BILL ANALYSIS                                                                                                                                                                                                    





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          |                                                                 |
          |         SENATE COMMITTEE ON NATURAL RESOURCES AND WATER         |
          |                   Senator Fran Pavley, Chair                    |
          |                    2009-2010 Regular Session                    |
          |                                                                 |
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          BILL NO: AB 153                    HEARING DATE: August 18, 2010
          AUTHOR: Hernandez and Eng          URGENCY: Yes
          VERSION: August 12, 2010           CONSULTANT: Dennis O'Connor
          DUAL REFERRAL: No                  FISCAL: Yes
          SUBJECT: Safe, Clean, and Reliable Drinking Water Supply Act
          
          BACKGROUND AND EXISTING LAW
          1. A part of the water package passed in the 2009/10 7th  
            Extraordinary Session was SBX7 2 (Cogdill).  That bill enacted  
            the Safe, Clean, and Reliable Drinking Water Supply Act of  
            2010, which, if approved by the voters in November 2010, would  
            authorize $11.14 billion in general obligation bonds to fund  
            various water resources programs and projects.  

          2.Chapter 10 of the water bond would provide $1 B for  
            expenditures, grants, and loans for projects to prevent or  
            reduce the contamination of groundwater that serves as a  
            source of drinking water.  The Department of Health Services  
            is to prioritize projects based upon the following criteria:
                 The threat posed by groundwater contamination to the  
               affected community's overall drinking water supplies.
                 The potential for groundwater contamination to spread  
               and reduce drinking water supply and water storage for  
               nearby population areas.
                 The potential of the project, if fully implemented, to  
               enhance local water supply reliability.
                 The potential of the project to increase opportunities  
               for groundwater recharge and optimization of groundwater  
               supplies.

          1.The Department of Public Health is to give additional  
            consideration to projects that meet any of the following  
            criteria:
                 The project is implemented pursuant to a comprehensive  
               basinwide groundwater quality management and remediation  
               plan or is necessary to develop a comprehensive groundwater  
               plan.
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                 Affected groundwater provides a local supply that, if  
               contaminated and not remediated, will require import of  
               additional water from outside the region.
                 The project will serve an economically disadvantaged  
               community or an economically distressed area.
                 The project addresses contamination at a site where the  
               responsible parties have not been identified, or where the  
               responsible parties are unwilling or unable to pay for  
               cleanup.

          1.Additionally, 79770 (d) provides that at least $100 M of the  
            funds provided by Chapter 10 be made available for projects  
            that meet the requirements of this section and both of the  
            following criteria:
                 The project is part of a basinwide management and  
               remediation plan for which federal funds have been  
               allocated.
                 The project addresses contamination at a site on the  
               list maintained by the Department of Toxic Substances  
               Control pursuant to Section 25356 of the Health and Safety  
               Code or a site listed on the National Priorities List  
               pursuant to the Comprehensive Environmental Response,  
               Compensation, and Liability Act of 1980 (42 U.S.C. Sec.  
               9601 et seq.).

          1.It appears that the only projects that meet the provisions of  
            79770 (d) are those associated with superfund sites in the  
            San Gabriel Valley, which include multiple areas of  
            contaminated groundwater in the 170-square-mile San Gabriel  
            Valley. The contaminated areas underlie significant portions  
            of the cities of Alhambra, Arcadia, Azusa, Baldwin Park,  
            Industry, Irwindale, El Monte, La Puente, Monrovia, Rosemead,  
            South El Monte, and West Covina. 

          2.Under the General Obligation Bond Law, unless otherwise  
            specified in the specific bond authorization act, proceeds  
            from the sale of any general obligation bond shall be used  
            only for the following purposes:
             a.   The costs of construction or acquisition of "capital  
               assets." 
                     "Capital assets" are tangible physical property with  
                 an expected useful life of 15 years or more.  Capital  
                 assets can include tangible physical property with an  
                 expected useful life of 10 to 15 years, but only if these  
                 costs do not exceed 10 percent of the net bond proceeds. 
                     "Capital assets" include major maintenance,  
                 reconstruction, demolition for purposes of reconstruction  
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                 of facilities, and retrofitting work that is ordinarily  
                 done no more often than once every 5 to 15 years or  
                 expenditures that continue or enhance the useful life of  
                 the capital asset. 
                     "Capital assets" also include equipment with an  
                 expected useful life of two years or more.
                     Allowable costs also include costs related to  
                 construction or acquisition, such as planning,  
                 engineering, construction management, design work,  
                 environmental impact reports and assessments, required  
                 mitigation expenses, appraisals, legal expenses, site  
                 acquisitions, and necessary easements.
             a.   To make grants or loans, if the proceeds of the grants  
               or loans are used for the costs of construction or  
               acquisition of capital assets. 
             b.   To repay funds borrowed in anticipation of the sale of  
               the bonds, including interest, or to pay interest on the  
               bonds themselves.
             c.   To pay the costs of a state agency with responsibility  
               for administering the bond program. 
             d.   The costs of the Treasurer's office directly associated  
               with the sale and payment of the bonds.

          1.On August 9, 2010, the legislature passed, and the next day  
            the governor signed, AB 1265 as an urgency measure.  That bill  
            delayed the water bond until the November 2012 general  
            election.

          PROPOSED LAW
          This bill would:

          1.Change the provisions governing 79770 (d) of the water bond.   
            It would remove the restriction that the funds be used for  
            "projects" authorized for funding by that subdivision, and  
            instead allow the funds to be used for "costs associated with  
            projects, programs, or activities" authorized for funding by  
            that subdivision.

          2.Declare that the bill is an urgency measure, the facts  
            constituting the necessity being:

          In order to enable the Secretary of State to make the changes  
            required by this act at the earliest possible date, it is  
            necessary that this act take effect immediately.

          ARGUMENTS IN SUPPORT
          Supporters assert that the amendments will "alleviate some of  
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          the rate pressure on San Gabriel area residents as they seek to  
          maximize the use of their local water supplies, thus relieving  
          pressure on the Sacramento-San Joaquin Delta, the Colorado  
          River, and other imported water sources."

          ARGUMENTS IN OPPOSITION: None Received

          COMMENTS 
          
           What Will Be Funded?   The bill would allow the bond proceeds to  
          fund any cost associated with the San Gabriel Valley groundwater  
          clean-up program.  Presumably, this would include remediation  
          and treatment costs associated with the project.  However, the  
          phrase "costs associated with projects, programs, or activities"  
          is quite broad.  It is not clear what limits, if any, there are  
          on the use of the funds.  

          In 2005, the San Gabriel Basin Water Quality Authority sponsored  
          SB 822 (Margett).  (The authority is authorized by the San  
          Gabriel Basin Water Quality Authority Act to coordinate  
          groundwater remediation planning and implementation activities;  
          control and remove hazardous substances from the basin;  
          construct, operate, and maintain water treatment facilities that  
          benefit the basin; receive and expend funds obtained from  
          various sources, including federal, state, or local  
          governments(the entity responsible of implementing the clean-up  
          project.)  SB 822 would have authorized the authority to receive  
          state funds to reimburse the authority for costs incurred prior  
          to January 1, 2006, for projects undertaken in accordance with  
          the Act and for the purpose of meeting matching federal funds  
          appropriated to the federal San Gabriel Basin Restoration Fund.   
          The Environmental Quality Committee's analysis of proposal was  
          particularly critical of the proposal and the hearing was  
          subsequently canceled at the author's request. (Analysis of:  
          April 25, 2005, see in particular comment 4.)

          It is not clear if this bill would authorize the bond funds also  
          to be used to reimburse costs in a manner similar to that  
          proposed in 2005.

           What Is The Rush?   The legislature just passed AB 1265, thereby  
          delaying the water bond to the November 2012 general election.   
          As a part of the hearing on AB 1265, this committee's analysis  
          noted the need for additional amendments to the water bond.  The  
          committee also received testimony that next session the bond  
          will require additional amendments.  If the water bond will need  
          additional amendments next session, it is not clear why this  
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          bill's amendments to the water bond need to be acted upon now.

          SUGGESTED AMENDMENTS: None 

          SUPPORT
          California Water Association

          OPPOSITION None Received







































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