BILL ANALYSIS                                                                                                                                                                                                    



                                                                SB 390
                                                                       

                      SENATE COMMITTEE ON ENVIRONMENTAL QUALITY
                        Senator S. Joseph Simitian, Chairman
                              2009-2010 Regular Session
                                           
           BILL NO:    SB 390            
           AUTHOR:     Kehoe             
           AMENDED:    April 13, 2009
           FISCAL:     Yes               HEARING DATE:     April 20, 2009
           URGENCY:    No                CONSULTANT:       Caroll  
           Mortensen
            
           SUBJECT  :    RECYCLED MARKET DEVELOPMENT ZONE LOAN
                       PROGRAM

            SUMMARY  :    
           
            Existing law  , under the California Integrated Waste Management  
           Act (Act) of 1989: 

           1)Requires each city or county source reduction and recycling  
             element to include an implementation schedule that shows a  
             city or county must divert 25% of solid waste from landfill  
             disposal or transformation by January 1, 1995, through  
             source reduction, recycling, and composting activities, and  
             must divert 50% of solid waste on and after January 1, 2000.

           2)Establishes a Market Development Program to assist local  
             governments in meeting the requirements of #1 above and  
             requires the Integrated Waste Management Board (IWMB) to  
             develop a comprehensive market development plan to stimulate  
             market demand for postconsumer water materials generated in  
             California. 

           3)Establishes a Recycling Market Development Zone (RMDZ)  
             Program within the IWMB that works with local zone  
             administrators to establish zones throughout California to  
             encourage recycling businesses through a variety of local  
             incentives.

           4)Establishes the Recycling Market Development Revolving Loan  
             Program (loan program) to provide loans to recycling  
             businesses as specified.










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           5)Establishes the Recycling Market Development Revolving Loan  
             Subaccount in the Integrated Waste Management Account and  
             continuously appropriates funds deposited in the subaccount  
             to the IWMB for making loans for the purposes of the loan  
             program.  The funds are from the state solid waste tipping  
             fee, not the general fund. 

           6)Establishes a per loan cap of $2 million and not to exceed  
             three-fourths the total cost of the project.

           7)Makes the provisions regarding the loan program, the  
             creation of the subaccount, and expenditures from the  
             subaccount inoperative on July 1, 2011, and repeals them as  
             of January 1, 2012, and provides for disposition of funds  
             remaining after sunset and repeal.

            This bill  :  

           1) Creates a two-tiered loan program that allows for larger  
              loans if there is sufficient money in the subaccount.

           2) Establishes a sunset provision for the new, larger loans in  
              July 1, 2016.

           3) Extends the sunset provisions for the loan program from  
              July 1, 2011 to July 1, 2021.

            COMMENTS  :

            1) Purpose of Bill  .  According to the sponsor, this bill is  
              needed to extend and update the loan program.

            2) History of the RMDZ Loan Program  .  The RMDZ program was  
              established by Senate Bill 1322 (Bergeson, Statutes of  
              1989, Chapter 1096) and codified in Public Resources Code  
              sections 42010-42024.  The goal for the program is to  
              further the establishment of local and regional markets for  
              the increased materials being collected by local  
              jurisdictions.  In order to accomplish this goal, the IWMB  
              must provide the right combination of technical/financial  
              incentives and resources to attract/retain recycling  
              manufacturers, ensure local Zone Administrators are  
              adequately trained, ensure the most efficient use of  









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              limited state resources, and provide RMDZ opportunities to  
              as many local jurisdictions as possible. 

            3) Program Description  .  There are currently 33 zones located  
              throughout the state.  These zones are comprised of 220  
              cities and 29 counties (46 percent of all jurisdictions  
              statewide).  The RMDZs cover approximately 85,000 square  
              miles or 52 percent of California, and represent almost 20  
              million Californians (approximately 54 percent of the total  
              population).

              The RMDZs are managed at the local level by Zone  
              Administrators (ZAs).  The ZAs are typically comprised of  
              staff from local government waste management departments,  
              economic development, etc.  The program is unique for the  
              IWMB, in that its intent is to "marry" recycling and  
              sustainability efforts with economic development effort.

            4) Loan Cap  .  The bill proposes to develop a two-tier system  
              for loans from the loan program.  It would maintain the  
              current $2 million cap per loan amount, however, if there  
              is more than $5 million in the subaccount it would allow  
              for larger loans.  These loans would be capped at $5  
              million and not more than three-fourths of the project  
              costs and would only be funded from funds in excess of $5  
              million in the subaccount.  This will help ensure that the  
              lower dollar amount loans will always be available, but if  
              the subaccount can support it and demand is there, a higher  
              loan amount is available.  The IWMB states that the ability  
              to offer larger loans will support the development of  
              larger recycling manufacturing facilities and to leverage  
              more private sector investment.

              Some Zone Administrators have raised some concern that the  
              with the allowance of larger loans that the IWMB could only  
              fund one or two large loans annually and not provide  
              funding for smaller loans.  The approach in the bill only  
              allows for the larger loans if there is more than $5  
              million in the subbacount.  This should alleviate some of  
              that concern.  Also the shorter sunset date (see # 5 below)  
              for the larger loans will allow for a Legislative review of  
              the IWMB's actions on loan distribution.  According to an  
              IWMB agenda item in September 2008, there was approximately  









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              $13 million available for loans for the 2008/2009 fiscal  
              year.

              As of January 14, 2009, the IWMB has approved and funded  
              153 loans totaling $100 million.  The funded loans have  
              resulted in an estimated additional 4 million tons per year  
              of material being diverted from California landfills and  
              the creation of 1,930 jobs.  The average loan amount has  
              been approximately $800,000.

              The initial funds for the loans came from the Integrated  
              Waste Management Account, which is funded by a state solid  
              waste tipping fee, (not the general fund) and ongoing loans  
              come from loan repayments.

            5) Sunset Date Extension  .  This bill proposes to extend the  
              sunset of this program until, 2021; a ten-year extension to  
              the existing program.  This should provide surety to  
              program participants that the loan program will be  
              available and should encourage more program participation.

              The interim sunset date on the allowance for the larger  
              loans will allow the Legislature to review this new  
              provision and evaluate its effectiveness and ensure that  
              loan funds are being distributed as directed in law. 

            6) Related Legislation  .  AB 1581 (Assembly Natural Resources  
              Committee) is pending in the Assembly Natural Resources  
              Committee.  That measure would extend the sunset date for  
              the RMDZ loan program until 2016.

            7) Proposed Amendment  .  To ensure that projects that have not  
              met statutory and regulatory standards are not funded  
              through the loan program, an amendment is needed to specify  
              that the IWMB shall not issue or fund loan until all local,  
              state and federal permits have been acquired. 

            SOURCE  :        California Integrated Waste Management Board  

           SUPPORT  :       City of Los Angeles
                          City of Vernon
                          Greater South San Joaquin Valley RMDZ (Kings  
                                         County)









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                          Greater South San Joaquin Valley RMDZ (Tulare  
                                         County)
                          Kings County Economic Development Corporation
                          Regional Council of Rural Counties
                          Siskiyou County Economic Development Council
                          Waste Management, Inc.
            
           OPPOSITION  :    None on file