Brief ⁽¹⁾

SB 501 would enact the Agricultural and Specialty Chemical Remediation Act to address corrective action costs for release of agricultural or specialty chemical that poses a threat to human health or the environment. The act would have two aspects: the first being a Remediation Linked Deposit Loan Program and the second being a Remediation Reimbursement Program.

In addition, the bill would create the Kansas Agricultural Remediation Board consisting of five members appointed by the Governor and would represent agricultural retailers, agricultural producers, agricultural processors, specialty chemical distributors or retailers, and agricultural and specialty chemical registrants. Not more than three members could be from the same political party. Representatives of the Department of Agriculture and the Kansas Department of Health and Environment would serve as ex officio members. The Board would have the following powers, duties, and functions:

• Administer the Remediation Reimbursement Program and associated fund;



• Adopt rules and regulations concerning the terms and conditions of any reimbursements from the fund;



• Adopt rules and regulations establishing criteria for classification and prioritization of properties for purposes of the Remediation Linked Deposit Loan Program and the Remediation Reimbursement Program;



• Establish operating standards and procedures for approval of projects, application procedures, appeals procedures, and priority determinations;



• Appoint or contract for administrative services subject to a $150,000 limit;



• Annually provide for an independent audit of the fund; and



• Annually report to the Governor, the Senate Committee on Energy and Natural Resources, and the House Committee on Environment.

Remediation Linked Deposit Loan Program

The bill would direct the State Treasurer to administer the Remediation Linked Deposit Loan Program which would provide loans to eligible persons to pay the cost of corrective actions. The loans would be made by "eligible lending institutions" which would be a bank or an institution of the Farm Credit System.

The bill would require that the lending institutions apply all usual lending standards to determine the credit worthiness of the borrowers. Under the provisions of the bill, the total amount of linked deposit loans for any one site could not exceed $300,000. Loans could not be amortized for a period of more than ten years. Eligible borrowers would certify that the reduced rate loan would be used exclusively for the purposes of the bill.

The State Treasurer would disseminate information and provide remediation linked deposit loan packages to lending institutions. The institutions would forward to the State Treasurer an approved loan package, in a form and manner prescribed and approved by the State Treasurer. Under the bill, the package would include information regarding the amount of the loan requested by the applicant and other information the State Treasurer would deem necessary. A lending institution may approve or reject a remediation linked deposit loan package. Upon acceptance of a loan package, the State Treasurer would certify to the Director of Investments of the Pooled Money Investment Board the amount required and the Director of Investments would place the amount certified with the eligible lending institution. The interest rate to the lending institution would be 2 percentage points below the market rate. The lending institution could not loan the money out for remediation loans at more than 2 percentage points above the market rate. The bill also would allow for the recalculation of the interest rate annually on the first business day of the year. Under the provisions of the bill, the state and the State Treasurer would not be liable for payment of the principal or interest on the loan. The bill would limit the total aggregate amount of loan deposits under the program to $5,000,000.

In addition, the bill would amend current law with respect to the requirement of the Director of Investments to loan money to banks at the market rate to make it clear that this requirement does not apply to the money deposited in banks or Farm Credit Institutions for use in the Remediation Linked Deposit Loan Program. Another section of current law would be amended to clarify that investments made by the Director of Investments for the program could be for ten years and not the current limit of four years for other investments.

Remediation Reimbursement Program

The bill also would establish the Remediation Reimbursement Program to provide reimbursement to eligible persons for the costs of corrective action. Reimbursement per site could not exceed 90 percent of total corrective action costs greater than $1,000 and less than or equal to $100,000 plus 80 percent of the costs greater than $100,000 and less than or equal to $200,000. The bill would impose certain assessments and place them in the Kansas Agricultural Remediation Fund which would be created by the bill. If an eligible person is not required to pay any of the assessments, then reimbursement from the fund per release would not exceed an amount equal to 100 percent of the costs greater than $1,000 and less than or equal to $10,000.

The bill would establish annual environmental assessments to be deposited into the fund:

$100 by each custom blender of fertilizer;

$20 for each commercial fertilizer required to be registered;

$60 for each agricultural chemical required to be registered, except for agricultural chemicals classified as an antimicrobial pesticide as defined by federal law;

$80 to be paid by each pesticide dealer required to be registered; and

$.0005 per bushel of storage capacity of each public grain warehouse licensed by the state or the federal government.

The bill would provide that expenditures from the Kansas Agricultural Remediation Fund would be approved by the Chairperson of the Kansas Agricultural Remediation Board or a person designated by the Chairperson. Interest earnings from the fund would be deposited back into the fund. The imposition of the assessments would cease when on April 1 of any year the fund has a balance of $5 million or more. The assessments would resume when on any April 1 the balances are $1.5 million or less.

The Kansas Agricultural Remediation Board and the Kansas Agricultural Remediation Fund would be subject to an annual audit by the Legislative Post Audit Committee under the provisions of the Kansas Legislative Post Audit Act.

The Remediation Linked Deposit Loan Program, Remediation Reimbursement Program, and the Kansas Agricultural Remediation Fund would be abolished on July 1, 2010.

SB 501 also would establish the Kansas Agricultural Production Loan Deposit Program to be administered by the State Treasurer. The purpose of the Program would be to provide incentives for the making of agricultural production loans by "eligible lending institutions" which would be defined by the bill as banks which are eligible to be a depository of state funds or institutions of the Farm Credit System.

The bill would require that the lending institution apply all usual lending standards to determine the credit worthiness of borrowers. Under the provisions of the bill, no single agricultural production loan to any one borrower could exceed $250,000. Loans only would be made to eligible agricultural borrowers who have debt to asset ratios of 40 percent or greater and could not be amortized for a period of more than eight years. Eligible agricultural borrowers would certify that the reduced rate loan would be used exclusively for the purposes of the bill.

The State Treasurer would disseminate information and provide agricultural production loan deposit loan packages to eligible lending institutions. The eligible lending institution would forward to the State Treasurer an agricultural production loan deposit loan package, in a form and manner prescribed and approved by the State Treasurer. Under the bill, the package would include information regarding the amount of the loan requested by each eligible agricultural borrower and other information the State Treasurer would deem necessary. The State Treasurer would have the authority to accept or reject an agricultural production loan deposit loan package. If a loan package is approved by the State Treasurer, then the State Treasurer would certify to the Director of Investments of the Pooled Money Investment Board the amount required and the Director of Investments would place the amount certified with the eligible lending institution. The interest rate to the eligible lending institution would be 2 percentage points below the market rate. The eligible lending institution could not loan the money out for agricultural production loans at more than 2 percentage points above the market rate. The bill also would allow for the recalculation of the interest rate annually on the first business day of the year. Under the provisions of the bill, the state and the State Treasurer would not be liable for payment of the principal or interest on the loan to an eligible agricultural borrower. The bill would limit the total aggregate amount of agricultural production loan deposit loans under the Program to $50,000,000 of unencumbered funds.

The bill would require that the State Treasurer submit an annual report outlining the status of the program to the Governor and the Legislature.

Finally, the bill would amend current law with respect to the requirements of the Director of Investments to loan money to banks at the market rate to make it clear that this requirement does not apply to the money deposited in banks for use under the Kansas Agricultural Production Loan Deposit Program. Another section of current law would be amended to clarify that investments made by the Director of Investments for the Kansas Agricultural Production Loan Deposit Program could be for eight years and not the current limit of four years for other investments.

Background

This bill was introduced at the request of a spokesperson from the Kansas Grain and Feed Association and the Kansas Fertilizer and Chemical Association. Appearing in support of the bill was a representative of the Governor's Office, the Kansas Grain and Feed Association and the Kansas Fertilizer and Chemical Association, the Kansas Cooperative Council, the Mid America Green Industry Council, the Kansas Banker's Association, and the Kansas Department of Health and Environment. Submitting written testimony in support of the bill were the Kansas Grain Sorghum Grower's Association and the Kansas Corn Growers Association and the Farm Credit System. Submitting neutral testimony was a representative of the U.S. Environmental Protection Agency and the State Treasurer. In addition, three individuals representing the industry appeared in support of the bill.

The Senate Committee on Energy and Natural Resources amended the bill to provide that there would be a $300,000 cap on loans through the Remediation Linked Deposit Loan Program. In addition, the Committee amended the bill to require that the deposits of the State Treasurer in eligible lending institutions would be at 2 percent below the market rate and that moneys loaned out would be at an interest rate of not more than 2 percent above the market rate.

The Senate Committee of the Whole amended the bill to add the provisions establishing the Kansas Agricultural Production Loan Deposit Program.

The House Committee on Agriculture amended the bill to:

• Make the definition of "eligible lending institution" consistent between different parts of the bill (this would clarify that Farm Credit institutions would provide securities accepted by the Pooled Money Investment Board);



• Provide that the interest rates provided in both linked deposit programs would be recalculated on the first business day of each calendar year using the market rate then in effect;



• Make modification to the appointees to the Kansas Agricultural Remediation Board;



• Subject the Kansas Agricultural Remediation Board and Kansas Agricultural Remediation Fund to review by the Legislative Post Audit Committee; and



• Clarify that the agricultural chemicals which are exempt from the special registration assessment would be those classified as antimicrobial rather than those which are classified as disinfectants.

The fiscal note on the original bill indicates that according to estimates from the State Treasurer, if the entire amount were loaned out in the first year, then FY 2001 State General Fund receipts would be reduced by $275,000. The State Treasurer also indicated that it would take $10,000 to develop and print paperwork for loan packages and to develop the required regulations. The Kansas Department of Health and Environment indicated that 1.0 FTE positions would be required to handle the increased workload for the Voluntary Cleanup and Property Redevelopment Program. The estimated $50,000 required to fund the position in FY 2001 would come from the Kansas Remediation Fund. The Department of Agriculture indicated that if it were required to determine whether an agricultural chemical product is a disinfectant, an additional 1.0 FTE position at $41,739 would be required in FY 2001.

1. *Supplemental notes are prepared by the Legislative Research Department and do not express legislative intent. The supplemental note and fiscal note for this bill may be accessed on the Internet at http://www.ink.org/public/legislative/bill_search.html