Call to Order and Roll Call
The third meeting of the Interim Joint Committee on Local Government was held on Wednesday, September 28, 2016, at 10:00 AM, in Room 171 of the Capitol Annex. Representative Steve Riggs, Chair, called the meeting to order, and the secretary called the roll.
Present were:
Members: Senator Joe Bowen, Co-Chair; Representative Steve Riggs, Co-Chair; Senators Julie Raque Adams, Ralph Alvarado, Denise Harper Angel, Stan Humphries, Christian McDaniel, Morgan McGarvey, Albert Robinson, Dan "Malano" Seum, and Damon Thayer; Representatives Linda Belcher, George Brown Jr., Ron Crimm, Mike Denham, Jim DuPlessis, Cluster Howard, Adam Koenig, Brian Linder, Tom McKee, Michael Meredith, Russ A. Meyer, Phil Moffett, Jonathan Shell, Arnold Simpson, Chuck Tackett, James Tipton, Jim Wayne, and Susan Westrom.
Guests: Sandra Dunahoo, Amy Barnes, Jessica Lee, and Andrew Schachtner, Department for Local Government; Peter Goodmann, Division of Water and Daniel Cleveland, General Counsel, Energy and Environment Cabinet; Talina Mathews, Stephanie Bell, Andrew Melnykovych, and David Spenard, Public Service Commission; Roger Recktenwald and Shellie Hampton, Kentucky Association of Counties; Daviess County Judge/Executive Al Mattingly; Larue County Judge/Executive Tommy Turner, Garrard County Judge/Executive John Wilson, and Vince Lang, Kentucky County Judge/Executives Association; Anne-Tyler Morgan, Michael Kurtsinger, and Bruce Roberts, Kentucky Fire Commission; Jack Couch, KIPDA Area Development District; Bert May, Kentucky League of Cities; and Mike Sunseri and Jarred Ball, Kentucky Office of Homeland Security.
LRC Staff: Mark Mitchell, Joe Pinczewski-Lee, and Cheryl Walters.
Approval of Minutes
Upon the motion of Senator Bowen, seconded by Representative Riggs, the minutes of the August 24, 2016 meeting were approved.
Issues relating to the Department for Local Government
Commissioner Sandra Dunahoo of the Department for Local Government (DLG) said that every effort is made to fund all Community Development Block Grant (CDBG) projects. August 1 was the deadline for project applications, which have all been reviewed. DLG is working with applicants to work through any deficiencies. There is nearly enough funding for all of the eligible applications received. This year DLG encouraged applicants to submit good, strong applications and work with DLG so that the applications can be approved. Funding was just received from HUD, and applications have been reviewed on a short turnaround schedule. DLG hopes to begin announcing awards within a week.
Appalachian Regional Commission applications were due by August 15, but the deadline was extended to August 29. Applications are currently under review. It appears that DLG will have a continuing resolution this year and will not have its full funding allocation from Washington on October 1. However, DLG will be able to access a percentage of last year’s allocation on October 1. DLG received $22,067,783 in application requests with $9 million available. Kentucky was able to get $10,000,000 for the Appalachian Regional Commission POWER. DLG will submit a new application for Eastern Kentucky and hope to be selected for a clinic in 2018 that will fund optometrists to perform laser surgery.
Regarding the Recreational Trails Program, the board has met and made recommendations. DLG will be reviewing the applications for compliance issues, and it hopes to make announcements during the next month.
The board was meeting the same day as the committee meeting for the Land and Water Conservation Fund. Applications will be reviewed by DLG for compliance issues, and DLG hopes to make announcements in October.
The Innovative Readiness Training (IRT) Program with the Delta Regional Commission has a military mission which is a coordinated troop effort—complete deployment utilizing multiple branches. There are dental, vision, medical, and pharmacy clinics located in Paducah, Bardwell, and Carlisle. There are over 13,000 patient contacts. The program is very popular with the troops, who are very appreciative.
In response to a question from Representative Brown, Commissioner Dunahoo said the amount of CDBG funding received from HUD was $23 million, and there was $24 million in requests.
In response to a question from Senator Bowen, Commissioner Dunahoo said that there were dozens of applications for CDBG funds.
In response to a question from Representative Riggs, Commissioner Dunahoo stated that she was not in a position to comment on the concept of having an Office of Inspector General within DLG. She would need to discuss it with the Governor.
Presentation on Possible Solutions for Package Sewer Treatment Plant Abandonment
Mr. Peter Goodmann, Director of the Division of Water (DOW), said that there are 243 municipal wastewater treatment plants. There are about 900 individual home units. Where water lines exist, people generate sewage, so the question is whether the public is being served.
To ensure reliable, sustainable, and compliant wastewater infrastructure, the following must be done: expanding and maintaining existing infrastructure, which involves using sewer rates revenue and using available grant and loan funding; regionalizing or finding financially viable and responsible partners for small and privately owned systems; and using new methods and old methods in new ways to address the issues.
There are 203 small wastewater treatment plants (WWTPs), which are package plants that serve neighborhoods, mobile home parks, apartments, and campgrounds. This figure does not include small WWTPs owned by public entities such as the Department of Parks, Kentucky Transportation Cabinet, and school districts, and those serving single businesses or other entities. The average flow of a WWTP is 35,000 gallons per day and the average age of one is 27 years. The design life of these plants is 30 to 40 years. There is an issue with aging infrastructure and aging owners. Thirty-six of those 203 facilities are utilities regulated by the Public Service Commission (PSC). The WWTP issue is not a new one. Twenty-five years ago, there were three times as many. Historically in Jefferson County there were 500 package plants. This year there are none.
The goal of regionalization is to bring the flows to regional WWTPs that provide better treatment and which are operated by in-perpetuity entities. Regionalization takes a long time and includes funding, cooperation, and creativity. Some scenarios for taking over a plant are better than others. The best case scenario is one where there is a system within or near to the regional planning area; one having access to a cooperative regional planning authority that will receive the outflow; one having a sewer system that is “available,” near a regional system that has adequate capacity to receive the plant’s sewage; one that can use gravity rather than lift stations to transport the sewage to its destination; one that has limited inflow and infiltration in the collection system; and one having a large customer base, which would assist with economies of scale.
The most challenging scenario is one where a plant is far from a regional planning area and regional sewers; one where there is a lack of available, or willing, partners such as a county or city government or private entities; one possessing significant infrastructure issues--especially inflow and infiltration issues; and one having fewer service connections.
DOW, local governments, Kentucky Infrastructure Authority (KIA), PSC, area development districts (ADDS), and Kentucky Association of Counties (KACo) are working together to collect additional data to develop a robust risk profile for each WWTP and to rank those 203 WWTPs. The groups will assess the risk of abandonment (and not just the formal, PCS abandonment process), non-compliance due to poor operation and maintenance, and infrastructure failure. In addition, other factors will be used including the age of their infrastructure; their flow; their structural integrity; their monthly rate/cash flow for operation and maintenance; the number of connections to the WWTP each has; each system’s proximity to regional planning area and available sewers; the water quality of each system’s receiving stream; the quality of wastewater effluent produced by each system; their compliance history and active enforcement actions; and DOW’s general perceptions toward each.
Regarding solutions and recommendations, abandonments are on the uptick and the infrastructure is beyond design life, but there is no current emergency. Because of the importance of the issue, all groups involved need to make sure they understand the scope of the problem, including the prioritized risks, before they try to identify and implement solutions. Give the agencies some time to characterize the issues and develop some recommendations. There are no global solutions yet.
In response to a question from Representative Meredith, Mr. Goodmann said he will get the number of school districts of the 36 facilities that are governed by the PSC.
In response to a question from Senator Bowen, Mr. Goodmann stated that regionalization is important and the best solution. Ensuring financial viability for future treatment plants is an excellent idea going forward. Retroactively applying a financial viability requirement to existing plants may be problematic, but that concept is under examination.
Representative Riggs asked staff to research if current law takes into consideration that package plants may not be new but remodeled.
In response to a question from Representative Riggs, Mr. Goodmann said that the concept of septic systems is still valid.
Mr. Andrew Melnykovych, Communications Director for the Public Service Commission (PSC), said that privately owned wastewater systems under PSC jurisdiction represent only a small fraction of sewer service in Kentucky and it is a fraction that is steadily diminishing, which is good news. However, they attract much attention because of their financial vulnerability, which is due to their ineligibility to receive funds otherwise available to publicly owned systems.
The abandonment statute only applies to systems under PSC control. The ultimate goal is to maintain continuity in service.
Transferring operations of the small WWTPs to existing systems is an effective solution.
Responding to a question from Representative Riggs, Mr. Melnykovych indicated that the PSC attempts to transfer the systems as expeditiously as possible.
Mr. David Spenard, General Counsel for the PSC, stated there are statutory timeframes dictating time windows and certain procedures for the commission’s deliberations.
Representative DuPlessis suggested requiring the establishment of a small escrow account for each system to accumulate for a ten to 30 year period.
Mr. Melnykovych stated that is a concept that would have to be looked at very carefully but merits study. It would have to be considered on a case-by-case basis.
Senator Seum noted he had heard testimony, relating to a failed WWTP, indicating that rates had not been adjusted in ten years because of the difficulty of doing so.
Andrew Melnykovych noted that for systems having under $5,000,000 annual operating income there is a simplified process called an alternative rate filing. PSC staff provides feedback for rates designed to effectively operate the WWTP. Information provided to the committee by the PSC notes which utilities have applied for rate changes. In most cases, the utilities get the rate applied for or a very close figure to the requested amount. There is a simplified process available for smaller utilities, but the operator of the utility must make the decision to use the process.
Responding to a comment from Representative Riggs relating to perceptions of a complicated and a slow rate-changing process, Mr. Melnykovych said that the PSC is always evaluating its processes to make them work better than they do.
Representative Belcher commented that it is time to stop pointing fingers and start looking for solutions.
In response to a question from Representative Belcher, Mr. Melnykovych said PSC inspectors do have authority to require improvements in WWTPs and that there is an inspector process in place. A historic trigger for abandonments has been attributed to a utility having to correct an expensive problem.
In response to a question from Senator Bowen, Mr. Goodmann noted that most abandonments are from infrastructure failure. Some WWTPs are fine and well-run. Some solutions for providing for the disposition of individual WWTPs will be evident. Solutions for other WWTPs may be less evident.
Representative Linder commented that it is easier for the owners not to ask for a rate increase. He is not sure that the process is really that hard. The solution may be that legislation is needed to tell the owners to come in every three to five years for a rate review.
In response to a question from Representative Meredith, Mr. Melnykovych stated that everyone under PSC authority would be eligible for a rate increase. PSC does not have the authority to require WWTPs to apply for a rate increase.
Daviess County Judge/Executive Al Mattingly said that it is time to stop talking about who is at fault.
Daviess County has two plants: one with 67 customers and the other one with 125 customers. The first meets low to moderate income requirements, the latter qualifying for little if any help. The small system has paid $11.50 per month for the last 40 years. The new cost for service, even with CDBG grants and low cost partially forgivable loans, will be around $70 per month. The larger system has paid $15.00 a month since 2000. Its cost will increase to $90 to $100 per month. Daviess County is fortunate that it has a regional wastewater agency for people to turn to when a package system fails.
Judge Mattingly offered the following suggestions: require the PSC to request a rate review every two years for the package plants; require a certain amount of money per customer to be placed in a trust fund to accumulate, much as public landfills do, to provide funds for major failures; and grant abandonment only if all required permits are in place and the plants are in reasonable working order.
Daviess County’s experience is not unique. The situation is occurring throughout the Commonwealth and while the state is contemplating what can be done, local governments are struggling every day to keep people in their homes.
Mr. Roger Recktenwald, Director of Research Planning with the Kentucky Association of Counties (KACo), said that local governments were ultimately responsible for wastewater treatment in private systems as well as public systems. The PSC’s process for abandonment is extremely complicated and needs to be streamlined. Regarding inspections, there is no direct communication with the owners, operators and inspectors. It is important that DOW and PSC are working together, however, they need to reach out to include all parties concerned. The committee should not abandon the progress that has been made and keep pushing the different groups for solutions.
Representative Belcher suggested that the groups meet on a regular basis and volunteered to meet with them.
Interlocal Agreement Training and Promotion Efforts
Larue County Judge/Executive Tommy Turner, Legislative Chair, Garrard County Judge/Executive John Wilson, and Vince Lang, Executive Director, Kentucky County Judge/Executives Association (KCJEA), addressed the committee.
In response to a question from Representative Riggs, Mr. Lang said there are interlocal agreements (ILAs) that deal with the problem of wastewater, but does not know if it has been within the last year or so. He would find the answer to that question.
Judge Turner said were statutorily created in KRS 65.210 to 65.300, which is known as the Interlocal Cooperation Act. The origin of the Act can be found in legislation passed in the early 1960s.
The Act contains a concise statement in statute of its purpose: “It is the purpose of KRS 65.210 to 65.300 to permit local governmental units and the sheriff upon approval of the fiscal court to make the most efficient use of their powers by enabling them to cooperate with other localities on a basis of mutual advantage and thereby to provide services and facilities in a manner and pursuant to forms of governmental organizations that will accord best with geographic, economic, population, and other factors influencing the needs and development of local communities.”
KRS 65.250 details specific provisions which each ILA must contain. ILAs entered into between cities, counties, charter counties, urban-county governments and sheriffs, or any combination thereof, must be submitted to the DLG for approval as to compliance with the Act. Any ILA in which at least one party is not one of those entities just named, shall instead be submitted to the Attorney General for approval.
ILAs have found quite extensive use in recent years. Beginning in 2000, DLG created an online database that houses all ILAs approved by DLG. From 2000 until now, 815 ILAs have been received DLG approval with over 2,500 entities participating in the ILAs. Every county in Kentucky participates in some form of ILA. The database-listed agreement with the most entities is the Google Fiber ILA, signed in Jefferson County, which has 76 participants.
The ILAs found in DLG’s database cover a wide range of joint efforts including: law enforcement and police protection, drug task force, industrial development, animal control, parks and recreation, regional jails, recycling efforts, enhanced 911 services, Workforce Development Act, EMS, occupational license sharing, insurance premium revenue sharing, senior center operations, riverport authorities, solid waste boards, broadband infrastructure, farmers market, cemetery maintenance and 50 additional areas where local governments have determined to work jointly to provide services to their citizenry.
One of the primary reasons a greater use of ILAs has been seen is possibly due to the training and education efforts now afforded local officials. Newly elected officials’ training, the Governor’s Local Issues Conference, KACo, Kentucky League of Cities (KLC), KCJEA, and the Kentucky Magistrates and Commissioners Association conferences contain extensive training that detail the advantages afforded communities by working together and utilizing ILAs.
Judge Wilson provided some examples of ILAs that Garrard County has joined in which include occupational license taxes ILA with Boyle and Lincoln Counties which assisted in capturing the appropriate taxes owed in each jurisdiction; local emergency management ILA with the City of Lancaster; Run Park ILA with Lincoln County; merged solid waste ILA with Lincoln County which has saved the counties hundreds of thousands of dollars in the past few years; and Bluegrass 911 system ILA with Lincoln County. By combining the 911 dispatching service, there is only one system with one director, and $504,000 has been saved from just the shared phone service system that is used among several counties in Kentucky.
In response to a question from Representative Riggs, Judge Turner said that DLG, KCJEA, and KACo all have training for the officials who have been in office longer, in addition to the newly elected ones. The ADDs also assist with training and executing ILAs.
Representative Koenig commented that he would, at some point, like to discuss mandating ILAs.
Consideration of Referred Administrative Regulation
The committee considered 815 KAR 739 KAR 2:140 (Kentucky Fire Commission: volunteer fire department reporting requirements). Ms. Anne-Tyler Morgan represented the Kentucky Fire Commission and summarized the regulation.
Representative Denham cautioned the Fire Commission about using the denial of equipment for a non-compliance penalty.
In response to a question from Representative Meredith, Mr. Michael Kurtsinger, Legislative Director of the Kentucky Fire Commission, said that all but less than 25 of the “Chapter 273” fire departments would have revenues under $100,000.
Representative Riggs stated that a written report of the review will be submitted to LRC.
There being no further business, the meeting was adjourned at 12:05 p.m.