BILL REQ. #:  S-1567.2 

Read first time 02/21/11.   Referred to Committee on Ways & Means.

     AN ACT Relating to financing local government infrastructure; amending RCW 43.155.010, 43.155.020, 43.155.050, and 43.155.060; adding a new section to chapter 43.155 RCW; and repealing RCW 43.155.055, 43.155.075, 43.155.100, 43.155.110, and 43.155.120.

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

Sec. 1   RCW 43.155.010 and 1996 c 168 s 1 are each amended to read as follows:
     (1) The legislature finds that ((there exists in the state of Washington over four billion dollars worth of critical projects for the planning, acquisition, construction, repair, replacement, rehabilitation, or improvement of streets and roads, bridges, water systems, and storm and sanitary sewage systems. The December, 1983 Washington state public works report prepared by the planning and community affairs agency documented that local governments expect to be capable of financing over two billion dollars worth of the costs of those critical projects but will not be able to fund nearly half of the documented needs.
     The legislature further finds that Washington's local governments have unmet financial needs for solid waste disposal, including recycling, and encourages the board to make an equitable geographic distribution of the funds.
     It is the policy of the state of Washington to encourage self-reliance by local governments in meeting their public works needs and to assist in the financing of critical public works projects by making loans, financing guarantees, and technical assistance available to local governments for these projects.)), since the creation of the public works board and the public works assistance account twenty-five years ago, over two billion dollars in low interest loans to local governments have financed needed infrastructure repairs and improvements. Many of these loans have built wastewater treatment systems resulting in water quality improvements in rivers, lakes, and Puget Sound. Some of these loans have improved the safety and efficiency of drinking water systems. Other loans repaired roads and bridges and financed solid waste recycling programs. Some of these public work improvements would not have occurred without the low interest public works loan. Others would have been delayed, and many would have been constructed with a higher financial burden on utility ratepayers. Even with these successes, there remains a significant backlog of projects to repair and improve public infrastructure.
     (2) The legislature finds that capital facilities planning by local government has improved, and there are many new grant and loan programs for local government infrastructure financed with state and federal resources. Prior studies of state programs that provide assistance for local infrastructure have identified significant duplication and redundancy among the various programs leading to coordination challenges in determining the entire state investment in a particular project. These studies have also identified the need to clarify state policy objectives for programs that provide state financial assistance for local government infrastructure. Further, these studies have found that state assistance is often delayed by unnecessary steps in the process and that programs do not rapidly adapt to emerging needs.
     (3) The legislature also finds that low interest loans can provide significant assistance for jurisdictions that have difficulty in accessing traditional private market tax exempt bond financing.
     (4) The legislature recognizes that prior efforts to reform programs providing assistance for local infrastructure have lacked a clear and strong enough mandate to the daunting complexity of consolidating and simplifying the many statutes, boards, programs, and accounts.
     (5) The legislature intends to modernize the public works assistance program and other programs providing state and federal funding assistance for local infrastructure by:
     (a) Clarifying the policy objectives of state assistance for local infrastructure;
     (b) Focusing the criteria to prioritize investment of state resources according to those policy objectives;
     (c) Eliminating redundancy and duplication among the various infrastructure assistance programs;
     (d) Increasing the speed of delivering state assistance for local infrastructure and the ability to respond to emerging infrastructure needs;
     (e) Maximizing the acquisition and use of federal funding sources;
     (f) Ensuring transparency in total state and federal assistance for individual projects;
     (g) Improving access to the lowest cost private market financing; and
     (h) Ensuring periodic review of progress on meeting the objectives in (a) through (g) of this subsection.
     (6) It is state policy that planning for, developing, and adequately maintaining local public infrastructure is the responsibility of local governments. In the provision of utility services, such as drinking water and wastewater systems, it is the responsibility of local governments to establish adequate rates to pay for these systems. While reinforcing that policy of local responsibility, the legislature recognizes that, in some cases, compelling state policy objectives justify providing state assistance for both utility-based and nonutility-based infrastructure. The legislature intends to create a system for providing assistance for local infrastructure that is organized around the state policy objectives for that assistance while reinforcing that foundation policy of local responsibility.

NEW SECTION.  Sec. 2   A new section is added to chapter 43.155 RCW to read as follows:
     (1) The board must prepare and submit to the appropriate committees of the legislature by November 1, 2011, an implementation plan to create a reformed state system for providing assistance for local infrastructure. The implementation plan must include draft legislation and the organizational and budgetary changes necessary to implement the new system in time for the 2013-2015 budget cycle. In developing the implementation plan, the board must consult with the appropriate state agencies that provide infrastructure funding and technical assistance. In addition, the board must consult with local governments or entities that would benefit from state and federal infrastructure funding and technical assistance. The new system must have the following characteristics:
     (a) Transparency. State assistance for a specific project must be a consolidated package of loans and/or grants from all sources. For large, multiphased projects, the consolidated package of assistance may describe an intent to fund multiple phases over more than one biennium. In accepting the package of assistance, the applicant must agree to not seek additional state assistance unless there are significant changes to the project or fiscal capacity of the applicant. All assistance in the form of low interest loans must describe the annual debt service value of the low interest loan compared to the likely annual debt service payments with private market financing. It is the responsibility of the board to consolidate reporting of all state assistance for local infrastructure to ensure transparency;
     (b) Accountability. Applicants for state assistance for local infrastructure must accept the foundation policy of local responsibility described in RCW 43.155.010. It is the responsibility of the board to collect and monitor information necessary to report to the legislature progress in meeting this policy. The board must also offer technical assistance to local governments most challenged by this policy. The board, in consultation with the departments of health and ecology, must establish minimum requirements for adequate utility rate systems, capital planning, asset management, and financial reporting to ensure the long-term maintenance, sustainability, and future replacement of the proposed project. Applicants for state assistance for local infrastructure not meeting these minimum requirements must agree to an implementation plan to meet those requirements as a condition of accepting state assistance;
     (c) Efficiency. The reformed system of state assistance must use resources efficiently while accomplishing the policies in this section. Redundancy and duplication must be eliminated. Processes must be redesigned to reduce steps that unnecessarily delay projects. Organizational responsibilities to implement the new system must minimize the portion of infrastructure assistance funding diverted to agency indirect administrative expenses. Measures of efficiency and performance must be developed and reported every two years; and
     (d) Policy-focused investments. The legislature intends to consolidate appropriations from all available funds for the following policy-focused local infrastructure investments. Each policy-focused appropriation must be to the agency with the greatest expertise in that policy objective. Each agency must develop specific criteria to prioritize applications for assistance. The board must simultaneously review applications for assistance to determine level of compliance with the foundation policy of local responsibility and the policies described in (a) through (c) of this subsection.
     (i) Water quality. State assistance for water quality infrastructure must support projects that result in the greatest improvements in the state's surface and groundwater, for communities least able to pay for those projects and for jurisdictions who are early adopters of new regulations and effective new technology. Water quality projects must be evaluated and prioritized against these policy objectives by the department of ecology.
     (ii) Safe drinking water. State assistance for water quality infrastructure must support projects that result in the greatest improvements in the safety and quality of drinking water, for communities least able to pay for those projects and for jurisdictions who are early adopters of new regulations and effective new technology. Safe drinking water projects must be evaluated and prioritized against these policy objectives by the department of health.
     (iii) Storm water. State assistance for storm water infrastructure shall support projects that result in the greatest improvements necessary to meet national pollution discharge elimination system requirements for communities least able to pay for those projects and for jurisdictions who are early adopters of new regulations and effective new technology. Storm water projects must be evaluated and prioritized against these policy objectives by the department of ecology.
     (iv) Economic development. State assistance for economic development infrastructure must support projects that result in retention or creation of businesses with family wage jobs and long-term growth potential, especially in areas of the state with patterns of high unemployment. Economic development infrastructure must include systems that support innovation partnership zones under RCW 43.330.270. Economic development projects must be evaluated and prioritized against these policies by the community economic revitalization board under chapter 43.160 RCW.
     (v) Access to private financing. State assistance for local infrastructure must expand capacity to improve local infrastructure. Improving access to and reducing the cost of private market financing for local government infrastructure supports the foundation policy of local responsibility while expanding the capacity to improve local infrastructure. The board and the state treasurer must develop an application and due diligence process for the evaluation and prioritization of projects receiving assistance to improve access to private financing under RCW 43.155.060.
     (2) The implementation plan must also make recommendations on how nonrate-based utilities could receive state infrastructure assistance.

Sec. 3   RCW 43.155.020 and 2009 c 565 s 33 are each amended to read as follows:
     Unless the context clearly requires otherwise, the definitions in this section ((shall)) apply throughout this chapter.
     (1) "Board" means the public works board created in RCW 43.155.030.
     (2) "Capital facility plan" means a capital facility plan required by the growth management act under chapter 36.70A RCW or, for local governments not fully planning under the growth management act, a plan required by the public works board.
     (3) "Department" means the department of commerce.
     (4) (("Financing guarantees" means the pledge of money in the public works assistance account, or money to be received by the public works assistance account, to the repayment of all or a portion of the principal of or interest on obligations issued by local governments to finance public works projects.)) "Contingent loan agreement" means an agreement between the state and a local government in which the state provides an absolute and unconditional commitment to make a loan to a local government from the infrastructure financing account in order to enhance the credit of local government borrowing.
     (5) "Local governments" means cities, towns, counties, special purpose districts, and any other municipal corporations or quasi-municipal corporations in the state excluding school districts ((and port districts)).
     (6) "Public works project" means a project of a local government for the planning, acquisition, construction, repair, reconstruction, replacement, rehabilitation, or improvement of streets and roads, bridges, water systems, or storm and sanitary sewage systems and ((solid waste facilities)) other capital facilities that support the policy objectives of the state's local infrastructure investments described in section 2 of this act, including recycling facilities. A planning project may include the compilation of biological, hydrological, or other data on a county, drainage basin, or region necessary to develop a base of information for a capital facility plan.
     (7) (("Solid waste or recycling project" means remedial actions necessary to bring abandoned or closed landfills into compliance with regulatory requirements and the repair, restoration, and replacement of existing solid waste transfer, recycling facilities, and landfill projects limited to the opening of landfill cells that are in existing and permitted landfills.
     (8))) "Technical assistance" means training and other services provided to local governments to help such local governments:
     (a) ((Help such local governments)) Plan, apply, and qualify for loans ((and financing guarantees from the board)), grants, and contingent loan agreements; and
     (b) ((help local governments)) Improve their ability to plan for, finance, acquire, construct, repair, replace, rehabilitate, and maintain public facilities; and
     (c) Comply with the policies of local responsibility described in section 2 of this act.

Sec. 4   RCW 43.155.050 and 2010 1st sp.s. c 37 s 932 are each amended to read as follows:
     The public works assistance account is hereby established in the state treasury. Money may be placed in the public works assistance account from the proceeds of bonds when authorized by the legislature or from any other lawful source. Money in the public works assistance account ((shall)) must be used to make loans and to give financial guarantees to local governments for public works projects. Moneys in the account may also be appropriated to provide for state match requirements ((under federal law for projects and activities conducted and financed by the board under the drinking water assistance account)) for federal assistance for clean water and drinking water local infrastructure. Moneys in the account may also be appropriated for payments required under contingent loan agreements for infrastructure projects. Moneys in the account may be appropriated to provide financial assistance through the water system acquisition and rehabilitation program created in chapter 70.119A RCW. Not more than fifteen percent of the biennial capital budget appropriation to the public works board from this account may be expended or obligated for preconstruction loans, emergency loans, or loans for capital facility planning under this chapter; of this amount, not more than ten percent of the biennial capital budget appropriation may be expended for emergency loans and not more than one percent of the biennial capital budget appropriation may be expended for capital facility planning loans. ((For the 2007-2009 biennium, moneys in the account may be used for grants for projects identified in section 138, chapter 488, Laws of 2005 and section 1033, chapter 520, Laws of 2007. During the 2009-2011 fiscal biennium, sums in the public works assistance account may be used for the water pollution control revolving fund program match in section 3013, chapter 36, Laws of 2010 1st sp. sess. During the 2009-2011 fiscal biennium, the legislature may transfer from the job development fund to the general fund such amounts as reflect the excess fund balance of the fund.))

Sec. 5   RCW 43.155.060 and 1988 c 93 s 2 are each amended to read as follows:
     (1) In order to aid the financing of public works projects, the board may:
     (((1))) (a) Make low-interest or interest-free loans and make grants to local governments from the public works assistance account or other funds and accounts for the purpose of assisting local governments in financing public works projects. The board may require such terms and conditions and may charge such rates of interest on its loans as it deems necessary or convenient to carry out the purposes of this chapter. Money received from local governments in repayment of loans made under this section ((shall)) must be paid into the public works assistance account for uses consistent with this chapter;
     (b) Make loans to local governments to assist those local governments to pay all or a portion of the principal of or interest on obligations issued to finance infrastructure projects pursuant to contingent loan agreements; and
     (c)(i) Coordinate with the Washington state treasurer who, on behalf of the state of Washington, may prescribe the terms of and enter into a contingent loan agreement between the state and a local government if the state treasurer determines that such a contingent loan agreement is financially prudent and is consistent with the provisions of this chapter. Contingent loan agreements may be entered into by the state treasurer only with local governments whose limited tax general obligations or senior revenue obligations, as applicable to the obligations concerned, are rated not higher than A1 or A+ by at least one of the nationally recognized rating agencies.
     (ii) The state's obligation to make any loan to a local government pursuant to the terms of a contingent loan agreement is subject to appropriation from the infrastructure financing account.
     (iii) The office of the state treasurer may charge a fee to local governments to recover the costs of creating the contingent loan agreements.
     (iv) In order to provide for the state's obligations under the terms of contingent loan agreements, the legislature must provide, from time to time in appropriations acts, for such amounts as may be required to make timely payments from the infrastructure financing account.
     (2) ((Pledge money in the public works assistance account, or money to be received by the public works assistance account, to the repayment of all or a portion of the principal of or interest on obligations issued by local governments to finance public works projects. The board shall not pledge any amount greater than the sum of money in the public works assistance account plus money to be received from the payment of the debt service on loans made from that account, nor shall the board)) Neither the board nor the state treasurer may pledge the faith and credit or the taxing power of the state or any agency or subdivision thereof to the repayment of obligations issued by any local government.
     (3) In order to aid the financing of public works projects, the board may:
     (a) Create such subaccounts in the public works assistance account as the board deems necessary to carry out the purposes of this chapter((.)); and
     (((4))) (b) Provide a method for the allocation of loans ((and financing guarantees)), grants, and contingent loan agreements and the provision of technical assistance under this chapter.
     (4) All local public works projects aided in whole or in part under the provisions of this chapter ((shall)) must be put out for competitive bids, except for emergency public works under RCW 43.155.065 for which the recipient jurisdiction ((shall)) must comply with this requirement to the extent feasible and practicable. The competitive bids called for ((shall)) must be administered in the same manner as all other public works projects put out for competitive bidding by the local governmental entity aided under this chapter.

NEW SECTION.  Sec. 6   The following acts or parts of acts are each repealed:
     (1) RCW 43.155.055 (Water storage projects and water systems facilities subaccount) and 2003 c 330 s 1;
     (2) RCW 43.155.075 (Loans for public works projects -- Statement of environmental benefits -- Development of outcome-focused performance measures) and 2001 c 227 s 10;
     (3) RCW 43.155.100 (Water conservation account) and 2002 c 329 s 11;
     (4) RCW 43.155.110 (Puget Sound partners) and 2007 c 341 s 25; and
     (5) RCW 43.155.120 (Administering funds -- Preference to an evergreen community) and 2008 c 299 s 30.