Grants and loans are the two most popular types of funding for regional districts. A grant is money that does not need to be repaid. Many grants have conditions for reporting and spending funds. A district may need to apply for both grants and loans. When applying for a grant, your ideas, ability to complete the project, and the impact of the project are important. Grant awards are usually based on the quality of the grant application. When applying for a loan, the criteria are typically numerically-based on the credit rating and the ability of the district to repay the monies.
In order to plan for and fund projects, your district will need to determine what funding sources are available and the criteria for those funding sources. Your district may be able to apply for loans and grants to cover portions of the cost. In this section, resources for individuals and communities will be discussed. This segment will explain different types of funding which may be available. In addition, we will discuss funding options which exist for a 501(c)(3) or with a nonprofit 501(c)(3) as a fiduciary agent.
There are many sources of funds available to districts. These sources vary based upon the status of the community. When a district is formed, it is similar to a municipality in that it is an entity recognized by the government. This means that the district as a recognized entity has additional sources and limitations from where and how it can apply for funding. A funding matrix from the Rural Community Assistance Program (RCAP) is included with the documents provided in this section. It details community funding which can be used without arranging for an alternative fiscal agent.
Water Environment Research Foundation (WERF) funds water research which can be performed by a variety of groups ranging from utility companies to University researchers.
Infrastructure Development Using Local Taxes (CAGIT, COIT, CEDIT)
The sections of the Indiana Code which address using local taxes for infrastructure development are CAGIT: IC 6-3.5-1.1, CAGIT: IC 6-1.1-18.5 (Property Tax Controls), COIT: IC 6-3.5-6, and CEDIT: IC 6-3.5-7.
The best way to start the process of using taxes for revenue is to form a task force. The task force should meet and examine available resources, discuss what they need to research, and determine how best to proceed. The task force could include the following:
- County Economic Development Agency
- County Health Department
- County Council and Commission Members (representatives of each)
- Representatives from each of the incorporated and unincorporated areas within the county
- County Plan Commission or representative
Nonprofit Status
Many organizations have monies available in the form of grants to 501(c)(3) organizations. However, this presents a difficulty for a newly founded utility district. It is being set up to serve a community, while it is not being set up as a nonprofit. The community itself or the utility is incurring the debt for the district. In order to be able to access those monies the utility can pursue one of two routes. First, the utility could try to incorporate as a nonprofit by applying for and pursuing this status. Second, the utility can try to discuss the idea of having a local nonprofit, like a community foundation, serve as a fiscal agent. There is the possibility that the local foundation or nonprofit would serve as a fiscal agent and administer the funds and spending of the monies. The monies could then be held in the foundation as a fund. This could potentially allow the sewer district to have the benefits of applying for monies from foundations and other grantmakers without the need to apply for a 501(c)(3) status.
After this has been completed or facilitated, there are many more opportunities for funding. The opportunities can include grants from corporations, foundations, and other organizations. A good tool is the Directory of Indiana Grantmakers published by the Indiana Grantmakers Alliance. There are other guides to grants which can be found on the internet and at your local library. The associations which provide assistance may help you to figure out more resources accessible to you if you have 501(c)(3) status.
Individual Assistance
Individuals do not qualify as easily for grants or loans as do governmental entities. Some assistance is available for individuals to pay for septic abandonment and lateral connections. The resources available are typically in the form of loans.
Two resources have been mentioned in this guide: the Indiana Housing and Community Development Authority Homeowner Rehabilitation, and Rural Development 504 programs. To apply for the Homeowner Rehabilitation grant, your county (not district) must have a grant administrator compile a list of homeowners seeking the grant and apply as one group. Contracts are then made by the grantor with each individual. For the 504 Program, each homeowner files a separate application.
Things to Consider When Obtaining Funding
Environmental Review (ER)
Based on the requirements of the National Environmental Policy Act (NEPA), all federal funding sources require an environmental review. However, each agency's requirements differ slightly based on the individual agency's regulations.
- Indiana Office of Community and Rural Affairs (OCRA) requires that the applicant solicit comment from specified agencies in order to meet ER requirements. Comment letters are then submitted to the agency for processing. Communities receiving OCRA planning money are encouraged to complete the ER with planning money.
- Based on a submitted (and acceptable) Preliminary Engineering Report (PER), the State Revolving Fund (SRF) will request agency comment letters on behalf of the applicant. However, SRF will also accept Rural Development (RD) or OCRA environmental letters as long as all relevant agencies are contacted and agency comments responded to accordingly. SRF will require copies of all information sent to commenting agencies.
- To meet RD requirements, the applicant must solicit comment from specified agencies and summarize this information into a written report that is submitted to RD with the PER. The two documents are then reviewed together to determine eligibility for funding.
Based on comments from the State Historic Preservation Office (SHPO), many projects will require an Archaeological Survey of any undisturbed land that will be impacted by the project. If SHPO requires such a survey, it must be completed in order to obtain environmental clearance from your funding agency (or agencies).
Easements
In most projects, the engineer will try to place all system components on public rights-of-way. However, there are unavoidable cases where pipes, pumps, treatment facilities, or other equipment must be placed on private property. Pipes, pumps, and other below-ground components will generally require an easement, which allows the system owner to have access to an area of private property for the purpose of maintaining their system. Above-ground facilities like treatment plants are more likely to require an outright purchase of property.
Communities are encouraged to work with an attorney to obtain easements and acquire land, including title searches or title opinions. OCRA also requires that all land acquisition follow a strict set of steps dictated by the Uniform Relocation Act (URA). Easements must be obtained prior to application submittal, and an option must be obtained on all property that will be purchased outright. Your grant administrator will guide you through these steps.
The last steps in a project before the construction stage begins are generally as follows:
- Obtaining funding commitments: This could include Release of Funds from OCRA, a form from RD, or an approval letter from SRF.
- Design & permitting: Final designs (plans and specifications) must be submitted to the relevant agencies (usually IDEM and/or RD) for review and approval. Once designs are approved, IDEM will issue construction permits (enabling the owner to build the improvements), and either an operating permit (enabling the owner to operate a non-surface-discharging system) or an NPDES discharge permit (enabling the owner to discharge treated wastewater to surface water). More information about National Pollutant Discharge Elimination System (NPDES) permits is in the Finding Resources section of this guide.
- Bids and closing: Once all permits and funding commitments have been obtained and other requirements met (check with each involved funding source before bidding), the project goes to bid. Your engineer will guide you through this process. After a bid has been accepted (generally the lowest "responsive and responsible" bid, unless there is a well-documented reason not to hire a specific contractor), loans are closed and all other necessary paperwork completed (again, coordinate this step with your funding source), construction will begin. Use, rate, and bond ordinances will also need to be timed around the bidding of the project.
- Setting up a new utility: Issues that need to be considered when setting up a new utility include hiring a billing/collections clerk and system operator; appointing or electing a board and instructing them as to board duties; obtaining all necessary bonds and insurance for those individuals who will be handling grant money, loan money, user fees, passing a sewer use ordinance; planning for maintenance on the plant and collection/distribution system; writing a personnel manual if you hire personnel; and forming a procedure for billing and collection of rates and charges including past due accounts and lien procedure.
In many cases, fund providers will require an interim rate (set at some proportion of the expected user rate) is charged during construction. This helps a new utility build up much-needed start-up funds, and ensures that they will be able to make interest payments on loans, which come due as soon as loan funds are drawn down.
The most important point to remember at all stages of a project is to coordinate all actions according to the rules of your funding agency. This guide is not meant to provide detailed instructions at each step, only to provide communities with an outline of the steps to expect.