Ohio Revamps Brownfield Loan Program
The Ohio Water Development Authority (OWDA) has long had a revolving loan fund to help finance brownfield clean up projects. However, the OWDA program has rarely been utilized because of two factors:
- Clean Ohio Program- Offers grants up to $3 million for clean up and remediation of sites (i.e. why take a loan when there is significant grant money available?)
- Non-competitive interest rates
At this week's Ohio Brownfield Conference, the State announced that they soon would be revamping the OWDA program to make it more attractive. The two major changes to be made are:
- Responsible Parties- OWDA will allow companies that have legal responsibility for contamination to be eligible for loans so long as the company is not under enforcement orders. Responsible parties (PRPs) are not eligible for Clean Ohio or other federal grant funding.
- Competitive Interest Rates- The State did not announce the exact interest rate. They simply stated the the new rates would be competitive.
The biggest change is allowing responsible parties to be eligible for loans. Now companies have a new financing option if they want to address historical contamination on their property to eliminate liability risks. Companies can utilize the Ohio Voluntary Action Program (VAP) in performing their clean up.
Clean up under VAP is a far better option than clean up under traditional enforcement or regulatory programs like RCRA (hazardous waste regulatory program). VAP clean ups are:
- Cheaper- the program allows use of institutional (i.e. deed restrictions) and engineering controls (physical barriers) as an alternative to more costly removal/disposal of contamination
- Companies have much more flexibility in how to perform their clean up-
- Residential versus industrial/commercial standards can be selected
- Buildings and parking lots can be used to contain contamination versus digging and hauling material off-site
- Companies private environmental consultant oversees the clean up and selects remedies versus the regulator
The OWDA program may provided needed financing to companies wishing to take advantage of the VAP program.
We will need to see the details for the changes to the program once the State rolls them out. I was told that would occur in the next few weeks. However, these changes appear to make the OWDA Brownfield Loan Program much more attractive.
(See extended entry for the current program guidelines which will soon be changed)
WHAT: Brownfield Program For WHAT: WHY: (Purpose)
enhancement.
By WHOM: Administered by: OWDA Funded by: OWDA Brownfield Fund (under LED) from OWDA Revenue Bonds Surplus Local Government Agencies (Cities, Villages, Counties) that have: 1. Plans designed by certified professionals; 2. Plan approval by OEPA; 3. Demonstration of revenues adequate to meet annual loan repayments. And Private Entities that have: 1. A VAP certified engineer directing the remediation effort; 2. Financial strength analysis; 3. Real estate appraisal; 4. Evaluation of potential effectiveness of remediation. HOW MUCH: Max Construction Loan: No max Eligible Costs: Engineering & design fees, construction costs, legal and inspection fees Application Fee: $2,500 (May be credited to Loan Fee) Loan Fee: .35% (.0035) of total estimated project, processing and closing costs OR $400 for loans up to $100 million; .00175% for loans between $100 million to $150 million; capped at $150 million Contract Interest Rate: Based on the higher of the comparable Treasury Note Rate or the comparable MMD AAA scale, plus 50 basis points Rate Discounts: NA Capitalized Interest Rate: Same % as Contract Interest Rate; Accrues on portion of loan disbursed, until 6 months prior to the Loan Maturity Date Retainage: 8% of first 50% of labor until project is substantially completed (as defined by the community), for all communities except home-rule, on Construction Loans only Planning/Design Repayment Rate: Balloon payment at maturity, if no prior repayment made Construction Repayment Rate: Varies by loan Late Pmt Penalty: Greater of: 10% of amount overdue OR $25 minimum Default Rate: Greater of: Contract Interest Rate + 300 basis points (3%) OR 16% HOW LONG: (Contract Term) WHEN: Loan Fee: Due when the Loan Agreement is executed Repaymt Invoice: Mailed approximately every May 15 and Nov 15 by OWDA to loan recipients Planning/Design Loan Repayment: Begins earlier of: 5 years, OR at the time remediation begins (May be rolled into subsequent Construction loan) Construction Loan Repayment: Negotiated between OWDA and borrower at the time the loan is made WHERE: Disbursement request: OWDA Chief Engineer Repayment to: OWDA Accounting Dept HOW: 1. Fill out and submit application form with supporting documents as listed on the application. 2. Meet with OWDA to negotiate loan terms. For Cooperative Agreement approval the Borrower must: 1. Receive bids and tentatively approve contract awards. 2. Pass legislation authorizing signing of the Cooperative Agreement. 3. Complete any necessary assessment, tap-in and/or rate legislation. 4. Prepare a Projection schedule of revenues, debt service obligations, and operation and maintenance costs, over the contract term of years repayments are to be made to OWDA. For Disbursement of loan funds the Borrower must: 1. Fill out Loan Payment Request form and send with supporting contractors’ documentation.
