(a) The commissioner shall maintain a priority list of eligible water quality projects and shall establish a system setting the priority for making project grants, grant account loans and project loans. In establishing such priority list and ranking system, the commissioner shall consider all factors he deems relevant, including but not limited to the following: (1) The public health and safety; (2) protection of environmental resources; (3) population affected; (4) attainment of state water quality goals and standards; (5) consistency with the state plan of conservation and development; (6) state and federal regulations; (7) the formation in municipalities of local housing partnerships pursuant to the provisions of section 8-336f; and (8) the necessity and feasibility of implementing measures designed to mitigate the impact of a rise in sea level over the projected life span of such project. The priority list of eligible water quality projects shall include a description of each project and its purpose, impact, cost and construction schedule, and an explanation of the manner in which priorities were established. The commissioner shall adopt an interim priority list of eligible water quality projects for the purpose of making project grants, grant account loans and project loans prior to adoption of final regulations, which priority list shall be the priority list currently in effect under subsection (c) of section 22a-439.

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(b) In each fiscal year the commissioner may make project grants, grant account loans and project loans to municipalities in the order of the priority list of eligible water quality projects to the extent of moneys available therefor in the appropriate accounts of the Clean Water Fund. Each municipality undertaking an eligible water quality project may apply for and receive a project grant and loan or project grants and loans in an amount equal to one hundred per cent of the eligible water quality project costs.

(c) The funding of an eligible water quality project shall be pursuant to a project funding agreement between the state, acting by and through the commissioner, and the municipality undertaking such project and shall be evidenced by a project fund obligation or grant account loan obligation, or both, or an interim funding obligation of such municipality issued in accordance with section 22a-479. A project funding agreement shall be in a form prescribed by the commissioner. Eligible water quality projects shall be funded as follows:

(1) A nonpoint source pollution abatement project shall receive a project grant of seventy-five per cent of the cost of the project determined to be eligible by the commissioner.

(2) A combined sewer project shall receive (A) a project grant of fifty per cent of the cost of the project, and (B) a loan for the remainder of the costs of the project, not exceeding one hundred per cent of the eligible water quality project costs.

(3) A construction contract eligible for financing awarded by a municipality on or after July 1, 2012, as a project undertaken for nutrient removal shall receive a project grant of thirty per cent of the cost of the project associated with nutrient removal, a twenty per cent grant for the balance of the cost of the project not related to nutrient removal, and a loan for the remainder of the costs of the project, not exceeding one hundred per cent of the eligible water quality project costs. Nutrient removal projects under design or construction on July 1, 2012, and projects that have been constructed but have not received permanent, Clean Water Fund financing, on July 1, 2012, shall be eligible to receive a project grant of thirty per cent of the cost of the project associated with nutrient removal, a twenty per cent grant for the balance of the cost of the project not related to nutrient removal, and a loan for the remainder of the costs of the project, not exceeding one hundred per cent of the eligible water quality project costs.

(4) If supplemental federal grant funds are available for Clean Water Fund projects specifically related to the clean-up of Long Island Sound that are funded on or after July 1, 2012, a distressed municipality, as defined in section 32-9p, may receive a combination of state and federal grants in an amount not to exceed fifty per cent of the cost of the project associated with nutrient removal, a twenty per cent grant for the balance of the cost of the project not related to nutrient removal, and a loan for the remainder of the costs of the project, not exceeding one hundred per cent of the allowable water quality project costs.

(5) A municipality with a water pollution control project, the construction of which began on or after July 1, 2003, which has (A) a population of five thousand or less, or (B) a population of greater than five thousand which has a discrete area containing a population of less than five thousand that is not contiguous with the existing sewerage system, shall be eligible to receive a grant in the amount of twenty-five per cent of the design and construction phase of eligible project costs, and a loan for the remainder of the costs of the project, not exceeding one hundred per cent of the eligible water quality project costs.

(6) Any contract entered into by a municipality prior to, on or after May 26, 2016, but before July 1, 2019, that is eligible for financing as a project undertaken for phosphorus removal to at or below thirty-one one hundredths milligrams per liter, provided such amount is specified as the average monthly effluent total phosphorous limit in a discharge permit issued to such municipality by the commissioner pursuant to section 22a-430, shall receive (A) a project grant of fifty per cent of the cost of the project associated with such phosphorus removal, (B) except as provided in subdivision (3) of this subsection, a twenty per cent grant for the balance of the cost of the project, and (C) a loan for the remainder of the costs of the project, not exceeding one hundred per cent of the eligible water quality project costs, provided nothing in this subdivision shall affect any requirement or schedule in any discharge permit issued by the commissioner pursuant to said section.

(7) A municipality with a 2012 population of not less than forty thousand but not more than forty-two thousand with a municipal sewerage system that provides a regional sewerage treatment capacity to not less than five abutting communities, each with 2012 populations of less than five thousand, shall receive funding levels consistent with subdivisions (1) to (6), inclusive, of this subsection plus an additional five per cent for the design and construction phase costs of an eligible water quality project and a loan for the remainder of the costs of such eligible water quality project, provided such loan shall not exceed one hundred per cent of the costs of such eligible water project.

(8) Any other eligible water quality project shall receive (A) a project grant of twenty per cent of the eligible cost, and (B) a loan for the remainder of the costs of the project, not exceeding one hundred per cent of the eligible project cost.

(9) Project agreements to fund eligible project costs with grants from the Clean Water Fund that were executed during or after the fiscal year beginning July 1, 2003, shall not be reduced according to the provisions of the regulations adopted under section 22a-482.

(10) On or after July 1, 2002, an eligible water quality project that exclusively addresses sewer collection and conveyance system improvements may receive a loan for one hundred per cent of the eligible costs provided such project does not receive a project grant. Any such sewer collection and conveyance system improvement project shall be rated, ranked, and funded separately from other water pollution control projects and shall be considered only if it is highly consistent with the state’s conservation and development plan, or is primarily needed as the most cost effective solution to an existing area-wide pollution problem and incorporates minimal capacity for growth.

(11) All loans made in accordance with the provisions of this section for an eligible water quality project shall bear an interest rate of two per cent per annum. The commissioner may allow any project fund obligation, grant account loan obligation or interim funding obligation for an eligible water quality project to be repaid by a borrowing municipality prior to maturity without penalty.

(d) Each project loan and grant account loan for an eligible water quality project shall be made pursuant to a project funding agreement between the state, acting by and through the commissioner, and such municipality, and each project loan for an eligible water quality project shall be evidenced by a project loan obligation, each grant account loan for an eligible water quality project shall be evidenced by a grant account loan obligation, or either may be evidenced by an interim funding obligation of such municipality issued in accordance with sections 22a-475 to 22a-483, inclusive. Except as otherwise provided in said sections, each project funding agreement shall contain such terms and conditions, including provisions for default which shall be enforceable against a municipality, as shall be approved by the commissioner. Each project loan obligation, grant account loan obligation or interim funding obligation issued pursuant to a project funding agreement for an eligible water quality project shall bear interest at a rate of two per cent per annum. Except as otherwise provided in sections 22a-475 to 22a-483, inclusive, each project loan obligation, grant account loan obligation and interim funding obligation shall be issued in accordance with the terms and conditions set forth in the project funding agreement. Notwithstanding any other provision of the general statutes, public act or special act to the contrary, each project loan obligation and grant account loan obligation for an eligible water quality project shall mature no later than twenty years from the date of completion of the construction of the project and shall be paid in monthly installments of principal and interest or in monthly installments of principal unless a finding is otherwise made by the Treasurer of the state requiring a different payment schedule. Interest on each project loan obligation and grant account loan obligation for an eligible water quality project shall be payable monthly unless a finding is otherwise made by the Treasurer of the state requiring a different payment schedule. Principal and interest on interim funding obligations issued under a project funding agreement for an eligible water quality project shall be payable at such time or times as provided in the project funding agreement, not exceeding six months after the date of completion of the planning and design phase or the construction phase, as applicable, of the eligible water quality project, as determined by the commissioner, and may be paid from the proceeds of a renewal note or notes or from the proceeds of a project loan obligation or grant account loan obligation. The commissioner may allow any project loan obligation, grant account loan obligation or interim funding obligation for an eligible water quality project to be repaid by the borrowing municipality prior to maturity without penalty.

(e) (1) The commissioner may make a project grant or a grant account loan or both to a municipality pursuant to a project funding agreement for the planning and design phase of an eligible water quality project. Principal and interest on a grant account loan for the planning and design phases of an eligible water quality project may be paid from and included in the principal amount of a loan for the construction phase of an eligible water quality project.

(2) In lieu of a grant and loan pursuant to subsection (b) of this section, the commissioner, upon written request by a municipality, may make a project grant to such municipality in the amount of fifty-five per cent of the cost approved by the commissioner for the planning phase of an eligible water quality project.

(3) If supplemental federal grant funds are available for Clean Water Fund projects specifically related to the clean-up of Long Island Sound that are funded on or after July 1, 2003, a distressed municipality, as defined in section 32-9p, may receive a combination of state and federal grants in an amount not to exceed one hundred per cent of the cost, approved by the commissioner, for the planning phase of an eligible water quality project for nitrogen removal.

(f) A project grant, a grant account loan and a project loan for an eligible water quality project shall not be made to a municipality unless:

(1) In the case of a project grant, grant account loan and project loan for the construction phase, final plans and specifications for such project are approved by the commissioner;

(2) Each municipality undertaking such project provides assurances satisfactory to the commissioner that the municipality shall undertake and complete such project with due diligence and, in the case of a project loan for the construction phase, that it shall own such project and shall operate and maintain the eligible water quality project for a period and in a manner satisfactory to the commissioner after completion of such project;

(3) Each municipality undertaking such project has filed with the commissioner all applications and other documents prescribed by the commissioner within time periods prescribed by the commissioner;

(4) Each municipality undertaking such project has established separate accounts for the receipt and disbursement of the proceeds of such project grant, grant account loan and project loan and has agreed to maintain project accounts in accordance with generally accepted government accounting standards;

(5) In any case in which an eligible water quality project shall be owned or maintained by more than one municipality, the commissioner has received evidence satisfactory to the commissioner that all such municipalities are legally required to complete their respective portions of such project;

(6) Each municipality undertaking such project has agreed to comply with such audit requirements as may be imposed by the commissioner;

(7) In the case of a project grant, grant account loan and project loan for the construction phase, each municipality shall assure the commissioner that it has adequate legal, institutional, managerial and financial capability to construct and operate the pollution abatement facility for the design life of the facility; and

(8) In the case of a project grant, grant account loan and project loan for the construction phase awarded after July 1, 1991, each municipality shall demonstrate, to the satisfaction of the commissioner, that it has implemented an adequate operation and maintenance program for the municipal sewerage system for the design life of the facility.

(g) Notwithstanding any provision of sections 22a-475 to 22a-483, inclusive, to the contrary, the commissioner may make a project grant or project grants and a grant account loan or loans in accordance with the provisions of subsection (c) of this section with respect to an eligible water quality project without regard to the priority list of eligible water quality projects if a public emergency exists which requires that the eligible water quality project be undertaken to protect the public health and safety or the natural and environmental resources of the state.

(h) The Department of Public Health shall establish and maintain a priority list of eligible drinking water projects and shall establish a system setting the priority for making project loans to eligible public water systems. In establishing such priority list and ranking system, the Commissioner of Public Health shall consider all factors which he deems relevant, including, but not limited to, the following: (1) The public health and safety; (2) protection of environmental resources; (3) population affected; (4) risk to human health; (5) public water systems most in need on a per household basis according to applicable state affordability criteria; (6) compliance with the applicable requirements of the federal Safe Drinking Water Act and other related federal acts; (7) applicable state and federal regulations. The priority list of eligible drinking water projects shall include a description of each project and its purpose, impact, cost and construction schedule, and an explanation of the manner in which priorities were established. The Commissioner of Public Health shall adopt an interim priority list of eligible drinking water projects for the purpose of making project loans prior to adoption of final regulations, and in so doing may utilize existing rules and regulations of the department relating to the program. To the extent required by applicable federal law, the Department of Public Health shall prepare any required intended use plan with respect to eligible drinking water projects; (8) consistency with the state plan of conservation and development; (9) consistency with the policies delineated in section 22a-380; and (10) consistency with the coordinated water system plan in accordance with subsection (f) of section 25-33d.

(i) In each fiscal year the Commissioner of Public Health may make project loans to recipients in the order of the priority list of eligible drinking water projects to the extent of moneys available therefor in the appropriate accounts of the Clean Water Fund. Each recipient undertaking an eligible drinking water project may apply for and receive a project loan or loans in an amount equal to one hundred per cent of the eligible project costs.

(j) The funding of an eligible drinking water project shall be pursuant to a project funding agreement between the state, acting by and through the Commissioner of Public Health, and the recipient undertaking such project and shall be evidenced by a project fund obligation or an interim funding obligation of such recipient issued in accordance with section 22a-479. A project funding agreement shall be in a form prescribed by the Commissioner of Public Health. Any eligible drinking water project shall receive a project loan for the costs of the project. All loans made in accordance with the provisions of this section for an eligible drinking water project shall bear an interest rate not exceeding one-half the rate of the average net interest cost as determined by the last previous similar bond issue by the state of Connecticut as determined by the State Bond Commission in accordance with subsection (t) of section 3-20. The Commissioner of Public Health may allow any project fund obligation or interim funding obligation for an eligible drinking water project to be repaid by a borrowing recipient prior to maturity without penalty.

(k) Each project loan for an eligible drinking water project shall be made pursuant to a project funding agreement between the state, acting by and through the Commissioner of Public Health, and such recipient, and each project loan for an eligible drinking water project shall be evidenced by a project loan obligation or by an interim funding obligation of such recipient issued in accordance with sections 22a-475 to 22a-483, inclusive. Except as otherwise provided in said sections 22a-475 to 22a-483, inclusive, each project funding agreement shall contain such terms and conditions, including provisions for default which shall be enforceable against a recipient, as shall be approved by the Commissioner of Public Health. Each project loan obligation or interim funding obligation issued pursuant to a project funding agreement for an eligible drinking water project shall bear an interest rate not exceeding one-half the rate of the average net interest cost as determined by the last previous similar bond issue by the state of Connecticut as determined by the State Bond Commission in accordance with subsection (t) of section 3-20. Except as otherwise provided in said sections 22a-475 to 22a-483, inclusive, each project loan obligation and interim funding obligation shall be issued in accordance with the terms and conditions set forth in the project funding agreement. Notwithstanding any other provision of the general statutes, public act or special act to the contrary, each project loan obligation for an eligible drinking water project shall mature no later than twenty years from the date of completion of the construction of the project and shall be paid in monthly installments of principal and interest or in monthly installments of principal unless a finding is otherwise made by the State Treasurer requiring a different payment schedule. Interest on each project loan obligation for an eligible drinking water project shall be payable monthly unless a finding is otherwise made by the State Treasurer requiring a different payment schedule. Principal and interest on interim funding obligations issued under a project funding agreement for an eligible drinking water project shall be payable at such time or times as provided in the project funding agreement, not exceeding six months after the date of completion of the planning and design phase or the construction phase, as applicable, of the eligible drinking water project, as determined by the Commissioner of Public Health, and may be paid from the proceeds of a renewal note or notes or from the proceeds of a project loan obligation. The Commissioner of Public Health may allow any project loan obligation or interim funding obligation for an eligible drinking water project to be repaid by the borrowing recipient prior to maturity without penalty.

(l) The Commissioner of Public Health may make a project loan to a recipient pursuant to a project funding agreement for an eligible drinking water project for the planning and design phase of an eligible project, to the extent provided by the federal Safe Drinking Water Act, as amended. Principal and interest on a project loan for the planning and design phases of an eligible drinking water project may be paid from and included in the principal amount of a loan for the construction phase of an eligible drinking water project.

(m) A project loan for an eligible drinking water project shall not be made to a recipient unless: (1) In the case of a project loan for the construction phase, final plans and specifications for such project are approved by the Commissioner of Public Health, and when the recipient is a water company, as defined in section 16-1, with the concurrence of the Public Utilities Regulatory Authority, and with the approval of the Commissioner of Public Health for consistency with financial requirements of the general statutes, regulations and resolutions; (2) each recipient undertaking such project provides assurances satisfactory to the Commissioner of Public Health that the recipient shall undertake and complete such project with due diligence and, in the case of a project loan for the construction phase, that it shall own such project and shall operate and maintain the eligible drinking water project for a period and in a manner satisfactory to the Department of Public Health after completion of such project; (3) each recipient undertaking such project has filed with the Commissioner of Public Health all applications and other documents prescribed by the Public Utilities Regulatory Authority and the Commissioner of Public Health within time periods prescribed by the Commissioner of Public Health; (4) each recipient undertaking such project has established separate accounts for the receipt and disbursement of the proceeds of such project loan and has agreed to maintain project accounts in accordance with generally accepted government accounting standards or uniform system of accounts, as applicable; (5) in any case in which an eligible drinking water project shall be owned or maintained by more than one recipient, the Commissioner of Public Health has received evidence satisfactory to him that all such recipients are legally required to complete their respective portions of such project; (6) each recipient undertaking such project has agreed to comply with such audit requirements as may be imposed by the Commissioner of Public Health; and (7) in the case of a project loan for the construction phase, each recipient shall assure the Public Utilities Regulatory Authority, as required, and the Commissioner of Public Health that it has adequate legal, institutional, technical, managerial and financial capability to ensure compliance with the requirements of applicable federal law, except to the extent otherwise permitted by federal law.

(n) Notwithstanding any provision of sections 22a-475 to 22a-483, inclusive, the Commissioner of Public Health may make a project loan or loans in accordance with the provisions of subsection (j) of this section with respect to an eligible drinking water project without regard to the priority list of eligible drinking water projects if an emergency exists, including, but not limited to, an unanticipated infrastructure failure, a contamination of water or a shortage of water, which requires that the eligible drinking water project be immediately undertaken to protect the public health and safety.

(o) The commissioner shall prepare an annual report to the Governor within ninety days after the completion of each fiscal year which includes a list of project funding agreements entered into during the fiscal year then ended, the estimated year that funding will be available for specific projects listed on each priority list of eligible projects and a financial report on the condition of the Clean Water Fund for the fiscal year then ended, which shall include a certification by the commissioner of any amounts to become available for payment of debt service or for the purchase or redemption of bonds during the next succeeding fiscal year.