The Utah Water Quality Board is the governing board for one of the four loan programs mentioned in your Nov. 29 editorial "Utah's water loan system needs some fine-tuning." We would like to comment on the suggestions presented in the article.

The Utah Wastewater Loan Program has been efficiently operating since 1984. In fact, Utah's loan program served as a model for the federal wastewater loan program, which began in 1988. Our track record is enviable. Of the 73 wastewater loans made to date, there have been no defaults and not even a missed payment.This loan program has provided an invaluable service to Utah communities, many of which could not afford to construct a wastewater project without state assistance.

The Utah Foundation's report suggests three ways this loan program could be "fine tuned": buy down interest rates on market bonds by making state grants; liquidate the state loan portfolio and use the proceeds to do interest buy-downs; and establish a single financial board to handle the financial aspects of all state loan programs.

Our analyses have shown that interest rate buy-downs do not fund the most projects given current market conditions of low inflation and low interest earnings. More wastewater projects can be funded by making revolving loans. Further, the federal grants that have capitalized 70 percent of the wastewater loan program cannot be used for interest buy-down grants.

There is a significant discount that would occur if the wastewater loan portfolio were to be liquidated. In addition to the up-front loss, the repayment stream on loans made from the liquidated proceeds would be less than the current repayment stream on outstanding loans.

Currently, the only good reason to liquidate the portfolio would be to help fund an urgently needed project that otherwise could not proceed.

The legal, accounting and investing aspects of state loan programs have already been centralized. We do not feel it is prudent for a single financial board to set the terms and conditions of all loans the state makes. The establishment of a separate and additional board would simply add another layer of bureaucracy.

The purpose of the wastewater loan program is to help communities solve water pollution problems. It is important that the board which sets the terms of the wastewater loans have insight into the particular needs of each applicant, both on a financial and technical level.

The technical assessment may include the priority of the project, the status of any water quality violations, the water quality improvement which will result if a project is implemented, and whether the user charge system is equitable for all users and sufficient to service a state-issued loan and provide adequate system operations and maintenance.

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A separate board interested primarily in rates of return, financial ratios and the bottom line would not appear to serve the best interests of our communities regarding their wastewater needs. In our opinion, only the Water Quality Board has the expertise and ability to make these assessments.

Don A. Ostler, P.E.

Executive Secretary

Utah State Water Quality Board

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