State sanitation spending in AHFC bond proceeds bill

The coronavirus pandemic shed light on the critical need for access to water and sewer. Understanding a pathway to service for Alaska’s 30 unserved communities demands navigating a complex web of agency regulations that leave unserved communities ineligible for funding.

Each fiscal year, between $80 million and $120 million are appropriated by the federal and state government to help tackle a $1.4 billion sanitation infrastructure need in Alaska. The State of Alaska provides a 25 percent match for federal Alaska Native village sanitation funds the Alaska Delegation secures in the United State Department of Agriculture, and Environmental Protection Agencies appropriations bills.

In his fiscal year 2022 budget, Governor Mike Dunleavy transmitted to lawmakers on February 16 a bill (HB 74) to fund the state match for federal sanitation funds via AHFC bond proceeds. The bill authorizes AHFC to issue bonds for village safe water projects generally funded in the capital budget. The budget request adds $4,545,200 for a new request of $42,487,200 for first time service projects.

“The match for village safe water this year is in the budget as Alaska Housing Finance Corporation Bond proceeds and there is a bill for that that is also moving through the legislature at this time” said Ruth Kostic, Administrative Services Director for Governor Dunleavey during a March 3 Senate Finance Committee hearing. The budget request for fiscal year 2022 is for $18 million, a 25 percent match to $52 million in federal funds appropriated by Congress in December of 2020.

In the “FY22 capital budget request, this is the governor’s amended numbers, which are an increase of $2.3 million match over what was requested in the original budget. That increase is a result of the federal funding that passed in late December, specifically from EPA, with an increase of $7 million what we had previously received in fiscal year 21” said Kostic.

Understanding the cycle of the federal fiscal year and the budget and appropriation process sheds light on how the Governor works with the Alaska Legislature to secure matching state funds. Sanitation funds for Alaska Native villages are appropriated by the United States Congress with the passage of USDA, IHS and EPA appropriations bills. Senator Murkowski (R-AK) serves as the ranking member of the Senate Committee on Appropriations Subcommittee on Interior, Environment and Related Agencies, appropriating IHS and EPA sanitation funds.

As the agencies administer the programs, regulations established by the agencies often determine whether or not a community will get served. The state of Alaska administers the Best Practice Score to determine whether or not a community is eligible for federal —USDA or EPA — state sanitation funds managed by the Village Safe Water program’s Capital Improvement Project process. On December 9, 2020 the Alaska Native Health Board passed a resolution recommending the state of Alaska “discontinue best practice score thresholds for underserved and unserved communities applying for Capital Improvement Projects” and further urges the state to “release construction funding to underserved/unserved communities with an approved MOA in place.”

Hurdles

Accessing EPA funding requires a certified operator, a challenge in the absence of statewide, culturally relevant operator training.

The high costs of construction limits the eligibility of communities for IHS funds. IHS funding is limited by cost caps. To connect homes to first time service it costs $350$750,000 per home, said Carrie Bohan, Facilities Services Program Manager for the state of Alaska during the March 3 Senate Finance Hearing. But according to the 2019 IHS Sanitation Deficiency System Manual the cost cap for the northern region is $235,500, $169,000 for the southern region and $197,000 for the central and western regions of Alaska. IHS cost caps and a local match requirement often render unserved communities ineligible and prevent unserved communities from receiving aid.

Village Safe Water projects typically last 5-10 years to completion depending on size and complexity of the project, availability of funds and the ability of community to meet ongoing construction funding conditions, said Bohan. In order for engineers to cut costs they must plan and execute projects operating within the timelines of Alaska’s short summer construction window, a reality the regulatory process for funds often ignores. “You’ve got to get materials ordered before the spring barge leaves Seattle or Anchorage by May that means you’ve got have any manufactured components of systems ordered well in advance to be ready for spring shipping,” said Mike Kruse, project manager acting as the owner’s representative for the Norton Sound Health Corporation via a private project management firm, Arcadus.

Hope on the horizon

The American Rescue Plan Act of 2021 provides several provisions to help address sanitation: $500 million for the Secretary of Health and Human Services for States and Indian Tribes to provide funds to owners of public water systems to reduce water rates for low income households, $10 million for the Indian Health Service for potable water, $20 million to the Bureau of Indian Affairs for potable water and $20 billion for tribal governments from the Department of Treasury for water and sewer, broadband and pandemic impacted sectors, like tourism and the hospitality sector.

On March 24 the Senate Committee on Indian Affairs holds an oversight hearing “Build Back Better: Water Infrastructure Needs for Native Communities.”