BILL NUMBER: AB 1742 CHAPTERED 10/13/07 CHAPTER 632 FILED WITH SECRETARY OF STATE OCTOBER 13, 2007 APPROVED BY GOVERNOR OCTOBER 13, 2007 PASSED THE SENATE AUGUST 30, 2007 PASSED THE ASSEMBLY JUNE 6, 2007 AMENDED IN ASSEMBLY JUNE 1, 2007 AMENDED IN ASSEMBLY APRIL 23, 2007 INTRODUCED BY Committee on Environmental Safety and Toxic Materials (Huffman (Chair), Smyth (Vice Chair), Eng, Evans, Feuer, Jeffries, and Nava) MARCH 22, 2007 An act to amend Sections 13476, 13478, and 13480 of, and to add Section 13477.5 to, the Water Code, relating to water. LEGISLATIVE COUNSEL'S DIGEST AB 1742, Committee on Environmental Safety and Toxic Materials. State Water Pollution Control Revolving Fund: administrative costs. Existing law continuously appropriates state and federal funds in the State Water Pollution Control Revolving Fund to the State Water Resources Control Board for loans and other financial assistance for the construction of publicly owned treatment works by a municipality, the implementation of a management program, the development and implementation of a conservation and management plan, and other related purposes in accordance with the federal Clean Water Act and the Porter-Cologne Water Quality Control Act. This bill would authorize the board to assess a specified annual charge with regard to a loan made under the revolving fund program. The bill would require the proceeds generated from the imposition of the annual fee, along with other moneys, to be deposited in the State Water Pollution Control Revolving Fund Administration Fund, which the bill would create in the State Treasury. The bill would authorize the board to expend the moneys in the fund, upon appropriation by the Legislature to the board, for costs incurred by the board in connection with the administration of the revolving fund program. THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS: SECTION 1. Section 13476 of the Water Code is amended to read: 13476. Unless the context otherwise requires, the following definitions govern the construction of this chapter: (a) "Administration fund" means the State Water Pollution Control Revolving Fund Administration Fund. (b) "Board" means the State Water Resources Control Board. (c) "Federal Clean Water Act" or "federal act" means the federal Water Pollution Control Act (33 U.S.C.A. Sec. 1251 et seq.) and acts amendatory thereof or supplemental thereto. (d) "Fund" means the State Water Pollution Control Revolving Fund. (e) "Matching funds" means money that equals that percentage of federal contributions required by the federal act to be matched with state funds. (f) "Municipality" has the same meaning and construction as in the federal act and also includes all state, interstate, and intermunicipal agencies. (g) "Publicly owned" means owned by a municipality. SEC. 2. Section 13477.5 is added to the Water Code, to read: 13477.5. (a) The State Water Pollution Control Revolving Fund Administration Fund is hereby created in the State Treasury. (b) The following moneys shall be deposited in the administration fund: (1) Moneys transferred to the administration fund to pay the costs incurred by the board in connection with the administration of this chapter. (2) The amounts collected for loan services pursuant to subdivision (c). (3) Notwithstanding Section 16475 of the Government Code, any interest earned upon the moneys deposited in the administration fund. (c) (1) For any loan made pursuant to paragraph (1) of subdivision (b) of Section 13480, the board may assess an annual charge for loan services with regard to the loan, not to exceed 1.0 percent of the loan balance computed according to the true interest cost method. (2) Any amounts collected under this subdivision shall be deposited in the administration fund. (3) The loan service rate authorized by this subdivision may be applied at any time during the term of the loan, and once applied, shall remain unchanged for the duration of the loan and shall not increase the loan repayment amount as set forth in the terms and conditions imposed pursuant to clause (i) of subparagraph (D) of paragraph (1) of subdivision (b) of Section 13480. (d) Moneys in the administration fund, upon appropriation by the Legislature to the board, may be expended for payment of the reasonable costs of administering the fund. (e) The board shall set the total amount of revenue collected each year through the charges authorized by subdivision (c) at an amount that is as equal as practicable to the revenue levels set forth in the annual Budget Act for this activity. At least once each fiscal year, the board shall adjust the loan service rate imposed pursuant to subdivision (c) to conform with the revenue levels set forth in the annual Budget Act. SEC. 3. Section 13478 of the Water Code is amended to read: 13478. The board may undertake any of the following: (a) Enter into agreements with the federal government for federal contributions to the fund. (b) Accept federal contributions to the fund. (c) Enter into an agreement with, and accept matching funds from, a municipality. A municipality that seeks to enter into an agreement with the board and provide matching funds pursuant to this subdivision shall provide to the board evidence of the availability of those funds in the form of a written resolution adopted by the governing body of the municipality before it requests a preliminary loan commitment. (d) Use moneys in the fund for the purposes permitted by the federal act. (e) Provide for the deposit of matching funds and any other available and necessary moneys into the fund. (f) Make requests on behalf of the state for deposit into the fund of available federal moneys under the federal act and determine on behalf of the state appropriate maintenance of progress toward compliance with the enforceable deadlines, goals, and requirements of the federal act. (g) Determine on behalf of the state that publicly owned treatment works that receive financial assistance from the fund will meet the requirements of, and otherwise be treated as required by, the federal act. (h) Provide for appropriate audit, accounting, and fiscal management services, plans, and reports relative to the fund. (i) Take additional incidental action as appropriate for the adequate administration and operation of the fund. (j) Charge municipalities that elect to provide matching funds a fee to cover the actual cost of obtaining the federal funds pursuant to Section 603(d)(7) of the federal act (33 U.S.C.A. Sec. 1383(d)(7)) and processing the loan application. The fee shall be waived by the board if sufficient funds to cover those costs are available from other sources. (k) Use money returned to the fund under clause (ii) of subparagraph (D) of paragraph (1) of subdivision (b) of Section 13480, and any other source of matching funds, if not prohibited by statute, as matching funds for the federal administrative allowance under Section 603(d)(7) of the federal act (33 U.S.C.A. Sec. 1383(d) (7)). (l) Expend money repaid by loan recipients for loan service under clauses (i) and (ii) of subparagraph (D) of paragraph (1) of subdivision (b) of Section 13480 to pay administrative costs incurred by the board under this chapter. SEC. 4. Section 13480 of the Water Code is amended to read: 13480. (a) Moneys in the fund shall be used only for the permissible purposes allowed by the federal act, including providing financial assistance for the following purposes: (1) The construction of publicly owned treatment works, as defined by Section 212 of the federal act (33 U.S.C.A. Sec. 1292), by any municipality. (2) Implementation of a management program pursuant to Section 319 of the federal act (33 U.S.C.A. Sec. 1329). (3) Development and implementation of a conservation and management plan under Section 320 of the federal act (33 U.S.C.A. Sec. 1330). (4) Financial assistance, other than a loan, toward the nonfederal share of costs of any grant-funded treatment works project, but only if that assistance is necessary to permit the project to proceed. (b) Consistent with expenditure for authorized purposes, moneys in the fund may be used for the following purposes: (1) Loans that meet all of the following requirements: (A) Are made at or below market interest rates. (B) Require annual payments of principal and any interest, with repayment commencing not later than one year after completion of the project for which the loan is made and full amortization not later than 20 years after project completion. (C) Require the loan recipient to establish an acceptable dedicated source of revenue for repayment of any loan. (D) (i) Contain other terms and conditions required by the board or the federal act or applicable rules, regulations, guidelines, and policies. To the extent permitted by federal law, the combined interest and loan service rate shall be set at a rate that does not exceed 50 percent of the interest rate paid by the state on the most recent sale of state general obligation bonds and the combined interest and loan service rate shall be computed according to the true interest cost method. If the combined interest and loan service rate so determined is not a multiple of one-tenth of 1 percent, the combined interest and loan service rate shall be set at the multiple of one-tenth of 1 percent next above the combined interest and loan service rate so determined. Any loan from the fund used to finance costs of facilities planning, or the preparation of plans, specifications, or estimates for construction of publicly owned treatment works shall comply with Section 603(e) of the federal act (33 U.S.C.A. Sec. 1383(e)). (ii) Notwithstanding clause (i), if the loan applicant is a municipality, an applicant for a loan for the implementation of a management program pursuant to Section 319 of the Clean Water Act (33 U.S.C. Sec. 1329), or an applicant for a loan for nonpoint source or estuary enhancement pursuant to Section 320 of the Clean Water Act (33 U.S.C. Sec. 1330), and the applicant provides matching funds, the combined interest and loan service rate on the loan shall be 0 percent. A loan recipient that returns to the fund an amount of money equal to 20 percent of the remaining unpaid federal balance of an existing loan shall have the remaining unpaid loan balance refinanced at a combined interest and loan service rate of 0 percent over the time remaining in the original loan contract. (2) To buy or refinance the debt obligations of municipalities within the state at or below market rates if those debt obligations were incurred after March 7, 1985. (3) To guarantee, or purchase insurance for, local obligations where that action would improve credit market access or reduce interest rates. (4) As a source of revenue or security for the payment of principal and interest on revenue or general obligation bonds issued by the state, if the proceeds of the sale of those bonds will be deposited in the fund. (5) To establish loan guarantees for similar revolving funds established by municipalities. (6) To earn interest. (7) For payment of the reasonable costs of administering the fund and conducting activities under Subchapter VI (commencing with Section 601) of the federal act (33 U.S.C.A. Sec. 1381 et seq.). Those costs shall not exceed 4 percent of all federal contributions to the fund, except that if permitted by federal and state law, interest repayments into the fund and other moneys in the fund may be used to defray additional administrative and activity costs to the extent permitted by the federal government and approved by the Legislature in the Budget Act. (8) For financial assistance toward the nonfederal share of the costs of grant-funded treatment works projects to the extent permitted by the federal act.