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Guidelines for Review and Approval of Privatization Transactions
Involving Federally Funded Wastewater Treatment Facilities

Applicability and Compliance with E.O. 12803

I. Project Funding

Was the wastewater treatment facility Federally funded in whole or in part?

If "No," the project transaction is exempt from review and approved under E.O. 12803 and no submission is required in respect to it. The host government will provide a notice to EPA of the project transaction.

If "Yes", please respond to Part II. below.

II. Transaction Type

Executive Order 12803 defines "privatization" as "the disposition or transfer of an infrastructure asset, such as by sale or long-term lease, from a State or local government to a private party." The general transaction types described below may (depending upon your response) involve such "disposition or transfer" and therefore require EPA review and approval of the transaction under E.O. 12803.

A. Asset Sale

  1. Will there be a sale of the Federally funded wastewater facility to a private entity under state law?
  2. Will there be a transfer of tenant rights to a private entity under state law?
  3. Is there any other conveyance of property interest to a private entity as defined by state law?

If the answer to question (1), (2) or (3) above is "yes," the transaction is subject to EPA review and approval under E.O. 12803. Answers to the questions in Part IV, Documentation of Compliance with E.O. 12803" must then be provided.

If the answer to each of these questions is "no," the transaction is not subject to EPA review and approval under E.O. 12803 as an asset sale.

B. Asset Lease

Does the transaction create a leasehold of a Federally funded facility under applicable state law or otherwise impose an encumbrance under applicable state law of a Federally funded facility on contain terms which could directly or indirectly result in permanent transfer thereof to a private entity?

If the answer is "yes" to this question, the transaction is subject to EPA review and approval under E.O. 12803. Answers to questions in Part IV of the Documentation of Compliance with E. O. 12803 must then be provided.

If the answer is "no" to this question, your transaction is not subject to EPA review and approval under E.O. 12803 as an asset lease.

C. Management Contract

Does the transaction directly or indirectly provide for any payment or concession fee to the host government by the private entity in which there is directly or indirectly an encumbrance under applicable state law of the Federally funded facility on terms which could directly or indirectly result in permanent transfer thereof to a private entity?

If the answer is "yes" to this question, your transaction is subject to EPA review and approval under E.O. 12803. Answers to the questions in Part IV, Documentation of Compliance with E.O. 12803 must then be provided.

If the answer is "no" to this question, your transaction is not subject to EPA review and approval under E.O. 12803 as an asset encumbered management contract.

III. Procedural Requirements

A. Information Statement

If the host government for a transaction submits to EPA an opinion from an independent legal counsel directly associated with the transaction (with supporting documentation for informational purposes) indicating the answers to questions II (A) - (C) above are each "no," the transaction is not subject to EPA review and approval under E.O. 12803. In such event, the host government will provide an Information Statement to EPA with respect to the items concerning the transaction set forth in Attachment A. Such Statement shall be utilized by EPA for information purposes only.

B. Failure to Submit Opinion of Counsel

If the host government submits responses to Questions II. (A) through (C), together with an Information Statement with respect to the items set forth on Attachment A, (which EPA shall utilize for information purposes only), but does not submit an opinion of counsel, EPA shall have fifteen (15) days to review the responses to questions Part II (A) through (C) and notify the host government of its finding with respect to the applicability of E.O. 12803 to the transaction.

If EPA determines that the transaction is not subject to its review and approval under E.O. 12803, it shall so notify the host government and provide a Declaration of Compliance with E.O. 12803.

If EPA determines that the answer to any of the questions Part II (A) through (C) above may be "yes," prior to making any final decision it shall request a legal opinion from the host government, and if such opinion is not forthcoming within thirty (30) days from its request EPA may determine that the transaction is subject to EPA review and approval under E.O. 12803. Answers to questions in Part IV., Documentation of Compliance with E.O. 12803" must then be provided.

C. Failure to Submit Any Information

If the host local government does not submit any information about the transaction to EPA, and EPA determines that the transaction may be subject to its review and approval under E.O. 12803 it shall so notify the host local government within fifteen (15) days of such determination. The host local government must then provide EPA with information concerning the transaction as required by these guidelines.

 

IV. Documentation of Compliance with E.O. 12803

If EPA has jurisdiction over the asset sale, transfer or lease transaction, the host government must submit:

  1. An Information Statement with respect to items concerning the proposed transaction as set forth in Attachment A.
  2. the following information to document compliance with E.O. 12803:

 

A. Contributions to Project and Depreciation Calculations (Executive Order Sec. 3)

Describe the current asset value showing calculations and amortization schedule used to determine remaining value and life of the Federally funded facilities being transferred. The host local government should:

  1. State the sources of funding for the project, e.g. Federal, state and local grants, loans and other sources of funding; and
  2. Submit the depreciation calculations associated with Federal grants (using accelerated depreciation per Executive Order Sec.3 (c)).

B. Establishment and Distribution of the Transfer Price (Executive Order Sec. 1 (d))

If the transfer price of the Federally Funded wastewater treatment facilities was established through a competitive process in compliance with local and state procurement requirements, provide a:

  1. brief description of the process, and,
  2. table of how the transfer price will be distributed to Federal, state and local governments (Executive Order Sec.3 (c).

If the transfer price of the Federally funded wastewater treatment facilities has not been determined by competitive bid, the host government transfer price approval by OMB, EPA or other relevant Federal authority is required to obtain. Provide a:

  1. brief description of the process that established the transfer price; and
  2. table of how the transfer price will be distributed to Federal, state and local governments (Executive Order Sec.3 (c)).

C. Continuation of Intended Asset Use (Executive Order Sec .4)

Describe the market mechanism, legally enforceable agreement or regulatory mechanism through which the Federally funded wastewater treatment facility host government or private owner or lessee, as the case may be, has:

  1. assured that the asset will continue to be used for its originally intended purpose;
  2. assured that the facilities remain in compliance with permits and enforcement programs (NPDES, RCRA permits and CWA regulations);
  3. made arrangements for permit transfer and their continued preservation;
  4. arranged for any necessary new construction;
  5. arranged for compliance with any outstanding consent decrees;
  6. arranged for compliance with any required Federal - State coordination programs; and
  7. assured that all regulatory approvals will be provided and maintained.

The host local government should include an opinion of independent counsel directly associated with the transaction that the continuation of intended asset use per Executive Order Section 4 is satisfied. Counsel may include supporting documentation it deems helpful to a more complete understanding of plans or proposed programs.


D. Use of Locally Retained Proceeds (Executive Order Sec. 3.c.iii)

  1. Describe if, and how, any locally retained proceeds of the transfer price under Section 3.c.iii of E.O. 12803 would be used for debt reduction.
  2. Describe if, and how, any locally retained proceeds of the transfer price under Section 3.c.iii of E.O. 12803 would be used for investment in additional infrastructure assets and how any required public notice requirements in connection with the investment will be satisfied; and
  3. Describe if, and how, any locally retained proceeds of transfer price under Section 3.c.iii of E.O. 12803 would be used for tax reduction.

The host local government should submit certification of accuracy of financial data by the chief financial officer and opinion of independent legal counsel directly associated with the transaction that the host government plan is sufficient to assure that the requirements E.O. 12803 are satisfied. Counsel may include supporting documentation it deems helpful to a more complete understanding of host government plans or proposed programs.

E. Rate Payer Protection (Executive Order Section 4 (b)

The host government should demonstrate equitable treatment of all user classes by stating that no user class is subsidizing or is being subsidized by any other user class, i.e. residential, commercial or industrial rates reflect the cost of treating their respective wastewater discharges.

 

F. Compliance with Federal Grant Use

Host government responses should include an opinion of independent legal counsel directly associated with the transaction that the plan is sufficient to meet E.O. 12803, and will comply with all applicable Federal, state and local requirements. Counsel may include supporting documentation it deems helpful to a more complete understanding of plans or proposed programs.

G. Grant Deviation Request

An executed Request for Grant Deviation shall accompany this submittal and shall be processed concurrently by EPA.

 

V. Timetable for Federal Review

A. Confirmation of Exemption

Upon receipt by the USEPA Office of Wastewater Management of a host government's "Declaration of Exemption" from E.O. 12803 review, (comprised of responses to Parts I through III of these Guidelines) such Declaration will be considered binding.

In the absence of a Part III A submission by the host government, such Declaration of Exemption will be considered binding only after a finding with respect to the applicability of USEPA Office of Wastewater Management per Parts III B and III C of these Guidelines.

B. USEPA Review of E.O. 12803 Compliance

Forty-five (45) calendar days from receipt by USEPA Office of Wastewater Management of the host local government’s responses to Part IV of these guidelines, the transaction will be deemed in compliance with E.O. 12803 requirements and free of further E.O. 12803 review, unless, prior to the expiration of such period, USEPA issues a request to the host government for additional clarification consistent with the information required in Part IV. Within fifteen (15) calendar days of receipt of such additional clarification from the host government, USEPA will (a) issue a Declaration of Compliance with E.O. 12803 or (b) issue a request for further additional statements or clarification of the information required in Part IV.

Declaration of Compliance with E.O. 12803 will automatically be deemed granted after USEPA has had a total of ninety (90) calendar days from receipt of the first submission by a local host government of responses to Part IV of these Guidelines.

An extension of the ninety (90) day time requirement may be taken by USEPA if it notifies the host government of all specific material variances from the submission by the local host government and issues requirements necessary for the variance thereof.

 

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