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Published on Monday, December 12, 2016

AWC is working on a new strategy to refresh the city state infrastructure partnership

Thirty years ago, Washington established the Public Works Trust Fund (PWTF), creating a national model – the first revolving loan fund for community infrastructure. It has proven to be one of the state’s great success stories, lending $2.6 billion to small, mid-size, and larger jurisdictions for infrastructure projects. Since the program’s inception, there has never been a loan default.

Even with that history the PWTF is now imperiled. Since 2013, the Legislature has redirected the fund’s accounts to help balance the State General and education funds.

Going forward, rather than seeing this critical program eliminated or further depleted, AWC will recommend refreshing the state infrastructure strategy with a centerpiece of updating and retooling the PWTF for the next 30 years. We have been working with a large group of stakeholders to develop this idea. With this article we hope to give you an outline of the proposal as it stands today. As we move forward, working with legislators, our partners and other interest groups, and you, our members we expect this proposal to evolve and improve.

Principles

  • Support and incentivize a smarter infrastructure investment discipline that delivers more value, multiple benefits, better asset and risk management, and improved cost-effectiveness for every dollar we spend on infrastructure.
  • Build on the best of the original Public Works Trust Fund, such as ease of paperwork and flexibility. PWTF 2.0 will not impose unfunded mandates on local jurisdictions. It will provide local communities that need help with the technical assistance to take advantage of best practices and new innovations in infrastructure planning, design, and investment.
  • The state needs a coherent and comprehensive local infrastructure investment strategy. This strategy must recognize the critical role for the state to play in local infrastructure investment, that different local governments and communities need different types of assistance, and must ensure that each local government has a responsibility to have local “skin in the game.”

Objectives

Short term (2017 session)

  • Commit to retaining public works loan repayments and remaining 2% of Real Estate Excise Tax (REET) revenues in a reformed Public Works Trust Fund 2.0. The state has shown in recent years a willingness to divert all public works resources to other budget priorities. In the short term it is time to commit to preserving at least the loan repayments and small amount of REET that remain flowing into the public works assistance account to ensure we have a base to rebuild a better and stronger infrastructure partnership.
  • Reform the PWTF: Smaller and more targeted, better ranking, new responsibilities for applicants and different benefits for different communities.
  • Public Works Board required to prioritize and rank all projects, with amended criteria to encourage cost effectiveness, long term resilience and multiple benefits.

    New responsibilities for the applicants that result in ­­­smarter, strategic long-term investment and management best practices.
    • Requirement to undertake value planning at the crucial pre-design project stage, where the greatest productivity gains and cost savings can be found. This will ensure that investments are right-sized and all opportunities for efficiencies have been considered. This value planning process is funded with PWTF resources.
    • Applicants for rate-supported utility infrastructure must provide a long-term financial plan to demonstrate a sound maintenance and repayment program is in place. The state is supporting but not supplanting local effort.
    • Sustainable Asset Management best practices must be in place to ensure preservation of state and local investments over the long term.
  • Different benefits for different communities. We have heard some legislators state a preference for directing support to small and financially distressed communities. Rather than providing access to the same subsidy for all communities, low interest loans will be provided on a sliding scale and the Public Works Board would be given direction to provide preference to smaller communities with limited capacity to assemble complex financing deals.
    • Smaller communities and financially distressed utilities that need state assistance to afford substantial infrastructure investments will be the priority focus of PWTF 2.0. In exchange for this assistance they will commit to the best practices detailed above. In addition to accessing the low interest loans under PWTF they will have access to a new grant program and a debt pooling program.
    • Larger communities which are home to the economies, construction activity, and real estate transactions that generate the bulk of the PWTF’s tax proceeds will remain eligible - but for a different set of benefits. Smaller, less generous low-interest loans will still be offered to provide a stable funding source for utility based infrastructure – but those will be pegged much closer to market rate. Non-utility supported infrastructure would receive attractive interest rates in recognition of the fact that general fund capacity remains strained across all types and sizes of jurisdictions.
  • More targeted financial assistance options. The Public Works Board is directed to develop and size a program to provide grants, forgivable loans, interest rate buy-downs, assistance to leverage federal programs and other opportunities to target deeper financial assistance to communities with economic distress or projects that would result in rate increases to residential sewer rates that exceed a determined percentage of median household income.
  • Establish a program to enable communities with poor debt ratings to access the private bond market. Pass an equivalent to Senator Keiser’s SB 5624 to develop a new program through the treasury to allow communities access to the private bond market without affecting the state’s debt rating.

Medium term (with activities to be completed in time to influence the 2019 biennial budget)

An interagency process improvement team shall be charged with identifying and implementing system improvements that result in:

  • Projects that are designed to meet the unique needs of the community, rather than the needs of particular funding programs.
  • The ability to plan across programs and jurisdictions, so that different investments are packaged to be complementary and appropriately sequenced, and that the projects maximize value, minimize overall costs and disturbance to the community, and ensure long-term durability and resilience.
  • Project designs that maximize long-term value, by fully considering and responding to the long-term environmental, technological, economic and population changes coming at us.
  • The flexibility to innovate, including utilizing natural systems, addressing multiple regulatory drivers, and forming regional partnerships.
  • The needed capacity for communities, appropriate to their unique financial, planning and management capacities, so they can design, finance and build projects that meet their long term needs while minimizing costs.
  • Optimal use and leveraging of federal and private infrastructure dollars.
  • Mechanisms to ensure periodic, system-wide review and ongoing achievement of the designated outcomes.
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