A Washington state legislative budgetary decision earlier this year to divert funds from an account used to provide low-interest loans to local government entities and taxing districts has brought at least a temporary halt to millions of dollars worth of infrastructure projects here and elsewhere across the state.

In Spokane County, the cities of Spokane and Deer Park and Whitworth Water District No. 2 originally had sought a combined total of about $12.6 million in loans from the state Public Works Assistance Account for projects with an estimated total value of about $16.7 million.

The city of Spokane says it will tap alternate funding sources to complete a Lincoln Heights booster station project and critical water line replacement projects in several areas of the city totaling nearly $9 million.

However, Whitworth Water District No. 2 and the city of Deer Park say they've put their projects—totaling about $4.1 million and $3.6 million, respectively—on hold while they work to identify other possible ways to finance them.

The water district had sought funding assistance to install replacement water lines and take over providing service to two small rural areas that have been experiencing serious water quality problems within their private water systems, says District Manager Susan McGeorge. It began making plans to take over the rural water systems, McGeorge says, after the state Department of Health approached it about the possibility of extending its service to those areas.

Meanwhile, as the Journal reported earlier, the city of Deer Park, about 15 miles north of Spokane, was seeking a $1.8 million loan to match an already approved $1.8 million federal grant. It planned to use the money to pay for constructing about a mile of road and making other infrastructure improvements to serve a long-planned industrial park's 140-acre first phase.

McGeorge and Deer Park Mayor Robert Whisman both say they're unsure where they might be able to secure other funding they need for their projects and don't have an estimate for when their projects might be able to proceed.

Both also say they were surprised and disappointed by the Legislature's decision to pull the money from the Public Works Assistance Account to meet other budget needs.

"We were primed to go. What they did was totally unexpected by anyone. We're not even sure of the legality of it," McGeorge says, adding, "It's very disheartening. It's hard to plan."

The projects here were among dozens of projects across the state that lost anticipated loan funding when the Legislature voted to sweep $277 million from the assistance account to support the state's operating budget and address a K-12 education funding shortfall, says the Olympia-based Association of Washington Cities.

Counting other tax revenues that help fund public works projects, the Legislature diverted a total of $366.7 million in the current biennium and another $141.6 million in the 2015-17 biennium, the association says. Perhaps even more concerning, it says, the Legislature's actions also redirects most of the future tax proceeds that would have gone to the Public Works Assistance Account over the next six years to meet K-12 education and other state funding needs.

The piece of legislation that authorized redirecting the public-works funds, House Bill 2015, was approved shortly before the legislative session ended, passing 55-34 vote in the House and 29-19 in the Senate.

Rep. Marcus Riccelli, a Democrat serving Spokane's 3rd Legislative District and a member of the House capital budget committee who voted yes on the measure, says, "I think those infrastructure jobs are crucial for our community and they put men and women back to work."

However, legislators faced tough choices in their efforts to reach a balanced budget that addressed a court mandate to increase education funding, yet also retained adequate funding for social services and could pass in both the House and Senate, Riccelli says. He says he would have preferred an alternate, but eventually abandoned a plan developed by the House Democratic majority that instead would have closed some tax loopholes and exemptions to cobble together additional funding to achieve a balanced budget.

"Politics is the art of compromise, and that's where we ended up," he says of HB-2015, adding, "There was still investment into infrastructure (approved during the legislative session), just not what we would have liked."

Rep. Timm Ormsby, a Democrat also serving the 3rd District, voted against the bill because of concerns about its negative impact on infrastructure projects, but said it ultimately was "necessary to implement the budget." Like Riccelli, he says he would have preferred a solution that closed tax loopholes and reduced special tax treatments to meet the state's budgetary needs, but "you end up having to get a majority of support in both chambers."

Rep. Kevin Parker, a Republican representing the 6th Legislative District here, who voted against the bill, says it was an "eleventh-hour" measure that "ended up being necessary to pass the budget" only because the Legislature has failed to establish needed funding priorities. Parker says he has sponsored legislation and long promoted funding education first, and then divvying up remaining monies to pay for other government services.

In a legislative advocacy report published last month, the Association of Washington Cities said it knew even before the 2013 legislative session began that the Legislature might opt to use Public Works Assistance Account funds to help meet other operating and education funding needs.

"In the end, as legislators were staring down an unprecedented government shutdown if they failed to reach agreement, the PWAA revenues became a big piece of the revenues used to close the deal on a budget, even after strong opposition from AWC and a coalition of other interests, as well as reluctance from a number of legislators," the report said.

McGeorge says one of the projects for which the Whitworth Water District No. 2 was seeking a low-interest public works trust fund loan would enable it to begin providing water service to eight rural homes in a forested area near Colbert, north of Spokane. She adds that the homeowners there also would pay a "fair share" of the cost. The water that the homes currently receive through a small association-operated system contains unhealthy levels of manganese and iron, she says.

Along with connecting the homes there to the Whitworth system, the project would include replacing all of the old water mains serving that area with new larger ones, equating to more than 19,000 linear feet of new pipe, she says.

The other water district project would include installing 11,600 linear feet of water lines to take over a tiny community water system that has been serving a church in the Chattaroy area north of Spokane. McGeorge says, though, that a lot of people use the church during the week. The church has been forced to rely on bottled water for some time due to contamination that has rendered its former well water supply unusable, she says.

The problem for the water district, she says, is that it doesn't qualify for community development block grants or certain other types of funding that municipalities might be able to pursue. "If we cannot get funding through a loan, it's just a matter of building up our reserves until we can take care of it," she says.

The water district serves a mostly rural area with a population of about 25,000 and has a little more than 10,000 water connections. McGeorge says the district has extended its water to and has taken over perhaps a dozen such small water systems since the early 1990s.

One of the options the city of Deer Park is evaluating is borrowing the money it needs for its industrial park infrastructure project from some other lender at an interest rate substantially higher than the roughly 1 percent it would have paid through the Public Works Assistance Account, its mayor said. The city is not in immediate danger of losing the federal grant that the borrowed money would match, though, so it's got some time to find an alternate funding source.

The city of Spokane originally had been seeking a total of about $8.8 million from the Public Works Assistance Account for its five water projects, but that eventually got reduced to about $3.9 million before the assistance money evaporated entirely, says Mark Papich, senior engineer in the city's capital projects department.

"With all of these projects, even though we didn't get the money on them, we're still building them," Papich says, adding, "These were critical projects. It means other projects we were going to do that are less critical may not get done."

He adds, though, that the disappointment over the loss of those public works assistance funds eased early this summer when the city received $10.1 million in federal pass-through money from a state Department of Health drinking water revolving fund that will help cover the costs of other water-related projects.

Two of the five projects for which the city had been seeking Public Works Assistance Account funds already are under way, he says.