Senate File 512 - Introduced SENATE FILE 512 BY COMMITTEE ON APPROPRIATIONS (SUCCESSOR TO SF 482) (SUCCESSOR TO SSB 1034) A BILL FOR An Act relating to water quality by amending the wastewater 1 treatment financial assistance program, creating a water 2 quality infrastructure fund, establishing a water quality 3 financing program, providing for cost-share programs for 4 infrastructure on agricultural and urban land under the 5 water quality initiative, creating a water service excise 6 tax and a related sales tax exemption, making transfers and 7 appropriations and other changes properly related to water 8 quality, and including effective date provisions. 9 BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA: 10 TLSB 1844SZ (4) 87 mm/sc

S.F. 512 Section 1. Section 8.57, subsection 5, paragraph f, 1 subparagraph (1), Code 2017, is amended by adding the following 2 new subparagraph division: 3 NEW SUBPARAGRAPH DIVISION . (0c) For the fiscal year 4 beginning July 1, 2020, and for each fiscal year thereafter, of 5 the wagering tax receipts received pursuant to sections 99D.17 6 and 99F.11, the next fifteen million dollars shall be deposited 7 in the water quality infrastructure fund created in section 8 8.57B. 9 Sec. 2. Section 8.57, subsection 5, paragraph f, 10 subparagraph (1), subparagraph division (d), Code 2017, is 11 amended to read as follows: 12 (d) For the fiscal year beginning July 1, 2013, and for 13 each fiscal year thereafter, the total moneys in excess of the 14 moneys deposited under this paragraph “f” in the revenue bonds 15 debt service fund, the revenue bonds federal subsidy holdback 16 fund, the vision Iowa fund, the water quality infrastructure 17 fund, and the Iowa skilled worker and job creation fund shall 18 be deposited in the rebuild Iowa infrastructure fund and shall 19 be used as provided in this section , notwithstanding section 20 8.60 . 21 Sec. 3. NEW SECTION . 8.57B Water quality infrastructure 22 fund —— creation —— appropriations. 23 1. A water quality infrastructure fund is created within 24 the division of soil conservation and water quality of the 25 department of agriculture and land stewardship. The fund 26 shall consist of moneys transferred pursuant to section 8.57, 27 subsection 5, paragraph “f” , subparagraph (1), subparagraph 28 division (0c), moneys transferred to the fund pursuant to 29 section 423G.6, and appropriations made to the fund and 30 transfers of interest, earnings, and moneys from other funds 31 as provided by law. 32 2. The fund shall be separate from the general fund of the 33 state and the balance in the fund shall not be considered part 34 of the balance of the general fund of the state. However, the 35 -1- LSB 1844SZ (4) 87 mm/sc 1/ 26

S.F. 512 fund shall be considered a special account for the purposes 1 of section 8.53, relating to generally accepted accounting 2 principles. 3 3. Moneys in the fund are appropriated to the division 4 of soil conservation and water quality of the department of 5 agriculture and land stewardship for the exclusive purpose of 6 supporting water quality agriculture infrastructure programs 7 created in section 466B.43. 8 4. Notwithstanding section 8.33, moneys in the fund 9 that remain unencumbered or unobligated at the close of a 10 fiscal year shall not revert but shall remain available for 11 expenditure for the purposes designated. Notwithstanding 12 section 12C.7, subsection 2, interest or earnings on moneys in 13 the fund shall be credited to the fund. 14 Sec. 4. Section 16.134, Code 2017, is amended to read as 15 follows: 16 16.134 Wastewater and drinking water treatment financial 17 assistance program. 18 1. The Iowa finance authority shall establish and 19 administer a wastewater and drinking water treatment financial 20 assistance program. The purpose of the program shall be to 21 provide financial assistance to enhance water quality. The 22 program shall be administered in accordance with rules adopted 23 by the authority pursuant to chapter 17A . For purposes of 24 this section , “program” means the wastewater and drinking water 25 treatment financial assistance program and “committee” means the 26 water quality financing review committee created in subsection 27 9 . 28 2. A wastewater and drinking water treatment financial 29 assistance fund is created and shall consist of appropriations 30 made to the fund and transfers of interest, earnings, and 31 moneys from other funds as provided by law. Moneys transferred 32 to the fund pursuant to section 16.134A are appropriated to the 33 authority for purposes of the program. Moneys in the fund are 34 not subject to section 8.33 . Notwithstanding section 12C.7, 35 -2- LSB 1844SZ (4) 87 mm/sc 2/ 26

S.F. 512 subsection 2 , interest or earnings on moneys in the fund shall 1 be credited to the fund. 2 3. Financial assistance under the program shall be used 3 to install or upgrade wastewater treatment facilities and 4 systems and drinking water treatment facilities and systems, 5 including source water protection projects , and for engineering 6 or technical assistance for facility planning and design. 7 4. The authority committee shall distribute approve 8 financial assistance in from the fund in accordance with the 9 following: 10 a. The goal of the program shall be to base awards on the 11 impact of the grant combined with other sources of financing to 12 ensure that sewer rates do not exceed one and one-half percent 13 of a community’s median household income. 14 b. a. Communities shall be eligible for financial 15 assistance by qualifying as Priority shall be given for 16 projects in which a disadvantaged community and is seeking 17 financial assistance for the installation or upgrade of 18 wastewater treatment facilities due to regulatory activity 19 by the department of natural resources and drinking water 20 treatment facilities . For purposes of this section , the term 21 “disadvantaged community” means the same as defined by the 22 department. 23 c. b. Priority shall be given to projects in which the 24 meeting criteria established in section 455B.199B in which the 25 applicant seeks financial assistance is to be used to obtain 26 with financing under the water pollution control works and 27 drinking water facilities financing program pursuant to section 28 16.131 or other federal , or state , or private financing. 29 d. c. Priority shall also be given to projects whose 30 completion will provide significant improvement to water 31 quality in the relevant watershed. 32 e. d. Priority shall also be given to communities that 33 employ an alternative wastewater treatment technology pursuant 34 to section 455B.199C . 35 -3- LSB 1844SZ (4) 87 mm/sc 3/ 26

S.F. 512 f. e. Priority shall be also be given to those communities 1 where sewer or water rates are the highest as a percentage of 2 that community’s median household income. 3 f. Priority shall also be given to communities that employ 4 technology to address the latest version of the “Iowa Nutrient 5 Reduction Strategy” initially presented in November 2012 by the 6 department of agriculture and land stewardship, the department 7 of natural resources, and Iowa state university of science and 8 technology. 9 g. Financial assistance in the form of grants shall be 10 issued on an annual basis. 11 h. An applicant shall not receive a grant that exceeds five 12 hundred thousand dollars. 13 4A. A utility management organization formed under chapter 14 28E or operated by a rural water system organized under chapter 15 357A or chapter 504 shall be considered eligible for financial 16 assistance under the program. 17 5. The authority in cooperation with the department of 18 natural resources shall share provide information and resources 19 to the committee when the committee is determining the 20 qualifications of a community for financial assistance from the 21 fund. 22 6. The authority shall enter into agreements with financial 23 assistance recipients and distribute moneys under the program 24 pursuant to financial assistance determinations made by the 25 committee. The authority may use an amount of not more than 26 four one percent of any moneys appropriated for deposit in the 27 fund for administration purposes. 28 7. By October 1 of each year, the authority shall submit 29 a report to the governor and the general assembly itemizing 30 expenditures under the program during the previous fiscal year, 31 if any. 32 8. a. Beginning September 1, 2027, and every ten years 33 thereafter, a program review committee is established for 34 purposes of reviewing the wastewater and drinking water 35 -4- LSB 1844SZ (4) 87 mm/sc 4/ 26

S.F. 512 treatment financial assistance program. By December 1 of the 1 same year, the program review committee shall file a report 2 with the governor and the general assembly that reviews the 3 effectiveness of the program during the prior ten fiscal years. 4 b. The program review committee shall consist of the 5 following members: 6 (1) The governor or the governor’s designee. 7 (2) The secretary of agriculture or the secretary’s 8 designee. 9 (3) The executive director of the authority or the executive 10 director’s designee. 11 (4) The director of the department of natural resources or 12 the director’s designee. 13 (5) Four members of the general assembly, with two from the 14 senate and two from the house of representatives and not more 15 than one member from each chamber being from the same political 16 party. The two senators shall be designated one member each 17 by the president of the senate, after consultation with the 18 majority leader of the senate, and by the minority leader of 19 the senate. The two representatives shall be designated one 20 member each by the speaker of the house of representatives, 21 after consultation with the majority leader of the house of 22 representatives, and by the minority leader of the house of 23 representatives. 24 c. Staffing services shall be provided by the authority. 25 9. a. A water quality financing review committee is 26 created consisting of the secretary of agriculture or the 27 secretary’s designee, the executive director of the authority 28 or the executive director’s designee, and the director of the 29 department of natural resources or the director’s designee. 30 b. The committee shall review and approve or deny 31 applications for financial assistance under the wastewater 32 and drinking water treatment financial assistance program 33 established in this section. 34 Sec. 5. NEW SECTION . 16.134A Water quality financial 35 -5- LSB 1844SZ (4) 87 mm/sc 5/ 26

S.F. 512 assistance fund. 1 1. A water quality financial assistance fund is created in 2 the state treasury as a revolving fund. 3 2. The fund shall consist of all of the following: 4 a. (1) Moneys transferred to the fund pursuant to section 5 423G.6. 6 (2) This paragraph “a” is repealed on January 1, 2030. 7 b. Appropriations made to the fund and transfers of 8 interest, earnings, and moneys from other funds as provided by 9 law. 10 3. For each fiscal year in the fiscal period beginning 11 July 1, 2018, and ending June 30, 2029, there is appropriated 12 the following percentages of the balance of the fund for the 13 following purposes: 14 a. Forty percent to the Iowa finance authority to support 15 the wastewater and drinking water treatment financial 16 assistance program created in section 16.134. 17 b. Forty-five percent to the Iowa finance authority to be 18 credited to the water quality financing program fund created 19 pursuant to section 16.144. 20 c. Fifteen percent to the division of soil conservation 21 and water quality of the department of agriculture and land 22 stewardship to support the water quality urban infrastructure 23 program created in section 466B.44. 24 4. Moneys in the fund are not subject to section 8.33. 25 Notwithstanding section 12C.7, subsection 2, interest or 26 earnings on moneys in the fund shall be credited to the fund. 27 Sec. 6. NEW SECTION . 16.142 Definitions. 28 As used in this part, unless the context otherwise requires: 29 1. “Cost” means all costs, charges, expenses, or other 30 indebtedness incurred by a loan recipient and determined by 31 the authority as reasonable and necessary for carrying out 32 all works and undertakings necessary or incidental to the 33 accomplishment of any project. 34 2. “Eligible entity” means a municipality or a landowner, 35 -6- LSB 1844SZ (4) 87 mm/sc 6/ 26

S.F. 512 as determined by the authority, a public utility as defined 1 in section 476.1, or a rural water district or rural water 2 association as defined in section 357A.1. 3 3. “Loan recipient” means an eligible entity that has 4 received a loan under the program. 5 4. “Municipality” means a governmental body such as a state 6 agency or a political subdivision of the state. Municipality 7 includes but is not limited to a city, city utility, county, 8 soil and water conservation district, sanitary district, a 9 subdistrict of any of the foregoing districts, a state agency, 10 or other governmental body or corporation empowered to provide 11 sewage collection and treatment services or drinking water, or 12 any entity jointly exercising governmental powers pursuant to 13 chapter 28E or 28F, or any other combination of two or more 14 governmental bodies or corporations acting jointly under the 15 laws of this state in connection with a project. 16 5. “Program” means the water quality financing program 17 created in this part. 18 6. “Project” means any combination of improvements, 19 structures, developments, tasks, actions, constructions, 20 modifications, operations, or practices designed to improve 21 water quality that are proposed by an eligible entity and 22 approved by the authority. “Project” includes but is not 23 limited to any of the following: 24 a. A project meeting the requirements of part 2 of this 25 subchapter. 26 b. A project, operation, or practice undertaken or carried 27 out to address watershed protection, flood prevention, or water 28 quality improvement. 29 c. A project meeting the requirements of a sponsor project 30 under section 455B.199. 31 Sec. 7. NEW SECTION . 16.143 Water quality financing 32 program. 33 1. The authority, in cooperation with the department of 34 natural resources and the department of agriculture and land 35 -7- LSB 1844SZ (4) 87 mm/sc 7/ 26

S.F. 512 stewardship, shall establish and administer a water quality 1 financing program. The purpose of the program shall be to 2 provide financial assistance to enhance the quality of surface 3 water and groundwater, particularly by providing financial 4 assistance for projects designed to improve water quality 5 by addressing point and nonpoint sources, with a higher 6 prioritization provided to collaborative efforts. 7 2. The authority shall determine the interest rate 8 and repayment terms for loans made under the program, in 9 cooperation with the department of natural resources and 10 the department of agriculture and land stewardship, and the 11 authority shall enter into loan agreements with eligible 12 entities in compliance with and subject to the terms and 13 conditions of the program as described in this part. 14 3. The authority may charge loan recipients fees and assess 15 costs against such recipients necessary for the continued 16 operation of the program. Such fees and costs shall not exceed 17 the costs directly associated with the administration of the 18 program. Fees and costs collected pursuant to this subsection 19 shall be deposited in the appropriate fund or account created 20 in section 16.144. 21 4. The program shall be administered by the authority in 22 accordance with rules adopted by the authority pursuant to 23 chapter 17A. 24 Sec. 8. NEW SECTION . 16.144 Water quality financing program 25 fund —— appropriation —— other funds. 26 1. a. A water quality financing program fund is created 27 and shall consist of appropriations made to the fund, moneys 28 credited to the fund pursuant to section 16.134A, and transfers 29 of interest, earnings, and moneys from other funds as provided 30 by law. The fund shall be administered by the authority as 31 a revolving fund. Moneys in the fund are appropriated to 32 the authority for purposes of the program. Notwithstanding 33 section 8.33, moneys in the fund that remain unencumbered or 34 unobligated at the close of a fiscal year shall not revert 35 -8- LSB 1844SZ (4) 87 mm/sc 8/ 26

S.F. 512 but shall remain available for expenditure for the purposes 1 designated. Notwithstanding section 12C.7, subsection 2, 2 interest or earnings on moneys in the fund shall be credited 3 to the fund. 4 b. The authority shall use the moneys in the fund to provide 5 financial assistance to eligible entities under the program. 6 The authority may provide financial assistance in the form 7 deemed most convenient for the efficient financing of projects, 8 including loans, forgivable loans, or grants. The authority 9 shall administer the fund and the program in such a manner 10 as to provide a permanent source of water quality project 11 financial assistance to eligible entities. 12 c. The authority may annually use an amount of not more 13 than one percent of the moneys in the fund for administrative 14 purposes. 15 2. a. The authority may establish and maintain other 16 funds and accounts determined to be necessary to carry out the 17 purposes of the program and shall provide for the funding, 18 administration, investment, restrictions, and disposition of 19 the funds and accounts. 20 b. Moneys appropriated to and used by the authority for 21 purposes of paying the costs and expenses associated with 22 the administration of the program shall be administered as 23 determined by the authority. 24 c. All moneys transferred to the authority for purposes of 25 the program shall be deposited and held in a fund or account 26 established and maintained pursuant to this section. 27 3. The funds or accounts held by the authority, or a trustee 28 acting on behalf of the authority pursuant to a trust agreement 29 related to the program, shall not be considered part of the 30 general fund of the state, are not subject to appropriation for 31 any other purpose by the general assembly, and in determining 32 a general fund balance shall not be included in the general 33 fund of the state, but shall remain in the funds and accounts 34 maintained by the authority or trustee pursuant to a trust 35 -9- LSB 1844SZ (4) 87 mm/sc 9/ 26

S.F. 512 agreement. Funds and accounts held by the authority, or a 1 trustee acting on behalf of the authority pursuant to a trust 2 agreement related to the program, are separate dedicated funds 3 and accounts under the administration and control of the 4 authority and subject to section 16.31. 5 4. By October 1, 2018, and by October 1 of each year 6 thereafter, the authority shall submit a report to the governor 7 and the general assembly itemizing expenditures from the fund, 8 if any, during the previous fiscal year. 9 Sec. 9. NEW SECTION . 16.145 Eligible entities —— agreements 10 required. 11 1. An eligible entity may apply to the authority for 12 financial assistance under the program by submitting a plan 13 that meets the following requirements: 14 a. The plan includes one or more projects that improve 15 water quality in the local area or watershed. Projects shall 16 use practices identified in the latest version of the document 17 entitled “Iowa Nutrient Reduction Strategy” initially presented 18 in November 2012 by the department of agriculture and land 19 stewardship, the department of natural resources, and Iowa 20 state university of science and technology. A drainage or 21 levee district established under chapter 468 shall utilize the 22 installation of edge-of-field infrastructure as described in 23 section 466B.43. 24 b. The plan describes in detail the manner in which the 25 projects will be financed and undertaken, including, as 26 applicable, the sources of revenue directed to financing the 27 improvements as well as the eligible entities that will be 28 receiving the revenues and how such revenues will be spent on 29 the projects. 30 2. The authority shall review and approve or deny 31 applications for financial assistance. The provision of 32 financial assistance under the program shall take into account, 33 as applicable, the number of municipalities, landowners, public 34 utilities, rural water districts, or rural water associations 35 -10- LSB 1844SZ (4) 87 mm/sc 10/ 26

S.F. 512 comprising an eligible entity and the eligible entity’s 1 financing capacity. The authority shall score applications 2 for financial assistance according to rules adopted pursuant 3 to this part. The authority shall only provide financial 4 assistance to eligible entities that have sufficient financing 5 capacity and that submit an appropriate plan designed to 6 improve water quality. 7 3. An approved eligible entity shall enter into an agreement 8 with the authority for the provision of financial assistance. 9 The agreement shall include standard terms for the receipt 10 of program moneys and any other terms the authority deems 11 necessary or convenient for the efficient administration of the 12 program. 13 Sec. 10. Section 423.3, Code 2017, is amended by adding the 14 following new subsection: 15 NEW SUBSECTION . 103. a. The sales price from the sale or 16 furnishing by a water utility of a water service in the state 17 to consumers or users. 18 b. For purposes of this subsection: 19 (1) “Water service” means the delivery of water by piped 20 distribution system. 21 (2) “Water utility” means a public utility as defined in 22 section 476.1 that furnishes water by piped distribution system 23 to the public for compensation. 24 Sec. 11. NEW SECTION . 423G.1 Short title. 25 This chapter may be cited as the “Water Service Tax Act” . 26 Sec. 12. NEW SECTION . 423G.2 Definitions. 27 1. All words and phrases used in this chapter and defined in 28 section 423.1 have the same meaning given them by section 423.1 29 for purposes of this chapter. 30 2. As used in this chapter, “water service” and “water 31 utility” mean the same as defined in section 423.3, subsection 32 103. 33 Sec. 13. NEW SECTION . 423G.3 Water service tax. 34 An excise tax at the rate of six percent is imposed on the 35 -11- LSB 1844SZ (4) 87 mm/sc 11/ 26

S.F. 512 sales price from the sale or furnishing by a water utility of a 1 water service in the state to consumers or users. 2 Sec. 14. NEW SECTION . 423G.4 Exemptions. 3 The sales price from transactions exempt from state sales 4 tax under section 423.3, except section 423.3, subsection 103, 5 is also exempt from the tax imposed by this chapter. 6 Sec. 15. NEW SECTION . 423G.5 Administration by director. 7 1. The director of revenue shall administer the water 8 service tax as nearly as possible in conjunction with the 9 administration of the state sales and use tax law, except that 10 portion of the law that implements the streamlined sales and 11 use tax agreement. The director shall provide appropriate 12 forms, or provide on the regular state tax forms, for reporting 13 water service tax liability. 14 2. The director may require all persons who are engaged 15 in the business of deriving any sales price or purchase 16 price subject to tax under this chapter to register with 17 the department. The director may also require a tax permit 18 applicable only to this chapter for any retailer not 19 collecting, or any user not paying, taxes under chapter 423. 20 3. Section 422.25, subsection 4, sections 422.30, 422.67, 21 and 422.68, section 422.69, subsection 1, sections 422.70, 22 422.71, 422.72, 422.74, and 422.75, section 423.14, subsection 23 1, and sections 423.23, 423.24, 423.25, 423.31 through 24 423.35, 423.37 through 423.42, and 423.47, consistent with the 25 provisions of this chapter, shall apply with respect to the tax 26 authorized under this chapter, in the same manner and with the 27 same effect as if the excise taxes on the sale or furnishing of 28 a water service were retail sales taxes within the meaning of 29 those statutes. Notwithstanding this subsection, the director 30 shall provide for quarterly filing of returns and for other 31 than quarterly filing of returns both as prescribed in section 32 423.31. All taxes collected under this chapter by a retailer 33 or any user are deemed to be held in trust for the state of 34 Iowa. 35 -12- LSB 1844SZ (4) 87 mm/sc 12/ 26

S.F. 512 Sec. 16. NEW SECTION . 423G.6 Deposit of revenues. 1 1. All moneys received and all refunds shall be deposited in 2 or withdrawn from the general fund of the state. 3 2. Subsequent to the deposit in the general fund of the 4 state, the department shall transfer the following amounts to 5 the following funds: 6 a. For revenues collected on or after July 1, 2018, but 7 before August 1, 2019, one-twelfth of the revenues to the 8 water quality infrastructure fund created in section 8.57B, 9 and one-twelfth of the revenues to the water quality financial 10 assistance fund created in section 16.134A. 11 b. For revenues collected on or after August 1, 2019, 12 but before August 1, 2020, one-sixth of the revenues to the 13 water quality infrastructure fund created in section 8.57B, 14 and one-sixth of the revenues to the water quality financial 15 assistance fund created in section 16.134A. 16 c. For revenues collected on or after August 1, 2020, 17 one-half of the revenues to the water quality financial 18 assistance fund created in section 16.134A. 19 Sec. 17. NEW SECTION . 423G.7 Future repeal. 20 This chapter is repealed upon the occurrence of one of the 21 following, whichever is earlier: 22 1. The enactment date that the tax rate for the sales 23 tax imposed upon the retail sales price of tangible personal 24 property and the furnishing of enumerated services sold in this 25 state in effect on July 1, 2016, is increased. 26 2. July 1, 2029. 27 Sec. 18. Section 455B.171, Code 2017, is amended by adding 28 the following new subsections: 29 NEW SUBSECTION . 10A. “Iowa nutrient reduction strategy” 30 means a water quality initiative developed and updated by the 31 department of agriculture and land stewardship, the department 32 of natural resources, and the college of agriculture and life 33 sciences at Iowa state university of science and technology in 34 order to assess and reduce nutrients in this state’s watersheds 35 -13- LSB 1844SZ (4) 87 mm/sc 13/ 26

S.F. 512 that utilize a pragmatic, strategic, and coordinated approach 1 with the goal of accomplishing reductions over time. 2 NEW SUBSECTION . 15A. “Nutrient” means total nitrogen and 3 total phosphorus. 4 Sec. 19. Section 455B.171, subsection 19, Code 2017, is 5 amended to read as follows: 6 19. “Point source” means any discernible, confined, and 7 discrete conveyance, including but not limited to any pipe, 8 ditch, channel, tunnel, conduit, well, discrete fissure, 9 container, rolling stock, concentrated animal feeding 10 operation, or vessel or other floating craft, from which 11 pollutants are or may be discharged. “Point source” does not 12 include agricultural storm water discharge and return flows 13 from irrigated agriculture. 14 Sec. 20. Section 455B.177, Code 2017, is amended by adding 15 the following new subsection: 16 NEW SUBSECTION . 3. The general assembly further finds 17 and declares that it is in the interest of the people of Iowa 18 to assess and reduce nutrients in surface waters over time by 19 implementing the Iowa nutrient reduction strategy. To evaluate 20 the progress achieved over time toward the goals of the Iowa 21 nutrient reduction strategy and the United States environmental 22 protection agency gulf hypoxia action plan, the baseline 23 condition shall be calculated for the time period from 1980 to 24 1996. 25 Sec. 21. Section 466B.3, subsection 3, paragraph c, Code 26 2017, is amended to read as follows: 27 c. Whether the funds, programs, and regulatory efforts 28 coordinated by the council eventually result in a long-term 29 improvement to the quality of surface water in Iowa. To 30 evaluate the progress achieved over time toward the goals of 31 the Iowa nutrient reduction strategy, as defined in section 32 455B.171, and the United States environmental protection agency 33 gulf hypoxia action plan, the baseline condition shall be 34 calculated for the time period from 1980 to 1996. 35 -14- LSB 1844SZ (4) 87 mm/sc 14/ 26

S.F. 512 Sec. 22. Section 466B.42, Code 2017, is amended to read as 1 follows: 2 466B.42 Water quality initiative. 3 The division shall establish a water quality initiative 4 in order to assess and reduce nutrients in this state’s 5 watersheds, including subwatersheds , and regional watersheds , 6 and for implementing its responsibilities under the Iowa 7 nutrient reduction strategy as defined in section 455B.171 . 8 The division shall establish and administer projects to 9 reduce nutrients in surface waters from nonpoint sources in 10 a scientific, reasonable, and cost-effective manner. The 11 division shall utilize a pragmatic, strategic, and coordinated 12 approach with the goal of accomplishing reductions over time. 13 To evaluate the progress achieved over time toward the goals 14 of the Iowa nutrient reduction strategy and the United States 15 environmental protection agency gulf hypoxia action plan, the 16 baseline condition shall be calculated for the time period from 17 1980 to 1996. 18 Sec. 23. NEW SECTION . 466B.43 Water quality agriculture 19 infrastructure programs. 20 1. As part of the water quality initiative established 21 pursuant to section 466B.42, the division shall administer 22 water quality agriculture infrastructure programs created in 23 this section. 24 2. The purpose of the programs is to support projects for 25 the installation of infrastructure, including conservation 26 structures, practices, or other measures that reduce 27 contributing nutrient loads, associated sediment, or 28 contaminants from sources to surface waters. The programs 29 shall be administered in a manner that is consistent with 30 the latest version of the “Iowa Nutrient Reduction Strategy” 31 initially presented in November 2012 by the department of 32 agriculture and land stewardship, the department of natural 33 resources, and Iowa state university of science and technology. 34 3. An edge-of-field infrastructure program is created. 35 -15- LSB 1844SZ (4) 87 mm/sc 15/ 26

S.F. 512 The program shall support projects located on agricultural 1 land, which may include demonstration projects, that capture 2 or filter nutrients entering into a surface water. The 3 program’s projects shall be limited to infrastructure designed 4 and installed for use over multiple years, including but not 5 limited to wetlands, bioreactor systems, saturated buffers, 6 or land use changes. The program shall be financed on a 7 cost-share basis. 8 4. An in-field infrastructure program is created. The 9 program shall support projects located on agricultural land, 10 which may include demonstration projects, that decrease erosion 11 and precipitation-induced surface runoff, increase water 12 infiltration rates, and increase soil sustainability. The 13 program’s projects shall be limited to infrastructure designed 14 and installed for use over multiple years, including but not 15 limited to structures, terraces, and waterways located on 16 cropland or pastureland, and including but not limited to soil 17 conservation or erosion control structures or managed drainage 18 systems. The program shall be financed on a cost-share basis. 19 5. Any state moneys used to finance a project under a 20 water quality agriculture infrastructure program shall be 21 administered according to an agreement entered into by the 22 division and the owner of the land where the infrastructure 23 is to be installed. The agreement shall include standard 24 terms and conditions for the receipt of program moneys and 25 any other terms and conditions the division deems necessary 26 or convenient for the efficient administration of the project 27 or program. The division may support multiple installations 28 of infrastructure on a single parcel of land. The division 29 may also combine programs if cost effective. The division 30 may annually use an amount of not more than four percent of 31 the moneys used to support each program for administrative 32 purposes. 33 6. By October 1, 2018, and each October 1, thereafter, the 34 division shall submit a report to the governor and the general 35 -16- LSB 1844SZ (4) 87 mm/sc 16/ 26

S.F. 512 assembly itemizing expenditures, by hydrologic unit code 8 1 watershed, under the programs during the previous fiscal year, 2 if any. 3 7. Any information obtained by the division identifying 4 a person holding a legal interest in agricultural land or 5 specific agricultural land shall be a confidential record under 6 section 22.7. 7 Sec. 24. NEW SECTION . 466B.44 Water quality urban 8 infrastructure program. 9 1. As part of the water quality initiative established 10 pursuant to section 466B.42, the division shall administer a 11 water quality urban infrastructure program. 12 2. The purpose of the program is to support watershed 13 projects and advance implementation of the latest version of 14 the “Iowa Nutrient Reduction Strategy” initially presented 15 in November 2012 by the department of agriculture and land 16 stewardship, the department of natural resources, and Iowa 17 state university of science and technology, which program 18 support may include demonstration projects that decrease 19 erosion, precipitation-induced surface runoff, and storm 20 water discharges and that increase water infiltration rates. 21 The program’s projects shall be based on Iowa’s storm water 22 management manual published by the department of natural 23 resources. 24 3. The program shall be financed on a cost-share basis or 25 through cooperative agreements with watershed projects funded 26 through section 455B.199 whose project activities fall outside 27 the territorial boundaries of a city. 28 4. Any state moneys used to finance a project under a water 29 quality urban infrastructure program shall be administered 30 according to an agreement entered into by the division and the 31 owner of the land where the infrastructure is to be installed. 32 The agreement shall include standard terms and conditions 33 for the receipt of program moneys and any other terms and 34 conditions the division deems necessary or convenient for 35 -17- LSB 1844SZ (4) 87 mm/sc 17/ 26

S.F. 512 the efficient administration of the project or program. The 1 division may support multiple installations of infrastructure 2 on a single parcel of land. The division may annually use an 3 amount of not more than four percent of the moneys used to 4 support the program for administrative purposes. 5 5. Notwithstanding any other provision in this section 6 to the contrary, beginning on July 1, 2018, the division may 7 use any amount available to support the water quality urban 8 infrastructure program to instead extend and support the 9 three-year data collection of in-field agricultural practices 10 project as enacted in 2015 Iowa Acts, ch. 132, §18. 11 6. Notwithstanding any other provision of this section 12 to the contrary, the division may use any amount available 13 to support the water quality urban infrastructure program to 14 develop and maintain an online resource displaying measurable 15 indicators of desirable change in water quality within the 16 state’s watersheds. These measurable indicators may include 17 but are not limited to public and private funding inputs, 18 involvement in water quality projects, and improvements, land 19 use, practice adoption, calculated load reduction, and measured 20 loads at existing monitoring stations. 21 7. By October 1, 2018, and by October 1 of each year 22 thereafter, the division shall submit a report to the governor 23 and the general assembly itemizing expenditures under the 24 program, if any, during the previous fiscal year. 25 8. Any information obtained by the division identifying a 26 person holding a legal interest in land or specific land shall 27 be a confidential record under section 22.7. 28 Sec. 25. LEGISLATIVE INTENT. It is the intent of the 29 general assembly that the amendment in this Act to the 30 definition of point source in section 455B.171, subsection 31 19, is a conforming amendment consistent with current state 32 and federal law, and that the amendment does not change the 33 application of current law but instead reflects current law 34 both before and after the enactment of this Act. 35 -18- LSB 1844SZ (4) 87 mm/sc 18/ 26

S.F. 512 Sec. 26. EFFECTIVE DATE. The following provision or 1 provisions of this Act take effect July 1, 2018: 2 1. The section of this Act enacting section 423.3, 3 subsection 103. 4 2. The sections of this Act enacting sections 423G.1, 5 423G.2, 423G.3, 423G.4, 423G.5, 423G.6, and 423G.7. 6 EXPLANATION 7 The inclusion of this explanation does not constitute agreement with 8 the explanation’s substance by the members of the general assembly. 9 This bill relates to water quality by modifying an existing 10 wastewater treatment program, establishing new water quality 11 programs, providing for transfers and appropriations related to 12 water quality, creating a water service excise tax and related 13 sales tax exemption, and providing for other changes properly 14 related to water quality. 15 WATER QUALITY PROGRAMS. 16 Water quality agriculture infrastructure programs —— As part 17 of the existing water quality initiative of the department of 18 agriculture and land stewardship (soil and water division) in 19 Code section 466B.42, the bill establishes two water quality 20 agriculture infrastructure programs (Code section 466B.43), 21 consisting of an edge-of-field infrastructure program and an 22 in-field infrastructure program, that will provide financing 23 on a cost-share basis to certain agriculture infrastructure 24 projects, including demonstration projects. The edge-of-field 25 program will support projects that capture or filter nutrients 26 entering into surface water. The bill includes wetlands, 27 bioreactor systems, saturated buffers, and land use changes 28 as examples of projects that may qualify. The in-field 29 infrastructure program will support projects that decrease 30 erosion and precipitation-induced surface runoff, increase 31 water infiltration rates, and increase soil sustainability. 32 The bill includes structures, terraces, waterways located on 33 cropland or pastureland, and soil conservation or erosion 34 control structures or managed drainage systems as examples of 35 -19- LSB 1844SZ (4) 87 mm/sc 19/ 26