DRAFT when the project type is taken into consideration and construction bids are received and approved, the full extent of eligible loan forgiveness can be realized. Upon approval of this Annex by the Department’s Environmental Protection Commission following a public review and comment period, the Socioeconomic Assessment Tool will be available to the public through the SRF website homepage at www.IowaSRF.com. Household Burden Indicator The third element of the loan forgiveness equation is an assessment of a community or service area’s household’s ability to afford the proposed project. The Household Affordability Assessment is made up of two components 7 : • Household Burden Indicator: Total water costs for combined water and sewer service, including the project being financed by SRF, as a percent of the 20th percentile of community household income (lowest quintile income, or LQI) • Poverty Prevalence Indicator: The percentage of community households at or below 200% of the Federal Poverty Level
Using this combination of factors will further indicate both the water cost burden borne by lower- income households as well as the overall affordability challenges facing the community.
The Household Burden Indicator may be computed with assistance from the Municipal Advisor after the construction bid has been awarded and other funding sources have been deducted. The borrower begins by determining the monthly water and sewer bill for residential users, assuming 5,000 gallons of usage per month (note that it may be normal for the service area or drinking water utility to differ from that of a sewer utility). The monthly total is then annualized and divided by the upper bound of the lowest quintile income from Table B19080 of the American Community Survey. The Poverty Prevalence Indicator for the community or service area is provided in the Socioeconomic Assessment analysis. Assuming 5,000 gal/month Monthly Water/Sewer Bill $145 Annual Water/Sewer Bill $1740 Lowest Quintile Income (LQI) $25,214 Total Water Costs as Percent of LQI 6.90% The resulting benchmarks for the Household Burden and Poverty Prevalence Indicators are as follows. The amount of loan forgiveness attributed to the Household Affordability Assessment will correspond to the resulting category of unaffordability. Percent of Households Below 200% of Poverty Level Water Costs as a Percent of Income at Lowest Quintile <= 20% > 20% and <= 35% > 35% > 10% Moderate-High Burden Moderate-High Burden High Burden 7% to 10% Moderate-Low Burden Moderate Burden Moderate-High Burden < 7% Low Burden Moderate-Low Burden Moderate-High Burden
7 Credit to R Raucher, E Rothstein, and J Mastracchio’s Developing a New Framework for Household Affordability and Financial Capability Assessment in the Water Sector, 2019
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