Sonya Butler

Sonya, Can you help draft some language for this inquiry as well? Thanks!

My notes from a call yesterday where your names came up. Let me know if questions. thanks Steve Marquardt USEPA Region 5 77 West Jackson Blvd Chicago, Illinois 60604 (312)353-3214 xxxEND_PAGE:treasury01_b41_7622_7971_142 January 24, 2015 Call Notes Call arranged by Emily Barson — HHS Included representatives from Michigan Governor’s office, MDEQ, USEPA headquarters and Region 5 On the call the Governor's office requested information regarding press related to $80M in infrastructure funds going to Michigan. USEPA responded that this was the annual appropriation of Clean Water State Revolving Funds {CWSRF) and Drinking Water State Revolving Funds (DWSRF) and these funds are awarded to the state as a grant and then state provide these funds to communities primarily in the form of low interest loans. It would be up to the state to determine the amount of funds provided to Flint. There was then discussion of the state revolving fund and options under the fund to provide resources to Flint. The State asked about the eligibility of lead service line replacement and USEPA responded that they were eligible. The state also asked about eligibility of items inside the home and USEPA indicated that this would be investigated. Options discussed for further investigation: - Old Debt - The Michigan Finance Authority holds approximately $20M in DWSRF Flint Debt. The state should examine any savings that could be provided to Flint on this old debt including lowering the interest rate which is at 2.5% and possible extending the term of the debt from 20 year to 30 year. The extended term may make the semi-annual payments more affordable but costs more in the long run. Also, the State could pay off a portion of the debt. The Michigan Finance Authority may also have other ideas of actions that could be taken. - New Funding - FY15 USEPA Funding — In September 2015, the MI DWSRF program identified $35M in projects they plan to fund in 2016 and provide $5.5M in principal forgiveness for those projects. The FY15 USEPA funding allowed stated to provide 20%-30% of the grant to the state as principal forgiveness to communities. This would be approximately $5.5M-S8M. The state should investigate the ability to award Flint a DWSRF loan that provides principal forgiveness up to the maximum allowed. - F¥16 USEPA Funding — FY16 CWSRF and DWSRF allocations to states have not yet been released. It is anticipated that MI would receive a similar allocation to FY15 — in FY15 USEPA awarded approximately S60M in CWSRF and $27M in DWSRF. If Flint applies for funding, the state could provide a loan to Flint and provide principal forgiveness up to the amount allowed under the FY16 appropriation language which is 20% of the DWSRF grant. The issue is that these funds would not be available for some time if the normal state SRF process is followed. The state normally applies for the funds in summer and provides funds to communities in the fall. All options for new funding are dependent on Flint providing detailed information on needs, prioritizing the needs, and applying for funds. Action items: - USEPA look into eligibility options for SRF related to internal home plumbing replacement — Peter Grevatt (USEPA) - USEPA, Michigan Finance Authority and MDEQ to investigate SRF funding options listed above and any other possible options. — John Barton (Michigan Finance Authority), Sonya Butler (MDEQ), Steve Marquardt (USEPA R5) o Look for most effective, economic and efficient way to approach needs - USEPA Finance Center offered assistance — Jim Gebhardt (USEPA) - Investigate the ability to transfer funds from the CWSRF to the DWSRF and the pros and cons of approach - MDEQ requested the formation of a Municipal Finance Team - The USEPA Region 5 representative is Steve Marquardt and the request was made by EPA to have Sonya Butler from MDEQ and John Barton from the Michigan Finance Authority. xxxEND_PAGE:treasury01_b41_7622_7971_143 Workman, Wayne (TREASURY)

Date: Thursday, December 17, 2015 3:15:11 PM FYI

FYI

Date: Tuesday, December 08, 2015 2:16:16 PM FYI

Here is a presentation it looks like given to Flint City Council — 9/14/15 it mentions: City Actions: oDeveloped a Written and Prioritized Infrastructure Plan 5 Year Capital Improvement Plan Section 6 —Pages 47 -68 also, DEQ funding options Steve Marquardt USEPA Region 5 77 West Jackson Blvd Chicago, Illinois 60604 (312)353-3214 xxxEND_PAGE:deq15_b781_2775_2775_1

004-265-2045 pdt https Awww. page 47 is infrastructure xxxEND_PAGE:deq16_b5_0892_4900_1019

Date: Tuesday, December 08, 2015 10:48:46 AM http://www. page 47 is infrastructure xxxEND_PAGE:deq03_b280_0439_0439_1

In order to provide DWRF to Flint, the city has to apply for funding. The city would need to submit a project plan that documents the problems and how the city intends to address the problems. The project plan has to be submitted by May 1 in order to be considered for funding in the following fiscal year. We can discuss the details tomorrow but the city will need to take action in order to receive DWRF funding.

One of the action items fer Flint is pulling together a DWRE grant and loan package. We need to discuss the logistics of what we think would be required to replace the 15,000 lead service lines. Liane has more details if you need thern. Maggie

Maggie Do you have any background information regarding the meeting tomorrow morning? I want to make sure I'm prepared. Sonya T. Butler, Chief Revolving Loan Section Office of Drinking Water & Municipal Assistance Michigan Department of Environmental Quality xxxEND_PAGE:deq21_b363_1040_1041_1 525 W. Allegan Lansing, MI 48933 @ 517-284-5433 xxxEND_PAGE:deq21_b363_1040_1041_2

04478"15 Draft 1.pdf 04479"15 Draft 1.pdf Liane and Sonya, Please see the attached drafts for changes to DWRF for private lead service lines. Will you please review and get me any suggested revisions? Thanks Maggie

My suggested revisions are noted below. Let me know if there are any questions.

Date: Friday, October 09, 2015 8:09:00 AM Importance: High FY| —I’ll need a daily summary by 4:00pm (4:15pm at the latest) of all work efforts as described below. Be sure to cc Tracy Jo so that one of us will be able to forward it to George by the 4:30pm deadline. Thanks!

Date: Friday, October 09, 2015 8:09:28 AM Importance: High FY| —I’ll need a daily summary by 4:00pm (4:15pm at the latest) of all work efforts as described below. Be sure to cc Tracy Jo so that one of us will be able to forward it to George by the 4:30pm deadline. Thanks!

Importance: High FY1- FH need a daily summary by 4:000m (4.1 5prn at the latest} of ali work efforts as described belaw. Be sure to cc Tracy Jo so that one of us will be able to forward it to George by the 4:30pm deaciina. Thanks!

EPA has indicated that lead service line replacement ts eligible for principal forgiveness under GPR. Water savings/conservation for nat having to flush and waste treated water; and wastewater savings not having to treat wasted drinking water. » Chit or Smt, PAL,

Date: Thursday, October 08, 2015 5:08:00 PM EPA has indicated that lead service line replacement is eligible for principal forgiveness under GPR. Water savings/conservation for not having to flush and waste treated water; and wastewater savings not having to treat wasted drinking water. Liane J. Shekter Smith, P.E., Chief Office of Drinking Water and Municipal Assistance Michigan Department of Environmental Quality 517-284-6543

I stopped by to talk with you about a statement you made during the Flint talk. You mentioned that a lead service line is eligible for principal forgiveness. This is not accurate. Flint would be determined to be disadvantaged and that is how the lead service line project would be eligible for principal forgiveness. Also I had a conversation with Sylvia. She asked: e If DWRF could be used to reconnect Flint to DWSD? No, it's not the purpose of the DWRF. e If SAW funding could be used to reconnect Flint to DWSD? No, it's not the intended purpose. e If principal forgiveness could be provided to Flint? Yes, if they apply with a project that ranks high enough to receive available funding. T know things are moving swiftly. Does Flint intend to apply for DWRF? If so, when?

Date: Thursday, October 08, 2015 4:17:47 PM I stopped by to talk with you about a statement you made during the Flint talk. You mentioned that a lead service line is eligible for principal forgiveness. This is not accurate. Flint would be determined to be disadvantaged and that is how the lead service line project would be eligible for principal forgiveness. Also I had a conversation with Sylvia. She asked: e If DWRF could be used to reconnect Flint to DWSD? No, it’s not the purpose of the DWRF. e If SAW funding could be used to reconnect Flint to DWSD? No, it's not the intended purpose. e If principal forgiveness could be provided to Flint? Yes, if they apply with a project that ranks high enough to receive available funding. T know things are moving swiftly. Does Flint intend to apply for DWRF? If so, when?

What language would you recommend instead? Gbviousty EPA allows the maney to be spent on private lead service line replacemerd, and i can't imagine that they would require the city to operate and maintain the lines (rio city would take on that lability), is there someone at EPA can help us expedite @ review so | can get final language over to the legislature tornorrow? in addition, do we need to clarify that the loans can receive principal forgiveness or in that just internal? Thanks, Maggie

“>; Shekter Smith, Liane (DEQ) T'm still waiting for replies from other states. So far I've heard from: e¢ MN which does not fund any private service line work as there are questions concerning the ability of a city to issue general obligation bonds for work on private property. e Ohio will fund lead service lines but has no guidance. They rely on the federal eligibility guidance. xxxEND_PAGE:deq20_b05_208_213_1 The definition below needs to acknowledge lead residential service lines. I think Treasury needs to be consulted about the ownership of the service line (public vs. private) and how that will affect the financing of the loan to a community to replace the lead service lines. Otherwise, we could end up with a statute change that does not resolve the issue. Similar to the issue we have in SWQIF for replacing failing septic systems. The additional sentence in 5409(1)(d) will not work. You are using federal dollars to fund a ‘public’ project. A requirement of using public funds is that the asset will be properly operated & maintained. There is no distinction between the public or private ownership of the asset if the project is funded with public money. In order to show due diligence on behalf of the city, there needs to be an assurance that the asset being publicly funded will be operated & maintained appropriately. Moving forward with this language would put the entire DWRF program in jeopardy with EPA.

| made the two changes that we discussed yesterday evening- changing the definition to privately owned and wordsmithing the second change in 5409. Thanks for your help with this. Maggie 324.5403 Definitions; P to W. 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. (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 the effective date of this part. (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, except for those waterworks systems that supply water to only | 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 Act 399 that establish water quality standards necessary to protect public health or that establish treatment techniques to meet these water quality standards. xxxEND_PAGE:deq20_b05_208_213_2 (f) “Water supplier’ or “supplier” means a municipality or its designated representative accepted by the director, a legal business entity, or any other person who 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: (1) Wells and well structures. (11) Intakes and cribs. (iti) Pumping stations. (iv) Treatment plants. (v) Storage tanks. (vi) Pipelines and appurtenances. (vii) Peivately-owned residential lead service lines. €id) (viii) A combination of any of the items specified in this subdivision. 324.5409 Application for fund assistance; contents; availability of revenue sources; acceptance of applications by department; liability for incurred costs. Sec. 5409. (1) A water supplier whose project plan 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 application shall 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, 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. (11) Adequate revenues to fund the operation and maintenance of the project. (b) Evidence of an approved project plan. (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 supplier has the legal, institutional, technical, financial, and managerial capability to build, operate, and maintain the 3 xxxEND_PAGE:deq20_b05_208_213_3 project. The water supply does not need to certify it will operate and maintain any portion of the project funded for the replacement privately-owned of residential private lead service lines.

Importance: High John I'm not sure you saw this. Would we be able to make loans to communities to replace private service line? Let me know what you think

T'm checking with what other states are doing in the Region. I think a modification to the draft below is necessary but I want to confirm how it should be revised.