ORDER of the DEPARTMENT OF ADMINISTRATION
The Wisconsin Department of Administration proposes an order to repeal Wis. Admin. Code §§ Adm 35.02 (6), 35.03 (1), (2) (intro.), and (2) (a) to (i), 35.04 (1), 35.05 (3), and 35.06 (3); to renumber and amend Adm 35.02 (1) and 35.06 (1); to amend Adm 35 (title), 35.01, 35.02 (4) and (5), 35.03 (title), 35.03 (3) (a) and (b), 35.03 (4) (a) and (b), 35.04 (3), 35.05 (title), 35.05 (1), Adm 35.06 (intro.), 35.07 (title), 35.07 (1) (intro.), 35.07 (1) (a) to (c), (2) and (3), and 35.09; to repeal and recreate Adm 35.02 (3) and (7), 35.04 (2), 35.05 (2), 35.06 (2), and 35.08; and to create Adm 35.02 (3m), 35.03 (3) (c), 35.03 (4) (b) 4., 35.06 (1) (a) to (e), and 35.06 (3) (intro) and (3) (a) and (b), relating to financial management of the Environmental Improvement Fund. Rule Analysis prepared by the Department of Administration
1. Citations to statutes interpreted:
2. Citations to statutory authority:
3. Explanation of the agency’s statutory authority to promulgate the rule under the statutes cited:
Section 281.59 (14), Stats. mandates that DOA promulgate rules necessary to execute its responsibilities under Sections 281.58, 281.59, and 281.61, Stats. Wis. Stat. s. 227.11 (2) (a) permits DOA to “promulgate rules interpreting the provisions of any statute enforced or administered by the agency, if the agency considers it necessary to effectuate the purpose of the statute. . . .” Adm 35 is necessary to carry out DOA’s responsibilities under ss. 281.59 (2) (a) and (b) and 281.61 (2), Stats. 4. Related statutes or rules:
The Department of Natural Resources is currently amending chs. NR 162 and 166, Wis. Admin Code, relating to its administration of the Environmental Improvement Fund (EIF). — Existing policy: DOA’s administration of the EIF is subject to:
— The federal Clean Water Act and Safe Drinking Water Act. “Clean Water Act” is the common name of the Federal Water Pollution Control Act and its amendments. The Clean Water Act and Safe Drinking Water Act require EIF funds to remain in the EIF in perpetuity; specify how, to whom, and for what projects the EIF can provide financial assistance; and require financial assistance to include principal forgiveness, which does not need to be repaid.
— Regulations of the U.S. Environmental Protection Agency (EPA). EPA regulations govern assistance recipient federal single audit requirements; the documentation required to disburse assistance; and for what purposes the EIF expends money from different sources, e.g. the EIF cannot use loan principal repayments to fund debt service on the state match portion of EIF revenue bonds.
— Regulations of the U.S. Treasury (Treasury). Treasury regulations govern tax-exempt municipal debt, including both EIF financial assistance to projects and the EIF’s issuance of revenue bonds. Treasury restricts who and for what purposes entities can issue tax-exempt debt.
— Wisconsin Administrative Code NR 162 and 166 – governing technical and application requirements of the Clean Water Fund Program (CWFP) and Safe Drinking Water Loan Program (SDWLP), respectively. NR 162 and 166 govern recipient and project eligibility, interest rates for various project activities, the assistance disbursement request form and process.
— The annual Intended Use Plans (IUP) prepared by DNR in consultation with DOA and submitted to EPA. There is one IUP for the CWFP and one for the SDWLP. The IUPs describe the policies, goals, and administration of the EIF. State fiscal year 2021 IUPs govern the maximum loan term, program timelines, and details for disbursing assistance.
— Resolutions enacted by the Wisconsin Building Commission regarding the EIF revenue bonds. Resolutions specify how money flows through EIF accounts; require bond counsel opinions for EIF loans; require the EIF to diligently enforce loan terms; and limit the EIF’s ability to take certain actions, such as modifying the terms of outstanding loans.
5. Brief plain language summary of the proposed rule:
— Address loan forgiveness. Federal law changes since the last Adm 35 revision allow the Environmental Improvement Fund to forgive loan principal. Forgiven loan principal is effectively a grant.
— Include all the types of financial assistance permitted under federal law, such as loan guarantees.
— Include the SDWLP and reflect the CWFP’s expansion into the Environmental Improvement Fund.
— Reflect Wisconsin’s creation of the Environmental Improvement Fund revenue bond program to replace the Clean Water revenue bond program.
— Remove requirements meant to protect funding capacity and instead focus on streamlined administration. The Environmental Improvement Fund’s increased funding capacity means that the program’s short-term solvency is not in doubt.
— Incorporate federal Environmental Protection Agency policy changes, including the federal equivalency policy that alleviates regulatory burdens on recipients.
— Remove provisions that duplicate Wisconsin Statutes or are the responsibility of the Department of Natural Resources.
6. Summary of, and preliminary comparison with, any existing or proposed federal regulation that is intended to address the activities to be regulated by the proposed rule:
The EIF is governed by the federal Clean Water Act and Safe Drinking Water Act as well as EPA regulations. The EPA annually reviews Wisconsin’s EIF and regularly determines that the EIF complies with federal law and regulations.
Because the EIF receives grants from the EPA, it is also subject to an annual grant agreement with the EPA.
Adm 35 complies with US Treasury and Internal Revenue Service regulations related to issuing tax-exempt municipal bonds.
7. Comparison with similar rules in Illinois, Iowa, Michigan, and Minnesota:
Illinois, Iowa, Michigan, and Minnesota, along with all other states and Puerto Rico, operate state revolving funds that are broadly similar to Wisconsin’s Environmental Improvement Fund. Like Wisconsin, Illinois, Iowa, Michigan, and Minnesota issue revenue bonds to leverage federal grants and program funds. Illinois, Michigan, and Minnesota are in EPA region five with Wisconsin, facilitating interstate communication and information sharing among state revolving fund program staff.
8. Summary of the factual data and analytical methodologies that the agency used in support of the proposed rule and how any related findings support the regulatory approach chosen for the proposed rule:
The Department of Administration did not use any factual data or analytical methodologies in developing the proposed rule. Adm 35 does not implement any regulatory requirements.
9. Effect on small business
None. The Environmental Improvement Fund provides financial assistance only to municipalities as defined in Section 281.59 (1) (c), Wis Stats. The requirements of Adm 35 apply only to municipalities and only if they choose to use the program. Municipalities who apply for Environmental Improvement Fund loans may employ professional services: engineers, accountants, financial advisors, and lawyers to help the municipalities comply with program requirements. Some of these professional services firms may be small businesses. Otherwise Adm 35 does not impact small businesses.
10. Any analysis and supporting documents used in support of the agency’s determination of the rule’s effect on small business or in preparation of economic impact report:
None.
11. Email address and telephone number of agency contact person:
