DDW-2024-008919

195 North 1950 West • Salt Lake City, UT
Mailing Address: P.O. Box 144830 • Salt Lake City, UT 84114-4830
Telephone [phone] • Fax [phone] • T.D.D. [phone]
www.deq.utah.gov
Printed on 100% recycled paper
State of Utah

Department of
Environmental Quality

Kimberly D. Shelley
Executive Director

DIVISION OF DRINKING WATER
Nathan Lunstad
Director

Drinking Water Board
Kristi Bell, Chair
Eric Franson, P.E., Vice-Chair
Dawn Ramsey
Justin Maughan
Corinna Harris
Jeff Coombs
Shazelle Terry
Blake Tullis, Ph.D.
Kimberly D. Shelley
Nathan Lunstad
Executive Secretary

SPENCER J. COX
Governor

DEIDRE HENDERSON
Lieutenant Governor

Dallas Anderson [e-mail]
Deseret – Oasis Special Service District
3300 West 4000 South
Delta, Utah 84624

Subject: State Loan Authorization and Procedures for Committal of Funds; Deseret – Oasis
Special Service District, System #14051, Loan #3S2176

Dear Dallas Anderson:

On June 25, 2024, the Drinking Water Board (hereinafter called the "Board") authorized a
construction loan of $155,000 at 2.61% interest/hardship grant fee for 20 years to Deseret –
Oasis Special Service District (hereinafter called the "Recipient") for the construction of
purchasing and installing an emergency generator and updating and installing a SCADA system
on the existing treatment plant. (hereinafter called the "Project"). Hinckley Town will contribute
$57,000 in-kind towards the project. The loan from the Board will be secured by General
Obligation bond(s), Non-voted Water Revenue bond(s), or a combination thereof issued by the
Recipient (hereinafter referred to as the "Bonds"). The Board has determined the retirement period
for the Bonds is to be no more than 20 annual installments with interest payable on the unpaid
principal balance from the date of issuance at an annual rate of 2.61%. The Board will require
annual payments on the Bonds in the amount of approximately $10,000 (proposed bond
repayment schedule is enclosed). Interest only payments calculated from the date of closing
through the following January, will be due on the first day of January. If a revenue bond is used, a
debt service reserve fund equal to this annual amount must be established by no more than ten
equal annual deposits.

The recipient is required to pay the Division of Drinking Water a 1.0% Loan Origination Fee (Fee)
on the new funding to pay for project administration. The fee will be $15,000.

As a condition of this loan, the Board will require the Recipient to conduct a review of the charges
for service with the assistance of the Division of Drinking Water, establish a rate structure that
will conserve water and provide funds for debt service, and to resolve the appropriate issues on
July 11, 2024
Dallas Anderson, Deseret - Oasis

Page 2

their Compliance Report. As an additional condition, the Board will require the Recipient to
establish a capital facilities replacement reserve account. Annual Payments/Deposits to this fund
shall be 5% of the Recipient's drinking water system's annual operating budget including debt
service and depreciation and must continue until the Bond is redeemed. This capital facilities
replacement reserve fund shall not serve as security for the payment of principal or interest on the
loan. The Recipient shall adopt such resolutions as necessary to limit the use of the fund to
construct capital facilities for its water system and to notify the Board prior to making any
disbursements from the fund so the Board can confirm that any expenditure is for an acceptable
purpose, the Recipient will not need the consent of the Board prior to making any expenditure
from the fund.

The Bonds may be prepaid, in whole or in part, at any time in minimum amounts of $1,000 or any
integral multiple thereof, with the prepayments applied against the Bond principal in inverse order
of maturities. In addition, if any Bond proceeds remain after the Project is completed, those
remaining proceeds shall be used to redeem Bond principal in inverse order of maturities. The
Bond documents must contain the following provisions:

i] The Bonds will be issued initially in the form of a single, fully-registered bond in
the amount of $155,000 (total on repayment schedule) with provisions for
incremental advances quarterly, based on a schedule that coincides with the rate at
which engineering/construction related costs are expected to be incurred for the
Project. However, provisions shall be made which would allow the Bonds to be
exchanged for separate serial bonds in minimum denominations of $1,000.

ii] If a revenue bond is used the Bonds must be secured by a pledge by the Recipient
of 100% of the net revenue produced by the Recipient's water system, and the
Recipient will be required to warrant and demonstrate that those net revenues equal
or exceed 125% of the total annual debt service requirements on the Bonds and any
other obligations secured by a pledge of those revenues.

iii] If interest is payable on the Bonds, that interest must be tax-exempt, and delivery
of the Bonds must be accompanied by an opinion of recognized bond counsel that
the interest is not subject to state or federal income taxes.

iv] If a revenue bond is used, and if the Recipient has previously issued bonds or other
obligations secured by a pledge of water system revenues, the Bonds to be
purchased by the Board shall be issued on a parity with those prior bonds or
obligations with respect to the revenue. If it is not possible for the Bonds to be
issued on a parity basis, the Recipient shall contact Mr. Michael Grange
immediately at [phone].

Based on the information presented to the Board, the following sources of funding will be
available for the construction of the Project:

July 11, 2024
Dallas Anderson, Deseret - Oasis

Page 3

Agency Share % of Total

Recipient In-Kind $57,000 27%
Drinking Water Board (Loan) $155,000 73%

Total Project Cost $212,000 100.0%

As a condition to the purchase of the Bonds by the Board, the Recipient must advertise for bids
for the construction of the Project, based on plans and specifications approved by the Division of
Drinking Water, must open bids, and must demonstrate that available sources of funding are
adequate to cover the cost of the project and the bond insurance costs. In addition, prior to bond
closing, the Recipient must make arrangements for all loan proceeds and all other Project funds to
be available for deposit into the escrow account described below at the time the Board delivers
funds unless other acceptable arrangements have been previously made.

The financial assistance is conditioned upon the availability of funds at the time of closing,
satisfaction of the conditions specified in this letter, and adherence to the project schedule approved
at that time. If the Project does not proceed according to the project schedule, the Board may
withdraw project authorization, so that other projects ready to proceed can obtain necessary funding.
The Board may consider extensions to the project schedule. Any extension requested must be fully
justified. After the Project's construction bids have been opened and the below listed requirements
have been met, and if the project remains substantially as approved, loan closing will proceed
subject to funds available at that time. But, if substantial changes in the Project are required, they
must be considered by the Board for committal of funds.

As Recipient of this project, you will need to complete the following items before the Board will
purchase your Bonds:

1. The State of Utah has appointed William L. Prater Esq. as special legal counsel to the
Board (the “Board’s Attorney”) and has assigned to him the responsibility of reviewing all
proceedings and documents relating to the sale of bonds to the Board. His address is 6925
Union Park Center, Suite 265, Midvale, Utah 84047; telephone number [phone] or
mail to P.O. Box 71368, Salt Lake City, Utah 84171. The Recipient's bond counsel shall
submit the following items to his office at the times indicated below.

a. No later than one week prior to the meeting at which the Recipient intends to adopt
its Resolution for the issuance of the Bonds, a complete copy of the Resolution
shall be submitted for review.

b. No later than two weeks after the adoption of the Resolution, the following items
shall be submitted:

i] A true and complete photocopy of the Resolution as adopted, showing
signatures of the appropriate officials of the Recipient on the Resolution
and on the Notice of Meeting, Acknowledgment of Notice and Consent,
July 11, 2024
Dallas Anderson, Deseret - Oasis

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Certificate of Publication, Open Meeting Certificate, and other similar
documents relating to the Resolution.

ii] A true and complete photocopy of the minutes, notices, resolutions, and
other documents relating to the Bonds, showing signatures of the
appropriate officials.

iii] A complete copy of the proposed documents to be signed at Closing,
including (but not necessarily limited to) General Certificate, Signature
Identification and Non-Litigation Certificate, Receipt, Arbitrage Certificate
(if required), Recipient Attorney's Non-Litigation Certificate, Certificate of
Clerk (or Recorder) as to contents of Bond Transcript File, Escrow
Agreement, and the Bond Attorney's Opinion.

iv] A copy of the water rate structure described in paragraph 3 below of this
letter.

v] A copy of the proposed opinion letter of the Recipient's attorney described
in paragraph 7 of this letter. The procedures for bond approval will be
substantially the same as required by the Utah Municipal Bond Act as it
applies to cities and towns. The opinion of the bond attorney must
accompany delivery of the Bonds to the Board before proceeds of the loan
will be released.

At or after the Closing, the Recipient will be billed by the Board’s Attorney, and
those legal fees must be paid by the Recipient. This is an eligible project expenditure.
If the Recipient fails to close the loan after this authorization, it will nonetheless be by
billed for the actions taken by the Board’s Attorney prior to loan cancellation.

2. Consistent with requirements of the law and the covenants of applicable bond resolutions,
the actual payment of funds by the Board to the Recipient will not take place until the
Board has assurance the funds will be used for Project costs and the Project will actually
be completed. To assure this, all monies to be expended on the Project, including the
Recipient 's share, shall be placed in an escrow account supervised by the Recipient and
the Board. A Copy of the proposed escrow agreement shall be submitted to the Board and
the Board’s Attorney for review.

Disbursements from the escrow account will be reviewed and approved by the Division of
Drinking Water. A Disbursement Request Form must be completed and submitted along
with each request. Disbursement amounts must be authorized in writing by the
Recipient and the State prior to any funds being released from the escrow account.

3. At the time of the adoption of the bond resolution, the Recipient shall have passed an
ordinance or resolution establishing reasonable water use rates and collection enforcement
remedies, taking into account many factors including the need to have sufficient revenue
July 11, 2024
Dallas Anderson, Deseret - Oasis

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income for all outstanding water system debts, operation and maintenance costs, and any
reserve funds. It will then be necessary to implement effective collection procedures. A
copy of the rate ordinance and collection enforcement procedures shall be submitted to the
Board and the Board’s Attorney for review.

4. The Recipient's contract with its engineer shall include the cost of developing the plans
and specifications and the construction inspection of the Project. The contract shall be
submitted to the Division of Drinking Water for review. (This requirement is to assure the
Board that adequate and appropriate arrangements are made for completing and inspecting
the project within the guidelines set by the Board.)

5. The project engineer shall submit, in accordance with R309-500, plans and specifications,
bidding documents, and general conditions to the Division of Drinking Water for review
and Plan Approval prior to soliciting bids on the Project. The engineer shall submit
project documents via [e-mail] per https://deq.utah.gov/drinking-water/general-
plan-approval-process for the expeditious assignment and review of the plans and
specifications. Any changes to approved plans and specifications prior to finalizing the
Recipient Agreement must be reviewed and approved by the Division of Drinking Water.
These funds cannot be disbursed until after the bid opening has occurred and a copy of the
bid tabulation has been reviewed by the Division to assure that sufficient funds are
authorized to complete the Project. If substantial changes in the Project are required, they
must be considered by the Board for committal of additional funds.

6. Rights-of-way and easements for construction, and operation and maintenance of the
Project shall be acquired. The Recipient, through its engineer, shall furnish its attorney a
right-of-way map showing the location of all sources, buildings, structures, pipelines, and
other pertinent facilities not only in the Project but for the entire water system. This map
will be signed by the engineer and presiding officer of the Recipient and a copy provided
to the Recipient's attorney as a basis for the certification described below.

7. The Recipient's attorney shall certify the following items in writing to the Board:

a. The Recipient is a legal entity.

b. The Recipient has valid legal title to the rights-of-way both for the project to be
constructed and the remainder of the existing water system.

c. The Recipient has established the ownership of water rights to any and all water
used in the system and such rights are summarized with associated water right
numbers.

d. The bidding process and contract documents for the construction of the Project
have the proper and legal format and are in compliance with the Utah Code
Annotated 1953 (including, but not limited to Title 34, Chapter 30).

July 11, 2024
Dallas Anderson, Deseret - Oasis

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e. After the completed and executed construction contract, along with the
performance and payment bonds and evidence of necessary insurance, has been
reviewed by the Recipient's attorney, the Recipient's attorney shall furnish to the
Board his legal opinion that all of such items are legal and binding and in
compliance with the Utah Code.

As indicated earlier a draft of this letter is to be submitted to the Board and the Board’s
Attorney two weeks after the adoption of the resolution.

8. The Bonds must be accompanied by a legal opinion of recognized municipal bond counsel
that interest on the bond obligations is exempt from federal income taxation. Unless
otherwise covered, the opinion must also include a statement that the project to be
constructed with the Bond proceeds is not for private activity and that the Recipient has
complied with all the covenants of the Board with respect to the State of Utah Revolving
Fund Recapitalization Program.

9. The Recipient must obtain and maintain continuously throughout the loan repayment
period, a fidelity bond on the positions handling the Recipient's funds, in an amount at
least equal to the total amount of funds that will be on hand at any one time, exclusive of
loan funds. This amount should be at least $20,000. (double the rounded P&I) This fidelity
bond must be obtained and furnished to the Board prior to the loan closing date. The name
of the insured on the position fidelity bond will be "Deseret – Oasis Special Service
District and the State of Utah acting through the Drinking Water Board."

10. As a condition of a non-voted revenue bond, either:

a. The Recipient must provide to the Board a legal petition signed by a majority of
the users of the Recipient 's service area approving the issuance of a non-voted
revenue bond to the Board: or

b. The Recipient must mail notices to each water user in the Recipient's service area
informing them of a public hearing. In addition to time and location of the public
hearing the notice shall inform water users of the Recipient's intent to issue a non-
voted revenue bond to the Board, shall describe the face amount of the bond, the
rate of interest, the repayment schedule and shall describe the impact of the project.
User charge rates and connection fees shall be noted in the notice. The notice shall
state that water users may respond to the Recipient in writing or in the public
hearing within ten days after the date of the notice. A copy of all written responses
and a certified record of a public hearing shall be forwarded to the Division of
Drinking Water. If the Board feels there is significant opposition to the proposed
Project, it may require the Recipient to hold a bond election before the Board's
funds will be made available.

11. As a condition of this loan, the Board will require the Recipient to complete a Water
Conservation Plan. If your system has less than 500 connections, the plan must be
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Dallas Anderson, Deseret - Oasis

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submitted to the Division of Drinking Water prior to loan closing. If your system has more
than 500 connections, the plan must be submitted to the Division of Water Resources for
review and approval, and the approved plan must be adopted (completing the Certification
of Adoption) prior to loan closing. If the Recipient has already adopted such a plan, that
plan and its certification of adoption may be submitted to the Division of Drinking Water
for verification.

12. In compliance with Utah Code Annotated 9-8-404, the project engineer shall submit a
report to the Division of Drinking Water that demonstrates a reasonable and good faith
effort was made to identify and gather information to determine if cultural resources are
present in the area of potential effects. The report format shall meet SHPO State of Utah
Archaeological Compliance Guidance. Cultural resource reporting guidance is outlined in
the Utah SHPO Short Cultural Resources Inventory Report Form.

13. In compliance with Utah Code Annotated 73-10g-402, political subdivisions applying for
state or federal financing for improvements to capital assets related to water infrastructure
shall commit to adopt a capital asset management plan. The Asset Management Plan shall
be submitted to the Division for review and approval prior to loan closing, unless
preparing an Asset Management Plan is included as part of the project for which the entity
has applied for financial assistance. In which case, the Asset Management Plan shall be
submitted to the Division as soon as it is completed or prior to the entity submitting its
final project reimbursement request.

To facilitate the timely completion of the financial assistance requirements outlined in this letter,
the Recipient and its attorney and engineer shall submit to the Division of Drinking Water all of
the items listed in numbered paragraphs 2 through 11 above prior to seeking committal of funds
from the Board and no later than 30 days before the bond closing, and the Recipient's bond
attorney shall submit to the Board’s Attorney the items listed in subsection "b" of paragraph 1 on
or before this date. As much as possible, this information shall apply to the Project in general to
allow a single review.

These requirements must be completed on or before June 25, 2025. If the Recipient fails to
reasonably comply with the Project schedule, the Authorization may be withdrawn in accordance
with R309-700-12.

These requirements will probably not cover all the matters pertaining to the Project. We anticipate
that specific questions on matters relating to your Project will arise, and we are confident that a
joint cooperative effort can resolve the issues.

July 11, 2024
Dallas Anderson, Deseret - Oasis

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If you have any questions concerning these requirements, please contact Andrea Thurlow at (385)
260-0337 or me at [phone].

Sincerely,

DRINKING WATER BOARD

Michael J. Grange, P.E.
Assistant Executive Secretary

MJG/at/lr

Enclosures

cc: William Prater, Esq., William L. Prater, LLC, P.O. Box 71368, SLC, UT 84171, [e-mail]
Jay Finlinson, Deseret – Oasis SSD, [e-mail]
Daniel Hawley, Jones and DeMille Engineering, [e-mail]
Richard Chamberlain, Chamberlain Associates,
Andrea Thurlow, Division of Drinking Water, [e-mail]
John Chartier, DEQ District Engineer, [e-mail]
DDW Finance
July 11, 2024