HOUSE BILL NO. 183 "An Act relating to the Village Safe Water Act." 9:30:26 AM SHEILA PETERSON, STAFF, REPRESENTATIVE ALAN DICK, explained CS HB 183 (CRA) and the proposed changes in the CS. She related that the Village Safe Water Act (VSW) provided grants for water and sewer in small communities in Alaska. The bill addressed issues of eligibility. She informed the committee that VSW defined a village as an unincorporated community, a second class city, and a first class city with less than 600 residents. The legislation modified the definition, modestly eased eligibility, and established accountability. Ms. Peterson detailed that the City of Nenana, (population 370) applied for a VSW grant. The community worked with city officials to plan and design an upgrade to their existing water and sewer system. The existing system was in use since 1970. The grant was awarded. The city subsequently learned that they were ineligible for the grant because Nenana was a "home rule" city organized under a charter. She delineated that a home rule city received their authority under an adopted charter rather than state statute. The bill added home rule municipalities with less than 1000 residents eligible for the VSW program. Under the provision, Nenana and Yakutat were eligible for VSW funding. Ms. Peterson continued to discuss the legislation. The bill raised the population limit for eligibility for first class cities to 1,000. The legislation ensured that an "unincorporated community" with a governing body was eligible. She defined "unincorporated community" as a community that was not a home rule, first class, or second class city. Villages identified under Alaska Native Claims Settlement Act (ANCSA) qualified. The legislation intended that ANSCA villages would operate under governing bodies. She identified the problem. The Alaska Native Claims Settlement Act required that a village must form a non- profit or for profit corporation but did not mandate a governing body. 9:34:15 AM Ms. Peterson indicated that the CS endeavored to include unincorporated communities. The CS required unincorporated communities to adopt governing bodies for VSW eligibility. Vice-chair Fairclough asked whether Representative Dick supported the CS. Ms. Peterson affirmed. Representative Wilson MOVED to ADOPT CS Work Draft HB 183 27-LS0601/I (4/11/11 Bullard) as a working document before the committee. Representative Doogan OBJECTED. Representative Doogan asked for a list of the eight first class cities that would benefit from the population limit increase. Ms. Peterson referred to an email addressed to her from Bill Griffith (4/11/11) (copy on file) distributed to the committee that listed the communities. She listed the eligible communities: Akiachak, Kipnuk, Yakutat, Klawock, Hoonah, Ninilchik, King Cove, and Sand Point. 9:37:27 AM BILL GRIFFITH, FACILITY PROGRAMS MANAGER, DIVISION OF WATER, DEPARTMENT OF COMMERCE, COMMUNITY AND ECONOMIC DEVELOPMENT (via teleconference), in response to a question by Representative Neuman, explained that Talkeetna had water facilities operated and maintained by the borough not the city. The borough received funding through the municipal matching grant and loan program. Talkeetna was eligible for the VSW program. LINDSAY WOLTER, ASSISTANT ATTORNEY GENERAL, CIVIL DIVISION, ENVIRONMENTAL SECTION, DEPARTMENT OF LAW, ANCHORAGE (via teleconference),affirmed Talkeetna's eligibility for VSW grants . Representative Neuman commented that the City of Talkeetna imposed a tax for water and sewer services to help pay for the system the Mat-Su borough provided. Representative Costello wondered about the change related to the definition of "unincorporated community." She anticipated unintended repercussions with the change in statute. Ms. Peterson replied that the definition of village only applied to the Village Safe Water Program. She pointed out that the CS removed the ANCSA list. She read the definition that replaced the ANCSA list related to eligibility from the CS, Page 1, lines 9-16: (D) the Annette Island Reserve established by 25 U.S.C. 495 for the Metlakatla Indian Community; (E) a community with a population between 25 and 1,000 that is represented by (i) a council organized under 25 U.S.C. 476 (sec. 16 of the Indian Reorganization Act); (ii) a traditional village council recognized by the United States… Ms. Peterson reassured the committee that the definition only applied to the VSW program. Ms. Wolter expressed uncertainty about the interpretation. She discerned that the language appeared to single out native or tribal governments eligible for the grants. She cautioned that possible constitutional concerns existed. She understood that DEC would like to have a local government in place to administer the grant and operate the water and sewer system. She wanted assurance that mandating tribal governments to form a governing body would not present constitutional issues. Representative Costello understood that a governing body for an unincorporated community was the legislature. 9:44:12 AM Ms. Wolter stated that she was unaware of a statute that authorized the legislature as the governing body for an unincorporated community. She qualified that she was not familiar with the particular area of law. She understood from other statutes that the legislature empowered some unincorporated communities to accept grant funds. She indicated that the major concern behind the legislation was to ensure a responsible entity existed to account for the VSW funds. The solution consisted of a statute that defined the entity and conformed to the Equal Protection Clause. Representative Costello expressed concerns with having two different meanings for unincorporated community defined in statute. She thought that problems would arise. Vice-chair Fairclough asked whether the definition included in the CS was specific to VSW or if it related to other portions of the law. Ms. Wolter confirmed that the definition of village only related to VSW. Co-Chair Thomas related from personal experience that tribal governments waived their sovereignty in order to accept funds from the state, including VSW. Vice-chair Fairclough wondered whether that was a question for the Department of Law. 9:48:10 AM Ms. Wolter was unable to confirm Co-Chair Thomas's statement. She stated she was new to the program and did not have further information. Mr. Griffith confirmed that Co-Chair Thomas was correct. Tribal governments were required to sign a waiver of sovereign immunity to receive VSW funds. Representative Guttenberg referred to Mr. Griffith's email (copy on file) to Sheila Peterson. He noticed the inclusion of unincorporated communities inside of larger boroughs. He asked whether that was an issue. He wanted to understand how VSW defined unincorporated communities. Mr. Griffith identified that over 100 communities in the state were unincorporated and had no tribal government or governing body. Some were located within a borough and some were not. The program learned of their existence when the community contacted VSW to request funding. He was often uncertain what type of governing organization, if any, existed in the communities. Representative Gara wondered whether the VSW was the only funding mechanism available for communities that were using outhouses and honey buckets. Mr. Griffith answered that the VSW was the primary program that funded most communities waste water improvements. Municipal matching grants and loans to larger communities and occasional legislative grants from Department of Commerce, Community and Economic Development (DCCEC) were available. He added that no established program existed to administer the DCCED grant funds. Representative Gara asked how many communities in the state did not have sewer systems. Mr. Griffith acknowledged that there were roughly 40 communities where more than half of the homes were without running water and sewer. He mentioned that VSW had ongoing projects to provide services in half of the communities. Representative Gara related that his only concern about expanding the program was that the communities with more serious problems had to compete against additional communities for the same pot of money. He wondered if VSW would prioritize communities with the most severe problems. Mr. Griffith replied that VSW used a prioritization process and scoring criteria to establish legislative funding for the program. The criteria determined need primarily based on the health impacts of the community. Communities without running water or sewer were prioritized higher. 9:54:01 AM Representative Gara deduced that the communities most in need would still get priority under the bill. Mr. Griffith thought that was a fair assumption. He added that occasionally VSW funds projects that were not first time water and sewer. Other criteria were also considered such as the ability to operate and maintain existing services. Representative Neuman inquired about the meaning of "governing body." He mentioned the Legal Services Memo from the Division of Legal and Research Services (4/6/11 Cook) (copy on file). He referenced the community of Settlers Bay, located in the Mat-Su borough, governed by a covenant board. He wondered whether a subdivision would qualify for the VSW program. Ms. Wolter reminded the committee that the Department of Law (DOL) did not write the legal opinion. She discussed the legal opinion with DEC and ascertained that city councils were not unincorporated communities. She believed that the legal services definition of "governing body" needed revision. 9:58:18 AM Representative Doogan WITHDREW his objection. The CS Work Draft HB 183 27-LS0601/I was ADOPTED. Vice-chair Fairclough OPENED public testimony. JASON MAYRAND, MAYOR OF NENANA (via teleconference), spoke in favor of expanding the definition of "home rule." He expressed concerns that Nenana was precluded from VSW funding as a home rule municipality. He noted that the "home rule" definition escaped statute. The legislation attempted to remedy the situation. He explained that Nenana's original sewer and water system was installed in the 1970's by Public Health Services (PHS). In the 1990's, a sewer and water expansion project was constructed. The project was funded by a DEC matching grant. The match cost the community $400 thousand. Four years ago, the community researched eligibility and applied for the VSW grant which provided 100 percent funding. He elaborated that Nenana was working to rehabilitate their water and sewer system. The piping experienced frequent cracks and required replacement. The PVC had a tendency to crack and fixing leaks underground was expensive and time consuming. Nenana was awarded VSW design and construction funds. The grant was subsequently revoked and the only option to fund the project was a capital appropriation. The community could not repay the exorbitant cost ($1 million to $2 million) in loans needed to replace the failing system. He stressed that the community competently operated and maintained the existing system. He urged passage of the legislation. Vice-chair Fairclough asked whether he had heard discussion on the CS. She invited the mayor to share his opinion on the CS. Mr. Mayrand referred to CSHB 183 (CRA) Section 1, line 2 that listed the definition of village as listed in statute 43 U.S.C. 1610 or 1615 and deleted "unincorporated community." He offered that the CS should include the statue and leave in "unincorporated community." Representative Edgmon concurred with the mayor's suggestion. He wondered whether that idea was discussed. Ms. Peterson replied that the concern with the ANCSA definition was twofold. The ANCSA definition did not ensure a governing body. The Department of Environmental Conservation strongly urged inclusion of a governing body to ensure accountability. The second concern was related to conformity with the Equal Protection Act. She solicited the legal memo to determine the constitutionality of the definition. Legal Services suggested the definition focus on a governing body as opposed to Native status. The ANCSA definition was removed. She noted that DEC worked with DOL to develop the language in the current CS. 10:06:32 AM Representative Edgmon discussed the legal opinion related to the Equal Protection Clause. He wondered about including Indian Reorganization Act (IRA) and village councils. He identified that federal tribal dollars were available that could enhance VSW grants. Vice-chair Fairclough requested the information at a later meeting. Representative Gara asked if DEC led Nenana to believe that they qualified for funding. Mr. Mayrand replied in the affirmative. He detailed that in addition to the VSW design grant, DEC awarded Nenana construction funds appropriated by the legislature in 2008. Representative Gara opined that if the legislation was not passed this session the legislature should appropriate capital funds for the project on moral grounds. He believed the situation was wrong. Vice-chair Fairclough asked if Nenana incurred outstanding costs due to the rescinded funding. Mr. Mayrand explained that the city was permitted to retain the design funding; only the construction funds were withdrawn. Vice-chair Fairclough asked for the project's construction costs. Mr. Mayrand responded that the total cost was estimated at $9.5 million over a period of 5 to 6 years. Representative Gara asked if the city was "out-of-pocket" for costs associated with the project. Mr. Mayrand answered in the negative. 10:11:11 AM Vice-chair Fairclough CLOSED public testimony. HB 183 was HEARD and HELD in committee for further consideration.