Biennium Cash Management Plan

Transcription

1 Biennium Cash Management Plan Mdel Txics Cntrl Accunts: Lcal Txics Cntrl State Txics Cntrl Envirnmental Legacy Stewardship Octber 19, 2015

2 Table f Cntents I. Purpse... 3 II. Legislative Staff and MTCA Stakehlder Cmmunicatin... 3 III. Backgrund Legislature Future Expenditure Assumptins... 3 a Biennium... 3 b Biennium Future Spending Assumptins Based n Histrical Patterns Revenue Uncertainty and Fund Vlatility Legislative Directives and Other Reprts... 5 a. Scheduling Cleanup Activities... 5 b. One time Capital Budget Prvisins... 5 c. Onging MTCA Reprting Requirements Hazardus Substance Tax Revenue Frecasts Department f Revenue Implementing Revised HST Frecasting Mdel... 6 IV. Cash Management Prcess Overview Initial Alltment Strategy and Peridic Alltment Review Mnitring and Review Crrective Actins MTCA Fund Transfers Supplemental Budget Request... 7 V. MTCA Cash Management Team and Staff Grup Cash Management Team Cash Management Staff Grup... 8 VI. MTCA Cash Management Plan Alltment Apprach... 8 a. Initial Alltment... 8 b. Eclgy Peridic Alltment Review/Update and Identifying Optimal Fund Surce Mnitring Frequency and Metrics a. Psitive Prjected Cash and Estimated Fund Balances Page 1 Octber 19, 2015

3 b. Mnitring f Revenue and Expenditures n a Mnthly Basis c. Reprting t OFM After Each Revenue Frecast MTCA Intra fund Transfers a. Initial MTCA Fund Transfers b. Onging Fund Transfers Cnservative Apprach t Cash Management a. Anticipated Revenues b. Review Wrking Capital Reserve Requirements and Ending Fund Balances Cleanup Settlement Accunt (CSA) Inter fund Lan Cleanup Prject Priritizatin Supplemental Budget Requests Standard Cntract Language Expenditure Reductins a. Required Data b. Recmmendatin c. Cmmunicatin Page 2 Octber 19, 2015

4 I. Purpse Describes the Mdel Txics Cntrl Act (MTCA) Cash Management Plan (Plan) the Department f Eclgy (Eclgy) will use t manage the three MTCA accunts during the Biennium. These accunts are: State Txics Cntrl Accunt (STCA), Lcal Txics Cntrl Accunt (LTCA), and the Envirnmental Legacy Stewardship Accunt (ELSA). II. Legislative Staff and MTCA Stakehlder Cmmunicatin Once legislative staff have prvided their input and OFM apprves the Plan, Eclgy and OFM will share with MTCA Stakehlder grups. Eclgy will als crdinate with the Department f Revenue (DOR) t include presentatin f its updated and revised hazardus substance tax (HST) frecasting mdel in these stakehlder grup discussins. III. Backgrund 1. Legislature Future Expenditure Assumptins a Biennium In the enacted capital budget (ESSB 5035), the Legislature assumed expenditures f less than 100% fr certain MTCA capital new apprpriatins. This apprach allwed it t apprpriate $119M mre in MTCA dllars fr the biennium than the frecasted revenue by assuming a prtin f the apprpriatin wuld be expended in subsequent biennia. 1 b Biennium The final enacted biennial capital budget (2EHB 1115) als assumed biennium expenditures f less than 100% fr certain LTCA and STCA capital new apprpriatins 2 and als assumed expenditures f less than 100% fr selected LTCA, STCA and ELSA capital reapprpriatins. 3 In ttal, the Legislature assumed expenditures f $121M ($56M reapprpriatins and $65M new 4 capital apprpriatin) wuld be spent in subsequent biennia. 2. Future Spending Assumptins Based n Histrical Patterns The Legislature relied, largely, upn histrical spending patterns when determining its future spending assumptins fr certain MTCA funded prjects. Fr sme cleanup prjects, actual spending patterns may differ frm histrical averages r trends assumed by the Legislature. Examples include: 1 The Legislature assumed $31.3M and $87.4M f capital new apprpriatin wuld nt be expended during in LTCA and ELSA respectively. It did nt make any future spending assumptins regarding reapprpriatins. 2 The Legislature assumed $11.9M and $52.7M f capital new apprpriatin wuld nt be expended during in STCA and LTCA respectively. 3 The Legislature assumed $3.0M, $19.3M and $34.0M f capital reapprpriatin wuld nt be expended during in STCA, LTCA and ELSA respectively. 4 Representing ver 40% f the $148M in new capital prjects. Page 3 Octber 19, 2015

5 Specific prjects where reimbursement will ccur at a much faster rate than traditinal prjects. Cleanup prjects funded in earlier biennia that are nw reaching a mature stage with significantly different spending patterns in the current and subsequent biennia. New tls prvided t Eclgy by Secnd Engrssed Secnd Substitute Senate Bill 5296 (2E2SSB 5296) t reduce the time it takes t clean up cntaminated sites. Independent wrk Eclgy undertk t speed cleanups and expend apprpriated funds at a faster pace by adpting Lean principles. 5 If HST revenue cntinues t fall r stays lw, assumed future expenditures will likely be carried frward, thus reducing capacity fr new wrk in future biennia. If the revenue insufficiency is severe during the current biennium, new capital prjects may be delayed, r ptentially, Eclgy may suspend r cancel existing prjects as part f an verall crrective actin plan. 3. Revenue Uncertainty and Fund Vlatility Each fiscal year, n a mnthly basis, the Department f Revenue (DOR) distributes the first $140M f HST revenues t STCA and LTCA ($11.67M per mnth $140M/12 mnths). DOR depsits amunts in excess f this level int ELSA. If, in a given mnth, revenue cllectins are less than $11.67M, DOR will transfer ut f ELSA and int STCA/LTCA t make up the difference (up t a maximum f $140M being depsited in STCA/LTCA in a fiscal year). 6 If there is a shrtfall and there are insufficient funds being depsited in ELSA t transfer t STCA/LTCA (r available in ELSA frm earlier transfers during the current fiscal year), DOR will accumulate any shrtfalls and transfer ut f ELSA in the remaining mnths f the fiscal year, as ELSA new revenue allws. 7 The amunt cllected in ELSA during a fiscal year is the maximum amunt DOR can transfer ut f the accunt t make up any shrtfalls in STCA /LTCA during a fiscal year. If ELSA experiences n revenue cllectins in a given fiscal year, then n funding can be transferred t STCA/LTCA. During the last six mnths f the Biennium (FM19 24), DOR transferred a ttal f $9.8M frm ELSA t STCA/LTCA. 8 Fr , it is pssible that less than $140M per fiscal year will be cllected; in this case, all three MTCA accunts may experience shrtfalls and greater vlatility than previusly seen. 5 In adpting Lean principles, Eclgy is prpsing t reduce the average time fr cleanups frm years by almst half (t five t six years n average) at publically funded sites. 6 See Appendix 2 fr details f transfers ut f ELSA t STCA/LTCA fr the last six mnths f the Biennium. 7 If there is an accumulated shrtfall in STCA/LTCA at the end f a fiscal year, it is nt carried ver t the fllwing fiscal year (RCW D.070 (2)(a) & (b)). 8 This cmpares t the first six mnths f the Biennium, when OST depsited ver $31M in HST revenue int ELSA. See Appendix 2 fr additinal transfer details. Page 4 Octber 19, 2015

6 4. Legislative Directives and Other Reprts a. Scheduling Cleanup Activities In 2013, 2E2SSB directed Eclgy t schedule cleanup and preventin activities at a pace that matches the estimated cash resurces in the three MTCA accunts created in RCW D. 10 In additin, in respnse t legislative directive 11, OFM published a Reprt 12 detailing prcedural and statutry recmmendatins related t ensuring the capacity f STCA and ELSA t maintain prgrams, as well as develping appraches fr perating and capital budgeting. OFM s reprt recmmended that Eclgy dcument under expenditure rates fr capital apprpriatins frm MTCA accunts in the biennial reprt n MTCA expenditures required by Sectin 6 f 2E2SSB It als recmmended that Eclgy include assumed under expenditure rates fr the first biennium in each new capital prject request. b. One time Capital Budget Prvisins Sectin 7038 f the Capital Budget (2EHB 1115) 13 authrizes Eclgy, in cnsultatin with OFM, t direct the Office f the State Treasurer (OST) t make transfers between MTCA accunts during the Biennium t maintain psitive accunt balances in all three accunts. It authrizes lans f up t $13M ttal frm the Cleanup Settlement Accunt (CSA) t MTCA accunts t maintain psitive accunt balances. The sectin als authrizes Eclgy t delay cleanup prjects if the Agency determines after using the inter fund transfer prvisins that further reductins are required t maintain psitive accunt balances. c. Onging MTCA Reprting Requirements Eclgy is required t submit t the Legislature a MTCA 10 Year Financing Reprt befre September 20 th f each even numbered year that identifies lng term remedial actin prject csts, tracks expenses and prjects future needs. 14 In dd numbered years, it submits a MTCA Biennial Reprt detailing the Agency s activities supprted by apprpriatins frm the three MTCA accunts Hazardus Substance Tax Revenue Frecasts Since Octber 2014, actual HST revenues have been significantly belw amunts frecasted primarily due t declining and vlatile il prices. This trend has cntinued int the current biennium. With sustained depressed crude il prices likely t cntinue in the near term, Eclgy, in cnsultatin with OFM, is assuming a prudent and cnservative apprach t cash management and prject funding in rder t avid negative prjected cash r fund balances 9 Relating t the Mdel Txics Cntrl Act Chapter 1, Laws f 2013, First Special Sessin. 10 See als RCW D.030 (3) fr Eclgy s pwers and duties in implementing the spending plan in its budgeting activities. 11 A prvis in the enacted capital budget bill (ESSB 5035, Sectin 7009) directed the Office f Financial Management t wrk with the Department f Eclgy and legislative fiscal cmmittee staff t develp budgetrelated prcesses, prcedures and recmmendatins, and prvide a reprt t the Legislature by Oct. 1, Budget Divisin, Office f Financial Management, Reprt t the Legislature: State Txics Cntrl and Envirnmental Legacy Stewardship Accunts Budgeting, Octber 1, See Appendix See RCW D.030 (3) and (5). 15 See RCW D.030 (6). Page 5 Octber 19, 2015

7 in the MTCA accunts. RCW Sectin 2(b) specifically prhibits cash deficiencies unless resulting frm disbursements under an apprved expenditure plan r authrized by OFM s directr. 6. Department f Revenue Implementing Revised HST Frecasting Mdel DOR implemented a revised HST frecasting mdel t supprt its September 2015 (and nging) frecasts. This culd have a significant and immediate impact n frecasted revenues fr the Biennium and beynd. 16 Given the uncertainty regarding future revenue frecast and recent lwer HST revenue cllectins, Eclgy, in cnsultatin with OFM, prpsed initial base capital alltments fr cleanup prjects that reflect the agencies cnservative assessment f anticipated revenues rather than alltting the full LTCA, STCA, and ELSA capital budget apprpriatins. IV. Cash Management Prcess Overview T manage the Legislature s current apprach t apprpriating the MTCA accunts and HST revenue uncertainties, Eclgy will fllw the Plan as utlined belw t assure clse mnitring f the three MTCA accunts and maintain psitive prjected cash and fund balances. 1. Initial Alltment Strategy and Peridic Alltment Review In its August 2015 initial base capital alltment submittal, Eclgy placed in alltted status the apprpriated amunts assumed t be spent in frm the latest Estimated Fund Balances fr MTCA related Accunts reprt. 17 Based n infrmatin available at the time, and t maintain psitive prjected fund balances, Eclgy als placed an additinal $16M capital in unalltted status, 18 reflecting actual revenue cllectins at the time being lwer than the May 2015 frecast. Eclgy will mnitr variances f actuals versus alltments and will update its expenditure alltments as needed, including after each new HST revenue frecast prepared by the DOR. 2. Mnitring and Review As part f its nging cash management prcess, Eclgy will review cash prjectins mnthly t ensure prjected cash levels in the three MTCA accunts remain psitive and abve acceptable levels. 19 On a quarterly basis, Eclgy will review actual prject expenditures relative t alltted as part f its agency level quarterly budget review prcess. If crrective actin is necessary, Eclgy will initiate ne r mre f the remedial steps utlined in this Plan The May 2015 revenue frecast estimates ttal HST revenue f $325M fr the Biennium. Each 5% change in the frecast wuld equate t an apprximately $16M impact t the estimate. 17 See Appendix 3 fr estimated fund balances fr MTCA related accunts and Appendix 4 fr details f Eclgy s initial alltments fr MTCA accunts. 18 Eclgy s Txics Cleanup Prgram (TCP) Cleanup Prject Priritizatins (see Attachment 1) dcument utlines TCP s apprach t implementing the directive t delay cleanup prjects if required fr cash management purpses. 19 Defined as abve the current wrking capital reserve requirement f $6.9M (acrss the three MTCA accunts). 20 See Sectin VI f this Plan fr a detailed descriptin f these steps. Page 6 Octber 19, 2015

8 3. Crrective Actins If MTCA cash balances, prjected cash balances, r estimated fund balances drp belw OFM apprved wrking capital reserve threshlds, 21 r if Eclgy r OFM believe there may be a cash r fund deficiency r fund balance prblem, 22 Eclgy will implement a tiered apprach t crrective actins. The tiers include MTCA inter fund transfers, lans frm the Cleanup Settlement Accunt (CSA), cleanup grant r cntract delays 23, cleanup grant r cntract suspensin r terminatin, and (if needed) delay, suspensin r cancellatin f nn cleanup capital prjects. 4. MTCA Fund Transfers Eclgy will wrk clsely with OFM and the Office f the State Treasurer (OST) t manage MTCA intra fund transfers and, if necessary, Cleanup Settlement Accunt (SCA) inter fund lans up t $13M ttal, t maintain prjected psitive cash and fund balances in all three MTCA accunts Supplemental Budget Request If significant HST revenue declines ccur, Eclgy will advance a supplemental budget request fr funding existing legislatively apprved prjects s that pririty cleanup prjects can prceed. The details f the cash management plan summarized here are discussed in the fllwing sectins. V. MTCA Cash Management Team and Staff Grup 1. Cash Management Team The Eclgy MTCA Cash Management Team (Team) will cnsist f the Deputy Directr, Chief Financial Officer (CFO), Agency Budget Manager, Agency Budget Plicy Manager, Fiscal Manager, LTCA, STCA and ELSA Accunt Managers, Water Quality Capital Budget Manager, and Txics Cleanup, Waste 2 Resurces and Water Quality Prgram Managers. The Team may ask ther Prgram Managers and Budget Managers t participate as needed. The Team will implement the Plan and identify r apprve fllw up actins as needed. 21 The current MTCA wrking capital threshld is set at $6.9M (acrss the three accunts). Eclgy based its initial Biennium base capital alltment submittal n maintaining sufficient psitive cash balances abve this level. If cash balances are prjected t fall belw this threshld, Eclgy will initiate ne r mre f the crrective actins utlined in Sectin VI f this Plan. 22 Fr example, in a depressed and vlatile HST revenue envirnment, Eclgy, in cnsultatin with OFM, may determine a mre cnservative apprach t cash management and prject priritizatin is required t ensure MTCA cash and fund balances remain abve acceptable levels. 23 As authrized in sectin 7038 f the Biennium Capital Budget (2EHB 1115). Page 7 Octber 19, 2015

9 2. Cash Management Staff Grup A staff grup cnsisting f the CFO, Agency Budget Manager, Agency Budget Plicy Manager, Fiscal Manager, LTCA, STCA and ELSA Accunt Managers, Water Quality Capital Budget Manager and the Central Budget Office Capital Budget Crdinatr will supprt the Team. The Capital Budget Crdinatr will supprt the Plan and specifically the Accunt Managers with data gathering, reprts, alltments, infrmatin distributin, prject lists, meetings, and whatever else is needed. The Grup will crdinate with ther agencies that spend ut f MTCA 24, OFM and OST, as required. The STCA, LTCA and ELSA Accunt Managers are the staff leads fr the STCA, LTCA and ELSA prtins f the Plan, and fr verall fund management related t the three accunts. The Accunt Managers, with the assistance f the Capital Budget Crdinatr, will mnitr alltments and ntify the CFO and staff grup f material changes r updates. They will wrk with the MTCA Prgram Budget Managers 25 and Central Budget Office as necessary t update alltments as spending plans change. The Team must apprve any expenditure reductins as well as material changes t this Plan (which Eclgy will als share with OFM, legislative staff, and MTCA Stakehlders). VI. MTCA Cash Management Plan Tiered Apprach t Crrective Actins Eclgy will mnitr specific criteria as utlined in Part 2 belw t identify variance and adjust alltments and implement crrective actins accrdingly. If the cash balances, prjected cash r estimated fund balances drp belw acceptable wrking capital reserve threshlds, currently defined as the aggregate MTCA wrking capital reserves f $6.9M, Eclgy will apply a tiered apprach t crrective actins as prvided in Sec f the Capital budget. Eclgy may determine, in cnsultatin with OFM, that the frecasted level 26 r vlatility f HST revenues, requires further reductins in prject expenditures fr prudent cash management purpses. In this case, Eclgy may be required t delay r cancel new r existing cleanup and nn cleanup prjects. 1. Alltment Apprach a. Initial Alltment 27 Eclgy initially placed in alltted status the dllars t be spent frm reapprpriated and new apprpriatins in the Biennium as identified in Eclgy s latest Estimated Fund 24 Nn Eclgy agency apprpriatins ut f MTCA accunts cmprise f the fllwing: Department f Cmmerce: Brwnfield Redevelpment Grants ( ) $1.2M; Prjects that Strengthen Cmmunities ( ) $0.4M. Recreatin and Cnservatin Funding Bard: Family Frest Fish Passage ( ) $1.1M Department f Natural Resurces: Cntaminated Sites Cleanup and Settlement ( ) $0.9M University f Washingtn: UW Tacma Sil and Grundwater Remediatin ( ) $1.0M 25 Budget managers in the Air Quality, Envirnmental Assessment, Hazardus Waste & Txics Reductin, Nuclear Waste, Spill Preventin, Preparedness & Respnse, Shrelands & Envirnmental Assistance, Txics Cleanup, Waste 2 Resurces, and Water Quality prgrams. 26 Relative t recent actual HST revenue cllectins r recent trends. 27 See Appendix 4 that identifies unalltted (future expenditures assumed rate) fr MTCA accunts in Eclgy s initial alltments t maintain psitive fund and cash balances. Page 8 Octber 19, 2015

10 Balances fr MTCA Related Accunts reprt. 28 Fr reapprpriatins, future alltment amendments will reflect updated expenditures thrugh Fiscal Mnth 24 after adjusting fr assumed future expenditures placed in unalltted status. Eclgy placed $45.9M f MTCA reapprpriatins in Reserve status in initial alltments t reflect these expenditures thrugh FM24 prir t Phase 2 clsing. Eclgy als included an additinal $16M capital in unalltted status fr cash management purpses. 29 Placing this additinal amunt 30 in unalltted status ensured psitive prjected cash balances in the three MTCA accunts and maintained sufficient wrking capital reserves based n cnditins in August Eclgy will place the remainder f the apprpriatin (expenditures in Fiscal Mnth f that were nt reflected in Eclgy s reapprpriatin budget submissin) in reserve status. Eclgy will update alltments fr reapprpriatins in fall 2015 t reflect final Biennium expenditures. LTCA T begin the Biennium, Eclgy will maintain at least $72,014,000 f LTCA apprpriatin in Unalltted frm the Remedial Actin Grants, Centennial Clean Water, and Strmwater prgrams t reflect the future spending assumptins in the enacted budget. It will als place an additinal $15M frm cleanup prjects in Unalltted fr cash management purpses. STCA T begin the Biennium, Eclgy will maintain at least $14,869,000 f STCA apprpriatin in Unalltted frm the Centennial Clean Water, Clean Up Txics Sites Puget Sund, and Eastern Washingtn Clean Sites prgrams t reflect the spending assumptins in the enacted budget. It will als place an additinal $1M frm cleanup prjects in Unalltted fr cash management purpses. ELSA T begin the Biennium, Eclgy will maintain at least $34,048,000 f ELSA reapprpriatin in Unalltted frm the strmwater and centennial clean water prgrams t reflect the spending assumptins in the enacted budget. Eclgy s initial base alltments are subject t OFM apprval, and the details f its final, apprved alltments may differ frm the plan utlined here. OFM has t apprve any changes t mve funds frm unalltted t alltted status. b. Eclgy Peridic Alltment Review/Update and Identifying Optimal Fund Surce At least quarterly Eclgy will review expenditure and cash receipt variances t determine what has changed frm the previus estimates; review alltments quarterly, r as required, and update if necessary, t reflect anticipated expenditure patterns. 28 See Appendix 3 fr estimated fund balances fr MTCA related accunts and Appendix 4 that identifies unalltted amunts fr MTCA accunts in Eclgy s initial alltments t maintain psitive fund and cash balances 29 Prject detail fr this ttal include the fllwing Txics Cleanup Prgram prjects: Leaking Tank Mdel Remedies ( ) $1M in STCA; Remedial Actin Grants ( ) $15M in LTCA. 30 Eclgy estimated a cash shrtfall f apprximately $20M versus the May 2015 frecast, apprximately $1M revenue transfer ut f STCA t Cleanup Settlement Accunt, and apprximately $5M in perating underexpenditures fr a ttal f apprximately $16M less available cash as f September Assumed wrking capital reserves fr the three MTCA accunts are: STCA $3M; LTCA $1M; and, ELSA $2.9M. Page 9 Octber 19, 2015

11 Eclgy will identify specific prjects that are cntributing t (significant r material) variances and cnfirm with prject/sectin managers that underlying expenditure assumptins cntinue t be valid. If necessary, Eclgy will determine if prgrams can spend bnds befre MTCA funds (e.g., Strmwater r Centennial). 2. Mnitring Frequency and Metrics a. Psitive Prjected Cash and Estimated Fund Balances Eclgy will implement this Plan t maintain psitive mnthly prjected cash and fund balances in the three MTCA accunts. If the prjected mnthly cash balances in aggregate fall belw the ttal MTCA wrking capital reserve amunt (currently set at $6.9 millin fr the three accunts cmbined), it will initiate ne r mre f the crrective actins identified in this Plan. b. Mnitring f Revenue and Expenditures n a Mnthly Basis i) The LTCA, STCA, and ELSA Accunt Managers, with the assistance f the Capital Budget Crdinatr, will review each mnth the Estimated Revenue and Expenditures and Actual Cash Receipts and Disbursements and Balances Reprt frm the Enterprise Reprting System (Reprt AMR021 see Appendix 1). This reprt shws actual cash balances frm AFRS fr past mnths, and estimates f cash balances based n revenue and expenditure alltments fr future mnths. Eclgy will als use its wn internal reprts as needed, t mnitr cash and expenditure activity. Eclgy will mnitr specific criteria 32 t identify variances and adjust alltments as necessary t maintain psitive prjected cash balances in the three MTCA accunts. The Accunt Managers, with the assistance f the Capital Budget Crdinatr, will als each quarter review the OFM apprved revenue and expenditure alltments. All MTCA Budget Managers will update alltments if needed, t maintain current data fr the cash management reprts. ii) The DOR accunting manager has agreed t give ntificatin f any refunds (decrease in revenue) r debit assessments (increase in revenue) that affect cash by ver $200,000. The Capital Budget Crdinatr will cntact the DOR accunting manager n a quarterly basis t review ttal cash activity and any large r unusual HST related transactins. iii) If the cash balance r prjected cash balance drps belw the MTCA wrking capital currently set at $6.9 millin fr the Biennium, r if fr any reasn the Accunt Manager believes there may be a cash r fund deficiency r fund balance prblem, the Accunt Manager, with the assistance f the Capital Budget Crdinatr, will examine receipts and expenditures and determine what changed frm the estimates. The Accunt Manager will cntact the apprpriate budget 32 Metrics Eclgy will mnitr include: new prject expenditures vs. alltted; reapprpriated prject expenditures vs. alltted; prjected mnthly cash balances fr the three MTCA accunts, LTCA/STCA actual receipts vs. mnthly ($11.67M) and fiscal year ($140M) targets and any accumulated shrtfalls during a fiscal year; HST receipts vs. frecast and prjected; crude il price and utlk. Page 10 Octber 19, 2015

12 manager t determine the cause and identify ptential slutins. The Accunt Manager will reprt findings t the staff grup with a recmmendatin as t whether r nt a change in the Plan, alltment changes r expenditure reductins shuld be cnsidered. The Accunt Manager will initiate a meeting f the staff grup if needed. c. Reprting t OFM After Each Revenue Frecast The Accunt Managers will prvide status updates, including the Estimated Revenue and Expenditures reprt, t the Team and OFM within tw weeks f DOR s update t revenue and cash receipt alltments fr LTCA, STCA, and ELSA, typically within fur weeks after the frecast date. The Capital Budget Crdinatr will review cash receipt activity mnthly. 3. MTCA Intra fund Transfers a. Initial MTCA Fund Transfers Eclgy used its initial expenditure alltments as determined abve 33 (including estimated expenditure alltments frm ther agencies 34 ) and DOR s (May 2015) revenue frecasts t prject estimated mnthly clsing cash balances fr the three MTCA accunts. It determined, in cnjunctin with OFM, the MTCA intra fund transfers required t maintain psitive cash balances in all three accunts fr the remainder f the biennium. Eclgy wrked with OST t identify the amunt and timing f these transfers t include in OST s initial Treasurer Transfer revenue alltments. 35 b. Onging Fund Transfers As part f Eclgy s nging cash management strategy, it will cntinue t mnitr prjected mnthly cash balances in the three MTCA accunts. The Agency, in cnjunctin with OFM, may determine that additinal transfers are required during the biennium t maintain psitive prjected cash balances. 4. Cnservative Apprach t Cash Management a. Anticipated Revenues Due t cntinuing declining HST revenue levels, recent actual receipts belw frecasted, uncertainty regarding future revenue frecast updates, and DOR s implementatin f a revised frecast mdel, Eclgy is initially prceeding t enter int cntract and grant 33 Expenditure Alltments exclude MTCA Unalltted Additinal Reapprpriatins spent in thru FM24 ($45.85 millin), future expenditures assumed by the Legislature ($ millin), and additinal Txics Cleanup prjects cash management ($16 millin). 34 As ther agencies alltments were unavailable, Eclgy applied a straight line apprach t allt these expenditures equally acrss the 24 mnths in the biennium. 35 As prvided in Sectin 7038(1) f the Capital Budget, Eclgy, in cnsultatin with OFM, requested the state treasurer make the fllwing transfers and include them in their initial alltments: MTCA Transfers: a. 174 LTCA ($50,000,000) January 2016 and ($19,400,000) January 2017 b. 173 STCA $4,700,000 January 2017 c. 19G ELSA $50,000,000 January 2016 and $14,700,000 January 2017 Page 11 Octber 19, 2015

13 agreements that reflect its cnservative assessment f anticipated revenues rather than the full LTCA, STCA, and ELSA capital budget alltments. This will prvide Eclgy with greater flexibility in managing cleanup prject delays as required t maintain psitive cash and fund balances in the three MTCA accunts. b. Review Wrking Capital Reserve Requirements and Ending Fund Balances Eclgy will review the wrking capital reserve requirements and prjected ending fund balances fr the three MTCA accunts and determine if increases are required as a buffer against increased fund vlatility r further revenue declines. Eclgy will prpse any changes t the wrking capital reserve requirement in subsequent budget requests. 5. Cleanup Settlement Accunt (CSA) Inter fund Lan Eclgy will determine, in cnjunctin with OFM, whether and when a lan f up t $13M ttal frm the CSA 36 is required and is apprpriate t meet necessary cash levels in the MTCA accunts and that the brrwing fund is able t pay debt service n the lan. The inter fund lan must be repaid with interest t the CSA in three equal repayments in fiscal years 2018, 2019, and 2020 ( Biennium Capital Budget (2EHB 1115), sectin 7038 (2)). 6. Cleanup Prject Priritizatin Eclgy s Txics Cleanup Prgram (TCP) Cleanup Prject Priritizatins 37 dcument utlines TCP s apprach t implementing the directive t delay cleanup prjects if required fr cash management purpses. 38 The enacted capital budget 39 explicitly directs Eclgy t delay the start f cleanup prjects if the Agency determines inter fund transfers were insufficient t maintain prjected psitive accunt balances in the three MTCA accunts. The bill directs Eclgy t use the fllwing unpriritized criteria in determining pririty fr delaying cleanup prjects: Acuity f need Readiness t prceed Cst efficiency, r 36 As prvided in sectin 7038 (2) f the Biennium Capital Budget (2EHB 1115). See Appendix 5 fr specific bill language. 37 See Attachment The Legislature assumed future expenditures fr new and reapprpriatins the fllwing prjects: Remedial Actin Grants ($51.2M); Clean Up Txic Sites Puget Sund ($3.3M); Strmwater ($43.4M); and Centennial ($14.5M). Eclgy included these expenditures in unalltted status Biennium Capital Budget (2EHB 1115), sectin 7038 (3) If, after using the inter fund transfer authrity granted in this sectin, the department f eclgy determines that further reductins are needed t maintain psitive accunt balances in the state txics cntrl accunt, the lcal txics cntrl accunt, and the envirnmental legacy stewardship accunt, the department is authrized t delay the start f cleanup prjects based n acuity f need, readiness t prceed, cst efficiency, r need t ensure gegraphic distributin. If the department uses this authrity, the department must submit a priritized list f prjects that may be delayed t the ffice f financial management and the apprpriate fiscal cmmittees f the Legislature. Page 12 Octber 19, 2015

14 Need t ensure gegraphic distributin 40 If required, Eclgy will implement a planned apprach t expenditure reductins and actins (that may include grant r cntract suspensins). Eclgy will maintain priritized prject lists that reflect available funding. It will update these prject lists if the agency determines, in cnjunctin with OFM, that further delay in cleanup prjects is required t reduce the risk f ptential negative cash balances in the MTCA accunts. It will submit these priritized lists f prjects that may be delayed t OFM, legislative staff and the apprpriate fiscal cmmittees f the Legislature Supplemental Budget Requests Eclgy may als pursue a legislative slutin if required t address shrtfalls in prjected revenues, and prjected negative cash r fund balances in the MTCA accunts. Eclgy will submit a 2016 Capital Budget Request t update the Gvernr and Legislature n the status f the MTCA accunts after the September 2015 frecast and include the list f prjects that will be delayed in light f the revenue dwnturn. 8. Standard Cntract Language All Eclgy grant and lan cntracts will cntinue t include standard language fr suspensin and terminatin t ensure flexibility in reducing r stpping spending if revenue cnditins wrsen. Eclgy Plicy requires that all Eclgy payable agreements cntain language stating that in the event funding is withdrawn, reduced, r limited Eclgy may renegtiate r terminate the agreement, r may suspend perfrmance f the agreement until the funding insufficiency is reslved. 40 This criteria nly applies t Remedial Actin Grants as prjects within this cleanup categry are state wide. Prjects within the Clean Up Txic Sites Puget Sund and Eastern Washingtn Clean Sites cleanup categries all fall within the same respective gegraphic regin. 41 The Plicy states that the fllwing language must be n all cntract, grant, lan, and interagency payable agreements: ECOLOGY s ability t make payments is cntingent n availability f funding. In the event funding frm state, federal, r ther surces is withdrawn, reduced, r limited in any way after the effective date and prir t cmpletin r expiratin date f this agreement, ECOLOGY, at its sle discretin, may elect t terminate the agreement, in whle r part, r renegtiate the agreement, subject t new funding limitatins r cnditins. ECOLOGY may als elect t suspend perfrmance f the agreement until ECOLOGY determines the funding insufficiency is reslved. ECOLOGY may exercise any f these ptins with n ntificatin restrictins. Page 13 Octber 19, 2015

15 9. Expenditure Reductins a. Required Data If, after inter fund transfers and the CSA lan have been implemented, the CFO r staff grup recmmend expenditure reductins, the Accunt Manager will initially prvide the Team with the fllwing data fr each capital apprpriatin (expenditure authrity): amunts apprpriated, alltted, alltted t date, expended, and encumbered; and whether it is a new apprpriatin r a re apprpriatin. If the staff grup needs additinal data, the Accunt Manager will wrk with Prgram Budget Managers wh will cntact prject managers r ther prgram staff t get the infrmatin. Data may include prject lists with specific prject status, prject managers estimates f mnthly future spending fr large r ther selected prjects, identificatin f stalled r underspending prjects (including amunt and length f time dllars have been reapprpriated), r any ther data deemed necessary. The staff grup, CFO r Team may request prgram recmmendatins regarding specific grants r cntracts and may slicit OFM s input and recmmendatins. b. Recmmendatin The CFO r staff grup will develp recmmendatins r ptins as required and present them t the Team. These may include grant r cntract suspensins r reductins, which grant r cntract prgrams and apprpriatins wuld be affected, and which specific grants r cntracts wuld be affected. c. Cmmunicatin The Team will determine the recmmended curse f actin regarding any expenditure reductins. Eclgy will submit a priritized list f prjects that may be delayed t OFM, legislative staff and the apprpriate fiscal cmmittees f the Legislature. If prject funding is delayed, suspended r terminated, Eclgy will cmmunicate with lcal partners as early as pssible. Page 14 Octber 19, 2015

16 APPENDIX 1 State f Washingtn OFM Estimated Revenue and Expenditures and Actual Cash Receipts and Disbursements and Balances Biennium Packet Status: Apprved Reprt Number: AMR021 Date Run: 9/3/ :11AM Print Date: 9/3/ :11AM 173 State Txics Cntrl Accunt Beginning Cash Balance* Alltted Revenue Frm TALS Actual Cash fr clsed mnths (Open mnths use estimates) Alltted Expenditures Est. Cash Balance Act. Receipts/Est. Revenue Act. Disbursements/Est. Expenditures Actual GAAP Frm AFRS fr clsed Mnths Actual/Prjected Cash Balance Actual Revenue Variance frm Estimates Actual Expenditures Fiscal Mnth Jul 15 Aug 15 Sep 15 Oct 15 Nv 15 Dec 15 Jan 16 Feb 16 Mar 16 Apr 16 May 16 Jun 16 Jul 16 Aug 16 Sep 16 Oct 16 Nv 16 Dec 16 Jan 17 Feb 17 Mar 17 Apr 17 May 17 Jun 17 Ttal Bien Reprt purpse: T mnitr cash balances t date and prjectins thrugh the biennium. Includes GL 3110 (est. revenue) GL 6210 (Est. Expenditures), and GL 4310 (current treasury cash activity). Actual cash receipts include debits t GL 4310, and actual cash disbursements include credits t GL Fr lcal accunts als includes GL 1110 except Agency Variance frm Estimates Page 15 Octber 19, 2015

17 APPENDIX 2 P a g e 16 Octber 19, 2015

18 Page 17 Octber 19, 2015 APPENDIX 3

19 Page 18 Octber 19, 2015 APPENDIX 4

20 APPENDIX Biennium Capital Budget 2EHB NEW SECTION. Sec STATE TREASURER TRANSFER AUTHORITY 33 State txics cntrl accunt: Fr transfer t the 34 envirnmental legacy trust accunt $24,000, Lcal txics cntrl accunt: Fr transfer t the 36 envirnmental legacy trust accunt $30,000,000 1 (1) As directed by the department f eclgy in cnsultatin with 2 the ffice f financial management, the state treasurer shall 3 transfer amunts amng the state txics cntrl accunt, the lcal 4 txics cntrl accunt, and the envirnmental legacy stewardship 5 accunt as needed during the fiscal biennium t maintain 6 psitive accunt balances in all three accunts. 7 (2) As directed by the department f eclgy in cnsultatin with 8 the ffice f financial management, the state treasurer shall 9 transfer amunts frm the cleanup settlement accunt established in 10 RCW D.130 t the state txics cntrl accunt, the lcal txics 11 cntrl accunt r the envirnmental legacy stewardship accunt t 12 maintain psitive accunt balances up t an amunt nt t exceed 13 $13,000,000 that must be cnsidered an inter fund lan that must be 14 repaid with interest t the cleanup settlement accunt in three equal 15 repayments in fiscal years 2018, 2019, and (3) If, after using the inter-fund transfer authrity granted in 17 this sectin, the department f eclgy determines that further 18 reductins are needed t maintain psitive accunt balances in the 19 state txics cntrl accunt, the lcal txics cntrl accunt, and 20 the envirnmental legacy stewardship accunt, the department is 21 authrized t delay the start f clean-up prjects based n acuity f 22 need, readiness t prceed, cst-efficiency, r need t ensure 23 gegraphic distributin. If the department uses this authrity, the 24 department must submit a priritized list f prjects that may be 25 delayed t the ffice f financial management and the apprpriate 26 fiscal cmmittees f the legislature. Page 19 Octber 19, 2015

21 Txics Cleanup Prgram Cleanup Prject Priritizatins August 27, 2015 ATTACHMENT 1 PURPOSE: Describe assumptins and criteria Eclgy will use when making decisins t delay the start f cleanup prjects, r suspend r cancel such agreements, t maintain psitive accunt balances in the three Mdel Txics Cntrl Act (MTCA) accunts. This dcument addresses Eclgy s implementatin plan given the amunts the Legislature assumed wuld be spent in the Biennium and the uncertainty surrunding actual Hazardus Substance Tax (HST) revenue cllectins. The fllwing table summarizes the future expenditures assumed by the Legislature (future expenditures assumed). Eclgy will include these expenditures and an additinal $16M capital in unalltted status fr cash management purpses due t actual revenue cllectins (thru July 2015) being lwer than frecast. Placing this additinal amunt in unalltted status ensures psitive prjected cash balances in the three MTCA accunts and maintains sufficient wrking capital reserves (based n cnditins in August 2015). Prject Title (New and Reapprpriatin) Future Expenditures Assumed HST Shrtfalls Ttal Unalltted Remedial Actin Grants $51,214 $15,000 $66,214 Clean Up Txic Sites Puget $8,569 $0 $8,569 Sund Eastern Washingtn Clean $3,300 $0 $3,300 Sites Initiative Leaking Tank Mdel $0 $1,000 $1,000 Remedy Strmwater $43,372 $0 $43,372 Centennial Clean Water $14,476 $0 $14,476 TOTAL $120,931 $16,000 $136,931 Dllars in $0,000s BACKGROUND: Eclgy has develped a MTCA Cash Management Plan (Plan) fr the Biennium with the Office f Financial Management s (OFM) review and apprval. The Plan guides Eclgy s management f the MTCA accunts as it implements the Legislature s assumptin that MTCA accunt expenditures will be less than 100% f selected new apprpriatins and reapprpriatins in the Biennium and HST revenue vlatility. Eclgy s Plan implements a tiered apprach t crrective actins and includes the fllwing cmpnents (see Part VI f the Plan fr a detailed descriptin): Alltment Review/Update MTCA Intra fund Transfers Cleanup Settlement Accunt Inter fund Lan Delay Start f Cleanup Prjects 2016 Supplemental Budget Requests Budget Reductin Packages Review Wrking Capital Reserve Requirements and Ending Fund Balances This dcument utlines the Txic Cleanup Prgram s (TCP) apprach t implementing the legislative directive t delay prjects if required fr cash management purpses (as detailed in 2EHB 1115, Sectin 7038(3)). Eclgy will maintain priritized prject lists that reflect available funding. It will update these prject lists if Eclgy determines, in cnjunctin with OFM, that further delay in cleanup prjects is required t reduce the risk f ptential negative cash balances in the MTCA accunts. Page 20 Octber 19, 2015

22 Fllwing is an excerpt frm Sec (see full sectin in Appendix 5 f the Plan). It identifies the legislative criteria (Criteria) that Eclgy will use t identify delayed prjects: (3) If, after using the inter fund transfer authrity granted in this sectin, the Department f Eclgy determines that further reductins are needed t maintain psitive accunt balances in the State Txics Cntrl Accunt (STCA), the Lcal Txics Cntrl Accunt (LTCA), and the Envirnmental Legacy Stewardship Accunt (ELSA), the department is authrized t delay the start f cleanup prjects based n: Acuity f need Readiness t prceed Cst efficiency, r Need t ensure gegraphic distributin The Criteria were nt priritized by the Legislature. ASSUMPTIONS: Eclgy will use the fllwing assumptins t implement the Criteria if it determines it is necessary t delay the start f cleanup prjects. Prtectin f human health will be the mst imprtant cnsideratin in all instances. Indicatrs that human health is at risk include the site hazard assessment ranking and actual dcumentatin f expsures. The Criteria applies t bth prjects funded frm new apprpriatins, and if needed, t existing prjects funded with reapprpriated dllars. Eclgy will delay new prjects t manage within legislative assumptins, HST revenue frecasts and actual HST revenue cllectins. Stpping signed cntracts r grants will be the last ptin cnsidered by Eclgy. The Criteria applies t all cleanup prjects, whether the prjects are funded with STCA, LTCA r ELSA. Each capital prject (Remedial Actin Grants, Clean Up Txic Sites Puget Sund, Eastern Washingtn Clean Sites Initiative and Leaking Tanks Mdel Remedy) will be managed within legislative assumptins and OFM apprved alltments (including unalltted dllars). Eclgy will manage the capital prjects apprpriated by the Legislature (Remedial Actin Grants, Clean Up Txic Sites Puget Sund, Eastern Washingtn Clean Sites Initiative and Leaking Tank Mdel Remedy) recgnizing the state has funding bligatins within these prjects that are nt discretinary and must be met. All grants leverage lcal match and make state investment g further. In sme instances, prviding a grant r cntracting fr state directed cleanup wrk brings additinal resurces t a site (e.g., ther grants, cleanup investments frm multiple ptentially liable parties, insurance settlements, etc.). SEC LEGISLATIVELY DIRECTED CRITERIA: Eclgy will apply the Criteria as fllws. ACUITY OF NEED: Eclgy will use the fllwing t evaluate a cleanup prject s acuity f need. Statutry r ther legal requirement. Examples include: Page 21 Octber 19, 2015

23 Sme lcal health departments receive grants t cmplete initial investigatins fr Eclgy (fr thse that dn t receive these grants Eclgy is the lead). The investigatins are required within 90 days f receiving infrmatin that a site may pse a threat t human health r the envirnment. RCW D.030(2) The Legislature has prvised, explicitly added r advanced prjects n Eclgy s funding lists. These are cnsidered when assessing acuity f need. The state has bligatins t pay fr 10% f the cnstructin csts incurred by the Envirnmental Prtectin Agency at superfund sites in Washingtn and has cmmitments fr lng term peratin and maintenance at certain sites. There is statutry bligatin t cmplete cleanup as required by hazardus waste, slid waste and dangerus waste regulatins. Eclgy cntinues t implement new legislative directin passed in 2013 under Secnd Engrssed Secnd Substitute Senate Bill (2E2SSB) This includes directin t plan t cleanup at a pace that matches estimated cash resurces in the MTCA accunts, develp mdel remedies and prvide areawide grundwater grants. Prject is cmplete and a ptential grant recipient has incurred csts and is awaiting state reimbursement. Fr example: vluntary cleanups, legislatively directed Grays Harbr PUD prject and Prt f Tacma Kaiser Site. Prject requires a steady flw f funding t cntinue prjects. Fr example, if a prject is currently in cnstructin and des nt have reapprpriated funding in an existing grant. Interim actins t address an imminent public health threat. Indicatrs include the site hazard assessment ranking and actual dcumentatin f expsures. Data abut past spending patterns by a recipient rganizatin r at a specific site (e.g., if a recipient rganizatin r a specific prject have a large r lng standing reapprpriatin). Recipients with existing reapprpriatins and the spending plans they prvide Eclgy will be reviewed. READINESS TO PROCEED: Eclgy will use knwn infrmatin abut the prject t evaluate its readiness t prceed. Infrmatin evaluated will include: Whether cntracts are in place r hw quickly they will be in place. Whether a lcal executive r legislative bdy has acted (city cuncil apprvals, prt cmmissin apprvals, etc.). Whether r nt there is a finalized agreed rder, cnsent decree r enfrcement rder. What stage f cleanup the prject is in Remedial Investigatin/Feasibility Study, Cleanup Actin Plan/Design/Cnstructin. At each stage, Eclgy will cnsider whether reprts are cmplete, whether the public cmment perid is cmplete, etc. Whether r nt required state, lcal r federal permits are in hand, and if lcal match r nn state funding is being used if it is fully secured and ready t be spent. COST EFFICIENCY: Eclgy will use the fllwing t evaluate a cleanup prject s cst efficiency. Whether r nt existing investments will be lst. Fr example, cnstructin prjects take significant, up frnt investments (studies, planning, investigatins, etc.) t reach the start f cleanup. And, a prject at the pint f cnstructin has a shelf life. Cnstructin plans, permits, etc. need t prceed r the investment will be lst r utdated if there is a significant delay. Eclgy will recgnize that the cst efficiency f investing in Page 22 Octber 19, 2015

24 and cntinuing a ready t prceed cnstructin prject is a pririty ver a ready t prceed remedial investigatin r feasibility study. Whether r nt the state funding will leverage ther investments at a cleanup site. All grants leverage lcal match and make the state investment g further. In sme instances, prviding a grant r cntracting fr state directed cleanup wrk brings additinal resurces t a site (e.g., ther grants, cleanup investments frm multiple ptentially liable parties, insurance settlements, etc.). NEED TO ENSURE GEOGRAPHIC DISTRIBUTION: Eclgy will use the fllwing t evaluate whether a cleanup prject cntributes t gegraphic distributin. Eclgy will wrk t maintain at least partial funding acrss the entire prtfli f capital apprpriatins fr cleanup (i.e., Remedial Actin Grants, Clean up Txic Sites Puget Sund, Eastern Washingtn Clean Sites Initiative, and Leaking Tank Mdel Remedy). Within each capital apprpriatin, Eclgy will make funding decisins t maintain its gal f ffering a statewide Txics Cleanup Prgram by ensuring bth Eastern and Western Washingtn cleanup investments. Page 23 Octber 19, 2015