James T. Gebhardt, Chief Financial Officer gebhardt@nysefc.org Tracey Hitchen Boyd, Assistant Director of Finance boyd@nysefc.org Seth Coulter, Assistant

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Text of James T. Gebhardt, Chief Financial Officer gebhardt@nysefc.org Tracey Hitchen Boyd, Assistant...

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  • James T. Gebhardt, Chief Financial Officer gebhardt@nysefc.org Tracey Hitchen Boyd, Assistant Director of Finance boyd@nysefc.org Seth Coulter, Assistant Director of Investments and Loan Administration coulter@nysefc.org
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  • 2 1. Who We Are 2. SRF Overview 3. Critical Elements for Sustainable Finance 4. SRF Financial Assistance Models 5. The New York State SRF Model and Experience
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  • The CWSRF was established by the 1987 Amendments to the federal Clean Water Act to help municipalities finance publicly-owned facilities that reduce or prevent water pollution. The CWSRF succeeded a federal grant program. The DWSRF was created by the 1996 Amendments to the federal Safe Drinking Water Act, to provide financial incentives for municipalities and private entities for drinking water infrastructure improvements. Federally authorized SRFs are: Capitalized with federal and state grants (State matching grant requirement is 20% of the federal grant). Governed by Project Priority System & Annual Intended Use Plans. Designed to provide below market rate loan and other forms of assistance Designed to recycle capital into new loans as loans are repaid Funding lines limit which projects are funded
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  • 5 Source:: US EPA
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  • Treatment Works Projects (examples) - New, expanded or rehabilitated plants - Sludge treatment facilities - Collection, trunk and interceptor sewers - Combined sewer overflows - Stormwater pollution abatement Non-point Source Projects (examples) - Capping and closure of solid waste landfills - Remediation of contamination from underground storage tanks - Water quality components of municipally owned brownfields - Salt storage facilities - Stormwater management facilities Estuary Conservation and Management Plans and Projects
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  • 7 Federal EPA Grant STATE Add 20% State Match Revolving Loan Fund (includes repayments, bond proceeds, interest, etc. Assistance to Public Water System: Treatment, Sources, Storage, Transmission Repayments return to Fund for future assistance
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  • Water Supply Projects (examples) - Rehabilitation or development of new drinking water sources to replace contaminated supplies - Facilities upgrade to improve quality of supply - Storage facilities upgrade - Installation or replacement of transmission or distribution mains - Promotion of viability through consolidation of water supply services - Purchase of a portion of another systems capacity Watershed protection Land Acquisition
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  • 1. Institutional Framework 2. Managing Institution (s) 3. Resources Financial ResourcesFinancial Resources Professional ResourcesProfessional Resources
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  • Legal Framework Federal/State/Local Government Roles Judicial System Marketplace
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  • Federal Government Establishes National environmental policy through establishment of nationwide laws & regulations (Clean Water Act of 1972) Currently provides pass-through funding to States to partially capitalize Revolving Funds Federal Environmental Protection Agency (created in 1970) administers the distribution of federal funds and monitors compliance with program rules as established in federal law Federal Tax and Securities Laws and Regulations Regulatory Oversight (SEC, MSRB, IRS)
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  • State Government State designates agency to receive and administer Revolving Fund dollars Provides matching funds to help capitalize Revolving Funds Adopts state-level laws and regulations to articulate state- specific program rules and regulations within the Federal framework Enforces federal and state environmental laws Enabling statute provides bonding authority to EFC Bonds are exempt from State Income Taxes
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  • Local Government Point of delivery for essential water quality-related services Best equipped to identify the needs of the local population Formally the beneficiaries of the Federal Construction Grants Program Now eligible recipients of cheap capital through State Revolving Funds State Local Finance Law Governs issuance of debt Power to raise taxes High degree of transparency Bonds are exempt from Local income taxes
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  • Used by citizens and governmental bodies to interpret and enforce environmental laws Also available to protect the contractual rights of investors Judicial decisions can influence priorities and practices of lawmakers and SRF program administrators
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  • Public infrastructure finance has historically used publicly issued bonds to raise capitalPublic infrastructure finance has historically used publicly issued bonds to raise capital Adds private capital to government revenues available for providing capital for environmental infrastructureAdds private capital to government revenues available for providing capital for environmental infrastructure Borrowing by some American Cities dates back to the Seventeenth CenturyBorrowing by some American Cities dates back to the Seventeenth Century Well established marketplace comprised of:Well established marketplace comprised of: Individuals and institutions looking to invest capital Intermediaries (investment banks) Ratings services Regulators Legal consultants Fiduciaries (bond trustees)
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  • 17 Secondary market provides investors with the ability to buy and sell on an ongoing basis (liquidity)Secondary market provides investors with the ability to buy and sell on an ongoing basis (liquidity) Essential to ensuring affordable capital and enforcing efficient market pricing Essential to ensuring affordable capital and enforcing efficient market pricing Issuer debt repayment supported by user fees or tax revenues, further supported by general obligation pledges to repay debtIssuer debt repayment supported by user fees or tax revenues, further supported by general obligation pledges to repay debt
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  • Public Ratings issued by independent rating services based on arms-length analysis of the debtors financial and economic condition and bond security pledge Annual Financial Reporting Requirements Bond Counsel Opinion that debt obligations are validly issued Disclosure documents which provide full critical disclosure to potential investors Competitive bidding requirements
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  • 19 Ongoing disclosure provides investors with updated information Ongoing disclosure provides investors with updated information Freedom of Information Act provides recourse to investors that believe critical information has been withheld Freedom of Information Act provides recourse to investors that believe critical information has been withheld Courts can act on citizen or bond trustee petition to force debtor to honor debt obligations Courts can act on citizen or bond trustee petition to force debtor to honor debt obligations
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  • Administers the Funds as delegated by federal and state government Administers the Funds as delegated by federal and state government Interacts with Stakeholders Interacts with Stakeholders Brand Name in Financial Markets Brand Name in Financial Markets Provides feedback to Institutional Framework Provides feedback to Institutional Framework Examples: Examples: State Bond Banks: Maine, North Dakota Dedicated Special Purpose State Agencies: New York, Virginia, Texas State Treasurers Office: Massachusetts, Michigan
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  • 23 Foreign Capital Foreign Capital - Terms and Conditions Influenced by External Factors - Terms and Conditions Influenced by External Factors - May Crowd Out Domestic Capital Domestic Capital Domestic Capital - Terms and Conditions Determined by Local Factors - Avoids Exchange Rate Risk - Mobilizes Local Financial Resources - Stimulates Local Capital Development
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  • 24 SRFs Rely on Domestic Capital Public capital provided by federal capitalization grants and state matching contribution Public capital provided by federal capitalization grants and state matching contribution Private capital mobilized through the issuance of tax exempt bonds to Private capital mobilized through the issuance of tax exempt bonds to Retail investors Investment management institutions
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  • Administering Staff and Borrower StaffAdministering Staff and Borrower Staff Financial InvestmentInvestment CreditCredit Structuring/ Terms negotiationStructuring/ Terms negotiation Disbursement & Debt ServicingDisbursement & Debt Servicing Legal FinanceFinance EnvironmentalEnvironmental Accounting Engineering TechnicalTechnical Program PlanningProgram Planning
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  • Financial Advisor - Assists in the bond sale. Including: Verifies cash flows Leads negotiations of bond sales to underwriting team (negotiated sales) Investment of bond proceeds and debt service reserves Underwriters - Sell bonds to investors at the best possible price (negotiated sale) Bond Counsel - Assists with meeting all legal requirements related to the bond sale and providing legal opinion for investors that the bonds are legally issued and binding on the SRF managing institution Underwriters Counsel - Represents underwriters and is responsible for full disclosure of all material issues