BILL ANALYSIS                                                                                                                                                                                                    

                   Senate Appropriations Committee Fiscal Summary
                           Senator Christine Kehoe, Chair

                                           153 (Hernandez)
          Hearing Date:  08/27/2010           Amended: 08/12/2010
                                          As proposed to be amended
          Consultant:  Brendan McCarthy   Policy Vote: NR&W 6-1


          AB 153 (Hernandez), Page 2

          BILL SUMMARY: AB 153, an urgency measure, changes the criteria  
          for spending $100 million from a proposed water bond.  
          Specifically, the bill expands the allowed uses of bond funds  
          for groundwater cleanup to include non-construction costs.
                            Fiscal Impact (in thousands)

           Major Provisions         2010-11      2011-12       2012-13     Fund
          Cost pressure on bond funds       Likely in the millions Bond *
          * Proposed water bond.

          STAFF COMMENTS: This bill meets the criteria for referral to the  
          Suspense File.
          Current law (SB x7 2, Cogdill, Chapter 3, Statutes of 2009)  
          authorizes an $11 billion general obligation bond to be placed  
          on the general election ballot in November 2010. The bond  
          measure authorizes expenditures for a variety of water-related  
          purposes. (AB 1265, Caballero, Chapter 126, Statutes of 2010  
          delays the vote on this proposed bond measure until 2012.)

          Funds authorized under the proposed bond measure include $455  
          million for drought relief, $1.05 billion for water supply  
          reliability, $2.25 billion for Delta sustainability, $3.00  
          billion for the statewide water supply system, $1.79 billion for  
          conservation and watershed protection, $1.00 billion for  
          groundwater protection, and $1.25 billion for water recycling.

          Of the $1.00 billion for groundwater protection, Section 79770  
          (d) provides not less than $100 million for groundwater cleanup  
          projects that meet certain criteria. (It appears that the only  
          projects that currently meet the criteria for these funds are  
          projects to remediate groundwater contamination in the San  
          Gabriel Valley associated with several superfund sites in that  

          AB 153 amends the proposed water bond, to expand the eligible  
          uses of the $100 million allocated under Section 79770 (d) so  
          that funds would be available for "costs associated with  
          projects, programs, or activities" rather than being limited to  


          AB 153 (Hernandez), Page 2

          project costs. The intent of the bill is to allow bond funds to  
          be used for ongoing treatment and remediation costs, rather than  
          just the costs to construct capital projects.

          Under the state's General Obligation Bond Law, bond funds are  
          generally limited to paying for capital costs or other projects  
          with long-term benefits. However, because general obligation  
          bond measures are approved by a vote of the people, a bond  
          measure itself may override those statutory requirements.  
          Previous bond measures have, in fact, allowed bond funds to be  
          used for ongoing program costs.

          According to the sponsors of the bill, total funding to date for  
          groundwater cleanup projects has been about $620 million, with  
          the bulk of the funding coming from parties responsible for the  
          groundwater contamination and federal funds. The state has  
          contributed about $9.6 million.

          The sponsors of the bill indicate that remaining cleanup costs  
          total about $710 million. Of the remaining costs, $64 million is  
          for capital projects and $650 million is for ongoing treatment  

          By amending the proposed water bond to allow non-capital costs  
          to be funded, the bill creates cost pressures on the proposed  
          bond funds. By expanding the allowed uses to non-capital costs,  
          the bill may reduce the availability of funds for other capital  
          projects. The extent of this impact will depend on the  
          allocation of funding for non-capital costs and whether there  
          are other eligible capital projects for those bond funds.

          This bill is an urgency measure.

          AB 1265 (Caballero, Chapter 126, Statutes of 2010) delayed the  
          vote on the proposed bond measure until 2012.

          The proposed author's amendments would make technical changes to  
          the bill and add coauthors.