Senate File 512 - Reprinted SENATE FILE 512 BY COMMITTEE ON APPROPRIATIONS (SUCCESSOR TO SF 482) (SUCCESSOR TO SSB 1034) (As Amended and Passed by the Senate April 20, 2017 ) 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 SF 512 (5) 87 mm/sc/jh

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) (i) For each fiscal year 4 of the period beginning July 1, 2020, and ending June 30, 2029, 5 of the wagering tax receipts received pursuant to sections 6 99D.17 and 99F.11, the next fifteen million dollars shall be 7 deposited in the water quality infrastructure fund created in 8 section 8.57B. 9 (ii) Notwithstanding subparagraph subdivision (i), this 10 subparagraph division (0c) is repealed on one of the following 11 dates, whichever is earlier: 12 (A) On July 1 following the enactment date that the tax 13 rate for the sales tax imposed upon the retail sales price of 14 tangible personal property and the furnishing of enumerated 15 services sold in this state in effect on July 1, 2016, is 16 increased. 17 (B) On July 1, 2029. 18 Sec. 2. Section 8.57, subsection 5, paragraph f, 19 subparagraph (1), subparagraph division (d), Code 2017, is 20 amended to read as follows: 21 (d) For the fiscal year beginning July 1, 2013, and for 22 each fiscal year thereafter, the total moneys in excess of the 23 moneys deposited under this paragraph “f” in the revenue bonds 24 debt service fund, the revenue bonds federal subsidy holdback 25 fund, the vision Iowa fund, the water quality infrastructure 26 fund, and the Iowa skilled worker and job creation fund shall 27 be deposited in the rebuild Iowa infrastructure fund and shall 28 be used as provided in this section , notwithstanding section 29 8.60 . 30 Sec. 3. NEW SECTION . 8.57B Water quality infrastructure 31 fund —— creation —— appropriations. 32 1. A water quality infrastructure fund is created within 33 the division of soil conservation and water quality of the 34 department of agriculture and land stewardship. The fund 35 -1- SF 512 (5) 87 mm/sc/jh 1/ 20

S.F. 512 shall consist of moneys transferred pursuant to section 8.57, 1 subsection 5, paragraph “f” , subparagraph (1), subparagraph 2 division (0c), moneys transferred to the fund pursuant to 3 section 423G.6, and appropriations made to the fund and 4 transfers of interest, earnings, and moneys from other funds 5 as provided by law. 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 Sec. 4. Section 16.134, Code 2017, is amended to read as 24 follows: 25 16.134 Wastewater and drinking water treatment financial 26 assistance program. 27 1. The Iowa finance authority shall establish and 28 administer a wastewater and drinking water treatment financial 29 assistance program. The purpose of the program shall be to 30 provide financial assistance to enhance water quality. The 31 program shall be administered in accordance with rules adopted 32 by the authority pursuant to chapter 17A . For purposes of 33 this section , “program” means the wastewater and drinking water 34 treatment financial assistance program and “committee” means the 35 -2- SF 512 (5) 87 mm/sc/jh 2/ 20

S.F. 512 water quality financing review committee created in subsection 1 9 . 2 2. A wastewater and drinking water treatment financial 3 assistance fund is created and shall consist of appropriations 4 made to the fund and transfers of interest, earnings, and 5 moneys from other funds as provided by law. Moneys transferred 6 to the fund pursuant to section 16.134A are appropriated to the 7 authority for purposes of the program. Moneys in the fund are 8 not subject to section 8.33 . Notwithstanding section 12C.7, 9 subsection 2 , interest or earnings on moneys in the fund shall 10 be credited to the fund. 11 3. Financial assistance under the program shall be used 12 to install or upgrade wastewater treatment facilities and 13 systems and drinking water treatment facilities and systems, 14 including source water protection projects , and for engineering 15 or technical assistance for facility planning and design. 16 4. The authority committee shall distribute approve 17 financial assistance in from the fund in accordance with the 18 following: 19 a. The goal of the program shall be to base awards on the 20 impact of the grant combined with other sources of financing to 21 ensure that sewer rates do not exceed one and one-half percent 22 of a community’s median household income. 23 b. a. Communities shall be eligible for financial 24 assistance by qualifying as Priority shall be given for 25 projects in which a disadvantaged community and is seeking 26 financial assistance for the installation or upgrade of 27 wastewater treatment facilities due to regulatory activity 28 by the department of natural resources and drinking water 29 treatment facilities . For purposes of this section , the term 30 “disadvantaged community” means the same as defined by the 31 department. 32 c. b. Priority shall be given to projects in which the 33 meeting criteria established in section 455B.199B in which the 34 applicant seeks financial assistance is to be used to obtain 35 -3- SF 512 (5) 87 mm/sc/jh 3/ 20

S.F. 512 with financing under the water pollution control works and 1 drinking water facilities financing program pursuant to section 2 16.131 or other federal , or state , or private financing. 3 d. c. Priority shall also be given to projects whose 4 completion will provide significant improvement to water 5 quality in the relevant watershed. 6 e. d. Priority shall also be given to communities that 7 employ an alternative wastewater treatment technology pursuant 8 to section 455B.199C . 9 f. e. Priority shall be also be given to those communities 10 where sewer or water rates are the highest as a percentage of 11 that community’s median household income. 12 f. Priority shall also be given to communities that employ 13 technology to address the latest version of the “Iowa Nutrient 14 Reduction Strategy” initially presented in November 2012 by the 15 department of agriculture and land stewardship, the department 16 of natural resources, and Iowa state university of science and 17 technology. 18 g. Financial assistance in the form of grants shall be 19 issued on an annual basis. 20 h. An applicant shall not receive a grant that exceeds five 21 hundred thousand dollars. 22 4A. A utility management organization formed under chapter 23 28E or operated by a rural water system organized under chapter 24 357A or chapter 504 shall be considered eligible for financial 25 assistance under the program. 26 5. The authority in cooperation with the department of 27 natural resources shall share provide information and resources 28 to the committee when the committee is determining the 29 qualifications of a community for financial assistance from the 30 fund. 31 6. The authority shall enter into agreements with financial 32 assistance recipients and distribute moneys under the program 33 pursuant to financial assistance determinations made by the 34 committee. The authority may use an amount of not more than 35 -4- SF 512 (5) 87 mm/sc/jh 4/ 20

S.F. 512 four one percent of any moneys appropriated for deposit in the 1 fund for administration purposes. 2 7. By October 1 of each year, the authority shall submit 3 a report to the governor and the general assembly itemizing 4 expenditures under the program during the previous fiscal year, 5 if any. 6 8. a. Beginning September 1, 2027, and every ten years 7 thereafter, a program review committee is established for 8 purposes of reviewing the wastewater and drinking water 9 treatment financial assistance program. By December 1 of the 10 same year, the program review committee shall file a report 11 with the governor and the general assembly that reviews the 12 effectiveness of the program during the prior ten fiscal years. 13 b. The program review committee shall consist of the 14 following members: 15 (1) The governor or the governor’s designee. 16 (2) The secretary of agriculture or the secretary’s 17 designee. 18 (3) The executive director of the authority or the executive 19 director’s designee. 20 (4) The director of the department of natural resources or 21 the director’s designee. 22 (5) Four members of the general assembly, with two from the 23 senate and two from the house of representatives and not more 24 than one member from each chamber being from the same political 25 party. The two senators shall be designated one member each 26 by the president of the senate, after consultation with the 27 majority leader of the senate, and by the minority leader of 28 the senate. The two representatives shall be designated one 29 member each by the speaker of the house of representatives, 30 after consultation with the majority leader of the house of 31 representatives, and by the minority leader of the house of 32 representatives. 33 c. Staffing services shall be provided by the authority. 34 9. a. A water quality financing review committee is 35 -5- SF 512 (5) 87 mm/sc/jh 5/ 20

S.F. 512 created consisting of the secretary of agriculture or the 1 secretary’s designee, the executive director of the authority 2 or the executive director’s designee, and the director of the 3 department of natural resources or the director’s designee. 4 b. The committee shall review and approve or deny 5 applications for financial assistance under the wastewater 6 and drinking water treatment financial assistance program 7 established in this section. 8 Sec. 5. NEW SECTION . 16.134A Water quality financial 9 assistance fund. 10 1. A water quality financial assistance fund is created in 11 the state treasury as a revolving fund. 12 2. The fund shall consist of all of the following: 13 a. (1) Moneys transferred to the fund pursuant to section 14 423G.6. 15 (2) This paragraph “a” is repealed on January 1, 2030. 16 b. Appropriations made to the fund and transfers of 17 interest, earnings, and moneys from other funds as provided by 18 law. 19 3. For each fiscal year in the fiscal period beginning 20 July 1, 2018, and ending June 30, 2029, there is appropriated 21 the following percentages of the balance of the fund for the 22 following purposes: 23 a. Forty percent to the Iowa finance authority to support 24 the wastewater and drinking water treatment financial 25 assistance program created in section 16.134. 26 b. Forty-five percent to the Iowa finance authority to be 27 credited to the water quality financing program fund created 28 pursuant to section 16.144. 29 c. Fifteen percent to the division of soil conservation 30 and water quality of the department of agriculture and land 31 stewardship to support the water quality urban infrastructure 32 program created in section 466B.44. 33 4. Moneys in the fund are not subject to section 8.33. 34 Notwithstanding section 12C.7, subsection 2, interest or 35 -6- SF 512 (5) 87 mm/sc/jh 6/ 20

S.F. 512 earnings on moneys in the fund shall be credited to the fund. 1 Sec. 6. NEW SECTION . 16.142 Definitions. 2 As used in this part, unless the context otherwise requires: 3 1. “Cost” means all costs, charges, expenses, or other 4 indebtedness incurred by a loan recipient and determined by 5 the authority as reasonable and necessary for carrying out 6 all works and undertakings necessary or incidental to the 7 accomplishment of any project. 8 2. “Eligible entity” means a municipality or a landowner, 9 as determined by the authority, a public utility as defined 10 in section 476.1, or a rural water district or rural water 11 association as defined in section 357A.1. 12 3. “Loan recipient” means an eligible entity that has 13 received a loan under the program. 14 4. “Municipality” means a governmental body such as a state 15 agency or a political subdivision of the state. Municipality 16 includes but is not limited to a city, city utility, county, 17 soil and water conservation district, sanitary district, a 18 subdistrict of any of the foregoing districts, a state agency, 19 or other governmental body or corporation empowered to provide 20 sewage collection and treatment services or drinking water, or 21 any entity jointly exercising governmental powers pursuant to 22 chapter 28E or 28F, or any other combination of two or more 23 governmental bodies or corporations acting jointly under the 24 laws of this state in connection with a project. 25 5. “Program” means the water quality financing program 26 created in this part. 27 6. “Project” means any combination of improvements, 28 structures, developments, tasks, actions, constructions, 29 modifications, operations, or practices designed to improve 30 water quality that are proposed by an eligible entity and 31 approved by the authority. “Project” includes but is not 32 limited to any of the following: 33 a. A project meeting the requirements of part 2 of this 34 subchapter. 35 -7- SF 512 (5) 87 mm/sc/jh 7/ 20

S.F. 512 b. A project, operation, or practice undertaken or carried 1 out to address watershed protection, flood prevention, or water 2 quality improvement. 3 c. A project meeting the requirements of a sponsor project 4 under section 455B.199. 5 Sec. 7. NEW SECTION . 16.143 Water quality financing 6 program. 7 1. The authority, in cooperation with the department of 8 natural resources and the department of agriculture and land 9 stewardship, shall establish and administer a water quality 10 financing program. The purpose of the program shall be to 11 provide financial assistance to enhance the quality of surface 12 water and groundwater, particularly by providing financial 13 assistance for projects designed to improve water quality 14 by addressing point and nonpoint sources, with a higher 15 prioritization provided to collaborative efforts. 16 2. The authority shall determine the interest rate 17 and repayment terms for loans made under the program, in 18 cooperation with the department of natural resources and 19 the department of agriculture and land stewardship, and the 20 authority shall enter into loan agreements with eligible 21 entities in compliance with and subject to the terms and 22 conditions of the program as described in this part. 23 3. The authority may charge loan recipients fees and assess 24 costs against such recipients necessary for the continued 25 operation of the program. Such fees and costs shall not exceed 26 the costs directly associated with the administration of the 27 program. Fees and costs collected pursuant to this subsection 28 shall be deposited in the appropriate fund or account created 29 in section 16.144. 30 4. The program shall be administered by the authority in 31 accordance with rules adopted by the authority pursuant to 32 chapter 17A. 33 Sec. 8. NEW SECTION . 16.144 Water quality financing program 34 fund —— appropriation —— other funds. 35 -8- SF 512 (5) 87 mm/sc/jh 8/ 20

S.F. 512 1. a. A water quality financing program fund is created 1 and shall consist of appropriations made to the fund, moneys 2 credited to the fund pursuant to section 16.134A, and transfers 3 of interest, earnings, and moneys from other funds as provided 4 by law. The fund shall be administered by the authority as 5 a revolving fund. Moneys in the fund are appropriated to 6 the authority for purposes of the program. Notwithstanding 7 section 8.33, moneys in the fund that remain unencumbered or 8 unobligated at the close of a fiscal year shall not revert 9 but shall remain available for expenditure for the purposes 10 designated. Notwithstanding section 12C.7, subsection 2, 11 interest or earnings on moneys in the fund shall be credited 12 to the fund. 13 b. The authority shall use the moneys in the fund to provide 14 financial assistance to eligible entities under the program. 15 The authority may provide financial assistance in the form 16 deemed most convenient for the efficient financing of projects, 17 including loans, forgivable loans, or grants. The authority 18 shall administer the fund and the program in such a manner 19 as to provide a permanent source of water quality project 20 financial assistance to eligible entities. 21 c. The authority may annually use an amount of not more 22 than one percent of the moneys in the fund for administrative 23 purposes. 24 2. a. The authority may establish and maintain other 25 funds and accounts determined to be necessary to carry out the 26 purposes of the program and shall provide for the funding, 27 administration, investment, restrictions, and disposition of 28 the funds and accounts. 29 b. Moneys appropriated to and used by the authority for 30 purposes of paying the costs and expenses associated with 31 the administration of the program shall be administered as 32 determined by the authority. 33 c. All moneys transferred to the authority for purposes of 34 the program shall be deposited and held in a fund or account 35 -9- SF 512 (5) 87 mm/sc/jh 9/ 20

S.F. 512 established and maintained pursuant to this section. 1 3. The funds or accounts held by the authority, or a trustee 2 acting on behalf of the authority pursuant to a trust agreement 3 related to the program, shall not be considered part of the 4 general fund of the state, are not subject to appropriation for 5 any other purpose by the general assembly, and in determining 6 a general fund balance shall not be included in the general 7 fund of the state, but shall remain in the funds and accounts 8 maintained by the authority or trustee pursuant to a trust 9 agreement. Funds and accounts held by the authority, or a 10 trustee acting on behalf of the authority pursuant to a trust 11 agreement related to the program, are separate dedicated funds 12 and accounts under the administration and control of the 13 authority and subject to section 16.31. 14 4. By October 1, 2018, and by October 1 of each year 15 thereafter, the authority shall submit a report to the governor 16 and the general assembly itemizing expenditures from the fund, 17 if any, during the previous fiscal year. 18 Sec. 9. NEW SECTION . 16.145 Eligible entities —— agreements 19 required. 20 1. An eligible entity may apply to the authority for 21 financial assistance under the program by submitting a plan 22 that meets the following requirements: 23 a. The plan includes one or more projects that improve 24 water quality in the local area or watershed. Projects shall 25 use practices identified in the latest version of the document 26 entitled “Iowa Nutrient Reduction Strategy” initially presented 27 in November 2012 by the department of agriculture and land 28 stewardship, the department of natural resources, and Iowa 29 state university of science and technology. A drainage or 30 levee district established under chapter 468 shall utilize the 31 installation of edge-of-field infrastructure as described in 32 section 466B.43. 33 b. The plan describes in detail the manner in which the 34 projects will be financed and undertaken, including, as 35 -10- SF 512 (5) 87 mm/sc/jh 10/ 20

S.F. 512 applicable, the sources of revenue directed to financing the 1 improvements as well as the eligible entities that will be 2 receiving the revenues and how such revenues will be spent on 3 the projects. 4 2. The authority shall review and approve or deny 5 applications for financial assistance. The provision of 6 financial assistance under the program shall take into account, 7 as applicable, the number of municipalities, landowners, public 8 utilities, rural water districts, or rural water associations 9 comprising an eligible entity and the eligible entity’s 10 financing capacity. The authority shall score applications 11 for financial assistance according to rules adopted pursuant 12 to this part. The authority shall only provide financial 13 assistance to eligible entities that have sufficient financing 14 capacity and that submit an appropriate plan designed to 15 improve water quality. 16 3. An approved eligible entity shall enter into an agreement 17 with the authority for the provision of financial assistance. 18 The agreement shall include standard terms for the receipt 19 of program moneys and any other terms the authority deems 20 necessary or convenient for the efficient administration of the 21 program. 22 Sec. 10. Section 423.3, Code 2017, is amended by adding the 23 following new subsection: 24 NEW SUBSECTION . 103. a. The sales price from the sale or 25 furnishing by a water utility of a water service in the state 26 to consumers or users. 27 b. For purposes of this subsection: 28 (1) “Water service” means the delivery of water by piped 29 distribution system. 30 (2) “Water utility” means a public utility as defined in 31 section 476.1 that furnishes water by piped distribution system 32 to the public for compensation. 33 Sec. 11. NEW SECTION . 423G.1 Short title. 34 This chapter may be cited as the “Water Service Tax Act” . 35 -11- SF 512 (5) 87 mm/sc/jh 11/ 20

S.F. 512 Sec. 12. NEW SECTION . 423G.2 Definitions. 1 1. All words and phrases used in this chapter and defined in 2 section 423.1 have the same meaning given them by section 423.1 3 for purposes of this chapter. 4 2. As used in this chapter, “water service” and “water 5 utility” mean the same as defined in section 423.3, subsection 6 103. 7 Sec. 13. NEW SECTION . 423G.3 Water service tax. 8 An excise tax at the rate of six percent is imposed on the 9 sales price from the sale or furnishing by a water utility of a 10 water service in the state to consumers or users. 11 Sec. 14. NEW SECTION . 423G.4 Exemptions. 12 The sales price from transactions exempt from state sales 13 tax under section 423.3, except section 423.3, subsection 103, 14 is also exempt from the tax imposed by this chapter. 15 Sec. 15. NEW SECTION . 423G.5 Administration by director. 16 1. The director of revenue shall administer the water 17 service tax as nearly as possible in conjunction with the 18 administration of the state sales and use tax law, except that 19 portion of the law that implements the streamlined sales and 20 use tax agreement. The director shall provide appropriate 21 forms, or provide on the regular state tax forms, for reporting 22 water service tax liability. 23 2. The director may require all persons who are engaged 24 in the business of deriving any sales price or purchase 25 price subject to tax under this chapter to register with 26 the department. The director may also require a tax permit 27 applicable only to this chapter for any retailer not 28 collecting, or any user not paying, taxes under chapter 423. 29 3. Section 422.25, subsection 4, sections 422.30, 422.67, 30 and 422.68, section 422.69, subsection 1, sections 422.70, 31 422.71, 422.72, 422.74, and 422.75, section 423.14, subsection 32 1, and sections 423.23, 423.24, 423.25, 423.31 through 33 423.35, 423.37 through 423.42, and 423.47, consistent with the 34 provisions of this chapter, shall apply with respect to the tax 35 -12- SF 512 (5) 87 mm/sc/jh 12/ 20

S.F. 512 authorized under this chapter, in the same manner and with the 1 same effect as if the excise taxes on the sale or furnishing of 2 a water service were retail sales taxes within the meaning of 3 those statutes. Notwithstanding this subsection, the director 4 shall provide for quarterly filing of returns and for other 5 than quarterly filing of returns both as prescribed in section 6 423.31. All taxes collected under this chapter by a retailer 7 or any user are deemed to be held in trust for the state of 8 Iowa. 9 Sec. 16. NEW SECTION . 423G.6 Deposit of revenues. 10 1. All moneys received and all refunds shall be deposited in 11 or withdrawn from the general fund of the state. 12 2. Subsequent to the deposit in the general fund of the 13 state, the department shall transfer the following amounts to 14 the following funds: 15 a. For revenues collected on or after July 1, 2018, but 16 before August 1, 2019, one-twelfth of the revenues to the 17 water quality infrastructure fund created in section 8.57B, 18 and one-twelfth of the revenues to the water quality financial 19 assistance fund created in section 16.134A. 20 b. For revenues collected on or after August 1, 2019, 21 but before August 1, 2020, one-sixth of the revenues to the 22 water quality infrastructure fund created in section 8.57B, 23 and one-sixth of the revenues to the water quality financial 24 assistance fund created in section 16.134A. 25 c. For revenues collected on or after August 1, 2020, 26 one-half of the revenues to the water quality financial 27 assistance fund created in section 16.134A. 28 Sec. 17. NEW SECTION . 423G.7 Future repeal. 29 This chapter is repealed upon the occurrence of one of the 30 following, whichever is earlier: 31 1. The enactment date that the tax rate for the sales 32 tax imposed upon the retail sales price of tangible personal 33 property and the furnishing of enumerated services sold in this 34 state in effect on July 1, 2016, is increased. 35 -13- SF 512 (5) 87 mm/sc/jh 13/ 20

S.F. 512 2. July 1, 2029. 1 Sec. 18. Section 455B.171, Code 2017, is amended by adding 2 the following new subsections: 3 NEW SUBSECTION . 10A. “Iowa nutrient reduction strategy” 4 means a water quality initiative developed and updated by the 5 department of agriculture and land stewardship, the department 6 of natural resources, and the college of agriculture and life 7 sciences at Iowa state university of science and technology in 8 order to assess and reduce nutrients in this state’s watersheds 9 that utilize a pragmatic, strategic, and coordinated approach 10 with the goal of accomplishing reductions over time. 11 NEW SUBSECTION . 15A. “Nutrient” means total nitrogen and 12 total phosphorus. 13 Sec. 19. Section 455B.171, subsection 19, Code 2017, is 14 amended to read as follows: 15 19. “Point source” means any discernible, confined, and 16 discrete conveyance, including but not limited to any pipe, 17 ditch, channel, tunnel, conduit, well, discrete fissure, 18 container, rolling stock, concentrated animal feeding 19 operation, or vessel or other floating craft, from which 20 pollutants are or may be discharged. “Point source” does not 21 include agricultural storm water discharge and return flows 22 from irrigated agriculture. 23 Sec. 20. Section 455B.177, Code 2017, is amended by adding 24 the following new subsection: 25 NEW SUBSECTION . 3. The general assembly further finds 26 and declares that it is in the interest of the people of Iowa 27 to assess and reduce nutrients in surface waters over time by 28 implementing the Iowa nutrient reduction strategy. To evaluate 29 the progress achieved over time toward the goals of the Iowa 30 nutrient reduction strategy and the United States environmental 31 protection agency gulf hypoxia action plan, the baseline 32 condition shall be calculated for the time period from 1980 to 33 1996. 34 Sec. 21. Section 466B.3, subsection 3, paragraph c, Code 35 -14- SF 512 (5) 87 mm/sc/jh 14/ 20

S.F. 512 2017, is amended to read as follows: 1 c. Whether the funds, programs, and regulatory efforts 2 coordinated by the council eventually result in a long-term 3 improvement to the quality of surface water in Iowa. To 4 evaluate the progress achieved over time toward the goals of 5 the Iowa nutrient reduction strategy, as defined in section 6 455B.171, and the United States environmental protection agency 7 gulf hypoxia action plan, the baseline condition shall be 8 calculated for the time period from 1980 to 1996. 9 Sec. 22. Section 466B.42, Code 2017, is amended to read as 10 follows: 11 466B.42 Water quality initiative. 12 The division shall establish a water quality initiative 13 in order to assess and reduce nutrients in this state’s 14 watersheds, including subwatersheds , and regional watersheds , 15 and for implementing its responsibilities under the Iowa 16 nutrient reduction strategy as defined in section 455B.171 . 17 The division shall establish and administer projects to 18 reduce nutrients in surface waters from nonpoint sources in 19 a scientific, reasonable, and cost-effective manner. The 20 division shall utilize a pragmatic, strategic, and coordinated 21 approach with the goal of accomplishing reductions over time. 22 To evaluate the progress achieved over time toward the goals 23 of the Iowa nutrient reduction strategy and the United States 24 environmental protection agency gulf hypoxia action plan, the 25 baseline condition shall be calculated for the time period from 26 1980 to 1996. 27 Sec. 23. NEW SECTION . 466B.43 Water quality agriculture 28 infrastructure programs. 29 1. As part of the water quality initiative established 30 pursuant to section 466B.42, the division shall administer 31 water quality agriculture infrastructure programs created in 32 this section. 33 2. The purpose of the programs is to support projects for 34 the installation of infrastructure, including conservation 35 -15- SF 512 (5) 87 mm/sc/jh 15/ 20

S.F. 512 structures, practices, or other measures that reduce 1 contributing nutrient loads, associated sediment, or 2 contaminants from sources to surface waters. The programs 3 shall be administered in a manner that is consistent with 4 the latest version of the “Iowa Nutrient Reduction Strategy” 5 initially presented in November 2012 by the department of 6 agriculture and land stewardship, the department of natural 7 resources, and Iowa state university of science and technology. 8 3. An edge-of-field infrastructure program is created. 9 The program shall support projects located on agricultural 10 land, which may include demonstration projects, that capture 11 or filter nutrients entering into a surface water. The 12 program’s projects shall be limited to infrastructure designed 13 and installed for use over multiple years, including but not 14 limited to wetlands, bioreactor systems, saturated buffers, 15 or land use changes. The program shall be financed on a 16 cost-share basis. 17 4. An in-field infrastructure program is created. The 18 program shall support projects located on agricultural land, 19 which may include demonstration projects, that decrease erosion 20 and precipitation-induced surface runoff, increase water 21 infiltration rates, and increase soil sustainability. The 22 program’s projects shall be limited to infrastructure designed 23 and installed for use over multiple years, including but not 24 limited to structures, terraces, and waterways located on 25 cropland or pastureland, and including but not limited to soil 26 conservation or erosion control structures or managed drainage 27 systems. The program shall be financed on a cost-share basis. 28 5. Any state moneys used to finance a project under a 29 water quality agriculture infrastructure program shall be 30 administered according to an agreement entered into by the 31 division and the owner of the land where the infrastructure 32 is to be installed. The agreement shall include standard 33 terms and conditions for the receipt of program moneys and 34 any other terms and conditions the division deems necessary 35 -16- SF 512 (5) 87 mm/sc/jh 16/ 20

S.F. 512 or convenient for the efficient administration of the project 1 or program. The division may support multiple installations 2 of infrastructure on a single parcel of land. The division 3 may also combine programs if cost effective. The division 4 may annually use an amount of not more than four percent of 5 the moneys used to support each program for administrative 6 purposes. 7 6. By October 1, 2018, and each October 1, thereafter, the 8 division shall submit a report to the governor and the general 9 assembly itemizing expenditures, by hydrologic unit code 8 10 watershed, under the programs during the previous fiscal year, 11 if any. 12 7. Any information obtained by the division identifying 13 a person holding a legal interest in agricultural land or 14 specific agricultural land shall be a confidential record under 15 section 22.7. 16 Sec. 24. NEW SECTION . 466B.44 Water quality urban 17 infrastructure program. 18 1. As part of the water quality initiative established 19 pursuant to section 466B.42, the division shall administer a 20 water quality urban infrastructure program. 21 2. The purpose of the program is to support watershed 22 projects and advance implementation of the latest version of 23 the “Iowa Nutrient Reduction Strategy” initially presented 24 in November 2012 by the department of agriculture and land 25 stewardship, the department of natural resources, and Iowa 26 state university of science and technology, which program 27 support may include demonstration projects that decrease 28 erosion, precipitation-induced surface runoff, and storm 29 water discharges and that increase water infiltration rates. 30 The program’s projects shall be based on Iowa’s storm water 31 management manual published by the department of natural 32 resources. 33 3. The program shall be financed on a cost-share basis or 34 through cooperative agreements with watershed projects funded 35 -17- SF 512 (5) 87 mm/sc/jh 17/ 20

S.F. 512 through section 455B.199 whose project activities fall outside 1 the territorial boundaries of a city. 2 4. Any state moneys used to finance a project under a water 3 quality urban infrastructure program shall be administered 4 according to an agreement entered into by the division and the 5 owner of the land where the infrastructure is to be installed. 6 The agreement shall include standard terms and conditions 7 for the receipt of program moneys and any other terms and 8 conditions the division deems necessary or convenient for 9 the efficient administration of the project or program. The 10 division may support multiple installations of infrastructure 11 on a single parcel of land. The division may annually use an 12 amount of not more than four percent of the moneys used to 13 support the program for administrative purposes. 14 5. Notwithstanding any other provision in this section 15 to the contrary, beginning on July 1, 2018, the division may 16 use any amount available to support the water quality urban 17 infrastructure program to instead extend and support the 18 three-year data collection of in-field agricultural practices 19 project as enacted in 2015 Iowa Acts, ch. 132, §18. 20 6. Notwithstanding any other provision of this section 21 to the contrary, the division may use any amount available 22 to support the water quality urban infrastructure program to 23 develop and maintain an online resource displaying measurable 24 indicators of desirable change in water quality within the 25 state’s watersheds. These measurable indicators may include 26 but are not limited to public and private funding inputs, 27 involvement in water quality projects, and improvements, land 28 use, practice adoption, calculated load reduction, and measured 29 loads at existing monitoring stations. 30 7. By October 1, 2018, and by October 1 of each year 31 thereafter, the division shall submit a report to the governor 32 and the general assembly itemizing expenditures under the 33 program, if any, during the previous fiscal year. 34 8. Any information obtained by the division identifying a 35 -18- SF 512 (5) 87 mm/sc/jh 18/ 20

S.F. 512 person holding a legal interest in land or specific land shall 1 be a confidential record under section 22.7. 2 Sec. 25. INTERIM STUDY COMMITTEE ON SMALL CITIES AND CLEAN 3 WATER STANDARDS. 4 1. The legislative council is requested to establish a study 5 committee for the 2017 interim to identify and comprehensively 6 review the financial and other challenges faced by small 7 cities in complying with the various state and federal clean 8 water standards, and to consider options for addressing those 9 challenges. 10 2. The interim committee’s review shall include an 11 evaluation of the future effectiveness of the wastewater 12 and drinking water treatment financial assistance program 13 created in this Act in section 16.134 and the water quality 14 financing program created in sections 16.142 through 16.145, 15 and may include evaluations of other existing or proposed 16 state programs as desired. The committee shall seek input 17 and may request information or assistance from public and 18 private stakeholders and experts, including utility management 19 organizations, the Iowa association of business and industry, 20 the department of natural resources, the Iowa finance 21 authority, the department of agriculture and land stewardship, 22 the economic development authority, the Iowa chamber alliance, 23 the Iowa league of cities, and the Iowa state association of 24 counties. 25 3. The interim committee shall submit its findings and 26 recommendations to the general assembly for consideration 27 during the 2018 legislative session. 28 Sec. 26. 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 -19- SF 512 (5) 87 mm/sc/jh 19/ 20