SENATE BILL REPORT

E2SSB 6235

BYSenate Committee on Ways & Means (originally sponsored by Senators Metcalf, Owen, Rasmussen and von Reichbauer; by request of Department of Ecology)

Creating the water pollution control account and authorizing financial assistance from it.

Senate Committee on Environment & Natural Resources

Senate Hearing Date(s):January 14, 1988; January 21, 1988

Majority Report:  That Substitute Senate Bill No. 6235 be substituted therefor, and the substitute bill do pass and be referred to Committee on Ways & Means.

      Signed by Senators Metcalf, Chairman; Smith, Chairman; Barr, Benitz, DeJarnatt, Kreidler, Owen, Patterson, Rinehart.

Senate Staff:Gary Wilburn (786-7453)

                  January 27, 1988

Senate Committee on Ways & Means

Senate Hearing Date(s):February 2, 1988; February 3, 1988

Majority Report:  That Second Substitute Senate Bill No. 6235 be substituted therefor, and the second substitute bill do pass.

      Signed by Senators McDonald, Chairman; Craswell, Vice Chairman; Bluechel, Cantu, Gaspard, Moore, Newhouse, Saling, Smith, Talmadge, Vognild, Warnke, Williams, Wojahn, Zimmerman.

Senate Staff:Charles Langen (786-7715)

                  March 4, 1988

AS PASSED SENATE, FEBRUARY 9, 1988

BACKGROUND:

The federal government provides funding to the states and local governments on a matching basis for sewage treatment facilities and other water quality activities under the federal Clean Water Act.  In 1987 the Clean Water Act was amended to phase into federal funding for loans for such activities.  Over the next three years, states are intended to create revolving funds for loans for wastewater treatment construction, to be funded primarily through federal capitalization grants to the states. Each state must commit to match the federal payments into the revolving fund by at least 20 percent.

Federal fiscal year 1988 will continue with the existing construction grants program.  However, if the governor of a state makes a timely request, up to 75 percent of the state's allotment of federal grant funds may be placed in the revolving fund, avoiding the requirement that funds not obligated during the fiscal year be returned to the federal government.  Washington's Governor has made such a timely request.

Fiscal years 1989 and 1990 are phase-in years for the revolving fund, with one-half of the federal funding authorized for construction grants, and one-half for capitalization grants to the revolving fund.  A condition of federal funding is that the revolving fund be used for loans or financial guarantees or purposes related to repayment of loans.  The allotment of the federal share for the State of Washington based upon the authorized funding under the 1987 Clean Water Act is approximately $42 million.

SUMMARY:

The legislative purpose of the act provides for an account to receive federal capitalization grants for financial assistance to state and local governments for water quality facilities and related activities.  The water pollution control revolving fund is created in the state treasury, to receive federal capitalization grants, state matching funds, principal and interest payments on loans from the fund, and fees and other revenues or funds.  Earnings from investments are to be credited to the revolving fund.

Moneys in the fund shall be used for loans for purposes allowed in the federal water quality law and for those purposes enumerated in this state act.  These purposes include construction of water pollution control facilities, implementation of management programs for nonpoint sources of pollution and for estuary conservation, correction of combined sewer overflows.  The fund may also be used for refinancing related debt obligations, for financial security, guarantees or insurance, and for administration of the fund.  The fund may not be used for grants.

The department is to provide annually a prioritized list of projects for funding from the account to the Ways & Means Committees of the Senate and House of Representatives.  The list is to include information on several enumerated subjects concerning the project and the fiscal factors regarding the local jurisdiction involved.  The board shall not obligate funds from the public works assistance account before the Legislature has appropriated funds for a specific list of projects.  The Legislature may remove projects from the list but may not change the order of priorities recommended by the board.

Loans must meet specified conditions concerning loan, interest rate, and repayment term and schedule, and dedicated sources for repayment.  The Department of Ecology is to allocate funds in accordance with annual project priority lists, and to provide any required reports and enter agreements with the federal government.  Applicants for loans shall be included on the project priority list, provide for a dedicated source for loan repayment, and meet other requirements.

If a public body defaults on repayment, the state may withhold additional funds and direct such funds to repayment of the defaulted indebtedness.  The department shall establish by rule the loan terms and interest rates for loans from the fund.  $5 million is appropriated for the biennium ending June 30, 1989 from the water quality account to the revolving fund account for providing the required state match for federal grants.

Appropriation:    $5 million from water quality account

Revenue:    yes

Fiscal Note:      available

Effective Date:The bill contains an emergency clause and takes effect immediately.

Senate Committee - Testified: ENVIRONMENT & NATURAL RESOURCES:  Joe Williams, Department of Ecology (for); Steve Carley, Department of Ecology

Senate Committee - Testified: WAYS & MEANS:  Joe Williams, DOE

HOUSE AMENDMENTS:

The engrossed Senate bill would create the water pollution control revolving fund for the purpose of making loans for water pollution control facilities, in order to receive federal grants pursuant to the 1987 federal Water Quality Act.  The House amendments delete provisions of the engrossed Senate bill which requires annual submission of a project priority list to the Ways and Means Committees of House and Senate, and legislative approval of the list as well as a specific appropriation for the list prior to obligation of moneys from the revolving fund. Added is a requirement that an annual progress report be submitted to both ways and means committees, describing the projects, loan terms and source of repayment.

The House amendments also delete the requirement that the Department of Ecology in administering the revolving fund shall comply with the distribution limits for categories of funding from the water quality account under RCW Chapter 70.146.  Added is a provision that moneys in the revolving fund are not subject to legislative appropriation.  A clarifying amendment provides that projects which may be included on the priority list include those qualifying under sections 319 (nonpoint pollution) and 320 (estuary programs) of the federal act.  A further clarifying amendment provides that at the end of the six-year program, after all federal money has been received, state matching funds are no longer required.

Finally, the House amendments require Ecology to transfer funds from the water quality account at intervals consistent with the deposits of federal funds.  The transfers are not to exceed the match required for each federal deposit.