House File 538 - Introduced HOUSE FILE 538 BY COMMITTEE ON AGRICULTURE (SUCCESSOR TO HSB 135) A BILL FOR An Act relating to water quality by providing for 1 appropriations from the rebuild Iowa infrastructure fund, 2 creating a water quality infrastructure fund, establishing 3 new water quality programs, providing for cost-share 4 programs for infrastructure on agricultural land under the 5 water quality initiative, creating a state water service 6 excise tax and a related sales tax exemption, making 7 appropriations and other changes properly related to water 8 quality, and including retroactive applicability provisions. 9 BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA: 10 TLSB 2041HV (3) 87 mm/sc/rj

H.F. 538 Section 1. Section 8.57, subsection 5, Code 2017, is amended 1 by adding the following new paragraph: 2 NEW PARAGRAPH . 0h. (1) Notwithstanding paragraph “c” of 3 this subsection, there is appropriated from the rebuild Iowa 4 infrastructure fund to the water quality infrastructure fund 5 created in section 8.57B the following amounts: 6 (a) For the fiscal year beginning July 1, 2017, and ending 7 June 30, 2018, five million dollars. 8 (b) For the fiscal year beginning July 1, 2018, and ending 9 June 30, 2019, six million five hundred thousand dollars. 10 (c) For the fiscal year beginning July 1, 2019, and ending 11 June 30, 2020, eleven million five hundred thousand dollars. 12 (d) For the fiscal year beginning July 1, 2020, and ending 13 June 30, 2021, sixteen million five hundred thousand dollars. 14 (e) For the fiscal year beginning July 1, 2021, and ending 15 June 30, 2022, sixteen million five hundred thousand dollars. 16 (f) For the fiscal year beginning July 1, 2022, and ending 17 June 30, 2023, twenty-two million dollars. 18 (g) For the fiscal year beginning July 1, 2023, and ending 19 June 30, 2024, twenty-two million dollars. 20 (h) For the fiscal year beginning July 1, 2024, and ending 21 June 30, 2025, twenty-two million dollars. 22 (i) For the fiscal year beginning July 1, 2025, and ending 23 June 30, 2026, twenty-two million dollars. 24 (j) For the fiscal year beginning July 1, 2026, and ending 25 June 30, 2027, twenty-two million dollars. 26 (k) For the fiscal year beginning July 1, 2027, and ending 27 June 30, 2028, twenty-two million dollars. 28 (l) For the fiscal year beginning July 1, 2028, and ending 29 June 30, 2029, twenty-two million dollars. 30 (m) For the fiscal year beginning July 1, 2029, and ending 31 June 30, 2030, twenty-two million dollars. 32 (2) This paragraph “0h” is repealed on January 1, 2031. 33 Sec. 2. NEW SECTION . 8.57B Water quality infrastructure 34 fund —— creation —— appropriations. 35 -1- LSB 2041HV (3) 87 mm/sc/rj 1/ 41

H.F. 538 1. A water quality infrastructure fund is created within 1 the division of soil conservation and water quality of the 2 department of agriculture and land stewardship. The fund 3 shall consist of moneys appropriated from the rebuild Iowa 4 infrastructure fund pursuant to section 8.57, subsection 5, 5 paragraph “0h” . 6 2. The fund shall be separate from the general fund of the 7 state and the balance in the fund shall not be considered part 8 of the balance of the general fund of the state. However, the 9 fund shall be considered a special account for the purposes 10 of section 8.53, relating to generally accepted accounting 11 principles. 12 3. Moneys in the fund are appropriated to the division 13 of soil conservation and water quality of the department of 14 agriculture and land stewardship for the exclusive purpose of 15 supporting water quality agriculture infrastructure programs 16 created in section 466B.43. 17 4. Notwithstanding section 8.33, moneys in the fund 18 that remain unencumbered or unobligated at the close of a 19 fiscal year shall not revert but shall remain available for 20 expenditure for the purposes designated. Notwithstanding 21 section 12C.7, subsection 2, interest or earnings on moneys in 22 the fund shall be credited to the fund. 23 5. This section is repealed on the date that all moneys 24 transferred to the water quality infrastructure fund from 25 the rebuild Iowa infrastructure fund pursuant to section 26 8.57, subsection 5, paragraph “0h” , including any interest 27 or earnings on such moneys credited to the water quality 28 infrastructure fund, are expended by the division of soil 29 conservation and water quality of the department of agriculture 30 and land stewardship, and the balance of the water quality 31 infrastructure fund is zero. The director of the division 32 of soil conservation and water quality of the department of 33 agriculture and land stewardship shall notify the Iowa Code 34 editor of this occurrence. 35 -2- LSB 2041HV (3) 87 mm/sc/rj 2/ 41

H.F. 538 Sec. 3. NEW SECTION . 16.140 Water quality protection and 1 wastewater treatment grant program —— fund. 2 1. As used in this section, unless the context otherwise 3 requires: 4 a. “Clean Water Act” means the same as defined in section 5 16.131A. 6 b. “Eligible entity” means either of the following: 7 (1) An entity engaged in an industry identified in the Iowa 8 nutrient reduction strategy, as determined by the authority, 9 which industry is or will be required pursuant to the Iowa 10 nutrient reduction strategy to collect data on the source, 11 concentration, and mass of total nitrogen or total phosphorus 12 in its effluent, and to evaluate alternatives for reducing the 13 amount of nutrients in its discharge. 14 (2) An entity implementing technology or operational 15 improvements to reduce nutrients in its discharge. 16 c. “Iowa nutrient reduction strategy” means a water 17 quality initiative developed and updated by the department of 18 agriculture and land stewardship, the department of natural 19 resources, and the college of agriculture and life sciences at 20 Iowa state university of science and technology in order to 21 assess and reduce nutrients in this state’s watersheds that 22 utilizes a pragmatic, strategic, and coordinated approach with 23 the goal of accomplishing reductions over time. 24 d. “Municipality” means a city or a rural water district or 25 association empowered by law to provide sewage collection and 26 treatment services or drinking water. 27 e. “Program” means the water quality protection and 28 wastewater treatment grant program created in this section. 29 f. “Safe Drinking Water Act” means the same as defined in 30 section 16.131A. 31 g. “Source water protection project” means a project or 32 activity designed to prevent pollutants from entering public 33 drinking water sources. 34 h. “Wastewater infrastructure improvement” includes 35 -3- LSB 2041HV (3) 87 mm/sc/rj 3/ 41

H.F. 538 the acquisition, construction, reconstruction, extension, 1 equipping, improvement, or rehabilitation of any works or 2 facilities useful for the collection, treatment, and disposal 3 of sewage or industrial waste in a sanitary manner, including 4 treatment works as defined in section 212 of the Clean Water 5 Act, and including the implementation and development of 6 sponsor projects under section 455B.199. 7 i. “Water infrastructure improvement” includes the 8 acquisition, construction, reconstruction, extending, 9 remodeling, improving, repairing, or equipping of waterworks, 10 water mains, extensions, or treatment facilities useful 11 for providing potable water to residents served by a water 12 system, including the acquisition of real property needed 13 for such purposes, and such other purposes and programs as 14 may be authorized under the Safe Drinking Water Act. “Water 15 infrastructure improvement” does not include the acquisition of 16 real property through the use of eminent domain. 17 2. The Iowa finance authority shall establish and 18 administer a water quality protection and wastewater treatment 19 grant program for the purpose of providing financial assistance 20 in the form of grants to enhance water quality, upgrade water 21 and wastewater infrastructure, and to implement the Iowa 22 nutrient reduction strategy. The program shall be administered 23 in accordance with rules adopted by the authority pursuant to 24 chapter 17A. 25 3. a. A water quality protection and wastewater treatment 26 grant fund is created in the state treasury and shall consist 27 of appropriations made to the fund, transfers of interest, 28 earnings, moneys from other funds as provided by law, and 29 moneys accepted by the authority for deposit in the fund 30 from other public or private sources. Moneys credited 31 or transferred to the fund pursuant to section 16.198 are 32 appropriated to the authority for purposes of the program. 33 Moneys in the fund shall be used exclusively for purposes of 34 the program. 35 -4- LSB 2041HV (3) 87 mm/sc/rj 4/ 41

H.F. 538 b. Notwithstanding section 8.33, moneys in the fund 1 that remain unencumbered or unobligated at the close of a 2 fiscal year shall not revert but shall remain available for 3 expenditure for the purposes designated. Notwithstanding 4 section 12C.7, subsection 2, interest or earnings on moneys in 5 the fund shall be credited to the fund. 6 4. Grants may be awarded under the program for any of the 7 following: 8 a. To a municipality or an eligible entity participating in 9 a nutrient reduction exchange, for the purpose of purchasing 10 nutrient reduction credits or for implementing water quality 11 practices as described in the Iowa nutrient reduction strategy. 12 For purposes of this paragraph, “nutrient reduction credit” and 13 “nutrient reduction exchange” both mean the same as defined in 14 section 16.206, section 1, paragraph “d” . 15 b. To a municipality or an eligible entity for up to fifty 16 percent of the costs associated with conducting economic and 17 technical feasibility studies or developing implementation 18 plans and reports required by the Iowa nutrient reduction 19 strategy. 20 c. To a municipality for a source water protection project. 21 d. To a municipality or an eligible entity for water 22 infrastructure improvements or for wastewater infrastructure 23 improvements. 24 5. Priority for grants shall be given to projects or 25 activities that will provide improvement to water quality in 26 the relevant watershed. 27 6. Priority for grants shall be given to projects or 28 activities that also have private financing, or financing 29 pursuant to section 16.131 under the water pollution control 30 works and drinking water facilities financing program created 31 pursuant to section 455B.294, or other federal or state 32 financing. 33 7. Priority for grants shall be given to projects or 34 activities that are part of a project receiving financing under 35 -5- LSB 2041HV (3) 87 mm/sc/rj 5/ 41

H.F. 538 the water quality project financial assistance program under 1 sections 16.201 through 16.206. 2 8. Grants awarded under the program shall not exceed five 3 hundred thousand dollars per recipient. 4 9. By October 1 of each year, the authority shall submit 5 a report to the governor and the general assembly itemizing 6 expenditures under the program during the previous fiscal year. 7 10. a. Beginning September 1, 2027, and every ten years 8 thereafter, a program review committee is established for 9 purposes of reviewing the program. By December 1 of the 10 same year, the review committee shall file a report with 11 the governor and the general assembly that reviews the 12 effectiveness of the program during the previous ten fiscal 13 years. 14 b. The program review committee shall consist of the 15 following members: 16 (1) The governor or the governor’s designee. 17 (2) The secretary of agriculture or the secretary’s 18 designee. 19 (3) The executive director of the authority or the executive 20 director’s designee. 21 (4) The director of the department of natural resources or 22 the director’s designee. 23 (5) Four members of the general assembly, with two from the 24 senate and two from the house of representatives and not more 25 than one member from each chamber being from the same political 26 party. The two senators shall be designated one member each 27 by the president of the senate, after consultation with the 28 majority leader of the senate, and by the minority leader of 29 the senate. The two representatives shall be designated one 30 member each by the speaker of the house of representatives, 31 after consultation with the majority leader of the house of 32 representatives, and by the minority leader of the house of 33 representatives. 34 c. Staffing services shall be provided by the authority. 35 -6- LSB 2041HV (3) 87 mm/sc/rj 6/ 41

H.F. 538 Sec. 4. NEW SECTION . 16.198 Water quality financial 1 assistance fund. 2 1. A water quality financial assistance fund is created in 3 the state treasury. 4 2. The fund shall consist of all of the following: 5 a. (1) Moneys transferred to the fund pursuant to section 6 423G.6. 7 (2) This paragraph “a” is repealed upon the date on which 8 chapter 423G is repealed pursuant to section 423G.7. 9 b. Appropriations made to the fund and transfers of 10 interest, earnings, and moneys from other funds as provided by 11 law. 12 3. For each fiscal year in the period beginning July 1, 13 2017, and ending when chapter 423G is repealed pursuant to 14 section 423G.7, there is appropriated the following amounts of 15 the balance of the fund for the following purposes: 16 a. One-sixth of the balance of the fund to the Iowa finance 17 authority to be credited to the water quality protection and 18 wastewater treatment grant fund created pursuant to section 19 16.140, subsection 3. 20 b. Five-sixths of the balance of the fund to the Iowa 21 finance authority to be credited to the water quality project 22 financial assistance fund created pursuant to section 16.204. 23 4. Moneys in the fund are not subject to section 8.33. 24 Notwithstanding section 12C.7, subsection 2, interest or 25 earnings on moneys in the fund shall be credited to the fund. 26 Sec. 5. NEW SECTION . 16.201 Definitions. 27 As used in this part, unless the context otherwise requires: 28 1. “Committee” means the water quality project financing 29 committee created in section 16.205, subsection 4. 30 2. “Eligible entity” means a financing entity meeting the 31 requirements of section 16.206, as determined by the committee. 32 3. “Financing entity” means two or more persons that have 33 entered into an agreement for purposes of joint financing of a 34 project under the program. A financing entity may include but 35 -7- LSB 2041HV (3) 87 mm/sc/rj 7/ 41

H.F. 538 is not limited to a governmental body such as a state agency or 1 a political subdivision of the state, a city or a city utility, 2 a public utility as defined in section 476.1 that furnishes 3 drinking water, sanitary sewage, or storm water services to the 4 public for compensation, a county, a rural water district or 5 association, a soil and water conservation district, a sanitary 6 district, a subdistrict of any of the foregoing districts, a 7 governmental body or corporation empowered to provide sewage 8 collection and treatment services or drinking water, an entity 9 jointly exercising governmental powers pursuant to chapter 28E 10 or 28F, or any other combination of two or more public agencies 11 or private agencies as defined in section 28E.2, acting jointly 12 under Iowa law in connection with a project. 13 4. “Iowa nutrient reduction strategy” means a water 14 quality initiative developed and updated by the department of 15 agriculture and land stewardship, the department of natural 16 resources, and the college of agriculture and life sciences at 17 Iowa state university of science and technology in order to 18 assess and reduce nutrients in this state’s watersheds that 19 utilizes a pragmatic, strategic, and coordinated approach with 20 the goal of accomplishing reductions over time. 21 5. “Loan recipient” means an eligible entity that has 22 received a loan under the program. 23 6. “Program” means the water quality project financial 24 assistance program created in this part. 25 7. “Project” means any combination of works, facilities, 26 improvements, structures, developments, tasks, activities, 27 constructions, modifications, operations, or practices designed 28 to improve water quality or water resource management that are 29 proposed by an eligible entity and approved by the committee. 30 “Project” includes but is not limited to the following: 31 a. A project meeting the requirements of part 2 of this 32 subchapter. 33 b. A project, operation, or practice undertaken or carried 34 out pursuant to chapter 161A, 161C, 161E, or 161F. 35 -8- LSB 2041HV (3) 87 mm/sc/rj 8/ 41

H.F. 538 c. A project meeting the requirements of a sponsor project 1 under section 455B.199. 2 d. Other water resource restoration projects as defined in 3 section 384.80, including ones financed pursuant to section 4 28F.1. 5 e. An agricultural nonpoint source project eligible for a 6 water quality agriculture infrastructure program under section 7 466B.43. 8 8. “Revolving fund” means the fund created in section 9 16.204. 10 Sec. 6. NEW SECTION . 16.202 Water quality project financial 11 assistance program —— funding —— bonds and notes. 12 1. The authority shall cooperate with the department of 13 natural resources and the department of agriculture and land 14 stewardship in the creation, administration, and financing of 15 the program established in this part. 16 2. The authority may issue its bonds and notes until June 17 30, 2042, for the purposes of this part, including for the 18 purposes of funding the program established under section 19 16.205 and of funding any fund or account created under section 20 16.204. 21 3. The authority may enter into one or more loan agreements 22 or purchase agreements with one or more bondholders or 23 noteholders containing the terms and conditions of the 24 repayment of and the security for the bonds or notes. The 25 authority and the bondholders or noteholders or a trustee 26 agent designated by the authority may enter into agreements to 27 provide for any of the following: 28 a. That the proceeds of the bonds and notes and the 29 investments of the proceeds may be received, held, and 30 disbursed by the authority or by a trustee or agent designated 31 by the authority. 32 b. That the bondholders or noteholders or a trustee or 33 agent designated by the authority may collect, invest, and 34 apply the amount payable under the loan agreements or any 35 -9- LSB 2041HV (3) 87 mm/sc/rj 9/ 41

H.F. 538 other instruments securing the debt obligations under the loan 1 agreements. 2 c. That the bondholders or noteholders may enforce the 3 remedies provided in the loan agreements or other instruments 4 on their own behalf without the appointment or designation of a 5 trustee. If there is a default in the principal of or interest 6 on the bonds or notes or in the performance of any agreement 7 contained in the loan agreements or other instruments, the 8 payment or performance may be enforced in accordance with the 9 loan agreement or other instrument. 10 d. Other terms and conditions as deemed necessary or 11 appropriate by the authority. 12 4. The powers granted the authority under this section 13 are in addition to other powers contained in this chapter. 14 All other provisions of this chapter, except section 16.28, 15 subsection 4, apply to bonds or notes issued and powers granted 16 to the authority under this section except to the extent they 17 are inconsistent with this section. 18 5. All bonds or notes issued by the authority in connection 19 with the program are exempt from taxation by this state and the 20 interest on the bonds or notes is exempt from state income tax. 21 Sec. 7. NEW SECTION . 16.203 Security —— reserve funds —— 22 pledges —— nonliability —— irrevocable contracts. 23 1. The authority may provide in the resolution, trust 24 agreement, or other instrument authorizing the issuance of its 25 bonds or notes pursuant to section 16.202 that the principal 26 of, premium, and interest on the bonds or notes are payable 27 from any of the following and may pledge the same to its bonds 28 and notes: 29 a. The income and receipts or other moneys derived from the 30 projects financed with the proceeds of the bonds or notes. 31 b. The income and receipts or other moneys derived from 32 designated projects whether or not the projects are financed in 33 whole or in part with the proceeds of the bonds or notes. 34 c. The amounts on deposit in the revolving fund. 35 -10- LSB 2041HV (3) 87 mm/sc/rj 10/ 41

H.F. 538 d. The amounts payable to the authority by eligible entities 1 pursuant to loan agreements with eligible entities. 2 e. Any other funds or accounts established by the authority 3 in connection with the program or the sale and issuance of its 4 bonds or notes. 5 2. The authority may establish reserve funds to secure 6 one or more issues of its bonds or notes. The authority may 7 deposit in a reserve fund established under this subsection the 8 proceeds of the sale of its bonds or notes and other moneys 9 that are made available from any other source. 10 3. It is the intention of the general assembly that a pledge 11 made in respect of bonds or notes issued under this part shall 12 be valid and binding from the time the pledge is made, that the 13 moneys or property so pledged and received after the pledge 14 by the authority shall immediately be subject to the lien of 15 the pledge without physical delivery or further act, and that 16 the lien of the pledge shall be valid and binding as against 17 all parties having claims of any kind in tort, contract, or 18 otherwise against the authority whether or not the parties have 19 notice of the lien. Neither the resolution, trust agreement, 20 nor any other instrument by which a pledge is created needs to 21 be recorded or filed under the Iowa uniform commercial code, 22 chapter 554, to be valid, binding, or effective against the 23 parties. 24 4. Neither the members of the authority nor persons 25 executing the bonds or notes are liable personally on the bonds 26 or notes or are subject to personal liability or accountability 27 by reason of the issuance of the bonds or notes. 28 5. The bonds or notes issued by the authority are not 29 an indebtedness or other liability of the state or of a 30 political subdivision of the state within the meaning of 31 any constitutional or statutory debt limitations but are 32 special obligations of the authority, and are payable solely 33 from the income and receipts or other funds or property of 34 the authority, and the amounts on deposit in the revolving 35 -11- LSB 2041HV (3) 87 mm/sc/rj 11/ 41

H.F. 538 fund, and the amounts payable to the authority under its loan 1 agreements with eligible entities to the extent that the 2 amounts are designated in the resolution, trust agreement, or 3 other instrument of the authority authorizing the issuance of 4 the bonds or notes as being available as security for such 5 bonds or notes. The authority shall not pledge the faith or 6 credit of the state or of a political subdivision of the state 7 to the payment of any bonds or notes. The issuance of any bonds 8 or notes by the authority does not directly, indirectly, or 9 contingently obligate the state or a political subdivision of 10 the state to apply moneys from, or levy or pledge any form of 11 taxation whatever to, the payment of the bonds or notes. 12 6. It is the intent of the general assembly, and the state 13 hereby pledges to the holders of bonds or notes issued under 14 this part, that the state will not limit or alter the rights 15 and powers vested in the authority to fulfill the terms of a 16 contract made by the authority with respect to the bonds or 17 notes, or in any way impair the rights and remedies of the 18 holders until the bonds or notes, together with the interest on 19 the bonds or notes, including interest on unpaid installments 20 of interest, and all costs and expenses in connection with an 21 action or proceeding by or on behalf of the holders, are fully 22 met and discharged. The authority is authorized to include 23 this pledge and agreement of the state, as it refers to holders 24 of bonds or notes of the authority, in a contract with the 25 holders. 26 Sec. 8. NEW SECTION . 16.204 Water quality project financial 27 assistance fund —— other funds and accounts. 28 1. a. A water quality project financial assistance 29 fund is created in the state treasury and shall consist of 30 appropriations made to the fund, moneys credited or transferred 31 to the fund pursuant to section 16.198, and transfers of 32 interest, earnings, and moneys from other funds as provided 33 by law. The fund shall be administered by the authority as a 34 revolving fund. 35 -12- LSB 2041HV (3) 87 mm/sc/rj 12/ 41

H.F. 538 b. Moneys in the fund are not subject to section 8.33. 1 Notwithstanding section 12C.7, subsection 2, interest or 2 earnings on moneys in the fund shall be credited to the fund. 3 c. The authority shall use the moneys in the fund to provide 4 financial assistance to eligible entities under the program 5 pursuant to section 16.205. 6 d. The authority may use an amount of not more than one 7 percent of the moneys in the fund for administrative purposes. 8 2. The authority may establish and maintain other funds 9 and accounts determined to be necessary to carry out the 10 purposes of the program and shall provide for the funding, 11 administration, investment, restrictions, and disposition of 12 the funds and accounts. 13 3. Moneys appropriated to and used by the authority for 14 purposes of paying the costs and expenses associated with 15 the administration of the program shall be administered as 16 determined by the authority. 17 4. The funds or accounts held by the authority, or a trustee 18 acting on behalf of the authority pursuant to a trust agreement 19 related to the program, shall not be considered part of the 20 general fund of the state, are not subject to appropriation for 21 any other purpose by the general assembly, and in determining 22 a general fund balance shall not be included in the general 23 fund of the state, but shall remain in the funds and accounts 24 maintained by the authority or trustee pursuant to a trust 25 agreement. Funds and accounts held by the authority, or a 26 trustee acting on behalf of the authority pursuant to a trust 27 agreement related to the program, are separate dedicated funds 28 and accounts under the administration and control of the 29 authority and subject to section 16.31. 30 Sec. 9. NEW SECTION . 16.205 Water quality project financial 31 assistance program —— committee created —— rules —— use of funds. 32 1. The authority, in cooperation with the department of 33 natural resources and the department of agriculture and land 34 stewardship, shall establish and administer a water quality 35 -13- LSB 2041HV (3) 87 mm/sc/rj 13/ 41

H.F. 538 project financial assistance program. The purpose of the 1 program shall be to provide financial assistance to enhance 2 the quality of surface water and groundwater, particularly 3 by providing financial assistance for projects designed to 4 improve water quality through collaboration between point 5 and nonpoint sources. The authority may provide financial 6 assistance in the form deemed most convenient for the efficient 7 financing of projects, including loans, forgivable loans, and 8 grants. However, the authority shall administer the fund and 9 the program in such a manner as to provide a permanent source 10 of water quality project financial assistance to eligible 11 entities. 12 2. The program shall be administered by the authority 13 in accordance with rules adopted by the authority pursuant 14 to chapter 17A. In adopting such rules, the authority shall 15 consult with the department of natural resources and the 16 department of agriculture and land stewardship. 17 3. The authority shall process and review financial 18 assistance applications and make recommendations to the 19 committee. 20 4. a. A water quality project financing committee is 21 created to consider applications for financial assistance from 22 eligible entities and approve awards of financial assistance 23 under the program. The committee shall consist of three 24 members, one appointed by the executive director of the 25 authority, one appointed by the director of the department 26 of natural resources, and one appointed by the secretary of 27 agriculture. 28 b. The committee shall review project plans submitted 29 pursuant to section 16.206, negotiate project details with 30 eligible entities, and make financial assistance awards. The 31 provision of financial assistance under the program shall take 32 into account the number of persons comprising an eligible 33 entity and the eligible entity’s financing capacity as well as 34 the extent to which the proposed projects will improve water 35 -14- LSB 2041HV (3) 87 mm/sc/rj 14/ 41

H.F. 538 quality. 1 c. The committee shall score applications for financial 2 assistance according to rules adopted pursuant to this part. 3 The committee shall only provide financial assistance to 4 eligible entities that have sufficient financing capacity and 5 that propose a plan likely to make progress toward achieving 6 the goals for agricultural and nonpoint sources described in 7 the Iowa nutrient reduction strategy. 8 5. The authority shall determine the interest rate 9 and repayment terms for loans made under the program, in 10 cooperation with the department of natural resources and 11 the department of agriculture and land stewardship, and the 12 authority shall enter into loan agreements with eligible 13 entities in compliance with and subject to the terms and 14 conditions of the program. 15 6. The authority shall adopt rules relating to the 16 proportional liability, if any, of members of an eligible 17 entity when such eligible entity enters into a loan agreement 18 under the program. 19 7. The authority may charge loan recipients fees and assess 20 costs against such recipients necessary for the continued 21 operation of the program. Such fees and costs shall not exceed 22 the costs directly associated with the administration of the 23 program. Fees and costs collected pursuant to this subsection 24 shall be deposited in the appropriate fund or account created 25 in section 16.204. 26 8. Financial assistance under the program shall be used by 27 eligible entities to fund projects designed to improve water 28 quality. 29 Sec. 10. NEW SECTION . 16.206 Eligible entities —— project 30 plans —— agreements required. 31 1. A financing entity may apply to the authority for 32 financial assistance under the program. To be eligible, a 33 financing entity shall meet the following requirements: 34 a. The financing entity shall include two or more entities 35 -15- LSB 2041HV (3) 87 mm/sc/rj 15/ 41

H.F. 538 acting jointly to propose a project plan designed to improve 1 water quality in a local area or watershed. 2 b. The plan shall include one or more projects that 3 substantially improve water quality in the local area or 4 watershed. Preference shall be given to projects that will 5 have the greatest impact on achieving the goals of the Iowa 6 nutrient reduction strategy, and plans designed to achieve 7 those goals shall be presumed to substantially improve water 8 quality in the local area or watershed. 9 c. The plan shall describe in detail the manner in which 10 the projects will be financed and undertaken, including the 11 sources of financing for the projects as well as the public or 12 private entities that will be receiving the revenues and how 13 such revenues will be spent on the projects. In describing the 14 projects and financing, the plan should attempt to quantify 15 the amount of nutrient reduction to be achieved under the 16 plan and should provide a reasonable means for verification 17 of the amount of nutrient reduction after the projects have 18 been financed and completed. Preference shall be given to 19 a financing entity that has had its plan evaluated by the 20 Iowa nutrient research center established in section 466B.47. 21 Preference shall also be given to a financing entity that has 22 contracted with the Iowa nutrient research center to verify 23 the amount of nutrient reduction achieved by the project upon 24 project completion. 25 d. (1) The plan may include a nutrient reduction exchange 26 between two or more members of the financing entity. A plan 27 that includes a nutrient reduction exchange shall be presumed 28 to substantially improve water quality in the local area or 29 watershed. 30 (2) For purposes of this paragraph: 31 (a) “Nutrient reduction” means a reduction in nitrogen or 32 phosphorus as measured against standards or goals established 33 or adopted by the committee. 34 (b) “Nutrient reduction credit” means an amount of nutrient 35 -16- LSB 2041HV (3) 87 mm/sc/rj 16/ 41

H.F. 538 reduction expressed as a unit of measurement that is calculated 1 using research-based modeling or other methods established or 2 adopted by the committee. 3 (c) “Nutrient reduction exchange” means an agreement between 4 one or more point source or nonpoint source contributors 5 and one or more other parties whereby nutrient reduction 6 credits are purchased, sold, traded, or exchanged for legal 7 consideration through a trading system approved by the 8 department of natural resources. 9 2. Any eligible entity receiving financial assistance under 10 the program shall enter into an agreement with the authority. 11 The agreement shall include standard terms for the receipt of 12 program funds and any other terms the authority deems necessary 13 and convenient for the efficient administration of the program. 14 Sec. 11. Section 28F.1, subsection 1, Code 2017, is amended 15 to read as follows: 16 1. This chapter provides a means for the joint financing 17 by public agencies of works or facilities useful and necessary 18 for the collection, treatment, purification, and disposal 19 in a sanitary manner of liquid and solid waste, sewage, and 20 industrial waste, facilities used for the conversion of solid 21 waste to energy, facilities, improvements, or projects in a 22 watershed useful for flood control, erosion control, or water 23 quality restoration by a water utility, wastewater utility, 24 or storm water utility, whether located within or without the 25 corporate boundaries of a municipal corporation, and also 26 electric power facilities constructed within the state of 27 Iowa, except that hydroelectric power facilities may also be 28 located in the waters and on the dams of or on land adjacent 29 to either side of the Mississippi or Missouri river bordering 30 the state of Iowa, water supply systems, swimming pools 31 or golf courses. This chapter applies to the acquisition, 32 construction, reconstruction, ownership, operation, repair, 33 extension, or improvement of such works or facilities, by a 34 separate administrative or legal entity created pursuant to 35 -17- LSB 2041HV (3) 87 mm/sc/rj 17/ 41

H.F. 538 chapter 28E or chapter 389 . When the legal entity created 1 under this chapter is comprised solely of cities, counties, 2 and sanitary districts established under chapter 358 , or any 3 combination thereof or any combination of the foregoing with 4 other public agencies, the entity shall be both a corporation 5 and a political subdivision with the name under which it was 6 organized. The legal entity may sue and be sued, contract, 7 acquire and hold real and personal property necessary for 8 corporate purposes, adopt a corporate seal and alter the seal 9 at pleasure, and execute all the powers conferred in this 10 chapter. This section shall not be construed or interpreted to 11 create or expand the authority to acquire real property through 12 the use of eminent domain. 13 Sec. 12. Section 161A.7, subsection 1, paragraph d, Code 14 2017, is amended to read as follows: 15 d. To cooperate, or enter into agreements with, and within 16 the limits of appropriations duly made available to it by law, 17 to furnish financial or other aid to any agency, governmental 18 or otherwise, or any owner or occupier of lands within the 19 district, in the carrying on of erosion-control and watershed 20 protection and flood prevention operations , or in the carrying 21 out of projects pursuant to paragraph “q” , within the district, 22 subject to such conditions as the commissioners may deem 23 necessary to advance the purposes of this chapter . 24 Sec. 13. Section 161A.7, subsection 1, Code 2017, is amended 25 by adding the following new paragraphs: 26 NEW PARAGRAPH . p. To apply for financial assistance under 27 the water quality project financial assistance program under 28 sections 16.201 through 16.206. 29 NEW PARAGRAPH . q. To carry out soil erosion control, 30 watershed protection or improvement, flood prevention, and 31 water quality protection projects and operations within the 32 district, including but not limited to projects and operations 33 to support water protection practices, to protect this 34 state’s groundwater and surface water from point and nonpoint 35 -18- LSB 2041HV (3) 87 mm/sc/rj 18/ 41

H.F. 538 sources of pollution, including but not limited to pollution 1 by agricultural drainage wells, sinkholes, sedimentation, 2 or chemical pollutants, to reduce or remove nutrients and 3 pollution in or from surface water and groundwater, to reduce 4 or eliminate nutrient loads to surface water and groundwater 5 from both point and nonpoint sources, to maintain, protect, 6 and improve the quality of surface water and groundwater, and 7 to achieve or further any of the goals and targets described 8 in the Iowa nutrient reduction strategy as defined in section 9 16.201. 10 Sec. 14. Section 161C.1, Code 2017, is amended by adding the 11 following new subsection: 12 NEW SUBSECTION . 4A. “Financing entity” means the same as 13 defined in section 16.201. 14 Sec. 15. Section 161C.2, subsection 1, paragraph a, Code 15 2017, is amended to read as follows: 16 a. Each soil and water conservation district, alone and 17 whenever practical in conjunction with other districts, shall 18 financing entities, or political subdivisions of the state, 19 or other local agencies, may carry out district-wide and 20 multiple-district projects to support soil erosion control, 21 water resource restoration projects, watershed protection, 22 flood prevention, and water quality protection practices , 23 projects, and operations in the district or districts, 24 including but not limited to projects carried out in order to 25 protect this state’s groundwater and surface water from point 26 and nonpoint sources of contamination pollution , including but 27 not limited to contamination pollution by agricultural drainage 28 wells, sinkholes, sedimentation, or chemical pollutants , as 29 described in the Iowa nutrient reduction strategy as defined 30 in section 16.201 . 31 Sec. 16. Section 161C.3, Code 2017, is amended to read as 32 follows: 33 161C.3 Cooperation with other agencies. 34 Soil and water conservation districts may enter into 35 -19- LSB 2041HV (3) 87 mm/sc/rj 19/ 41