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Published on Friday, April 5, 2013

Senate proposes dramatic and permanent diversions from Public Works Trust Fund

SB 5895, creating the new Education Legacy Trust Account (ELTA) permanently redirects 67% of the Real Estate Excise Tax (REET), 100% of the Public Utility Tax, and 100% of the Solid Waste Tax revenues that were formerly directed to the Public Works Trust Fund. The funds are redirected into the ELTA. This would take effect beginning with the 2014 state fiscal year, which starts July 1, 2013. In addition, the Senate budget sweeps $15 million in cash from the PWTF into the state general fund.

In the future, the PWTF would be funded only by loan repayments, interest, and 2% of state REET collections (for 2013-15 that is projected to be $21.4 million). Currently the portion of state REET that goes into the PWTF is 6.1%. Over six years, a total of $368 million will be diverted out of the PWTF. The demand for loans from the PWTF has always exceeded available funds - this proposal will only exacerbate that condition.

We do not yet know what the 2014 construction loan list will look like. The PWTF does have cash resources (approx. $365 million — $15 million sweep = $350 million) that will be appropriated through the capital budget when it comes out. It’s possible that the construction loan list will be similar to what came out of the Gregoire budget which funded $350 million in construction loans, but it’s likely to be significantly less.

Some are claiming that the PWTF could be made relatively whole again by shifting eligible projects from the PWTF to federally financed Drinking Water and Clean Water Revolving Funds. The problem with this assertion is that the federal revolving funds are much more restrictive. They are meant to address specific drinking water problems (such as too much arsenic in drinking water) or pollution problems (such as too much nitrogen in the water coming out of a sewage treatment plant). Those funds cannot be used for expansion/capacity projects. In addition, federal funds come with other restrictions with regard to contracting and record keeping that make the administrative burden very high. For small projects, and small cities with few staff, these loan programs are not attractive.

We’ll provide further updates once the capital budget is released.

Categories: Infrastructure