SJR 024 - Fiscal Note

Fiscal Note - SJR 024 - Issuance of bonds for water pollution and stormwater control

COMMITTEE ON LEGISLATIVE RESEARCH

OVERSIGHT DIVISION

FISCAL NOTE

L.R. NO. 2729-05

BILL NO. HCS for SCS for SJR 24 with HA 1

SUBJECT: Constitutional Amendment: Bonds

TYPE: Original

DATE: May 5, 1998

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FISCAL SUMMARY

ESTIMATED NET EFFECT ON STATE FUNDS
FUND AFFECTED	FY 1999	FY 2000	FY 2001
General Revenue	($369,000)	$0	$0
Total Estimated Net Effect on All State Funds	($369,000)	$0	$0

ESTIMATED NET EFFECT ON FEDERAL FUNDS
FUND AFFECTED	FY 1999	FY 2000	FY 2001
Total Estimated Net Effect on All Federal Funds	$0	$0	$0

ESTIMATED NET EFFECT ON LOCAL FUNDS
FUND AFFECTED	FY 1999	FY 2000	FY 2001
Local Government	$0	$0	$0

Numbers within parentheses: ( ) indicate costs or losses

This fiscal note contains 5 pages.

FISCAL ANALYSIS

ASSUMPTION

Since parts of this proposal would authorize issuance of up to $300,000,000 of certain bonds, Oversight assumes those parts would not have fiscal impact until enabling legislation were adopted.

Officials of the Department of Natural Resources noted that the original $275 million

Pollution Control Bond allocation included:

$225 million to provide state match for federal funds for waste water treatment

facilities grants or loans

$25 million for storm water construction

$25 million to support rural water and sewer construction

Section 37(e):

All the storm water and rural water and sewer funds have been spent. Of the $225 million for waste water, there is $110 million remaining to fund waste water treatment facilities grants or loans. The proposed amendment to the constitution would increase the maximum amount that could be allocated for rural water and sewer construction projects to $50 million.

The amendment to the constitution, in itself, does not create an additional workload for the department, but provides for continuation of rural water and sewer grant projects administered in accordance with 640.600-.620 RSMo.

It should be noted that the department has never received staff for the administration of rural water and sewer grant programs. If the amendment to the constitution is approved, the department would request an engineer and an environmental specialist to complete the activities supported by these additional bond authorizations for rural water and sewer.

Section 37(g):

The amendment would create a $100 million rural water and sewer revolving loan program. A revolving loan program would require more administration than the current grant program. The department understands this amendment to the constitution provides additional funding for the programs specified in the bill and does not authorize additional powers or authorities. However, to carry out its duties with the expanded funding authorized in this amendment to the constitution, the department would require additional resources.

The department assumes applications would eventually be received from all eligible applicants and would phase in program staff would as awareness and understanding of the program ASSUMPTION (continued)

increased and public participation increased.

The department assumes that an average rural water and sewer project would cost approximately $150,000 and that there would be about 50 projects per year, resulting in about $7,500,000 annually in loans. The department assumes that the number of projects in subsequent years would increase because of the revolving loan concept.

The department would request 5 FTE to implement the rural water and sewer revolving loan program; which includes establishing the program, reviewing the project's plans and specifications, conducting inspections, preparing and reviewing the loan structures, and preparing the necessary financial reports.

The general election is scheduled for November, 1998 (FY 1999), so the earliest the department would request staff would be for FY 2000. The department plans to request an Environmental Specialist IV to establish the framework and guidelines for the revolving loan program. As the program expands the department would request the necessary technical, financial and support staff necessary to fully implement the program. The remainder of the FTE that would be requested by the department are outside of the fiscal note reporting period; however, the department has shown the annualized costs of the total FTE.

It should be noted, the proposed amendment to the constitution states that loans provided by the department may include administration fees. Since the administration fees associated with the loans will not be collected until the loan repayments start, the department assumes general revenue funds will be used to fund department staff during the initial years. Total staff request would be:

Environmental Engineer II [2.0 (1.0 for rural water and sewers and 1.0 for stormwater facilities) in FY 2001 and 4.0 more (1.0 for rural water and sewers and 3.0 for stormwater facilities) in later years as more loans and grants are made]:

Responsible for reviewing plans and specifications for rural water facilities and rural sewer facilities. Conduct final inspections.

Environmental Specialist IV [2.0 (1.0 for each program) in FY 2000 and in later years]:

Responsible for reviewing rural water and rural sewer applications and project administration. In addition, responsible for preparing presentations to the Clean Water Commission for their review and acceptance or denial of rural water and sewer applications.

Management Analysis Specialist II [3.0 (1.0 for rural water and sewers and 2.0 for stormwater facilities), all in FY 2002 and later years ]:

Provide project coordination for rural water and sewer loan programs. Review payment ASSUMPTION (continued)

requests, review financial capability.

Accountant II [2.0 (1.0 for each program) in FY 2001 and later years]:

Provide accounting support, auditing, payment processing, fund management for rural water and sewer loan programs. Prepare projections/fund balances

Cost, including fringe benefits and equipment and expense, would be $148,506 for FY 2000, 414,752 for FY 2001, and $845,916 when the programs are fully implemented.

Oversight assumes that until the General Assembly passes bills to issue bonds authorized by this proposal and to determine whether the rural water and sewer bond proceeds are to be used for a grant program or a loan program (the proposal allows either or both) there will be no administrative costs for any agency.

(Note: Total costs to retire $300,000,000 worth of bonds, assuming the first bonds would be issued during FY 2000, have level debt service, pay interest of 8.5%, would be twenty-five year bonds, and assuming twelve $25,000,000 bond issues over eight years beginning in FY 2000 would be approximately $730,000,000.)

Advertisement costs for the proposal would be $3,990 per newspaper column inch for three publications of the text of the proposal, the introduction, title, fiscal note summary, and affidavit. The proposal would be on the ballot for the November 1998 general election.

FISCAL IMPACT - State Government	FY 1999	FY 2000	FY 2001
GENERAL REVENUE FUND
Cost to General Revenue Fund
Secretary of State
Newspaper Advertisements	($369,000)
NET EFFECT ON
GENERAL REVENUE FUND	($369,000)	$0	$0
FISCAL IMPACT - Local Government	FY 1999	FY 2000	FY 2001
	$0	$0	$0
FISCAL IMPACT - Small Business

No direct fiscal impact to small businesses would be expected as a result of this proposal.

DESCRIPTION

This proposal would:

1) authorize $200,000,000 of general obligation bonds for storm water control in first class counties and St. Louis City,

2) raise the aggregate limit on bond debt for rural water and sewer grants to $50,000,000 (current provisions limit aggregate bond debt to a maximum of $25,000,000) ,

3) state that the repeal and re-enactment of section 37(e) of article III should not be interpreted to authorize any additional bonded indebtedness under terms of that section, and

4) allow the General Assembly to authorize issuance of $100,000,000 in general obligation bonds for rural water and sewer grants and loans.

The General Assembly would be authorized to pass laws needed to carry out the provisions of this proposal.

This legislation is not federally mandated, would not duplicate any other program, would not require additional capital improvements or rental space, and would not affect total state revenue.

SOURCES OF INFORMATION

Office of Administration - Division of Accounting

Department of Natural Resources

Jeanne Jarrett, CPA

Director

May 5, 1998