A Bill for an Act
Page 1, Line 101Concerning the creation of an enterprise to implement a
Page 1, Line 102loan program in order to replace failing septic
Page 1, Line 103systems.
Bill Summary
(Note: This summary applies to this bill as introduced and does not reflect any amendments that may be subsequently adopted. If this bill passes third reading in the house of introduction, a bill summary that applies to the reengrossed version of this bill will be available at http://leg.colorado.gov.)
The bill creates the septic-system replacement enterprise (enterprise), which operates as a government-owned business imposing and collecting a fee charged on septic-system permits and using the fee revenue to provide loans to replace failing septic systems (loan program).
The enterprise is governed by a board that consists of 7 members appointed by the governor as follows:
- One member who is a county commissioner in a county that has rural areas;
- One member who is a member of a county board of health in a county that has rural areas;
- One member who is a member of a governing body of a municipality that has septic systems;
- One member who represents the department of public health and environment (department);
- One member who represents the department of local affairs;
- One member who represents an association of counties within Colorado and who lives in a rural area; and
- One member who is a rural homeowner with a septic system.
- An accounting of the number of loans made under the loan program, the total amount of the loans, the average amount of a loan, and the number of septic systems replaced as a result of the loan program;
- An evaluation of the loan program; and
- Any legislative recommendations for the loan program.
- $10 if the fee for the septic-system permit is less than $500;
- $50 if the fee for the septic-system permit is $500 or more but less than $1,000;
- $100 if the fee for the septic-system permit is $1,000 or more but less than $1,400; and
- $200 if the fee for the septic-system permit is $1,400 or more.
Each member of the board serves at the pleasure of the governor. The term of appointment is 4 years, with some members having staggered terms. Members of the board serve without compensation but are entitled to receive reimbursement for actual and necessary expenses incurred in the performance of the members' duties on the board. The board will meet as necessary.
The enterprise will impose a fee on septic-system permits and administer the collection of the fee, and the enterprise may issue revenue bonds, buy and sell property, enter into contracts, sue or be sued, hire employees, set up an office, place liens on property, adopt rules, and take any action necessary to implement the bill.
Starting January 15, 2027, and by January 15 each year through 2029, the enterprise will submit a written report to the governor, the joint budget committee, the house of representatives transportation, housing, and local government committee, and the senate local government and housing committee. The report must include:
The enterprise will impose a septic-system enterprise fee on each permit to install or replace a septic system. The fee is:
The enterprise must consult with and coordinate with the water quality control commission (commission) and local boards of health that issue septic-system permits. The division of administration within the department and the local government that issues the permit may retain up to 5% of the fee to cover administrative costs. When the fee revenue is projected to exceed the amount reasonably necessary to implement the loan program and administer the bill, the enterprise shall adjust the amount of the fee so that the revenue will equal the amount of money needed to reasonably administer the loan program. The commission may adopt rules to implement the division of administration's collection of the fee.
The fee will be used by the enterprise to establish the loan program, which makes interest-free or low-interest loans to low-income or low-credit-score households to replace failing septic systems.
The enterprise will contract with at least 2 community development financial institutions (financial institutions) to administer the loan program. Standards are set for a financial institution to qualify to administer the loan program. The financial institution must enter into a contract with the enterprise. The bill sets contract standards, including authorization for a financial institution to include an administration fee in an amount reasonably calculated to cover the costs to implement the contract.
A financial institution will use the money collected from the fee to make loans to eligible homeowners in low-income or low-credit-score households for the purpose of replacing septic systems. The financial institution may establish reasonable standards and procedures to make loans in compliance with the bill and the contract.
The enterprise or the department may seek, accept, and expend gifts, grants, or donations from private or public sources to fund the bill.
Page 3, Line 1Be it enacted by the General Assembly of the State of Colorado:
Page 3, Line 2SECTION 1. In Colorado Revised Statutes, add part 39 to article 32 of title 24 as follows:
Page 3, Line 3PART 39
SEPTIC-SYSTEM REPLACEMENT ENTERPRISE
Page 3, Line 4AND LOAN PROGRAM
Page 3, Line 524-32-3901. Short title.The short title of this part 39 is the
Page 3, Line 6"Community Loans for Essential Access to New Septic Systems Act" or the "CLEAN Septic Systems Act".
Page 4, Line 124-32-3902. Legislative declaration. (1) The general assembly finds that:
Page 4, Line 2(a) Many of Colorado's rural residents with low incomes
Page 4, Line 3or low credit scores may not qualify for financing to replace failing septic systems;
Page 4, Line 4(b) Failing septic systems may affect the drinking water
Page 4, Line 5supply of property in the area, and these water supply problems can affect the habitability and value of homes in the area;
Page 4, Line 6(c) A state-established and -administered revolving loan
Page 4, Line 7program would give residents with low incomes or low credit
Page 4, Line 8scores the ability to finance the replacement of their septic systems;
Page 4, Line 9(d) These replacements help all the homeowners in the
Page 4, Line 10area who would be affected by both the habitability problems and the consequential lowering of property values; and
Page 4, Line 11(e) By making the loans authorized by this part 39, the septic-system replacement enterprise operates as a business.
Page 4, Line 12(2) The general assembly further finds that, as loans are
Page 4, Line 13made and repaid and as each year's fee revenues add money to
Page 4, Line 14the loan program, the capital in the loan program will increase
Page 4, Line 15until it is able to consistently help low-income households replace failing septic systems.
Page 4, Line 16(3) The general assembly declares that the fee collected
Page 4, Line 17by the enterprise is a fee, not a tax, because the fee is imposed for
Page 4, Line 18the specific purpose of allowing the enterprise to defray the
Page 4, Line 19costs of providing loans to homeowners who have failing septic
Page 5, Line 1systems. The fee is collected at a rate that is reasonably
Page 5, Line 2calculated to reflect the homeowner benefits, including
Page 5, Line 3maintaining the habitability of the home, maintaining the value
Page 5, Line 4of the home, and giving the paying homeowner, if the homeowner
Page 5, Line 5has a low income or low credit score, an option to replace the homeowner's septic system when it begins to fail.
Page 5, Line 6(4) The general assembly further declares that:
Page 5, Line 7(a) So long as the enterprise qualifies as an enterprise for
Page 5, Line 8purposes of section 20 of article X of the state constitution, the
Page 5, Line 9revenue from the fee collected by the enterprise is not state
Page 5, Line 10revenues, as defined in section 24-77-103.6 (6)(c), and does not
Page 5, Line 11count against either the state fiscal year spending limit imposed
Page 5, Line 12by section 20 of article X of the state constitution or the excess
Page 5, Line 13state revenues cap, as defined in section 24-77-103.6 (6)(b)(I)(G); and
Page 5, Line 14(b) No other enterprise created simultaneously or within
Page 5, Line 15the preceding five years serves primarily the same purpose as the
Page 5, Line 16enterprise, and the enterprise will generate revenue from fees
Page 5, Line 17and surcharges of less than one hundred million dollars total
Page 5, Line 18in its first five fiscal years. Accordingly, the creation of the
Page 5, Line 19enterprise does not require voter approval pursuant to section 24-77-108.
Page 5, Line 2024-32-3903. Definitions.As used in this part 39, unless the context otherwise requires:
Page 5, Line 21(1) "Administrator" means a community development
Page 5, Line 22financial institution that has entered into a contract with the
Page 5, Line 23enterprise to offer loans under the loan program.
Page 6, Line 1(2) "Board" means the governing board created in section 24-32-3905.
Page 6, Line 2(3) "Commission" means the water quality control commission created in section 25-8-201.
Page 6, Line 3(4) "Community development financial institution" means
Page 6, Line 4an entity that has a primary purpose of providing financial
Page 6, Line 5products or services to low-income communities in order to
Page 6, Line 6expand financial opportunity or security for residents or businesses in the low-income communities.
Page 6, Line 7(5) "Department" means the department of local affairs.
Page 6, Line 8(6) "Division" means the division of administration within the department of public health and environment.
Page 6, Line 9(7) "Enterprise" means the septic-system replacement enterprise created in section 24-32-3904.
Page 6, Line 10(8) "Executive director" means the executive director of the department or the executive director's designee.
Page 6, Line 11(9) "Fund" means the septic-system replacement loan program fund created in section 24-32-3909.
Page 6, Line 12(10) "Loan program" means the septic-system replacement loan program created in section 24-32-3908.
Page 6, Line 13(11) "Local board of health" means a local, county,
Page 6, Line 14municipal, or district board of health that regulates septic systems under article 10 of title 25.
Page 6, Line 15(12) "Local government" has the meaning set forth in section 24-32-102 (7).
Page 6, Line 16(13) "Low-income or low-credit-score household" means
Page 6, Line 17a household meeting at least one of the following criteria:
Page 7, Line 1(a) A household income that is less than or equal to two hundred percent of the federal poverty guideline;
Page 7, Line 2(b) A household income that is less than or equal to eighty percent of median income for the county; or
Page 7, Line 3(c) A household where the primary income earners have a mean credit score of less than six hundred forty.
Page 7, Line 4(14) (a) "Septic system" means an on-site wastewater
Page 7, Line 5treatment system that treats, neutralizes, stabilizes, or disperses sewage generated on the property.
Page 7, Line 6(b) "Septic system" excludes a system that is part of or
Page 7, Line 7connected to a sewage treatment works, as defined in section 25-10-103 (20).
Page 7, Line 824-32-3904. Creation of enterprise. (1) The septic-system replacement enterprise is created in the department.
Page 7, Line 9(2) The enterprise is a type 1 entity, as defined in section
Page 7, Line 1024-1-105, and exercises its powers and performs its duties and functions under the department.
Page 7, Line 11(3) The enterprise is and operates as a government-owned
Page 7, Line 12business for the business purpose of imposing a fee on
Page 7, Line 13septic-system permits, collecting the fee charged, and using the fee revenue to provide loans to replace failing septic systems.
Page 7, Line 14(4) The enterprise constitutes an enterprise for purposes
Page 7, Line 15of section 20 of article X of the state constitution so long as it
Page 7, Line 16retains the authority to issue revenue bonds and receives less
Page 7, Line 17than ten percent of its total revenues in grants from all
Page 7, Line 18Colorado state and local governments combined. So long as it
Page 7, Line 19constitutes an enterprise in accordance with this subsection (4),
Page 8, Line 1the enterprise is not subject to section 20 of article X of the state constitution.
Page 8, Line 224-32-3905. Enterprise governing board - membership -
Page 8, Line 3meetings. (1) (a) The enterprise is governed by a board that consists of seven members appointed by the governor as follows:
Page 8, Line 4(I) One member who is a county commissioner in a county that has rural areas;
Page 8, Line 5(II) One member who is a member of a county board of health in a county that has rural areas;
Page 8, Line 6(III) One member who is a member of a governing body of a municipality that has septic systems;
Page 8, Line 7(IV) One member who represents the department of public health and environment;
Page 8, Line 8(V) One member who represents the department;
Page 8, Line 9(VI) One member who represents an association of counties within Colorado and who lives in a rural area; and
Page 8, Line 10(VII) One member who is a rural homeowner with a septic system.
Page 8, Line 11(b) The governor shall make the initial appointments to the board no later than October 31, 2025.
Page 8, Line 12(c) Each member of the board who is appointed under this
Page 8, Line 13subsection (1) serves at the pleasure of the governor. The term
Page 8, Line 14of appointment is four years; except that the initial term of each
Page 8, Line 15member appointed under subsections (1)(a)(I) and (1)(a)(III) of this section is two years.
Page 8, Line 16(2) Members of the board serve without compensation but
Page 8, Line 17are entitled to receive reimbursement for actual and necessary
Page 9, Line 1expenses incurred in the performance of the members' duties on the board.
Page 9, Line 2(3) (a) The executive director shall organize and call the first meeting of the board by December 1, 2025.
Page 9, Line 3(b) The board shall elect a chair from among the board's
Page 9, Line 4members to serve for a term not to exceed two years, as determined by the board.
Page 9, Line 5(c) The board shall meet as necessary for the board to complete its duties.
Page 9, Line 624-32-3906. Powers and duties of the enterprise - rules -
Page 9, Line 7reports - repeal. (1) The enterprise shall administer the
Page 9, Line 8collection of the fee imposed under section 24-32-3907, and the enterprise may:
Page 9, Line 9(a) Issue revenue bonds, payable from the septic-system permit fee revenue, to implement this part 39;
Page 9, Line 10(b) Buy and sell property;
(c) Enter into contracts;
Page 9, Line 11(d) Sue or be sued;
(e) Hire employees;
Page 9, Line 12(f) Set up an office;
(g) Place liens on property;
Page 9, Line 13(h) Adopt rules as necessary to implement this part 39; and
Page 9, Line 14(i) Take any action necessary to implement this part 39.
(2) The enterprise shall implement this part 39.
Page 9, Line 15(3) (a) On or before January 15, 2027, and on or before
Page 9, Line 16January 15 each year thereafter, the enterprise shall submit a
Page 10, Line 1written report to the governor, the joint budget committee, the
Page 10, Line 2house of representatives transportation, housing, and local
Page 10, Line 3government committee, and the senate local government and
Page 10, Line 4housing committee, or their successor committees. The report must include:
Page 10, Line 5(I) An accounting of the number of loans made under the
Page 10, Line 6loan program, the total amount of the loans, the average
Page 10, Line 7amount of a loan, and the number of septic systems replaced as a result of the loan program;
Page 10, Line 8(II) An evaluation of the loan program; and
Page 10, Line 9(III) Any legislative recommendations for the loan program.
Page 10, Line 10(b) This subsection (3) is repealed, effective July 1, 2029.
Page 10, Line 1124-32-3907. Septic-system permit fee - collection for the
Page 10, Line 12enterprise - memoranda of understanding with local governments -
Page 10, Line 13rules - repeal. (1) (a) In furtherance of the enterprise's business
Page 10, Line 14purposes, the enterprise shall impose a fee on each permit that is
Page 10, Line 15issued to install or replace a septic system, but not a permit
Page 10, Line 16issued to modify, repair, or alter a septic system. The enterprise fee is:
Page 10, Line 17(I) Ten dollars if the fee for the septic-system permit is less than five hundred dollars;
Page 10, Line 18(II) Fifty dollars if the fee for the septic-system permit is
Page 10, Line 19five hundred dollars or more but less than one thousand dollars;
Page 10, Line 20(III) One hundred dollars if the fee for the septic-system
Page 10, Line 21permit is one thousand dollars or more but less than one thousand four hundred dollars; and
Page 11, Line 1(IV) Two hundred dollars if the fee for the septic-system permit is one thousand four hundred dollars or more.
Page 11, Line 2(b) To implement this section, the department shall
Page 11, Line 3consult with and coordinate with the commission and the local
Page 11, Line 4board of health that issues septic-system permits. The
Page 11, Line 5department shall enter into a memorandum of understanding
Page 11, Line 6with each local board of health that issues septic-system
Page 11, Line 7permits to collect the fee. A local board of health shall not
Page 11, Line 8refuse to enter into a memorandum of understanding with the department.
Page 11, Line 9(c) Each local government and the division shall transfer
Page 11, Line 10the fee to the department; except that the division or the local
Page 11, Line 11government that collects the fee may retain up to five percent
Page 11, Line 12of the fee to cover administrative costs. The state treasurer shall credit the fee to the fund.
Page 11, Line 13(d) The money collected and held by the department, the division, or a local government pursuant to this subsection (1):
Page 11, Line 14(I) Is collected for the enterprise;
Page 11, Line 15(II) Is custodial money intended for the enterprise and
Page 11, Line 16held temporarily by the department, the division, or a local
Page 11, Line 17government and the state treasurer solely for the purpose of crediting the money to the fund; and
Page 11, Line 18(III) Based on the enterprise's status as an enterprise, is
Page 11, Line 19not subject to section 20 of article X of the state constitution at any time during its collection, transmission, and use.
Page 11, Line 20(2) When the fee revenue is projected to exceed the
Page 12, Line 1amount reasonably necessary to implement the loan program
Page 12, Line 2and administer this part 39, the enterprise shall adjust the
Page 12, Line 3amount of the fee so that the revenue will equal the amount of
Page 12, Line 4money needed to reasonably administer the loan program. The
Page 12, Line 5enterprise shall notify the commission and each local board of
Page 12, Line 6health for a local government that collects the fee of the fee change.
Page 12, Line 7(3) The commission may adopt rules to implement the division's collection of the fee pursuant to this section.
Page 12, Line 8(4) (a) The enterprise, the division, and a local government
Page 12, Line 9that issues septic-system permits shall timely take any action necessary to begin collecting the fee by July 1, 2026.
Page 12, Line 10(b) This subsection (4) is repealed, effective July 1, 2028.
Page 12, Line 1124-32-3908. Septic-system replacement loan program -
Page 12, Line 12contracts with administrators for implementation. (1) The
Page 12, Line 13enterprise shall establish a septic-system replacement loan
Page 12, Line 14program to make interest-free or low-interest loans to
Page 12, Line 15low-income or low-credit-score households to replace failing septic systems.
Page 12, Line 16(2) (a) The enterprise shall contract with at least two
Page 12, Line 17community development financial institutions to administer the
Page 12, Line 18loan program in accordance with this part 39. To qualify to
Page 12, Line 19administer the loan program, a community development financial institution must:
Page 12, Line 20(I) Be a nonprofit organization; and
Page 12, Line 21(II) Demonstrate the capacity and proficiency necessary
Page 12, Line 22to administer the loan program.
(b) The enterprise shall:
Page 13, Line 1(I) Use an open and competitive process to select each entity that administers the loan program;
Page 13, Line 2(II) Contract with each selected administrator to provide loans;
Page 13, Line 3(III) Establish performance benchmarks and performance reviews for each administrator; and
Page 13, Line 4(IV) Establish minimum loan standards, including
Page 13, Line 5requiring that the loans be made to low-income or
Page 13, Line 6low-credit-score households and setting the maximum income requirement for loan amounts.
Page 13, Line 7(c) (I) To provide loans under the loan program, an
Page 13, Line 8administrator must enter into a contract with the enterprise. The contract must:
Page 13, Line 9(A) Set forth the criteria for making a loan in accordance with this part 39;
Page 13, Line 10(B) Contain the performance benchmarks established pursuant to subsection (2)(b)(III) of this section;
Page 13, Line 11(C) Require the implementation of the performance
Page 13, Line 12reviews established pursuant to subsection (2)(b)(III) of this section;
Page 13, Line 13(D) Be of limited duration, not to exceed three years; and
Page 13, Line 14(E) Require the administrator to repay all lending
Page 13, Line 15capital that is not committed to loans under the loan program
Page 13, Line 16and all principal and interest that is repaid by borrowers under
Page 13, Line 17the loan program at the end of the contract period if, in the
Page 13, Line 18judgment of the enterprise, the administrator has not successfully performed the contract.
Page 14, Line 1(II) The contract may include an administration fee
Page 14, Line 2established by the administrator in an amount reasonably
Page 14, Line 3calculated to cover the administrative costs of the administrator to implement the contract.
Page 14, Line 4(3) (a) The enterprise may use money from the fund to
Page 14, Line 5establish and administer the loan program in accordance with this section.
Page 14, Line 6(b) An administrator shall use the money to make loans
Page 14, Line 7to eligible homeowners in low-income or low-credit-score households for the purpose of replacing septic systems.
Page 14, Line 8(4) An administrator may establish reasonable standards
Page 14, Line 9and procedures to make loans if each standard and procedure complies with this part 39 and the contract with the enterprise.
Page 14, Line 1024-32-3909. Septic-system replacement loan program fund.
Page 14, Line 11(1) The septic-system replacement loan program fund is created
Page 14, Line 12in the state treasury. The fund consists of the fees credited to
Page 14, Line 13the fund pursuant to section 24-32-3907, any gifts, grants, or
Page 14, Line 14donations made to the enterprise or the department, or any
Page 14, Line 15money that the general assembly appropriates or transfers to the fund.
Page 14, Line 16(2) The state treasurer shall credit all interest and
Page 14, Line 17income derived from the deposit and investment of money in the fund to the fund.
Page 14, Line 18(3) Money in the fund is continuously appropriated to the enterprise to implement this part 39.
Page 14, Line 1924-32-3910. Gifts, grants, and donations.The enterprise or
Page 15, Line 1the department may seek, accept, and expend gifts, grants, or
Page 15, Line 2donations from private or public sources for the purposes of this part 39. The state treasurer shall credit the money to the fund.
Page 15, Line 3SECTION 2. In Colorado Revised Statutes, 25-10-107, add (5) as follows:
Page 15, Line 425-10-107. Fees - rules - repeal. (5) In addition to the fees
Page 15, Line 5established in this section, each local board of health and the
Page 15, Line 6division shall coordinate with the septic-system replacement
Page 15, Line 7enterprise, created in section 24-32-3904, to collect the fee
Page 15, Line 8established in section 24-32-3907. The commission may adopt rules necessary to implement section 24-32-3907.
Page 15, Line 9SECTION 3. Act subject to petition - effective date. This act
Page 15, Line 10takes effect at 12:01 a.m. on the day following the expiration of the
Page 15, Line 11ninety-day period after final adjournment of the general assembly; except
Page 15, Line 12that, if a referendum petition is filed pursuant to section 1 (3) of article V
Page 15, Line 13of the state constitution against this act or an item, section, or part of this
Page 15, Line 14act within such period, then the act, item, section, or part will not take
Page 15, Line 15effect unless approved by the people at the general election to be held in
Page 15, Line 16November 2026 and, in such case, will take effect on the date of the official declaration of the vote thereon by the governor.