HOUSE BILL NO. 124 "An Act relating to grants to municipalities, named recipients, and unincorporated communities; establishing capital project matching grant programs for municipalities and unincorporated communities; establishing a local share requirement for capital project grants to municipalities, named recipients, and unincorporated communities; and providing for an effective date." Co-Chair MacLean provided members a with work draft for HB 124 (FIN), 8-GH1018\O (copy on file). Co-Chair MacLean provided members with AMENDMENT 1 (Attachment 1). She explained that Amendment 1 would create a sliding scale and change 8 percent to 7 percent. Co-Chair MacLean MOVED to ADOPT AMENDMENT 1. There being NO OBJECTION, it was so ordered. Representative Brown presented members with AMENDMENT 2 (Attachment 2). Amendment 2 would define "capital project" as a project with a cost exceeding $10.0 thousand dollars... with an anticipated life exceeding one year..." She suggested that the Amendment be amended to $5.0 thousand dollars a year over two years. SHELBY STASTNY, DIRECTOR, OFFICE OF BUDGET AND MANAGEMENT did not have objections to Representative Brown's amendment or amendment to the Amendment. Co-Chair Larson expressed concern that school districts and municipalities would use the matching grant for deferred maintenance. Representative Martin expressed concern that the $5.0 thousand dollar eligibility requirement would result in more administrative costs. Representative Parnell asked if the Internal Revenue Code definition of capital project would apply. Mr. Stastny replied that the Internal Revenue Code defines "capital project" as any expenditure that is expected to last more than a year and/or extend the life of an asset. Representative Grussendorf noted that the definition of capital project contained in Amendment 2 would only apply to the Capital Matching Program. 3 Co-Chair Larson stressed that municipalities can handle smaller maintenance projects. Representative Brown asserted that small communities need flexibility. Representative Brown MOVED to AMEND Amendment 2 to insert "$5.0" and delete "$10.0" and delete "one" and insert "two" years. Representative Martin OBJECTED. A roll call vote was taken on the motion. IN FAVOR: Parnell, Brown OPPOSED: Grussendorf, Foster, Hanley, Martin, Parnell, Therriault, MacLean, Larson Representatives Hoffman and Navarre were not present for the vote. The MOTION FAILED (2-8). Representative Brown MOVED to ADOPT AMENDMENT 2. Representative Martin OBJECTED. A roll call vote was taken on the motion. IN FAVOR: Therriault, Brown, Foster, Grussendorf, MacLean OPPOSED: Martin, Parnell, Hanley, Larson Representatives Hoffman and Navarre were not present for the vote. The MOTION PASSED (5-4). Representative Brown provided members with AMENDMENT 3 (Attachment 3). She explained that the Amendment would acknowledge that the state is not responsible for operation of projects. She discussed Amendment 3. Members discussed the affect of the amendment on CSHB 82 (FIN). Representative Brown WITHDREW AMENDMENT 3. Co-Chair MacLean expressed concern that page 4, line 20 and 23 needs further clarification to identify money spent as capital matching money. JACK FARGNOLI, OFFICE OF MANAGEMENT AND BUDGET, OFFICE OF THE GOVERNOR observed that language should be adopted to define that "10 percent of the total amount of money spent on land acquisition" applies to the appropriation or grant. Representative Brown provided members with AMENDMENT 4 (Attachment 4). She explained that Amendment 4 will clarify that no more than 10 percent of state money will go to the administrative cost for the whole project. Representative Brown MOVED to ADOPT AMENDMENT 4. There being NO OBJECTION, it was so ordered. 4 Representative Brown provided members with AMENDMENT 5 (Attachment 5). She explained that Amendment 5 will forward fund the program. The Office of Management and Budget would have the summer months to establish regulations. Representative Brown MOVED to ADOPT AMENDMENT 5. Co-Chair MacLean OBJECTED. A roll call vote was taken on the motion. IN FAVOR: Brown OPPOSED: Grussendorf, Navarre, Hanley, Martin, Parnell, Therriault, MacLean, Larson The MOTION FAILED (8-1). Representatives Foster and Hoffman were not present for the vote. Representative Brown MOVED to ADOPT AMENDMENT 6 (Attachment 6). She MOVED to AMEND the Amendment to delete "originally" and "insert or other assets". She stated that the amendment to Amendment 5 would allow equipment obtained through state grants to be sold. There being NO OBJECTION, it was so ordered. Representative Brown MOVED to ADOPT AMENDMENT 5 as amended. Co-Chair Larson spoke in support of the amendment. There being NO OBJECTION, it was so ordered. Co-Chair MacLean provided members with AMENDMENT 7 (Attachment 7). (Tape Change, HFC 93-125, Side 1) Mr. Fargnoli explained that Amendment 7 is a "housekeeping" amendment which clarifies the definition of "local share". Co-Chair MacLean MOVED to ADOPT AMENDMENT 7. Co-Chair Larson asked who would be responsible for cost overruns. Mr. Stastny stressed that each community has the option of investing from their pool of funds. If a community has money in their account the state would provide a match at the same ratios. Co-Chair MacLean referred to fiscal notes accompanying HB 124. Mr. Fargnoli discussed fiscal notes for the Department of Community and Regional Affairs, Department of Administration and municipal impact. He noted that matching requirements will add to administrative costs in the Department of Community and Regional Affairs. Representative Navarre express concern that the departments will not have sufficient personnel to administrator the grants efficiently. He asked if Davis Bacon laws regarding pay scale cause difficulties. Mr. Fargnoli assured him that 5 Davis Bacon laws will not cause problems. Representative Grussendorf asked if the Department of Transportation and Public Facilities would be involved in projects. Mr Fargnoli agreed that the Department of Transportation and Public Facilities could be affected by projects but did not anticipate increased budget needs. Representative Foster MOVED to ADOPT the fiscal notes associated with CSSB 88 (FIN) for as House Finance Committee fiscal notes for HB 124. There being NO OBJECTION, it was so ordered. Representative Martin MOVED to report CSHB 124 (FIN) out of Committee with individual recommendations and with the accompanying fiscal notes. There being NO OBJECTION, it was so ordered. CSHB 124 (FIN) was reported out of Committee with "no recommendation" and with a zero fiscal note by the House Finance Committee and with two fiscal impact notes by the House Finance Committee. Representative Hanley expressed his desire to see administrative costs deducted from the grant. Mr. Stastny observed that overhead costs for the capital matching grants are absorbed in the affected agencies' budget. Co-Chair Larson agreed that increased agency costs should be included in the grant process. He stressed that it is the Committee's intent that costs be born by the grant program. There being NO OBJECTION, CSHB 124 (FIN) was moved from the Committee.