AN ACT Relating to the financing of water pollution control facilities and systems; amending RCW 43.99F.040; adding a new chapter to Title 43 RCW; and creating a new section.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF WASHINGTON:

NEW SECTION. Sec. 1. The long-range health and environmental goals of the state of Washington require the protection of the state's waters for the health, safety, enjoyment and economic benefit of its people. The purpose of this chapter is to provide financial assistance to the state and to local governments for the planning, design, acquisition, construction, and improvement of water pollution control facilities and related activities in the achievement of federal and state water pollution control requirements for the protection of the state's water resources.

NEW SECTION. Sec. 2. Unless the context clearly requires otherwise, the definitions in this section apply throughout this chapter.

(1) "Account" means the water quality account in the state treasury.

(2) "Department" means the department of ecology.

(3) "Eligible cost" means that portion of the cost of a water pollution control facility that can be financed in part by a grant or loan under this chapter. "Eligible cost" does not include any portion of a water pollution control facility's cost attributable to capacity that is in excess of that reasonably required to address one hundred ten percent of the applicant's needs for water pollution control facilities existing at the time the application for a loan or grant under this chapter is submitted.

(4) "Public body" means the state of Washington or any agency, county, city, political subdivision, municipal corporation, or quasi-municipal corporation thereof, an agency of the federal government, and those Indian tribes now or hereafter recognized as such by the federal government.

(5) "Water pollution control facility" means any facility owned or operated by a public body for the control, collection, storage, treatment, disposal, or recycling of wastewater, including but not limited to sanitary sewage, storm water, residential, industrial, commercial, and agricultural wastes, which are causing water quality degradation. "Water pollution control facility" may include all equipment, utilities, structures, real property, and interest in and improvements on real property necessary for or incidental to such purpose.

(6) "Water pollution control activity" means actions taken by a public body for the following purposes: (a) To remove pollutants from or prevent pollution of significant subterranean water bodies in jeopardy of serious deterioration; (b) to restore the water quality of fresh water lakes; (c) to implement a surface water management program for controlling nonpoint sources of pollution; (d) to develop plans designed to prevent pollution of water resources; (e) to identify needs for water pollution control facilities and activities; and (f) to develop plans specific to particular water pollution control facilities.

NEW SECTION. Sec. 3. (1) Moneys deposited in the water quality account shall be administered by the department of ecology, subject to legislative appropriation. The department may use or permit the use of any moneys in the account to make grants or loans to public bodies, including grants to public bodies as cost-sharing moneys in any case where federal, local, or other funds are made available on a cost-sharing basis, for water pollution control facilities and activities within the purposes of this chapter, and for related administrative expenses.

(2) The department shall ensure that grants of funds available under this chapter do not constitute more than fifty percent of the total eligible cost of any water pollution control facilities and that any combination of grants, loans, and federal funds do not constitute more than seventy-five percent of the eligible cost of any water pollution control facility.

(3) The department shall ensure that grants or loans made to a public body for a water pollution control activity do not constitute more than fifty percent of the total cost of such activity.

(4) No more than two percent of the moneys deposited in the account may be used by the department to pay for the administration of the grant and loan program authorized by this chapter.

(5) Loans shall be for a term not to exceed ten years and shall bear interest at rates determined by the department in consultation with the state treasurer.

(6) The department shall present a progress report on the use of moneys from the account to the legislature no later than November 30th of each year.

(7) One-half of one percent of the total authorized by the legislature each biennium may be used by the department to provide funds to public bodies to prepare feasibility studies on joint development and other alternative methods of financing water pollution control facilities.

NEW SECTION. Sec. 4. During the period from the effective date of this act until December 31, 1995, the following limitations shall apply to the department's total distribution of grants and loans authorized by this chapter:

(1) Not more than fifty percent for water pollution control facilities or activities that remove pollutants from or prevent the pollution of Puget Sound, including Hood Canal;

(2) Not more than five percent for water pollution control facilities or activities that remove pollutants from or prevent the pollution of the straits of Juan de Fuca, Georgia, and Rosario, and marine embayments immediately adjacent to these straits;

(3) Not more than two percent for water pollution control facilities or activities that remove pollutants from or prevent the pollution of other marine waters in the state;

(4) Not more than ten percent for water pollution control facilities and activities that remove pollutants from or prevent the pollution of freshwater lakes and rivers, including but not limited to Lake Chelan and the Yakima and Columbia rivers;

(5) Not more than twenty percent for water pollution control facilities or activities that remove pollutants from or prevent the pollution of significant subterranean water bodies as designated by the department, including, but not limited to, sole source aquifers designated under the federal safe drinking water act with at least two-thirds for the Spokane-Rathdrum Prairie aquifer; and

(6) Thirteen percent and such sums as may be remaining from the categories specified in subsections (1) through (5) of this section for water pollution control facilities or activities as prescribed by the department.

NEW SECTION. Sec. 5. When making grants or loans for water pollution control facilities, the department shall consider the following:

(1) The protection of water quality and public health;

(2) The cost to residential ratepayers if they had to finance water pollution control facilities without state assistance;

(3) Actions required under federal and state permits and compliance orders;

(4) The level of local fiscal effort by residential ratepayers since 1972 in financing water pollution control facilities;

(5) The extent to which the applicant county or city, or if the applicant is another public body, the extent to which the county or city in which the applicant public body is located, has established programs to mitigate nonpoint pollution of the surface or subterranean water sought to be protected by the water pollution control facility named in the application for state assistance; and

(6) The recommendations of the Puget Sound water quality authority and any other board, council, commission, or group established by the legislature or a state agency to study water pollution control issues in the state.

When allocating moneys in the account for water pollution control activities, the department shall take into consideration subsections (1), (3), (4), (5), and (6) of this section.

NEW SECTION. Sec. 6. Any public body with ownership rights in a project authorized by this chapter may sell, lease, or otherwise transfer for value part or all of such ownership rights pursuant to the restrictions, covenants, and conditions described in this section.

The purchasers or lessees, their successors, and assignees shall be obligated to devote such real property only to the uses specified in such agreement and may be obligated to comply with such other requirements as the governing public body may determine to be in the public interest. Any agreement affecting such sale, lease, or other transfer of such property shall require that the property be leased back to the governing public body for operation by such body. Any instrument purporting to allow the sale, lease, or other transfer of such property by the governing body shall be in conformance with all restrictions, covenants, and agreements contained in bonds issued by such body which pledge to their payment properties of, or revenues from, the project.

NEW SECTION. Sec. 7. The state treasurer shall withdraw from any general state revenues received in the state treasury and deposit into the water quality account, hereby created in the state treasury, on a quarterly basis in each of the following fiscal years the following annual amounts:

!tm1,1 !tcFiscal!sc ,1Year!tcAmount

!tl1987!tc$1,000,000

!tl1988!tc$20,000,000

!tl1989!tc$20,000,000

!tl1990 and thereafter !tc$50,000,000

Sec. 8. Section 4, chapter 159, Laws of 1980 and RCW 43.99F.040 are each amended to read as follows:

The proceeds from the sale of the bonds deposited in the state and local improvements revolving account, Waste Disposal Facilities, 1980 of the general fund under the terms of this chapter shall be administered by the state department of ecology subject to legislative appropriation. The department may use or permit the use of any funds derived from the sale of bonds authorized under this chapter to accomplish the purpose for which the bonds are issued by direct expenditures and by grants or loans to public bodies, including grants to public bodies as cost-sharing funds in any case where federal, local, or other funds are made available on a cost-sharing basis for improvements within the purposes of this chapter. The department shall ensure that funds derived from the sale of bonds authorized under this chapter do not constitute more than seventy-five percent of the total cost of any waste disposal or management facility. Not more than two percent of the proceeds of the bond issue may be used by the department of ecology in relation to the administration of the expenditures, grants, and loans.

At least ((~~one hundred fifty~~)) eighty-five million dollars of the proceeds of the bonds authorized by this chapter shall be used exclusively for solid waste management systems capable of producing renewable energy or energy savings as a result of the management of the wastes. "Renewable energy" means, but is not limited to, the production of steam, hot water for steam heat, electricity, cogeneration, gas, or fuel through the use of wastes by incineration, refuse-derived fuel processes, pyrolysis, hydrolysis, or bioconversion, and energy savings through material recovery from waste source separation and/or recycling. At least fifty million dollars of the unobligated proceeds of the bonds authorized by this chapter remaining as of June 30, 1985, shall be used exclusively for municipal water pollution control facilities and activities in this state. Proceeds from the sale of such bonds used for municipal water pollution control facilities and activities shall be deposited in the water quality account in the state treasury. Any remaining unobligated funds shall be available for the general purposes authorized by this chapter.

The department of ecology shall present a progress report of actual projects committed by the department to the senate committee on ways and means and the house of representatives committee on appropriations no later than November 30th of each year.

Integration of the management and operation of systems for solid waste disposal with systems of liquid waste disposal holds promise of improved waste disposal efficiency and greater environmental protection and restoration. To encourage the planning for and development of such integration, the department may provide for special grant incentives to public bodies which plan for or operate integrated waste disposal management systems.

NEW SECTION. Sec. 9. As soon as practicable after the effective date of this act, the director of financial management shall establish and chair a study group to evaluate alternative funding mechanisms for implementing a continuing state commitment to providing financial assistance for water pollution control facilities and activities.

Members of the study group shall include the director of ecology, two members of the senate, one from each caucus, appointed by the president of the senate, two members of the house of representatives, one from each caucus, appointed by the speaker of the house, and three individuals appointed by the director of financial management at least one of whom shall have expertise in the field of public finance. The office of financial management shall provide staff support for the study group.

The study group shall review and evaluate: (1) All funding mechanisms that could be used by the state and by public bodies in a continuing cost-sharing program to finance water pollution control facilities and activities necessary to protect the state's water resources; and (2) state agency allocation and distribution procedures for capital improvement projects. A report of its findings and recommendations shall be submitted to the governor and the legislature no later than December 1, 1985.

NEW SECTION. Sec. 10. Sections 1 through 7 of this act shall constitute a new chapter in Title 43 RCW.