Substitute For

HOUSE BILL NO. 5890

A bill to amend 1994 PA 451, entitled

"Natural resources and environmental protection act,"

by amending sections 5204d, 5301, 5302, 5303, 5306, 5307, 5308, 5309, 5310, 5311, 5401, 5402, 5403, 5404, 5405, 5406, 5407, 5408, 5409, 5412, 5415, 5416, 5417, and 19703a (MCL 324.5204d, 324.5301, 324.5302, 324.5303, 324.5306, 324.5307, 324.5308, 324.5309, 324.5310, 324.5311, 324.5401, 324.5402, 324.5403, 324.5404, 324.5405, 324.5406, 324.5407, 324.5408, 324.5409, 324.5412, 324.5415, 324.5416, 324.5417, and 324.19703a), sections 5204d and 19703a as added by 2010 PA 232, sections 5301, 5403, and 5405 as amended by 2021 PA 45, section 5303 as amended by 2012 PA 560, sections 5401, 5404, 5407, 5408, 5409, 5412, 5415, 5416, and 5417 as added by 1997 PA 26, and sections 5402 and 5406 as amended by 2012 PA 561, and by adding sections 5303a, 5307a, 5313b, 5313c, 5406a, 5407a, and 5415a; and to repeal acts and parts of acts.

the people of the state of michigan enact:


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Sec. 5204d. The state may establish a grant program within the strategic water quality initiatives fund for the purpose of funding specific wastewater treatment facility infrastructure improvement projects designed to prevent chronic discharges and projected to have significant regional benefits to Great Lakes water quality and recreational opportunities. In establishing such a program, the state may consider the recommendations of the advisory committee created in section 5317.

Sec. 5301. As used in this part:

(a) "Assistance" means 1 or more of the following activities to the extent authorized by the federal water pollution control act:

(i) Provision of loans to municipalities for construction of sewage treatment works projects, stormwater treatment management projects, or nonpoint source projects.

(ii) Project refinancing assistance.

(iii) The guarantee or purchase of insurance for local obligations, if the guarantee or purchase action would improve credit market access or reduce interest rates.

(iv) Use of the proceeds of the fund as a source of revenue or security for the payment of principal and interest on revenue or general obligation bonds issued by this state, if the proceeds of the sale of the bonds will be deposited into the fund.

(v) Provision of loan guarantees for similar revolving funds established by municipalities.

(vi) The use of deposited funds to earn interest on fund


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accounts.

(vii) Provision for reasonable costs of administering and conducting activities under title VI of the federal water pollution control act, 33 USC 1381 to 1388.1389.

(b) "Authority" means the Michigan municipal bond authority created in the shared credit rating act, 1985 PA 227, MCL 141.1051 to 141.1076.

(c) "Capitalization grant" means the federal grant made to this state by the United States Environmental Protection Agency for the purpose of establishing a state water pollution control revolving fund, as provided in title VI of the federal water pollution control act, 33 USC 1381 to 1388.1389.

(d) "Construction activities" means any actions an action undertaken in the planning, designing, to plan, design, or building of build sewage treatment works projects, stormwater treatment management projects, or nonpoint source projects. Construction activities include, but are not limited to, all of the following:

(i) Project planning services.

(ii) Engineering services.

(iii) Legal services.

(iv) Financial services.

(v) Design of plans and specifications.

(vi) Acquisition of land or structural components, or both.

(vii) Building, erection, alteration, remodeling, or extension of a any of the following:

(A) A sewage treatment works.

(viii) Building, erection, alteration, remodeling, or extension of projects

(B) Projects designed to control nonpoint source pollution,


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consistent with section 319 of title III of the federal water pollution control act, 33 USC 1329.

(ix) Building, erection, alteration, or remodeling of a

(C) A stormwater treatment management project.

(viii) (x) Municipal Reasonable expenses of supervision of the project activities described in subparagraphs (i) to (ix).(vii).

(e) "Disadvantaged community" means a municipality in which all of the following conditions are met:

(i) Users within the area served by a proposed sewage treatment works project or stormwater treatment project are directly assessed for the costs of construction.

(ii) The median household income of the area served by a proposed sewage treatment works project or stormwater treatment project does not exceed 120% of the statewide median annual household income for this state.

(iii) The municipality demonstrates at least 1 of the following:

(A) More than 50% of the area served by a proposed sewage treatment works project or stormwater treatment project is identified as a poverty area by the United States Census Bureau.

(B) The median annual household income of the area served by a proposed sewage treatment works project or stormwater treatment project is less than the federal poverty guidelines for a family of 4 in the 48 contiguous United States. In determining the median annual household income of the area served by the proposed sewage treatment works project or stormwater treatment project under this sub-subparagraph, the municipality shall utilize the most recently published statistics from the United States Census Bureau, updated to reflect current dollars, for the community that most closely approximates the area being served by the project. As used in this


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sub-subparagraph, "federal poverty guidelines" means the poverty guidelines published annually in the Federal Register by the United States Department of Health and Human Services under its authority to revise the poverty line under 42 USC 9902.

(C) The median annual household income of the area served by a proposed sewage treatment works project or stormwater treatment project is less than the most recently published statewide median annual household income for this state, and annual user costs for sewage treatment or stormwater treatment exceed 1% of the median annual household income of the area served by the proposed sewage treatment works project or stormwater treatment project.

(D) The median annual household income of the area served by a proposed sewage treatment works project or stormwater treatment project is not greater than 120% of the statewide median annual household income for this state, and annual user costs for sewage treatment or stormwater treatment exceed 3% of the median annual household income of the area served by the proposed project.

(e) (f) "Federal water pollution control act" means 33 USC 1251 to 1388.1389.

(f) (g) "Fund" means the state water pollution control revolving fund established under section 16a of the shared credit rating act, 1985 PA 227, MCL 141.1066a. , established under title VI of the federal water pollution control act, 33 USC 1381 to 1388.

(g) (h) "Fundable range" means those projects, taken in descending order on the priority lists, for which sufficient funds are estimated by the department to exist to provide assistance at the beginning of each annual funding cycle.

(h) (i) "Municipality" means a city, village, county, township, authority, or other public body, including an either of


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the following:

(i) An intermunicipal agency of 2 or more municipalities, authorized or created under state law. ; or an

(ii) An Indian tribe that has jurisdiction over construction and operation of sewage treatment works or other projects qualifying under section 319 of the federal water pollution control act, 33 USC 1329.

(i) (j) "Nonpoint source project" means construction activities designed to reduce nonpoint source pollution consistent with the state nonpoint source management plan under section 319 of the federal water pollution control act, 33 USC 1329.

(j) (k) "Priority list" means the annual ranked listing of projects developed by the department in section 5303.

(k) (l) "Project" means a sewage treatment works project, a stormwater treatment management project, or a nonpoint source project, or a combination of these and may include utilization of more efficient energy and resources as described in any of the following:

(i) The cost-effective governmental energy use act, 2012 PA 625, MCL 18.1711 to 18.1725.

(ii) Section 11c of 1851 PA 156, MCL 46.11c.

(iii) Section 75b of 1846 RS 16, MCL 41.75b.

(iv) Section 5f of the home rule city act, 1909 PA 279, MCL 117.5f.

(v) Section 24b of the home rule village act, 1909 PA 278, MCL 78.24b.

(vi) Section 36 of the general law village act, 1895 PA 3, MCL 68.36.

(l) (m) "Project refinancing assistance" means buying or


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refinancing the debt obligations of municipalities within this state if construction activities commenced after March 7, 1985 and the debt obligation was incurred after March 7, 1985.

(m) (n) "Sewage treatment works project" means construction activities on any device or system for the treatment, storage, collection, conveyance, recycling, or reclamation of the sewage of a municipality, including combined sewer overflow correction and major rehabilitation of sewers.

(n) (o) "Stormwater treatment management project" means construction activities of a municipality on any device or system for the treatment, storage, recycling, or reclamation of storm water that is conveyed by a storm sewer that is separate from a sanitary sewer.

(p) "Tier I project" means a project for which assistance is sought or provided from funds made directly available from the federal capitalization grant or from the Great Lakes water quality bond fund under section 19708(1)(a).

(q) "Tier II project" means a project for which assistance is sought or provided from funds other than those made directly available from the federal capitalization grant or from the Great Lakes water quality bond fund under section 19708(1)(a).

Sec. 5302. (1) This part shall must be construed liberally to effectuate the legislative intent. All powers granted under this part shall must be broadly interpreted to effectuate the intent and purposes of this part and shall must not be interpreted as a limitation of powers.

(2) Except as may be authorized by the federal water pollution control act, the fund shall must not provide grant assistance to a municipality or provide loans for the local share of projects


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constructed with grants provided under title II of the federal water pollution control act, chapter 758, 86 Stat. 833, 33 U.S.C. USC 1281, 1282 to 1293, and 1294 to 1299.1302f.

(3) This state is not liable to a municipality, or any other person performing services for the municipality, for costs incurred in developing or submitting an application for assistance under this part.

(4) It is the specific intent of the legislature to minimize paperwork for tier II projects.

Sec. 5303. (1) Municipalities During the development of a planning document, a municipality shall consider and utilize, where possible, cooperative regional or intermunicipal projects in satisfying sewerage needs. in the development of project plans.

(2) A municipality may submit a project plan planning document for use by the department in developing a priority list. A municipality may submit as part of the planning document for a project either of the following:

(a) Any preexisting documents or plans that were prepared for another project for other purposes.

(b) Any preexisting documents that were developed under another local, state, or federal program, as applicable.

(3) The project plan for a tier I project shall A planning document must include documentation that demonstrates that the all of the following:

(a) The project is needed to assure enable maintenance of, or to progress toward, compliance with the federal water pollution control act, or part 31, or part 41, and to meet the minimum requirements of the national environmental policy act of 1969, Public Law 91-190, 42 USC 4321, 4331 to 4335, and 4341 to 4347. The


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documentation shall demonstrate all of the following:

(b) An analysis of alternatives that meet the requirements of part 31 or 41, including the cost of each alternative and a resolution adopted by the municipality to implement a selected alternative.

(c) A description of project costs and how the project will be paid for including, but not limited to, an explanation of how the debt will be repaid.

(d) A list of the environmental and public health implications and mitigation plans.

(e) (a) The need for the project.

(f) (b) That feasible alternatives to the project were evaluated, taking into consideration considering volume reduction opportunities and the demographic, topographic, hydrologic, and institutional characteristics of the area.

(g) (c) That the project is cost effective and implementable from a legal, institutional, financial, and management standpoint.

(h) (d) Other Any other information as required by the department.

(4) The project plan for a tier II project shall include documentation that demonstrates that the project is or was needed to assure maintenance of or progress towards compliance with the federal water pollution control act or part 31, and is consistent with all applicable state environmental laws. The documentation shall include all of the following information:

(a) Information to demonstrate the need for the project.

(b) A showing that the cost of the project is or was justified, taking into account available alternatives. Those costs determined by the department to be in excess of those costs


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justified are not eligible for assistance under this part.

(4) A planning document must describe the public participation activities conducted during planning and must include all of the following:

(a) Significant issues raised by the public and any changes to the project that were made as a result of the public participation process.

(b) A demonstration that there were adequate opportunities for making public consultation, participation, and input in the decision-making process during alternatives selection.

(c) A demonstration that before the adoption of the planning document, the municipality held a public meeting on the proposed project not less than 15 days after advertising the public meeting in local media of general circulation including, but not limited to, the municipality's website, and at a time and place conducive to maximizing public input.

(d) A demonstration that, concurrent with advertisement of the public meeting, a notice of the public meeting was sent to all affected local, state, and federal agencies and to any public or private parties that expressed an interest in the proposed project.

(e) A summary of the public meeting including a list of all attendees, and any specific concerns that were raised.

(5) After notice and an opportunity for public comment, the department shall annually develop separate priority lists for sewage treatment works projects and stormwater treatment management projects, for nonpoint source projects, and for projects funded under the strategic water quality initiatives fund created in section 5204. Projects not funded during the time that a priority list developed under this section is in effect shall must be


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automatically prioritized on the next annual list using the same criteria, unless the municipality submits an amendment to its plan planning document that introduces new information to be used as the basis for prioritization. These The priority lists shall must be based upon project plans submitted by municipalities, and the following criteria:

(a) That a project complies with all applicable standards in part 31 and the federal water pollution control act.

(b) An application for a segment of a project that received funds under the title II construction grant program or title VI state revolving loan funds of the federal water pollution control act or the strategic water quality initiatives fund created in section 5204 shall be first priority on its respective priority list for funding for a period of not more than 3 years after funds were first committed under those programs.

(c) If the project is a sewage treatment works project or a stormwater treatment project, all of the following criteria:

(i) The severity of the water pollution problem to be addressed, maximizing progress towards restoring beneficial uses and meeting water quality standards.

(ii) A determination of whether a project is or was necessary to comply with an order, permit, or other document with an enforceable schedule for addressing a municipality's sewage-related water pollution problems that was issued by the department or entered as part of an action brought by the state against the municipality or any component of the municipality. A municipality may voluntarily agree to an order, permit, or other document with an enforceable schedule as described in this subparagraph.

(iii) The population to be served by the project. However, the


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criterion provided in this subparagraph shall not be applied to projects funded by the strategic water quality initiatives fund created in section 5204.

(iv) The dilution ratio existing between the discharge volume and the receiving stream.

(v) If the project is within a disadvantaged community, a maximum of 50 points shall be awarded to the project in the manner that points are awarded in rules promulgated under this part.

(d) If the project is a sewage treatment works project, 100 priority points shall be awarded pursuant to R 323.958 of the Michigan administrative code for each of the following that apply to the project:

(i) The project addresses on-site septic systems that are adversely affecting the water quality of a water body or represent a threat to public health, provided that soil and hydrologic conditions are not suitable for the replacement of those on-site septic systems.

(ii) The project includes the construction of facilities for the acceptance or treatment of septage collected from on-site septic systems.

(e) Rankings for nonpoint source projects shall be consistent with the state nonpoint source management plan developed pursuant to section 319 of title III of the federal water pollution control act, chapter 758, 101 Stat. 52, 33 USC 1329.

(f) Any other criteria established by the department by rule.on the planning documents and the scoring criteria developed under section 5303a.

(6) If a municipality is an overburdened community or a significantly overburdened community, the department shall


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automatically award the municipality at least 20% of the total allowable points.

(7) (6) The priority list shall must be submitted annually to the chair of the senate and house of representatives standing committees that primarily consider legislation pertaining to the protection of natural resources and the environment.

(8) (7) For purposes of providing assistance, the priority list shall take takes effect on the first day of each fiscal year.

(9) (8) This section does not limit other actions undertaken to enforce part 31, part 41, the federal water pollution control act, or any other act.

(9) As used in this section, "on-site septic system" means that term as defined in section 5201.

Sec. 5303a. (1) The department shall develop scoring criteria that assign points to and prioritize projects under section 5303 and definitions of overburdened community and significantly overburdened community. In developing scoring criteria and the definitions under this subsection, the department shall do all of the following:

(a) Publish, hold at least 1 public hearing, and allow for public comment.

(b) Review the scoring criteria and definitions not more than once every 3 years, unless otherwise directed by the United States Environmental Protection Agency.

(c) Publish, hold at least 1 public hearing, and allow for public comment on any changes made after a review under subdivision (b).

(2) The scoring criteria developed under subsection (1) must address the following:


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(a) Wastewater regulatory compliance.

(b) Public health.

(c) Achieving water quality standards.

(d) Improving infrastructure.

(e) Impacts on overburdened communities and significantly overburdened communities.

(3) The definitions of overburdened community and significantly overburdened community developed under subsection (1) must address the following:

(a) Income and unemployment data.

(b) Population trends.

(c) Housing costs and values.

(d) Annual user costs, allocation of costs across customer classes, and historical and projected trends in user costs.

(e) Existing public health, environmental, and affordability impacts.

(f) Other data considered relevant by the department.

Sec. 5306. (1) The department shall prepare and submit an intended use plan annually to identify proposed annual intended uses of the fund, and to facilitate the negotiation process that the department may conduct with the United States environmental protection agency Environmental Protection Agency for the capitalization grant agreement and schedule of payments to be made to this state under the federal water pollution control act.

(2) The department shall provide must allow for a public participation process that requires not less than 1 public hearing for the intended use plan . The department may make changes in the intended use plan without holding additional hearings in response to the comments received from the United States environmental


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protection agency and through the public participation process.

(3) The intended use plan shall include all of the following:

(a) A copy of the state's priority lists.

(b) A description of the long- and short-term goals of the fund.

(c) The proposed fundable range and an allocation of the funds available for projects on the nonpoint source priority list and for the sewage treatment works projects and stormwater treatment projects priority list.

(d) A description of the projects that are on the priority lists, including project categories and types, applicable discharge or enforceable requirements, proposed terms of the assistance, including a schedule of estimated disbursements of funds, and the names of the municipalities proposed to receive assistance.

(e) Any necessary assurances or proposals indicating how the state intends to meet applicable federal requirements.

(f) A description of the criteria and method for distribution of the fund.

(g) A description of the public participation process followed in the development of the intended use plan and the results of that process.

(h) Any other information needed to comply with the federal water pollution control act.

(i) Any other information considered appropriate by the department.by publishing a draft of the intended use plan on the department's website at least 14 days before a final intended use plan is submitted under subsection (1). The intended use plan must describe and identify all of the following:

(a) Additional subsidization that will be allocated to


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projects.

(b) The projects that will receive additional subsidization identified under subdivision (a).

(c) The reasons why a project will receive additional subsidization.

(3) (4) Upon notice from the United States environmental protection agency Environmental Protection Agency that the intended use plan is approved, the department shall notify each municipality of its inclusion on the intended use plan and shall further provide copies of the sewage treatment works projects and stormwater treatment management projects priority list, the nonpoint source project priority list, and the intended use plan to all persons requesting such any person that requests that information. Following notification under this subsection, the department shall establish, with the concurrence of the municipality, a schedule for project plan planning document approval, submittal of a complete completed application for assistance, and approval of plans and specifications.

Sec. 5307. (1) The department shall review, generally in priority order, the project plans any planning documents for projects in the fundable range and either approve or disapprove the plans a planning document within 120 days of after notifying the municipalities municipality of their its inclusion in the intended use plan submitted under section 5306. Upon determination by the department that a project is complex and warrants additional review, the department shall notify the municipality and may extend the review period described in this subsection for not more than 60 days.

(2) If the project plan a planning document is disapproved,


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the department shall notify the municipality of any deficiencies that need to be corrected. The municipality shall correct any deficiencies and submit an amended planning document to the department within 45 days after receiving notice under this subsection.

(3) The department shall review subsequent submittals and either approve or disapprove the an amended project plan planning document within 120 90 days of those submittals.after the amended planning document is submitted.

(4) If the project plan an amended planning document is not approved, the department shall notify the municipality of the deficiencies.

Sec. 5307a. (1) The department shall conduct an environmental review of the planning document for each project in the fundable range of the priority list to determine whether any significant impacts are anticipated and whether any changes can be made in the project to eliminate significant adverse impacts. As part of the environmental review, the department may require a municipality to submit additional information or meet additional public participation and coordination requirements to justify the environmental determination.

(2) Based on the environmental review completed under subsection (1), the department may determine that an environmental assessment is necessary and the department may describe any of the following in its determination:

(a) The purpose and need for the project.

(b) The project costs.

(c) The alternatives considered and the reasons for their acceptance or rejection.


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(d) The existing environment.

(e) Any potential adverse impacts and mitigative measures.

(f) How mitigative measures will be incorporated into the project, as well as any proposed conditions of financial assistance and the means for monitoring compliance with the conditions.

(3) Based on an environmental assessment completed under subsection (2), the department may issue a finding of no significant impact. The finding of no significant impact must document that the potential environmental impacts will not be significant or that the environmental impacts may be mitigated without extraordinary measures.

(4) Based on an environmental assessment completed under subsection (2), the department may require a municipality to complete an environmental impact statement if the department determines any of the following:

(a) The project will have significant adverse impacts on any of the following:

(i) Wetlands.

(ii) Flood plains.

(iii) Threatened or endangered species or habitats.

(iv) Cultural resources, including any of the following:

(A) Park lands.

(B) Preserves.

(C) Other public lands.

(D) Areas of recognized scenic, recreational, agricultural, archeological, or historical value.

(b) The project will cause significant displacement of population.

(c) The project will directly or indirectly, such as through


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induced development, have a significant adverse effect upon any of the following:

(i) Local ambient air quality.

(ii) Public health.

(iii) Local noise levels.

(iv) Surface water and groundwater quantity or quality.

(v) Shellfish.

(vi) Fish.

(vii) Wildlife.

(viii) Wildlife natural habitats.

(d) The project will generate significant public controversy.

(5) Based on the environmental impact statement, the department shall issue a record of decision summarizing the findings of the environmental impact statement that identifies the conditions under which the project can proceed and maintain compliance with the national environmental policy act of 1969, Public Law 91-190, 42 USC 4321, 4331 to 4335, and 4341 to 4347.

(6) If 5 or more years have elapsed since a determination of compliance with the national environmental policy act of 1969, Public Law 91-190, 42 USC 4321, 4331 to 4335, and 4341 to 4347, or if significant changes in the project have occurred, the department shall reevaluate the project for compliance with the national environmental policy act of 1969, Public Law 91-190, 42 USC 4321, 4331 to 4335, and 4341 to 4347, and the department may do any of the following:

(a) Reaffirm the original finding of no significant impact or the record of decision through the issuance of a public notice or statement of finding.

(b) Issue an amendment to a finding of no significant impact


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or revoke a finding of no significant impact and issue a public notice that the preparation of an environmental impact statement is required.

(c) Issue a supplement to a record of decision or revoke a record of decision and issue a public notice that financial assistance will not be provided.

(7) Action regarding approval of a planning document or provision of financial assistance must not be taken during a 30-day public comment period after the issuance of a finding of no significant impact or record of decision.

Sec. 5308. (1) To apply for assistance from the fund, a municipality shall submit the following, if applicable, as determined by the department:

(a) If assistance is in the form of a loan, financial documentation that a dedicated source of revenue is established, consistent with municipal bond obligations existing at the time assistance is requested, and pledged to both of the following purposes:

(i) If assistance is in the form of a loan, the timely repayment of the loan.

(ii) Adequate revenues from a user-based source to fund the operation and maintenance of the project.

(b) A project plan planning document approved under section 5307.

(c) A certification by an authorized representative of a municipality affirming that the municipality has the legal, managerial, institutional, and financial capability to build, operate, and maintain the project.

(d) A letter of credit, insurance, or other credit enhancement


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to support the credit position of the municipality, as required by the department.

(e) A set of plans and specifications suitable for bidding.

(f) A certification from an authorized representative of the municipality that the applicant has, or will have prior to before the start of construction, all applicable state and federal permits required for construction of the project.

(g) A certified resolution from the municipality designating an authorized representative for the project.

(h) A certification from an authorized representative of the municipality that an undisclosed fact or event, or pending litigation, will not materially or adversely affect the project, the prospects for its the project's completion, or the municipality's ability to make timely loan repayments, if applicable.

(i) If applicable, all All executed intermunicipal service agreements, if applicable.

(j) An agreement that the municipality will operate the project in compliance with applicable state and federal laws.

(k) An agreement that the municipality will not sell, lease, abandon, or otherwise dispose of the project without an effective assignment of obligations and the prior written approval of the department and the authority.

(l) An agreement that all municipal project accounts will be maintained in accordance with generally accepted government accounting standards as defined and required under the federal water pollution control act.

(m) An agreement that the municipality will provide written authorizations to the department for the purpose of examining the


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physical plant and for examining, reviewing, or auditing the operational or financial records of the project, and that the municipality will require similar authorizations from all contractors, consultants, or agents with which it negotiates an agreement.

(n) An agreement that all municipal contracts with contractors will provide that the contractor and any subcontractor may be subject to a financial audit and that contractors and subcontractors shall comply with generally accepted governmental accounting standards.

(o) An agreement that all pertinent records shall must be retained and available to the department for a minimum of 3 years after initiation of the operation and that if litigation, a claim, an appeal, or an audit is begun before the end of the 3-year period, records shall must be retained and available until the 3 years have passed or until the action is completed and resolved, whichever is longer. As used in this subdivision, "initiation of the operation" means the date certain set by the municipality and accepted by the department, on which use of the project begins for the purposes for which it was constructed.

(p) If the project is segmented as provided in section 5309, a schedule for completion of the project and adequate assurance that the project shall will be completed with or without assistance from the fund or that the segmented project shall will be operational without completion of the entire project.

(q) An agreement that the project shall will proceed in a timely fashion if the application for assistance is approved.

(r) An application fee, if required by the department.

(2) The requirement of under subsection (1)(a) for a dedicated


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source of revenue may include a revenue source pledged to repay the debt to the fund from sources including, but not limited to, 1 or more of the following:

(a) Ad valorem taxes.

(b) Special assessments.

(c) User-based revenue collections.

(d) General funds of the municipality.

(e) Benefit charges.

(f) Tap-in fees, or other 1-time assessments.

(3) The department shall accept applications for assistance from municipalities in the fundable range of the priority list that have approved project plans and planning documents. The department shall determine whether an application for assistance is administratively complete and notify the applicant within 30 calendar days of after receipt of the application specifying any additional information necessary to complete the application.

(4) The department shall approve or disapprove an application within 30 calendar days of the determination that the application is complete.

Sec. 5309. To When the department prepares the priority list under section 5303, to ensure that a disproportionate share of available funds for a given fiscal year is not committed to a single sewage treatment work project or stormwater project, the department may segment a sewage treatment work project if either of the following criteria is present:

(a) The the cost of the proposed project is more than 30% of the amount available in the fund.

(b) Upon application of a municipality, the department has approved a municipality's application for segmenting a project.


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Sec. 5310. (1) A project in the fundable range of a priority list The department may bypass a project that fails to meet the schedule established by the department under section 5306, or that does not have an approved plans and specifications planning document and an approvable application 90 days prior to before the last day of the fiscal year, whichever comes first. , is subject to bypass.The department must provide a municipality with written notice of the department's intent to bypass not less than 30 days before a project is bypassed under this section.

(2) A If demand exceeds funding availability, a municipality may submit a written request an extension of the to the department to extend the schedule for cause.established under section 5306 for not more than 60 days. A municipality must include in its written request the reason or reasons for its noncompliance with the schedule. A municipality may submit 1 additional written request to the department to extend the schedule established under section 5306 for not more than 30 days.

(3) A project bypassed pursuant to under this section shall must not be considered for an order of approval until all other projects in the fundable range have either been funded or rejected. This section does not prohibit the inclusion of the project in the priority list of the next annual funding cycle or the resubmission of an application for assistance in the next annual funding cycle.

(4) A bypass action under this section does not modify any compliance dates established in a permit, order, or other document issued by the department or entered as part of an action brought by this state or a federal agency.

(5) After a project within the fundable range has been is bypassed under this section, the department may award assistance to


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projects outside the fundable range. Assistance shall be made The department shall make assistance available to projects outside the fundable range in priority order contingent upon on the municipality's satisfaction of all applicable requirements for assistance pursuant to under section 5308 within the time period established by the department, but not to exceed 60 days from the date of notification notice of bypass. The department shall notify a municipality with a project outside the fundable range of bypass action, of the amount of the bypassed funds available for obligation, and of the deadline for submitting a complete, approvable application.

Sec. 5311. (1) The department shall review a complete application for assistance for a project in the fundable range. If the department approves the application for assistance, the department shall issue, subject to section 5310, an order of approval to establish the specific terms of the assistance. The order of approval shall must include, but is not be limited to, all of the following:

(a) The term of the assistance.

(b) The maximum principal amount of the assistance.

(c) The maximum rate of interest or method of calculation of the rate of interest that will be used, or the premium charged.

(2) The order of approval shall must incorporate all requirements, provisions, or information included in the application and other documents submitted to the department during the application process.

(3) After issuance of the order, the department shall certify to the authority that the municipality is eligible to receive assistance.


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(4) Within each annual funding cycle, the method of establishing the interest rate applicable to a loan or project refinancing assistance shall be applied equally within tier I and tier II projects to all municipalities receiving such assistance.

(4) (5) The method of The department shall annually establish the interest rates to be assessed for projects receiving assistance under this part. In establishing interest rates under this section, the department may provide for a different level of subsidy. for tier I projects than for tier II projects.The interest rates must be in effect for loans made during the next state fiscal year.

Sec. 5313b. (1) A municipality is responsible for obtaining any federal, state, or local permits necessary for the project and shall perform any surveys or studies that are required under the permits.

(2) A municipality shall incorporate all appropriate provisions, conditions, and mitigative measures included in the studies, surveys, permits, and licenses into the construction documents. The construction documents are subject to review by the department for conformity with environmental determinations and coordination requirements.

(3) All applicable and appropriate conditions and mitigative measures must be enforced by the municipality or its designated representative and apply to all construction and post-construction activities, including disposal of all liquid or solid spoils, waste material, and residuals from construction.

(4) A municipality may seek guidance from the department regarding the requirements under this part or the rules promulgated under this part.

Sec. 5313c. (1) The state revolving administration fund is


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created within the state treasury. The state treasurer may receive money or other assets for any source for deposit into the state revolving administration fund. The state treasurer shall direct the investment of the state revolving administration fund and credit to the fund interest and earnings from fund investments. Money in the state revolving administration fund at the end of the fiscal year remains in the fund and does not lapse to the general fund. The department is the administrator of the state revolving administration fund for auditing purposes.

(2) Not more than 0.25% of the interest charged on a loan issued under this part or part 54 may be deposited into the state revolving administration fund.

(3) The department shall expend money from the fund only for the reasonable costs of administering and conducting activities under this part and part 54.

Sec. 5401. As used in this part:

(a) "Act 399" means the safe drinking water act, 1976 PA 399, MCL 325.101 325.1001 to 325.1023.

(b) "Annual user costs" means an annual charge levied by a water supplier on users of the waterworks system to pay for each user's share of the cost for operation, maintenance, and replacement of the waterworks system. These costs may also include a charge to pay for the debt obligation.

(c) "Assistance" means 1 or more of the following activities to the extent authorized by the federal safe drinking water act:

(i) Provision of loans for the planning, design, and construction or alteration of waterworks systems.

(ii) Project refinancing assistance.

(iii) The guarantee or purchase of insurance for local


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obligations, if the guarantee or purchase action would improve credit market access or reduce interest rates.

(iv) Use of the proceeds of the fund as a source of revenue or security for the payment of principal and interest on revenue or general obligation bonds issued by this state, if the proceeds of the sale of the bonds will be deposited into the fund.

(v) Provision of loan guarantees for sub-state revolving funds established by water suppliers that are municipalities.

(vi) The use of deposited funds to earn interest on fund accounts.

(vii) Provision for reasonable costs of administering and conducting activities under this part.

(viii) Provision of technical assistance under this part.

(ix) Provision of loan forgiveness for certain planning costs incurred by disadvantaged overburdened communities.

(d) "Authority" means the Michigan municipal bond authority created in the shared credit rating act, 1985 PA 227, MCL 141.1051 to 141.1077.

(e) "Capitalization grant" means the federal grant made to this state by the United States environmental protection agency, Environmental Protection Agency, as provided in the federal safe drinking water act.

(f) "Community water supply" means a public water supply that provides year-round service to not less than 15 living units or which that regularly provides year-round service to not less than 25 residents.

(g) "Construction activities" means any actions undertaken in the planning, designing, or building of a waterworks system. Construction activities include, but are not limited to, all of the


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following:

(i) Engineering services.

(ii) Legal services.

(iii) Financial services.

(iv) Preparation of plans and specifications.

(v) Acquisition of land or structural components, or both, if the acquisition is integral to a project authorized by this part and the purchase is from a willing seller at fair market value.

(vi) Building, erection, alteration, remodeling, or extension of waterworks systems, providing the extension is not primarily for the anticipation of future population growth.

(vii) Reasonable expenses of supervision of the project activities described in subparagraphs (i) to (vi).

Sec. 5402. As used in this part:

(a) "Department" means the department of environmental quality environment, Great Lakes, and energy or its authorized agent or representative.

(b) "Director" means the director of the department of environmental quality or his or her designated representative.

(c) "Disadvantaged community" means a municipality in which all of the following conditions are met:

(i) Users within the area served by a proposed public water supply project are directly assessed for the costs of construction.

(ii) The median annual household income of the area served by a proposed public water supply project does not exceed 120% of the statewide median annual household income for Michigan.

(iii) The municipality demonstrates at least 1 of the following:

(A) More than 50% of the area served by a proposed public water supply project is identified as a poverty area by the United


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States bureau of the census.

(B) The median annual household income of the area served by a proposed public water supply project is less than the most recently published federal poverty guidelines for a family of 4 in the 48 contiguous United States. In determining the median annual household income of the area served by the proposed public water supply project under this subparagraph, the municipality shall utilize the most recently published statistics from the United States Bureau of the Census, updated to reflect current dollars, for the community which most closely approximates the area being served. If these figures are not available for the area served by the proposed public water supply project, the municipality may have a survey conducted to document the median annual household income of the area served by the project.

(C) The median annual household income of the area served by a proposed public water supply project is less than the most recently published statewide median annual household income for this state, and annual user costs for water supply exceed 1% of the median annual household income of the area served by the proposed public water supply project.

(D) The median annual household income of the area served by a proposed public water supply project is not greater than 120% of the statewide median annual household income for this state, and annual user costs for water supply exceed 3% of the median annual household income of the area served by the proposed project.

(c) (d) "Federal safe drinking water act" means the safe drinking water act, 42 USC 300f to 300j-26, 300j-25, and the rules promulgated under that act.

(d) (e) "Fund" means the safe state drinking water revolving


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fund established under section 16b of the shared credit rating act, 1985 PA 227, MCL 141.1066b.

(e) (f) "Fundable range" means those projects, taken in descending order on the priority list, for which the department estimates sufficient funds exist to provide assistance during each annual funding cycle.

(f) (g) "Municipality" means a city, village, county, township, authority, public school district, or other public body with taxing authority, including an intermunicipal agency of 2 or more municipalities, authorized or created under state law.

(g) (h) "Noncommunity water supply" means a public water supply that is not a community water supply, but that has not less than 15 service connections or that serves not less than 25 individuals on an average daily basis for not less than 60 days per year.

Sec. 5403. As used in this part:

(a) "Priority list" means the annual ranked listing of projects developed by the department in section 5406.

(b) "Project" means a project related to the planning, design, and construction or alteration of a waterworks system and may include utilization of more efficient energy and resources as described in any of the following:

(i) The cost-effective governmental energy use act, 2012 PA 625, MCL 18.1711 to 18.1725.

(ii) Section 11c of 1851 PA 156, MCL 46.11c.

(iii) Section 75b of 1846 RS 16, MCL 41.75b.

(iv) Section 5f of the home rule city act, 1909 PA 279, MCL 117.5f.

(v) Section 24b of the home rule village act, 1909 PA 278, MCL


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78.24b.

(vi) Section 36 of the general law village act, 1895 PA 3, MCL 68.36.

(c) "Project refinancing assistance" means buying or refinancing the debt obligations of water suppliers if construction activities commenced, and the debt obligation was incurred, after June 17, 1997.

(d) "Public water supply" means a waterworks system that provides water for drinking or household purposes to persons other than the supplier of the water supplier, except for those waterworks systems that supply water to only 1 house, apartment, or other domicile occupied or intended to be occupied on a day-to-day basis by an individual, family group, or equivalent.

(e) "State drinking water standards" means rules promulgated under section 5 of Act 399, MCL 325.1005, that establish water quality standards necessary to protect public health or that establish treatment techniques to meet these water quality standards.

(f) "Water supplier" or "supplier" means a municipality or its designated representative accepted by the director, a legal business entity, or any other person that owns a public water supply. However, water supplier does not include a water hauler.

(g) "Waterworks system" or "system" means a system of pipes and structures through which water is obtained or distributed and includes any of the following that are actually used or intended to be used for the purpose of furnishing water for drinking or household purposes:

(i) Wells and well structures.

(ii) Intakes and cribs.


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(iii) Pumping stations.

(iv) Treatment plants.

(v) Storage tanks.

(vi) Pipelines, service lines, and appurtenances.

(vii) A combination of any of the items specified in subparagraphs (i) to (vi).

Sec. 5404. (1) Water suppliers owning that own the following types of public water supplies qualify to receive assistance under this part:

(a) A community water supply.

(b) A noncommunity water supply that operates as a nonprofit entity.

(2) Water suppliers identified in subsection (1) that serve 10,000 people or less may qualify for assistance from funds prescribed in section 1452(a)(2) of part 6 of the federal safe drinking water act, 42 U.S.C. USC 300j-12.

(3) Project planning costs are eligible for funding under this part and will be reimbursed by the department as follows:

(a) For a municipality serving greater than 10,000 people, incurred planning costs related to the proposed project may be reimbursed as part of the construction loan approved by the Michigan municipal bond authority. These costs shall be repaid as part of the outstanding construction loan proceeds according to a schedule established by the authority.

(b) For a municipality serving less than 10,000 people, incurred planning costs related to the proposed project will be directly reimbursed by the department upon completion and submittal of an approvable project plan by the municipality to the department. These costs shall be repaid as part of the outstanding


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planning loan proceeds according to a schedule established by the authority.

(3) (c) For disadvantaged communities, On completion and submittal of approved planning documents by an overburdened community to the department, if the overburdened community incurred planning costs related to the proposed project, shall the overburdened community must be directly reimbursed by the department to the extent funds are available. by the department upon completion and submittal of an approvable project plan by the municipality to the department. Technical assistance funds identified in section 1452(g)(2)(D) or section 1452(d)(1) of part E of the federal safe drinking water act, 42 U.S.C. USC 300j-12, shall must be used to the extent available, to forgive repayment of the planning loan.

(4) Only water suppliers that have no outstanding prior year fees as prescribed in Act 399 may receive assistance under this part.

(5) A federal, state, or other water supplier that is not regulated by the department shall not receive assistance under this part.

Sec. 5405. (1) A water supplier that is interested in applying for assistance under this part shall prepare and submit to the department a project plan planning document as provided in this section. The department shall use a project plan the planning documents submitted under this section to develop a priority list for assistance as provided under this part. A water supplier may submit as part of the planning document for a project either of the following:

(a) Any preexisting documents or plans that were prepared for


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other projects or purposes.

(b) Any preexisting documents that were developed under another local, state, or federal program, as applicable.

(2) During the development of a project plan, planning document, a water supplier that is a municipality shall consider and utilize, where practicable, cooperative regional or intermunicipal projects, and a water supplier that is not a municipality shall consider and utilize, where practicable, connection to, or ownership by, a water supplier that is a municipality.

(3) The project plan for a project must include documentation that demonstrates that the project is needed to assure maintenance of, or progress toward, compliance with the federal safe drinking water act. A complete project plan must include all of the following as background:

(a) Identification of planning area boundaries and characteristics.

(b) A description of the existing waterworks systems.

(c) A description of the existing waterworks problems and needs, including the severity and extent of water supply problems or public health problems.

(d) An examination of projected needs for the next 20 years.

(e) Population projections and the source and basis for the population projections.

(4) A project plan must include an analysis of alternatives, which must consist of a systematic identification, screening, study, evaluation, and cost-effectiveness comparison of feasible technologies, processes, and techniques. The alternatives must be capable of meeting the applicable state drinking water standards


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over the design life of the facility, while recognizing environmental and other nonmonetary considerations. The analysis must include, but is not limited to, all of the following:

(a) A planning period for the cost-effectiveness analysis of 20 years or other such planning period as is justified by the unique characteristics of the project.

(b) Monetary costs that consider the present worth or equivalent annual value of all capital costs and operation and maintenance costs.

(c) Provisions for the ultimate disposal of residuals and sludge resulting from drinking water treatment processes.

(d) A synopsis of the environmental setting of the project and an analysis of the potential environmental and public health impacts of the various alternatives, as well as the identification of any significant environmental or public health benefits precluded by rejection of an alternative.

(3) A planning document must include documentation that demonstrates all of the following:

(a) The project is needed to ensure maintenance of or progress toward compliance with the minimum requirements of the national environmental policy act of 1969, Public Law 91-190, 42 USC 4321, 4331 to 4335, and 4341 to 4347.

(b) An analysis of alternatives including the cost of each alternative.

(c) A description of project costs and how the project will be paid for including, but not limited to, an explanation of how the debt will be repaid.

(d) A list of the environmental and public health implications and mitigation plans.


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(e) Consideration of opportunities to utilize more efficient energy and resources as described in any of the following:

(i) The cost-effective governmental energy use act, 2012 PA 625, MCL 18.1711 to 18.1725.

(ii) Section 11c of 1851 PA 156, MCL 46.11c.

(iii) Section 75b of 1846 RS 16, MCL 41.75b.

(iv) Section 5f of the home rule city act, 1909 PA 279, MCL 117.5f.

(v) Section 24b of the home rule village act, 1909 PA 278, MCL 78.24b.

(vi) Section 36 of the general law village act, 1895 PA 3, MCL 68.36.

(f) A description of the relationship between the service capacity of each waterworks systems alternative and the estimated future needs using population projections under subsection (3)(e).

(5) A project plan must include a description of the selected alternative, including all of the following:

(a) Relevant design parameters.

(b) Estimated capital construction costs, operation and maintenance costs, and a description of the manner in which project costs will be financed.

(c) A demonstration of the water supplier's ability to repay the incurred debt, including an analysis of the impacts of the annual user costs for water supply on its users.

(d) A demonstration that the selected alternative can be implemented considering the legal, institutional, technical, financial, and managerial resources of the water supplier.

(e) Assurance that there is sufficient waterworks system service capacity for the service area based on projected needs


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identified in subdivision (d) while avoiding the use of funds available under this part to finance the expansion of any public water system if a primary purpose of the expansion is to accommodate future development.

(f) Documentation of the project's consistency with the approved general plan prepared under section 4 of Act 399, MCL 325.1004.

(g) An analysis of the environmental and public health impacts of the selected alternative.

(h) Consideration of structural and nonstructural measures that could be taken to mitigate or eliminate adverse effects on the environment.

(4) (6) A project plan planning document must describe the public participation activities conducted during planning and must include all of the following:

(a) Significant issues raised by the public and any changes to the project that were made as a result of the public participation process.

(b) A demonstration that there were adequate opportunities for public consultation, participation, and input in the decision-making process during alternative selection.

(c) A demonstration that before the adoption of the project plan, planning document, the water supplier held a public hearing meeting on the proposed project not less than 30 10 days after advertising the public meeting in local media of general circulation including, but not limited to, the water supplier's website, and at a time and place conducive to maximizing public input.

(d) A demonstration that, concurrent with advertisement of the


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hearing, public meeting, a notice of public hearing meeting was sent to all affected local, state, and federal agencies and to any public or private parties that have expressed an interest in the proposed project.

(e) A transcript or recording of the hearing, summary of the public meeting, including a list of all attendees , and any written testimony received, and the water supplier's responses to the issues specific concerns that were raised.

(5) (7) A project plan planning document must include either of the following, as appropriate:

(a) For a water supplier that is a municipality, a resolution adopted by the governing board of the municipality approving the project plan.planning document.

(b) For a water supplier that is not a municipality, a statement of intent to implement the project plan.planning document.

(6) (8) A project plan planning document must not have as a primary purpose the construction of or expansion of a waterworks system to accommodate future development or fire protection.

Sec. 5406. (1) The department shall annually develop a priority list of projects eligible for assistance under this part. The priority list must be based on planning documents and the scoring criteria developed under section 5406a. Projects that are not funded during the year that a priority list developed under this section is in effect shall be automatically prioritized on the next annual list using the same criteria, unless the water supplier submits an amendment to its project plan that introduces new information to be used as the basis for prioritization. The priority list shall be based on project plans submitted by water


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suppliers under section 5405 and the criteria listed in subdivisions (a) through (f). Each project shall be assigned points up to a maximum of 1,000. The point values are maximum values available for each category or subcategory listed in this section and shall only be awarded if the project substantially addresses the problem for which the point award is given. If a project is primarily designed to replace individual wells at private homes, 50% or more of the homes in the affected area shall meet equivalent water quality or infrastructure deficiency criteria listed in subdivisions (a) through (f) in order to receive the maximum available points. If less than 50% of the homes in the affected area can demonstrate deficiencies, 1/2 of the total points available shall be awarded. Points shall be awarded as follows:

(a) A maximum of 450 points may be awarded to a project that addresses drinking water quality as outlined in Act 399, if the project:

(i) Is designed to eliminate an acute violation of a drinking water standard as described in R 325.10401 to R 325.10420 of the Michigan administrative code. A violation of a surface water treatment technique, or if a waterborne disease outbreak has been documented, 250 points shall be awarded for each violation.

(ii) Is designed to eliminate a violation of a drinking water standard other than those outlined in subparagraph (i), 200 points shall be awarded for each violation.

(iii) Is designed to upgrade a facility to maintain compliance with drinking water standards or system capacity requirements, 150 points shall be awarded.

(iv) Is designed to eliminate an exceedance of a secondary maximum contaminant level for aesthetic water quality, 25 points


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shall be awarded.

(b) A maximum of 350 points may be awarded to a project that addresses infrastructure improvements, as follows:

(i) If source or treatment facilities are upgraded, including the watermains to connect to the distribution system, a maximum of 125 points shall be awarded, if the improvement is:

(A) To meet minimum capacity requirements, 100 points shall be awarded.

(B) For reliability, 75 points shall be awarded.

(C) For other source or treatment facility upgrades not included in subparagraph (i)(A) or (B), 25 points shall be awarded.

(D) To satisfy the conditions of a formal enforcement action, 25 points shall be awarded. Points awarded for formal enforcement actions are in addition to the maximum points allowable in any category.

(E) For source water protection, 50 points shall be awarded.

(ii) If transmission or distribution watermains are upgraded, a maximum of 125 points shall be awarded, if the improvement is:

(A) To meet minimum capacity where flow or residual pressure is less than acceptable, 100 points shall be awarded.

(B) For reliability, including looping or redundant feeds, 75 points shall be awarded.

(C) Other transmission or distribution system upgrades not included in subparagraph (ii)(A) or (B), 25 points shall be awarded.

(D) To satisfy the conditions of a formal enforcement action, 25 points shall be awarded. Points awarded for formal enforcement actions are in addition to the maximum points allowable in any category.

(iii) If water storage facilities or pumping stations are


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upgraded, a maximum of 125 points shall be awarded, if the improvement is:

(A) To meet minimum capacity where storage or pumping capacity is less than minimum requirements, 100 points shall be awarded.

(B) For reliability, 75 points shall be awarded.

(C) Other storage facility or pumping station upgrades not included in subparagraph (iii)(A) or (B), 25 points shall be awarded.

(D) To satisfy the conditions of a formal enforcement action, 25 points shall be awarded. Points awarded for formal enforcement actions are in addition to the maximum points allowable in any category.

(c) A maximum of 50 points shall be awarded based on the population served by the water system according to the following table. However, a transient noncommunity water supply as defined in section 2 of Act 399, MCL 325.1002, is eligible for 1/2 of the point value listed in the following table:

Population

Points

>50,000

50

10,001 50,000

40

3,301 10,000

30

501 3,300

20

0 - 500

10

(d) A maximum of 50 points shall be awarded to a community water supply that serves a disadvantaged community.

(e) A maximum of 100 points shall be awarded for projects that include consolidation as follows:

(i) If 1 or more public water supplies are brought into compliance with state drinking water standards as a result of consolidation, 100 points shall be awarded.


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(ii) If deficiencies, which are documented in writing by the department, at 1 or more public water supplies are corrected as a result of consolidation, 60 points shall be awarded.

(iii) Other consolidations, not included under subparagraph (i) or (ii), shall be awarded 40 points.

(f) For communities that have completed an approved source water protection program, 100 points shall be awarded.

(g) After scoring, using the criteria in subdivisions (a) through (f), if 2 or more projects have the same score, the following tie-breaker shall be applied:

(i) If the system has fewer than 2 violations of the monitoring, record-keeping, and reporting requirements of Act 399 in the previous 2-year reporting period, or no violations if ownership of the system has changed in the previous 2 years, it shall rank above systems having more violations.

(ii) After applying the tie-breaker in subparagraph (i), if 2 or more projects score exactly the same, a calculation of the cost per population served by the water system shall be made. The affected projects shall be ranked with the highest ratio of cost to population ranked higher.

(2) The priority list shall be submitted annually to the chairpersons of the senate and house of representatives standing committees that primarily consider legislation pertaining to the protection of public health and the environment.

(3) In preparing the priority list, to ensure that a disproportionate share of available funds for a given fiscal year is not committed to a single water supply project, the department may segment a project if either of the following criteria is present:


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(a) The cost of the proposed project is more than 30% of the total amount available in the fund during the fiscal year.

(b) The department has approved a water supplier's application for segmenting a project.

(4) Segments of a project that have been segmented under subsection (3) shall be assigned priority points based on the project as identified in the project plan. After funding assistance for the first segment is accepted, the remaining segments will retain first priority for funding assistance on the next 3 fiscal year priority lists. All projects with previously funded segments will be designated with first priority. Ranking order for these projects to receive funding assistance will be subject to the relative ranking of all first segment projects.

(5) In preparing the intended use plan, the department shall make every effort to assure that funding for assistance is equitably distributed among public water supplies of varying sizes.

(2) (6) For purposes of providing assistance, the priority list shall take takes effect on the first day of each fiscal year.

Sec. 5406a. (1) The department shall develop scoring criteria that assign points to and prioritize projects under section 5406 and definitions of overburdened community and significantly overburdened community. In developing scoring criteria and the definitions under this subsection, the department shall do all of the following:

(a) Publish, hold at least 1 public hearing, and allow for public comment.

(b) Review the scoring criteria and the definitions not more than once every 3 years, unless otherwise directed by the United States Environmental Protection Agency.


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(c) Publish, hold at least 1 public hearing, and allow for public comment on any changes made after a review under subdivision (b).

(2) The scoring criteria developed under subsection (1) must address the following:

(a) Drinking water regulatory compliance.

(b) Public health.

(c) Drinking water quality.

(d) Improving infrastructure.

(e) Impacts on overburdened communities and significantly overburdened communities.

(3) The definitions of overburdened community and significantly overburdened community developed under subsection (1) must address the following:

(a) Income and unemployment data.

(b) Population trends.

(c) Housing costs and values.

(d) Annual user costs, allocation of costs across customer classes, and historical and projected trends in user costs.

(e) Existing public health, environmental, and affordability impacts.

(f) Other data considered relevant by the department.

Sec. 5407. The department shall annually identify those projects in the fundable range of the priority list. Following the identification of projects in the fundable range, the department shall review, generally in priority order, the project plans planning documents for these projects and, following completion of the environmental review process described in section 5408, either approve or disapprove the project plans.planning documents.


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Sec. 5407a. When the department prepares the priority list under section 5406, to ensure that a disproportionate share of available funds for a given fiscal year is not committed to a single project, the department may segment the project if the cost of the proposed project is more than 30% of the amount available in the fund.

Sec. 5408. (1) The department shall conduct an environmental review of the project plan planning documents of each project in the fundable range of the priority list to determine whether any significant impacts are anticipated and whether any changes can be made in the project to eliminate significant adverse impacts. As part of this review, the department may require the submittal of water supplier to submit additional information or meet additional public participation and coordination requirements to justify the environmental determination.

(2) Based on the environmental review under subsection (1), the department may issue a categorical exclusion for categories of actions that do not individually, cumulatively over time, or in conjunction with other federal, state, local, or private actions have a significant adverse effect on the quality of the human environment or public health. Additional environmental information documentation, environmental assessments, and environmental impact statements will not be required for excluded actions.

(3) Following receipt of the project plan, planning document, the director shall determine if the proposed public water supply project qualifies for a categorical exclusion and document the decision.

(4) The director may revoke a categorical exclusion and require a complete environmental review if, subsequent to after the


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determination, the director finds any of the following:

(a) The proposed public water supply project no longer qualifies for a categorical exclusion due to changes in the proposed plan.

(b) New evidence exists documenting a serious health or environmental issue.

(c) Federal, state, local, or tribal laws will be violated by the proposed public water supply project.

(5) The proposed project shall must not qualify for a categorical exclusion if the director determines any of the following criteria are applicable:

(a) The proposed facilities project will result in an increase in residuals and sludge generated by drinking water processes, either volume or type, which that would negatively impact the performance of the waterworks system or the disposal methods, or would threaten an aquifer recharge zone.

(b) The proposed facilities would project will provide service to a population greater than 30% of the existing population. , unless population projections required in section 5405(3)(e) support projected needs.

(c) The proposed public water supply project is known, or expected, to directly or indirectly affect cultural areas, fauna or flora habitats, endangered or threatened species, or environmentally important natural resource areas.

(d) The proposed public water supply project directly or indirectly involves the extension of transmission systems to new service areas.

(e) The proposed public water supply project has been is shown not to be the cost-effective alternative.


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(f) The proposed public water supply project will cause significant public controversy.

(6) If, based on the environmental review under subsection (1), the department determines that an environmental assessment is necessary, the department may describe the following:

(a) The purpose and need for the project.

(b) The project, including its costs.

(c) The alternatives considered and the reasons for their acceptance or rejection.

(d) The existing environment.

(e) Any potential adverse impacts and mitigative measures.

(f) How mitigative measures will be incorporated into the project, as well as any proposed conditions of financial assistance and the means for monitoring compliance with the conditions.

(7) The department may issue a finding of no significant impact, based upon on an environmental assessment which that documents that potential environmental impacts will not be significant or that they may be mitigated without extraordinary measures.

(8) An environmental impact statement may be required when the department determines any of the following:

(a) The project will have a significant impact on the pattern and type of land use or the growth and distribution of the population.

(b) The effects of the project's construction or operation will conflict with local or state laws or policies.

(c) The project will have significant adverse impacts on any of the following:

(i) Wetlands.


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(ii) Flood plains.

(iii) Threatened or endangered species or habitats.

(iv) Cultural resources, including any of the following:

(A) Park lands.

(B) Preserves.

(C) Other public lands.

(D) Areas of recognized scenic, recreational, agricultural, archeological, or historical value.

(d) The project will cause significant displacement of population.

(e) The project will directly or indirectly, such as through induced development, have a significant adverse effect upon on any of the following:

(i) Local ambient air quality.

(ii) Public health.

(iii) (ii) Local noise levels.

(iv) (iii) Surface water and groundwater quantity or quality.

(v) (iv) Shellfish.

(vi) (v) Fish.

(vii) (vi) Wildlife.

(viii) (vii) Wildlife natural habitats.

(f) The project will generate significant public controversy.

(9) Based on the environmental impact statement, a record of decision summarizing the findings of the environmental impact statement shall must be issued identifying those conditions under which the project can proceed and maintain compliance with the national environmental policy act of 1969, Public Law 91-190, 42 U.S.C. USC 4321, 4331 to 4335, and 4341 to 4347.

(10) If 5 or more years have elapsed since a determination of


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compliance with the national environmental policy act of 1969, Public Law 91-190, 42 USC 4321, 4331 to 4335, and 4341 to 4347, or if significant changes in the project have taken place, the department shall reevaluate the project for compliance with the national environmental policy act of 1969, Public Law 91-190, 42 USC 4321, 4331 to 4335, and 4341 to 4347, requirements. The department may do any of the following:

(a) Reaffirm the original finding of no significant impact or the record of decision through the issuance of a public notice or statement of finding.

(b) Issue an amendment to a finding of no significant impact or revoke a finding of no significant impact and issue a public notice that the preparation of an environmental impact statement is required.

(c) Issue a supplement to a record of decision or revoke a record of decision and issue a public notice that financial assistance will not be provided.

(11) Action regarding approval of a project plan planning document or provision of financial assistance shall must not be taken during a 30-day public comment period after the issuance of a finding of no significant impact or record of decision.

Sec. 5409. (1) A water supplier whose project plan planning document is approved or under review by the department under section 5407 may apply for assistance from the fund by submitting an application to the department. A complete completed application shall must include all of the following, if applicable, as determined by the department:

(a) If assistance is in the form of a loan, financial documentation that a dedicated source of revenue is established,


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consistent with obligations of debt instruments existing at the time assistance is requested, and pledged to both of the following purposes:

(i) The timely repayment of principal and interest.

(ii) Adequate revenues to fund the operation and maintenance of the project.

(b) Evidence of an approved project plan.planning document.

(c) A certified resolution from a water supplier that is a municipality, or a letter of appointment from a water supplier that is not a municipality, designating an authorized representative for the project.

(d) A certification by an authorized representative of the water supplier affirming that the water supplier has the legal, institutional, technical, financial, and managerial capability to build, operate, and maintain the project.

(e) A letter of credit, insurance, or other credit enhancement to support the credit position of the water supplier, as required by the department.

(f) A set of plans and specifications , developed in accordance with Act 399 , which that is suitable for bidding.

(g) A certification from an authorized representative of the water supplier that it has, or will have before the start of construction, all applicable state and federal permits required for construction of the project.

(h) A certification from an authorized representative of the water supplier that an undisclosed fact or event, or pending litigation, will not materially or adversely affect the project, the prospects for its completion, or the water supplier's ability to make timely loan repayments, if applicable.


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(i) If applicable, all executed service contracts or agreements.

(j) An agreement that the water supplier will operate the waterworks system in compliance with applicable state and federal laws.

(k) An agreement that the water supplier will not sell, lease, abandon, or otherwise dispose of the waterworks system without an effective assignment of obligations and the prior written approval of the department and the authority.

(l) An agreement that:

(i) For water suppliers that are municipalities, all accounts will must be maintained in accordance with generally accepted accounting practices, generally accepted government auditing standards, and chapter 75 of title 31 of the United States Code, 31 U.S.C. USC 7501 to 7507, as required by the federal safe drinking water act.

(ii) For water suppliers that are not municipalities, all accounts will must be maintained in accordance with generally accepted accounting practices and generally accepted auditing standards.

(m) An agreement that all water supplier contracts with contractors will require them to maintain project accounts in accordance with the requirements of this subsection and provide notice that any subcontractor may be subject to a financial audit as part of an overall project audit.

(n) An agreement that the water supplier will provide written authorizations to the department for the purpose of examining the physical plant and for examining, reviewing, or auditing the operational or financial records of the project, and that the water


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supplier will require similar authorizations from all contractors, consultants, or agents with which it negotiates an agreement.

(o) An agreement that all pertinent records shall must be retained and available to the department for a minimum of 3 years after initiation of the operation and that if litigation , or a claim, an appeal, or an audit is begun before the end of the 3-year period, records shall must be retained and available until the 3 years have passed or until the action is completed and resolved, whichever is longer. As used in this subdivision, "initiation of the operation" means the date certain set by the water supplier and accepted by the department, on which use of the project begins for the purposes for which it was constructed.

(p) If the project is segmented, as provided in section 5406(3), a schedule for completion of the project and adequate assurance that the project will be completed with or without assistance from the fund or that the segmented project will be operational without completion of the entire project.

(p) (q) An agreement that the project will proceed in a timely fashion if the application for assistance is approved.

(q) (r) An application fee, if required by the department.

(2) A demonstration that a dedicated source of revenue will be available for operating and maintaining the waterworks system and repaying the incurred debt.

(3) The department shall accept applications for assistance from water suppliers in the fundable range of the priority list and shall determine whether an application for assistance is complete.

(4) The This state is not liable to a water supplier, or any other person performing services for the water supplier, for costs incurred in developing or submitting an application for assistance


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under this part.

Sec. 5412. (1) The department may bypass projects that fail to meet the schedule negotiated and agreed upon between the water supplier and the department, or that do not have approved project plans planning documents and specifications and an approvable application 90 days prior to before the last day of the state fiscal year, whichever comes first.

(2) A water supplier may submit a written request to the department to extend a project schedule for not more than 60 days. The request shall must provide the reason for the noncompliance with the schedule. A water supplier may file 1 additional 30-day extension request to its schedule.

(3) A project bypassed under this section shall must not be considered for an order of approval until all other projects have either been funded or rejected. This section does not prohibit the inclusion of the project in the priority list of the next annual funding cycle or the resubmission of an application for assistance in the next annual funding cycle.

(4) The department shall provide affected water suppliers with a written notice of intent to bypass not less than 30 days before the bypass action.

(5) For projects bypassed under this section, the department shall transmit to the water supplier an official notice of bypass for the fundable project.

(6) A bypass action under this section does not modify any compliance dates established pursuant to under a permit, order, or other document issued by the department or entered as part of an action brought by the this state or a federal agency.

(7) After a project is bypassed, the department may award


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assistance to projects outside the fundable range. Assistance shall must be made available to projects outside the fundable range in priority order contingent upon the water supplier's satisfaction of all applicable requirements for assistance within the time period established by the department, but not to exceed 60 days from the date of notification. The department shall notify water suppliers with projects outside the fundable range of bypass action, of the amount of bypassed funds available for obligation, and of the deadline for submittal of a complete, approvable application.

Sec. 5415. (1) The department shall annually establish the interest rates to be assessed for projects receiving assistance under this part. These rates of In establishing interest rates under this section, the department may provide for a different level of subsidy for projects. The interest shall rates must be in effect for loans made during the next state fiscal year. The interest rates must be in effect for loans made during the next state fiscal year.

(2) In establishing the interest rates under subsection (1), all of the following criteria shall be considered:

(a) Future demands.

(b) Present demands.

(c) Market conditions.

(d) Cost of compliance with program elements.

Sec. 5415a. (1) A water supplier is responsible for obtaining any federal, state, or local permits necessary for the project and shall perform any surveys or studies that are required under the permits.

(2) A water supplier shall incorporate all appropriate provisions, conditions, and mitigative measures included in the


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studies, surveys, permits, and licenses into the construction documents. The construction documents are subject to review by the department for conformity with environmental determinations and coordination requirements.

(3) All applicable and appropriate conditions and mitigative measures must be enforced by the municipality or its designated representative and apply to all construction and post-construction activities, including disposal of all liquid or solid spoils, waste material, and residuals from construction.

(4) A water supplier may seek guidance from the department regarding the requirements under this part or the rules promulgated under this part.

Sec. 5416. The costs of administering and implementing this part by the department, the designated agents of the department, and the authority may be paid from funds annually appropriated by the legislature from 1 or more of the following sources:

(a) An amount taken from the federal capitalization grant, subject to the limitations prescribed in allowed under the federal safe drinking water act.

(b) A local match provided by the water supplier receiving assistance not to exceed the department's administrative costs associated with providing the assistance.

(c) Interest or earnings realized on loan repayments to the fund, unless the earnings are pledged to secure or repay any indebtedness of the authority.

(d) Proceeds of bonds or notes issued pursuant to the fund and sold by the authority.

(e) Collection of fees and charges by the department in connection with a transaction authorized under this part.


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(f) (e) Any other money appropriated by the legislature.

Sec. 5417. In implementing this part, the department may do 1 or more of the following:

(a) Make, execute, and deliver contracts, conveyances, and other instruments necessary or convenient for the implementation of this part.

(b) Solicit and accept gifts, grants, loans, allocations, appropriations, and other aid, including capitalization grant awards, from any person or the federal, state, or a local government or any agency of the federal, state, or local government, enter into agreements with any person or the federal, state, or a local government, or participate in any other way in any federal, state, or local government program consistent with this part and the purposes of this part.

(c) Expend federal and state money allocated under the federal safe drinking water act for any of the following purposes, in accordance with that act:

(i) Fund activities authorized under section 1452(g)(2) of the federal safe drinking water act, 42 USC 300j-12, which may include fund administration and the provision of set-asides annually identified as part of an intended use plan.

(ii) Fund implementation of a technical assistance program created in Act 399 and used by the state to provide technical assistance to public water systems serving not more than 10,000 persons.

(iii) Fund activities authorized under section 1452(k) of the federal safe drinking water act, 42 USC 300j-12, which may include the lending of money for certain source water protection efforts, assisting in the implementation of capacity development strategies,


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conducting source water assessments, and implementing wellhead protection programs.

(d) Negotiate and enter into agreements and amendments to agreements with the federal government to implement establishment and operation of the fund, including capitalization grant agreements and schedules of payments.

(e) Employ personnel as is necessary, and contract for the services of private consultants, managers, counsel, auditors, engineers, and scientists for rendering professional management and technical assistance and advice.

(f) Charge, impose, and collect fees and charges in connection with any transaction authorized under this part and provide for reasonable penalties for delinquent payment of fees or charges.

(g) Review and approve all necessary documents in a water supplier's application for assistance and issue an order authorizing assistance to the authority.

(h) Promulgate rules necessary to carry out the purposes of this part and to exercise the powers expressly granted in this part.

(i) Administer, manage, and do all other things necessary or convenient to achieve the objectives and purposes of the fund, the authority, this part, or other state and federal laws that relate to the purposes and responsibilities of the fund.

(j) Apply for a capitalization grant and prepare, submit, and certify any required or appropriate information with that application.

(k) Establish priority lists and fundable ranges for projects and the scoring criteria and methods used to determine the distribution of the funds available to the fund among the various


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types of assistance to be offered and select projects to be funded.

(l) Prepare and submit an annual intended use plan and an annual report as required under the federal safe drinking water act. The department shall annually invite stakeholders including, but not limited to, representatives of water utilities, local units of government, agricultural interests, industry, public health organizations, medical organizations, environmental organizations, consumer organizations, and drinking water consumers who are not affiliated with any of the other represented interests, to 1 or more public meetings to provide recommendations for the development of the annual intended use plan as it relates to the set-asides allowed under the federal safe drinking water act. The intended use plan must describe and identify all of the following:

(i) Additional subsidization that will be allocated to projects.

(ii) The projects that will receive additional subsidization identified under subparagraph (i).

(iii) The reasons why a project will receive additional subsidization.

(m) Perform other functions necessary or convenient for the implementation of this part.

Sec. 19703a. (1) Bonds issued under this part are subject to the following:

(a) For the state fiscal year ending on September 30, 2011, bonds shall must not be issued or expended under this part for the purposes of section 5204b, unless the department of natural resources and environment has established a fundable range of at least $210,000,000.00 for that state fiscal year to fund projects under the state water pollution control revolving fund created in


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section 16a of the shared credit rating act, 1985 PA 227, MCL 141.1066a.

(b) For the state fiscal year ending on September 30, 2012, bonds shall must not be issued or expended under this part for the purposes of section 5204b, unless the department of natural resources and environment has established a fundable range of at least $259,000,000.00 for that state fiscal year to fund projects under the state water pollution control revolving fund created in section 16a of the shared credit rating act, 1985 PA 227, MCL 141.1066a, to the extent administratively possible and as long as sufficient applications have been submitted to the department of natural resources and environment.

(c) For each state fiscal year beginning with the state fiscal year ending September 30, 2013, the department of natural resources and environment, in conjunction with the department of treasury, shall seek to fully fund all eligible projects applying for assistance under part 53, to the extent administratively possible, utilizing the bond proceeds under this part as necessary to achieve this goal. , considering the recommendations of the state water pollution control revolving fund advisory committee created in section 5317.

(2) If the department of natural resources and environment is not able to establish a fundable range under subsection (1)(b) of at least $259,000,000.00, the department of natural resources and environment shall submit to the standing committees of the senate and house of representatives with jurisdiction over issues primarily pertaining to natural resources and the environment a report detailing the reasons why the fundable range was not set at this level.


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(3) As used in this section, "fundable range" means that term as it is defined in section 5301.

Enacting section 1. Section 5317 of the natural resources and environmental protection act, 1994 PA 451, MCL 324.5317, is repealed.