HOUSE BILL REPORT
HB 1326
BYRepresentatives Rust, Valle, Holland, Schoon and Winsley; by request of Department of Ecology
Creating the water pollution control account and authorizing financial assistance from it.
House Committe on Ways & Means/Appropriations
Majority Report: The substitute bill be substituted therefor and the substitute bill do pass. (21)
Signed by Representatives Locke, Chair; Belcher, Brekke, Bristow, Brough, Butterfield, Ebersole, Fuhrman, Grant, Grimm, Hine, McLean, Nealey, Peery, Sayan, Silver, H. Sommers, Spanel, Sprenkle, Wang and B. Williams.
House Staff:Nancy Stevenson (786-7136)
AS REPORTED BY COMMITTEE ON WAYS & MEANS/APPROPRIATIONS
FEBRUARY 2, 1988
BACKGROUND:
Since 1972, federal construction grants have been provided to municipalities constructing sewage treatment facilities. These grants have accounted for more than 75 percent of the $60 billion in combined federal, state, and local money spent on sewage treatment plants in the United States. Local governments have heavily relied on this source of financing for construction of their sewage treatment facilities.
The federal Water Quality Act of 1987 (the Clean Water Act amendments) introduced a new approach to the financing of sewage treatment facilities. Under the new law, responsibility for financing sewage treatment facilities is shifted from the federal government to state governments. Federal construction grants to municipalities are being phased out and will be replaced with federal dollars that may only be used to capitalize state revolving loan funds (SRF).
The Clean Water Act amendments authorized annual appropriations of $2.4 billion to the states for construction grants and SRF's. All of the federal money appropriated for 1987 and 1988 may continue to be used for construction grants. During 1989 and 1990, one-half of the $2.4 billion may be used for grants and one-half must be used for state revolving loan funds. By 1991, construction grants will be completely phased out and all of the $2.4 billion will go to SRF's.
Federal law places extensive restrictions on the use of all (state and federal) money in the revolving loan fund. One notable limitation is that all money in the fund must be used initially to maintain progress with the enforceable requirements of the Clean Water Act (secondary treatment) before SRF money can be used for nonpoint or estuary programs.
Washington has been allocated 1.76 percent of the annual $2.4 billion. This amounts to approximately $42.0 million for Washington annually. Prior to receiving this federal money, Washington must:
(1) Establish a revolving loan fund in accordance with the federal Clean Water Act of 1987;
(2) Negotiate an agreement with the Environmental Protection Agency (EPA) detailing the use of the fund; and
(3) Provide the fund with a state match of at least 20 percent of the federal grant.
The Department of Ecology is in the process of negotiating an agreement with the EPA. In the 1987-89 capital budget, the Washington legislature authorized the transfer of the 20 percent match from the Water Quality Account. However, the budget did not specifically authorize the creation of a revolving loan fund nor did it appropriate an exact amount to be transferred to the fund.
SUMMARY:
SUBSTITUTE BILL: The water pollution control revolving fund is established in the state treasury. The fund consists of: 1) all capitalization grants provided by the federal government under the federal water quality act of 1987; 2) all state matching funds appropriated by the legislature; 3) any other revenues derived from gifts or grants for water pollution control projects; 4) All repayments of moneys borrowed from the fund as well as interest payments; 5) any other fee levied in conjunction with administration of the fund; and 6) any new funds as a result of leveraging. All investment earnings will be credited to the water pollution control revolving fund. The fund is not subject to legislative appropriation, however state matching funds from the water quality account are appropriated and transferred to the fund.
The Department of Ecology must use the revolving fund to provide financial assistance in accordance with the federal water quality act of 1987. Loans are to be made at or below market interest rates, including interest free loans, for terms not to exceed twenty years. Loans may be made for water pollution control facilities, non-point source pollution management programs, and for conservation management plans associated with the national estuary program.
Money in the loan fund may also be used to: purchase or refinance local debt obligations at or below market rates if the debt was incurred after March 7, 1985; guarantee, or purchase insurance for, local debt obligations; secure or provide revenue for payment of principal and interest on state issued revenue or GO bonds if the proceeds go into the fund; earn interest on fund accounts; and pay administrative expenses of the department.
Money in the water pollution control revolving fund may not be used for grants.
Public bodies receiving a loan must: be on the annual project priority list; submit an application; establish a dedicated source of revenue for repayment of the loan; and demonstrate that they have sufficient legal authority to incur the debt. If a loan recipient defaults on payment, the state may withhold any amounts otherwise due to that entity and direct that such funds be deposited into the water pollution control revolving fund.
In administering the fund, Ecology must assure that adequate funds are maintained to meet future needs.
SUBSTITUTE BILL COMPARED TO ORIGINAL: The substitute bill clarifies: 1) how funds are transferred, 2) that state matching funds will no longer be required after the federal authorization expires in six years, and 3) all interest earnings are credited to the revolving fund.
Appropriation: $5,000,000 is appropriated from the water quality account (cigarette tax) to the water pollution control revolving fund.
Fiscal Note: Requested January 14, 1988.
Effective Date:The bill contains an emergency clause and takes effect immediately.
House Committee ‑ Testified For: Joe Williams, Department of Ecology.
House Committee - Testified Against: None Presented.
House Committee - Testimony For: Creating the revolving fund allows the Department of ecology to qualify for the federal capitalization grant program thus providing additional money to finance water pollution control facilities and activities.
House Committee - Testimony Against: None Presented.