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Published on Friday, July 31, 2015

Mixed bag on infrastructure this session – much accomplished but still a lot to do

Your favorite flavor of infrastructure might be the most important determinant of how you feel the legislative session turned out. Transportation? Stormwater? Major new investments and a reaffirmation of a budding partnership. Sewer? Water? Well…we’ve got a lot of work to do.

The Legislature and Governor completed their multi-year effort to pass a comprehensive transportation package. You can read more about that here.

This year’s capital budget dedicated another $53 million to helping local governments deal with their stormwater challenges. The funding was provided to a program that AWC has been heavily involved in developing, and it will provide assistance to both sides of the stormwater picture – operating responsibilities as well as capital retrofit investments. The program has been designed to fund projects and activities that have the best water quality benefit, regardless of approach. This represents a continuation of a series of investments in stormwater by the state, and it is great news that that pattern is becoming ingrained in the capital budget. It was not long ago that legislators had only a vague notion of what cities do to manage stormwater, and now they are regularly making significant investments to help cities meet this challenge.

The bad news

Despite a huge level of engagement by cities pressing their legislators on the importance of the Public Works Trust Fund (PWTF), this session ended with disappointment on that front. Despite both House and Senate initial capital budgets largely funding the PWTF loan list in some form, the final agreed upon budgets swept another $73 million in each of the next two biennia, and did not fund any new loan list. In some ways this fate was determined in 2013 when the state over-estimated the available resources and swept deeper than the account could handle. The account crossed the biennium line “in the red” even after the agency asked loan recipients to change contracts to make loan payments earlier in the year. By the time the final budget was written, they had to backfill $11 million with bond funds just to keep previously awarded projects whole. By sweeping $73 million for the operating budget, legislators were left with two choices: not fund any new loans, or borrow money at a relatively high interest rate (issue bonds) to give out low interest loans – terrible budgeting. So, it’s in some ways understandable they chose not to dig the hole deeper.

Finally, despite hard work by the Sewer Funding Coalition of small cities facing huge rate burdens, the investment in the Centennial Clean Water Account, which makes grants for sewer projects, was also cut dramatically down to $20 million for the biennium.

This marks several budget years in a row that despite the best efforts and advocacy of cities, including more direct engagement this year than in the past, the lure of “free money” was too attractive to the operating budget writers. Partially this is a result of the broader politics that makes it very difficult to raise significant new revenues for the operating budget. But what cities and AWC grapple with, is that there seems to be a growing belief that providing interest rate subsidies through PWTF loans to local governments is not the best way for the state to be investing in basic local infrastructure. While we may disagree, we need to do a better job of identifying other alternatives that will meet the needs of the variety of cities around the state. We’ve already begun some of this work, and we’re going to be asking for your help to move forward.

Compromise REET flexibility bill passes

Some level of resolution was achieved in regards to the longstanding issue of flexibility for expenditure of Real Estate Excise Tax (REET) revenues. By way of background, REET I and II revenues have different allowable uses – REET I uses being much broader. Additionally, while REET revenues may be used on capital projects, they have not been allowed for the maintenance and operations of these projects. Realtors have strongly opposed any changes to these restrictions and worked hard to block any legislation to that effect. During the economic recession, the Legislature approved temporary REET flexibility. Cities and counties are allowed to use REET revenues for maintenance and operations of capital flexibilities until the end of 2016.

As the session started, cities and counties sought legislation, HB 1789 and SSB 5585, to continue this temporary flexibility and to harmonize the allowable uses of REET I and II revenues. These bills were opposed by the Realtors and faced no chance of passing without agreement from the Realtors. After much negotiation, a compromise bill EHB 2122 passed the Legislature. This new law does not provide the flexibility that cities and counties were seeking at the beginning of session, but does allow cities to use a portion of their REET revenues for maintenance and a certain portion of their REET II revenues for REET I purposes, provided the city fulfills certain requirements set out in the bill.

BillTracker Bill # Descriptive title Final status
  SHB 1575 Allowing public bodies to require retainage bond providers to have a rating of A- or better Law; Effective 7/24/2015
  EHB 2122 Granting counties and cities greater flexibility with real estate excise tax proceeds Law; Effective 9/26/2015
  ESSB 5048 Subjecting water/sewer district assumptions to a referendum Law; Effective 7/24/2015
  SSB 5795 Authorizing cities to create assessment reimbursement areas for the construction or improvement of water or sewer facilities. Law; Effective 7/24/2015
  ESB 5871 Creating appeal procedures for single-family homeowners with failing septic systems required to connect to public sewer systems Law; Effective 7/24/2015
  HB 1038 Apprenticeship utilization requirements for subsidized public works projects Failed
  HB 1102/SB 5055 Requiring cities to extend sewer facilities when residents with failing septic systems are required to connect to sewer Failed; See ESB 5871
  HB 1383 Community redevelopment financing in apportionment districts Failed
  HB 1711 Allowing for qualifications and experience to be considered when evaluating bidder responsibility criteria for public works projects Failed
  ESHB 1754 Adding building envelope to the list of building trades that a prime contractor must list for bids on public works Failed
  HB 1789 Granting counties and cities greater flexibility with real estate excise tax proceeds Failed; See EHB 2122
  ESB 5624 Authorizing state's full faith, credit and taxing power to guarantee bonds issued by local governments for essential public infrastructure projects Failed
  SB 5628 New stormwater, flood control and water supply infrastructure funding program Failed