03/12/1994 10:05 AM Senate FIN

                                                                               
  SENATE BILL NO. 330                                                          
                                                                               
       An  Act relating  to  water quality  enhancement, water                 
       supply, wastewater, and solid  waste grants; the Alaska                 
       clean water fund; the establishment of the Alaska clean                 
       water account, the Alaska drinking  water fund, and the                 
       Alaska  drinking water  account; and  providing  for an                 
       effective date.                                                         
                                                                               
  Co-chair Pearce  directed  that SB  330  be brought  on  for                 
  discussion  and  referenced the  zero  fiscal note  from the                 
  Dept.  of Environmental  Conservation,  a sponsor  statement                 
  from Senator Halford,  a sectional analysis, and  letters of                 
  support  from  the   City  of  Hoonah   and  the  Dept.   of                 
  Environmental  Conservation.  She  further observed that the                 
  bill was introduced at the request of the department.                        
                                                                               
  KEITH KELTON,  Director, Division  of Facility  Construction                 
  and  Operation, Dept.  of  Environmental Conservation,  came                 
  before committee.                                                            
                                                                               
  End:      SFC-94, #28, Side 2                                                
  Begin:    SFC-94, #30, Side 1                                                
                                                                               
  He explained that the bill amends two statutes:  one relates                 
                                                                               
                                                                               
  to  grants  and the  other to  loans.   Changes  to matching                 
  grants are included in the first  five sections of the bill.                 
  The program  currently provides assistance  for construction                 
  of  water  and  sewage  treatment  plants  and  solid  waste                 
  facilities for  incorporated communities.   First  class and                 
  larger  communities have typically availed themselves of the                 
  program.  Proposed amendments would:                                         
                                                                               
       1.   Make   it   easier   for    smaller   incorporated                 
  communities                                                                  
            to receive assistance.                                             
                                                                               
       2.   Clean up archaic provisions in statutes enacted in                 
                                                                               
            1972 and amended many times hence.                                 
                                                                               
  As  originally  drafted,  the matching  grants  program  was                 
  intended to match  a federal grant  program from EPA.   That                 
  program  is  no  longer  available.    The  federal  program                 
  provided 75% funding.  Statutes required that the balance be                 
  spilt 50/50 between state and local governments.   Since the                 
  federal program no longer exists, there is no reason for the                 
  statutory provisions.   The department  has found, over  the                 
  past  several   years,  that   the  50/50   requirement  led                 
  communities to seek total state funding rather than applying                 
  for  federal   dollars.    The  proposed   statutory  change                 
  eliminates  the  federal clause  and  allows communities  to                 
  match as much state money with as much federal money as they                 
  can acquire.  There would thus  be no disincentive to obtain                 
  federal dollars.                                                             
                                                                               
  Mr.   Kelton  explained   that   smaller  communities   with                 
  populations of 1,000 to 5,000 have not availed themselves of                 
  the program,  although many  have  "real sanitation  needs."                 
  For communities below 1,000, the  village safe water program                 
  provides funding,  and communities with  populations greater                 
  than 5,000  generally do  not have  problems with the  local                 
  match.  Communities that fall  within those ranges have been                 
  unable  to  finance  facilities.    The department  is  thus                 
  proposing a change in funding  relationships to more closely                 
  parallel the Governor's matching grants program.  Instead of                 
  50%  state  participation,  the  level   would  be  85%  for                 
  communities  of   1,000  and  30%  state  participation  for                 
  communities between 1,000  and 5,000.  For  communities over                 
  5,000, the status quo is maintained.                                         
                                                                               
  Changes to loan statutes, involve an addition to the current                 
  program.    Present statutes  allow  the department  to take                 
  advantage of an EPA loan program which is 85% capitalized by                 
  the  federal  government.   These  loans are  for wastewater                 
  facilities only, and a fund  of approximately $60 million is                 
  available for capitalization.   Three bills, now  pending in                 
  Congress, would  establish a parallel  program for  drinking                 
  water.  Through changes in the proposed bill, the department                 
                                                                               
                                                                               
  is  attempting  to   "get  ahead  of  the   federal  program                 
  authorization . .  . ."  The bill seeks to establish a state                 
  loan  program  so  that when  the  federal  authorization is                 
  available, the department  will be  able to utilize  federal                 
  moneys.   Mr. Kelton  described the  importance of  drinking                 
  water loans in relation to  federal requirements for surface                 
  water treatment.   Federal  law requires  all surface  water                 
  sources to receive filtration.  Due to that law, a number of                 
  "very expensive treatment systems" are required.  Localities                 
  (Unalaska, Kodiak, and Cordova were cited as examples) where                 
  seafood   processors  use   surface   water  will   incur  a                 
  "tremendous cost."   The proposed loan program  will provide                 
  communities low interest loans, at 2/3 of the municipal bond                 
  index (about 4%), capitalized 80% by the federal government.                 
                                                                               
                                                                               
  Senator Rieger directed attention to  existing law set forth                 
  at page  3, line  16, of  the bill  and referenced  language                 
  allowing use  of the  clean water  fund for "guaranteeing  a                 
  public  agency debt  obligation."   He then  voiced need  to                 
  substitute other wording for "guaranteeing"  to more clearly                 
  indicate that clean water assets may be used as security for                 
  debt obligation.   The Senator voiced concern  that existing                 
  language might infer an obligation of the state.  Mr. Kelton                 
  advised that while  the language  has been  in effect  since                 
  1987 and no problems have arisen, he would have no objection                 
  to a change.   Senator Rieger then MOVED for adoption of the                 
  following amendment:                                                         
                                                                               
       Page 3, Line 16:     delete "guaranteeing or"                           
                            insert "collateral or for"                         
                                                                               
  Co-chair Pearce  called for  a show  of hands.   The  motion                 
  CARRIED unanimously, and the amendment was ADOPTED.                          
                                                                               
  Senator Sharp asked how the proposed new drinking water fund                 
  would interplay with  the existing clean water program.  Mr.                 
  Kelton explained that  there is  no correlation between  the                 
  first five sections of the bill (relating to grants) and the                 
  new loan program in remaining bill  provisions.  There is no                 
  interplay between the two; one does  not provide a match for                 
  the other.                                                                   
                                                                               
  Co-chair   Pearce  called   for   additional  testimony   or                 
  discussion.  None was forthcoming.                                           
                                                                               
  Senator  Kerttula  MOVED  that  CSSB  330  (Fin)  pass  from                 
  committee  with individual  recommendations.   No  objection                 
  having  been  raised, CSSB  330  (Fin) was  REPORTED  OUT of                 
  committee  with  a  zero  fiscal  note  from  the  Dept.  of                 
  Environmental   Conservation.     All  members   signed  the                 
  committee report with  a "do  pass" recommendation with  the                 
  exception of Senator Kelly who was absent from the meeting.