In 2002, the water quality program proposed the use of a pilot-rule project as a means to potentially amend chapter 173-98 WAC, Uses and limitations of the water pollution control revolving fund, (SRF). Several public bodies requested us to initiate the pilot-rule project to allow them to use the "service agreement" concept per chapter 70.150 RCW, Water Quality Joint Development Act to receive low interest loans awarded under chapter 173-98 WAC for completion of wastewater facilities.

     Through the pilot-rule process, we expanded the project to include provisions of chapter 39.10 RCW, Alternative public works contracting procedures, and chapter 35.58 RCW, Powers of metropolitan municipal corporations. The pilot-rule project provisions to allow for SRF loans to be issued are referred to as alternative contracting/service agreement (AC/SA), in Appendix L to the Guidelines for the FY 2006 Water Quality Program Funding Cycle, at http://www.ecy.wa.gov/biblio/0410062.html.

     We held a public meeting on July 12, 2006, to explain our intentions to end the pilot-rule project. We are being responsive to the expressed concerns of public bodies that may eventually proceed with AC/SA.

     Numerous issues were identified during the pilot-rule project that needs to be addressed as we attempt to prepare for and administer AC/SA loans under chapter 173-98 WAC. Also identified were issues that public bodies need to address as they proceed with AC/SA projects. These issues are outlined with further background information in the pilot-rule report available on ecology's web site.

     As our staff proposed at the July 12 public meeting, we will:

     1. Discontinue the pilot-rule project at this time so we will not be encumbered with new agreements as it continues to develop the formal rule under chapter 173-98 WAC;

     2. Defer any new AC/SA's loan requests; and

     3. Implement changes to a new AC/SA process through formal rule making for the FY 2009 funding cycle, scheduled to begin in September 2007.

     The water quality program will continue to manage existing AC/SA - SRF loans issued to several public bodies in accordance with the pilot-rule process outlined in program guidelines for SRF.

     The final pilot-rule report entitled, Alternative Contracting/Service Agreement - Pilot Rule Project Final Report Relating to Chapter 173-98 WAC Uses and Limitations of the Water Pollution Control Revolving Fund (SRF) is available on the agency web site at http://www.ecy.wa.gov/programs/wq/funding/Rule%20Amendment/rule_revision_index.htm. It provides an overview of our experiences and rationale for our decision.

David C. Peeler

Water Quality Program Manager

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