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Current and Projected Financial Capacity of the CWSRF Appendix A, the Estimated Sources and Uses table, shows that funds are available to fund current requests. The leveraging capacity of the CWSRF is robust due to the maturity of the fund and the current loan portfolio. SRF staff has analyzed the future financial capacity of the CWSRF in light of the discussion over water quality standards and other future wastewater needs. Assuming that Iowa continues receive Cap Grants, and that the CWSRF Program continues to grant 10% loan forgiveness and the current interest rates, it is projected that the CWSRF could loan an average approximately $290 million per year over the next 10 years, or a total of $2.9 billion. If Iowa receives no additional Cap Grants and the CWSRF Program keeps current interest rates, the CWSRF could loan an average of approximately $230 million per year over the next 10 years. These figures would increase with an increase in interest rates. Financial Management Strategies The CWSRF Project Priority List (Attachment 1) shows total loan requests for wastewater projects. Because many of these projects are in the planning phase, they are not expected to sign a binding loan commitment during this fiscal year. The projected timing and demand for loan draws is reflected in the sources and uses table (Appendix A). Other uses for CWSRF program funds in SFY 2023 include $18.5 million reserved for the Nonpoint Source Assistance Programs. The cash draw procedure used is the direct loan method. The Iowa CWSRF program uses its equity fund to originate loans. When a sufficient number of loans have been made, the CWSRF program issues bonds and uses the bond proceeds to replenish the equity fund. Iowa’s bonds are cross-collateralized across both the Clean Water and Drinking Water SRF accounts. When funds are needed, state match bonds are issued at the same time that leveraged bond issues are done for greater cost effectiveness. State match is fully disbursed prior to drawing Cap Grant funds. The Cap Grant funds will be drawn at a 100% proportionality ratio. The Iowa SRF program was invited to apply for a loan through EPA’s State Infrastructure Financing Authority Water Infrastructure Finance and Innovation Act (SWIFIA). SWIFIA is a loan program exclusively for state infrastructure financing authority borrowers. SWIFIA may be used for up to 49 percent of an eligible project’s costs that are ready to proceed, meaning construction will commence within 18 months after the Letter of Interest is submitted to EPA. A preliminary list of mostly CWSRF projects eligible for SWIFIA funding has been identified, totaling more than $500 million. The SRF program is in the process of working through the underwriting process; the timeline for closing the loan is yet to be determined. The program issued bonds in May 2022, which included the required state match obligations for the FFY 2022 Cap Grants (base CWSRF program and BIL supplemental). Plan for Use of Administrative Accounts There are three distinct funding sources for CWSRF administrative expenses: • The CWSRF administrative Cap Grant set-aside. Iowa intends to take or reserve 4% of the federal Cap Grant funds for program administration. • Loan initiation fees. A 0.5% loan origination fee will be charged on new CWSRF loans. The maximum amount charged is $100,000. Under EPA rules, because Iowa’s origination fees are financed through the loans, the proceeds are considered program income. Program income can only be used for the purposes of administering the CWSRF program or for making new loans. Beginning in SFY 2023, loan initiation fees will not be assessed on loans to Disadvantaged Community (DAC) receiving loan forgiveness. • Loan servicing fees. A servicing fee of 0.25% on the outstanding principal is charged on CWSRF loans. Under EPA rules, only servicing fees received from loans made above and beyond the amount of the Cap Grant and after the Cap Grant under which the loan was made has been closed are considered Non-Program Income. Non- Program Income can be used to administer the program or for other water quality purposes. The uses of Non- Program Income are discussed below. Program Income. Program Income collected in SFY 2023 will be used for administering the CWSRF Program. Program Income is replenished throughout the fiscal year by funds received from loan initiation fees as described above.

IOWA SRF INTENDED USE PLANS 2023 - CWSRF | Page 14