Senate Study Bill 1034 - Introduced SENATE/HOUSE FILE _____ BY (PROPOSED GOVERNOR BILL) A BILL FOR An Act relating to water quality by amending the wastewater 1 treatment financial assistance program, making 2 appropriations from the rebuild Iowa infrastructure fund, 3 creating a water quality infrastructure fund, establishing 4 a water quality financing program, providing for cost-share 5 programs for infrastructure on agricultural and urban land 6 under the water quality initiative, creating a water service 7 excise tax and a related sales tax exemption, and making 8 appropriations. 9 BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA: 10 TLSB 1844XL (5) 87 mm/sc

S.F. _____ H.F. _____ 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, four million three hundred thousand dollars. 8 (b) For the fiscal year beginning July 1, 2018, and ending 9 June 30, 2019, four million three 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 1844XL (5) 87 mm/sc 1/ 23

S.F. _____ H.F. _____ 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 Code editor 34 of this occurrence. 35 -2- LSB 1844XL (5) 87 mm/sc 2/ 23

S.F. _____ H.F. _____ Sec. 3. Section 16.134, Code 2017, is amended to read as 1 follows: 2 16.134 Wastewater and drinking water treatment financial 3 assistance program. 4 1. The Iowa finance authority shall establish and 5 administer a wastewater and drinking water treatment financial 6 assistance program. The purpose of the program shall be to 7 provide financial assistance to enhance water quality. The 8 program shall be administered in accordance with rules adopted 9 by the authority pursuant to chapter 17A . For purposes of 10 this section , “program” means the wastewater and drinking water 11 treatment financial assistance program and “committee” means the 12 water quality financing review committee created in subsection 13 9 . 14 2. A wastewater and drinking water treatment financial 15 assistance fund is created and shall consist of appropriations 16 made to the fund and transfers of interest, earnings, and 17 moneys from other funds as provided by law. Moneys transferred 18 to the fund pursuant to section 16.134A are appropriated to the 19 authority for purposes of the program. Moneys in the fund are 20 not subject to section 8.33 . Notwithstanding section 12C.7, 21 subsection 2 , interest or earnings on moneys in the fund shall 22 be credited to the fund. 23 3. Financial assistance under the program shall be used 24 to install or upgrade wastewater treatment facilities and 25 systems and drinking water treatment facilities and systems, 26 including source water protection projects , and for engineering 27 or technical assistance for facility planning and design. 28 4. The authority committee shall distribute approve 29 financial assistance in from the fund in accordance with the 30 following: 31 a. The goal of the program shall be to base awards on the 32 impact of the grant combined with other sources of financing to 33 ensure that sewer rates do not exceed one and one-half percent 34 of a community’s median household income. 35 -3- LSB 1844XL (5) 87 mm/sc 3/ 23

S.F. _____ H.F. _____ b. a. Communities shall be eligible for financial 1 assistance by qualifying as Priority shall be given for 2 projects in which a disadvantaged community and is seeking 3 financial assistance for the installation or upgrade of 4 wastewater treatment facilities due to regulatory activity 5 by the department of natural resources and drinking water 6 treatment facilities . For purposes of this section , the term 7 “disadvantaged community” means the same as defined by the 8 department. 9 c. b. Priority shall be given to projects in which the 10 meeting criteria established in section 455B.199B in which the 11 applicant seeks financial assistance is to be used to obtain 12 with financing under the water pollution control works and 13 drinking water facilities financing program pursuant to section 14 16.131 or other federal , or state , or private financing. 15 d. c. Priority shall also be given to projects whose 16 completion will provide significant improvement to water 17 quality in the relevant watershed. 18 e. d. Priority shall also be given to communities that 19 employ an alternative wastewater treatment technology pursuant 20 to section 455B.199C . 21 f. e. Priority shall be also be given to those communities 22 where sewer or water rates are the highest as a percentage of 23 that community’s median household income. 24 f. Priority shall also be given to communities that employ 25 technology to address the latest version of the “Iowa Nutrient 26 Reduction Strategy” initially presented in November 2012 by the 27 department of agriculture and land stewardship, the department 28 of natural resources, and Iowa state university of science and 29 technology. 30 g. Financial assistance in the form of grants shall be 31 issued on an annual basis. 32 h. An applicant shall not receive a grant that exceeds five 33 hundred thousand dollars. 34 4A. A utility management organization formed under chapter 35 -4- LSB 1844XL (5) 87 mm/sc 4/ 23

S.F. _____ H.F. _____ 28E or operated by a rural water system organized under chapter 1 357A or chapter 504 shall be considered eligible for financial 2 assistance under the program. 3 5. The authority in cooperation with the department of 4 natural resources shall share provide information and resources 5 to the committee when the committee is determining the 6 qualifications of a community for financial assistance from the 7 fund. 8 6. The authority shall enter into agreements with financial 9 assistance recipients and distribute moneys under the program 10 pursuant to financial assistance determinations made by the 11 committee. The authority may use an amount of not more than 12 four one percent of any moneys appropriated for deposit in the 13 fund for administration purposes. 14 7. By October 1 of each year, the authority shall submit 15 a report to the governor and the general assembly itemizing 16 expenditures under the program during the previous fiscal year. 17 8. a. Beginning September 1, 2027, and every ten years 18 thereafter, a program review committee is established for 19 purposes of reviewing the wastewater and drinking water 20 treatment financial assistance program. By December 1 of the 21 same year, the program review committee shall file a report 22 with the governor and the general assembly that reviews the 23 effectiveness of the program during the prior ten fiscal years. 24 b. The program review committee shall consist of the 25 following members: 26 (1) The governor or the governor’s designee. 27 (2) The secretary of agriculture or the secretary’s 28 designee. 29 (3) The executive director of the authority or the executive 30 director’s designee. 31 (4) The director of the department of natural resources or 32 the director’s designee. 33 (5) Four members of the general assembly, with two from the 34 senate and two from the house of representatives and not more 35 -5- LSB 1844XL (5) 87 mm/sc 5/ 23

S.F. _____ H.F. _____ than one member from each chamber being from the same political 1 party. The two senators shall be designated one member each 2 by the president of the senate, after consultation with the 3 majority leader of the senate, and by the minority leader of 4 the senate. The two representatives shall be designated one 5 member each by the speaker of the house of representatives, 6 after consultation with the majority leader of the house of 7 representatives, and by the minority leader of the house of 8 representatives. 9 c. Staffing services shall be provided by the authority. 10 9. a. A water quality financing review committee is 11 created consisting of the secretary of agriculture or the 12 secretary’s designee, the executive director of the authority 13 or the executive director’s designee, and the director of the 14 department of natural resources or the director’s designee. 15 b. The committee shall review and approve or deny 16 applications for financial assistance under the wastewater 17 and drinking water treatment financial assistance program 18 established in this section. 19 Sec. 4. NEW SECTION . 16.134A Water quality financial 20 assistance fund. 21 1. A water quality financial assistance fund is created in 22 the state treasury as a revolving fund. 23 2. The fund shall consist of all of the following: 24 a. (1) Moneys transferred to the fund pursuant to section 25 423G.6. 26 (2) This paragraph “a” is repealed on January 1, 2030. 27 b. Appropriations made to the fund and transfers of 28 interest, earnings, and moneys from other funds as provided by 29 law. 30 3. For each fiscal year in the fiscal period beginning 31 July 1, 2017, and ending June 30, 2029, there is appropriated 32 the following percentages of the balance of the fund for the 33 following purposes: 34 a. Forty percent to the Iowa finance authority to support 35 -6- LSB 1844XL (5) 87 mm/sc 6/ 23

S.F. _____ H.F. _____ the wastewater and drinking water treatment financial 1 assistance program created in section 16.134. 2 b. Forty-five percent to the Iowa finance authority to be 3 credited to the water quality financing program fund created 4 pursuant to section 16.144. 5 c. Fifteen percent to the division of soil conservation 6 and water quality of the department of agriculture and land 7 stewardship to support the water quality urban infrastructure 8 program created in section 466B.44. 9 4. Moneys in the fund are not subject to section 8.33. 10 Notwithstanding section 12C.7, subsection 2, interest or 11 earnings on moneys in the fund shall be credited to the fund. 12 Sec. 5. NEW SECTION . 16.142 Definitions. 13 As used in this part, unless the context otherwise requires: 14 1. “Cost” means all costs, charges, expenses, or other 15 indebtedness incurred by a loan recipient and determined by 16 the authority as reasonable and necessary for carrying out 17 all works and undertakings necessary or incidental to the 18 accomplishment of any project. 19 2. “Eligible entity” means a municipality or a landowner, 20 as determined by the authority, a public utility as defined 21 in section 476.1, or a rural water district or rural water 22 association as defined in section 357A.1. 23 3. “Loan recipient” means an eligible entity that has 24 received a loan under the program. 25 4. “Municipality” means a governmental body such as a state 26 agency or a political subdivision of the state. Municipality 27 includes but is not limited to a city, city utility, county, 28 soil and water conservation district, sanitary district, a 29 subdistrict of any of the foregoing districts, a state agency, 30 or other governmental body or corporation empowered to provide 31 sewage collection and treatment services or drinking water, or 32 any entity jointly exercising governmental powers pursuant to 33 chapter 28E or 28F, or any other combination of two or more 34 governmental bodies or corporations acting jointly under the 35 -7- LSB 1844XL (5) 87 mm/sc 7/ 23

S.F. _____ H.F. _____ laws of this state in connection with a project. 1 5. “Program” means the water quality financing program 2 created in this part. 3 6. “Project” means any combination of improvements, 4 structures, developments, tasks, actions, constructions, 5 modifications, operations, or practices designed to improve 6 water quality that are proposed by an eligible entity and 7 approved by the authority. “Project” includes but is not 8 limited to any of the following: 9 a. A project meeting the requirements of part 2 of this 10 subchapter. 11 b. A project, operation, or practice undertaken or carried 12 out to address watershed protection, flood prevention, or water 13 quality improvement. 14 c. A project meeting the requirements of a sponsor project 15 under section 455B.199. 16 Sec. 6. NEW SECTION . 16.143 Water quality financing 17 program. 18 1. The authority, in cooperation with the department of 19 natural resources and the department of agriculture and land 20 stewardship, shall establish and administer a water quality 21 financing program. The purpose of the program shall be to 22 provide financial assistance to enhance the quality of surface 23 water and groundwater, particularly by providing financial 24 assistance for projects designed to improve water quality 25 by addressing point and nonpoint sources, with a higher 26 prioritization provided to collaborative efforts. 27 2. The authority shall determine the interest rate 28 and repayment terms for loans made under the program, in 29 cooperation with the department of natural resources and 30 the department of agriculture and land stewardship, and the 31 authority shall enter into loan agreements with eligible 32 entities in compliance with and subject to the terms and 33 conditions of the program as described in this part. 34 3. The authority may charge loan recipients fees and assess 35 -8- LSB 1844XL (5) 87 mm/sc 8/ 23

S.F. _____ H.F. _____ costs against such recipients necessary for the continued 1 operation of the program. Such fees and costs shall not exceed 2 the costs directly associated with the administration of the 3 program. Fees and costs collected pursuant to this subsection 4 shall be deposited in the appropriate fund or account created 5 in section 16.144. 6 4. The program shall be administered by the authority in 7 accordance with rules adopted by the authority pursuant to 8 chapter 17A. 9 Sec. 7. NEW SECTION . 16.144 Water quality financing program 10 fund —— appropriation —— other funds. 11 1. a. A water quality financing program fund is created 12 and shall consist of appropriations made to the fund, moneys 13 credited to the fund pursuant to section 16.134A, and transfers 14 of interest, earnings, and moneys from other funds as provided 15 by law. The fund shall be administered by the authority as 16 a revolving fund. Moneys in the fund are appropriated to 17 the authority for purposes of the program. Notwithstanding 18 section 8.33, moneys in the fund that remain unencumbered or 19 unobligated at the close of a fiscal year shall not revert 20 but shall remain available for expenditure for the purposes 21 designated. Notwithstanding section 12C.7, subsection 2, 22 interest or earnings on moneys in the fund shall be credited 23 to the fund. 24 b. The authority shall use the moneys in the fund to provide 25 financial assistance to eligible entities under the program. 26 The authority may provide financial assistance in the form 27 deemed most convenient for the efficient financing of projects, 28 including loans, forgivable loans, or grants. The authority 29 shall administer the fund and the program in such a manner 30 as to provide a permanent source of water quality project 31 financial assistance to eligible entities. 32 c. The authority may annually use an amount of not more 33 than one percent of the moneys in the fund for administrative 34 purposes. 35 -9- LSB 1844XL (5) 87 mm/sc 9/ 23

S.F. _____ H.F. _____ 2. a. The authority may establish and maintain other 1 funds and accounts determined to be necessary to carry out the 2 purposes of the program and shall provide for the funding, 3 administration, investment, restrictions, and disposition of 4 the funds and accounts. 5 b. Moneys appropriated to and used by the authority for 6 purposes of paying the costs and expenses associated with 7 the administration of the program shall be administered as 8 determined by the authority. 9 c. All moneys transferred to the authority for purposes of 10 the program shall be deposited and held in a fund or account 11 established and maintained pursuant to this section. 12 3. The funds or accounts held by the authority, or a trustee 13 acting on behalf of the authority pursuant to a trust agreement 14 related to the program, shall not be considered part of the 15 general fund of the state, are not subject to appropriation for 16 any other purpose by the general assembly, and in determining 17 a general fund balance shall not be included in the general 18 fund of the state, but shall remain in the funds and accounts 19 maintained by the authority or trustee pursuant to a trust 20 agreement. Funds and accounts held by the authority, or a 21 trustee acting on behalf of the authority pursuant to a trust 22 agreement related to the program, are separate dedicated funds 23 and accounts under the administration and control of the 24 authority and subject to section 16.31. 25 4. By October 1, 2018, and by October 1 of each year 26 thereafter, the authority shall submit a report to the governor 27 and the general assembly itemizing expenditures from the fund 28 during the previous fiscal year. 29 Sec. 8. NEW SECTION . 16.145 Eligible entities —— agreements 30 required. 31 1. An eligible entity may apply to the authority for 32 financial assistance under the program by submitting a plan 33 that meets the following requirements: 34 a. The plan includes one or more projects that improve 35 -10- LSB 1844XL (5) 87 mm/sc 10/ 23

S.F. _____ H.F. _____ water quality in the local area or watershed. Projects shall 1 use practices identified in the latest version of the document 2 entitled “Iowa Nutrient Reduction Strategy” initially presented 3 in November 2012 by the department of agriculture and land 4 stewardship, the department of natural resources, and Iowa 5 state university of science and technology. A drainage or 6 levee district established under chapter 468 shall utilize the 7 installation of edge-of-field infrastructure as described in 8 section 466B.43. 9 b. The plan describes in detail the manner in which the 10 projects will be financed and undertaken, including, as 11 applicable, the sources of revenue directed to financing the 12 improvements as well as the eligible entities that will be 13 receiving the revenues and how such revenues will be spent on 14 the projects. 15 2. The authority shall review and approve or deny 16 applications for financial assistance. The provision of 17 financial assistance under the program shall take into account, 18 as applicable, the number of municipalities, landowners, public 19 utilities, rural water districts, or rural water associations 20 comprising an eligible entity and the eligible entity’s 21 financing capacity. The authority shall score applications 22 for financial assistance according to rules adopted pursuant 23 to this part. The authority shall only provide financial 24 assistance to eligible entities that have sufficient financing 25 capacity and that submit an appropriate plan designed to 26 improve water quality. 27 3. An approved eligible entity shall enter into an agreement 28 with the authority for the provision of financial assistance. 29 The agreement shall include standard terms for the receipt 30 of program moneys and any other terms the authority deems 31 necessary or convenient for the efficient administration of the 32 program. 33 Sec. 9. Section 423.3, Code 2017, is amended by adding the 34 following new subsection: 35 -11- LSB 1844XL (5) 87 mm/sc 11/ 23

S.F. _____ H.F. _____ NEW SUBSECTION . 103. a. The sales price from the sale or 1 furnishing by a water utility of a water service in the state 2 to consumers or users. 3 b. For purposes of this subsection: 4 (1) “Water service” means the delivery of water by piped 5 distribution system. 6 (2) “Water utility” means a public utility as defined in 7 section 476.1 that furnishes water by piped distribution system 8 to the public for compensation. 9 Sec. 10. NEW SECTION . 423G.1 Short title. 10 This chapter may be cited as the “Water Service Tax Act” . 11 Sec. 11. NEW SECTION . 423G.2 Definitions. 12 1. All words and phrases used in this chapter and defined in 13 section 423.1 have the same meaning given them by section 423.1 14 for purposes of this chapter. 15 2. As used in this chapter, “water service” and “water 16 utility” mean the same as defined in section 423.3, subsection 17 103. 18 Sec. 12. NEW SECTION . 423G.3 Water service tax. 19 An excise tax at the rate of six percent is imposed on the 20 sales price from the sale or furnishing by a water utility of a 21 water service in the state to consumers or users. 22 Sec. 13. NEW SECTION . 423G.4 Exemptions. 23 The sales price from transactions exempt from state sales 24 tax under section 423.3, except section 423.3, subsection 103, 25 is also exempt from the tax imposed by this chapter. 26 Sec. 14. NEW SECTION . 423G.5 Administration by director. 27 1. The director of revenue shall administer the water 28 service tax as nearly as possible in conjunction with the 29 administration of the state sales and use tax law, except that 30 portion of the law that implements the streamlined sales and 31 use tax agreement. The director shall provide appropriate 32 forms, or provide on the regular state tax forms, for reporting 33 water service tax liability. 34 2. The director may require all persons who are engaged 35 -12- LSB 1844XL (5) 87 mm/sc 12/ 23

S.F. _____ H.F. _____ in the business of deriving any sales price or purchase 1 price subject to tax under this chapter to register with 2 the department. The director may also require a tax permit 3 applicable only to this chapter for any retailer not 4 collecting, or any user not paying, taxes under chapter 423. 5 3. Section 422.25, subsection 4, sections 422.30, 422.67, 6 and 422.68, section 422.69, subsection 1, sections 422.70, 7 422.71, 422.72, 422.74, and 422.75, section 423.14, subsection 8 1, and sections 423.23, 423.24, 423.25, 423.31 through 9 423.35, 423.37 through 423.42, and 423.47, consistent with the 10 provisions of this chapter, shall apply with respect to the tax 11 authorized under this chapter, in the same manner and with the 12 same effect as if the excise taxes on the sale or furnishing of 13 a water service were retail sales taxes within the meaning of 14 those statutes. Notwithstanding this subsection, the director 15 shall provide for quarterly filing of returns and for other 16 than quarterly filing of returns both as prescribed in section 17 423.31. All taxes collected under this chapter by a retailer 18 or any user are deemed to be held in trust for the state of 19 Iowa. 20 Sec. 15. NEW SECTION . 423G.6 Deposit of revenues. 21 1. All moneys received and all refunds shall be deposited in 22 or withdrawn from the general fund of the state. 23 2. Subsequent to the deposit in the general fund of the 24 state, the department shall transfer the following amounts to 25 the water quality financial assistance fund created in section 26 16.134A: 27 a. For revenues collected on or after July 1, 2017, but 28 before August 1, 2018, one-sixth of the revenues. 29 b. For revenues collected on or after August 1, 2018, but 30 before August 1, 2019, one-third of the revenues. 31 c. For revenues collected on or after August 1, 2019, but 32 before August 1, 2020, one-half of the revenues. 33 d. For revenues collected on or after August 1, 2020, but 34 before August 1, 2021, two-thirds of the revenues. 35 -13- LSB 1844XL (5) 87 mm/sc 13/ 23

S.F. _____ H.F. _____ e. For revenues collected on or after August 1, 2021, but 1 before August 1, 2022, five-sixths of the revenues. 2 f. For revenues collected on or after August 1, 2022, one 3 hundred percent of the revenues. 4 Sec. 16. NEW SECTION . 423G.7 Future repeal. 5 This chapter is repealed upon the occurrence of one of the 6 following, whichever is earlier: 7 1. The enactment date that the tax rate for the sales 8 tax imposed upon the retail sales price of tangible personal 9 property and the furnishing of enumerated services sold in this 10 state in effect on July 1, 2016, is increased. 11 2. July 1, 2029. 12 Sec. 17. NEW SECTION . 466B.43 Water quality agriculture 13 infrastructure programs. 14 1. As part of the water quality initiative established 15 pursuant to section 466B.42, the division shall administer 16 water quality agriculture infrastructure programs created in 17 this section. 18 2. The purpose of the programs is to support projects for 19 the installation of infrastructure, including conservation 20 structures, practices, or other measures that reduce 21 contributing nutrient loads, associated sediment, or 22 contaminants from sources to surface waters. The programs 23 shall be administered in a manner that is consistent with 24 the latest version of the “Iowa Nutrient Reduction Strategy” 25 initially presented in November 2012 by the department of 26 agriculture and land stewardship, the department of natural 27 resources, and Iowa state university of science and technology. 28 3. An edge-of-field infrastructure program is created. 29 The program shall support projects located on agricultural 30 land, which may include demonstration projects, that capture 31 or filter nutrients entering into a surface water. The 32 program’s projects shall be limited to infrastructure designed 33 and installed for use over multiple years, including but not 34 limited to wetlands, bioreactor systems, saturated buffers, 35 -14- LSB 1844XL (5) 87 mm/sc 14/ 23

S.F. _____ H.F. _____ or land use changes. The program shall be financed on a 1 cost-share basis. 2 4. An in-field infrastructure program is created. The 3 program shall support projects located on agricultural land, 4 which may include demonstration projects, that decrease erosion 5 and precipitation-induced surface runoff, increase water 6 infiltration rates, and increase soil sustainability. The 7 program’s projects shall be limited to infrastructure designed 8 and installed for use over multiple years, including but not 9 limited to structures, terraces, and waterways located on 10 cropland or pastureland, and including but not limited to soil 11 conservation or erosion control structures or managed drainage 12 systems. The program shall be financed on a cost-share basis. 13 5. Any state moneys used to finance a project under a 14 water quality agriculture infrastructure program shall be 15 administered according to an agreement entered into by the 16 division and the owner of the land where the infrastructure 17 is to be installed. The agreement shall include standard 18 terms and conditions for the receipt of program moneys and 19 any other terms and conditions the division deems necessary 20 or convenient for the efficient administration of the project 21 or program. The division may support multiple installations 22 of infrastructure on a single parcel of land. The division 23 may also combine programs if cost effective. The division 24 may annually use an amount of not more than four percent of 25 the moneys used to support each program for administrative 26 purposes. 27 6. By October 1, 2018, and each October 1, thereafter, the 28 division shall submit a report to the governor and the general 29 assembly itemizing expenditures, by hydrologic unit code 8 30 watershed, under the programs during the previous fiscal year. 31 7. Any information obtained by the division identifying 32 a person holding a legal interest in agricultural land or 33 specific agricultural land shall be a confidential record under 34 section 22.7. 35 -15- LSB 1844XL (5) 87 mm/sc 15/ 23

S.F. _____ H.F. _____ Sec. 18. NEW SECTION . 466B.44 Water quality urban 1 infrastructure program. 2 1. As part of the water quality initiative established 3 pursuant to section 466B.42, the division shall administer a 4 water quality urban infrastructure program. 5 2. The purpose of the program is to support watershed 6 projects and advance implementation of the latest version of 7 the “Iowa Nutrient Reduction Strategy” initially presented 8 in November 2012 by the department of agriculture and land 9 stewardship, the department of natural resources, and Iowa 10 state university of science and technology, which program 11 support may include demonstration projects that decrease 12 erosion, precipitation-induced surface runoff, and storm 13 water discharges and that increase water infiltration rates. 14 The program’s projects shall be based on Iowa’s storm water 15 management manual published by the department of natural 16 resources. 17 3. The program shall be financed on a cost-share basis or 18 through cooperative agreements with watershed projects funded 19 through section 455B.199 whose project activities fall outside 20 the territorial boundaries of a city. 21 4. Any state moneys used to finance a project under a water 22 quality urban infrastructure program shall be administered 23 according to an agreement entered into by the division and the 24 owner of the land where the infrastructure is to be installed. 25 The agreement shall include standard terms and conditions 26 for the receipt of program moneys and any other terms and 27 conditions the division deems necessary or convenient for 28 the efficient administration of the project or program. The 29 division may support multiple installations of infrastructure 30 on a single parcel of land. The division may annually use an 31 amount of not more than four percent of the moneys used to 32 support the program for administrative purposes. 33 5. Notwithstanding any other provision in this section 34 to the contrary, beginning on July 1, 2019, the division may 35 -16- LSB 1844XL (5) 87 mm/sc 16/ 23

S.F. _____ H.F. _____ use any amount available to support the water quality urban 1 infrastructure program to instead support the three-year data 2 collection of in-field agricultural practices project as 3 enacted in 2015 Iowa Acts, ch. 132, §18. 4 6. Notwithstanding any other provision of this section 5 to the contrary, the division may use any amount available 6 to support the water quality urban infrastructure program to 7 develop and maintain an online resource displaying measurable 8 indicators of desirable change in water quality within the 9 state’s watersheds. These measurable indicators may include 10 but are not limited to public and private funding inputs, 11 involvement in water quality projects, and improvements, land 12 use, practice adoption, calculated load reduction, and measured 13 loads at existing monitoring stations. 14 7. By October 1, 2018, and by October 1 of each year 15 thereafter, the division shall submit a report to the governor 16 and the general assembly itemizing expenditures under the 17 program during the previous fiscal year. 18 8. Any information obtained by the division identifying a 19 person holding a legal interest in land or specific land shall 20 be a confidential record under section 22.7. 21 EXPLANATION 22 The inclusion of this explanation does not constitute agreement with 23 the explanation’s substance by the members of the general assembly. 24 This bill relates to water quality by modifying an existing 25 wastewater treatment program, establishing new water quality 26 programs, providing for appropriations from the rebuild Iowa 27 infrastructure fund and making other appropriations, and 28 creating a water service excise tax and related sales tax 29 exemption. 30 REBUILD IOWA INFRASTRUCTURE FUND APPROPRIATIONS FOR WATER 31 QUALITY AGRICULTURE INFRASTRUCTURE PROGRAMS. 32 RIIF appropriations —— The bill provides for a total of 33 $229.1 million of appropriations over 13 fiscal years from 34 the rebuild Iowa infrastructure fund in Code section 8.57 to 35 -17- LSB 1844XL (5) 87 mm/sc 17/ 23

S.F. _____ H.F. _____ a water quality infrastructure fund created in the bill (Code 1 section 8.57B) to be used by the division of soil conservation 2 and water quality of the department of agriculture and land 3 stewardship (soil and water division) in administering 4 two new water quality agriculture infrastructure programs, 5 described below. The appropriations shall be as follows: $4.3 6 million for fiscal year 2017-2018; $4.3 million for fiscal 7 year 2018-2019; $11.5 million for fiscal year 2019-2020; 8 $16.5 million per fiscal year for the two-year fiscal period 9 beginning July 1, 2020, and ending June 30, 2022; and $22 10 million per fiscal year for the eight-year fiscal period 11 beginning July 1, 2022, and ending June 30, 2030. The water 12 quality infrastructure fund is repealed on the date that 13 all moneys transferred to the fund from the rebuild Iowa 14 infrastructure fund as provided in the bill, including any 15 interest or earnings on such moneys credited to the fund, are 16 expended by the soil and water division, and the balance of the 17 fund is zero. 18 Water quality agriculture infrastructure programs —— As 19 part of the existing water quality initiative of the soil and 20 water division in Code section 466B.42, the bill establishes 21 two water quality agriculture infrastructure programs (Code 22 section 466B.43), consisting of an edge-of-field infrastructure 23 program and an in-field infrastructure program, that will 24 provide financing on a cost-share basis to certain agriculture 25 infrastructure projects, including demonstration projects. 26 The edge-of-field program will support projects that capture 27 or filter nutrients entering into surface water. The bill 28 includes wetlands, bioreactor systems, saturated buffers, and 29 land use changes as examples of projects that may qualify. 30 The in-field infrastructure program will support projects 31 that decrease erosion and precipitation-induced surface 32 runoff, increase water infiltration rates, and increase soil 33 sustainability. The bill includes structures, terraces, 34 waterways located on cropland or pastureland, and soil 35 -18- LSB 1844XL (5) 87 mm/sc 18/ 23

S.F. _____ H.F. _____ conservation or erosion control structures or managed drainage 1 systems as examples of projects that may qualify. 2 The bill provides for the purpose of the programs and 3 requires that the programs be administered in a manner that 4 is consistent with 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 8 and technology (nutrient reduction strategy). Both programs 9 require that projects be located on agricultural land and limit 10 projects to infrastructure designed and installed for use over 11 multiple years. The bill requires that the soil and water 12 division and landowners enter into agreements for financing 13 projects under the programs, provides that the soil and water 14 division may support multiple installations of infrastructure 15 on a single parcel of land, and provides that the two programs 16 may be combined by the soil and water division if it is cost 17 effective to do so. The soil and water division is allowed 18 to annually use up to 4 percent of the programs’ moneys for 19 administrative purposes. Beginning in 2018, the soil and 20 water division is required to submit a report by October 1 of 21 each year to the general assembly and the governor detailing 22 expenditures for the previous fiscal year under the programs 23 by hydrologic unit code 8 watershed. The bill provides that 24 certain information related to agricultural land and obtained 25 by the soil and water division under the programs shall be 26 considered a confidential record under Code section 22.7. 27 WATER SERVICE EXCISE TAX FOR CERTAIN WATER QUALITY PROGRAMS. 28 Water service excise tax and related sales tax exemption —— 29 The bill exempts from the state sales tax the sales price from 30 the sale or furnishing by a water utility of a water service in 31 the state to consumers or users. “Water service” and “water 32 utility” are defined in the bill. 33 By operation of Code section 423.6, an item exempt from the 34 imposition of the sales tax is also exempt from the use tax 35 -19- LSB 1844XL (5) 87 mm/sc 19/ 23