SENATE BILL NO. 303 "An Act relating to certain grants awarded by the Department of Environmental Conservation." Co-Chair Stedman presented the opening remarks and overview for the meeting. 9:13:30 AM GINGER BLAISDELL, STAFF, SENATOR GREEN provided a technical overview of SB 303. She noted that the bill reflected a population change from 5,000 to 10,000 persons (Page 1, line 13 and Page 2, line 1-2). She referred to a "community listing" with the current population of each city in Alaska. She remarked that Legal Services indicated that changing the population under this program would not impact any other program in the state (copy on file). Ms. Blaisdell presented a final note showing a three year listing of water and sewer projects and the cities awarded these projects. She maintained that although the listing reflected FY 07-09 projects, this bill would only deal with FY 09. Co-Chair Stedman requested an explanation of the bill. Ms. Blaisdell responded that the bill changes the population criteria for the rates of community matching water and sewer grants. She noted that the bill changes the population criteria from a city of 5,000 to a city of up to 10,000. Ms. Blaisdell cited that cites of 1000 or less can participate in the program with a matching rate of eighty five percent state funding to fifteen percent municipality funding. She continued that cities between 1,001 and 5,000 have a funding rate of seventy percent state to thirty percent municipality participation and cities of 5,001 or higher was on a fifty percent to fifty percent matching rate. She indicated that the rational is that cities beginning to grow beyond the 5,000 population mark are experiencing a significant rise in costs for their expanding system of piped water and sewer. This has pushed a higher tax burden on the citizens to pay for the rising costs of steel and construction. 9:16:42 AM Senator Dyson questioned the genesis of the bill. He also asked if this involved an expansion of the sewer and water system or the intensity in the treatment of the water and wastewater. 9:17:07 AM Ms. Blaisdell responded that the requests came from multiple communities. She specified that the bill does not change the program at all or the type of sewer system used in the communities, but just helps newly growing communities. 9:17:48 AM Senator Olson remarked that it would change the funding structure for these communities and he wondered about the size of the projects being considered. Ms. Blaisdell showed that some of projects reflected a wide funding range from a few hundred thousand to several million. She remarked that a community has to follow a process by turning in an application to the Department of Environmental Conservation. This application is scored and ranked and then a decision made on how much in general funds will be provided to pay for the project. If the project costs more than the state agrees to pay, the Legislature would decide how much of the General Fund would be made available. Senator Olson remarked that he does not see reflected in the fiscal note what it will cost the state when the matching fund rate changes from a fifty/fifty to a seventy/thirty ratio. Co-Chair Stedman answered that the Fiscal Note reflected $3.72 million for one year. 9:19:32 AM Ms. Blaisdell remarked that the Fiscal Note only reflects one year because the number or type of applications that will be received from the communities next year is not known. She noted that the $3.72 million reflects the projects that it is anticipated will be approved in the budget. 9:20:08 AM Senator Elton questioned why the grants are made at the municipal rather than the borough level. Ms. Blaisdell remarked that boroughs, and municipalities within the boroughs, may have different powers. Senator Elton seemed to see a significant difference between a borough with incorporated municipalities, like the Kenai Borough, and the boroughs, such as, the Northwest Arctic Borough. He believed it might create an incentive for organized boroughs, with municipalities within them, to switch their mode of operations to access these funds. 9:22:18 AM Ms. Blaisdell reported that she had never heard this suggestion from any of the cities impacted by the bill. Senator Elton mentioned that he understood the impacts for the next fiscal year and how there is only a change in the definition of population size but he wondered if there would be a realistic way for the larger communities to grow without the money growing. Ms. Blaisdell agreed that more money would be needed. She stressed that if the fiscal note for $3.72 million was not passed, then many of the planned projects for FY 09 would have to be removed. 9:25:32 AM KATHIE WASSERMAN, EXECUTIVE DIRECTOR, ALASKA MUNICIPAL LEAGUE supported SB 303 because it would help growing communities boost local water and sewer projects. She indicated that the 5,000 population number was an arbitrary number in 1994, but since that time, costs have risen for water and sewer projects so the intent of the bill is to raise that arbitrary number to 10,000. She explained the population number change would help eight communities in dealing with aging water and sewer projects: Wasilla, Ketchikan, Kenai, Sitka, Kodiak, Bethel, Palmer and Homer. Ms. Wasserman answered the earlier question about borough management by saying that boroughs usually do not have the water and sewer rights unless it is a unified borough, like Sitka, Juneau, and Yakatat. She advised that other boroughs do not provide borough-wide water and sewer projects. BILL ALLEN, CITY MANAGER, CITY OF PALMER supported SB 303. He related that the smaller city of Palmer is dealing with an aging infrastructure that contains lengths of steel wall construction pipe with a forty percent leakage in the water system. Mr. Allen pointed out that Palmer is very aggressive in economic development however the city is only five square miles which leaves the city trying to expand its boundaries through annexation. Mr. Allen related that when trying to annex outlying communities the benefits are important. Palmer wants to be able provide city-wide safe water and sanitation. Mr. Allen remarked that the local savings from fifty percent to thirty percent makes a considerable difference to the small tax base of Palmer. He remarked that Palmer is also experiencing a migration into the city from rural Alaska that is impacting the city's infrastructure. 9:33:29 AM BILL GRIFFITH, FACILITY PROGRAMS MANGER, DIVISION OF WATER, DEPARTMENT OF ENVIRONMENTAL CONSERVATION, testified via teleconference, and advised that the department is not opposed to this statutory change but it is viewed as a policy decision by the Legislature to establish what share of project costs should be born by both the state and the local municipalities. He affirmed that for FY 09, under these proposed changes and in order to provide funding for the same number of projects, it would be necessary to increase the Department of Environmental Conservation's Capital Budget request. Or, he advised, the department could fund fewer projects with the same amount of funding that has already been requested. He indicated that in future years, the department would incorporate the new matching ratios into the department's budget request. Senator Huggins questioned how many of the existing twenty- six projects would be affected by this legislation. Mr. Griffith responded that nine projects would be affected by this change. 9:35:52 AM Senator Elton remarked that nine communities would receive a beneficial effect but there would be a potential negative affect on smaller communities or larger communities unless the amount of money grew. Mr. Griffith responded that most communities of less than 1000 people are eligible for village safe-water funding which is a separate funding request the department makes every year. Senator Elton remarked on the potential negative affect of communities between 1,000 and 5,000 and the other potential negative affect on those communities above 10,000, unless the money grows by Legislative action. Mr. Griffin agreed that either the money must grow in order to provide funding for the same number of projects or the choice could be to fund fewer projects. 9:38:15 AM Co-Chair Stedman clarified that in the fiscal note, eight projects are listed for FY 09: Homer Water Treatment Plant Upgrade Kenai New Water Transmission Main Phase Wellhouse Kodiak Aleutian Homes Water & Sewer Replacement Ph 4 Palmer Steel Water Main Replacement Phase 6 Palmer Wastewater Treatment Plant Improvement Design Palmer Southwest Utility Extension Phase II Wasilla Mission Hills Water Extension Senator Huggins observed that Mr. Griffith clarified that there are only eight, not nine, community projects. 9:39:59 AM ARCHIE GIDDINGS, PUBLIC WORKS DIRECTOR, CITY OF WASILLA, testified via teleconference in support of this legislation. He mentioned that projects are scored on a priority basis, not necessarily the size of the project. He expressed the ongoing difficulty in getting federal funding and stressed that the increase in the state contribution would help communities achieve the needed matching funds. 9:41:45 AM Ms. Blaisdell referred to the population list and indicated that most of the benefiting communities had a population of approximately 3,000 in 1994. She remarked that these communities are now in the 6,000 to 7,000 population range. She described a large population gap until reaching the higher population communities of Juneau and Fairbanks at 30,000. She explained that 10,000 was a good base number as she is confident that neither Juneau nor Fairbanks would fall below the 10,000 population mark. 9:43:25 AM Co-Chair Hoffman MOVED to REPORT SB 303 out of Committee with individual recommendation and the accompanying fiscal note. There being NO OBJECTION, it was so ordered. SB 303 was REPORTED out of Committee with a "do pass" recommendation and an accompanying previously published fiscal note from the Department of Environmental Conservation. AT EASE: 9:44:15 AM RECONVENED: 9:44:35 AM