Legislature(2007 - 2008)HOUSE FINANCE 519
04/10/2008 08:30 AM FINANCE
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SENATE BILL NO. 303 An Act relating to certain grants awarded by the Department of Environmental Conservation. GINGER BLAISDELL, STAFF, SENATOR LYDA GREEN, addressed the impact of the bill by changing the population criteria for certain match requirements on water and sewer projects, increasing the municipality size from 5,000 to 10,000. The changes would impact positively eight communities. There are only three communities above the 10,000 mark - Anchorage, Fairbanks & Juneau. She noted that the cost for construction projects has significantly especially for costs associated with steel and concrete. Some projects have become unattainable because of these costs. The bill provides a higher State matching rate, which provides communities opportunity for improved water and sewer systems. Co-Chair Meyer questioned why the three largest communities had been excluded. 9:32:39 AM Ms. Blaisdell agreed every community has been impacted by high construction costs, yet, the hope is that the denser populated areas could absorb costs easier. Vice-Chair Stoltze countered the reasoning, pointed out an infrastructure project ongoing in Palmer. Ms. Blaisdell agreed. 9:34:02 AM Representative Thomas questioned how the 15,000 number had been determined. Ms. Blaisdell said 10,000 was a good cut off point; she did not know why a higher number had not been considered. Vice-Chair Stoltze observed that 10,000 is a consistent number for determining a small community and is used over and over in the State. Co-Chair Meyer was more comfortable with the 5,000 resident number because that group has a tax base. Co-Chair Meyer observed that SB 303 is another revenue sharing bill. Ms. Blaisdell agreed it helps with municipal revenue. Representative Kelly interpreted that it is a "weighted" revenue sharing bill. 9:36:12 AM Co-Chair Meyer referenced Page 1, Line 14, recommending changing 50% to 60%. Ms. Blasdell responded that would be acceptable. She recommended that if that change was made, then Page 2, Lines 1-5 should be deleted, following "persons". Representative Gara referenced the $3.7 million dollars fiscal note asking why it was projected to end in FY09. When the grant ends, would the Department then cover the remaining costs. Ms. Blasdell explained that the way the municipal matching grant program works for water and sewer projects is that the communities send in extensive applications and then those are ranked by Department of Environmental Conservation and the highest priority is determined. The determination regarding whether a project is included or not is determined by the appropriation cap. Currently, the Governor's Office has requested $26 million General Fund matching dollars for those projects. The proposed fiscal notes assume that the same projects, which would have been matched under the $26 million dollar amount, would have a higher match rate and would provide the additional cost for the impacted programs. The zero indication for FY10 resulted because the Department has not considered any applications yet. 9:39:10 AM Representative Gara asked if the State currently only spends $26 million dollars on grant programs. Ms. Blaisdell replied that was correct for the General Fund dollars only and that there are also federal clean water funds. Representative Gara attempted to determine if the request was a "reshuffling of the spending dollars". BILL GRIFFITH, FACILITIES PROGRAM MANAGER, DIVISON OF WATER, DEPARTMENT OF ENVIRONMENTAL CONSERVATION testified via teleconference, advised that the fiscal effect of the bill would be that the Department would need more General Funds to provide grants for the same number of projects. Each year, the Department provides a new priority list including the grant requests made that year. Funds would need to be allocated by the Legislature each year to fund the projects. Representative Gara worried about the proposed expense associated with the projects. He indicated concerns for communities that currently have no water and/or sewer. He mentioned the need to make changes for communities currently using "honey-buckets". He asked what portion goes to those communities. Mr. Griffith replied those projects are funded through the Village Safe Water Program, federal funds, 75% federal funds and 25% State match dollars. That is a separate program and separate budget request. The municipal matching grant projects are 100% State funding. 9:42:44 AM Representative Gara inquired the current amount the State spends on the Village Safe Water projects and if there is a back log for those projects. Mr. Griffith responded that each year, the Department attempts to capture all the available federal funds for such projects and requests the necessary State dollars to capture those fund matches. Representative Gara reiterated concern for areas of the State that do not have flush toilets and asked if those projects would be fully funded. Mr. Griffith did not have the numbers available; typically, the Department requests the same or more than the State portion. The funding for the Village Safe Water projects this year was around $30 million dollars. He advised that the Department captures three times that amount in federal funds. Representative Gara inquired if there was a project backlog. Mr. Griffith replied there is a backlog and that currently, there is an unfunded need for both the Village Safe Water projects & the municipal matching grant projects. The Department is never able to fully fund all the requests each year. 9:45:19 AM Vice-Chair Stoltze pointed out that last year, a total spending of $120 million dollars was provided to Alaska. He pointed out that there are people in his district that do not have safe drinking water and have failed septic tank issues. The problems are not regional and placing infrastructure near regional hospitals is important. He suggested the needs were being presented from a one-sided point of view and that there are areas in urban Alaska that also have serious concerns. 9:47:49 AM Representative Hawker echoed similar sentiments. He commented on the allocation and rationing of the State's capital investment and the consideration of how well managed the money is spent and how extensive the projects are. The Village Safe Water projects has experienced financial mismanagement over the years. The Department has undertaken a significant effort to remedy the situation. He warned that it is important to know all the facts that are involved in making allocation choices. Co-Chair Meyer questioned how the program would be affected if the percentage was changed from 50% to 60%. Mr. Griffith responded that the Department was working on a fiscal note indicating those changes and acknowledged it will require additional funds. Representative Gara wanted to see "honey-buckets" disappear in Alaska. Any community that is still using them has serious needs. He stressed that mismanagement of the program should not result in people being deprived of proper water and sewer. Representative Gara did not agree with spending more money on the larger municipality size from 5,000 to 10,000 and then 50,000 to 60,000 for Anchorage. He worried about the smallest communities with fewer than 1,000 receiving the 85% match. He believed that the amendment would help the mid and big size communities but would leave the small communities without funding dollars. He urged that all community size numbers be adjusted. 9:51:05 AM Representative Nelson addressed the Village Safe Water Program concerns. She noted that she had worked for a contractor in that program. She emphasized that many of the villages have had their concerns addressed. The ones currently on the list are the ones that are the most challenging and expensive. She acknowledged there are unmet village needs, while pointing out how expensive those projects will be. She reiterated the challenges. 9:53:01 AM Representative Kelly requested a list of the statewide locations that have more than 50 people still on the "honey- bucket" system. He appreciated the progress the State has made. He worried about the lower limit and encouraged focusing on the areas with a population density. He reminded members that the bill is about revenue sharing and that he intended to vote against it. 9:55:00 AM Co-Chair Meyer acknowledged the increase to steel and pipe costs and realized there is a need and demand in his own area. Co-Chair Meyer MOVED to ADOPT Amendment 1 to Page 1, Line 14, deleting "50" and inserting "60". There being NO OBJECTION, it was adopted. Co-Chair Meyer MOVED to ADOPT Amendment 2 to Page 2, deleting all language on Line 1 to the end of the bill from "however, if a municipality.." There being NO OBJECTION, it was deleted. Representative Gara MOVED to ADOPT Amendment 3, Page 1, Line 11, deleting "1,000" and inserting "2,000". Representative Hawker OBJECTED. 9:56:26 AM Representative Hawker asked which communities would be affected by that change. Representative Gara did not know but wanted to make sure that all statewide communities were taken care of. Vice-Chair Stoltze pointed out that technically, Line 13 would also need to be changed. Representative Nelson interjected that she only knew one village over 1,000, Hooper Bay. Representative Hawker listed the other areas affected by that change: Wrangell, North Pole, Houston, Hooper Bay, Craig and Delta Junction. 9:57:21 AM In response to Representative Kelly, Mr. Griffith explained that communities would be able to participate in either one. In order to be eligible for the Village Safe Water, all second class cities would be if they were over 1,000 residents. The municipal matching grants are distributed to the first class cities with a population of over 600. Representative Kelly believed that information clarifies that that the scale should not be adjusted; he spoke against the amendment. Representative Gara WITHDREW Amendment 3. 9:59:43 AM Representative Kelly agreed that when the State grows into that situation, the idea should be revisited. Representative Nelson asked the position of Hooper Bay on the Village Safe Water list. Mr. Griffith interjected that the Department currently has a large, aggressive project to pipe water and sewer system into that area. Funding is available for that project from the three year priority list to keep the project going for the next 2-4 years. Representative Nelson asked if Amendment 3 would have been beneficial for that community. Mr. Griffith responded that the amendment would not have affected that project. Hooper Bay is eligible under the Village Safe Water program for 100% grants. 10:02:07 AM Vice-Chair Stoltze MOVED to REPORT HCS SB 303(FIN) out of Committee with individual recommendations and with the accompanying zero note. There being NO OBJECTION, it was so ordered. HCS SB 303(FIN) was reported out of Committee with a "do pass" recommendation and with a new zero note by the House Finance Committee.