SENATE BILL NO. 147 "An Act relating to local contributions under the village safe water program; and providing for an effective date." Senator Dave Donley spoke to the bill. This was a Senate Finance Committee bill that applied the same guidelines for the Municipal Matching Grants program to the Village Safe Water program. Co-Chair John Torgerson referred to the text in Section 2 that determined the local municipality asking if that was currently in statute. Senator Dave Donley answered that used the same standards as were used in the Municipal Matching Grants program. Co-Chair John Torgerson noted the committee did receive a $304,000 fiscal note from the department to implement the legislation. The costs would mainly cover the tests dictated in the bill on how to determine the required local effort. DAN EASTON, Director, Facilities Construction, Department of Environmental Conservation testified in opposition to the bill. He had seven concerns to bring before the committee. He began with saying there was nothing wrong with the idea of local communities contributing to the projects. That was done currently in that they were asked to contribute based on what they had. This bill would create a "one size fits all," criteria and not all communities would be able to meet the requirement. The department was particularly concerned that some of the communities with more severe health and sanitation problems would be the ones that would have the most trouble meeting the standard match requirement. He stated the program would lose federal fund if this bill were implemented. Tape: SFC - 99 #102, Side B 9:07 AM Of the 71 projects waiting to begin on July 1 if the funding was approved. Of those, 44 projects could be considered new projects and would be subject to the match requirement. The communities did not currently have any idea that they would have to meet a match requirement. While the Environmental Protection Agency funding could wait for communities to collect match funding, the US Department of Agriculture funding could not wait. Alaska was in competition with other states for those funds. Senator Dave Donley wondered if the simple fix would be to change the effective date to July 1, 2000. Dan Easton replied that the department would consider that a vast improvement. Senator Randy Phillips asked if the department would still oppose the bill. Dan Easton listed the third concern was that the match calculations were complex. He recommended that an engineer reviews and simplifies the calculations. He said the department oversaw other match programs that were more straightforward. The Municipal Water, Sewer and Solid Waste Matching Grant (AS 46.03.) program in statute was one of those simpler match programs. This program was for larger communities. Co-Chair John Torgerson asked if the recommendation was to adopt the criteria for that program into this bill. Dan Easton suggested looking at those statutes and regulations as a guide for a simpler way to calculate matching requirements. The fourth concern was the proposed thirty-percent cap would actually exceed the match requirement in the Municipal Water, Sewer and Solid Waste Matching Grant program. The smaller communities served by this program could actually be required to provide a larger match than larger communities. Co-Chair John Torgerson assured him the committee would look at the formula. The fifth concern was that the proposed method for which the match requirements were calculated required an evaluation assessment for first and second class cities. Those assessments were not available from any communities, according to the state assessor, and they would have to be done. It was not a matter of compiling data at hand. There was more to it than that. He continued with the sixth concern. The legislation would increase operating costs for the program. He noted the fiscal note. The changes would complicate the accounting process. Not only would the department have to track state and federal funds, it would also have to track local funds. The department would also have to place values on the in- kind contributions. He felt it was a good thing that the state allowed such contributions done as part of the local match. However, the worth would have to be determined. Finally, this would require the department to do an audit of every project to track local funds. This was not normally done. Co-Chair John Torgerson asked how would this effect the next phases of ongoing projects. Dan Easton interpreted the bill, as those projects under current construction would be exempt. However, that was a broad stipulation. If the original project was to build a road to a dump, what happens to the status of the project when the dump needed to be constructed? Would that be the same project? Co-Chair John Torgerson repeated the question and wanted to know if those projects would proceed with no match. He asked how many current projects there were. Dan Easton answered 140. Co-Chair John Torgerson asked what percent would be as described as road/dump type projects. Dan Easton responded fifty percent. Dan Easton gave another example of a project to put water pipe into a certain area of a town. Phase two would put the pipes into another area. Co-Chair John Torgerson stated that the committee then needed to better define the on-going projects. Senator Al Adams referred to the formula on page two and wanted to know if the state assessor was going to testify on the assessment. He noted that many of the affected communities were in his district that had never been assessed. He wanted someone to walk through the process and explain it to the committee. Co-Chair John Torgerson stated his intent was to have a simpler formula. He didn't oppose a match requirement but did not want it to incur further expenses to calculate. He also understood there were some areas of the state that could not afford any match. The bill would have to apply a grant similar to that for the underground storage tank programs. Senator Loren Leman suggested simplifying the formula to a five-percent match requirement. He supported community investment into projects. He felt the facilities would be better cared for. However, he knew there were some that could not afford it and he wanted better flexibility. He talked about in-kind services. He spoke to the stated need for audits. He wanted to know where that information came from. If an audit were not required for every project under state and federal funding, why would it be required for a municipal match? Dan Easton said that was a good point. Internal audits would ensure the matches were made. He felt it was a policy call. Senator Loren Leman suggested the department engineer could place a value and make a reasonable assumption of in-kind services. Senator Dave Donley understood this was the same formula used by Department of Community and Regional Affairs for community matching grants. How difficult could it be? He did support the co-chair's efforts to simplify. He felt there were strong incentives in the bill. He was in favor of volunteer labor and material and donated land, etc. Co-Chair John Torgerson noted that the Department of Community and Regional Affairs did not have a formula for unincorporated communities. That was were the difficulties would arise. Senator Al Adams added that those formulas did not go up to the thirty-percent necessary for this program. Until all communities were assessed, the formula won't work. Senator Loren Leman asked what first class cities were eligible. Dan Easton answered that first class city with a population less than 600. Seldovia was one example. All second class cities were eligible. GREG CAPITO, Program Manager, Village Safe Water Section, Division of Facility Construction and Operation, Department of Environmental Conservation came to the table to say that Galena and St. Mary were two eligible first class cities. He had a list to hand out to the committee. Senator Loren Leman felt this matter would be an easy fix. He then referred to page one lines 13 and 14 addressing local contributions required for each draw of monies. He thought that could be cumbersome and suggested that the match be required before the project was completed rather than for each draw. Co-Chair John Torgerson requested Dan Easton draft language to incorporate the formula used for the other water and sewer program. He asked if the department would oppose any local contribution requirement or if they wanted the program to work right. Dan Easton felt the current system worked well and a more complicated formula would not benefit. Co-Chair John Torgerson requested match information for current projects for comparison. TOM COLLIDGE, Indian Health Service, Alaska Area Native Health Service, and Director, Office of Environmental Health and Engineering, testified via teleconference from Anchorage. He worked with the Village Safe Water program. He did not think the proposed changes would achieve the goal of the safe water projects for the following reasons. It would eliminate grants for some communities that could not afford the five-percent match. It would be hardest on small communities that the needed the sanitation improvements the most. The short timeframe for implementation could delay existing and new projects. It would result in a loss of federal funds. It was unlikely to result in new additional federal funds. Likely no new local resources would be generated by this effort. It would increase the administrative hurdles on existing sanitation projects. It was already the practice of the Indian Health Service to require in-kind contributions from communities. He saw little benefit of spending resources determine the value of in-kind contributions in detail. He saw no gain for the state at the expense of slowing rural health. He suggested there could be higher costs in other areas. TINA LONG, Coordinator, Rural Alaska Sanitation Coalition, Member, Alaska Native Health Board testified via teleconference from Anchorage. Speaking for the two groups and as an individual, she opposed the bill. She detailed the missions and efforts of the organizations. She felt this would disenfranchise rural communities. SHEILA SELKREGG, Director for Rural Development, US Department of Agriculture, testified from Anchorage. She spoke to the federal funding available. She worked to coordinate federal and state funding. She warned of the risk of the funds being sent to other states. She stressed the contributions already made by the communities. TIM GILMARTIN, Mayor, City of Metlakatla, testified via teleconference from Metlakatla. He spoke of the pending projects in his community and the state of the economy in Southeast Alaska that would prohibit them from coming up with matching funds. GINNEY TIERNEY, City Administrator, City of Thorne Bay and Community Member, Governor's Rural Sanitation Council, testified via teleconference from Thorne Bay in opposition to the bill. She would hold the remainder of her comments until the revised version was release and she could review it. Co-Chair John Torgerson noted there would be a committee substitute for the bill. PAUL ERHART testified via teleconference from Tanana. He spoke of a sewage plant under construction. This bill would delay the project. He spoke about the slow economy in Interior Alaska due to a poor commercial fishing season. BRENT URSEL, Mayor, City of McGrath, testified via teleconference from McGrath in opposition to the bill. The average family in the community paid $100 a month for water service. With cuts proposed to the Power Cost Equalization program and other services, they could not afford any other costs. He pointed out the efforts of the community in providing maintenance and operation of the facilities. LORETTA LOLNITZ, Mayor, City of Koyikuk, Member, Governor's Council on Rural Sanitation, and Member, Rural Alaska Sanitation Coalition, testified via teleconference from Koyikuk. She opposed the bill. She told the committee about the current water facility and the need for improvements She also told about the hazards of honey buckets. [Teleconference interrupted at the request of the co- chair.] JOANNE BECK, Second Chief, Eagle Village Council, testified via teleconference from Eagle Village. She opposed the bill. She didn't believe her community could meet the match requirements. She told of the difficulty for residents to earn a living. JAMES NATHANIEL, Environmental Coordinator for EPA/GAP Program, testified via teleconference from Chalkyitsik, in opposition of the bill. He told of problems with current water and sewer systems and the hazards of these. Co-Chair John Torgerson said the bill would be worked on and some of the concerns voiced by the witnesses would be addressed. He ordered the bill held in committee.