Short Term Fix Proposed for MTCA Funding

Author: Jim Darling Published: February 2, 2016

The Governor’s proposed Supplemental Capital Budget includes $25 million for cleanup funds to partially cover the recent shortfall in Remedial Action Grants. The source of the funds will be State issued bonds. The $25 million represents 29 percent of all state bond capacity available this session. The budget will be reviewed and negotiated through the 2016 legislative session. While this amount does not meet the original Department of Ecology budget request for the 2015-16 biennium, it demonstrates the state’s commitment to this important funding program.

At the annual Washington Public Ports Association meeting Jim Darling and Mike Stringer presented an update on the current financial status of funding for Remedial Action Grants for local governments to undertake site planning and cleanup. Here are the key points.

State Cleanup Funds—The Washington State Model Toxics Control Act (MTCA) created a fund to support pollution prevention and cleanup of contaminated sites. The revenue stream for the fund is a 0.7% fee on the market value of imported hazardous substances, which includes petroleum products and pesticides. The revenues fund state environmental programs along with Remedial Action Grants.

High Demand – Going into the State of Washington’s 2015-2016 biennium budget grant eligible local governments (cities, counties and ports) identified a total need of $206 million to fund contaminated property remediation. The Department of Ecology budget request included $75 million for Remedial Action Grants and ultimately the legislature approved $65 million.

Funding Constraints –The capital budget legislation included a critical proviso that any shortfalls in revenues from the Hazardous Substance Tax be balanced out of the Remedial Action Grant program. The approved funding level was based on the projected price of crude oil imported into the State which generates 96% of the fund revenue. Since the budget was adopted the price of crude oil has continued to decline. The available of funding for Remedial Action Grants has dropped from the approved $65 million to as low as $1.9 million. The net result is that Ecology is not issuing anymore grants to local government until the fund is restored.

Impact of Remedial Action Grants – With the budget shortfall, many cleanups are being delayed and local government budgets are being strained to meet cleanup obligations they have committed to complete.

The Remedial Action Grant program is one of the most effective economic development programs in Washington State. Every $1 of MTCA funding leverages some $4 in additional state taxes; $2 in local taxes and $32 in business revenue. This is the economic leverage effect of restoring impacted properties and getting them back into productive use. This is truly a triple bottom line effort as the environmental and economic benefits stimulate community development.

While the state bonding fix will provide a short term fix, the state and local governments need to make a New Year’s Resolution to implement a long-term fix to the Remedial Action Grant funding crisis.