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Review the Commonwealth's Growing Greener II Initiative

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Legislative Budget and Finance Committee A JOINT COMMITTEE OF THE PENNSYLVANIA GENERAL ASSEMBLY Offices: Room 400 Finance Building, 613 North Street, Harrisburg Mailing Address: P.O. Box 8737, Harrisburg, PA 17105-8737 Tel: (717) 783-1600 • Fax: (717) 787-5487 • Web: http://lbfc.legis.state.pa.us SENATORS JOHN R. PIPPY Chairman JAY COSTA, JR. WAYNE D. FONTANA ROBERT B. MENSCH DOMINIC PILEGGI JOHN N. WOZNIAK Review of the Commonwealth’s Growing Greener II Initiative REPRESENTATIVES ROBERT W. GODSHALL Secretary DAVID K. LEVDANSKY Treasurer STEPHEN BARRAR JIM CHRISTIANA H. SCOTT CONKLIN ANTHONY M. DELUCA As Required by House Resolution 2009-17 EXECUTIVE DIRECTOR PHILIP R. DURGIN March 2010 Table of Contents Page Summary .............................................................................................................. 1 I. Introduction ............................................................................................. 3 II. Growing Greener II Bond Issues and Debt Service ............................. 5 A. Bond Issues ............................................................................................ 5 B. Debt Service ............................................................................................ 6 III. Uses of Growing Greener II Funds ........................................................ 8 IV. Appendices .............................................................................................. 25 A. HR 2009-17 ............................................................................................. 26 B. Growing Greener II Projects .................................................................... 30 i Summary In May 2005, Pennsylvania voters approved through a referendum borrowing $625 million for the Growing Greener II program “for the maintenance and protec- tion of the environment, open space and farmland preservation, watershed protec- tion, abandoned mine reclamation, acid mine drainage remediation and other envi- ronmental initiatives”. In July 2005, Governor Rendell signed Act 45, the Growing Greener II legislation that directs how the Growing Greener II funds are to be dis- tributed. Growing Greener II Bond Issues and Debt Service As of January 2010, the Commonwealth had issued $384.5 million of the $625 million approved in Growing Greener II bonds. The bonds have interest rates between 3.45 percent and 5.50 percent, with varying maturity dates through FY 2028-29. Of the $240.5 million principal amount of debt remaining, the Common- wealth anticipates issuing $120 million in bonds in FY 2009-10 and $121 million in FY 2010-11. The funds to make the principal and interest payments for the Growing Greener II bonds come from the Environmental Stewardship Fund1. The primary source of revenue for the Environmental Stewardship Fund is the $4.25 per ton dis- posal fee for solid waste disposed of at any municipal waste landfill, which in recent years has ranged from $65 million to $84 million annually (including earned inter- est). Of this amount, approximately $30 million is currently being used for debt service to repay the principal and interest on the GGII bonds. The remaining $35- 54 million is used to support other environmental initiatives. However, the amount needed for GGII debt service will increase to approximately $50 million once the remaining $240.5 million in bonds is issued. The Governor’s Budget Office projects this will leave only about $15 million remaining for other Environmental Steward- ship Fund projects. Use of Growing Greener II Funds The Growing Greener Bond Fund was created by Act 2005-45 to receive and distribute the proceeds from the sale of Growing Greener II bonds to Common- wealth agencies. The table below shows the uses of the GGII bond funds. 1 Procedurally, the Environmental Stewardship Fund makes payments to the Growing Greener II Sinking (Debt Repayment) Fund. Principal and interest payment are then made from the sinking fund. 1 Growing Greener Bond Fund Allocations and Expenditures ($ in Millions) Actual Plus Actual Estimated Act 45 Expenditures (Through Allocations (as of 6/30/09) June 30, 2011) Agriculture ..................................................... $ 80 .0 $ 74.5 $ 80.0 Community and Economic Development ....... 50.0 45.0 71.8a Conservation and Natural Resources ............ 217.5 148.9 216.6 Environmental Protection ............................... 230.0 94.5 212.2 Fish and Boat Commission ............................ 27.5 10.3 30.1 Game Commission ........................................ 20.0 10.8 17.4 Total ........................................................... $625.0 $371.6 $628.0 _______________ a Includes $15 million for Industrial Sites Reuse. Under Act 45, DEP is authorized to allocate up to $5 million annually to DCED for this purpose. As the table shows, by June 30, 2011, all the GGII funds available to the De- partment of Agriculture for farmland preservation will have been expended,2 as will all or virtually of the GGII funds available to DEP, DCNR, DCED, Fish and Boat Commission, and the Game Commission. Although the funds may not be expended until 2011, each department has reported that virtually all the funds not yet spent are already committed to GGII environmental projects and that they can undertake few if any new GGII projects. The report lists each of the 1,535 projects that have been awarded Growing Greener II funding. Many of these projects are unique and do not have performance or outcome metrics that can be quantified or aggregated. However, to the extent that we were able to aggregate outcome measures, we found Growing Greener II funds were used to: • Purchase 316 farmland preservation projects which preserved 33,714 acres of farmland in perpetuity (Department of Agriculture). • Create 1,500 jobs, improve 41 buildings, leverage $140.4 million in private dollars, remediate 1 site, and construct 4 new buildings (Department of Community and Economic Development). • Purchase, either outright or through conservation easements, 42,357 acres of open spaces (Department of Conservation and Natural Resources). • Remediate 1,619 acres of abandoned mine lands, plug 239 orphaned and/or leaking gas and oil wells (Department of Environmental Re- sources). 2 The Department of Agriculture reported that all its GGII farmland preservation funds had been expended or committed as of June 30, 2009. 2 I. Introduction House Resolution 2009-17 (Appendix A) calls on the Legislative Budget and Finance Committee to review the Commonwealth’s Growing Greener II initiative. Study Objectives HR 17 is specific in the objectives of this study, which are to determine: 1. the overall amount of bond funding authorized, the amount issued, the amount remaining to be issued and a schedule of debt service on the bond issuance; 2. the total amount of funds allocated to each agency, a compilation of how the allocated funds were spent and the amount of remaining funds to be allocated by the agency; 3. the costs and benefits of the program; and 4. the projects completed under the County Environmental Initiative Program, including the number and type of projects by county, the amount of funding requested and provided to each county and an evaluation of the costs and benefits of the projects implemented under the program. The resolution also calls on the LB&FC to “make a thorough study of various proposals for continued funding for environmental initiatives . including recommendations for legislation.” We did not identify any specific proposals for continued funding, but were informed that a coalition of about 20 primarily environmental, conservation, and recreational organizations has formed under the name Renew Growing Greener Coalition. The coalition is exploring various possible funding sources, including natural gas severance taxes, the Oil and Gas Lease Fund, a bottle bill (surcharge on beverage containers), bond issue, etc., in an effort to generate $200 million annually in sustainable funding for Growing Greener-type programs and projects. Methodology Information on the GGII bond indebtedness and debt service was obtained from the Office of the Budget. Information on the amount awarded to specific GGII projects by the various agencies was provided by the Governor’s Policy Office. Information on the status of individual projects (i.e., whether the project has yet to be started, is underway, or is completed) was not available, so the report only lists the projects that have been approved for funding. Information on the benefits 3 (outcomes) of the various projects was, to the extent it was available, provided by the individual agencies. As noted above, we could not identify any specific proposals for continued funding of the Growing Greener environmental, conservation and recreational initiatives, and therefore do not have recommendations regarding this aspect of the resolution. Acknowledgements We appreciate the cooperation provided by Ms. Patricia Allan in the Gover- nor’s Policy Office in assembling information on the Growing Greener II projects, particularly those funded through the County Environmental Initiative program. We also appreciate the cooperation provided by the various departments and com- missions in providing us with information on the outcomes (benefits) of the funded projects. Important Note This report was developed by the Legislative Budget and Finance Committee staff. The release of this report should not be construed as an indication that the Committee or its individual members necessarily concur with the
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