimize the volume of stormwater that requires treatment at the wastewater plant.
2. Reuse of treated wastewater for landscape irrigation will reduce the potable water drawn for those purposes3
3. When planning for facility upgrades wastewater utilities can replace faucets and toilets with water conserving products.

What are energy conservation efforts?
Most treatment plants were built when energy cost was not a high priority. This means that investments focusing on energy conservation can reduce labor, maintenance and disposal costs, and reduce chemical use. Cost savings create a financial reserve for planned improvements and minimize rate increases.