Background:

Public Works Assistance Account.

The Public Works Assistance Account (Account) was established in 1985 to encourage local government self-reliance in meeting public works needs, and to assist in financing critical infrastructure projects. Moneys in the Account must be used to make loans and give financial guarantees, and may also be appropriated to provide state match for federal dollars. Loan repayments and revenues from three tax sources have historically been deposited into the Account. However, in recent years, repayment cash and tax revenues have largely been redirected to the State General Fund or Education Legacy Trust Account to support the operating budget.

Public Works Board (Board) Membership.

The Board is staffed by the Department of Commerce and includes 13 voting members: two elected officials and one public works manager representing cities; two elected officials and one public works manager representing counties; three members representing public utility and water-sewer districts; and four members representing the general public.

The Board Responsibilities.

The Board may make low-interest or interest-free loans from the Account to finance the acquisition, construction, repair, replacement, or improvement of the following local public works: bridges, streets, and roads; water systems; storm and sanitary sewage systems; and solid waste facilities, including recycling. For up to a maximum of 15 percent of the biennial capital budget appropriation, the Board may make loans for pre-construction, emergency, and capital facilities planning. Local governments and special purpose districts, except port and school districts, are eligible to apply for loans from the Account. The Board may provide technical assistance. Existing debt or financial obligations may not be refinanced.

The Board must consider a number of factors in prioritizing projects: health and safety; unemployment rate; the Puget Sound Partnership Action Agenda; fiscal distress; permitting processes; relative project costs; number of communities served or funding the project; water system health and safety violations; Evergreen community recognition; and relative project benefits. By November 1 of each even-numbered year, the Board must develop and submit to legislative fiscal committees a prioritized recommended funding list of public works construction projects. The Legislature may remove projects from the list, but may not change the priority order of the Board's recommendations. Funds cannot be obligated by the Board until the Legislature has appropriated funds for a specific list of projects.

In both the 2013-15 Capital Budget (ESSB 5035, Section 7032) and the 2015-2017 Capital Budget (2EHB 1115, Section 7033), the Legislature required the Board to develop a process for numerically ranking applications for construction loans, and to use an alternative list of consideration factors in order to assign that ranking. In addition, the Capital Budget required the Board to:

base loan interest rates for construction projects on tax-exempt municipal bond interest rates as published in the Bond Buyer's Index and provide special rates and terms for projects that meet standardized hardship criteria;

contractually require an investment grade efficiency audit for public facilities for which an audit is obtainable, and allow the audit costs to be financed as part of the loan; and

implement policies and procedures to maximize local government use of federally-funded drinking water and clean water state revolving funds, including those operated by the Department of Ecology (DOE) and the Department of Health (DOH). The 2015-17 directive further specified that projects "eligible" for the DOE and DOH revolving funds are not eligible for Public Works Board construction loans and defined what "eligible" means.

Summary of Bill:

The Board Membership.

The Board membership is increased from 13 to 17 by adding one member from each of the two major caucuses of the House of Representatives (House), appointed by the Speaker of the House, and one member from each of the two major caucuses of the Senate (Senate), appointed by the President of the Senate. Each appointed member may designate an alternate member from the same caucus to attend meetings from which the appointed member will be absent, and the designee will have the same voting and participation powers as other Board members.

The Board Responsibilities.

The Board's responsibilities are revised on an ongoing basis, generally consistent with the 2013-15 and 2015-17 Capital Budget provisos. The Board must assign a numeric ranking to the applications received for construction loans and must, at a minimum and in any order, consider the extent to which the project:

is critical and affects the health and safety of many;
leverages non-state funds;
is ready to proceed;
is in an area of high unemployment;
promotes environmental quality;
consolidates or regionalizes systems;
encourages economic development through mixed-use and mixed-income development;
is part of a well-managed system;
results in equitable geographic and population distribution of funds; and
meets eight specified state policy objectives.

The Board's general authority to make "low-interest or interest-free" loans to local governments for construction, emergency public works projects, and preconstruction activities is replaced by a requirement that the Board base interest rates on the average daily market interest rate for tax-exempt municipal bonds as published in the Bond Buyer's Index for 30 to 60 days prior to the start of the application cycle. In addition, for projects that meet standardized hardship criteria, the Board must allow for reduced interest rates, extended repayment periods or forgivable principal loans.

The Board must adopt policies and procedures to maximize local government use of federal funds to finance local infrastructure projects.

For preconstruction and construction loans, the Board must contractually require an investment grade efficiency audit for public facilities for which an audit is obtainable, and may allow the audit costs to be financed as part of the loan.

As a new responsibility, the Board must collaborate with other organizations to provide the Governor and appropriate legislative committees every four years with an assessment of local infrastructure needs and potential in-state resources to meet the needs.